10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 1, 2016

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___ to ___

Commission file number 0-15451

PHOTRONICS, INC.

(Exact name of registrant as specified in its charter)

Connecticut	06-0854886
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

15 Secor Road, Brookfield, Connecticut	06804
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code (203) 775-9000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☒  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer," "accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer ☐ Accelerated Filer ☒ Non-Accelerated Filer ☐ Smaller Reporting Company ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐  No ☒

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Class	Outstanding at May 27, 2016
Common Stock, $0.01 par value	68,139,720 Shares

Forward-Looking Statements

     The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements made by or on behalf of Photronics, Inc. ("Photronics" or the "Company" or “we”). These statements are based on management's beliefs, as well as assumptions made by, and information currently available to, management. Forward-looking statements may be identified by words like "expect," "anticipate," "believe," "plan," "project," “could,” “estimate,” “intend,” “may,” “will” and similar expressions, or the negative of such terms, or other comparable terminology. All forward-looking statements involve risks and uncertainties that are difficult to predict. In particular, any statement contained in this quarterly report on Form 10-Q or in other documents filed with the Securities and Exchange Commission, in press releases or in the Company's communications and discussions with investors and analysts in the normal course of business through meetings, phone calls, or conference calls regarding, among other things, the consummation and benefits of transactions and acquisitions, expectations with respect to future sales, financial performance, operating efficiencies, or product expansion, are subject to known and unknown risks, uncertainties, and contingencies, many of which are beyond the control of the Company. Various factors may cause actual results, performance, or achievements to differ materially from anticipated results, performance, or achievements expressed or implied by forward-looking statements. Factors that might affect forward-looking statements include, but are not limited to, overall economic and business conditions; economic and political conditions in international markets; the demand for the Company's products; competitive factors in the industries and geographic markets in which the Company competes; federal, state and international tax requirements (including tax rate changes, new tax laws and revised tax law interpretations); interest rate and other capital market conditions, including changes in the market price of the Company's securities; foreign currency exchange rate fluctuations; changes in technology; the timing, impact, and other uncertainties relating to transactions and acquisitions, divestitures and joint ventures as well as decisions the Company may make in the future regarding the Company’s business, capital and organizational structure and other matters; the seasonal and cyclical nature of the semiconductor and flat panel display industries; management changes; damage or destruction to the Company's facilities, or the facilities of its customers or suppliers, by natural disasters, labor strikes, political unrest, or terrorist activity; the ability of the Company to (i) place new equipment in service on a timely basis; (ii) obtain additional financing; (iii) achieve anticipated synergies and cost savings; (iv) fully utilize its tools; (v) achieve desired yields, pricing, product mix, and market acceptance of its products and (vi) obtain necessary export licenses. Any forward-looking statements should be considered in light of these factors. Accordingly, there is no assurance that the Company's expectations will be realized. The Company does not assume responsibility for the accuracy and completeness of the forward-looking statements and does not assume an obligation to provide revisions to any forward-looking statements, except as otherwise required by securities and other applicable laws.

2

PHOTRONICS, INC.

AND SUBSIDIARIES

INDEX

PART I.	FINANCIAL INFORMATION	Page
Item 1.	Condensed Consolidated Financial Statements	4
	Condensed Consolidated Balance Sheets at May 1, 2016 and November 1, 2015	4
	Condensed Consolidated Statements of Income for the Three and Six Months Ended May 1, 2016 and May 3, 2015	5
	Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended May 1, 2016 and May 3, 2015	6
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended May 1, 2016 and May 3, 2015	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	24
Item 4.	Controls and Procedures	25
PART II.	OTHER INFORMATION
Item 1A.	Risk Factors	25
Item 6.	Exhibits	26

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PART I. FINANCIAL INFORMATION

Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

PHOTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands, except per share amounts)

(unaudited)

	May 1, 2016			November 1, 2015
ASSETS
Current assets:
Cash and cash equivalents	$	193,978		$	205,867
Accounts receivable, net of allowance of $3,296 in 2016 and $3,301 in 2015		104,330			110,056
Inventories		24,510			24,157
Other current assets		24,409			24,034
Total current assets		347,227			364,114
Property, plant and equipment, net		523,669			547,284
Investment in joint venture		92,911			93,021
Intangible assets, net		22,071			24,616
Deferred income taxes		11,870			11,908
Other assets		4,160			4,612
Total assets	$	1,001,908		$	1,045,555
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term borrowings	$	5,806		$	65,495
Accounts payable		65,697			87,983
Accrued liabilities		42,614			39,214
Total current liabilities		114,117			192,692
Long-term borrowings		64,419			67,120
Other liabilities		20,600			23,677
Total liabilities		199,136			283,489
Commitments and contingencies
Equity:
Preferred stock, $0.01 par value, 2,000 shares authorized, none issued and outstanding		-			-
Common stock, $0.01 par value, 150,000 shares authorized, 67,943 shares issued and outstanding at May 1, 2016 and 66,602 shares issued and outstanding at November 1, 2015		679			666
Additional paid-in capital		538,535			526,402
Retained earnings		162,916			130,060
Accumulated other comprehensive loss		(8,846	)		(10,573	)
Total Photronics, Inc. shareholders' equity		693,284			646,555
Noncontrolling interests		109,488			115,511
Total equity		802,772			762,066
Total liabilities and equity	$	1,001,908		$	1,045,555

See accompanying notes to condensed consolidated financial statements.

4

PHOTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income

(in thousands, except per share amounts)

(unaudited)

	Three Months Ended						Six Months Ended
	May 1, 2016			May 3, 2015			May 1, 2016			May 3, 2015
Net sales	$	122,923		$	127,309		$	252,879		$	250,814
Costs and expenses:
Cost of sales		(91,636	)		(94,214	)		(186,156	)		(189,535	)
Selling, general and administrative		(11,024	)		(12,421	)		(23,222	)		(24,365	)
Research and development		(5,447	)		(5,809	)		(11,148	)		(10,490	)
Operating income		14,816			14,865			32,353			26,424
Other income (expense):
Gain on sale of investment		-			-			8,785			-
Interest expense		(964	)		(1,233	)		(2,138	)		(2,603	)
Interest and other income (expense), net		(2,025	)		(224	)		27			(137	)
Income before income tax benefit (provision)		11,827			13,408			39,027			23,684
Income tax benefit (provision)		2,326			(1,252	)		(1,374	)		(4,386	)
Net income		14,153			12,156			37,653			19,298
Net income attributable to noncontrolling interests		(2,299	)		(2,096	)		(4,797	)		(5,401	)
Net income attributable to Photronics, Inc. shareholders	$	11,854		$	10,060		$	32,856		$	13,897
Earnings per share:
Basic	$	0.18		$	0.15		$	0.49		$	0.21
Diluted	$	0.16		$	0.14		$	0.44		$	0.21
Weighted-average number of common shares outstanding:
Basic		67,372			66,230			67,090			66,148
Diluted		77,516			78,228			78,326			72,624

See accompanying notes to condensed consolidated financial statements.

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PHOTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

(in thousands)

(unaudited)

	Three Months Ended				Six Months Ended
	May 1, 2016		May 3, 2015		May 1, 2016		May 3, 2015
Net income	$	14,153	$	12,156	$	37,653	$	19,298
Other comprehensive income (loss), net of tax of $0:
Foreign currency translation adjustments		23,811		12,507		2,735		(7,568	)
Amortization of cash flow hedge		32		32		64		64
Net current period other comprehensive income (loss)		23,843		12,539		2,799		(7,504	)
Comprehensive income		37,996		24,695		40,452		11,794
Less: comprehensive income attributable to noncontrolling interests		6,983		5,392		5,870		4,833
Comprehensive income attributable to Photronics, Inc. shareholders	$	31,013	$	19,303	$	34,582	$	6,961

See accompanying notes to condensed consolidated financial statements.

6

PHOTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	Six Months Ended
	May 1, 2016			May 3, 2015
Cash flows from operating activities:
Net income	$	37,653		$	19,298
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		40,832			40,318
Gain on sale of investment		(8,785	)		-
Changes in assets and liabilities:
Accounts receivable		6,499			(4,244	)
Inventories		(256	)		(985	)
Other current assets		3,095			7
Accounts payable, accrued liabilities and other		(13,899	)		3,513
Net cash provided by operating activities		65,139			57,907
Cash flows from investing activities:
Purchases of property, plant and equipment		(34,928	)		(67,935	)
Proceeds from sale of investment		8,785			-
Other		193			(218	)
Net cash used in investing activities		(25,950	)		(68,153	)
Cash flows from financing activities:
Repayments of long-term borrowings		(54,951	)		(4,751	)
Proceeds from share-based arrangements		3,046			1,195
Other		(19	)		(76	)
Net cash used in financing activities		(51,924	)		(3,632	)
Effect of exchange rate changes on cash and cash equivalents		846			(3,001	)
Net decrease in cash and cash equivalents		(11,889	)		(16,879	)
Cash and cash equivalents at beginning of period		205,867			192,929
Cash and cash equivalents at end of period	$	193,978		$	176,050
Supplemental disclosure of noncash information:
Accrual for property, plant and equipment purchased during the period	$	3,297		$	49,082
Subsidiary dividend payable		11,901			-

See accompanying notes to condensed consolidated financial statements.

7

PHOTRONICS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Three Months and Six Months Ended May 1, 2016 and May 3, 2015

(unaudited)

(in thousands, except share amounts)

NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION

     Photronics, Inc. and its subsidiaries ("Photronics" or “the Company") is one of the world's leading manufacturers of photomasks, which are high precision photographic quartz plates containing microscopic images of electronic circuits. Photomasks are a key element in the manufacture of semiconductors and flat panel displays ("FPDs"), and are used as masters to transfer circuit patterns onto semiconductor wafers and flat panel substrates during the fabrication of integrated circuits ("ICs") and a variety of FPDs and, to a lesser extent, other types of electrical and optical components. The Company currently operates principally from nine manufacturing facilities, two of which are located in Europe, three in Taiwan, one in Korea, and three in the United States.

     The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of management, adjustments, all of which are of a normal recurring nature, considered necessary for a fair presentation have been included. The Company is typically impacted during its first fiscal quarter by the North American and European holiday periods, as some customers reduce their effective workdays and orders during these periods. Additionally, the Company can be impacted during its first or second quarter by the Asian New Year holiday period, which may also reduce customer orders. Operating results for the interim period are not necessarily indicative of the results that may be expected for the fiscal year ending October 30, 2016. For further information, refer to the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended November 1, 2015.

NOTE 2 - CHANGES IN EQUITY

The following tables set forth the Company's consolidated changes in equity for the three and six month periods ended May 1, 2016 and May 3, 2015:

	Three Months Ended May 1, 2016
	Photronics, Inc. Shareholders
	Common Stock				Additional					Accumulated Other			Non-
					Paid-in			Retained		Comprehensive			controlling			Total
	Shares		Amount		Capital			Earnings		Loss			Interests			Equity
Balance at January 31, 2016		67,081	$	671	$	529,337		$	151,062	$	(28,005	)	$	114,398		$	767,463
Net income		-		-		-			11,854		-			2,299			14,153
Other comprehensive income		-		-		-			-		19,159			4,684			23,843
Sale of common stock through employee stock option and purchase plans		130		1		799			-		-			-			800
Restricted stock awards vesting and expense		15		-		313			-		-			-			313
Share-based compensation expense		-		-		663			-		-			-			663
Conversion of debt to common stock		717		7		7,431			-		-			-			7,438
Repurchase of common stock of subsidiary		-		-		(8	)		-		-			8			-
Subsidiary dividend payable		-		-		-			-		-			(11,901	)		(11,901	)
Balance at May 1, 2016		67,943	$	679	$	538,535		$	162,916	$	(8,846	)	$	109,488		$	802,772

8

	Three Months Ended May 3, 2015
	Photronics, Inc. Shareholders
	Common Stock				Additional				Accumulated Other		Non-
					Paid-in		Retained		Comprehensive		controlling			Total
	Shares		Amount		Capital		Earnings		Income		Interests			Equity
Balance at February 1, 2015		66,209	$	662	$	521,580	$	89,272	$	5,595	$	110,936		$	728,045
Net income		-		-		-		10,060		-		2,096			12,156
Other comprehensive income		-		-		-		-		9,243		3,296			12,539
Sale of common stock through employee stock option and purchase plans		73		1		331		-		-		-			332
Restricted stock awards vesting and expense		16		-		260		-		-		-			260
Share-based compensation expense		-		-		702		-		-		(51	)		651
Balance at May 3, 2015		66,298	$	663	$	522,873	$	99,332	$	14,838	$	116,277		$	753,983

	Six Months Ended May 1, 2016
	Photronics, Inc. Shareholders
	Common Stock				Additional					Accumulated Other			Non-
					Paid-in			Retained		Comprehensive			controlling			Total
	Shares		Amount		Capital			Earnings		Loss			Interests			Equity
Balance at November 1, 2015		66,602	$	666	$	526,401		$	130,060	$	(10,572	)	$	115,511		$	762,066
Net income		-		-		-			32,856		-			4,797			37,653
Other comprehensive income		-		-		-			-		1,726			1,073			2,799
Sale of common stock through employee stock option and purchase plans		514		5		2,839			-		-			-			2,844
Restricted stock awards vesting and expense		110		1		563			-		-			-			564
Share-based compensation expense		-		-		1,309			-		-			-			1,309
Conversion of debt to common stock		717		7		7,431			-		-			-			7,438
Repurchase of common stock of subsidiary		-		-		(8	)		-		-			8			-
Subsidiary dividend payable		-		-		-			-		-			(11,901	)		(11,901	)
Balance at May 1, 2016		67,943	$	679	$	538,535		$	162,916	$	(8,846	)	$	109,488		$	802,772

9

	Six Months Ended May 3, 2015
	Photronics, Inc. Shareholders
	Common Stock				Additional				Accumulated Other			Non-
					Paid-in		Retained		Comprehensive			controlling			Total
	Shares		Amount		Capital		Earnings		Income			Interests			Equity
Balance at November 2, 2014		65,930	$	659	$	520,182	$	85,435	$	21,774		$	111,444		$	739,494
Net income		-		-		-		13,897		-			5,401			19,298
Other comprehensive loss		-		-		-		-		(6,936	)		(568	)		(7,504	)
Sale of common stock through employee stock option and purchase plans		239		3		856		-		-			-			859
Restricted stock awards vesting and expense		129		1		533		-		-			-			534
Share-based compensation expense		-		-		1,302		-		-			-			1,302
Balance at May 3, 2015		66,298	$	663	$	522,873	$	99,332	$	14,838		$	116,277		$	753,983

NOTE 3 - PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following:

	May 1, 2016		November 1, 2015
Land	$	8,217	$	8,172
Buildings and improvements		121,655		121,472
Machinery and equipment		1,467,020		1,458,623
Leasehold improvements		19,002		18,856
Furniture, fixtures and office equipment		12,729		12,700
Construction in progress		14,199		6,657
		1,642,822		1,626,480
Less accumulated depreciation and amortization		1,119,153		1,079,196
	$	523,669	$	547,284

Equipment under capital leases are included in above property, plant and equipment as follows:

	May 1, 2016		November 1, 2015
Machinery and equipment	$	34,917	$	56,245
Less accumulated amortization		8,606		16,054
	$	26,311	$	40,191

 Depreciation and amortization expense for property, plant and equipment was $18.9 million and $38.0 million for the three and six month periods ended May 1, 2016, respectively, and $17.8 million and $37.0 million for the three and six month periods ended May 3, 2015, respectively.

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NOTE 4 - JOINT VENTURE, TECHNOLOGY LICENSE AND OTHER AGREEMENTS WITH MICRON TECHNOLOGY, INC.

In May 2006, Photronics and Micron Technology, Inc. ("Micron") entered into the MP Mask joint venture (“MP Mask”), which developed and produced photomasks for leading-edge and advanced next generation semiconductors. At the time of the formation of the joint venture, the Company also entered into both an agreement to license photomask technology developed by Micron and certain supply agreements.

This joint venture was a variable interest entity ("VIE") (as that term is defined in the ASC) because all costs of the joint venture were passed on to the Company and Micron through purchase agreements they had entered into with the joint venture, and it was dependent upon the Company and Micron for any additional cash requirements. On a quarterly basis the Company reassessed whether its interest in MP Mask gave it a controlling financial interest in this VIE. The purpose of this quarterly reassessment was to identify the primary beneficiary (which is defined in the ASC as the entity that consolidates a VIE) of the VIE. As a result of the reassessment in the current quarter, the Company determined that Micron was still the primary beneficiary of the VIE, by virtue of its tie-breaking voting rights within MP Mask’s Board of Managers, thereby having given it the power to direct the activities of MP Mask that most significantly impacted its economic performance, including its decision making authority in the ordinary course of business and its purchasing the majority of products produced by the VIE.

The Company utilized MP Mask for both high-end IC photomask production and research and development purposes. MP Mask charged its variable interest holders based on their actual usage of its facility. MP Mask separately charged for any research and development activities it engaged in at the requests of its owners. The Company recorded cost of sales of $2.7 million and $4.9 million and research and development expenses of $0.2 million and $0.5 million during the three and six month periods ended May 1, 2016. Cost of sales of $2.2 million and $3.4 million and research and development expenses of $0.2 million and $0.5 million were recorded during the three and six month periods ended May 3, 2015. As of May 1, 2016 and November 1, 2015, the Company owed MP Mask $7.3 million and $4.3 million, respectively, and had a receivable from Micron of $4.9 million and $6.4 million, respectively, both primarily related to the aforementioned supply agreements.

MP Mask was governed by a Board of Managers, appointed by Micron and the Company. Since MP Mask's inception, Micron, as a result of its majority ownership, had held majority voting power on the Board of Managers. The voting power held by each party was subject to change as ownership interests changed. Under the MP Mask joint venture operating agreement, the Company may have been required to make additional capital contributions to MP Mask up to the maximum amount defined in the operating agreement. However, had the Board of Managers determined that further additional funding was required, MP Mask would have pursued its own financing. If MP Mask was unable to obtain its own financing, it may have requested additional capital contributions from the Company. Should the Company have chosen not to make a requested contribution to MP Mask, its ownership percentage may have been reduced.

The Company's investment in the VIE, which represented its maximum exposure to loss, was $92.9 million at May 1, 2016 and $93.0 million at November 1, 2015. These amounts are reported in the Company's condensed consolidated balance sheets as "Investment in joint venture." The Company recorded a loss from its investment in the VIE of $0.1 million in the six month period ended May 1, 2016, and recorded a loss from its investment in the VIE of $0.1 million in the three and six month periods ended May 3, 2015.

On May 5, 2016, the Company sold its investment in MP Mask to Micron for $93.1 million. On that same date a supply agreement commenced between the Company and Micron, which provides that the Company will be the majority outsourced supplier of Micron’s photomasks and related services. The supply agreement has a one year term, subject to mutually agreeable renewals. In addition, the Company forevermore has the rights to use technology under the prior technology license agreement.

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NOTE 5 - LONG-TERM BORROWINGS

     Long-term borrowings consist of the following:

	May 1, 2016		November 1, 2015
3.25% convertible senior notes due in April 2016	$	-	$	57,500
3.25% convertible senior notes due in April 2019		57,500		57,500
2.77% capital lease obligation payable through July 2018		12,725		15,346
3.09% capital lease obligation payable through March 2016		-		2,269
		70,225		132,615
Less current portion		5,806		65,495
	$	64,419	$	67,120

In April 2016 $57.5 million of the Company’s senior convertible notes matured. The Company repaid $50.1 million to noteholders and issued approximately 0.7 million shares to noteholders that elected to convert their notes to common stock. The notes were exchanged at the rate of approximately 96 shares per $1,000 note principle, equivalent to a conversion rate of $10.37 per share.

In January 2015 the Company privately exchanged $57.5 million in aggregate principal amount of its 3.25% convertible senior notes with a maturity date of April 1, 2016, for new 3.25% convertible senior notes with an aggregate principal amount of $57.5 million with a maturity date of April 1, 2019. The conversion rate of the new notes is the same as that of the exchanged notes, which were issued in March 2011 with a conversion rate of approximately 96 shares of common stock per $1,000 note principal, equivalent to a conversion price of $10.37 per share of common stock, and is subject to adjustment upon the occurrence of certain events, which are described in the indenture dated January 22, 2015. Noteholders may convert each $1,000 principal amount of notes at any time prior to the close of business on the second scheduled trading day immediately preceding April 1, 2019, and the Company is not required to redeem the notes prior to their maturity date. Interest on the notes accrues in arrears, and is paid semiannually through the notes’ maturity date.

The Company’s credit facility, which expires in December 2018, has a $50 million limit with an expansion capacity to $75 million, and is secured by substantially all of the Company’s assets located in the United States and common stock the Company owns in certain of its foreign subsidiaries. The credit facility precludes the Company from paying cash dividends, and is subject to a minimum interest coverage ratio, total leverage ratio and minimum unrestricted cash balance financial covenants, all of which the Company was in compliance with at May 1, 2016. The Company had no outstanding borrowings against the credit facility at May 1, 2016, and $50 million was available for borrowing. The interest rate on the credit facility (1.73% at May 1, 2016) is based on the Company’s total leverage ratio at LIBOR plus a spread, as defined in the credit facility.

In August 2013 a $26.4 million principal amount, five year capital lease commenced to fund the purchase of a high-end lithography tool. Payments under the capital lease, which bears interest at 2.77%, are $0.5 million per month through July 2018.  Under the terms of the lease agreement, the Company must maintain the equipment in good working order, and is subject to a cross default with cross acceleration provision related to certain nonfinancial covenants incorporated in its credit facility. As of May 1, 2016, the total amount payable through the end of the lease term was $13.2 million, of which $12.7 million represented principal and $0.5 million represented interest.

In April 2011 the Company entered into a five year, $21.2 million capital lease for manufacturing equipment. Payments under the lease, which bore interest at 3.09%, were $0.4 million per month through March 2016. The lease agreement provided that the Company must maintain the equipment in good working order, and included a cross default with cross acceleration provision related to certain non-financial covenants incorporated in the Company's credit facility agreement. In March 2016 the Company paid the final installment on this lease and assumed ownership of the related equipment.

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NOTE 6 - SHARE-BASED COMPENSATION

The Company has a share-based compensation plan (the "Plan"), under which options, restricted stock, restricted stock units, stock appreciation rights, performance stock, performance units, and other awards based on, or related to, shares of the Company's common stock may be granted from shares authorized but unissued or shares previously issued and reacquired by the Company. The maximum number of shares of common stock approved by the Company’s shareholders to be issued under the Plan is nine million shares. Awards may be granted to officers, employees, directors, consultants, advisors, and independent contractors of the Company or its subsidiaries. In the event of a change in control (as defined in the Plan), the vesting of awards may be accelerated. The Plan, aspects of which are more fully described below, prohibits further awards from being issued under prior plans. Total share-based compensation costs for the three and six month periods ended May 1, 2016, were $1.0 million and $1.9 million, respectively, and $0.9 million and $1.8 million for the three and six month periods ended May 3, 2015, respectively. The Company received cash from option exercises of $0.9 million and $2.8 million for the three and six month periods ended May 1, 2016, respectively, and $0.3 million and $1.0 million for the three and six month periods ended May 3, 2015, respectively. No share-based compensation cost was capitalized as part of an asset and no related income tax benefits were recorded during the periods presented.

Stock Options

Option awards generally vest in one to four years, and have a ten-year contractual term. All incentive and non-qualified stock option grants have an exercise price equal to the market value of the underlying common stock on the date of grant. The grant date fair values of options are based on closing prices of the Company’s common stock on the dates of grant using the Black-Scholes option pricing model. Expected volatility is based on the historical volatility of the Company's stock. The Company uses historical option exercise behavior and employee termination data to estimate expected term, which represents the period of time that the options granted are expected to remain outstanding. The risk-free rate of return for the estimated term of the option is based on the U.S. Treasury yield curve in effect at the date of grant.

The weighted-average inputs and risk-free rate of return ranges used to calculate the grant date fair value of options issued during the three and six month periods ended May 1, 2016 and May 3, 2015, are presented in the following table.

	Three Months Ended				Six Months Ended
	May 1, 2016		May 3, 2015		May 1, 2016		May 3, 2015
Volatility		39.8%		54.9%		49.5%		55.0%
Risk free rate of return		1.4%		1.3%		1.4-1.7%		1.3-1.6%
Dividend yield		0.0%		0.0%		0.0%		0.0%
Expected term	5.1 years		4.7 years		5.1 years		4.7 years

Information on outstanding and exercisable option awards as of May 1, 2016, is presented below.

Options	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding at May 1, 2016		3,888,510	$	8.25	6.2 years	$	12,053
Exercisable at May 1, 2016		2,324,435	$	7.33	4.5 years	$	9,671

There were 23,000 share options granted during the three month period ended May 1, 2016,with a weighted-average grant date fair value of $3.74 per share and 302,800 share options granted during the three month period ended May 3, 2015, with a weighted-average grant date fair value of $3.84 per share. There were 602,250 share options granted during the six month period ended May 1, 2016, with a weighted-average grant date fair value of $4.63 per share and 604,800 share options granted during the six month period ended May 3, 2015, with a weighted-average grant date fair value of $3.86 per share. As of May 1, 2016, the total unrecognized compensation cost related to unvested option awards was approximately $5.7 million. That cost is expected to be recognized over a weighted-average amortization period of 2.7 years.

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Restricted Stock

The Company periodically grants restricted stock awards. The restrictions on these awards lapse over a service period that has ranged from less-than-one to four years. No restricted stock awards were granted during the three month period ended May 1, 2016, and 115,225 restricted stock awards were issued during the six month period ended May 1, 2016, with a weighted-average grant date fair value of $12.13 per share. No restricted stock awards were granted during the three month period ended May 3, 2015, and 111,334 restricted stock awards were issued during the six month period ended May 3, 2015, with a weighted-average grant date fair value of $8.23 per share. As of May 1, 2016, the total compensation cost not yet recognized related to unvested restricted stock awards was approximately $1.7 million. That cost is expected to be recognized over a weighted-average amortization period of 2.2 years. As of May 1, 2016, there were 194,875 shares of restricted stock outstanding.

NOTE 7 - INCOME TAXES

    The effective tax rate differs from the U.S. statutory rate of 35% in the three and six month periods ended May 1, 2016 and May 3, 2015, primarily due to earnings being taxed at lower statutory rates in foreign jurisdictions, combined with the realization of certain tax benefits, as further noted below, in a foreign jurisdiction and the benefit of various investment credits in a foreign jurisdiction. Valuation allowances in jurisdictions with historic losses eliminate the effective rate impact of these jurisdictions.

    As of May 1, 2016, and May 3, 2015, the Company determined that deferred tax assets of $2.5 million and $1.5 million, respectively, whose realization was previously not considered to be more likely than not, are realizable and, therefore, reduced their related valuation allowances. During the three month period ended May 1, 2016, the Company realized a $2.4 million benefit, which resulted from the reversal of a previously recorded undistributed earnings tax liability in a foreign jurisdiction. As a result of a shareholder action to approve a dividend in this jurisdiction, the Company determined that it is no longer liable for this tax. In addition, during April 2016, $0.7 million of withholding tax was incurred upon the completion of a foreign subsidiary share redemption which commenced in fiscal year 2015.

    Unrecognized tax benefits related to uncertain tax positions were $4.8 million at May 1, 2016, and $4.1 million at November 1, 2015, all of which would favorably impact the Company's effective tax rate if recognized. Accrued interest and penalties related to unrecognized tax benefits was $0.1 million at May 1, 2016 and November 1, 2015. As of May 1, 2016, the total amount of unrecognized tax benefits is not expected to significantly increase or decrease in the next twelve months.

    PKLT, the Company's FPD manufacturing facility in Taiwan, has been accorded a tax holiday, which started in 2012 and expires in 2017. This tax holiday had no dollar or per share effect in the three and six month periods ended May 1, 2016 and May 3, 2015. PDMC, the Company’s IC manufacturing facility in Taiwan was accorded a tax holiday that commenced in 2015 and expires in 2019. The Company realized tax benefits from this tax holiday of $0.1 million in the three month periods ended May 1, 2016 and May 3, 2015and $0.2 million and $0.1 million in the respective six month periods. The tax holiday had no per share effect in the three and six month periods ended May 1, 2016 and May 3, 2015.

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NOTE 8 - EARNINGS PER SHARE

The calculation of basic and diluted earnings per share is presented below.

	Three Months Ended				Six Months Ended
	May 1, 2016		May 3, 2015		May 1, 2016		May 3, 2015
Net income attributable to Photronics, Inc. shareholders	$	11,854	$	10,060	$	32,856	$	13,897
Effect of dilutive securities:
Interest expense on convertible notes, net of related tax effects		875		1,071		1,946		1,071
Earnings for diluted earnings per share	$	12,729	$	11,131	$	34,802	$	14,968
Weighted-average common shares computations:
Weighted-average common shares used for basic earnings per share		67,372		66,230		67,090		66,148
Effect of dilutive securities:
Convertible notes		9,196		11,084		10,140		5,542
Share-based payment awards		948		914		1,096		934
Potentially dilutive common shares		10,144		11,998		11,236		6,476
Weighted-average common shares used for diluted earnings per share		77,516		78,228		78,326		72,624
Basic earnings per share	$	0.18	$	0.15	$	0.49	$	0.21
Diluted earnings per share	$	0.16	$	0.14	$	0.44	$	0.21

The table below shows the outstanding weighted-average share-based payment awards that were excluded from the calculation of diluted earnings per share because their exercise price exceeded the average market value of the common shares for the period, and convertible notes that, if converted, would have been antidilutive.

	Three Months Ended				Six Months Ended
	May 1, 2016		May 3, 2015		May 1, 2016		May 3, 2015
Share-based payment awards		2,160		1,654		1,414		1,621
Convertible notes		-		-		-		5,542
Total potentially dilutive shares excluded		2,160		1,654		1,414		7,163

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NOTE 9 - CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME BY COMPONENT

The following tables set forth thechanges in the Company's accumulated other comprehensive income by component (net of tax of $0)for the three and six month periods ended May 1, 2016 and May 3, 2015:

	Three Months Ended May 1, 2016
	Foreign Currency Translation Adjustments			Amortization of Cash Flow Hedge			Other			Total
Balance at January 31, 2016	$	(27,118	)	$	(274	)	$	(613	)	$	(28,005	)
Other comprehensive income (loss) before reclassifications		23,861			-			(50	)		23,811
Amounts reclassified from other comprehensive income		-			32			-			32
Net current period other comprehensive income (loss)		23,861			32			(50	)		23,843
Less: other comprehensive (income) loss attributable to noncontrolling interests		(4,709	)		-			25			(4,684	)
Balance at May 1, 2016	$	(7,966	)	$	(242	)	$	(638	)	$	(8,846	)

	Three Months Ended May 3, 2015
	Foreign Currency Translation Adjustments			Amortization of Cash Flow Hedge			Other			Total
Balance at February 1, 2015	$	6,424		$	(402	)	$	(427	)	$	5,595
Other comprehensive income (loss) before reclassifications		12,532			-			(25	)		12,507
Amounts reclassified from other comprehensive income		-			32			-			32
Net current period other comprehensive income (loss)		12,532			32			(25	)		12,539
Less: other comprehensive income attributable to noncontrolling interests		(3,308	)		-			12			(3,296	)
Balance at May 3, 2015	$	15,648		$	(370	)	$	(440	)	$	14,838

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	Six Months Ended May 1, 2016
	Foreign Currency Translation Adjustments			Amortization of Cash Flow Hedge			Other			Total
Balance at November 1, 2015	$	(9,634	)	$	(306	)	$	(633	)	$	(10,573	)
Other comprehensive income (loss) before reclassifications		2,746			-			(11	)		2,735
Amounts reclassified from other comprehensive income		-			64			-			64
Net current period other comprehensive income (loss)		2,746			64			(11	)		2,799
Less: other comprehensive (income) loss attributable to noncontrolling interests		(1,078	)		-			6			(1,072	)
Balance at May 1, 2016	$	(7,966	)	$	(242	)	$	(638	)	$	(8,846	)

	Six Months Ended May 3, 2015
	Foreign Currency Translation Adjustments			Amortization of Cash Flow Hedge			Other			Total
Balance at November 2, 2014	$	22,651		$	(434	)	$	(443	)	$	21,774
Other comprehensive income (loss) before reclassifications		(7,574	)		-			6			(7,568	)
Amounts reclassified from other comprehensive income		-			64			-			64
Net current period other comprehensive income (loss)		(7,574	)		64			6			(7,504	)
Less: other comprehensive (income) loss attributable to noncontrolling interests		571			-			(3	)		568
Balance at May 3, 2015	$	15,648		$	(370	)	$	(440	)	$	14,838

The amortization of the cash flow hedge is included in cost of sales in the condensed consolidated statements of income for all periods presented.

NOTE 10 - FAIR VALUE MEASUREMENTS

The accounting framework for determining fair value includes a hierarchy for ranking the quality and reliability of the information used to measure fair value, which enables the reader of the financial statements to assess the inputs used to develop those measurements. The fair value hierarchy consists of three tiers as follows: Level 1, defined as quoted prices (unadjusted) in active markets for identical securities; Level 2, defined as inputs other than Level 1 that are observable, either directly or indirectly; and Level 3, defined as unobservable inputs that are not corroborated by market data.

The Company did not have any assets or liabilities measured at fair value on a recurring or a nonrecurring basis at May 1, 2016 or November 1, 2015.

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Fair Value of Other Financial Instruments

The fair values of the Company's cash and cash equivalents (Level 1 measurements), accounts receivable, accounts payable, and certain other current assets and current liabilities (Level 2 measurements) approximate their carrying value due to their short-term maturities. The fair value of the Company’s convertible senior notes is a Level 2 measurement that is determined using recent bid prices.

The table below presents the fair and carrying values of the Company's convertible senior notes at May 1, 2016 and November 1, 2015.

	May 1, 2016				November 1, 2015
	Fair Value		Carrying Value		Fair Value		Carrying Value
3.25% convertible senior notes due 2016	$	-	$	-	$	60,375	$	57,500
3.25% convertible senior notes due 2019	$	69,966	$	57,500	$	64,550	$	57,500

NOTE 11 - COMMITMENTS AND CONTINGENCIES

As of May 1, 2016, the Company had commitments outstanding for capital expenditures of approximately $59 million.

The Company is subject to various claims that arise in the ordinary course of business. The Company believes such claims, individually or in the aggregate, will not have a material effect on its condensed consolidated financial statements.

NOTE 12 – GAIN ON SALE OF INVESTMENT

The Company had a minority interest in a foreign entity. In the first quarter of fiscal year 2016, the Company sold this investment and recognized a gain of $8.8 million.

NOTE 13 - RECENT ACCOUNTING PRONOUNCEMENTS

In March 2016 the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016 – 09 “Improvements to Employee Share-Based Payment Accounting”, which simplifies the accounting for share-based payment transactions including their income tax consequences, classification as either equity or liability awards, classification on the statement of cash flows, and other areas. The Update is effective for the Company in its first quarter of fiscal year 2018, with early application permitted. The Company is currently evaluating the effect this ASU will have on its consolidated financial statements.

In February 2016 the FASB issued ASU 2016 – 02 “Leases (Topic 842)”, which requires lessees to recognize right-of-use assets and corresponding liabilities for all leases with an initial term in excess of twelve months. The ASU is effective for the Company in its first quarter of fiscal year 2020, with early application permitted, and the Company is currently evaluating the effect this ASU will have on its consolidated financial statements.

In January 2016 the FASB issued ASU 2016-01 “Recognition and Measurement of Financial Assets and Financial Liabilities”, which provides targeted improvements to the recognition, measurement, presentation and disclosure of financial assets and financial liabilities. Specific accounting areas addressed include, equity investments, financial liabilities reported under the fair value option and valuation allowance assessment resulting from unrealized losses on available-for-sale securities. The ASU also changes certain presentation and disclosure requirements for financial instruments. This ASU is effective for the Company in its first quarter of fiscal year 2019. Early adoption, with certain exceptions, is not permitted. The Company is currently evaluating the effect this ASU will have on its consolidated financial statements.

In November 2015 the FASB issued ASU 2015-17 “Balance Sheet Classification of Deferred Taxes”, which requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. This ASU is effective for the Company in its first quarter of fiscal year 2018, with early application permitted and, upon adoption, may be applied either prospectively or retrospectively. The Company is currently evaluating the effect this ASU will have on its consolidated financial statements.

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In April 2015 the FASB issued ASU 2015-03 “Simplifying the Presentation of Debt Issuance Costs”, which requires debt issuance costs related to recognized debt liability to be presented in the balance sheet as a direct deduction from that debt liability, consistent with the presentation of a debt discount. This ASU is effective for the Company in its first quarter of fiscal year 2017 and, upon adoption, should be applied retrospectively. Early adoption is permitted. The Company is currently evaluating the effect this ASU will have on its consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers”, which will supersede nearly all existing revenue recognition guidance under accounting principles generally accepted in the United States. The core principle of this ASU is that revenue should be recognized for the amount of consideration expected to be received for promised goods or services transferred to customers. This ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments, and assets recognized for costs incurred to obtain or fulfill a contract. In August 2015 the FASB issued ASU 2015-14 which defers the effective date of ASU 2014-09 by one year and allows entities to early adopt, but no earlier than the original effective date. ASU 2014-09 will now be effective for the Company in its first quarter of fiscal year 2019. ASU 2014-09 allows for either full retrospective or modified retrospective adoption. In April 2016 the FASB issued ASU 2016-10 “Identifying Performance Obligations and Licensing” which amends guidance previously issued on these matters in ASU 2014-09. The effective date and transition requirements of ASU 2016-10 are the same as those for ASU 2014-09. The Company is evaluating the transition method that will be elected and the potential effects of the adoption of these Updates on its consolidated financial statements.

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

Management's discussion and analysis ("MD&A") of the Company's financial condition, results of operations and outlook should be read in conjunction with its condensed consolidated financial statements and related notes. Various segments of this MD&A contain forward-looking statements, all of which are presented based on current expectations and may be adversely affected by uncertainties and risk factors (presented throughout this filing and in the Company's Annual Report on Form 10-K for the fiscal 2015 year), that may cause actual results to materially differ from these expectations.

The Company sells substantially all of its photomasks to semiconductor designers and manufacturers, and manufacturers of FPDs. Photomask technology is also being applied to the fabrication of other higher performance electronic products such as photonics, micro-electronic mechanical systems and certain nanotechnology applications. Thus, the Company's selling cycle is tightly interwoven with the development and release of new semiconductor designs and flat panel applications, particularly as it relates to the semiconductor industry's migration to more advanced design methodologies and fabrication processes. The Company believes that the demand for photomasks primarily depends on design activity rather than sales volumes from products produced using photomask technologies. Consequently, an increase in semiconductor or FPD sales does not necessarily result in a corresponding increase in photomask sales. However, the reduced use of customized ICs, reductions in design complexity, other changes in the technology or methods of manufacturing or designing semiconductors, or a slowdown in the introduction of new semiconductor or FPD designs could reduce demand for photomasks even if demand for semiconductors and FPDs increases. Advances in semiconductor, FPD and photomask design and semiconductor production methods could also reduce the demand for photomasks. Historically, the semiconductor industry has been volatile, with sharp periodic downturns and slowdowns. These downturns have been characterized by, among other things, diminished product demand, excess production capacity and accelerated erosion of selling prices.

The global semiconductor industry, including mobile displays, is driven by end markets which have been closely tied to consumer driven applications of high performance semiconductor devices including, but not limited to, mobile communications and computing solutions. The Company is typically required to fulfill its customer orders within a short period of time, sometimes within 24 hours. This results in the Company having a minimal level of backlog orders, typically one to two weeks for IC photomasks and two to three weeks for FPD photomasks. The Company cannot predict the timing of the industry's transition to volume production of next generation technology nodes or the timing of up and down cycles with precise accuracy, but believes that such transitions and cycles will continue into the future, beneficially and adversely affecting its business, financial condition and operating results in the near term. The Company believes its ability to remain successful in these environments is dependent upon achieving its goals of being a service and technology leader and efficient solutions supplier, which it believes should enable it to continually reinvest in its global infrastructure.

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Material Changes in Results of Operations

Three and Six Months ended May 1, 2016 and May 3, 2015

The following table represents selected operating information expressed as a percentage of net sales.

	Three Months Ended						Six Months Ended
	May 1, 2016			May 3, 2015			May 1, 2016			May 3, 2015
Net sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales		(74.5	)		(74.0	)		(73.6	)		(75.6	)
Gross margin		25.5			26.0			26.4			24.4
Selling, general and administrative expenses		(9.0	)		(9.7	)		(9.2	)		(9.7	)
Research and development expenses		(4.4	)		(4.6	)		(4.4	)		(4.2	)
Operating income		12.1			11.7			12.8			10.5
Gain on acquisition		-			-			3.4			-
Other income (expense), net		(2.5	)		(1.2	)		(0.8	)		(1.1	)
Income before income tax benefit (provision)		9.6			10.5			15.4			9.4
Income tax benefit (provision)		1.9			(1.0	)		(0.5	)		(1.7	)
Net income		11.5			9.5			14.9			7.7
Net income attributable to noncontrolling interests		(1.9	)		(1.6	)		(1.9	)		(2.2	)
Net income attributable to Photronics, Inc. shareholders		9.6	%		7.9	%		13.0	%		5.5	%

Note: All of the following tabular comparisons, unless otherwise indicated, are for the three months ended May 1, 2016 (Q2-16) and May 3, 2015 (Q2-15) and for the six months ended May 1, 2016 (YTD-16) and May 3, 2015 (YTD-15), in millions of dollars.

Net Sales

	Three Months Ended							Six Months Ended
		Q2-16		Q2-15	Percent Change			YTD-16		YTD-15		Percent Change
IC	$	90.9	$	103.8		( 12.5	)%	$	190.6	$	205.3		( 7.1	)%
FPD		32.0		23.5		36.4	%		62.3		45.5		36.7	%
Total net sales	$	122.9	$	127.3		(3.4	)%	$	252.9	$	250.8		0.8	%

Net sales for Q2-16 decreased 3.4% to $122.9 million as compared to $127.3 million for Q2-15. The decrease was primarily a result of reduced high-end IC demand and seasonality in Asia, offset by higher FPD revenue due to increased advanced display demand. Revenues attributable to high-end products increased by $1.4 million to $58.1 million in Q2-16 as compared to $56.6 million in Q2-15. High-end photomask applications include mask sets for 45 nanometer and below for IC products, and G8 and above and active matrix organic light-emitting diode (AMOLED) display screen technologies for FPD products. By geographic area, net sales in Q2-16, as compared to Q2-15, increased (decreased) by $(2.9) million or (5.9)% to $46.6 million in Taiwan, $(1.3) million or (3.8)% to $31.6 million in the United States, and $(0.2) million or (2.4)%to $8.6 million in Europe. Net sales in Korea in Q2-16 were $35.6 million, unchanged from Q2-15.

Net sales for YTD-16 increased to $252.9 million as compared to $250.8 million for YTD-15, as a result of strong FPD demand offset by lower IC revenues. Revenues attributable to high-end products increased by $14.8 million to $123.2 million in YTD-16 as compared to $108.4 million in YTD-15 primarily due to increased FPD advanced display demand.

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The Company’s quarterly revenues can be affected by the seasonal purchasing of its customers. Demand for the Company's products is typically negatively impacted during the first six months of its fiscal year by the North American, European and Asian holiday periods, as some customers reduce their effective workdays and orders during this period.

Gross Margin

	Three Months Ended									Six Months Ended
		Q2-16			Q2-15		Percent Change			YTD-16			YTD-15			Percent Change
Gross margin	$	31.3		$	33.1			(5.5	)%	$	66.7		$	61.3			8.9	%
Percentage of net sales		25.5	%		26.0	%					26.4	%		24.4	%

Gross margin percentage decreased to 25.5% in Q2-16 from 26.0% in Q2-15, primarily due to lower demand for IC products. YTD-16 increased to 26.4% from 24.4% in YTD-15 due to increased high-end revenues. The Company operates in a high fixed cost environment and, to the extent that the Company's revenues and utilization increase or decrease, gross margin will generally be positively or negatively impacted.

Selling, General and Administrative Expenses

	Three Months Ended									Six Months Ended
		Q2-16			Q2-15		Percent Change			YTD-16			YTD-15			Percent Change
Selling, general and administrative expenses	$	11.0		$	12.4			(11.2	)%	$	23.2		$	24.4			(4.7	)%
Percentage of net sales		9.0	%		9.7	%					9.2	%		9.7	%

Selling, general and administrative expenses were $11.0 million in Q2-16 and $12.4 million in Q2-15, and were $23.2 million in YTD-16 and $24.4 million in YTD-15. These decreases were primarily the result of lower compensation and selling expenses.

Research and Development

	Three Months Ended									Six Months Ended
		Q2-16			Q2-15		Percent Change			YTD-16			YTD-15			Percent Change
Research and development	$	5.4		$	5.8			(6.2	)%	$	11.1		$	10.5			6.3	%
Percentage of net sales		4.4	%		4.6	%					4.4	%		4.2	%

Research and development expenses consist primarily of global development efforts related to high-end process technologies for advanced sub-wavelength reticle solutions for IC technologies. Research and development expenses decreased by $0.4 million to $5.4 million in Q2-16, as compared to $5.8 million in Q2-15 due to decreased development activities related to advanced nanometer technology nodes. YTD-16 research and development expense increased by $0.6 million to $11.1 million, as compared $10.5 million in YTD-15 due to increased activities at advanced nanometer technology nodes for IC photomasks in Q1-16.

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Other Income (Expense), net

	Three Months Ended						Six Months Ended
		Q2-16			Q2-15		YTD-16			YTD-15
Gain on sale of investment	$	-		$	-		$	8.8		$	-
Interest expense		(1.0	)		(1.3	)		(2.1	)		(2.6	)
Interest and other income (expense), net		(2.0	)		(0.2	)		-			(0.1	)
Other income (expense), net	$	(3.0	)	$	(1.5	)	$	6.7		$	(2.7	)

In January 2016 the Company sold a minority interest investment in a foreign entity and recognized a gain of $8.8 million.

Interest expense decreased by $0.3 million in Q2-16, as compared to Q2-15, and by $0.5 million in YTD-16, as compared to YTD-15, primarily as a result of the impact of the 3.25% convertible debt that matured on April 1, 2016.

Interest and other income (expense), net decreased in Q2-16 as compared to Q2-15 by $1.8 million primarily due to foreign currency exchange losses recorded in Q2-16, and increased $0.1 million in YTD-16, as compared to YTD-15, as the impact of debt conversion expenses incurred in FY-15 offset less favorable foreign currency exchange results in FY-15.

Income Tax (Benefit) Provision

	Three Months Ended						Six Months Ended
		Q2-16			Q2-15		YTD-16			YTD-15
Income tax provision	$	(2.3	)	$	1.3		$	1.4		$	4.4
Effective income tax rate		(19.7	)%		9.3	%		3.5	%		18.5	%

The Company’s effective income tax rate is sensitive to the jurisdictional mix of earnings, due in part to the non-recognition of tax benefits on losses in jurisdictions with valuation allowances.

The effective income tax rate decreased in Q2-16 and YTD-16, as compared with Q2-15 and YTD-15, primarily as a result of the following factors: the recognition in Q2-16 and FY-16 of $2.5 million, compared with $1.5 million in Q2-15 and FY-15, of previously unrecognized deferred tax assets which resulted from the improved performance of the Company’s FPD operations; the reversal of previously recognized tax expense of $2.4 million that was eliminated by a distribution of the FY-15 earnings of a foreign subsidiary to its foreign parent; a higher percentage of income before income taxes, including the $8.8 million gain on the sale of investment in Q1-16, generated in jurisdictions where the company previously incurred losses that, due to valuation allowances, did not result in the Company recognizing tax benefits. These positive factors were offset in part by the accrual of $0.7 million of withholding taxes related to a foreign subsidiary share redemption in a foreign jurisdiction. As of each reporting date, the Company considers new evidence, both positive and negative, that could impact management’s view with regards to the future realizations of deferred tax assets.

Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests increased $0.2 million to $2.3 million in Q2-16, as compared to $2.1 million in Q2-15, and decreased by $0.6 million to $4.8 million in YTD-16, as compared to $5.4 million in YTD-15, as a result of the net income of the Company’s IC manufacturing facility in Taiwan.

Liquidity and Capital Resources

The Company's working capital increased to $233.1 million at May 1, 2016 as compared to $171.4 million at November 1, 2015. Cash and cash equivalents decreased to $194.0 million at May 1, 2016, as compared to $205.9 million at November 1, 2015. The decrease was primarily due to repayment of $50.1 million to convertible debt noteholders, offset by an increase in net income over the prior year’s comparable period, and the proceeds of $8.8 million from the sale of an investment in a foreign entity. Net cash provided by operating activities was $65.1 million for the six month period ended May 1, 2016, as compared to $57.9 million for the six month period ended May 3, 2015, the increase primarily due to an increase in net income over the prior year’s comparable period. Net cash used in investing activities for the six month period ended May 1, 2016, was $26.0 million, which was comprised primarily of capital expenditure payments, partially offset by proceeds of $8.8 million received from the sale of an investment. Net cash used in financing activities of $51.9 million for the six month period ended May 1, 2016, was comprised of repayments of long-term borrowings of $55.0 million, partially offset by proceeds of $3.0 million received from exercises of employee stock options. The Company may use its cash available on hand for operations, capital expenditures, debt repayments, strategic opportunities, stock repurchases or other corporate uses, any of which may be material.

22

As of May 1, 2016 and November 1, 2015, the Company’s total cash and cash equivalents include $111.3 million and $102.9 million, respectively, held by its foreign subsidiaries. The majority of earnings of the Company’s foreign subsidiaries are considered to be indefinitely reinvested. However, in the event that the Company was to repatriate these earnings, such action may result in increased U.S. federal income taxes and local country withholding tax in certain jurisdictions. The Company’s foreign subsidiaries continue to grow through the reinvestment of earnings in additional manufacturing capacity and capability, particularly in the high-end IC and FPD areas.

On May 5, 2016, the Company sold its investment in MP Mask to Micron for $93.1 million. On that same date a supply agreement commenced between the Company and Micron, which provides that the Company will be the majority outsourced supplier of Micron’s photomasks and related services. The supply agreement has a one year term, subject to mutually agreeable renewals. In addition, the Company forevermore has the rights to use technology under the prior technology license agreement.

In April 2016 PDMC, the Company’s majority owned IC manufacturing subsidiary in Taiwan, declared a dividend of approximately $23.8 million, approximately $11.9 million of which is expected to be paid to PDMC’s noncontrolling interest in the third fiscal quarter of 2016.

In April 2016 $57.5 million of the Company’s senior convertible notes matured. The Company repaid $50.1 million to noteholders and issued approximately 0.7 million shares to noteholders that elected to convert their notes to common stock. The notes were exchanged at the rate of approximately 96 shares per $1,000 note principle, equivalent to a conversion rate of $10.37 per share.

In January 2015 the Company privately exchanged $57.5 million in aggregate principal amount of its 3.25% convertible senior notes with a maturity date of April 1, 2016, for new 3.25% convertible senior notes with an aggregate principal amount of $57.5 million with a maturity date of April 1, 2019. The conversion rate of the new notes is the same as that of the exchanged notes, which were issued in March 2011 with a conversion rate of approximately 96 shares of common stock per $1,000 note principal, equivalent to a conversion price of $10.37 per share of common stock, and is subject to adjustment upon the occurrence of certain events, which are described in the indenture dated January 22, 2015. Noteholders may convert each $1,000 principal amount of notes at any time prior to the close of business on the second scheduled trading day immediately preceding April 1, 2019, and the Company is not required to redeem the notes prior to their maturity date. Interest on the notes accrues in arrears, and is paid semiannually through the notes’ maturity date.

The Company’s credit facility, which expires in December 2018, has a $50 million limit with an expansion capacity to $75 million, and is secured by substantially all of the Company’s assets located in the United States and common stock the Company owns in certain of its foreign subsidiaries. The credit facility precludes the Company from paying cash dividends and is subject to a minimum interest coverage ratio, total leverage ratio and minimum unrestricted cash balance financial covenants, all of which the Company was in compliance with at May 1, 2016. The Company had no outstanding borrowings against the credit facility at May 1, 2016, and $50 million was available for borrowing. The interest rate on the credit facility (1.73% at May 1, 2016) is based on the Company’s total leverage ratio at LIBOR plus a spread, as defined in the credit facility.

As of May 1, 2016, the Company had capital equipment commitments outstanding of approximately $59 million. The Company believes that its currently available resources, together with its capacity for growth, and its access to equity and other financing sources, will be sufficient to satisfy its currently planned capital expenditures, as well as its anticipated working capital requirements for the next twelve months. However, the Company cannot assure that additional sources of financing would be available to the Company on commercially favorable terms should the Company's capital requirements exceed cash available from operations, existing cash, and cash available under its credit facility.

The Company's liquidity is highly dependent on its sales volume, cash conversion cycle, and the timing of its capital expenditures (which can vary significantly from period to period), as it operates in a high fixed cost environment. Depending on conditions in the semiconductor and FPD markets, the Company's cash flows from operations and current holdings of cash may not be adequate to meet its current and long-term needs for capital expenditures, operations and debt repayments. However, the Company believes its cash on hand, cash generated from its operations and cash committed under its credit facility will allow it to fund its operations through at least the next twelve months. Historically, in certain years, the Company has used external financing to fund these needs. Due to conditions in the credit markets, some financing instruments used by the Company in the past may not be currently available to it. The Company continues to evaluate further cost reduction initiatives. However, the Company cannot assure that additional sources of financing would be available to it on commercially favorable terms, should its cash requirements exceed cash available from operations, existing cash, and cash available under its credit facility.

 

23

Off-Balance Sheet Arrangements

In April 2014 the Company acquired 50.01% (a controlling interest) of PDMC, its IC manufacturing facility located in Taiwan. Under the PDMC operating agreement the shareholders of PDMC may be requested to make additional contributions to PDMC. In the event that PDMC requests additional capital from its shareholders, the Company may be required to make additional capital contributions to PDMC in order to maintain its 50.01% ownership. The PDMC operating agreement limits the amount of contributions that may be requested during both the first four years of PDMC and during any individual year within those first four years.

The Company leases certain office facilities and equipment under operating leases that may require it to pay taxes, insurance and maintenance expenses related to the properties. Certain of these leases contain renewal or purchase options exercisable at the end of the lease terms.

Business Outlook

A majority of the Company's revenue growth is expected to continue to come from the Asian region, as customers increase their use of manufacturing foundries located outside of North America and Europe. Additional revenue growth is also anticipated in North America, as the Company expects to continue to benefit from advanced technology it may utilize under its technology license with Micron.

The Company continues to assess its global manufacturing strategy and monitor its market capitalization, sales volume and related cash flows from operations. This ongoing assessment could result in future facility closures, asset redeployments, additional impairments of intangible or long-lived assets, workforce reductions, or the addition of increased manufacturing facilities, all of which would be based on market conditions and customer requirements.

Effect of Recent Accounting Pronouncements

See “Note 13 – Recent Accounting Pronouncements” to the condensed consolidated financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Exchange Rate Risk

The Company conducts business in several major international currencies through its worldwide operations and its financial performance may be affected by fluctuations in the exchange rates of these currencies. Changes in exchange rates can positively or negatively affect the Company's sales, operating margins, assets, liabilities, and equity. The functional currencies of the Company's Asian subsidiaries are the Korean won, the New Taiwan dollar, and the Singapore dollar. The functional currencies of the Company's European subsidiaries are the British pound and the euro. The Company also engages in transactions and holds balances in Japanese yen.

The Company attempts to minimize its risk of foreign currency transaction losses by producing its products in the same country in which the products are sold (thereby generating revenues and incurring expenses in the same currency), and by managing its working capital. There can be no assurance that this approach will continue to be successful, especially in the event of a significant adverse movement in the value of any foreign currency against the U.S. dollar, the New Taiwan dollar or the Korean won. However, in some instances, the Company sells products in a currency other than the functional currency of the country where it was produced or purchases products in a currency that differs from the functional currency of the purchasing manufacturing facility.

The Company's primary net foreign currency exposures as of May 1, 2016, included the Korean won, the Japanese yen, the New Taiwan dollar, the Singapore dollar, the British pound, and the euro. As of May 1, 2016, a 10% adverse movement in the value of these currencies against the U.S. dollar would have resulted in a net unrealized pre-tax loss of $8.3 million. The Company does not believe that a 10% change in the exchange rates of other non-U.S. dollar currencies would have a material effect on its results of operations or cash flows.

Interest Rate Risk

At May 1, 2016, the Company did not have any variable rate borrowings. A 10% change in interest rates would not have had a material effect on the Company’s consolidated financial position, results of operations, or cash flows in the three or six month periods ended May 1, 2016.

24

Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company has established and currently maintains disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), designed to provide reasonable assurance that information required to be disclosed in its reports filed under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to management, including the Company's chief executive officer and chief financial officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

The Company's management, under the supervision and with the participation of the Company’s chief executive officer and chief financial officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation the Company’s chief executive officer and chief financial officer concluded that the Company’s disclosure controls and procedures were effective at a reasonable assurance level as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

There was no change in the Company's internal control over financial reporting during the Company's second quarter of fiscal 2016 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1A. RISK FACTORS

There have been no material changes to risks relating to the Company's business as disclosed in Part 1, Item 1A of the Company's Form 10-K for the year ended November 1, 2015.

25

Item 6.	EXHIBITS
	(a)	Exhibits
		Exhibit Number	Description
		31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
		31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
		32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
		32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
		101.INS	XBRL Instance Document
		101.SCH	XBRL Taxonomy Extension Schema Document
		101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
		101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
		101.LAB	XBRL Taxonomy Extension Label Linkbase Document
		101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Photronics, Inc. (Registrant)
By:	/s/ SEAN T. SMITH
	Sean T. Smith
	Senior Vice President
	Chief Financial Officer
	(Duly Authorized Officer and
	Principal Financial Officer)
Date:  June 3, 2016

26

EX-31.1

EXHIBIT 31.1

I, Peter S. Kirlin, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Photronics, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/  PETER S. KIRLIN

Peter S. Kirlin

Chief Executive Officer

June 3, 2016

EX-31.2

EXHIBIT 31.2

I, Sean T. Smith, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Photronics, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/  SEAN T. SMITH

Sean T. Smith

Chief Financial Officer

June 3, 2016

EX-32.1

EXHIBIT 32.1

Section 1350 Certification of the Chief Executive Officer

I, Peter S. Kirlin, Chief Executive Officer of Photronics, Inc. (the "Company"), certify, to my knowledge, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

(1) The Quarterly Report on Form 10-Q of the Company for the quarter ended May 1, 2016, (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

The foregoing certification is being furnished pursuant to 18 U.S.C. § 1350 and will not be deemed "filed" for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

/s/  PETER S. KIRLIN

Peter S. Kirlin

Chief Executive Officer

June 3, 2016

EX-32.2

EXHIBIT 32.2

Section 1350 Certification of the Chief Financial Officer

I, Sean T. Smith, Chief Financial Officer of Photronics, Inc. (the "Company"), certify, to my knowledge, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

(1) The Quarterly Report on Form 10-Q of the Company for the quarter ended May 1, 2016, (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

The foregoing certification is being furnished pursuant to 18 U.S.C. § 1350 and will not be deemed "filed" for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

/s/  SEAN T. SMITH

Sean T. Smith

Chief Financial Officer

June 3, 2016

XML

Document and Entity Information - shares	6 Months Ended
	May. 01, 2016	May. 27, 2016
Document and Entity Information [Abstract]
Entity Registrant Name	PHOTRONICS INC
Entity Central Index Key	0000810136
Current Fiscal Year End Date	--10-30
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		68,139,720
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q2
Document Type	10-Q
Amendment Flag	false
Document Period End Date	May 01, 2016

XML

Condensed Consolidated Balance Sheets (unaudited) - USD ($) $ in Thousands	May. 01, 2016	Nov. 01, 2015
Current assets:
Cash and cash equivalents	$ 193,978	$ 205,867
Accounts receivable, net of allowance of $3,296 in 2016 and $3,301 in 2015	104,330	110,056
Inventories	24,510	24,157
Other current assets	24,409	24,034
Total current assets	347,227	364,114
Property, plant and equipment, net	523,669	547,284
Investment in joint venture	92,911	93,021
Intangible assets, net	22,071	24,616
Deferred income taxes	11,870	11,908
Other assets	4,160	4,612
Total assets	1,001,908	1,045,555
Current liabilities:
Current portion of long-term borrowings	5,806	65,495
Accounts payable	65,697	87,983
Accrued liabilities	42,614	39,214
Total current liabilities	114,117	192,692
Long-term borrowings	64,419	67,120
Other liabilities	20,600	23,677
Total liabilities	$ 199,136	$ 283,489
Commitments and contingencies
Equity:
Preferred stock, $0.01 par value, 2,000 shares authorized, none issued and outstanding	$ 0	$ 0
Common stock, $0.01 par value, 150,000 shares authorized, 67,943 shares issued and outstanding at May 1, 2016 and 66,602 shares issued and outstanding at November 1, 2015	679	666
Additional paid-in capital	538,535	526,402
Retained earnings	162,916	130,060
Accumulated other comprehensive loss	(8,846)	(10,573)
Total Photronics, Inc. shareholders' equity	693,284	646,555
Noncontrolling interests	109,488	115,511
Total equity	802,772	762,066
Total liabilities and equity	$ 1,001,908	$ 1,045,555

XML

Condensed Consolidated Balance Sheets (unaudited) (Parenthetical) - USD ($) shares in Thousands, $ in Thousands	May. 01, 2016	Nov. 01, 2015
Current assets:
Accounts receivable, allowance	$ 3,296	$ 3,301
Equity:
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	2,000	2,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	150,000	150,000
Common stock, shares issued (in shares)	67,943	66,602
Common stock, shares outstanding (in shares)	67,943	66,602

XML

Condensed Consolidated Statements of Income (unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	May. 01, 2016	May. 03, 2015	May. 01, 2016	May. 03, 2015
Condensed Consolidated Statements of Income (unaudited) [Abstract]
Net sales	$ 122,923	$ 127,309	$ 252,879	$ 250,814
Cost and expenses:
Cost of sales	(91,636)	(94,214)	(186,156)	(189,535)
Selling, general and administrative	(11,024)	(12,421)	(23,222)	(24,365)
Research and development	(5,447)	(5,809)	(11,148)	(10,490)
Operating income	14,816	14,865	32,353	26,424
Other income (expense):
Gain on sale of investment	0	0	8,785	0
Interest expense	(964)	(1,233)	(2,138)	(2,603)
Interest and other income (expense), net	(2,025)	(224)	27	(137)
Income before income tax benefit (provision)	11,827	13,408	39,027	23,684
Income tax benefit (provision)	2,326	(1,252)	(1,374)	(4,386)
Net income	14,153	12,156	37,653	19,298
Net income attributable to noncontrolling interests	(2,299)	(2,096)	(4,797)	(5,401)
Net income attributable to Photronics, Inc. shareholders	$ 11,854	$ 10,060	$ 32,856	$ 13,897
Earnings per share:
Basic (in dollars per share)	$ 0.18	$ 0.15	$ 0.49	$ 0.21
Diluted (in dollars per share)	$ 0.16	$ 0.14	$ 0.44	$ 0.21
Weighted-average number of common shares outstanding:
Basic (in shares)	67,372	66,230	67,090	66,148
Diluted (in shares)	77,516	78,228	78,326	72,624

XML

Condensed Consolidated Statements of Comprehensive Income (unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	May. 01, 2016	May. 03, 2015	May. 01, 2016	May. 03, 2015
Condensed Consolidated Statements of Comprehensive Income (unaudited) [Abstract]
Net income	$ 14,153	$ 12,156	$ 37,653	$ 19,298
Other comprehensive income (loss), net of tax of $0:
Foreign currency translation adjustments	23,811	12,507	2,735	(7,568)
Amortization of cash flow hedge	32	32	64	64
Net current period other comprehensive income (loss)	23,843	12,539	2,799	(7,504)
Comprehensive income	37,996	24,695	40,452	11,794
Less: comprehensive income attributable to noncontrolling interests	6,983	5,392	5,870	4,833
Comprehensive income attributable to Photronics, Inc. shareholders	$ 31,013	$ 19,303	$ 34,582	$ 6,961

XML

Condensed Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	May. 01, 2016	May. 03, 2015	May. 01, 2016	May. 03, 2015
Condensed Consolidated Statements of Comprehensive Income (unaudited) [Abstract]
Other comprehensive income (loss), tax	$ 0	$ 0	$ 0	$ 0

XML

Condensed Consolidated Statements of Cash Flows (unaudited) - USD ($) $ in Thousands	6 Months Ended
	May. 01, 2016	May. 03, 2015
Cash flows from operating activities:
Net income	$ 37,653	$ 19,298
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	40,832	40,318
Gain on sale of investment	(8,785)	0
Changes in assets and liabilities:
Accounts receivable	6,499	(4,244)
Inventories	(256)	(985)
Other current assets	3,095	7
Accounts payable, accrued liabilities and other	(13,899)	3,513
Net cash provided by operating activities	65,139	57,907
Cash flows from investing activities:
Purchases of property, plant and equipment	(34,928)	(67,935)
Proceeds from sale of investment	8,785	0
Other	193	(218)
Net cash used in investing activities	(25,950)	(68,153)
Cash flows from financing activities:
Repayments of long-term borrowings	(54,951)	(4,751)
Proceeds from share-based arrangements	3,046	1,195
Other	(19)	(76)
Net cash used in financing activities	(51,924)	(3,632)
Effect of exchange rate changes on cash and cash equivalents	846	(3,001)
Net decrease in cash and cash equivalents	(11,889)	(16,879)
Cash and cash equivalents at beginning of period	205,867	192,929
Cash and cash equivalents at end of period	193,978	176,050
Supplemental disclosure of noncash information:
Accrual for property, plant and equipment purchased during the period	3,297	49,082
Subsidiary dividend payable	$ 11,901	$ 0

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BASIS OF FINANCIAL STATEMENT PRESENTATION

6 Months Ended

May. 01, 2016

BASIS OF FINANCIAL STATEMENT PRESENTATION [Abstract]

BASIS OF FINANCIAL STATEMENT PRESENTATION

NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION

     Photronics, Inc. and its subsidiaries ("Photronics" or “the Company") is one of the world's leading manufacturers of photomasks, which are high precision photographic quartz plates containing microscopic images of electronic circuits. Photomasks are a key element in the manufacture of semiconductors and flat panel displays ("FPDs"), and are used as masters to transfer circuit patterns onto semiconductor wafers and flat panel substrates during the fabrication of integrated circuits ("ICs") and a variety of FPDs and, to a lesser extent, other types of electrical and optical components. The Company currently operates principally from nine manufacturing facilities, two of which are located in Europe, three in Taiwan, one in Korea, and three in the United States.

     The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of management, adjustments, all of which are of a normal recurring nature, considered necessary for a fair presentation have been included. The Company is typically impacted during its first fiscal quarter by the North American and European holiday periods, as some customers reduce their effective workdays and orders during these periods. Additionally, the Company can be impacted during its first or second quarter by the Asian New Year holiday period, which may also reduce customer orders. Operating results for the interim period are not necessarily indicative of the results that may be expected for the fiscal year ending October 30, 2016. For further information, refer to the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended November 1, 2015.

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CHANGES IN EQUITY

6 Months Ended

May. 01, 2016

CHANGES IN EQUITY [Abstract]

CHANGES IN EQUITY

NOTE 2 - CHANGES IN EQUITY

The following tables set forth the Company's consolidated changes in equity for the three and six month periods ended May 1, 2016 and May 3, 2015:

	Three Months Ended May 1, 2016
	Photronics, Inc. Shareholders
	Common Stock				Additional					Accumulated Other			Non-
					Paid-in			Retained		Comprehensive			controlling			Total
	Shares		Amount		Capital			Earnings		Loss			Interests			Equity
Balance at January 31, 2016		67,081	$	671	$	529,337		$	151,062	$	(28,005	)	$	114,398		$	767,463
Net income		-		-		-			11,854		-			2,299			14,153
Other comprehensive income		-		-		-			-		19,159			4,684			23,843
Sale of common stock through employee stock option and purchase plans		130		1		799			-		-			-			800
Restricted stock awards vesting and expense		15		-		313			-		-			-			313
Share-based compensation expense		-		-		663			-		-			-			663
Conversion of debt to common stock		717		7		7,431			-		-			-			7,438
Repurchase of common stock of subsidiary		-		-		(8	)		-		-			8			-
Subsidiary dividend payable		-		-		-			-		-			(11,901	)		(11,901	)
Balance at May 1, 2016		67,943	$	679	$	538,535		$	162,916	$	(8,846	)	$	109,488		$	802,772

	Three Months Ended May 3, 2015
	Photronics, Inc. Shareholders
	Common Stock				Additional				Accumulated Other		Non-
					Paid-in		Retained		Comprehensive		controlling			Total
	Shares		Amount		Capital		Earnings		Income		Interests			Equity
Balance at February 1, 2015		66,209	$	662	$	521,580	$	89,272	$	5,595	$	110,936		$	728,045
Net income		-		-		-		10,060		-		2,096			12,156
Other comprehensive income		-		-		-		-		9,243		3,296			12,539
Sale of common stock through employee stock option and purchase plans		73		1		331		-		-		-			332
Restricted stock awards vesting and expense		16		-		260		-		-		-			260
Share-based compensation expense		-		-		702		-		-		(51	)		651
Balance at May 3, 2015		66,298	$	663	$	522,873	$	99,332	$	14,838	$	116,277		$	753,983

	Six Months Ended May 1, 2016
	Photronics, Inc. Shareholders
	Common Stock				Additional					Accumulated Other			Non-
					Paid-in			Retained		Comprehensive			controlling			Total
	Shares		Amount		Capital			Earnings		Loss			Interests			Equity
Balance at November 1, 2015		66,602	$	666	$	526,401		$	130,060	$	(10,572	)	$	115,511		$	762,066
Net income		-		-		-			32,856		-			4,797			37,653
Other comprehensive income		-		-		-			-		1,726			1,073			2,799
Sale of common stock through employee stock option and purchase plans		514		5		2,839			-		-			-			2,844
Restricted stock awards vesting and expense		110		1		563			-		-			-			564
Share-based compensation expense		-		-		1,309			-		-			-			1,309
Conversion of debt to common stock		717		7		7,431			-		-			-			7,438
Repurchase of common stock of subsidiary		-		-		(8	)		-		-			8			-
Subsidiary dividend payable		-		-		-			-		-			(11,901	)		(11,901	)
Balance at May 1, 2016		67,943	$	679	$	538,535		$	162,916	$	(8,846	)	$	109,488		$	802,772

	Six Months Ended May 3, 2015
	Photronics, Inc. Shareholders
	Common Stock				Additional				Accumulated Other			Non-
					Paid-in		Retained		Comprehensive			controlling			Total
	Shares		Amount		Capital		Earnings		Income			Interests			Equity
Balance at November 2, 2014		65,930	$	659	$	520,182	$	85,435	$	21,774		$	111,444		$	739,494
Net income		-		-		-		13,897		-			5,401			19,298
Other comprehensive loss		-		-		-		-		(6,936	)		(568	)		(7,504	)
Sale of common stock through employee stock option and purchase plans		239		3		856		-		-			-			859
Restricted stock awards vesting and expense		129		1		533		-		-			-			534
Share-based compensation expense		-		-		1,302		-		-			-			1,302
Balance at May 3, 2015		66,298	$	663	$	522,873	$	99,332	$	14,838		$	116,277		$	753,983

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PROPERTY, PLANT AND EQUIPMENT

6 Months Ended

May. 01, 2016

PROPERTY, PLANT AND EQUIPMENT [Abstract]

PROPERTY, PLANT AND EQUIPMENT

NOTE 3 - PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following:

	May 1, 2016		November 1, 2015
Land	$	8,217	$	8,172
Buildings and improvements		121,655		121,472
Machinery and equipment		1,467,020		1,458,623
Leasehold improvements		19,002		18,856
Furniture, fixtures and office equipment		12,729		12,700
Construction in progress		14,199		6,657
		1,642,822		1,626,480
Less accumulated depreciation and amortization		1,119,153		1,079,196
	$	523,669	$	547,284

Equipment under capital leases are included in above property, plant and equipment as follows:

	May 1, 2016		November 1, 2015
Machinery and equipment	$	34,917	$	56,245
Less accumulated amortization		8,606		16,054
	$	26,311	$	40,191

 Depreciation and amortization expense for property, plant and equipment was $18.9 million and $38.0 million for the three and six month periods ended May 1, 2016, respectively, and $17.8 million and $37.0 million for the three and six month periods ended May 3, 2015, respectively.

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JOINT VENTURE, TECHNOLOGY LICENSE AND OTHER AGREEMENTS WITH MICRON TECHNOLOGY, INC

6 Months Ended

May. 01, 2016

JOINT VENTURE, TECHNOLOGY LICENSE AND OTHER AGREEMENTS WITH MICRON TECHNOLOGY, INC. [Abstract]

JOINT VENTURE, TECHNOLOGY LICENSE AND OTHER AGREEMENTS WITH MICRON TECHNOLOGY, INC.

NOTE 4 - JOINT VENTURE, TECHNOLOGY LICENSE AND OTHER AGREEMENTS WITH MICRON TECHNOLOGY, INC.

In May 2006, Photronics and Micron Technology, Inc. ("Micron") entered into the MP Mask joint venture (“MP Mask”), which developed and produced photomasks for leading-edge and advanced next generation semiconductors. At the time of the formation of the joint venture, the Company also entered into both an agreement to license photomask technology developed by Micron and certain supply agreements.

This joint venture was a variable interest entity ("VIE") (as that term is defined in the ASC) because all costs of the joint venture were passed on to the Company and Micron through purchase agreements they had entered into with the joint venture, and it was dependent upon the Company and Micron for any additional cash requirements. On a quarterly basis the Company reassessed whether its interest in MP Mask gave it a controlling financial interest in this VIE. The purpose of this quarterly reassessment was to identify the primary beneficiary (which is defined in the ASC as the entity that consolidates a VIE) of the VIE. As a result of the reassessment in the current quarter, the Company determined that Micron was still the primary beneficiary of the VIE, by virtue of its tie-breaking voting rights within MP Mask’s Board of Managers, thereby having given it the power to direct the activities of MP Mask that most significantly impacted its economic performance, including its decision making authority in the ordinary course of business and its purchasing the majority of products produced by the VIE.

The Company utilized MP Mask for both high-end IC photomask production and research and development purposes. MP Mask charged its variable interest holders based on their actual usage of its facility. MP Mask separately charged for any research and development activities it engaged in at the requests of its owners. The Company recorded cost of sales of $2.7 million and $4.9 million and research and development expenses of $0.2 million and $0.5 million during the three and six month periods ended May 1, 2016. Cost of sales of $2.2 million and $3.4 million and research and development expenses of $0.2 million and $0.5 million were recorded during the three and six month periods ended May 3, 2015. As of May 1, 2016 and November 1, 2015, the Company owed MP Mask $7.3 million and $4.3 million, respectively, and had a receivable from Micron of $4.9 million and $6.4 million, respectively, both primarily related to the aforementioned supply agreements.

MP Mask was governed by a Board of Managers, appointed by Micron and the Company. Since MP Mask's inception, Micron, as a result of its majority ownership, had held majority voting power on the Board of Managers. The voting power held by each party was subject to change as ownership interests changed. Under the MP Mask joint venture operating agreement, the Company may have been required to make additional capital contributions to MP Mask up to the maximum amount defined in the operating agreement. However, had the Board of Managers determined that further additional funding was required, MP Mask would have pursued its own financing. If MP Mask was unable to obtain its own financing, it may have requested additional capital contributions from the Company. Should the Company have chosen not to make a requested contribution to MP Mask, its ownership percentage may have been reduced.

The Company's investment in the VIE, which represented its maximum exposure to loss, was $92.9 million at May 1, 2016 and $93.0 million at November 1, 2015. These amounts are reported in the Company's condensed consolidated balance sheets as "Investment in joint venture." The Company recorded a loss from its investment in the VIE of $0.1 million in the six month period ended May 1, 2016, and recorded a loss from its investment in the VIE of $0.1 million in the three and six month periods ended May 3, 2015.

On May 5, 2016, the Company sold its investment in MP Mask to Micron for $93.1 million. On that same date a supply agreement commenced between the Company and Micron, which provides that the Company will be the majority outsourced supplier of Micron’s photomasks and related services. The supply agreement has a one year term, subject to mutually agreeable renewals. In addition, the Company forevermore has the rights to use technology under the prior technology license agreement.

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LONG-TERM BORROWINGS

6 Months Ended

May. 01, 2016

LONG-TERM BORROWINGS [Abstract]

LONG-TERM BORROWINGS

NOTE 5 - LONG-TERM BORROWINGS

     Long-term borrowings consist of the following:

	May 1, 2016		November 1, 2015
3.25% convertible senior notes due in April 2016	$	-	$	57,500
3.25% convertible senior notes due in April 2019		57,500		57,500
2.77% capital lease obligation payable through July 2018		12,725		15,346
3.09% capital lease obligation payable through March 2016		-		2,269
		70,225		132,615
Less current portion		5,806		65,495
	$	64,419	$	67,120

In April 2016 $57.5 million of the Company’s senior convertible notes matured. The Company repaid $50.1 million to noteholders and issued approximately 0.7 million shares to noteholders that elected to convert their notes to common stock. The notes were exchanged at the rate of approximately 96 shares per $1,000 note principle, equivalent to a conversion rate of $10.37 per share.

In January 2015 the Company privately exchanged $57.5 million in aggregate principal amount of its 3.25% convertible senior notes with a maturity date of April 1, 2016, for new 3.25% convertible senior notes with an aggregate principal amount of $57.5 million with a maturity date of April 1, 2019. The conversion rate of the new notes is the same as that of the exchanged notes, which were issued in March 2011 with a conversion rate of approximately 96 shares of common stock per $1,000 note principal, equivalent to a conversion price of $10.37 per share of common stock, and is subject to adjustment upon the occurrence of certain events, which are described in the indenture dated January 22, 2015. Noteholders may convert each $1,000 principal amount of notes at any time prior to the close of business on the second scheduled trading day immediately preceding April 1, 2019, and the Company is not required to redeem the notes prior to their maturity date. Interest on the notes accrues in arrears, and is paid semiannually through the notes’ maturity date.

The Company’s credit facility, which expires in December 2018, has a $50 million limit with an expansion capacity to $75 million, and is secured by substantially all of the Company’s assets located in the United States and common stock the Company owns in certain of its foreign subsidiaries. The credit facility precludes the Company from paying cash dividends, and is subject to a minimum interest coverage ratio, total leverage ratio and minimum unrestricted cash balance financial covenants, all of which the Company was in compliance with at May 1, 2016. The Company had no outstanding borrowings against the credit facility at May 1, 2016, and $50 million was available for borrowing. The interest rate on the credit facility (1.73% at May 1, 2016) is based on the Company’s total leverage ratio at LIBOR plus a spread, as defined in the credit facility.

In August 2013 a $26.4 million principal amount, five year capital lease commenced to fund the purchase of a high-end lithography tool. Payments under the capital lease, which bears interest at 2.77%, are $0.5 million per month through July 2018.  Under the terms of the lease agreement, the Company must maintain the equipment in good working order, and is subject to a cross default with cross acceleration provision related to certain nonfinancial covenants incorporated in its credit facility. As of May 1, 2016, the total amount payable through the end of the lease term was $13.2 million, of which $12.7 million represented principal and $0.5 million represented interest.

In April 2011 the Company entered into a five year, $21.2 million capital lease for manufacturing equipment. Payments under the lease, which bore interest at 3.09%, were $0.4 million per month through March 2016. The lease agreement provided that the Company must maintain the equipment in good working order, and included a cross default with cross acceleration provision related to certain non-financial covenants incorporated in the Company's credit facility agreement. In March 2016 the Company paid the final installment on this lease and assumed ownership of the related equipment.

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SHARE-BASED COMPENSATION

6 Months Ended

May. 01, 2016

SHARE-BASED COMPENSATION [Abstract]

SHARE-BASED COMPENSATION

NOTE 6 - SHARE-BASED COMPENSATION

The Company has a share-based compensation plan (the "Plan"), under which options, restricted stock, restricted stock units, stock appreciation rights, performance stock, performance units, and other awards based on, or related to, shares of the Company's common stock may be granted from shares authorized but unissued or shares previously issued and reacquired by the Company. The maximum number of shares of common stock approved by the Company’s shareholders to be issued under the Plan is nine million shares. Awards may be granted to officers, employees, directors, consultants, advisors, and independent contractors of the Company or its subsidiaries. In the event of a change in control (as defined in the Plan), the vesting of awards may be accelerated. The Plan, aspects of which are more fully described below, prohibits further awards from being issued under prior plans. Total share-based compensation costs for the three and six month periods ended May 1, 2016, were $1.0 million and $1.9 million, respectively, and $0.9 million and $1.8 million for the three and six month periods ended May 3, 2015, respectively. The Company received cash from option exercises of $0.9 million and $2.8 million for the three and six month periods ended May 1, 2016, respectively, and $0.3 million and $1.0 million for the three and six month periods ended May 3, 2015, respectively. No share-based compensation cost was capitalized as part of an asset and no related income tax benefits were recorded during the periods presented.

Stock Options

Option awards generally vest in one to four years, and have a ten-year contractual term. All incentive and non-qualified stock option grants have an exercise price equal to the market value of the underlying common stock on the date of grant. The grant date fair values of options are based on closing prices of the Company’s common stock on the dates of grant using the Black-Scholes option pricing model. Expected volatility is based on the historical volatility of the Company's stock. The Company uses historical option exercise behavior and employee termination data to estimate expected term, which represents the period of time that the options granted are expected to remain outstanding. The risk-free rate of return for the estimated term of the option is based on the U.S. Treasury yield curve in effect at the date of grant.

The weighted-average inputs and risk-free rate of return ranges used to calculate the grant date fair value of options issued during the three and six month periods ended May 1, 2016 and May 3, 2015, are presented in the following table.

	Three Months Ended				Six Months Ended
	May 1, 2016		May 3, 2015		May 1, 2016		May 3, 2015
Volatility		39.8%		54.9%		49.5%		55.0%
Risk free rate of return		1.4%		1.3%		1.4-1.7%		1.3-1.6%
Dividend yield		0.0%		0.0%		0.0%		0.0%
Expected term	5.1 years		4.7 years		5.1 years		4.7 years

Information on outstanding and exercisable option awards as of May 1, 2016, is presented below.

Options	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding at May 1, 2016		3,888,510	$	8.25	6.2 years	$	12,053
Exercisable at May 1, 2016		2,324,435	$	7.33	4.5 years	$	9,671

There were 23,000 share options granted during the three month period ended May 1, 2016,with a weighted-average grant date fair value of $3.74 per share and 302,800 share options granted during the three month period ended May 3, 2015, with a weighted-average grant date fair value of $3.84 per share. There were 602,250 share options granted during the six month period ended May 1, 2016, with a weighted-average grant date fair value of $4.63 per share and 604,800 share options granted during the six month period ended May 3, 2015, with a weighted-average grant date fair value of $3.86 per share. As of May 1, 2016, the total unrecognized compensation cost related to unvested option awards was approximately $5.7 million. That cost is expected to be recognized over a weighted-average amortization period of 2.7 years.

Restricted Stock

The Company periodically grants restricted stock awards. The restrictions on these awards lapse over a service period that has ranged from less-than-one to four years. No restricted stock awards were granted during the three month period ended May 1, 2016, and 115,225 restricted stock awards were issued during the six month period ended May 1, 2016, with a weighted-average grant date fair value of $12.13 per share. No restricted stock awards were granted during the three month period ended May 3, 2015, and 111,334 restricted stock awards were issued during the six month period ended May 3, 2015, with a weighted-average grant date fair value of $8.23 per share. As of May 1, 2016, the total compensation cost not yet recognized related to unvested restricted stock awards was approximately $1.7 million. That cost is expected to be recognized over a weighted-average amortization period of 2.2 years. As of May 1, 2016, there were 194,875 shares of restricted stock outstanding.

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INCOME TAXES

6 Months Ended

May. 01, 2016

INCOME TAXES [Abstract]

INCOME TAXES

NOTE 7 - INCOME TAXES

    The effective tax rate differs from the U.S. statutory rate of 35% in the three and six month periods ended May 1, 2016 and May 3, 2015, primarily due to earnings being taxed at lower statutory rates in foreign jurisdictions, combined with the realization of certain tax benefits, as further noted below, in a foreign jurisdiction and the benefit of various investment credits in a foreign jurisdiction. Valuation allowances in jurisdictions with historic losses eliminate the effective rate impact of these jurisdictions.

    As of May 1, 2016, and May 3, 2015, the Company determined that deferred tax assets of $2.5 million and $1.5 million, respectively, whose realization was previously not considered to be more likely than not, are realizable and, therefore, reduced their related valuation allowances. During the three month period ended May 1, 2016, the Company realized a $2.4 million benefit, which resulted from the reversal of a previously recorded undistributed earnings tax liability in a foreign jurisdiction. As a result of a shareholder action to approve a dividend in this jurisdiction, the Company determined that it is no longer liable for this tax. In addition, during April 2016, $0.7 million of withholding tax was incurred upon the completion of a foreign subsidiary share redemption which commenced in fiscal year 2015.

    Unrecognized tax benefits related to uncertain tax positions were $4.8 million at May 1, 2016, and $4.1 million at November 1, 2015, all of which would favorably impact the Company's effective tax rate if recognized. Accrued interest and penalties related to unrecognized tax benefits was $0.1 million at May 1, 2016 and November 1, 2015. As of May 1, 2016, the total amount of unrecognized tax benefits is not expected to significantly increase or decrease in the next twelve months.

    PKLT, the Company's FPD manufacturing facility in Taiwan, has been accorded a tax holiday, which started in 2012 and expires in 2017. This tax holiday had no dollar or per share effect in the three and six month periods ended May 1, 2016 and May 3, 2015. PDMC, the Company’s IC manufacturing facility in Taiwan was accorded a tax holiday that commenced in 2015 and expires in 2019. The Company realized tax benefits from this tax holiday of $0.1 million in the three month periods ended May 1, 2016 and May 3, 2015and $0.2 million and $0.1 million in the respective six month periods. The tax holiday had no per share effect in the three and six month periods ended May 1, 2016 and May 3, 2015.

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EARNINGS PER SHARE

6 Months Ended

May. 01, 2016

EARNINGS PER SHARE [Abstract]

EARNINGS PER SHARE

NOTE 8 - EARNINGS PER SHARE

The calculation of basic and diluted earnings per share is presented below.

	Three Months Ended				Six Months Ended
	May 1, 2016		May 3, 2015		May 1, 2016		May 3, 2015
Net income attributable to Photronics, Inc. shareholders	$	11,854	$	10,060	$	32,856	$	13,897
Effect of dilutive securities:
Interest expense on convertible notes, net of related tax effects		875		1,071		1,946		1,071
Earnings for diluted earnings per share	$	12,729	$	11,131	$	34,802	$	14,968
Weighted-average common shares computations:
Weighted-average common shares used for basic earnings per share		67,372		66,230		67,090		66,148
Effect of dilutive securities:
Convertible notes		9,196		11,084		10,140		5,542
Share-based payment awards		948		914		1,096		934
Potentially dilutive common shares		10,144		11,998		11,236		6,476
Weighted-average common shares used for diluted earnings per share		77,516		78,228		78,326		72,624
Basic earnings per share	$	0.18	$	0.15	$	0.49	$	0.21
Diluted earnings per share	$	0.16	$	0.14	$	0.44	$	0.21

The table below shows the outstanding weighted-average share-based payment awards that were excluded from the calculation of diluted earnings per share because their exercise price exceeded the average market value of the common shares for the period, and convertible notes that, if converted, would have been antidilutive.

	Three Months Ended				Six Months Ended
	May 1, 2016		May 3, 2015		May 1, 2016		May 3, 2015
Share-based payment awards		2,160		1,654		1,414		1,621
Convertible notes		-		-		-		5,542
Total potentially dilutive shares excluded		2,160		1,654		1,414		7,163

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CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME BY COMPONENT

6 Months Ended

May. 01, 2016

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME BY COMPONENT [Abstract]

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME BY COMPONENT

NOTE 9 - CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME BY COMPONENT

The following tables set forth thechanges in the Company's accumulated other comprehensive income by component (net of tax of $0)for the three and six month periods ended May 1, 2016 and May 3, 2015:

	Three Months Ended May 1, 2016
	Foreign Currency Translation Adjustments			Amortization of Cash Flow Hedge			Other			Total
Balance at January 31, 2016	$	(27,118	)	$	(274	)	$	(613	)	$	(28,005	)
Other comprehensive income (loss) before reclassifications		23,861			-			(50	)		23,811
Amounts reclassified from other comprehensive income		-			32			-			32
Net current period other comprehensive income (loss)		23,861			32			(50	)		23,843
Less: other comprehensive (income) loss attributable to noncontrolling interests		(4,709	)		-			25			(4,684	)
Balance at May 1, 2016	$	(7,966	)	$	(242	)	$	(638	)	$	(8,846	)

	Three Months Ended May 3, 2015
	Foreign Currency Translation Adjustments			Amortization of Cash Flow Hedge			Other			Total
Balance at February 1, 2015	$	6,424		$	(402	)	$	(427	)	$	5,595
Other comprehensive income (loss) before reclassifications		12,532			-			(25	)		12,507
Amounts reclassified from other comprehensive income		-			32			-			32
Net current period other comprehensive income (loss)		12,532			32			(25	)		12,539
Less: other comprehensive income attributable to noncontrolling interests		(3,308	)		-			12			(3,296	)
Balance at May 3, 2015	$	15,648		$	(370	)	$	(440	)	$	14,838

	Six Months Ended May 1, 2016
	Foreign Currency Translation Adjustments			Amortization of Cash Flow Hedge			Other			Total
Balance at November 1, 2015	$	(9,634	)	$	(306	)	$	(633	)	$	(10,573	)
Other comprehensive income (loss) before reclassifications		2,746			-			(11	)		2,735
Amounts reclassified from other comprehensive income		-			64			-			64
Net current period other comprehensive income (loss)		2,746			64			(11	)		2,799
Less: other comprehensive (income) loss attributable to noncontrolling interests		(1,078	)		-			6			(1,072	)
Balance at May 1, 2016	$	(7,966	)	$	(242	)	$	(638	)	$	(8,846	)

	Six Months Ended May 3, 2015
	Foreign Currency Translation Adjustments			Amortization of Cash Flow Hedge			Other			Total
Balance at November 2, 2014	$	22,651		$	(434	)	$	(443	)	$	21,774
Other comprehensive income (loss) before reclassifications		(7,574	)		-			6			(7,568	)
Amounts reclassified from other comprehensive income		-			64			-			64
Net current period other comprehensive income (loss)		(7,574	)		64			6			(7,504	)
Less: other comprehensive (income) loss attributable to noncontrolling interests		571			-			(3	)		568
Balance at May 3, 2015	$	15,648		$	(370	)	$	(440	)	$	14,838

The amortization of the cash flow hedge is included in cost of sales in the condensed consolidated statements of income for all periods presented.

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FAIR VALUE MEASUREMENTS

6 Months Ended

May. 01, 2016

FAIR VALUE MEASUREMENTS [Abstract]

FAIR VALUE MEASUREMENTS

NOTE 10 - FAIR VALUE MEASUREMENTS

The accounting framework for determining fair value includes a hierarchy for ranking the quality and reliability of the information used to measure fair value, which enables the reader of the financial statements to assess the inputs used to develop those measurements. The fair value hierarchy consists of three tiers as follows: Level 1, defined as quoted prices (unadjusted) in active markets for identical securities; Level 2, defined as inputs other than Level 1 that are observable, either directly or indirectly; and Level 3, defined as unobservable inputs that are not corroborated by market data.

The Company did not have any assets or liabilities measured at fair value on a recurring or a nonrecurring basis at May 1, 2016 or November 1, 2015.

Fair Value of Other Financial Instruments

The fair values of the Company's cash and cash equivalents (Level 1 measurements), accounts receivable, accounts payable, and certain other current assets and current liabilities (Level 2 measurements) approximate their carrying value due to their short-term maturities. The fair value of the Company’s convertible senior notes is a Level 2 measurement that is determined using recent bid prices.

The table below presents the fair and carrying values of the Company's convertible senior notes at May 1, 2016 and November 1, 2015.

	May 1, 2016				November 1, 2015
	Fair Value		Carrying Value		Fair Value		Carrying Value
3.25% convertible senior notes due 2016	$	-	$	-	$	60,375	$	57,500
3.25% convertible senior notes due 2019	$	69,966	$	57,500	$	64,550	$	57,500

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COMMITMENTS AND CONTINGENCIES

6 Months Ended

May. 01, 2016

COMMITMENTS AND CONTINGENCIES [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 11 - COMMITMENTS AND CONTINGENCIES

As of May 1, 2016, the Company had commitments outstanding for capital expenditures of approximately $59 million.

The Company is subject to various claims that arise in the ordinary course of business. The Company believes such claims, individually or in the aggregate, will not have a material effect on its condensed consolidated financial statements.

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GAIN ON SALE OF INVESTMENT

6 Months Ended

May. 01, 2016

GAIN ON SALE OF INVESTMENT [Abstract]

GAIN ON SALE OF INVESTMENT

NOTE 12 – GAIN ON SALE OF INVESTMENT

The Company had a minority interest in a foreign entity. In the first quarter of fiscal year 2016, the Company sold this investment and recognized a gain of $8.8 million.

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RECENT ACCOUNTING PRONOUNCEMENTS

6 Months Ended

May. 01, 2016

RECENT ACCOUNTING PRONOUNCEMENTS [Abstract]

RECENT ACCOUNTING PRONOUNCEMENTS

NOTE 13 - RECENT ACCOUNTING PRONOUNCEMENTS

In March 2016 the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016 – 09 “Improvements to Employee Share-Based Payment Accounting”, which simplifies the accounting for share-based payment transactions including their income tax consequences, classification as either equity or liability awards, classification on the statement of cash flows, and other areas. The Update is effective for the Company in its first quarter of fiscal year 2018, with early application permitted. The Company is currently evaluating the effect this ASU will have on its consolidated financial statements.

In February 2016 the FASB issued ASU 2016 – 02 “Leases (Topic 842)”, which requires lessees to recognize right-of-use assets and corresponding liabilities for all leases with an initial term in excess of twelve months. The ASU is effective for the Company in its first quarter of fiscal year 2020, with early application permitted, and the Company is currently evaluating the effect this ASU will have on its consolidated financial statements.

In January 2016 the FASB issued ASU 2016-01 “Recognition and Measurement of Financial Assets and Financial Liabilities”, which provides targeted improvements to the recognition, measurement, presentation and disclosure of financial assets and financial liabilities. Specific accounting areas addressed include, equity investments, financial liabilities reported under the fair value option and valuation allowance assessment resulting from unrealized losses on available-for-sale securities. The ASU also changes certain presentation and disclosure requirements for financial instruments. This ASU is effective for the Company in its first quarter of fiscal year 2019. Early adoption, with certain exceptions, is not permitted. The Company is currently evaluating the effect this ASU will have on its consolidated financial statements.

In November 2015 the FASB issued ASU 2015-17 “Balance Sheet Classification of Deferred Taxes”, which requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. This ASU is effective for the Company in its first quarter of fiscal year 2018, with early application permitted and, upon adoption, may be applied either prospectively or retrospectively. The Company is currently evaluating the effect this ASU will have on its consolidated financial statements.

In April 2015 the FASB issued ASU 2015-03 “Simplifying the Presentation of Debt Issuance Costs”, which requires debt issuance costs related to recognized debt liability to be presented in the balance sheet as a direct deduction from that debt liability, consistent with the presentation of a debt discount. This ASU is effective for the Company in its first quarter of fiscal year 2017 and, upon adoption, should be applied retrospectively. Early adoption is permitted. The Company is currently evaluating the effect this ASU will have on its consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers”, which will supersede nearly all existing revenue recognition guidance under accounting principles generally accepted in the United States. The core principle of this ASU is that revenue should be recognized for the amount of consideration expected to be received for promised goods or services transferred to customers. This ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments, and assets recognized for costs incurred to obtain or fulfill a contract. In August 2015 the FASB issued ASU 2015-14 which defers the effective date of ASU 2014-09 by one year and allows entities to early adopt, but no earlier than the original effective date. ASU 2014-09 will now be effective for the Company in its first quarter of fiscal year 2019. ASU 2014-09 allows for either full retrospective or modified retrospective adoption. In April 2016 the FASB issued ASU 2016-10 “Identifying Performance Obligations and Licensing” which amends guidance previously issued on these matters in ASU 2014-09. The effective date and transition requirements of ASU 2016-10 are the same as those for ASU 2014-09. The Company is evaluating the transition method that will be elected and the potential effects of the adoption of these Updates on its consolidated financial statements.

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SHARE-BASED COMPENSATION (Policies)

6 Months Ended

May. 01, 2016

SHARE-BASED COMPENSATION [Abstract]

Share-based compensation accounting policy

Option awards generally vest in one to four years, and have a ten-year contractual term. All incentive and non-qualified stock option grants have an exercise price equal to the market value of the underlying common stock on the date of grant. The grant date fair values of options are based on closing prices of the Company’s common stock on the dates of grant using the Black-Scholes option pricing model. Expected volatility is based on the historical volatility of the Company's stock. The Company uses historical option exercise behavior and employee termination data to estimate expected term, which represents the period of time that the options granted are expected to remain outstanding. The risk-free rate of return for the estimated term of the option is based on the U.S. Treasury yield curve in effect at the date of grant.

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FAIR VALUE MEASUREMENTS (Policies)

6 Months Ended

May. 01, 2016

FAIR VALUE MEASUREMENTS [Abstract]

Fair Value Financial Instruments Policy

The accounting framework for determining fair value includes a hierarchy for ranking the quality and reliability of the information used to measure fair value, which enables the reader of the financial statements to assess the inputs used to develop those measurements. The fair value hierarchy consists of three tiers as follows: Level 1, defined as quoted prices (unadjusted) in active markets for identical securities; Level 2, defined as inputs other than Level 1 that are observable, either directly or indirectly; and Level 3, defined as unobservable inputs that are not corroborated by market data.

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RECENT ACCOUNTING PRONOUNCEMENTS (Policies)

6 Months Ended

May. 01, 2016

RECENT ACCOUNTING PRONOUNCEMENTS [Abstract]

Recent Accounting Pronouncements

In March 2016 the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016 – 09 “Improvements to Employee Share-Based Payment Accounting”, which simplifies the accounting for share-based payment transactions including their income tax consequences, classification as either equity or liability awards, classification on the statement of cash flows, and other areas. The Update is effective for the Company in its first quarter of fiscal year 2018, with early application permitted. The Company is currently evaluating the effect this ASU will have on its consolidated financial statements.

In February 2016 the FASB issued ASU 2016 – 02 “Leases (Topic 842)”, which requires lessees to recognize right-of-use assets and corresponding liabilities for all leases with an initial term in excess of twelve months. The ASU is effective for the Company in its first quarter of fiscal year 2020, with early application permitted, and the Company is currently evaluating the effect this ASU will have on its consolidated financial statements.

In January 2016 the FASB issued ASU 2016-01 “Recognition and Measurement of Financial Assets and Financial Liabilities”, which provides targeted improvements to the recognition, measurement, presentation and disclosure of financial assets and financial liabilities. Specific accounting areas addressed include, equity investments, financial liabilities reported under the fair value option and valuation allowance assessment resulting from unrealized losses on available-for-sale securities. The ASU also changes certain presentation and disclosure requirements for financial instruments. This ASU is effective for the Company in its first quarter of fiscal year 2019. Early adoption, with certain exceptions, is not permitted. The Company is currently evaluating the effect this ASU will have on its consolidated financial statements.

In November 2015 the FASB issued ASU 2015-17 “Balance Sheet Classification of Deferred Taxes”, which requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. This ASU is effective for the Company in its first quarter of fiscal year 2018, with early application permitted and, upon adoption, may be applied either prospectively or retrospectively. The Company is currently evaluating the effect this ASU will have on its consolidated financial statements.

In April 2015 the FASB issued ASU 2015-03 “Simplifying the Presentation of Debt Issuance Costs”, which requires debt issuance costs related to recognized debt liability to be presented in the balance sheet as a direct deduction from that debt liability, consistent with the presentation of a debt discount. This ASU is effective for the Company in its first quarter of fiscal year 2017 and, upon adoption, should be applied retrospectively. Early adoption is permitted. The Company is currently evaluating the effect this ASU will have on its consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers”, which will supersede nearly all existing revenue recognition guidance under accounting principles generally accepted in the United States. The core principle of this ASU is that revenue should be recognized for the amount of consideration expected to be received for promised goods or services transferred to customers. This ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments, and assets recognized for costs incurred to obtain or fulfill a contract. In August 2015 the FASB issued ASU 2015-14 which defers the effective date of ASU 2014-09 by one year and allows entities to early adopt, but no earlier than the original effective date. ASU 2014-09 will now be effective for the Company in its first quarter of fiscal year 2019. ASU 2014-09 allows for either full retrospective or modified retrospective adoption. In April 2016 the FASB issued ASU 2016-10 “Identifying Performance Obligations and Licensing” which amends guidance previously issued on these matters in ASU 2014-09. The effective date and transition requirements of ASU 2016-10 are the same as those for ASU 2014-09. The Company is evaluating the transition method that will be elected and the potential effects of the adoption of these Updates on its consolidated financial statements.

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CHANGES IN EQUITY (Tables)

6 Months Ended

May. 01, 2016

CHANGES IN EQUITY [Abstract]

Consolidated changes in equity

The following tables set forth the Company's consolidated changes in equity for the three and six month periods ended May 1, 2016 and May 3, 2015:

	Three Months Ended May 1, 2016
	Photronics, Inc. Shareholders
	Common Stock				Additional					Accumulated Other			Non-
					Paid-in			Retained		Comprehensive			controlling			Total
	Shares		Amount		Capital			Earnings		Loss			Interests			Equity
Balance at January 31, 2016		67,081	$	671	$	529,337		$	151,062	$	(28,005	)	$	114,398		$	767,463
Net income		-		-		-			11,854		-			2,299			14,153
Other comprehensive income		-		-		-			-		19,159			4,684			23,843
Sale of common stock through employee stock option and purchase plans		130		1		799			-		-			-			800
Restricted stock awards vesting and expense		15		-		313			-		-			-			313
Share-based compensation expense		-		-		663			-		-			-			663
Conversion of debt to common stock		717		7		7,431			-		-			-			7,438
Repurchase of common stock of subsidiary		-		-		(8	)		-		-			8			-
Subsidiary dividend payable		-		-		-			-		-			(11,901	)		(11,901	)
Balance at May 1, 2016		67,943	$	679	$	538,535		$	162,916	$	(8,846	)	$	109,488		$	802,772

	Three Months Ended May 3, 2015
	Photronics, Inc. Shareholders
	Common Stock				Additional				Accumulated Other		Non-
					Paid-in		Retained		Comprehensive		controlling			Total
	Shares		Amount		Capital		Earnings		Income		Interests			Equity
Balance at February 1, 2015		66,209	$	662	$	521,580	$	89,272	$	5,595	$	110,936		$	728,045
Net income		-		-		-		10,060		-		2,096			12,156
Other comprehensive income		-		-		-		-		9,243		3,296			12,539
Sale of common stock through employee stock option and purchase plans		73		1		331		-		-		-			332
Restricted stock awards vesting and expense		16		-		260		-		-		-			260
Share-based compensation expense		-		-		702		-		-		(51	)		651
Balance at May 3, 2015		66,298	$	663	$	522,873	$	99,332	$	14,838	$	116,277		$	753,983

	Six Months Ended May 1, 2016
	Photronics, Inc. Shareholders
	Common Stock				Additional					Accumulated Other			Non-
					Paid-in			Retained		Comprehensive			controlling			Total
	Shares		Amount		Capital			Earnings		Loss			Interests			Equity
Balance at November 1, 2015		66,602	$	666	$	526,401		$	130,060	$	(10,572	)	$	115,511		$	762,066
Net income		-		-		-			32,856		-			4,797			37,653
Other comprehensive income		-		-		-			-		1,726			1,073			2,799
Sale of common stock through employee stock option and purchase plans		514		5		2,839			-		-			-			2,844
Restricted stock awards vesting and expense		110		1		563			-		-			-			564
Share-based compensation expense		-		-		1,309			-		-			-			1,309
Conversion of debt to common stock		717		7		7,431			-		-			-			7,438
Repurchase of common stock of subsidiary		-		-		(8	)		-		-			8			-
Subsidiary dividend payable		-		-		-			-		-			(11,901	)		(11,901	)
Balance at May 1, 2016		67,943	$	679	$	538,535		$	162,916	$	(8,846	)	$	109,488		$	802,772

	Six Months Ended May 3, 2015
	Photronics, Inc. Shareholders
	Common Stock				Additional				Accumulated Other			Non-
					Paid-in		Retained		Comprehensive			controlling			Total
	Shares		Amount		Capital		Earnings		Income			Interests			Equity
Balance at November 2, 2014		65,930	$	659	$	520,182	$	85,435	$	21,774		$	111,444		$	739,494
Net income		-		-		-		13,897		-			5,401			19,298
Other comprehensive loss		-		-		-		-		(6,936	)		(568	)		(7,504	)
Sale of common stock through employee stock option and purchase plans		239		3		856		-		-			-			859
Restricted stock awards vesting and expense		129		1		533		-		-			-			534
Share-based compensation expense		-		-		1,302		-		-			-			1,302
Balance at May 3, 2015		66,298	$	663	$	522,873	$	99,332	$	14,838		$	116,277		$	753,983

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PROPERTY, PLANT AND EQUIPMENT (Tables)

6 Months Ended

May. 01, 2016

PROPERTY, PLANT AND EQUIPMENT [Abstract]

Property, plant and equipment

Property, plant and equipment consists of the following:

	May 1, 2016		November 1, 2015
Land	$	8,217	$	8,172
Buildings and improvements		121,655		121,472
Machinery and equipment		1,467,020		1,458,623
Leasehold improvements		19,002		18,856
Furniture, fixtures and office equipment		12,729		12,700
Construction in progress		14,199		6,657
		1,642,822		1,626,480
Less accumulated depreciation and amortization		1,119,153		1,079,196
	$	523,669	$	547,284

Equipment under capital leases included in property, plant and equipment

Equipment under capital leases are included in above property, plant and equipment as follows:

	May 1, 2016		November 1, 2015
Machinery and equipment	$	34,917	$	56,245
Less accumulated amortization		8,606		16,054
	$	26,311	$	40,191

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LONG-TERM BORROWINGS (Tables)

6 Months Ended

May. 01, 2016

LONG-TERM BORROWINGS [Abstract]

Long-term borrowings

Long-term borrowings consist of the following:

	May 1, 2016		November 1, 2015
3.25% convertible senior notes due in April 2016	$	-	$	57,500
3.25% convertible senior notes due in April 2019		57,500		57,500
2.77% capital lease obligation payable through July 2018		12,725		15,346
3.09% capital lease obligation payable through March 2016		-		2,269
		70,225		132,615
Less current portion		5,806		65,495
	$	64,419	$	67,120

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SHARE-BASED COMPENSATION (Tables)

6 Months Ended

May. 01, 2016

SHARE-BASED COMPENSATION [Abstract]

Weighted-average inputs and risk-free rate of return ranges used to calculate the grant date fair value of options

The weighted-average inputs and risk-free rate of return ranges used to calculate the grant date fair value of options issued during the three and six month periods ended May 1, 2016 and May 3, 2015, are presented in the following table.

	Three Months Ended				Six Months Ended
	May 1, 2016		May 3, 2015		May 1, 2016		May 3, 2015
Volatility		39.8%		54.9%		49.5%		55.0%
Risk free rate of return		1.4%		1.3%		1.4-1.7%		1.3-1.6%
Dividend yield		0.0%		0.0%		0.0%		0.0%
Expected term	5.1 years		4.7 years		5.1 years		4.7 years

Information on outstanding and exercisable option awards

Information on outstanding and exercisable option awards as of May 1, 2016, is presented below.

Options	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding at May 1, 2016		3,888,510	$	8.25	6.2 years	$	12,053
Exercisable at May 1, 2016		2,324,435	$	7.33	4.5 years	$	9,671

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EARNINGS PER SHARE (Tables)

6 Months Ended

May. 01, 2016

EARNINGS PER SHARE [Abstract]

Calculation of basic and diluted earnings per share

The calculation of basic and diluted earnings per share is presented below.

	Three Months Ended				Six Months Ended
	May 1, 2016		May 3, 2015		May 1, 2016		May 3, 2015
Net income attributable to Photronics, Inc. shareholders	$	11,854	$	10,060	$	32,856	$	13,897
Effect of dilutive securities:
Interest expense on convertible notes, net of related tax effects		875		1,071		1,946		1,071
Earnings for diluted earnings per share	$	12,729	$	11,131	$	34,802	$	14,968
Weighted-average common shares computations:
Weighted-average common shares used for basic earnings per share		67,372		66,230		67,090		66,148
Effect of dilutive securities:
Convertible notes		9,196		11,084		10,140		5,542
Share-based payment awards		948		914		1,096		934
Potentially dilutive common shares		10,144		11,998		11,236		6,476
Weighted-average common shares used for diluted earnings per share		77,516		78,228		78,326		72,624
Basic earnings per share	$	0.18	$	0.15	$	0.49	$	0.21
Diluted earnings per share	$	0.16	$	0.14	$	0.44	$	0.21

Outstanding securities excluded from the calculation of diluted earnings or loss per share

The table below shows the outstanding weighted-average share-based payment awards that were excluded from the calculation of diluted earnings per share because their exercise price exceeded the average market value of the common shares for the period, and convertible notes that, if converted, would have been antidilutive.

	Three Months Ended				Six Months Ended
	May 1, 2016		May 3, 2015		May 1, 2016		May 3, 2015
Share-based payment awards		2,160		1,654		1,414		1,621
Convertible notes		-		-		-		5,542
Total potentially dilutive shares excluded		2,160		1,654		1,414		7,163

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CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME BY COMPONENT (Tables)

6 Months Ended

May. 01, 2016

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME BY COMPONENT [Abstract]

Schedule of changes in accumulated other comprehensive income by component

The following tables set forth thechanges in the Company's accumulated other comprehensive income by component (net of tax of $0)for the three and six month periods ended May 1, 2016 and May 3, 2015:

	Three Months Ended May 1, 2016
	Foreign Currency Translation Adjustments			Amortization of Cash Flow Hedge			Other			Total
Balance at January 31, 2016	$	(27,118	)	$	(274	)	$	(613	)	$	(28,005	)
Other comprehensive income (loss) before reclassifications		23,861			-			(50	)		23,811
Amounts reclassified from other comprehensive income		-			32			-			32
Net current period other comprehensive income (loss)		23,861			32			(50	)		23,843
Less: other comprehensive (income) loss attributable to noncontrolling interests		(4,709	)		-			25			(4,684	)
Balance at May 1, 2016	$	(7,966	)	$	(242	)	$	(638	)	$	(8,846	)

	Three Months Ended May 3, 2015
	Foreign Currency Translation Adjustments			Amortization of Cash Flow Hedge			Other			Total
Balance at February 1, 2015	$	6,424		$	(402	)	$	(427	)	$	5,595
Other comprehensive income (loss) before reclassifications		12,532			-			(25	)		12,507
Amounts reclassified from other comprehensive income		-			32			-			32
Net current period other comprehensive income (loss)		12,532			32			(25	)		12,539
Less: other comprehensive income attributable to noncontrolling interests		(3,308	)		-			12			(3,296	)
Balance at May 3, 2015	$	15,648		$	(370	)	$	(440	)	$	14,838

	Six Months Ended May 1, 2016
	Foreign Currency Translation Adjustments			Amortization of Cash Flow Hedge			Other			Total
Balance at November 1, 2015	$	(9,634	)	$	(306	)	$	(633	)	$	(10,573	)
Other comprehensive income (loss) before reclassifications		2,746			-			(11	)		2,735
Amounts reclassified from other comprehensive income		-			64			-			64
Net current period other comprehensive income (loss)		2,746			64			(11	)		2,799
Less: other comprehensive (income) loss attributable to noncontrolling interests		(1,078	)		-			6			(1,072	)
Balance at May 1, 2016	$	(7,966	)	$	(242	)	$	(638	)	$	(8,846	)

	Six Months Ended May 3, 2015
	Foreign Currency Translation Adjustments			Amortization of Cash Flow Hedge			Other			Total
Balance at November 2, 2014	$	22,651		$	(434	)	$	(443	)	$	21,774
Other comprehensive income (loss) before reclassifications		(7,574	)		-			6			(7,568	)
Amounts reclassified from other comprehensive income		-			64			-			64
Net current period other comprehensive income (loss)		(7,574	)		64			6			(7,504	)
Less: other comprehensive (income) loss attributable to noncontrolling interests		571			-			(3	)		568
Balance at May 3, 2015	$	15,648		$	(370	)	$	(440	)	$	14,838

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FAIR VALUE MEASUREMENTS (Tables)

6 Months Ended

May. 01, 2016

FAIR VALUE MEASUREMENTS [Abstract]

Fair and carrying values of convertible senior notes

The table below presents the fair and carrying values of the Company's convertible senior notes at May 1, 2016 and November 1, 2015.

	May 1, 2016				November 1, 2015
	Fair Value		Carrying Value		Fair Value		Carrying Value
3.25% convertible senior notes due 2016	$	-	$	-	$	60,375	$	57,500
3.25% convertible senior notes due 2019	$	69,966	$	57,500	$	64,550	$	57,500

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BASIS OF FINANCIAL STATEMENT PRESENTATION (Details)	6 Months Ended
	May. 01, 2016 Facility
Manufacturing Facilities By Geographical Region [Line Items]
Number of manufacturing facilities	9
Europe [Member]
Manufacturing Facilities By Geographical Region [Line Items]
Number of manufacturing facilities	2
Taiwan [Member]
Manufacturing Facilities By Geographical Region [Line Items]
Number of manufacturing facilities	3
Korea [Member]
Manufacturing Facilities By Geographical Region [Line Items]
Number of manufacturing facilities	1
United States [Member]
Manufacturing Facilities By Geographical Region [Line Items]
Number of manufacturing facilities	3

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CHANGES IN EQUITY (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	May. 01, 2016	May. 03, 2015	May. 01, 2016	May. 03, 2015
Class of Stock [Line Items]
Beginning balance	$ 767,463	$ 728,045	$ 762,066	$ 739,494
Net income	14,153	12,156	37,653	19,298
Other comprehensive income (loss)	23,843	12,539	2,799	(7,504)
Sale of common stock through employee stock option and purchase plans	800	332	2,844	859
Restricted stock awards vesting and expense	313	260	564	534
Share-based compensation expense	663	651	1,309	1,302
Conversion of debt to common stock	7,438		7,438
Repurchase of common stock of subsidiary	0		0
Subsidiary dividend payable	(11,901)		(11,901)	0
Ending balance	802,772	753,983	802,772	753,983
Common Stock [Member]
Class of Stock [Line Items]
Beginning balance	$ 671	$ 662	$ 666	$ 659
Beginning balance (in shares)	67,081	66,209	66,602	65,930
Net income	$ 0	$ 0	$ 0	$ 0
Other comprehensive income (loss)	0	0	0	0
Sale of common stock through employee stock option and purchase plans	$ 1	$ 1	$ 5	$ 3
Sale of common stock through employee stock option and purchase plans (in shares)	130	73	514	239
Restricted stock awards vesting and expense	$ 0	$ 0	$ 1	$ 1
Restricted stock awards vesting and expense (in shares)	15	16	110	129
Share-based compensation expense	$ 0	$ 0	$ 0	$ 0
Conversion of debt to common stock	$ 7		$ 7
Conversion of debt to common stock (in shares)	717		717
Repurchase of common stock of subsidiary	$ 0		$ 0
Repurchase of common stock of subsidiary (in shares)	0		0
Subsidiary dividend payable	$ 0		$ 0
Ending balance	$ 679	$ 663	$ 679	$ 663
Ending balance (in shares)	67,943	66,298	67,943	66,298
Additional Paid-in Capital [Member]
Class of Stock [Line Items]
Beginning balance	$ 529,337	$ 521,580	$ 526,401	$ 520,182
Net income	0	0	0	0
Other comprehensive income (loss)	0	0	0	0
Sale of common stock through employee stock option and purchase plans	799	331	2,839	856
Restricted stock awards vesting and expense	313	260	563	533
Share-based compensation expense	663	702	1,309	1,302
Conversion of debt to common stock	7,431		7,431
Repurchase of common stock of subsidiary	(8)		(8)
Subsidiary dividend payable	0		0
Ending balance	538,535	522,873	538,535	522,873
Retained Earnings [Member]
Class of Stock [Line Items]
Beginning balance	151,062	89,272	130,060	85,435
Net income	11,854	10,060	32,856	13,897
Other comprehensive income (loss)	0	0	0	0
Sale of common stock through employee stock option and purchase plans	0	0	0	0
Restricted stock awards vesting and expense	0	0	0	0
Share-based compensation expense	0	0	0	0
Conversion of debt to common stock	0		0
Repurchase of common stock of subsidiary	0		0
Subsidiary dividend payable	0		0
Ending balance	162,916	99,332	162,916	99,332
Accumulated Other Comprehensive Income (Loss) [Member]
Class of Stock [Line Items]
Beginning balance	(28,005)	5,595	(10,572)	21,774
Net income	0	0	0	0
Other comprehensive income (loss)	19,159	9,243	1,726	(6,936)
Sale of common stock through employee stock option and purchase plans	0	0	0	0
Restricted stock awards vesting and expense	0	0	0	0
Share-based compensation expense	0	0	0	0
Conversion of debt to common stock	0		0
Repurchase of common stock of subsidiary	0		0
Subsidiary dividend payable	0		0
Ending balance	(8,846)	14,838	(8,846)	14,838
Non-controlling Interests [Member]
Class of Stock [Line Items]
Beginning balance	114,398	110,936	115,511	111,444
Net income	2,299	2,096	4,797	5,401
Other comprehensive income (loss)	4,684	3,296	1,073	(568)
Sale of common stock through employee stock option and purchase plans	0	0	0	0
Restricted stock awards vesting and expense	0	0	0	0
Share-based compensation expense	0	(51)	0	0
Conversion of debt to common stock	0		0
Repurchase of common stock of subsidiary	8		8
Subsidiary dividend payable	(11,901)		(11,901)
Ending balance	$ 109,488	$ 116,277	$ 109,488	$ 116,277

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PROPERTY, PLANT AND EQUIPMENT (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	May. 01, 2016	May. 03, 2015	May. 01, 2016	May. 03, 2015	Nov. 01, 2015
Property, plant and equipment [Abstract]
Property, plant and equipment, gross	$ 1,642,822		$ 1,642,822		$ 1,626,480
Less accumulated depreciation and amortization	1,119,153		1,119,153		1,079,196
Property, plant and equipment, net	523,669		523,669		547,284
Depreciation and amortization expense	18,900	$ 17,800	38,000	$ 37,000
Equipment under capital leases included in property, plant and equipment [Abstract]
Machinery and equipment	34,917		34,917		56,245
Less accumulated amortization	8,606		8,606		16,054
Capital leased assets, net	26,311		26,311		40,191
Land [Member]
Property, plant and equipment [Abstract]
Property, plant and equipment, gross	8,217		8,217		8,172
Buildings and Improvements [Member]
Property, plant and equipment [Abstract]
Property, plant and equipment, gross	121,655		121,655		121,472
Machinery and equipment [Member]
Property, plant and equipment [Abstract]
Property, plant and equipment, gross	1,467,020		1,467,020		1,458,623
Leasehold Improvements [Member]
Property, plant and equipment [Abstract]
Property, plant and equipment, gross	19,002		19,002		18,856
Furniture, Fixtures and Office Equipment [Member]
Property, plant and equipment [Abstract]
Property, plant and equipment, gross	12,729		12,729		12,700
Construction in Progress [Member]
Property, plant and equipment [Abstract]
Property, plant and equipment, gross	$ 14,199		$ 14,199		$ 6,657

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JOINT VENTURE, TECHNOLOGY LICENSE AND OTHER AGREEMENTS WITH MICRON TECHNOLOGY, INC (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
	May. 05, 2016	May. 01, 2016	May. 03, 2015	May. 01, 2016	May. 03, 2015	Nov. 01, 2015
Variable Interest Entity [Line Items]
Variable interest entity, methodology for determining whether entity is primary beneficiary				This joint venture was a variable interest entity ("VIE") (as that term is defined in the ASC) because all costs of the joint venture were passed on to the Company and Micron through purchase agreements they had entered into with the joint venture, and it was dependent upon the Company and Micron for any additional cash requirements. On a quarterly basis the Company reassessed whether its interest in MP Mask gave it a controlling financial interest in this VIE. The purpose of this quarterly reassessment was to identify the primary beneficiary (which is defined in the ASC as the entity that consolidates a VIE) of the VIE. As a result of the reassessment in the current quarter, the Company determined that Micron was still the primary beneficiary of the VIE, by virtue of its tie-breaking voting rights within MP Mask’s Board of Managers, thereby having given it the power to direct the activities of MP Mask that most significantly impacted its economic performance, including its decision making authority in the ordinary course of business and its purchasing the majority of products produced by the VIE.
Cost of sales		$ 91,636	$ 94,214	$ 186,156	$ 189,535
Research and development expenses		5,447	5,809	11,148	10,490
Amount receivable from Micron Technology, Inc.		104,330		104,330		$ 110,056
MP Mask [Member]
Variable Interest Entity [Line Items]
Cost of sales		2,700	2,200	4,900	3,400
Research and development expenses		200	200	500	500
Amount owed to MP Mask		7,300		7,300		4,300
Maximum exposure to loss from investment in VIE		92,900		92,900		93,000
Loss from variable interest entity			$ (100)	(100)	$ (100)
MP Mask [Member] | Subsequent Event [Member]
Variable Interest Entity [Line Items]
Proceeds from sale of equity method investment	$ 93,100
Co-venturer [Member]
Variable Interest Entity [Line Items]
Amount receivable from Micron Technology, Inc.		$ 4,900		$ 4,900		$ 6,400
Initial term of supply agreement term subject to mutually agreeable renewals	1 year

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LONG-TERM BORROWINGS (Details)		1 Months Ended		6 Months Ended
	Apr. 30, 2016 USD ($) shares	Jan. 31, 2015 USD ($) shares $ / shares	Mar. 31, 2011 USD ($) shares $ / shares	May. 01, 2016 USD ($)	Nov. 01, 2015 USD ($)
Long-term borrowings [Abstract]
Long-term debt and capital lease obligations				$ 70,225,000	$ 132,615,000
Less current portion				5,806,000	65,495,000
Long-term debt and capital lease obligations non current				$ 64,419,000	67,120,000
Credit Facility [Member]
Long-term borrowings [Abstract]
Maturity date of debt				Dec. 31, 2018
Current borrowing capacity				$ 50,000,000
Maximum borrowing capacity				75,000,000
Amount outstanding under credit facility				0
Available borrowing capacity				$ 50,000,000
Interest rate				1.73%
3.25% Convertible Senior Notes due on April 2016 [Member]
Long-term borrowings [Abstract]
Long-term debt and capital lease obligations				$ 0	57,500,000
Interest rate percentage				3.25%
Maturity date of debt				Apr. 01, 2016
Repayments of convertible debt	$ 50,100,000
Conversion of debt to common stock (in shares) | shares	700,000
Number of shares each note is convertible to (in shares) | shares			96
Face amount of each note converted			$ 1,000
Conversion price per share (in dollars per share) | $ / shares			$ 10.37
3.25% Convertible Senior Notes due on April 2019 [Member]
Long-term borrowings [Abstract]
Long-term debt and capital lease obligations				$ 57,500,000	57,500,000
Interest rate percentage				3.25%
Maturity date of debt				Apr. 01, 2019
Number of shares each note is convertible to (in shares) | shares		96
Face amount of each note converted		$ 1,000
Conversion price per share (in dollars per share) | $ / shares		$ 10.37
2.77% Capital Lease Obligation Payable through July 2018 [Member]
Long-term borrowings [Abstract]
Long-term debt and capital lease obligations				$ 12,725,000	15,346,000
Interest rate percentage				2.77%
Maturity date of debt				Jul. 31, 2018
Original face amount of debt				$ 26,400,000
Repayment period of debt				5 years
Periodic payments				$ 500,000
Frequency of periodic payment				per month
Amount payable through the end of lease term				$ 13,200,000
Interest included in lease payments				500,000
3.09% Capital Lease Obligation Payable through March 2016 [Member]
Long-term borrowings [Abstract]
Long-term debt and capital lease obligations				$ 0	$ 2,269,000
Interest rate percentage				3.09%
Maturity date of debt				Mar. 30, 2016
Original face amount of debt				$ 21,200,000
Repayment period of debt				5 years
Periodic payments				$ 400,000
Frequency of periodic payment				per month

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SHARE-BASED COMPENSATION (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	May. 01, 2016	May. 03, 2015	May. 01, 2016	May. 03, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum number of shares of common stock that may be issued (in shares)	9,000,000		9,000,000
Share-based compensation costs incurred	$ 1,000	$ 900	$ 1,900	$ 1,800
Cash received from option exercises	900	300	2,800	1,000
Share-based compensation cost capitalized	0	0	0	0
Income tax benefits realized from stock option exercises	$ 0	$ 0	$ 0	$ 0
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Contractual term			10 years
Period for recognition of compensation cost not yet recognized			2 years 8 months 12 days
Weighted-average inputs and risk-free rate of return ranges used to calculate the grant date fair value of options [Abstract]
Volatility	39.80%	54.90%	49.50%	55.00%
Risk free rate of return	1.40%	1.30%
Dividend yield	0.00%	0.00%	0.00%	0.00%
Expected term	5 years 1 month 6 days	4 years 8 months 12 days	5 years 1 month 6 days	4 years 8 months 12 days
Outstanding and exercisable option awards [Abstract]
Outstanding at end of period (in shares)	3,888,510		3,888,510
Exercisable at end of period (in shares)	2,324,435		2,324,435
Share options granted (in shares)	23,000	302,800	602,250	604,800
Weighted Average Exercise Price [Abstract]
Weighted average exercise price, Outstanding at end of period (in dollar per share)	$ 8.25		$ 8.25
Weighted average exercise price, Exercisable at end of period (in dollar per share)	$ 7.33		$ 7.33
Stock options, additional disclosures [Abstract]
Weighted average remaining contractual life, Outstanding at end of period			6 years 2 months 12 days
Weighted average remaining contractual life, Exercisable at end of period			4 years 6 months
Aggregate intrinsic value, Outstanding at end of period	$ 12,053		$ 12,053
Aggregate intrinsic value, Exercisable at end of period	$ 9,671		$ 9,671
Weighted-average grant date fair value of options granted (in dollar per share)	$ 3.74	$ 3.84	$ 4.63	$ 3.86
Unrecognized compensation cost related to unvested option awards	$ 5,700		$ 5,700
Stock Options [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period			1 year
Weighted-average inputs and risk-free rate of return ranges used to calculate the grant date fair value of options [Abstract]
Risk free rate of return			1.40%	1.30%
Stock Options [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period			4 years
Weighted-average inputs and risk-free rate of return ranges used to calculate the grant date fair value of options [Abstract]
Risk free rate of return			1.70%	1.60%
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Period for recognition of compensation cost not yet recognized			2 years 2 months 12 days
Restricted Stock [Abstract]
Restricted stock awards granted (in shares)	0	0	115,225	111,334
Weighted average grant date fair value of restricted stock awards (in dollar per share)	$ 0	$ 0	$ 12.13	$ 8.23
Compensation cost not yet recognized related to unvested restricted stock awards	$ 1,700		$ 1,700
Number of shares of restricted stock outstanding (in shares)	194,875		194,875
Restricted Stock [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period			1 year
Restricted Stock [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period			4 years

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INCOME TAXES (Details) - USD ($) $ / shares in Units, $ in Millions		3 Months Ended		6 Months Ended
	Apr. 30, 2016	May. 01, 2016	May. 03, 2015	May. 01, 2016	May. 03, 2015	Nov. 01, 2015
INCOME TAXES [Abstract]
U.S. statutory rate		35.00%	35.00%	35.00%	35.00%
Valuation allowance decrease				$ 2.5	$ 1.5
Unrecognized tax benefits		$ 4.8		4.8		$ 4.1
Accrued interest and penalties related to unrecognized tax benefits		0.1		0.1		$ 0.1
Foreign Tax Authority [Member]
Income Tax Holiday [Line Items]
Other income tax expense (benefit)	$ 0.7	$ (2.4)
Foreign Tax Authority [Member] | PKLT [Member]
Income Tax Holiday [Line Items]
Income tax holiday termination date		October 31, 2017
Dollar effect of income tax holiday		$ 0.0	$ 0.0	$ 0.0	$ 0.0
Per share effect of income tax holiday (in dollars per share)		$ 0	$ 0	$ 0	$ 0
Foreign Tax Authority [Member] | PDMC [Member]
Income Tax Holiday [Line Items]
Income tax holiday termination date		October 31, 2019
Dollar effect of income tax holiday		$ 0.1	$ 0.1	$ 0.2	$ 0.1
Per share effect of income tax holiday (in dollars per share)		$ 0	$ 0	$ 0	$ 0

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EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	May. 01, 2016	May. 03, 2015	May. 01, 2016	May. 03, 2015
Calculation of basic and diluted earnings per share [Abstract]
Net income attributable to Photronics, Inc. shareholders	$ 11,854	$ 10,060	$ 32,856	$ 13,897
Effect of dilutive securities [Abstract]
Interest expense on convertible notes, net of related tax effects	875	1,071	1,946	1,071
Earnings for diluted earnings per share	$ 12,729	$ 11,131	$ 34,802	$ 14,968
Weighted-average common shares computations [Abstract]
Weighted-average common shares used for basic earnings per share (in shares)	67,372	66,230	67,090	66,148
Effect of dilutive securities [Abstract]
Convertible notes (in shares)	9,196	11,084	10,140	5,542
Share-based payment awards (in shares)	948	914	1,096	934
Potentially dilutive common shares (in shares)	10,144	11,998	11,236	6,476
Weighted-average common shares used for diluted earnings per share (in shares)	77,516	78,228	78,326	72,624
Basic earnings per share (in dollars per share)	$ 0.18	$ 0.15	$ 0.49	$ 0.21
Diluted earnings per share (in dollars per share)	$ 0.16	$ 0.14	$ 0.44	$ 0.21
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total potentially dilutive shares excluded (in shares)	2,160	1,654	1,414	7,163
Share-Based Payment Awards [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total potentially dilutive shares excluded (in shares)	2,160	1,654	1,414	1,621
Convertible Notes [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total potentially dilutive shares excluded (in shares)	0	0	0	5,542

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CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME BY COMPONENT (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	May. 01, 2016	May. 03, 2015	May. 01, 2016	May. 03, 2015
CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME BY COMPONENT [Abstract]
Other comprehensive income, tax	$ 0	$ 0	$ 0	$ 0
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning Balance	(28,005)	5,595	(10,573)	21,774
Other comprehensive income (loss) before reclassifications	23,811	12,507	2,735	(7,568)
Amounts reclassified from other comprehensive income	32	32	64	64
Net current period other comprehensive income (loss)	23,843	12,539	2,799	(7,504)
Less: other comprehensive (income) loss attributable to noncontrolling interests	(4,684)	(3,296)	(1,072)	568
Ending Balance	(8,846)	14,838	(8,846)	14,838
Foreign Currency Translation Adjustments [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning Balance	(27,118)	6,424	(9,634)	22,651
Other comprehensive income (loss) before reclassifications	23,861	12,532	2,746	(7,574)
Amounts reclassified from other comprehensive income	0	0	0	0
Net current period other comprehensive income (loss)	23,861	12,532	2,746	(7,574)
Less: other comprehensive (income) loss attributable to noncontrolling interests	(4,709)	(3,308)	(1,078)	571
Ending Balance	(7,966)	15,648	(7,966)	15,648
Amortization of Cash Flows Hedge [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning Balance	(274)	(402)	(306)	(434)
Other comprehensive income (loss) before reclassifications	0	0	0	0
Amounts reclassified from other comprehensive income	32	32	64	64
Net current period other comprehensive income (loss)	32	32	64	64
Less: other comprehensive (income) loss attributable to noncontrolling interests	0	0	0	0
Ending Balance	(242)	(370)	(242)	(370)
Other [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning Balance	(613)	(427)	(633)	(443)
Other comprehensive income (loss) before reclassifications	(50)	(25)	(11)	6
Amounts reclassified from other comprehensive income	0	0	0	0
Net current period other comprehensive income (loss)	(50)	(25)	(11)	6
Less: other comprehensive (income) loss attributable to noncontrolling interests	25	12	6	(3)
Ending Balance	$ (638)	$ (440)	$ (638)	$ (440)

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FAIR VALUE MEASUREMENTS (Details) - USD ($) $ in Thousands	May. 01, 2016	Nov. 01, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	$ 0	$ 0
Total liabilities	0	0
Fair Value [Member] | 3.25% convertible senior notes due 2016 [Member]
Fair and carrying values of the Company's convertible senior notes [Abstract]
Convertible senior notes	0	60,375
Fair Value [Member] | 3.25% convertible senior notes due 2019 [Member]
Fair and carrying values of the Company's convertible senior notes [Abstract]
Convertible senior notes	69,966	64,550
Carrying Value [Member] | 3.25% convertible senior notes due 2016 [Member]
Fair and carrying values of the Company's convertible senior notes [Abstract]
Convertible senior notes	0	57,500
Carrying Value [Member] | 3.25% convertible senior notes due 2019 [Member]
Fair and carrying values of the Company's convertible senior notes [Abstract]
Convertible senior notes	$ 57,500	$ 57,500

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COMMITMENTS AND CONTINGENCIES (Details) $ in Millions	May. 01, 2016 USD ($)
COMMITMENTS AND CONTINGENCIES [Abstract]
Outstanding commitments for capital expenditure	$ 59

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GAIN ON SALE OF INVESTMENT (Details) - USD ($) $ in Thousands	3 Months Ended			6 Months Ended
	May. 01, 2016	Jan. 31, 2016	May. 03, 2015	May. 01, 2016	May. 03, 2015
GAIN ON SALE OF INVESTMENT [Abstract]
Gain on Sale of Investment	$ 0	$ 8,785	$ 0	$ 8,785	$ 0