10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended April 30, 2023

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 001-39063

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
COMMON	PLAB	NASDAQ Global Select Market

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 every Interactive Data File required to be submitted 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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer ☒ Accelerated Filer ☐ Non-Accelerated Filer ☐  Smaller Reporting Company
☐
Emerging Growth company
☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

Yes ☐  No ☒

The registrant had 62,518,181 shares of common stock outstanding as of June 1, 2023.

PHOTRONICS, INC.

QUARTERLY REPORT ON FORM 10-Q

April 30, 2023

TABLE OF CONTENTS

Glossary of Terms and Acronyms		3
Forward-Looking Statements		4
PART I.	FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (unaudited)	5
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Income	6
	Condensed Consolidated Statements of Comprehensive Income	7
	Condensed Consolidated Statements of Equity	8
	Condensed Consolidated Statements of Cash Flows	10
	Notes to Condensed Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	35
Item 4.	Controls and Procedures	36
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 6.	Exhibits	38

2

Glossary of Terms and Acronyms

Definitions of certain terms and acronyms that may appear in this report are provided below.

AMOLED	Active-matrix organic light-emitting diode. A technology used in mobile devices.
Application-specific IC	An integrated circuit customized for a particular use, rather than intended for general-purpose use
ASC	Accounting Standards Codification
ASP	Average Selling Price
ASU	Accounting Standards Update
Chip stacking	Placement of an integrated circuit on top of another integrated circuit, resulting in the reduction of the distance between the chips in a circuit board
COVID-19	Covid virus 2019, an infectious disease that was declared a pandemic by the World Health Organization in March 2020
DNP	Dai Nippon Printing Co., Ltd.
EUV	A wafer lithography technology using the industry standard extreme ultraviolet (EUV) wavelength. EUV photomasks function by selectively reflecting or blocking light, in contrast to conventional photomasks which function by selectively transmitting or blocking light
Exchange Act	The Securities Exchange Act of 1934 (as amended)
FASB	Financial Accounting Standards Board
Form 10-K	Annual Report on Form 10-K
Form 10-Q	Quarterly Report on Form 10-Q
FPDs	Flat-panel displays, or “displays”
Generation	In reference to flat-panel displays, refers to the size range of the underlying substrate to which a photomask is applied. Higher generation (or “G”) numbers represent larger substrates
High-end (photomasks)	For IC, photomasks that are 28nm or smaller; for FPD, AMOLED, G10.5+, and LTPS photomasks
ICs	Integrated circuits, or semiconductors
LIBOR	London Inter-Bank Offered Rate
LTPS	Low-Temperature Poly Silicon, a polycrystalline silicon synthesized at relatively low temperatures; polycrystalline silicon in thin-film transistors (TFTs) are used in liquid-crystal display (LCD) flat panels and to drive organic light-emitting diode (OLED) displays
MLA	Master Lease Agreement
Optical proximity correction	A photolithography enhancement technique applied to compensate for the limitations of light to maintain the edge placement integrity of an original design, imaged onto a silicon wafer, for further processing to an etched pattern.
PDMCX	Xiamen American Japan Photronics Mask Co., Ltd., a joint venture of Photronics and DNP
Phase-shift photomasks	Photomasks that take advantage of the interference generated by phase differences to improve image resolution in photolithography
Pure-play foundry	A company that does not produce a significant volume of IC products of its own design, but rather operates IC fabrication plants dedicated to producing ICs for other companies
RMB	Chinese renminbi
ROU (assets)	Right-of-use asset
SEC	Securities and Exchange Commission
Securities Act	The Securities Act of 1933 (as amended)
Sputtering	The bombardment of a material with energetic particles to cause microscopic particles of the material to eject from its surface.
U.S. GAAP	Accounting principles generally accepted in the United States of America
Wafer	A wafer, or silicon wafer, is a thin slice of semiconductor material that, in the fabrication of microelectronics, serves as the substrate for microelectronic devices built in and upon the wafer

3

Forward-Looking Statements

This Form 10-Q contains forward-looking statements, as defined by the SEC. The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements made by us, or on our behalf. Forward-looking statements are statements other than statements of historical fact, including, without limitation, those statements that include such words as “anticipates”, “believes”, “estimates”, “expects”, “intends”, “may”, “plans”, “predicts”, and similar expressions, and, without limitation, may address our future plans, objectives, goals, strategies, events, or performance, as well as underlying assumptions and other statements that are other than statements of historical facts. On occasion, in other documents filed with the SEC, press releases, conferences, or by other means, we may discuss, publish, disseminate, or otherwise make available, forward-looking statements, including statements contained within Part I, Item 2 – “Management’s Discussion & Analysis of Financial Condition and Results of Operations” of this Form 10-Q.

Forward-looking statements involve risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed. Our expectations, beliefs, and projections are expressed in good faith and are believed by us to have a reasonable basis, including, without limitation, management’s examination of historical operating trends, information contained in our records, and information we’ve obtained from other parties. However, we can offer no assurance that our expectations, beliefs, or projections will be realized, accomplished, or achieved.

Forward-looking statements within this Form 10-Q speak only as of the date of its filing, and we undertake no obligation to update any such statements to reflect changes in events or circumstances that may subsequently occur. Users of this Form 10-Q are cautioned that various factors may cause actual results to differ materially from those contained in any forward-looking statements found within this Form 10-Q and that they should not place undue reliance on any forward-looking statement. In addition, all forward-looking statements, whether written or oral and whether made by us or on our behalf, are expressly qualified by the risk factors provided in Part I, Item 1A “Risk Factors” of our Form 10-K, as well as any additional risk factors we may provide in Part II, Item 1A of our Quarterly Reports on Form 10-Q.

4

PART I. FINANCIAL INFORMATION

Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

PHOTRONICS, INC.

Condensed Consolidated Balance Sheets

(in thousands, except per share amounts)

(unaudited)

	April 30, 2023			October 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	367,485		$	319,680
Short-term investments		45,431			38,820
Accounts receivable, net of allowance of $1,172 in 2023 and $1,002 in 2022		214,464			198,147
Inventories		54,940			50,753
Other current assets		37,796			37,252
Total current assets		720,116			644,652
Property, plant and equipment, net		699,917			643,873
Deferred income taxes		19,302			19,816
Other assets		11,690			7,489
Total assets	$	1,451,025		$	1,315,830
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	7,017		$	10,024
Accounts payable		92,672			79,566
Accrued liabilities		85,479			104,207
Total current liabilities		185,168			193,797
Long-term debt		21,322			32,310
Other liabilities		39,851			27,634
Total liabilities		246,341			253,741
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, 61,185 shares issued and outstanding at April 30, 2023, and 60,791 shares issued and outstanding at October 31, 2022		612			608
Additional paid-in capital		497,391			493,741
Retained earnings		489,549			435,634
Accumulated other comprehensive loss		(59,505	)		(98,456	)
Total Photronics, Inc. shareholders’ equity		928,047			831,527
Noncontrolling interests		276,637			230,562
Total equity		1,204,684			1,062,089
Total liabilities and equity	$	1,451,025		$	1,315,830

See accompanying notes to condensed consolidated financial statements.

5

PHOTRONICS, INC.

Condensed Consolidated Statements of Income

(in thousands, except per share amounts)

(unaudited)

	Three Months Ended					Six Months Ended
	April 30, 2023			May 1, 2022		April 30, 2023			May 1, 2022
Revenue	$	229,306		$	204,509	$	440,397		$	394,336
Cost of goods sold		140,904			134,289		275,918			264,253
Gross profit		88,402			70,220		164,479			130,083
Operating expenses:
Selling, general, and administrative		17,878			16,613		34,696			32,340
Research and development		3,479			4,206		6,781			10,145
Total operating expenses		21,357			20,819		41,477			42,485
Operating income		67,045			49,401		123,002			87,598
Other income (expense):
Foreign currency transactions impact, net		10,718			7,844		(6,226	)		13,112
Interest income and other income, net		2,987			162		5,570			496
Interest expense		(134	)		15		(198	)		(880	)
Income before income tax provision		80,616			57,422		122,148			100,326
Income tax provision		21,343			14,393		33,925			25,571
Net income		59,273			43,029		88,223			74,755
Net income attributable to noncontrolling interests		19,344			15,597		34,308			24,259
Net income attributable to Photronics, Inc. shareholders	$	39,929		$	27,432	$	53,915		$	50,496
Earnings per share:
Basic	$	0.65		$	0.45	$	0.88		$	0.84
Diluted	$	0.65		$	0.45	$	0.88		$	0.83
Weighted-average number of common shares outstanding:
Basic		61,138			60,606		61,016			60,382
Diluted		61,507			61,145		61,489			61,041

See accompanying notes to condensed consolidated financial statements.

6

PHOTRONICS, INC.

Condensed Consolidated Statements of Comprehensive Income

(in thousands)

(unaudited)

	Three Months Ended						Six Months Ended
	April 30, 2023			May 1, 2022			April 30, 2023		May 1, 2022
Net income	$	59,273		$	43,029		$	88,223	$	74,755
Other comprehensive (loss) income, net of tax of $0:
Foreign currency translation adjustments		(39,813	)		(44,118	)		50,707		(53,949	)
Other		66			129			11		166
Net other comprehensive (loss) income		(39,747	)		(43,989	)		50,718		(53,783	)
Comprehensive income (loss)		19,526			(960	)		138,941		20,972
Less: comprehensive income attributable to noncontrolling interests		14,682			5,092			46,075		13,966
Comprehensive income (loss) attributable to Photronics, Inc. shareholders	$	4,844		$	(6,052	)	$	92,866	$	7,006

See accompanying notes to condensed consolidated financial statements.

7

PHOTRONICS, INC.

Condensed Consolidated Statements of Equity

(in thousands)

(unaudited)

	Three Months Ended April 30, 2023
	Photronics, Inc. Shareholders
					Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss			Non- controlling Interests			Total Equity
	Common Stock
	Shares		Amount
Balance at January 29, 2023		61,102	$	611	$	494,954	$	449,620	$	-	$	(24,420	)	$	261,955		$	1,182,720
Net income		-		-		-		39,929		-		-			19,344			59,273
Other comprehensive loss		-		-		-		-		-		(35,085	)		(4,662	)		(39,747	)
Shares issued under equity plans		83		1		428		-		-		-			-			429
Share-based compensation expense		-		-		2,009		-		-		-			-			2,009
Balance at April 30, 2023		61,185	$	612	$	497,391	$	489,549	$	-	$	(59,505	)	$	276,637		$	1,204,684

	Three Months Ended May 1, 2022
	Photronics, Inc. Shareholders
	Common Stock				Additional Paid-in		Retained		Treasury		Accumulated Other Comprehensive			Non- controlling			Total
	Shares		Amount		Capital		Earnings		Stock		Income (Loss)			Interests			Equity
Balance at January 30, 2022		60,564	$	606	$	487,342	$	339,912	$	-	$	10,565		$	200,741		$	1,039,166
Net income		-		-		-		27,432		-		-			15,597			43,029
Other comprehensive loss		-		-		-		-		-		(33,484	)		(10,505	)		(43,989	)
Shares issued under equity plans		73		-		442		-		-		-			-			442
Share-based compensation expense		-		-		1,584		-		-		-			-			1,584
Contribution from noncontrolling interest		-		-		-		-		-		-			9,998			9,998
Balance at May 1, 2022		60,637	$	606	$	489,368	$	367,344	$	-	$	(22,919	)	$	215,831		$	1,050,230

See accompanying notes to condensed consolidated financial statements.

8

	Six Months Ended April 30, 2023
	Photronics, Inc. Shareholders
					Additional Paid-in Capital			Retained Earnings		Treasury Stock		Accumulated Other Comprehensive  Loss			Non- controlling Interests		Total Equity
	Common Stock
	Shares		Amount
Balance at October 31, 2022		60,791	$	608	$	493,741		$	435,634	$	-	$	(98,456	)	$	230,562	$	1,062,089
Net income		-		-		-			53,915		-		-			34,308		88,223
Other comprehensive Income		-		-		-			-		-		38,951			11,767		50,718
Shares issued under equity plans		394		4		(180	)		-		-		-			-		(176	)
Share-based compensation expense		-		-		3,830			-		-		-			-		3,830
Balance at April 30, 2023		61,185	$	612	$	497,391		$	489,549	$	-	$	(59,505	)	$	276,637	$	1,204,684

	Six Months Ended May 1, 2022
	Photronics, Inc. Shareholders
	Common Stock						Additional Paid-in			Retained			Treasury			Accumulated Other Comprehensive			Non- controlling			Total
	Shares			Amount			Capital			Earnings			Stock			Income (Loss)			Interests			Equity
Balance at October 31, 2021		60,024		$	600		$	484,672		$	317,849		$	-		$	20,571		$	176,870		$	1,000,562
Net income		-			-			-			50,496			-			-			24,259			74,755
Other comprehensive loss		-			-			-			-			-			(43,490	)		(10,293	)		(53,783	)
Shares issued under equity plans		801			7			3,175			-			-			-			-			3,182
Share-based compensation expense		-			-			3,041			-			-			-			-			3,041
Contribution from noncontrolling interest		-			-			-			-			-			-			24,995			24,995
Purchase of treasury stock		-			-			-			-			(2,522	)		-			-			(2,522	)
Retirement of treasury stock		(188	)		(1	)		(1,520	)		(1,001	)		2,522			-			-			-
Balance at May 1, 2022		60,637		$	606		$	489,368		$	367,344		$	-		$	(22,919	)	$	215,831		$	1,050,230

See accompanying notes to condensed consolidated financial statements.

9

PHOTRONICS, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	Six Months Ended
	April 30, 2023			May 1, 2022
Cash flows from operating activities:
Net income	$	88,223		$	74,755
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		39,085			41,405
Share-based compensation		3,830			3,041
Changes in assets and liabilities:
Accounts receivable		(5,952	)		(25,122	)
Inventories		(1,905	)		(5,081	)
Other current assets		1,382			(10,858	)
Accounts payable, accrued liabilities, and other		(14,986	)		25,149
Net cash provided by operating activities		109,677			103,289
Cash flows from investing activities:
Purchases of property, plant and equipment		(57,728	)		(34,809	)
Purchases of available-for-sale debt securities		(9,837	)		-
Proceeds from maturities of available-for-sale debt securities		4,000			-
Government incentives		1,393			1,394
Other		(88	)		(199	)
Net cash used in investing activities		(62,260	)		(33,614	)
Cash flows from financing activities:
Repayments of debt		(14,720	)		(27,571	)
Purchases of treasury stock		-			(2,522	)
Contribution from noncontrolling interest		-			24,995
Proceeds from share-based arrangements		730			4,384
Net settlements of restricted stock awards		(1,252	)		(1,452	)
Net cash used in financing activities		(15,242	)		(2,166	)
Effects of exchange rate changes on cash, cash equivalents, and restricted cash		15,621			(14,917	)
Net increase in cash, cash equivalents, and restricted cash		47,796			52,592
Cash, cash equivalents, and restricted cash at beginning of period		322,409			279,680
Cash, cash equivalents, and restricted cash at end of period		370,205			332,272
Less: Ending restricted cash		2,720			2,990
Cash and cash equivalents at end of period	$	367,485		$	329,282
Supplemental disclosure of non-cash information:
Accruals for property, plant and equipment purchased during the period	$	14,420		$	5,737

See accompanying notes to condensed consolidated financial statements.

10

PHOTRONICS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

(in thousands, except share amounts and per share data)

NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION

Photronics, Inc. (“Photronics”, “the Company”, “we”, “our”, or “us”) is  one of the world’s leading manufacturers of photomasks, which are high-precision photographic quartz or glass plates containing microscopic images of electronic circuits. Photomasks are a key element in the manufacture of ICs and FPDs and are used as masters to transfer circuit patterns onto semiconductor wafers and FPD substrates during the fabrication of ICs, a variety of FPDs and, to a lesser extent, other types of electrical and optical components. We operate eleven manufacturing facilities, which are located in Taiwan (3), Korea, China (2), the United States (3), and Europe (2).

The accompanying unaudited condensed consolidated financial statements (“the financial statements”) have been prepared in accordance with U.S. GAAP 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 U.S. GAAP 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 financial statements include the accounts of Photronics, its wholly owned subsidiaries, and the majority-owned subsidiaries, which it controls. All intercompany balances and transactions have been eliminated in consolidation. These financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our Form 10-K for the fiscal year ended October 31, 2022, where we discuss and provide additional information about our accounting policies and the methods and assumptions used in our estimates.

The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect amounts reported in them. Our estimates, including those on the impact of COVID-19, are based on historical experience and on various assumptions that we believe to be reasonable under the facts and circumstances at the time they are made. Subsequent actual results may differ from such estimates. We review these estimates periodically and reflect any effects of revisions in the period in which they are determined.

Our business is typically impacted during the first quarter of our fiscal year by the North American, European, and Asian holiday periods, as some customers reduce their development and buying activities during this period. Operating results for the interim periods are not necessarily indicative of the results that may be expected for the fiscal year ending October 31, 2023.

NOTE 2 - SHORT-TERM INVESTMENTS

Short-term investments consist of U.S. government securities and are classified as available-for-sale. We classify available-for-sale securities on our consolidated balance sheet as follows:

-	Maturing within three months or less from the date of purchase	Cash and cash equivalents
-	Maturing, as of the date of purchase, more than three months, but with remaining maturities of less than one year, from the balance sheet date	Short-term investments
-	Maturing one year or more from the balance sheet date	Long-term marketable investments

       As of April 30, 2023, all of our available-for-sale securities had, at their dates of purchase, remaining maturities of more than three months, but less than one year, and have been classified as Short-term investments.

11

Available-for-sale debt investments are reported at fair value, with unrealized gains or losses (net of tax) reported in Accumulated other comprehensive income. The fair values of our available-for-sale securities are Level 1 measurements, based on quoted prices from active markets for identical assets. In the event of a sale of an available-for-sale debt investment, we would determine the cost of the investment sold at the specific individual security level, and would include any gain or loss in Interest income and other income, net, where we also report periodic interest earned and the amortization (accretion) of discounts (premiums) related to these investments. The table below provides information on our available-for-sale debt securities.

	April 30, 2023									October 31, 2022
	Amortized Cost		Unrealized Gains		Unrealized Losses			Carrying Value		Amortized Cost		Unrealized Gains		Unrealized Losses			Carrying Value
Government securities	$	45,492	$	-	$	(61	)	$	45,431	$	38,911	$	-	$	(91	)	$	38,820

NOTE 3 - INVENTORIES

Inventories are stated at the lower of cost, determined under the first-in, first-out (“FIFO”) method, or net realizable value. Presented below are the components of Inventories at the balance sheet dates.

	April 30, 2023		October 31, 2022
Raw materials	$	53,642	$	49,326
Work in process		1,203		1,408
Finished goods		95		19
	$	54,940	$	50,753

NOTE 4 - PROPERTY, PLANT, AND EQUIPMENT, NET

Presented below are the components of Property, plant, and equipment, net at the balance sheet dates.

	April 30, 2023			October 31, 2022
Land	$	11,620		$	11,134
Buildings and improvements		190,134			168,024
Machinery and equipment		1,884,235			1,769,478
Leasehold improvements		19,835			18,802
Furniture, fixtures, and office equipment		15,523			14,355
Construction in progress		91,204			90,846
		2,212,551			2,072,639
Accumulated depreciation and amortization		(1,512,634	)		(1,428,766	)
	$	699,917		$	643,873

Information on ROU assets resulting from finance leases, at the balance sheet dates, is presented below.

	April 30, 2023			October 31, 2022
Machinery and equipment	$	42,817		$	42,760
Accumulated amortization		(6,206	)		(4,784	)
	$	36,611		$	37,976

The following table presents depreciation expense (including the amortization of ROU assets) related to property, plant, and equipment incurred during the reporting periods.

	Three Months Ended						Six Months Ended
	April 30, 2023			May 1, 2022			April 30, 2023		May 1, 2022
Depreciation Expense		$	19,880		$	20,506	$	38,908	$	41,229

12

NOTE 5 - PDMCX JOINT VENTURE

In January 2018, Photronics, Inc., through its wholly owned Singapore subsidiary (hereinafter, within this Note “we”, “Photronics”, “us”, or “our”), and DNP, through its wholly owned subsidiary “DNP Asia Pacific PTE, Ltd.”, entered into a joint venture under which DNP obtained a 49.99% interest in our IC business in Xiamen, China. The joint venture, which we refer to as “PDMCX”, was established to develop and manufacture photomasks for semiconductors. We entered into this joint venture to enable us to compete more effectively for the merchant photomask business in China, and to benefit from the additional resources and investment that DNP provides to enable us to offer advanced-process technology to our customers.

In 2020, in combination with local financing obtained by PDMCX, Photronics and DNP fulfilled their investment obligations under the PDMCX operating agreement (“the Agreement”). As discussed in Note 6, liens were granted to the local financing entity on property, plant, and equipment and were paid off during fiscal year 2023. These liens had an October 31, 2022, total carrying value of $70.7 million, as collateral for the loans.

Under the Agreement, DNP is afforded, under certain circumstances, the right to put its interest in PDMCX to Photronics. These circumstances include disputes regarding the strategic direction of PDMCX that may arise after the initial two-year term of the Agreement and cannot be resolved between the two parties. As of the date of issuance of these financial statements, DNP had not indicated its intention to exercise this right. In addition, both Photronics and DNP have the option to purchase, or put, their interest from, or to, the other party, should their ownership interest fall below twenty percent for a period of more than six consecutive months. Under all such circumstances, the sales of ownership interests would be at the exiting party’s ownership percentage of the joint venture’s net book value, with closing to take place within three business days of obtaining required approvals and clearance.

The following table presents net income we recorded from the operations of PDMCX during the reporting periods.

	Three Months Ended						Six Months Ended
	April 30, 2023			May 1, 2022			April 30,  2023		May 1, 2022
Net income from PDMCX		$	6,652		$	4,895	$	12,569	$	6,772

As required by the guidance in Topic 810 - “Consolidation” of the Accounting Standards Codification (“ASC”), we evaluated our involvement in PDMCX for the purpose of determining whether we should consolidate its results in our financial statements. The initial step of our evaluation was to determine whether PDMCX was a variable interest entity (“VIE”). Due to its lack of sufficient equity at risk to finance its activities without additional subordinated financial support, we determined that it was a VIE. Having made this determination, we then assessed whether we were the primary beneficiary of the VIE and concluded that we were the primary beneficiary during the current and prior year reporting periods; thus, as required, the PDMCX financial results have been consolidated with Photronics. Our conclusion was based on the facts that we held a controlling financial interest in PDMCX (which resulted from our having the power to direct the activities that most significantly impacted its economic performance) and had the obligation to absorb losses and the right to receive benefits that could potentially be significant to PDMCX. Our conclusions that we had the power to direct the activities that most significantly affected the economic performance of PDMCX during the current and prior year reporting periods were based on our right to appoint the majority of its board of directors, which has, among others, the powers to manage the business (through its rights to appoint and evaluate PDMCX’s management), incur indebtedness, enter into agreements and commitments, and acquire and dispose of PDMCX’s assets. In addition, as a result of the 50.01% variable interest we held during the current and prior year periods, we had the obligation to absorb losses, and the right to receive benefits, that could potentially be significant to PDMCX.

13

The following table presents the carrying amounts of PDMCX assets and liabilities included in our condensed consolidated balance sheets. General creditors of PDMCX do not have recourse to the assets of Photronics (other than the net assets of PDMCX); therefore, our maximum exposure to loss from PDMCX is our interest in the carrying amount of the net assets of the joint venture.

	April 30, 2023				October 31, 2022
Classification	Carrying Amount		Photronics Interest		Carrying Amount		Photronics Interest
Current assets	$	128,626	$	64,326	$	127,542	$	63,784
Noncurrent assets		145,471		72,750		119,392		59,708
Total assets		274,097		137,076		246,934		123,492
Current liabilities		50,925		25,468		51,274		25,643
Noncurrent liabilities		1,484		742		9,161		4,581
Total liabilities		52,409		26,210		60,435		30,224
Net assets	$	221,688	$	110,866	$	186,499	$	93,268

NOTE 6 - DEBT

Due to the Q2 FY23 payoff of the Xiamen Project loans, as of April 30, 2023, the Current portion of long-term debt and the Long-term debt balances were comprised of finance leases as described below:

As of April 30, 2023	Xiamen Project Loans			Finance Leases			Total
Principal due:
Next 12 months	$	-		$	7,017		$	7,017
Months 13 – 24	$	-		$	21,290		$	21,290
Months 25 – 36		-			12			12
Months 37 – 48		-			12			12
Months 49 – 60		-			8			8
Long-term debt		-			21,322			21,322
Total debt	$	-		$	28,339		$	28,339
Interest rate at balance sheet date		N/A	%		N/A
Basis spread on interest rates		0.00			N/A
Interest rate reset	Quarterly				N/A
Maturity date	December 2025				N/A
Periodic payment amount	Varies as loans mature(1)			Varies as leases mature
Periodic payment frequency	Semiannual, on individual loans			Monthly
Loan collateral (carrying amount)	$	N/A		$	36,611	(2)

⁽¹⁾ During the three-month period ended April 30, 2023, we repaid the entire balance of 26.4 million RMB (approximately $3.9 million) remaining on the loan, of which, 2.0 million RMB was due to be paid in June 2025 and 24.4 million RMB was due to be paid in December 2025.

⁽²⁾ Represents the carrying amount at the balance sheet date of the related ROU assets, in which the lessors have secured interests.

14

The table below provides information on our long-term debt as of October 31, 2022.

As of October 31, 2022	Xiamen Project Loans			Xiamen Working Capital Loans			Finance Leases			Total
Principal due:
Next 12 months	$	-		$	3,512		$	6,512		$	10,024
Months 13 – 24	$	-		$	-		$	6,610		$	6,610
Months 25 – 36		1,098			-			17,961			19,059
Months 37 – 48		6,641			-			-			6,641
Long-term debt	$	7,739		$	-		$	24,571		$	32,310
Interest rate at balance sheet date		4.30% - 4.45	%		4.46	%		N/A
Basis spread on interest rates		0.00			76			N/A
Interest rate reset	Quarterly			Monthly/Annually				N/A
Maturity date	December 2025			July 2023				N/A
Periodic payment amount	Varies as loans mature (1)			Increases as loans mature			Varies as leases mature
Periodic payment frequency	Semiannual, on individual loans			Semiannual, on individual loans			Monthly
Loan collateral (carrying amount)	$	70,705			N/A		$	37,976	(2)

⁽¹⁾ During the three-month period ended October 31, 2022, we repaid 81.0 million RMB (approximately $11.5 million) that had contractual maturity dates ranging from December 2023 through June 2025.

⁽²⁾ Represents the carrying amount at the balance sheet date of the related ROU assets, in which the lessors have secured interests.

Finance Leases

In February 2021, we entered into a five-year $7.2 million finance lease for a high-end inspection tool. Monthly payments on the lease, which commenced in February 2021, are $0.1 million per month. Upon the payment of the fiftieth monthly payment and prior to payment of the fifty-first monthly payment, we may exercise an early buyout option to purchase the tool for $2.4 million. If we do not exercise the early buyout option, then at the end of the five-year lease term, the lease shall continue to renew on a month-to-month basis at the same rental terms; at our option, after the original term or any renewal periods, we may return the tool, elect to extend the lease, or purchase the tool at its fair market value. Since we are reasonably certain that we will exercise the early buyout option, our lease liability reflects such exercise and we have classified the lease as a finance lease. The interest rate implicit in the lease is 1.08%.

15

In December 2020, we entered into a five-year $35.5 million finance lease for a high-end lithography tool. Monthly payments on the lease, which commenced in January 2021, increased from $0.04 million during the first three months to $0.6 million for the following nine months, followed by forty-eight monthly payments of $0.5 million. As of the due date of the forty-eighth monthly payment, we may exercise an early buyout option to purchase the tool for $14.1 million. If we do not exercise the early buyout option, then at the end of the five-year lease term, at our option, we may return the tool, elect to extend the lease term for a period and a lease payment to be agreed with lessor at the time, or purchase the tool for its then-fair market value, as determined by the lessor. Since we are reasonably certain that we will exercise the early buyout option, our lease liability reflects such exercise and we have classified the lease as a finance lease. The interest rate implicit in the lease is 1.58%. The lease agreement incorporates the covenants included in our Corporate Credit Agreement, which are detailed below, and includes a cross-default provision for any agreement or instrument with an outstanding, committed balance greater than $5.0 million in which we are the indebted party.

Xiamen Project Loans

In November 2018, PDMCX obtained approval to borrow 345.0 million RMB from the Industrial and Commercial Bank of China. From November 2018 through July 2020, PDMCX entered into separate loan agreements (the “Project Loans”) for the entire approved amount. In February 2023, PDMCX  repaid the entire outstanding balance of 26.4 million RMB ($3.9 million). As of April 30, 2023, PDMCX had no amount outstanding. The Project Loans were used to finance certain capital expenditures at the PDMCX facility and were collateralized by liens granted on the land use right, building, and certain equipment located at the facility. The interest rates on the Project Loans were variable (based on the RMB Loan Prime Rate of the National Interbank Funding Center), and interest incurred on the loans was eligible for reimbursement through incentives provided by the Xiamen Torch Hi-Tech Industrial Development Zone, which provided for such reimbursements up to a prescribed limit and duration. The Project Loans were subject to covenants and provisions, certain of which related to the assets pledged as security for the loans, all of which we were in compliance with as of April 30, 2023.

Xiamen Working Capital Loans

In November 2018, PDMCX obtained approval for revolving, unsecured credit of the equivalent of $25.0 million, pursuant to which PDMCX may enter into separate loan agreements with varying terms to maturity. This facility is subject to annual reviews and extensions, with the most recent extension set to expire in November 2023. In December 2022, we repaid our entire outstanding balance of 25.6 million RMB ($3.6 million). As of April 30, 2023, PDMCX had no amount outstanding against the approval. The interest rates are variable, based on the RMB Loan Prime Rate of the National Interbank Funding Center. Interest incurred on the loans related to the amount borrowed was eligible for reimbursement through incentives provided by the Xiamen Torch Hi-Tech Industrial Development Zone, which provided for such reimbursements up to a prescribed limit and duration.

Corporate Credit Agreement

In September 2018, we entered into a five-year amended and restated credit agreement (the “Credit Agreement”), which has a $50 million borrowing limit, with an expansion capacity to $100 million. The Credit Agreement is secured by substantially all of our assets located in the United States and common stock we own in certain subsidiaries. The Credit Agreement includes covenants around minimum interest coverage ratio, total leverage ratio, and minimum unrestricted cash balance (all of which we were in compliance with at April 30, 2023), and limits the amount of cash dividends, distributions, and redemptions we can pay on our common stock to an aggregate annual amount of $50 million. We had no outstanding borrowings against the Credit Agreement at April 30, 2023. The interest rate on the Credit Agreement (6.02% at April 30, 2023) is based on our total leverage ratio at one-month LIBOR plus a spread, as defined in the Credit Agreement.

Hefei Equipment Loan

In October 2020, our Hefei, China, facility was approved to borrow 200 million RMB from the China Construction Bank Corporation. In July 2022, we repaid our entire outstanding balance of 120.7 million RMB ($18.0 million). This credit facility was subject to annual reviews and extension; the most recent extension expired in August 2022 and we did not apply for an extension. The loan proceeds were used to fund purchases of two lithography tools at the Hefei facility. The interest rate on the loan was variable and based on the RMB Loan Prime Rate of the National Interbank Funding Center. The borrowings were secured by the Hefei facility, its related land use right, and certain manufacturing equipment. The Hefei Equipment Loan was subject to covenants and provisions, certain of which relate to the assets pledged as security for the loan, including covenants for the ratio of total liabilities to total assets and the ratio of current assets to current liabilities, all of which we were in compliance with at the time of repayment.

NOTE 7 - REVENUE

We recognize revenue when, or as, control of a good or service transfers to a customer, in an amount that reflects the consideration to which we expect to be entitled in exchange for transferring those goods or services. We account for an arrangement as a revenue contract when each party has approved and is committed to perform under the contract, the rights of the contracting parties regarding the goods or services to be transferred and the payment terms are identifiable, the arrangement has commercial substance, and collection of consideration is probable. Substantially all of our revenue comes from the sales of photomasks. We typically contract with our customers to sell sets of photomasks, which are comprised of multiple layers, the predominance of which we invoice as they ship to customers. As the photomasks are manufactured to customer specifications, they have no alternative use to us and, as our contracts generally provide us with the right to payment for work completed to date, we recognize revenue as we perform, or “over time”, on most of our contracts. We measure our performance to date using an input method, which is based on our estimated costs to complete the various manufacturing phases of a photomask. At the end of a reporting period, there are a number of uncompleted revenue contracts on which we have performed; for any such contracts under which we are entitled to be compensated for our costs incurred plus a reasonable profit, we recognize revenue and a corresponding contract asset for such performance. We account for shipping and handling activities that we perform after a customer obtains control of a good as being activities to fulfill our promise to transfer the good to the customer, rather than as promised services, or performance obligations, under the contract. We report our revenue net of any sales or similar taxes we collect on behalf of government entities.

As stated above, photomasks are manufactured to customer specifications in accordance with their proprietary designs; thus, they are individually unique. Due to their uniqueness and other factors, their transaction prices are individually established through negotiations with customers; consequently, our photomasks do not have standard or “list” prices. The transaction prices of the vast majority of our revenue contracts include only fixed amounts of consideration. In certain instances, such as when we offer a customer an early payment discount, an estimate of variable consideration would be included in the transaction price, but only to the extent that a significant reversal of revenue would not occur when the uncertainty related to the variability was resolved.

Contract Assets, Contract Liabilities, and Accounts Receivable

We recognize a contract asset when our performance under a contract precedes our receipt of consideration from a customer, or before payment is due, and our receipt of consideration is conditional upon factors other than the passage of time. Contract assets reflect our transfer of control of photomasks that are in process or completed but not yet shipped to customers. A receivable is recognized when we have an unconditional right to payment for our performance, which generally occurs when we ship the photomasks. Our contract assets primarily consist of a significant amount of our in-process production orders and fully manufactured photomasks which have not yet shipped, for which we have an enforceable right to collect consideration (including a reasonable profit) in the event the in-process orders are cancelled by customers. On an individual contract basis, we net contract assets with contract liabilities (deferred revenue) for financial reporting purposes. We did not identify impairment indicators for any outstanding contract assets during the three or six-month periods ended April 30, 2023, or May 1, 2022.

16

The following table provides information about our contract balances at the balance sheet dates.

Classification	April 30, 2023		October 31, 2022
Contract Assets
Other current assets	$	21,385	$	15,752
Contract Liabilities
Accrued liabilities	$	19,224	$	18,872
Other liabilities		13,189		4,989
	$	32,413	$	23,861

The following table presents revenue recognized from contract liabilities that existed at the beginning of the reporting periods.

	Three Months Ended				Six Months Ended
	April 30, 2023		May 1, 2022		April 30, 2023		May 1, 2022
Revenue recognized from beginning liability	$	11,228	$	11,460	$	7,875	$	7,278

We generally record our accounts receivable at their billed amounts. All outstanding past due customer invoices are reviewed for collectability during, and at the end of, every reporting period. To the extent we believe a loss on the collection of a customer invoice is probable, we record the loss and credit an allowance for credit losses. In the event that an amount is determined to be uncollectible, we charge the allowance for credit losses and derecognize the related receivable. We incurred credit losses on our accounts receivable of $0.1 million during the three and six-month periods ended April 30, 2023, and there were no charges for the three and six-month periods ended May 1, 2022.

Our invoice terms generally range from net-thirty to ninety days, depending on both the geographic market in which the transaction occurs and our payment agreements with specific customers. In the event that our evaluation of a customer’s business prospects and financial condition indicate that the customer presents a collectability risk, we modify terms of sale, which may require payment in advance of performance. At the time of adoption, we elected the practical expedient allowed under ASC Topic 606 “Revenue from Contracts with Customers” (“Topic 606”) that permits us not to adjust a contract’s promised amount of consideration to reflect a financing component when the period between when we transfer control of goods or services to customers and when we are paid is one year or less.

In instances when we are paid in advance of our performance, we record a contract liability and, as allowed under the practical expedient in Topic 606, recognize interest expense only if the period between when we receive payment from the customer and the date when we expect to be entitled to the payment is greater than one year. Historically, advance payments we have received from customers have generally not preceded the completion of our performance obligations by more than one year.

17

Disaggregation of Revenue

The following tables present our revenue for the three and six-month periods ended April 30, 2023, and May 1, 2022, disaggregated by product type, geographic origin, and timing of recognition.

	Three Months Ended				Six Months Ended
Revenue by Product Type	April 30, 2023		May 1, 2022		April 30, 2023		May 1, 2022
IC
High-end	$	43,920	$	51,362	$	91,923	$	98,285
Mainstream		123,134		94,437		231,720		177,275
Total IC	$	167,054	$	145,799	$	323,643	$	275,560
FPD
High-end	$	51,888	$	46,610	$	97,579	$	92,886
Mainstream		10,364		12,100		19,175		25,890
Total FPD	$	62,252	$	58,710	$	116,754	$	118,776
	$	229,306	$	204,509	$	440,397	$	394,336

	Three Months Ended				Six Months Ended
Revenue by Geographic Origin*	April 30, 2023		May 1, 2022		April 30, 2023		May 1, 2022
Taiwan	$	80,448	$	69,852	$	156,017	$	137,693
China		65,215		53,691		124,148		99,645
Korea		41,372		40,769		79,204		80,283
United States		32,495		30,335		62,377		57,511
Europe		9,276		9,506		17,722		18,420
Other		500		356		929		784
	$	229,306	$	204,509	$	440,397	$	394,336

	Three Months Ended				Six Months Ended
Revenue by Timing of Recognition	April 30, 2023		May 1, 2022		April 30, 2023		May 1, 2022
Over time	$	215,376	$	192,770	$	412,541	$	363,034
At a point in time		13,930		11,739		27,856		31,302
	$	229,306	$	204,509	$	440,397	$	394,336

18

Contract Costs

We pay commissions to third-party sales agents for certain sales they procure on our behalf. However, the bases of the commissions are the transaction prices of the sales, which are completed in less than one year; thus, no relationship is established with a customer that will result in future business. Therefore, we do not recognize any portion of these sales commissions as costs of obtaining a contract, nor do we currently foresee other circumstances under which we would recognize contract obtainment costs as assets.

Remaining Performance Obligations

As we are typically required to fulfill customer orders within a short period of time, our backlog of orders has historically been two to three weeks for FPD photomasks and one to two weeks for IC photomasks. However, the demand for some IC photomasks has expanded beyond the industry’s capacity to supply them within the traditional time period; thus the backlog, in some cases, can expand to as long as two to three months. As allowed under Topic 606, we have elected not to disclose our remaining performance obligations, which represent the costs associated with the completion of the manufacturing process of in-process photomasks related to contracts that have an original duration of one year or less.

Product Warranties

Our photomasks are sold under warranties that generally range from one to twenty-four months. We warrant that our photomasks conform to customer specifications and will typically repair, replace, or issue a refund for any photomasks that fail to do so. The warranties do not represent separate performance obligations in our revenue contracts. Historically, customer claims under warranties have been immaterial.

NOTE 8 - SHARE-BASED COMPENSATION

In March 2016, shareholders approved our current equity incentive compensation plan (the “Plan”), under which incentive stock options, non-qualified stock options, stock grants, stock-based awards, restricted stock, restricted stock units, stock appreciation rights, performance units, performance stock, and other stock or cash awards may be granted. Shares to be issued under the Plan may be authorized and unissued shares, issued shares that have been reacquired by us (in the open market or in private transactions), or a combination thereof. The maximum number of shares of common stock approved that may be issued under the Plan was four million shares. On March 16, 2023, at its annual meeting of shareholders, the shareholders of Photronics, Inc., approved amendments to the Plan to increase the number of shares available for issuance by an additional one million shares, thereby increasing the shares available for issuance under the Plan from four million to five million. Awards may be granted to officers, employees, directors, consultants, advisors, and independent contractors of Photronics 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. The table below presents information on our share-based compensation expenses for the three and six-month periods ended April 30, 2023, and May 1, 2022.

19

	Three Months Ended				Six Months Ended
	April 30, 2023		May 1, 2022		April 30, 2023		May 1, 2022
Expense reported in:
Cost of goods sold	$	288	$	182	$	570	$	324
Selling, general, and administrative		1,531		1,243		2,908		2,424
Research and development		190		159		352		293
Total expense incurred	$	2,009	$	1,584	$	3,830	$	3,041
Expense by award type:
Restricted stock awards	$	1,974	$	1,316	$	3,738	$	2,683
Stock options		-		221		1		259
Employee stock purchase plan		35		47		91		99
Total expense incurred	$	2,009	$	1,584	$	3,830	$	3,041
Income tax benefits of share-based compensation	$	207	$	104	$	361	$	188
Share-based compensation cost capitalized	$	-	$	-	$	-	$	-

Restricted Stock Awards

We periodically grant restricted stock awards, the restrictions on which typically lapse over a service period of one to four years. The fair value of the awards is determined on the date of grant, based on the closing price of our common stock. The table below presents information on our restricted stock awards for the three and six-month periods ended April 30, 2023, and May 1, 2022.

	Three Months Ended				Six Months Ended
	April 30, 2023		May 1, 2022		April 30, 2023		May 1, 2022
Number of shares granted in period		-		-		786,500		535,400
Weighted-average grant-date fair value of awards (in dollars per share)	$	-	$	-	$	16.77	$	19.28
Compensation cost not yet recognized	$	16,419	$	10,779	$	16,419	$	10,779
Weighted-average amortization period for cost not yet recognized (in years)		3.0		2.8		3.0		2.8
Shares outstanding at balance sheet date		1,328,572		891,429		1,328,572		891,429

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 must have an exercise price no less than 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 our common stock on the dates of grant and are calculated using the Black-Scholes option pricing model. Expected volatility is based on the historical volatility of our common stock. We use historical option exercise behavior and employee termination data to estimate expected term, which represents the period of time that options are expected to remain outstanding. The risk-free rate of return for the estimated term of an option is based on the U.S. Treasury yield curve in effect at the date of grant. The table below presents information on our stock options for the three and six-month periods ended April 30, 2023, and May 1, 2022.

20

	Three Months Ended				Six Months Ended
	April 30, 2023		May 1, 2022		April 30, 2023		May 1, 2022
Number of options granted in period		-		-		-		-
Cash received from options exercised	$	20	$	438	$	583	$	4,149
Compensation cost not yet recognized	$	-	$	52	$	-	$	52
Weighted-average amortization period for cost not yet recognized (in years)		-		0.7		-		0.7

Information on outstanding and exercisable option awards as of April 30, 2023, is presented below.

Options	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value
Outstanding and exercisable at April 30, 2023		526,926	$	10.11		2.99	$	2,293

NOTE 9 - INCOME TAXES

We calculate our provision for income taxes at the end of each interim reporting period on the basis of an estimated annual effective tax rate adjusted for tax items that are discrete to each period. The table below sets forth the primary reasons that our effective income tax rates differed from the U.S. statutory tax rates in effect during the three and six-month periods ended April 30, 2023, and May 1, 2022.

Reporting Period	U.S. Statutory Tax Rates	Photronics Effective Tax Rates	Primary Reasons for Differences
Three months ended April 30, 2023	21.0%	26.5%	Non-recognition of the tax benefit of losses that, in certain jurisdictions, have been offset by valuation allowances, non-U.S. pre-tax income being taxed at higher statutory rates in the non-U.S. jurisdictions, and the establishment of uncertain tax positions in non-U.S. jurisdictions.
Three months ended May 1, 2022	21.0%	25.1%	Non-recognition of the tax benefit of losses that, in certain jurisdictions, have been offset by valuation allowances, non-U.S. pre-tax income being taxed at higher statutory rates in the non-U.S. jurisdictions, and the establishment of uncertain tax positions in non-U.S. jurisdictions.
Six months ended April 30, 2023	21.0%	27.8%	Non-recognition of the tax benefit of losses that, in certain jurisdictions, have been offset by valuation allowances, non-U.S. pre-tax income being taxed at higher statutory rates in the non-U.S. jurisdictions, and the establishment of uncertain tax positions in non-U.S. jurisdictions.
Six months ended May 1, 2022	21.0%	25.5%	Non-recognition of the tax benefit of losses that, in certain jurisdictions, have been offset by valuation allowances, non-U.S. pre-tax income being taxed at higher statutory rates in the non-U.S. jurisdictions, and the establishment of uncertain tax positions in non-U.S. jurisdictions.

Uncertain Tax Positions

We include unrecognized tax benefits in Other liabilities, and we include any applicable interests and penalties related to uncertain tax positions in our income tax provision. Although the timing of reversal of uncertain tax positions may be uncertain, as they can be dependent upon the settlement of tax audits, we believe that the amount of uncertain tax positions (including interest and penalties, and net of tax benefits) that may be resolved over the next twelve months is immaterial. Resolution of these uncertain tax positions may result from either or both the lapses of statutes of limitations and tax settlements. We are no longer subject to tax authority examinations in the U.S., major foreign, or state tax jurisdictions for years prior to fiscal year 2017. The table below presents information on our unrecognized tax benefits as of the balance sheet dates.

	April 30, 2023		October 31, 2022
Unrecognized tax benefits related to uncertain tax positions	$	7,128	$	5,599
Unrecognized tax benefits that, if recognized, would impact the effective tax rate	$	7,128	$	5,599
Accrued interest and penalties related to uncertain tax positions	$	549	$	395

21

NOTE 10 - EARNINGS PER SHARE

The calculations of basic and diluted earnings per share are presented below.

	Three Months Ended				Six Months Ended
	April 30, 2023		May 1, 2022		April 30, 2023		May 1, 2022
Net income attributable to Photronics, Inc. shareholders	$	39,929	$	27,432	$	53,915	$	50,496
Effect of dilutive securities		-		-		-		-
Earnings used for diluted earnings per share	$	39,929	$	27,432	$	53,915	$	50,496
Weighted-average common shares computations:
Weighted-average common shares used for basic earnings per share		61,138		60,606		61,016		60,382
Effect of dilutive securities:
Share-based payment awards		369		539		473		659
Potentially dilutive common shares		369		539		473		659
Weighted-average common shares used for diluted earnings per share		61,507		61,145		61,489		61,041
Basic earnings per share	$	0.65	$	0.45	$	0.88	$	0.84
Diluted earnings per share	$	0.65	$	0.45	$	0.88	$	0.83

The table below illustrates 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 or, under application of the treasury stock method, they were otherwise determined to be antidilutive.

	Three Months Ended				Six Months Ended
	April 30, 2023		May 1, 2022		April 30, 2023		May 1, 2022
Share-based payment awards		267		427		535		626
Total potentially dilutive shares excluded		267		427		535		626

NOTE 11 - COMMITMENTS AND CONTINGENCIES

As of April 30, 2023, we had commitments outstanding for capital expenditures of approximately $113.1 million, primarily for purchases of high-end equipment.

In May 2022, we were informed of a customs audit in one of our China operations. We estimated a contingency ranging from $2.2 million to $3.7 million, which included unpaid additional customs duties and related interest and penalties for the previous three years (the period under audit). In the three and six-month periods ended May 1, 2022, we recorded a contingent loss of $2.2 million, as we believed this was the most likely outcome. The $2.2 million amount was recorded with a charge to Cost of goods sold in the condensed consolidated statements of income and Accrued liabilities in the condensed consolidated balance sheets. In November 2022, upon settlement of the audit, we reversed $1.0 million of the accrual.

We are subject to various other claims that arise in the ordinary course of business. We believe that our potential liability under such claims, individually or in the aggregate, will not have a material effect on our consolidated financial statements.

22

NOTE 12 - CHANGES IN ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME BY COMPONENT

The following tables set forth the changes in our accumulated other comprehensive (loss) income by component (net of tax of $0) for the three and six-month periods ended April 30, 2023, and May 1, 2022.

23

	Three Months Ended April 30, 2023
	Foreign Currency Translation Adjustments			Other			Total
Balance at January 29, 2023	$	(23,737	)	$	(683	)	$	(24,420	)
Other comprehensive (loss) income		(39,813	)		66			(39,747	)
Less: Other comprehensive (loss) income attributable to noncontrolling interests		(4,760	)		98			(4,662	)
Balance at April 30, 2023	$	(58,790	)	$	(715	)	$	(59,505	)

	Three Months Ended May 1, 2022
	Foreign Currency Translation Adjustments			Other			Total
Balance at January 30, 2022	$	11,451		$	(886	)	$	10,565
Other comprehensive (loss) income		(44,118	)		129			(43,989	)
Less: Other comprehensive (loss) income attributable to noncontrolling interests		(10,570	)		65			(10,505	)
Balance at May 1, 2022	$	(22,097	)	$	(822	)	$	(22,919	)

	Six Months Ended April 30, 2023
	Foreign Currency Translation Adjustments			Other			Total
Balance at October 31, 2022	$	(97,790	)	$	(666	)	$	(98,456	)
Other comprehensive income		50,707			11			50,718
Less: Other comprehensive income attributable to noncontrolling interests		11,707			60			11,767
Balance at April 30, 2023	$	(58,790	)	$	(715	)	$	(59,505	)

	Six Months Ended May 1, 2022
	Foreign Currency Translation Adjustments			Other			Total
Balance at October 31, 2021	$	21,476		$	(905	)	$	20,571
Other comprehensive (loss) income		(53,949	)		166			(53,783	)
Less: Other comprehensive (loss) income attributable to noncontrolling interests		(10,376	)		83			(10,293	)
Balance at May 1, 2022	$	(22,097	)	$	(822	)	$	(22,919	)

24

NOTE 13 - 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 market 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 fair values of our cash and certain cash equivalents (Level 1 measurements), accounts receivable, accounts payable, and certain other current assets and current liabilities (Level 2 measurements) approximate their carrying values due to their short-term maturities. The fair values of our Short-term investments are Level 1 measurements. (Please refer to “Investments” within Note 2 for additional fair value information on our Short-term investments.) The fair values of certain cash equivalents are Level 2 measurements that are provided by independent third-party pricing services or other independent entities, which may use matrix pricing, valuation models, or other methods which utilize observable market data. The fair values of our variable-rate debt instruments are Level 2 measurements and approximate their carrying values due to the variable nature of their underlying interest rates. Other than our Short-term investments, we did not have any assets or liabilities measured at fair value, on a recurring or a nonrecurring basis, at April 30, 2023, or October 31, 2022.

25

NOTE 14 - SHARE REPURCHASE PROGRAMS

In September 2020, the Company’s board of directors authorized the repurchase of up to $100 million of its common stock, pursuant to a repurchase plan under Rule 10b5-1 of the Securities Act. We commenced repurchasing shares under this authorization on September 16, 2020. All of the shares repurchased under this authorization prior to January 30, 2022, have been retired prior to that date. As of April 30, 2023, $31.7 million was available under this authorization for the purchase of additional shares. The table below presents information on this repurchase program for the three and six-month periods ended April 30, 2023, and May 1, 2022.

	Three Months Ended						Six Months Ended
	April 30, 2023			May 1, 2022			April 30, 2023		May 1, 2022
Number of shares repurchased			-			-		-		188
Cost of shares repurchased		$	-		$	-	$	-	$	2,522
Average price paid per share		$	-		$	-	$	-	$	13.43

NOTE 15 - RECENT ACCOUNTING PRONOUNCEMENTS

Accounting Standards Updates to be Adopted

In November 2021, the FASB issued ASU 2021-10, “Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance”, to increase the transparency of government assistance including the disclosure of the types of assistance an entity receives, an entity’s method of accounting for government assistance, and the effect of the assistance on an entity’s financial statements. The guidance in this Update will be effective for Photronics in its fiscal year 2023 Form 10-K, with early application of the amendments allowed. The amendments are to be applied prospectively to all transactions within the scope of the amendments that are reflected in financial statements at the date of initial application and new transactions that are entered into after the date of initial application or, retrospectively to those transactions. We are currently evaluating the effect the adoption of this ASU may have on our disclosures.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”, which provides optional expedients and exceptions to applying the guidance on contract modifications, hedge accounting, and other transactions, to simplify the accounting for transitioning from LIBOR, and other interbank offered rates expected to be discontinued, to alternative reference rates. The guidance in this Update was effective upon its issuance; if elected, it was to be applied prospectively from December 31, 2022. In December 2022, the FASB issued ASU 2022-06 “Deferral of the Sunset Date of Topic 848” which extended the time that the optional expedients and exceptions may be adopted to December 31, 2024.  We do not expect the impact of this ASU to be material to our consolidated financial statements.

26

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 and results of operations should be read in conjunction with its condensed consolidated financial statements and related notes. Various sections of this MD&A contain forward-looking statements, all of which are presented based on current expectations, which may be adversely affected by uncertainties and risk factors (presented throughout this filing and in the Company's Form 10-K for fiscal year 2022), that may cause actual results to materially differ from these expectations. See “Forward-Looking Statements”.

We sell substantially all of our 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, microelectronic mechanical systems, and certain nanotechnology applications. Our selling cycle is tightly interwoven with the development and release of new semiconductor and display designs and applications, particularly as they relate to the semiconductor industry's migration to more advanced product innovation, design methodologies, and fabrication processes. The demand for photomasks primarily depends on design activity rather than sales volumes from products manufactured using photomask technologies. Consequently, an increase in semiconductor or display 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 display designs could reduce demand for photomasks ‒ even if the demand for semiconductors and displays increases. Advances in semiconductor, display, and photomask design and production methods that shift the burden of achieving device performance away from lithography could also reduce the demand for photomasks. Historically, the microelectronics industry has been volatile, experiencing periodic downturns and slowdowns in design activity. These negative trends have been characterized by, among other things, diminished product demand, excess production capacity, and accelerated erosion of selling prices, with a concomitant effect on revenue and profitability.

We are typically required to fulfill customer orders within a short period of time, sometimes within twenty-four hours. This results in a minimal level of backlog, typically two to three weeks of backlog for FPD photomasks and one to two weeks for IC photomasks. However, the demand for some IC photomasks has expanded beyond the industry’s capacity to supply them within the traditional time period; thus, for some products, the backlog can expand to as long as two to three months.

The global semiconductor and FPD industries are driven by end markets which have been closely tied to consumer-driven applications of high-performance devices, including, but not limited to, mobile display devices, mobile communications, and computing solutions. While we 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, we believe that such transitions and cycles will continue into the future, beneficially and adversely affecting our business, financial condition, and operating results as they occur. We believe our ability to remain successful in these environments is dependent upon the achievement of our goals of being a service and technology leader and efficient solutions supplier, which we believe should enable us to continually reinvest in our global infrastructure.

Impact of the COVID-19 Pandemic

All of our facilities have continued to operate throughout the COVID-19 pandemic. However, since shortly after it was first identified near the end of calendar year 2019, the pandemic has had an impact on our business in a number of ways including customer shutdowns, which led to delays in new photomask design releases, and travel restrictions, which delayed tool installations and servicing. To date, we have not experienced significant raw material shortages; however, supply-chain disruptions could potentially delay or prevent us from fulfilling customer orders.

At certain facilities, employees not required to be on-site to maintain production have worked remotely at various times ‒ either at our discretion or due to government mandates. The implementation of these measures has not materially affected our operations.

27

Results of Operations

Three Months Ended April 30, 2023

The following table presents selected operating information expressed as a percentage of revenue. The columns may not foot due to rounding.

	Three Months Ended									Six Months Ended
	April 30,			January 29,			May 1,			April 30,			May 1,
	2023			2023			2022			2023			2022
Revenue		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Cost of goods sold		61.4			64.0			65.7			62.7			67.0
Gross profit		38.6			36.0			34.3			37.3			33.0
Operating expenses:
Selling, general, and administrative		7.8			8.0			8.1			7.9			8.2
Research and development		1.5			1.6			2.1			1.5			2.6
Operating income		29.2			26.5			24.2			27.9			22.2
Other operating expense, net		5.9			(6.8	)		3.9			(0.2	)		3.2
Income before income tax provision		35.2			19.7			28.1			27.7			25.4
Income tax provision		9.3			6.0			7.0			7.7			6.5
Net income		25.8			13.7			21.0			20.0			19.0
Net income attributable to noncontrolling interests		8.4			7.1			7.6			7.8			6.2
Net income attributable to Photronics, Inc. shareholders		17.4	%		6.6	%		13.4	%		12.2	%		12.8	%

Note: All tabular comparisons included in the following discussion, unless otherwise indicated, are for the three months ended April 30, 2023 (Q2 FY23), January 29, 2023 (Q1 FY23), and May 1, 2022 (Q2 FY22), and for the six months ended April 30, 2023 (YTD FY23) and May 1, 2022 (YTD FY22), in millions of dollars. The columns may not foot due to rounding.

Revenue

 Our quarterly revenues can be affected by the seasonal purchasing practices of our customers. As a result, demand for our products is typically reduced during the first quarter of our fiscal year by the North American, European, and Asian holiday periods, as some of our customers reduce their development and, consequently, their buying activities during those periods.

28

     The following tables present changes in disaggregated revenue in Q2 FY23 and YTD FY23 from revenue in prior reporting periods.

Quarterly Changes in Revenue by Product Type

			Q2 FY23 compared with Q1 FY23									Q2 FY23 compared with Q2 FY22					YTD FY23 compared with YTD FY22
	Revenue in		Increase			Percent			Increase			Percent			Revenue in		Increase			Percent
	Q2 FY23		(Decrease)			Change			(Decrease)			Change			YTD FY23		(Decrease)			Change
IC
High-end*	$	43.9	$	(4.1	)		(8.5	)%	$	(7.4	)		(14.5	)%	$	91.9	$	(6.3	)		(6.5	)%
Mainstream		123.1		14.5			13.4	%		28.7			30.4	%		231.7		54.4			30.7	%
Total IC	$	167.0	$	10.4			6.7	%	$	21.3			14.6	%		323.6	$	48.1			17.4	%
FPD
High-end*	$	51.9	$	6.2			13.6	%	$	5.2			11.3	%		97.6	$	4.7			5.1	%
Mainstream		10.4		1.6			17.6	%		(1.7	)		(14.3	)%		19.2		(6.7	)		(25.9	)%
Total FPD	$	62.3	$	7.8			14.2	%	$	3.5			6.0	%		116.8	$	(2.0	)		(1.7	)%
Total Revenue	$	229.3	$	18.2			8.6	%	$	24.8			12.1	%		440.4	$	46.1			11.7	%

* High-end photomasks typically have higher average selling prices (ASPs) than mainstream products.

Quarterly Changes in Revenue by Geographic Origin**

	Q2 FY23 compared with Q1 FY23							Q2 FY23 compared with Q2 FY22						YTD FY23 from YTD22
	Revenue in		Increase		Percent			Increase			Percent			Revenue in		Increase			Percent
	Q2 FY23		(Decrease)		Change			(Decrease)			Change			YTD FY23		(Decrease)			Change
Taiwan	$	80.4	$	4.9		6.5	%	$	10.6			15.2	%	$	156.0	$	18.3			13.3	%
China		65.2		6.3		10.7	%		11.5			21.5	%		124.1		24.5			24.6	%
Korea		41.4		3.5		9.4	%		0.6			1.5	%		79.2		(1.1	)		(1.3	)%
United States		32.5		2.6		8.7	%		2.2			7.1	%		62.4		4.9			8.5	%
Europe		9.3		0.8		9.8	%		(0.2	)		(2.4	)%		17.8		(0.6	)		(3.8	)%
Other		0.5		0.1		16.8	%		0.1			40.4	%		0.9		0.1			18.5	%
	$	229.3	$	18.2		8.6	%	$	24.8			12.1	%	$	440.4	$	46.1			11.7	%

** This table disaggregates revenue by the location in which it was earned.

Revenue in Q2 FY23 was $229.3 million, representing an increase of 8.6% compared with Q1 FY23 and 12.1% from Q2 FY22.

IC photomask revenue increased 6.7% and 14.6% in Q2 FY23, compared with Q1 FY23 and Q2 FY22, respectively. These increases were driven by continued strong demand in Asia, and increased pricing, resulting from robust design activity for mainstream products used for computer chips used in the production of consumer goods, products considered part of the “internet-of-things”, 5G wireless technology applications, and cryptocurrency mining.

29

The increase from Q1 FY23 was driven by mainstream growth which more than offset some high-end softness. This strong demand continues to strain the photomask industry’s mainstream tool capacity, despite some industry capacity expansions, thereby providing the conditions that support a favorable pricing environment. This has enabled us to maintain increased selling prices, though expediting premiums that customers pay to accelerate deliveries have decreased. The increase from Q2 FY22, is driven by continued strong growth in Asia and the U.S. for mainstream products, and increased pricing.

FPD revenue increased 14.2% and 6.0% in Q2 FY23, compared with Q1 FY23 and Q2 FY22, respectively. The increase from Q1 FY23 was driven by strong high-end demand, as AMOLED panels used in advanced mobile displays continue to fuel healthy demand for high-end masks. Mainstream also grew during the quarter as a result of increased write capacity and improved mainstream demand from LCD panels. The increase from Q2 FY22, is due to increased high-end demand, driven by continued growth in AMOLED panels, more than offset some weakness in mainstream. We continue to believe that strong demand for AMOLED photomasks used in mobile devices will continue, as expected technology advances drives increasing overall demand for higher-value masks.

Gross Margin

							Percent						Percent									Percent
	Q2 FY23			Q1 FY23			Change			Q2 FY22			Change			YTD FY23			YTD FY22			Change
Gross profit	$	88.4		$	76.1			16.2	%	$	70.2			25.9	%		164.5			130.1			26.4	%
Gross margin		38.6	%		36.0	%					34.3	%					37.3	%		33.0	%

Gross margin increased by 2.6 percentage points in Q2 FY23, from Q1 FY23, primarily as a result of volume leverage, favorable pricing and product mix. Material costs increased 7.0% from the prior quarter, but decreased, as a percentage of revenue, by 36 basis points. Labor cost increased 4.1% from the prior quarter, but decreased, as a percentage of revenue, by 48 basis points. Equipment and other overhead costs increased 2.2%, but decreased 167 basis points as a percentage of revenue.

Gross margin increased by 4.3 percentage points in Q2 FY23, from Q2 FY22, primarily as a result of the increase in revenue from the prior year quarter and favorable product mix. Material costs increased 3.4% from the prior year quarter, but decreased 202 basis points, as a percentage of revenue. Labor and benefits costs increased 12.8% from the prior year quarter, but remained flat as a percent of revenue, as labor increased in both the U.S. and at several Asia-based facilities, reflecting labor market conditions. Equipment and other overhead costs increased 3.3% but decreased 226 basis points, as a percentage of revenue. Increased WIP, utilities, and equipment service contract costs, partially offset by decreased importation costs were the most significant contributors to the net increase in equipment and other overhead costs.

Gross margin increased by 4.3 percentage points in YTD FY23, from YTD FY22, primarily as a result of the increase in revenue from the prior year and favorable product mix. Material costs increased 1.2% from YTD FY22, but decreased 250 basis points, as a percentage of revenue. Labor costs increased 13.5% from YTD FY22 and increased 18 basis points as a percentage of revenue. The increase was primarily the result of increased labor cost in Asia. Equipment and other overhead costs rose 3.9%, but decreased 204 basis points, as a percentage of revenue. Increased WIP, Outsourced manufacturing, and reduced R&D reclassification costs, partially offset by decreased importation costs and depreciation expense, were the most significant contributors to the net increase in equipment and other overhead costs.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses were $17.9 million in Q2 FY23, compared with $16.8 million in Q1 FY23. The increase of $1.1 million was primarily the result of increased compensation and related expenses of $0.4 million and professional fees of $0.4 million. Selling, general, and administrative expenses increased $1.3 million in Q2 FY23, from $16.6 million in Q2 FY22, primarily as a result of increased professional fees of $0.9 million.

Selling, general, and administrative expenses increased $2.4 million in YTD FY23 to $34.7 million, compared with $32.3 million in YTD FY22. The increase was driven by the results of increased compensation and related expense of $1.0 million and increased professional fees of $1.0 million.

30

Research and Development Expenses

Research and development expenses, which primarily consist of development and qualification efforts related to process technologies for high-end IC and FPD applications, were $3.5 million in Q2 FY23, $3.3 million in Q1 FY23, and $4.2 million in Q2 FY22. Research and development expenses increased compared to Q1 FY23 as a result of increased development activities in the U.S.

Research and development expenses decreased by $3.4 million in YTD FY 23 to $6.8 million, compared with $10.1 million in YTD FY22. The decrease was driven by less development activities in the U.S., Taiwan, and China.

Non-operating Income (Expense)

	Q2 FY23			Q1 FY23			Q2 FY22		YTD FY23			YTD FY22
Foreign currency transactions impact, net	$	10.7		$	(16.9	)	$	7.8	$	(6.2	)	$	13.1
Interest expense, net		(0.1	)		(0.1	)		-		(0.2	)		(0.9	)
Interest income and other income (expense), net		3.0			2.6			0.2		5.6			0.5
Non-operating income (expense), net	$	13.6		$	(14.4	)	$	8.0	$	(0.8	)	$	12.7

Non-operating income (expense) increased $28.0 million to $13.6 million in Q2 FY23, compared with $(14.4) million in Q1 FY23, primarily due to foreign currency transactions impact, net, driven by favorable movements of the South Korean won and the New Taiwan dollar against the U.S. dollar exceeding an unfavorable movement of the RMB against the U.S. dollar. Non-operating income (expense) increased $5.6 million from Q2 FY22, primarily due to foreign currency transaction impact, net, driven by favorable movements of the South Korean won and RMB against the USD dollar, exceeding an unfavorable movement of the New Taiwan dollar.

Interest income and other income (expense), net, increased to $3.0 million in Q2 FY23, compared with $2.6 million in Q1 FY23, and $0.2 million in Q2 FY22 driven by an increase in cash invested and higher interest rates.

Non-operating income (expense) decreased $13.5 million to $(0.8) million in YTD FY23, compared with $12.7 million in YTD FY22, primarily due to foreign currency transactions impact, net, driven by unfavorable movements of the South Korean won and the New Taiwan dollar against the U.S. dollar exceeding a favorable movement of the RMB against the USD.

Interest income and other income (expense), net, increased to $5.6 million in YTD FY23, compared with $0.5 million in YTD FY22, primarily due to an increase in cash invested and higher interest rates.

Income Tax Provision

	Q2 FY23			Q1 FY23			Q2 FY22			YTD FY23			YTD FY22
Income tax provision	$	21.3		$	12.6		$	14.4		$	33.9		$	25.6
Effective income tax rate		26.5	%		30.3	%		25.1	%		27.8	%		25.5	%

The 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 where the tax benefits of the losses are not available.

The effective income tax rate decrease in Q2 FY23, compared with Q1 FY23, is primarily due to changes in the jurisdictional mix of earnings and a decrease in foreign taxes in Q2 FY23.

The effective income tax rate increase in Q2 FY23, compared with Q2 FY22, is primarily due to changes in the jurisdictional mix of earnings and an increase in foreign taxes in Q2 FY23.

31

The effective income tax rate increase in YTD FY23 compared with YTD FY22, is primarily due to changes in the jurisdictional mix of earnings and an increase in foreign taxes in Q2 FY23.

Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests was $19.3 million in Q2 FY23, compared with $15.0 million in Q1 FY23, and $15.6 million in Q2 FY22. The increases from Q2 FY22 to Q2 FY23 resulted from increased net income at our Taiwan-based and China-based IC joint ventures.

Liquidity and Capital Resources

Cash and cash equivalents were $367.5 million and $319.7 million as of April 30, 2023, and October 31, 2022, respectively. As of the most recent balance sheet date, total cash and cash equivalents included $352.4 million held by foreign subsidiaries. Net Cash, a non-GAAP financial measure as defined and discussed in the Non-GAAP Financial Measures section below, was $339.2 million and $277.4 million as of April 30, 2023, and October 31, 2022, respectively. Our primary sources of liquidity are our cash on hand, cash we generate from operations, and borrowing capacity we have available from financial institutions. Our corporate credit agreement has a $50 million borrowing limit, with an expansion capacity to $100 million. Although we have not accessed funds under our corporate credit facilities since 2011, it continues to afford us financial flexibility. In addition, in China, we currently have approximately $25.0 million of borrowing capacity to support local operations. See Note 6 to the condensed consolidated financial statements for additional information on our currently available financing.

We continually evaluate alternatives for efficiently funding our capital expenditures and ongoing operations. These reviews may result in our engagement in a variety of investing and financing transactions, in the transfer of cash among subsidiaries, and/or the repatriation of cash to the U.S. The transfer of funds among subsidiaries could be subject to foreign withholding taxes; in certain jurisdictions, repatriation of these funds to the U.S. may subject them to U.S. state income taxes and/or local country withholding taxes. We believe that our liquidity, including available financing, is sufficient to meet our requirements through the next twelve months and thereafter for the foreseeable future. Through the utilization of our existing liquidity, cash we generate from operations, short-term investments, and (potentially) our borrowing capacity under our financing arrangements, we plan to continue to invest in our business, with our investments targeted to align with our customers’ technology road maps. We may also elect to use our cash to reduce our debt through early repayments. In addition, we stand ready to invest in mergers, acquisitions, or strategic partnerships, should a suitable opportunity arise.

We estimate capital expenditures for full year FY23 will be approximately $130.0 million; these investments will be targeted towards high-end and mainstream IC capacity and efficiency, and enable us to support our customers’ near-term demands. As of April 30, 2023, we had outstanding capital commitments of approximately $113.1 million and recognized liabilities related to capital equipment purchases of approximately $15.5 million. Although payment timing could vary, primarily as a result of the timing of tool delivery, installation, and testing, we currently estimate that we will fund $94.0 million of our total $128.6 million committed and recognized obligations for capital expenditures over the next twelve months. Please refer to Note 6 to the condensed consolidated financial statements for information on our outstanding debt.

In September 2020, the Company’s board of directors authorized the repurchase of up to $100 million of its common stock, pursuant to a repurchase plan under Rule 10b5-1 of the Securities Act. This authorization does not obligate the Company to repurchase any dollar amount or number of shares of common stock. As of April 30, 2023, our current share repurchase program had approximately $31.7 million remaining under its authorization. Depending on market conditions, we may utilize some or the entire remaining approved amount to reacquire additional shares. On August 16, 2022, the Inflation Reduction Act (“IRA”) was enacted in the U.S. Among other provisions, the IRA included a one percent excise tax on corporate share repurchases. The one percent excise tax on share repurchases applies to shares repurchased after December 31, 2022, and excludes repurchases under $1 million. We do not anticipate that the IRA will have a material effect on our liquidity.

As discussed in Note 5 to the condensed consolidated financial statements, DNP, the noncontrolling interest in our China-based joint venture has, under certain circumstances, the right to put its interest in the joint venture to Photronics, or to purchase our interest in the joint venture. Under all such circumstances, the sale of DNP’s interest would be at its ownership percentage of the joint venture’s net book value, with closing to take place within three business days of obtaining required approvals and clearance. As of the date of issuance of this report, DNP had not indicated its intention to exercise this right. As of April 30, 2023, Photronics and DNP each had net investments in this joint venture of approximately $110.9 million.

32

Cash Flows

	YTD FY23			YTD FY22
Net cash provided by operating activities	$	109.7		$	103.3
Net cash used in investing activities	$	(62.3	)	$	(33.6	)
Net cash used in financing activities	$	(15.2	)	$	(2.2	)

Operating Activities: Net cash provided by operating activities reflects net income adjusted for certain non-cash items, including depreciation and amortization, share-based compensation, and the impacts of cash from changes in operating assets and liabilities. Net cash provided by operating activities increased by $6.4 million in YTD FY23, compared with YTD FY22, due to increased net income partially offset by cash used from changes in working capital.

Free Cash Flow and LTM (“Last Twelve Months”) Free Cash Flow, which are non-GAAP financial measures as discussed in the “Non-GAAP Financial Measures” section below, decreased by $16.5 million and increased by $20.7 million, respectively, compared with YTD FY22, primarily due to the increase in Net cash provided by operating activities discussed above and an increase in spending on property, plant, and equipment.

Investing Activities: Net cash flows used in investing activities primarily consisted of purchases of property, plant, and equipment of $57.7 million, which increased $22.9 million and purchases of available-for-sale debt securities of $9.8 million, which increased $9.8 million in YTD FY23, compared with YTD FY22.

Financing Activities: Net cash used in financing activities increased by $13.0 million in YTD FY23, compared with YTD FY22, primarily due to contributions from noncontrolling interests in our majority owned subsidiaries in Taiwan and China of $25.0 million in YTD FY22, which did not repeat during YTD FY23, and decreased debt repayments of $12.9 million.

The increase in our cash balance from YTD FY22 was favorably impacted by the effects of exchange rate changes in the amount of $15.6 million in YTD FY23, which was in contrast to the $14.9 million unfavorable impact effect of exchange rate changes had on our cash balance in YTD FY22.

Non-GAAP Financial Measures

Non-GAAP Net Income attributable to Photronics, Inc. shareholders and non-GAAP earnings per share, Free Cash Flow, LTM Free Cash Flow, and Net Cash are "non-GAAP financial measures" as such term is defined by the Securities and Exchange Commission and may differ from similarly named non-GAAP financial measures used by other companies. The financial tables below reconcile Photronics, Inc. financial results under GAAP to non-GAAP financial information. We believe these non-GAAP financial measures that exclude certain items are useful for analysts and investors to evaluate our future on-going performance because they enable a more meaningful comparison of our projected performance with our historical results. These non-GAAP metrics are not intended to represent funds available for our discretionary use and are not intended to represent, or be used as a substitute for, net income attributable to Photronics, Inc. shareholders, diluted earnings per share, cash and cash equivalents, or cash flows from operations, as measured under GAAP. The items excluded from these non-GAAP metrics but included in the calculation of their closest GAAP equivalent, are significant components of the condensed consolidated statements of income, condensed consolidated balance sheets and statement of cash flows and must be considered in performing a comprehensive assessment of overall financial performance.

33

The following table reconciles GAAP to Non-GAAP Income at the balance sheet dates. The columns may not foot due to rounding.

	Three Months ended									Six Months ended
	April 30,			January 29,			May 1,			April 30,			May 1,
	2023			2023			2022			2023			2022
Reconciliation of GAAP to Non-GAAP Net Income:
GAAP Net Income	$	39,929		$	13,986		$	27,432		$	53,915		$	50,496
FX (gain) loss		(10,718	)		16,944			(7,844	)		6,226			(13,112	)
Estimated tax effects of above		2,823			(4,506	)		1,947			(1,683	)		3,284
Estimated noncontrolling interest effects of above		901			(2,060	)		1,543			(1,159	)		1,639
Non-GAAP Net Income	$	32,935		$	24,364		$	23,078		$	57,299		$	42,307
Weighted-average number of common shares outstanding - Diluted		61,507			61,470			61,145			61,489			61,041
Reconciliation of GAAP to Non-GAAP EPS:
GAAP diluted earnings per share	$	0.65		$	0.23		$	0.45		$	0.88		$	0.83
Effects of the above adjustments	$	(0.11	)	$	0.17		$	(0.07	)	$	0.05		$	(0.14	)
Non-GAAP diluted earnings per share	$	0.54		$	0.40		$	0.38		$	0.93		$	0.69

The following tables reconcile Net cash provided by operating activities to Free Cash Flow for YTD FY23 and YTD FY22 and present the calculations of LTM Free Cash Flow for YTD FY23 and YTD FY22. The columns may not foot due to rounding. Prior year amounts in the non-GAAP disclosure below have been recast to eliminate government incentives to conform to current year presentation.

	YTD FY23			YTD FY22
Free Cash Flow
Net cash provided by operating activities	$	109.7		$	103.3
Purchases of property, plant, and equipment		(57.7	)		(34.8	)
Free cash flow	$	52.0		$	68.5

	Q2 FY23			Q2 FY22
LTM Free Cash Flow
First six months of the respective fiscal year	$	52.0		$	68.5
Prior fiscal year		162.8			41.8
First six months of the prior year		(68.5	)		15.3
LTM free cash flow	$	146.3		$	125.6

34

The following table reconciles Cash and cash equivalents to Net Cash at the balance sheet dates. The increase in Net Cash was primarily driven by an increase in Net cash provided by operating activities and decreased spending on property, plant, and equipment, as discussed above. The columns may not foot due to rounding. Prior year amounts in the non-GAAP disclosure below have been recast to eliminate short-term investments to conform to current year presentation.

	As of
	April 30,			October 31,
	2023			2022
Net Cash
Cash and cash equivalents	$	367.5		$	319.7
Current portion of Long-term debt		(7.0	)		(10.0	)
Long-term debt		(21.3	)		(32.3	)
Net cash	$	339.1		$	277.3

Business Outlook

Our current business outlook and guidance was provided in the Photronics Q2 FY23 earnings release, earnings presentation, and financial results conference call, but is not incorporated herein. These can be accessed in the investor section of our website - www.photronics.com.

Our future results of operations and the other forward-looking statements contained in this filing and in the Photronics Q2 FY23 earnings presentation and the related financial results conference call and slide deck involve a number of risks and uncertainties, some of which are discussed in Part I, Item 1A of our 2022 Form 10-K. A number of other unforeseeable factors could cause actual results to differ materially from our expectations.

Critical Accounting Estimates

Please refer to Part II, Item 7 of our 2022 Form 10-K for discussion of our critical accounting estimates. There have been no changes to our critical accounting estimates since the filing of our Form 10-K for the year ended October 31, 2022.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Exchange Rate Risk

We conduct business in several major international currencies throughout our worldwide operations, and our financial performance may be affected by fluctuations in the exchange rates of these currencies. Changes in exchange rates can positively or negatively affect our reported revenue, operating income, assets, liabilities, and equity. The functional currencies of our Asian subsidiaries are the South Korean won, the New Taiwan dollar, the RMB, and the Singapore dollar. The functional currencies of our European subsidiaries are the British pound and the euro. In addition, we engage in transactions in, and have exposures to, the Japanese yen.

We attempt to minimize our risk of foreign currency transaction losses by producing products in the same country in which the products are sold (thereby generating revenues and incurring expenses in the same currency), and by managing our working capital. However, in some instances, we sell products in a currency other than the functional currency of the country where it was produced, or purchase products in a currency that differs from the functional currency of the purchasing entity. We may also enter into derivative contracts to mitigate our exposure to foreign currency fluctuations when we have a significant purchase obligation, or a significant receivable denominated in a currency that differs from the functional currency of the transacting subsidiary. We do not enter into derivatives for speculative purposes. There can be no assurance that this approach will protect us from the need to recognize significant foreign currency transaction gains and losses, especially in the event of a significant adverse movement in the value of any foreign currency in which we conduct business against any of our functional currencies, including the U.S. dollar.

Our primary net foreign currency exposures as of April 30, 2023, included the South Korean won, the Japanese yen, the New Taiwan dollar, the RMB, the Singapore dollar, the British pound sterling, and the euro. As of that date, a 10% adverse movement in the value of currencies different from the functional currencies of our subsidiaries would have resulted in a net unrealized pre-tax loss of $48.0 million, which represents an increase of $5.9 million from our exposure at January 29, 2023. Our most significant exposures at April 30, 2023, were exposures of the South Korean won, the RMB, and the New Taiwan Dollar to the U.S. dollar, which were, respectively, $12.2 million, $11.4 million, and $21.4 million at that date. We do not believe that a 10% change in the exchange rates of non-US dollar currencies, other than the aforementioned currencies and the Japanese yen, would have had a material effect on our April 30, 2023, condensed consolidated financial statements.

35

Interest Rate Risk

A 10% adverse movement in the interest rates on our variable rate borrowings would not have had a material effect on our April 30, 2023, condensed consolidated financial statements.

Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We have established, and currently maintain, disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, designed to provide reasonable assurance that information required to be disclosed in reports filed under the Exchange Act, is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to management, including our 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.

Our management, under the supervision and with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our chief executive officer and chief financial officer concluded that our 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 our internal control over financial reporting during the second fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

36

PART II.  OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

Please refer to Note 11 within Item 1 of this report for information on legal proceedings involving the Company.

Item 1A. RISK FACTORS

There have been no material changes to our risk factors as set forth in “Item 1A. Risk Factors” in our 2022 Form 10-K.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

In September 2020, the Company’s board of directors authorized the repurchase of up to $100 million of its common stock, pursuant to a repurchase plan under Rule 10b5-1 of the Securities Act. The share repurchase program commenced on September 14, 2020, and all shares repurchased under this program were retired. The table below presents share repurchase activity during the second quarter of 2023 in connection with the payment of withholding taxes related to the vesting of restricted stock awards.

	Total Number of Shares Purchased		Average Price Paid Per share		Total Number of Shares Purchased as Part of Publicly Announced Program		Dollar Value of Shares That May Yet Be Purchased (in millions)
January 30, 2023 – February 26, 2023		0	$	0.00		0	$	31.7
February 27, 2023 – March 26, 2023		2,297	$	17.39		0	$	31.7
March 27, 2023 – April 30, 2023		2,627	$	16.58		0	$	31.7
Total		4,924				0

Certain of our debt agreements and lease arrangements include limitations on the amounts of dividends we may pay. Please refer to Note 6 of the condensed consolidated financial statements for information on these limitations.

37

Item 6. EXHIBITS

		Incorporated by Reference			Filed or Furnished Herewith
Exhibit Number	Description	Form	Exhibit	Filing Date
10.41	Photronics, Inc. 2016 Equity Incentive Compensation Plan As Amended March 16, 2023	8-K	10.1	3/21/2023
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X
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.				X
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.				X
101.INS	Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)				X
101.SCH	Inline XBRL Taxonomy Extension Schema Document				X
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document				X
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document				X
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document				X
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document				X
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)				X

38

SIGNATURES

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

	Photronics, Inc.
	(Registrant)
By:	/s/ JOHN P. JORDAN	By:	/s/ ERIC RIVERA
	JOHN P. JORDAN		ERIC RIVERA
	Executive Vice President,		Vice President,
	Chief Financial Officer		Corporate Controller
	(Principal Financial Officer)		(Principal Accounting Officer)
Date:  June 7, 2023		Date:  June 7, 2023

39

EX-31.1

EXHIBIT 31.1

I, Frank Lee, 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/ FRANK LEE

Frank Lee

Chief Executive Officer

June 7, 2023

EX-31.2

EXHIBIT 31.2

I, John P. Jordan, 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/ JOHN P. JORDAN

John P. Jordan

Chief Financial Officer

June 7, 2023

EX-32.1

EXHIBIT 32.1

Section 1350 Certification of the Chief Executive Officer

I, Frank Lee, 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 April 30, 2023 (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/ FRANK LEE

 Frank Lee

Chief Executive Officer

June 7, 2023

EX-32.2

EXHIBIT 32.2

Section 1350 Certification of the Chief Financial Officer

I, John P. Jordan, 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 April 30, 2023 (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/ JOHN P. JORDAN

John P. Jordan

Chief Financial Officer

June 7, 2023

XML

Document and Entity Information - shares	6 Months Ended
	Apr. 30, 2023	Jun. 01, 2023
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Quarterly Report	true
Document Period End Date	Apr. 30, 2023
Current Fiscal Year End Date	--10-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q2
Document Transition Report	false
Entity File Number	001-39063
Entity Registrant Name	PHOTRONICS, INC.
Entity Central Index Key	0000810136
Entity Incorporation, State or Country Code	CT
Entity Tax Identification Number	06-0854886
Entity Address, Address Line One	15 Secor Road
Entity Address, City or Town	Brookfield
Entity Address, State or Province	CT
Entity Address, Postal Zip Code	06804
City Area Code	203
Local Phone Number	775-9000
Title of 12(b) Security	COMMON
Trading Symbol	PLAB
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		62,518,181

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Apr. 30, 2023	Oct. 31, 2022
Current assets:
Cash and cash equivalents	$ 367,485	$ 319,680
Short-term investments	45,431	38,820
Accounts receivable, net of allowance of $1,172 in 2023 and $1,002 in 2022	214,464	198,147
Inventories	54,940	50,753
Other current assets	37,796	37,252
Total current assets	720,116	644,652
Property, plant and equipment, net	699,917	643,873
Deferred income taxes	19,302	19,816
Other assets	11,690	7,489
Total assets	1,451,025	1,315,830
Current liabilities:
Current portion of long-term debt	7,017	10,024
Accounts payable	92,672	79,566
Accrued liabilities	85,479	104,207
Total current liabilities	185,168	193,797
Long-term debt	21,322	32,310
Other liabilities	39,851	27,634
Total liabilities	246,341	253,741
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, 61,185 shares issued and outstanding at April 30, 2023, and 60,791 shares issued and outstanding at October 31, 2022	612	608
Additional paid-in capital	497,391	493,741
Retained earnings	489,549	435,634
Accumulated other comprehensive loss	(59,505)	(98,456)
Total Photronics, Inc. shareholders' equity	928,047	831,527
Noncontrolling interests	276,637	230,562
Total equity	1,204,684	1,062,089
Total liabilities and equity	$ 1,451,025	$ 1,315,830

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) shares in Thousands, $ in Thousands	Apr. 30, 2023	Oct. 31, 2022
Current assets:
Accounts receivable, allowance	$ 1,172	$ 1,002
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)	61,185	60,791
Common stock, shares outstanding (in shares)	61,185	60,791

XML

Condensed Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Apr. 30, 2023	May 01, 2022	Apr. 30, 2023	May 01, 2022
Condensed Consolidated Statements of Income [Abstract]
Revenue	$ 229,306	$ 204,509	$ 440,397	$ 394,336
Cost of goods sold	140,904	134,289	275,918	264,253
Gross profit	88,402	70,220	164,479	130,083
Operating expenses:
Selling, general, and administrative	17,878	16,613	34,696	32,340
Research and development	3,479	4,206	6,781	10,145
Total operating expenses	21,357	20,819	41,477	42,485
Operating income	67,045	49,401	123,002	87,598
Other income (expense):
Foreign currency transactions impact, net	10,718	7,844	(6,226)	13,112
Interest income and other income, net	2,987	162	5,570	496
Interest expense	(134)	15	(198)	(880)
Income before income tax provision	80,616	57,422	122,148	100,326
Income tax provision	21,343	14,393	33,925	25,571
Net income	59,273	43,029	88,223	74,755
Net income attributable to noncontrolling interests	19,344	15,597	34,308	24,259
Net income attributable to Photronics, Inc. shareholders	$ 39,929	$ 27,432	$ 53,915	$ 50,496
Earnings per share:
Basic (in dollars per share)	$ 0.65	$ 0.45	$ 0.88	$ 0.84
Diluted (in dollars per share)	$ 0.65	$ 0.45	$ 0.88	$ 0.83
Weighted-average number of common shares outstanding:
Basic (in shares)	61,138	60,606	61,016	60,382
Diluted (in shares)	61,507	61,145	61,489	61,041

XML

Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Apr. 30, 2023	May 01, 2022	Apr. 30, 2023	May 01, 2022
Condensed Consolidated Statements of Comprehensive Income [Abstract]
Net income	$ 59,273	$ 43,029	$ 88,223	$ 74,755
Other comprehensive (loss) income, net of tax of $0:
Foreign currency translation adjustments	(39,813)	(44,118)	50,707	(53,949)
Other	66	129	11	166
Net other comprehensive (loss) income	(39,747)	(43,989)	50,718	(53,783)
Comprehensive income (loss)	19,526	(960)	138,941	20,972
Less: comprehensive income attributable to noncontrolling interests	14,682	5,092	46,075	13,966
Comprehensive income (loss) attributable to Photronics, Inc. shareholders	$ 4,844	$ (6,052)	$ 92,866	$ 7,006

XML

Condensed Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Apr. 30, 2023	May 01, 2022	Apr. 30, 2023	May 01, 2022
Condensed Consolidated Statements of Comprehensive Income [Abstract]
Other comprehensive income (loss), tax	$ 0	$ 0	$ 0	$ 0

XML

Condensed Consolidated Statements of Equity - USD ($) shares in Thousands, $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Treasury Stock [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Non-Controlling Interests [Member]	Total
Balance at Oct. 31, 2021	$ 600	$ 484,672	$ 317,849	$ 0	$ 20,571	$ 176,870	$ 1,000,562
Balance (in shares) at Oct. 31, 2021	60,024
Net income	$ 0	0	50,496	0	0	24,259	74,755
Other comprehensive (loss) income	0	0	0	0	(43,490)	(10,293)	(53,783)
Shares issued under equity plans	$ 7	3,175	0	0	0	0	3,182
Shares issued under equity plans (in shares)	801
Share-based compensation expense	$ 0	3,041	0	0	0	0	3,041
Contribution from noncontrolling interest	0	0	0	0	0	24,995	24,995
Purchase of treasury stock	$ 0	0	0	(2,522)	0	0	$ (2,522)
Purchase of treasury stock (in shares)	0						188
Retirement of treasury stock	$ (1)	(1,520)	(1,001)	2,522	0	0	$ 0
Retirement of treasury stock (in shares)	(188)
Balance at May. 01, 2022	$ 606	489,368	367,344	0	(22,919)	215,831	1,050,230
Balance (in shares) at May. 01, 2022	60,637
Balance at Jan. 30, 2022	$ 606	487,342	339,912	0	10,565	200,741	1,039,166
Balance (in shares) at Jan. 30, 2022	60,564
Net income	$ 0	0	27,432	0	0	15,597	43,029
Other comprehensive (loss) income	0	0	0	0	(33,484)	(10,505)	(43,989)
Shares issued under equity plans	$ 0	442	0	0	0	0	442
Shares issued under equity plans (in shares)	73
Share-based compensation expense	$ 0	1,584	0	0	0	0	1,584
Contribution from noncontrolling interest	0	0	0	0	0	9,998	9,998
Purchase of treasury stock							$ 0
Purchase of treasury stock (in shares)							0
Balance at May. 01, 2022	$ 606	489,368	367,344	0	(22,919)	215,831	$ 1,050,230
Balance (in shares) at May. 01, 2022	60,637
Balance at Oct. 31, 2022	$ 608	493,741	435,634	0	(98,456)	230,562	1,062,089
Balance (in shares) at Oct. 31, 2022	60,791
Net income	$ 0	0	53,915	0	0	34,308	88,223
Other comprehensive (loss) income	0	0	0	0	38,951	11,767	50,718
Shares issued under equity plans	$ 4	(180)	0	0	0	0	(176)
Shares issued under equity plans (in shares)	394
Share-based compensation expense	$ 0	3,830	0	0	0	0	3,830
Purchase of treasury stock							$ 0
Purchase of treasury stock (in shares)							0
Balance at Apr. 30, 2023	$ 612	497,391	489,549	0	(59,505)	276,637	$ 1,204,684
Balance (in shares) at Apr. 30, 2023	61,185
Balance at Jan. 29, 2023	$ 611	494,954	449,620	0	(24,420)	261,955	1,182,720
Balance (in shares) at Jan. 29, 2023	61,102
Net income	$ 0	0	39,929	0	0	19,344	59,273
Other comprehensive (loss) income	0	0	0	0	(35,085)	(4,662)	(39,747)
Shares issued under equity plans	$ 1	428	0	0	0	0	429
Shares issued under equity plans (in shares)	83
Share-based compensation expense	$ 0	2,009	0	0	0	0	2,009
Purchase of treasury stock							$ 0
Purchase of treasury stock (in shares)							0
Balance at Apr. 30, 2023	$ 612	$ 497,391	$ 489,549	$ 0	$ (59,505)	$ 276,637	$ 1,204,684
Balance (in shares) at Apr. 30, 2023	61,185

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Apr. 30, 2023	May 01, 2022
Cash flows from operating activities:
Net income	$ 88,223	$ 74,755
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	39,085	41,405
Share-based compensation	3,830	3,041
Changes in assets and liabilities:
Accounts receivable	(5,952)	(25,122)
Inventories	(1,905)	(5,081)
Other current assets	1,382	(10,858)
Accounts payable, accrued liabilities, and other	(14,986)	25,149
Net cash provided by operating activities	109,677	103,289
Cash flows from investing activities:
Purchases of property, plant and equipment	(57,728)	(34,809)
Purchases of available-for-sale debt securities	(9,837)	0
Proceeds from maturities of available-for-sale debt securities	4,000	0
Government incentives	1,393	1,394
Other	(88)	(199)
Net cash used in investing activities	(62,260)	(33,614)
Cash flows from financing activities:
Repayments of debt	(14,720)	(27,571)
Purchases of treasury stock	0	(2,522)
Contribution from noncontrolling interest	0	24,995
Proceeds from share-based arrangements	730	4,384
Net settlements of restricted stock awards	(1,252)	(1,452)
Net cash used in financing activities	(15,242)	(2,166)
Effects of exchange rate changes on cash, cash equivalents, and restricted cash	15,621	(14,917)
Net increase in cash, cash equivalents, and restricted cash	47,796	52,592
Cash, cash equivalents, and restricted cash at beginning of period	322,409	279,680
Cash, cash equivalents, and restricted cash at end of period	370,205	332,272
Less: Ending restricted cash	2,720	2,990
Cash and cash equivalents at end of period	367,485	329,282
Supplemental disclosure of non-cash information:
Accruals for property, plant and equipment purchased during the period	$ 14,420	$ 5,737

XML

BASIS OF FINANCIAL STATEMENT PRESENTATION

6 Months Ended

Apr. 30, 2023

BASIS OF FINANCIAL STATEMENT PRESENTATION [Abstract]

BASIS OF FINANCIAL STATEMENT PRESENTATION

NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION

Photronics, Inc. (“Photronics”, “the Company”, “we”, “our”, or “us”) is  one of the world’s leading manufacturers of photomasks, which are high-precision photographic quartz or glass plates containing microscopic images of electronic circuits. Photomasks are a key element in the manufacture of ICs and FPDs and are used as masters to transfer circuit patterns onto semiconductor wafers and FPD substrates during the fabrication of ICs, a variety of FPDs and, to a lesser extent, other types of electrical and optical components. We operate eleven manufacturing facilities, which are located in Taiwan (3), Korea, China (2), the United States (3), and Europe (2).

The accompanying unaudited condensed consolidated financial statements (“the financial statements”) have been prepared in accordance with U.S. GAAP 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 U.S. GAAP 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 financial statements include the accounts of Photronics, its wholly owned subsidiaries, and the majority-owned subsidiaries, which it controls. All intercompany balances and transactions have been eliminated in consolidation. These financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our Form 10-K for the fiscal year ended October 31, 2022, where we discuss and provide additional information about our accounting policies and the methods and assumptions used in our estimates.

The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect amounts reported in them. Our estimates, including those on the impact of COVID-19, are based on historical experience and on various assumptions that we believe to be reasonable under the facts and circumstances at the time they are made. Subsequent actual results may differ from such estimates. We review these estimates periodically and reflect any effects of revisions in the period in which they are determined.

Our business is typically impacted during the first quarter of our fiscal year by the North American, European, and Asian holiday periods, as some customers reduce their development and buying activities during this period. Operating results for the interim periods are not necessarily indicative of the results that may be expected for the fiscal year ending October 31, 2023.

XML

SHORT-TERM INVESTMENTS

6 Months Ended

Apr. 30, 2023

SHORT-TERM INVESTMENTS [Abstract]

SHORT-TERM INVESTMENTS

NOTE 2 - SHORT-TERM INVESTMENTS

Short-term investments consist of U.S. government securities and are classified as available-for-sale. We classify available-for-sale securities on our consolidated balance sheet as follows:

-	Maturing within three months or less from the date of purchase	Cash and cash equivalents
-	Maturing, as of the date of purchase, more than three months, but with remaining maturities of less than one year, from the balance sheet date	Short-term investments
-	Maturing one year or more from the balance sheet date	Long-term marketable investments

       As of April 30, 2023, all of our available-for-sale securities had, at their dates of purchase, remaining maturities of more than three months, but less than one year, and have been classified as Short-term investments.

Available-for-sale debt investments are reported at fair value, with unrealized gains or losses (net of tax) reported in Accumulated other comprehensive income. The fair values of our available-for-sale securities are Level 1 measurements, based on quoted prices from active markets for identical assets. In the event of a sale of an available-for-sale debt investment, we would determine the cost of the investment sold at the specific individual security level, and would include any gain or loss in Interest income and other income, net, where we also report periodic interest earned and the amortization (accretion) of discounts (premiums) related to these investments. The table below provides information on our available-for-sale debt securities.

	April 30, 2023									October 31, 2022
	Amortized Cost		Unrealized Gains		Unrealized Losses			Carrying Value		Amortized Cost		Unrealized Gains		Unrealized Losses			Carrying Value
Government securities	$	45,492	$	-	$	(61	)	$	45,431	$	38,911	$	-	$	(91	)	$	38,820

XML

INVENTORIES

6 Months Ended

Apr. 30, 2023

INVENTORIES [Abstract]

INVENTORIES

NOTE 3 - INVENTORIES

Inventories are stated at the lower of cost, determined under the first-in, first-out (“FIFO”) method, or net realizable value. Presented below are the components of Inventories at the balance sheet dates.

	April 30, 2023		October 31, 2022
Raw materials	$	53,642	$	49,326
Work in process		1,203		1,408
Finished goods		95		19
	$	54,940	$	50,753

XML

PROPERTY, PLANT, AND EQUIPMENT, NET

6 Months Ended

Apr. 30, 2023

PROPERTY, PLANT, AND EQUIPMENT, NET [Abstract]

PROPERTY, PLANT, AND EQUIPMENT, NET

NOTE 4 - PROPERTY, PLANT, AND EQUIPMENT, NET

Presented below are the components of Property, plant, and equipment, net at the balance sheet dates.

	April 30, 2023			October 31, 2022
Land	$	11,620		$	11,134
Buildings and improvements		190,134			168,024
Machinery and equipment		1,884,235			1,769,478
Leasehold improvements		19,835			18,802
Furniture, fixtures, and office equipment		15,523			14,355
Construction in progress		91,204			90,846
		2,212,551			2,072,639
Accumulated depreciation and amortization		(1,512,634	)		(1,428,766	)
	$	699,917		$	643,873

Information on ROU assets resulting from finance leases, at the balance sheet dates, is presented below.

	April 30, 2023			October 31, 2022
Machinery and equipment	$	42,817		$	42,760
Accumulated amortization		(6,206	)		(4,784	)
	$	36,611		$	37,976

The following table presents depreciation expense (including the amortization of ROU assets) related to property, plant, and equipment incurred during the reporting periods.

	Three Months Ended						Six Months Ended
	April 30, 2023			May 1, 2022			April 30, 2023		May 1, 2022
Depreciation Expense		$	19,880		$	20,506	$	38,908	$	41,229

XML

PDMCX JOINT VENTURE

6 Months Ended

Apr. 30, 2023

PDMCX JOINT VENTURE [Abstract]

PDMCX JOINT VENTURE

NOTE 5 - PDMCX JOINT VENTURE

In January 2018, Photronics, Inc., through its wholly owned Singapore subsidiary (hereinafter, within this Note “we”, “Photronics”, “us”, or “our”), and DNP, through its wholly owned subsidiary “DNP Asia Pacific PTE, Ltd.”, entered into a joint venture under which DNP obtained a 49.99% interest in our IC business in Xiamen, China. The joint venture, which we refer to as “PDMCX”, was established to develop and manufacture photomasks for semiconductors. We entered into this joint venture to enable us to compete more effectively for the merchant photomask business in China, and to benefit from the additional resources and investment that DNP provides to enable us to offer advanced-process technology to our customers.

In 2020, in combination with local financing obtained by PDMCX, Photronics and DNP fulfilled their investment obligations under the PDMCX operating agreement (“the Agreement”). As discussed in Note 6, liens were granted to the local financing entity on property, plant, and equipment and were paid off during fiscal year 2023. These liens had an October 31, 2022, total carrying value of $70.7 million, as collateral for the loans.

Under the Agreement, DNP is afforded, under certain circumstances, the right to put its interest in PDMCX to Photronics. These circumstances include disputes regarding the strategic direction of PDMCX that may arise after the initial two-year term of the Agreement and cannot be resolved between the two parties. As of the date of issuance of these financial statements, DNP had not indicated its intention to exercise this right. In addition, both Photronics and DNP have the option to purchase, or put, their interest from, or to, the other party, should their ownership interest fall below twenty percent for a period of more than six consecutive months. Under all such circumstances, the sales of ownership interests would be at the exiting party’s ownership percentage of the joint venture’s net book value, with closing to take place within three business days of obtaining required approvals and clearance.

The following table presents net income we recorded from the operations of PDMCX during the reporting periods.

	Three Months Ended						Six Months Ended
	April 30, 2023			May 1, 2022			April 30,  2023		May 1, 2022
Net income from PDMCX		$	6,652		$	4,895	$	12,569	$	6,772

As required by the guidance in Topic 810 - “Consolidation” of the Accounting Standards Codification (“ASC”), we evaluated our involvement in PDMCX for the purpose of determining whether we should consolidate its results in our financial statements. The initial step of our evaluation was to determine whether PDMCX was a variable interest entity (“VIE”). Due to its lack of sufficient equity at risk to finance its activities without additional subordinated financial support, we determined that it was a VIE. Having made this determination, we then assessed whether we were the primary beneficiary of the VIE and concluded that we were the primary beneficiary during the current and prior year reporting periods; thus, as required, the PDMCX financial results have been consolidated with Photronics. Our conclusion was based on the facts that we held a controlling financial interest in PDMCX (which resulted from our having the power to direct the activities that most significantly impacted its economic performance) and had the obligation to absorb losses and the right to receive benefits that could potentially be significant to PDMCX. Our conclusions that we had the power to direct the activities that most significantly affected the economic performance of PDMCX during the current and prior year reporting periods were based on our right to appoint the majority of its board of directors, which has, among others, the powers to manage the business (through its rights to appoint and evaluate PDMCX’s management), incur indebtedness, enter into agreements and commitments, and acquire and dispose of PDMCX’s assets. In addition, as a result of the 50.01% variable interest we held during the current and prior year periods, we had the obligation to absorb losses, and the right to receive benefits, that could potentially be significant to PDMCX.

The following table presents the carrying amounts of PDMCX assets and liabilities included in our condensed consolidated balance sheets. General creditors of PDMCX do not have recourse to the assets of Photronics (other than the net assets of PDMCX); therefore, our maximum exposure to loss from PDMCX is our interest in the carrying amount of the net assets of the joint venture.

	April 30, 2023				October 31, 2022
Classification	Carrying Amount		Photronics Interest		Carrying Amount		Photronics Interest
Current assets	$	128,626	$	64,326	$	127,542	$	63,784
Noncurrent assets		145,471		72,750		119,392		59,708
Total assets		274,097		137,076		246,934		123,492
Current liabilities		50,925		25,468		51,274		25,643
Noncurrent liabilities		1,484		742		9,161		4,581
Total liabilities		52,409		26,210		60,435		30,224
Net assets	$	221,688	$	110,866	$	186,499	$	93,268

XML

DEBT

6 Months Ended

Apr. 30, 2023

DEBT [Abstract]

DEBT

NOTE 6 - DEBT

Due to the Q2 FY23 payoff of the Xiamen Project loans, as of April 30, 2023, the Current portion of long-term debt and the Long-term debt balances were comprised of finance leases as described below:

As of April 30, 2023	Xiamen Project Loans			Finance Leases			Total
Principal due:
Next 12 months	$	-		$	7,017		$	7,017
Months 13 – 24	$	-		$	21,290		$	21,290
Months 25 – 36		-			12			12
Months 37 – 48		-			12			12
Months 49 – 60		-			8			8
Long-term debt		-			21,322			21,322
Total debt	$	-		$	28,339		$	28,339
Interest rate at balance sheet date		N/A	%		N/A
Basis spread on interest rates		0.00			N/A
Interest rate reset	Quarterly				N/A
Maturity date	December 2025				N/A
Periodic payment amount	Varies as loans mature(1)			Varies as leases mature
Periodic payment frequency	Semiannual, on individual loans			Monthly
Loan collateral (carrying amount)	$	N/A		$	36,611	(2)

⁽¹⁾ During the three-month period ended April 30, 2023, we repaid the entire balance of 26.4 million RMB (approximately $3.9 million) remaining on the loan, of which, 2.0 million RMB was due to be paid in June 2025 and 24.4 million RMB was due to be paid in December 2025.

⁽²⁾ Represents the carrying amount at the balance sheet date of the related ROU assets, in which the lessors have secured interests.

The table below provides information on our long-term debt as of October 31, 2022.

As of October 31, 2022	Xiamen Project Loans			Xiamen Working Capital Loans			Finance Leases			Total
Principal due:
Next 12 months	$	-		$	3,512		$	6,512		$	10,024
Months 13 – 24	$	-		$	-		$	6,610		$	6,610
Months 25 – 36		1,098			-			17,961			19,059
Months 37 – 48		6,641			-			-			6,641
Long-term debt	$	7,739		$	-		$	24,571		$	32,310
Interest rate at balance sheet date		4.30% - 4.45	%		4.46	%		N/A
Basis spread on interest rates		0.00			76			N/A
Interest rate reset	Quarterly			Monthly/Annually				N/A
Maturity date	December 2025			July 2023				N/A
Periodic payment amount	Varies as loans mature (1)			Increases as loans mature			Varies as leases mature
Periodic payment frequency	Semiannual, on individual loans			Semiannual, on individual loans			Monthly
Loan collateral (carrying amount)	$	70,705			N/A		$	37,976	(2)

⁽¹⁾ During the three-month period ended October 31, 2022, we repaid 81.0 million RMB (approximately $11.5 million) that had contractual maturity dates ranging from December 2023 through June 2025.

⁽²⁾ Represents the carrying amount at the balance sheet date of the related ROU assets, in which the lessors have secured interests.

Finance Leases

In February 2021, we entered into a five-year $7.2 million finance lease for a high-end inspection tool. Monthly payments on the lease, which commenced in February 2021, are $0.1 million per month. Upon the payment of the fiftieth monthly payment and prior to payment of the fifty-first monthly payment, we may exercise an early buyout option to purchase the tool for $2.4 million. If we do not exercise the early buyout option, then at the end of the five-year lease term, the lease shall continue to renew on a month-to-month basis at the same rental terms; at our option, after the original term or any renewal periods, we may return the tool, elect to extend the lease, or purchase the tool at its fair market value. Since we are reasonably certain that we will exercise the early buyout option, our lease liability reflects such exercise and we have classified the lease as a finance lease. The interest rate implicit in the lease is 1.08%.

In December 2020, we entered into a five-year $35.5 million finance lease for a high-end lithography tool. Monthly payments on the lease, which commenced in January 2021, increased from $0.04 million during the first three months to $0.6 million for the following nine months, followed by forty-eight monthly payments of $0.5 million. As of the due date of the forty-eighth monthly payment, we may exercise an early buyout option to purchase the tool for $14.1 million. If we do not exercise the early buyout option, then at the end of the five-year lease term, at our option, we may return the tool, elect to extend the lease term for a period and a lease payment to be agreed with lessor at the time, or purchase the tool for its then-fair market value, as determined by the lessor. Since we are reasonably certain that we will exercise the early buyout option, our lease liability reflects such exercise and we have classified the lease as a finance lease. The interest rate implicit in the lease is 1.58%. The lease agreement incorporates the covenants included in our Corporate Credit Agreement, which are detailed below, and includes a cross-default provision for any agreement or instrument with an outstanding, committed balance greater than $5.0 million in which we are the indebted party.

Xiamen Project Loans

In November 2018, PDMCX obtained approval to borrow 345.0 million RMB from the Industrial and Commercial Bank of China. From November 2018 through July 2020, PDMCX entered into separate loan agreements (the “Project Loans”) for the entire approved amount. In February 2023, PDMCX  repaid the entire outstanding balance of 26.4 million RMB ($3.9 million). As of April 30, 2023, PDMCX had no amount outstanding. The Project Loans were used to finance certain capital expenditures at the PDMCX facility and were collateralized by liens granted on the land use right, building, and certain equipment located at the facility. The interest rates on the Project Loans were variable (based on the RMB Loan Prime Rate of the National Interbank Funding Center), and interest incurred on the loans was eligible for reimbursement through incentives provided by the Xiamen Torch Hi-Tech Industrial Development Zone, which provided for such reimbursements up to a prescribed limit and duration. The Project Loans were subject to covenants and provisions, certain of which related to the assets pledged as security for the loans, all of which we were in compliance with as of April 30, 2023.

Xiamen Working Capital Loans

In November 2018, PDMCX obtained approval for revolving, unsecured credit of the equivalent of $25.0 million, pursuant to which PDMCX may enter into separate loan agreements with varying terms to maturity. This facility is subject to annual reviews and extensions, with the most recent extension set to expire in November 2023. In December 2022, we repaid our entire outstanding balance of 25.6 million RMB ($3.6 million). As of April 30, 2023, PDMCX had no amount outstanding against the approval. The interest rates are variable, based on the RMB Loan Prime Rate of the National Interbank Funding Center. Interest incurred on the loans related to the amount borrowed was eligible for reimbursement through incentives provided by the Xiamen Torch Hi-Tech Industrial Development Zone, which provided for such reimbursements up to a prescribed limit and duration.

Corporate Credit Agreement

In September 2018, we entered into a five-year amended and restated credit agreement (the “Credit Agreement”), which has a $50 million borrowing limit, with an expansion capacity to $100 million. The Credit Agreement is secured by substantially all of our assets located in the United States and common stock we own in certain subsidiaries. The Credit Agreement includes covenants around minimum interest coverage ratio, total leverage ratio, and minimum unrestricted cash balance (all of which we were in compliance with at April 30, 2023), and limits the amount of cash dividends, distributions, and redemptions we can pay on our common stock to an aggregate annual amount of $50 million. We had no outstanding borrowings against the Credit Agreement at April 30, 2023. The interest rate on the Credit Agreement (6.02% at April 30, 2023) is based on our total leverage ratio at one-month LIBOR plus a spread, as defined in the Credit Agreement.

Hefei Equipment Loan

In October 2020, our Hefei, China, facility was approved to borrow 200 million RMB from the China Construction Bank Corporation. In July 2022, we repaid our entire outstanding balance of 120.7 million RMB ($18.0 million). This credit facility was subject to annual reviews and extension; the most recent extension expired in August 2022 and we did not apply for an extension. The loan proceeds were used to fund purchases of two lithography tools at the Hefei facility. The interest rate on the loan was variable and based on the RMB Loan Prime Rate of the National Interbank Funding Center. The borrowings were secured by the Hefei facility, its related land use right, and certain manufacturing equipment. The Hefei Equipment Loan was subject to covenants and provisions, certain of which relate to the assets pledged as security for the loan, including covenants for the ratio of total liabilities to total assets and the ratio of current assets to current liabilities, all of which we were in compliance with at the time of repayment.

XML

REVENUE

6 Months Ended

Apr. 30, 2023

REVENUE [Abstract]

REVENUE

NOTE 7 - REVENUE

We recognize revenue when, or as, control of a good or service transfers to a customer, in an amount that reflects the consideration to which we expect to be entitled in exchange for transferring those goods or services. We account for an arrangement as a revenue contract when each party has approved and is committed to perform under the contract, the rights of the contracting parties regarding the goods or services to be transferred and the payment terms are identifiable, the arrangement has commercial substance, and collection of consideration is probable. Substantially all of our revenue comes from the sales of photomasks. We typically contract with our customers to sell sets of photomasks, which are comprised of multiple layers, the predominance of which we invoice as they ship to customers. As the photomasks are manufactured to customer specifications, they have no alternative use to us and, as our contracts generally provide us with the right to payment for work completed to date, we recognize revenue as we perform, or “over time”, on most of our contracts. We measure our performance to date using an input method, which is based on our estimated costs to complete the various manufacturing phases of a photomask. At the end of a reporting period, there are a number of uncompleted revenue contracts on which we have performed; for any such contracts under which we are entitled to be compensated for our costs incurred plus a reasonable profit, we recognize revenue and a corresponding contract asset for such performance. We account for shipping and handling activities that we perform after a customer obtains control of a good as being activities to fulfill our promise to transfer the good to the customer, rather than as promised services, or performance obligations, under the contract. We report our revenue net of any sales or similar taxes we collect on behalf of government entities.

As stated above, photomasks are manufactured to customer specifications in accordance with their proprietary designs; thus, they are individually unique. Due to their uniqueness and other factors, their transaction prices are individually established through negotiations with customers; consequently, our photomasks do not have standard or “list” prices. The transaction prices of the vast majority of our revenue contracts include only fixed amounts of consideration. In certain instances, such as when we offer a customer an early payment discount, an estimate of variable consideration would be included in the transaction price, but only to the extent that a significant reversal of revenue would not occur when the uncertainty related to the variability was resolved.

Contract Assets, Contract Liabilities, and Accounts Receivable

We recognize a contract asset when our performance under a contract precedes our receipt of consideration from a customer, or before payment is due, and our receipt of consideration is conditional upon factors other than the passage of time. Contract assets reflect our transfer of control of photomasks that are in process or completed but not yet shipped to customers. A receivable is recognized when we have an unconditional right to payment for our performance, which generally occurs when we ship the photomasks. Our contract assets primarily consist of a significant amount of our in-process production orders and fully manufactured photomasks which have not yet shipped, for which we have an enforceable right to collect consideration (including a reasonable profit) in the event the in-process orders are cancelled by customers. On an individual contract basis, we net contract assets with contract liabilities (deferred revenue) for financial reporting purposes. We did not identify impairment indicators for any outstanding contract assets during the three or six-month periods ended April 30, 2023, or May 1, 2022.

The following table provides information about our contract balances at the balance sheet dates.

Classification	April 30, 2023		October 31, 2022
Contract Assets
Other current assets	$	21,385	$	15,752
Contract Liabilities
Accrued liabilities	$	19,224	$	18,872
Other liabilities		13,189		4,989
	$	32,413	$	23,861

The following table presents revenue recognized from contract liabilities that existed at the beginning of the reporting periods.

	Three Months Ended				Six Months Ended
	April 30, 2023		May 1, 2022		April 30, 2023		May 1, 2022
Revenue recognized from beginning liability	$	11,228	$	11,460	$	7,875	$	7,278

We generally record our accounts receivable at their billed amounts. All outstanding past due customer invoices are reviewed for collectability during, and at the end of, every reporting period. To the extent we believe a loss on the collection of a customer invoice is probable, we record the loss and credit an allowance for credit losses. In the event that an amount is determined to be uncollectible, we charge the allowance for credit losses and derecognize the related receivable. We incurred credit losses on our accounts receivable of $0.1 million during the three and six-month periods ended April 30, 2023, and there were no charges for the three and six-month periods ended May 1, 2022.

Our invoice terms generally range from net-thirty to ninety days, depending on both the geographic market in which the transaction occurs and our payment agreements with specific customers. In the event that our evaluation of a customer’s business prospects and financial condition indicate that the customer presents a collectability risk, we modify terms of sale, which may require payment in advance of performance. At the time of adoption, we elected the practical expedient allowed under ASC Topic 606 “Revenue from Contracts with Customers” (“Topic 606”) that permits us not to adjust a contract’s promised amount of consideration to reflect a financing component when the period between when we transfer control of goods or services to customers and when we are paid is one year or less.

In instances when we are paid in advance of our performance, we record a contract liability and, as allowed under the practical expedient in Topic 606, recognize interest expense only if the period between when we receive payment from the customer and the date when we expect to be entitled to the payment is greater than one year. Historically, advance payments we have received from customers have generally not preceded the completion of our performance obligations by more than one year.

Disaggregation of Revenue

The following tables present our revenue for the three and six-month periods ended April 30, 2023, and May 1, 2022, disaggregated by product type, geographic origin, and timing of recognition.

	Three Months Ended				Six Months Ended
Revenue by Product Type	April 30, 2023		May 1, 2022		April 30, 2023		May 1, 2022
IC
High-end	$	43,920	$	51,362	$	91,923	$	98,285
Mainstream		123,134		94,437		231,720		177,275
Total IC	$	167,054	$	145,799	$	323,643	$	275,560
FPD
High-end	$	51,888	$	46,610	$	97,579	$	92,886
Mainstream		10,364		12,100		19,175		25,890
Total FPD	$	62,252	$	58,710	$	116,754	$	118,776
	$	229,306	$	204,509	$	440,397	$	394,336

	Three Months Ended				Six Months Ended
Revenue by Geographic Origin*	April 30, 2023		May 1, 2022		April 30, 2023		May 1, 2022
Taiwan	$	80,448	$	69,852	$	156,017	$	137,693
China		65,215		53,691		124,148		99,645
Korea		41,372		40,769		79,204		80,283
United States		32,495		30,335		62,377		57,511
Europe		9,276		9,506		17,722		18,420
Other		500		356		929		784
	$	229,306	$	204,509	$	440,397	$	394,336

	Three Months Ended				Six Months Ended
Revenue by Timing of Recognition	April 30, 2023		May 1, 2022		April 30, 2023		May 1, 2022
Over time	$	215,376	$	192,770	$	412,541	$	363,034
At a point in time		13,930		11,739		27,856		31,302
	$	229,306	$	204,509	$	440,397	$	394,336

Contract Costs

We pay commissions to third-party sales agents for certain sales they procure on our behalf. However, the bases of the commissions are the transaction prices of the sales, which are completed in less than one year; thus, no relationship is established with a customer that will result in future business. Therefore, we do not recognize any portion of these sales commissions as costs of obtaining a contract, nor do we currently foresee other circumstances under which we would recognize contract obtainment costs as assets.

Remaining Performance Obligations

As we are typically required to fulfill customer orders within a short period of time, our backlog of orders has historically been two to three weeks for FPD photomasks and one to two weeks for IC photomasks. However, the demand for some IC photomasks has expanded beyond the industry’s capacity to supply them within the traditional time period; thus the backlog, in some cases, can expand to as long as two to three months. As allowed under Topic 606, we have elected not to disclose our remaining performance obligations, which represent the costs associated with the completion of the manufacturing process of in-process photomasks related to contracts that have an original duration of one year or less.

Product Warranties

Our photomasks are sold under warranties that generally range from one to twenty-four months. We warrant that our photomasks conform to customer specifications and will typically repair, replace, or issue a refund for any photomasks that fail to do so. The warranties do not represent separate performance obligations in our revenue contracts. Historically, customer claims under warranties have been immaterial.

XML

SHARE-BASED COMPENSATION

6 Months Ended

Apr. 30, 2023

SHARE-BASED COMPENSATION [Abstract]

SHARE-BASED COMPENSATION

NOTE 8 - SHARE-BASED COMPENSATION

In March 2016, shareholders approved our current equity incentive compensation plan (the “Plan”), under which incentive stock options, non-qualified stock options, stock grants, stock-based awards, restricted stock, restricted stock units, stock appreciation rights, performance units, performance stock, and other stock or cash awards may be granted. Shares to be issued under the Plan may be authorized and unissued shares, issued shares that have been reacquired by us (in the open market or in private transactions), or a combination thereof. The maximum number of shares of common stock approved that may be issued under the Plan was four million shares. On March 16, 2023, at its annual meeting of shareholders, the shareholders of Photronics, Inc., approved amendments to the Plan to increase the number of shares available for issuance by an additional one million shares, thereby increasing the shares available for issuance under the Plan from four million to five million. Awards may be granted to officers, employees, directors, consultants, advisors, and independent contractors of Photronics 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. The table below presents information on our share-based compensation expenses for the three and six-month periods ended April 30, 2023, and May 1, 2022.

	Three Months Ended				Six Months Ended
	April 30, 2023		May 1, 2022		April 30, 2023		May 1, 2022
Expense reported in:
Cost of goods sold	$	288	$	182	$	570	$	324
Selling, general, and administrative		1,531		1,243		2,908		2,424
Research and development		190		159		352		293
Total expense incurred	$	2,009	$	1,584	$	3,830	$	3,041
Expense by award type:
Restricted stock awards	$	1,974	$	1,316	$	3,738	$	2,683
Stock options		-		221		1		259
Employee stock purchase plan		35		47		91		99
Total expense incurred	$	2,009	$	1,584	$	3,830	$	3,041
Income tax benefits of share-based compensation	$	207	$	104	$	361	$	188
Share-based compensation cost capitalized	$	-	$	-	$	-	$	-

Restricted Stock Awards

We periodically grant restricted stock awards, the restrictions on which typically lapse over a service period of one to four years. The fair value of the awards is determined on the date of grant, based on the closing price of our common stock. The table below presents information on our restricted stock awards for the three and six-month periods ended April 30, 2023, and May 1, 2022.

	Three Months Ended				Six Months Ended
	April 30, 2023		May 1, 2022		April 30, 2023		May 1, 2022
Number of shares granted in period		-		-		786,500		535,400
Weighted-average grant-date fair value of awards (in dollars per share)	$	-	$	-	$	16.77	$	19.28
Compensation cost not yet recognized	$	16,419	$	10,779	$	16,419	$	10,779
Weighted-average amortization period for cost not yet recognized (in years)		3.0		2.8		3.0		2.8
Shares outstanding at balance sheet date		1,328,572		891,429		1,328,572		891,429

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 must have an exercise price no less than 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 our common stock on the dates of grant and are calculated using the Black-Scholes option pricing model. Expected volatility is based on the historical volatility of our common stock. We use historical option exercise behavior and employee termination data to estimate expected term, which represents the period of time that options are expected to remain outstanding. The risk-free rate of return for the estimated term of an option is based on the U.S. Treasury yield curve in effect at the date of grant. The table below presents information on our stock options for the three and six-month periods ended April 30, 2023, and May 1, 2022.

	Three Months Ended				Six Months Ended
	April 30, 2023		May 1, 2022		April 30, 2023		May 1, 2022
Number of options granted in period		-		-		-		-
Cash received from options exercised	$	20	$	438	$	583	$	4,149
Compensation cost not yet recognized	$	-	$	52	$	-	$	52
Weighted-average amortization period for cost not yet recognized (in years)		-		0.7		-		0.7

Information on outstanding and exercisable option awards as of April 30, 2023, is presented below.

Options	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value
Outstanding and exercisable at April 30, 2023		526,926	$	10.11		2.99	$	2,293

XML

INCOME TAXES

6 Months Ended

Apr. 30, 2023

INCOME TAXES [Abstract]

INCOME TAXES

NOTE 9 - INCOME TAXES

We calculate our provision for income taxes at the end of each interim reporting period on the basis of an estimated annual effective tax rate adjusted for tax items that are discrete to each period. The table below sets forth the primary reasons that our effective income tax rates differed from the U.S. statutory tax rates in effect during the three and six-month periods ended April 30, 2023, and May 1, 2022.

Reporting Period	U.S. Statutory Tax Rates	Photronics Effective Tax Rates	Primary Reasons for Differences
Three months ended April 30, 2023	21.0%	26.5%	Non-recognition of the tax benefit of losses that, in certain jurisdictions, have been offset by valuation allowances, non-U.S. pre-tax income being taxed at higher statutory rates in the non-U.S. jurisdictions, and the establishment of uncertain tax positions in non-U.S. jurisdictions.
Three months ended May 1, 2022	21.0%	25.1%	Non-recognition of the tax benefit of losses that, in certain jurisdictions, have been offset by valuation allowances, non-U.S. pre-tax income being taxed at higher statutory rates in the non-U.S. jurisdictions, and the establishment of uncertain tax positions in non-U.S. jurisdictions.
Six months ended April 30, 2023	21.0%	27.8%	Non-recognition of the tax benefit of losses that, in certain jurisdictions, have been offset by valuation allowances, non-U.S. pre-tax income being taxed at higher statutory rates in the non-U.S. jurisdictions, and the establishment of uncertain tax positions in non-U.S. jurisdictions.
Six months ended May 1, 2022	21.0%	25.5%	Non-recognition of the tax benefit of losses that, in certain jurisdictions, have been offset by valuation allowances, non-U.S. pre-tax income being taxed at higher statutory rates in the non-U.S. jurisdictions, and the establishment of uncertain tax positions in non-U.S. jurisdictions.

Uncertain Tax Positions

We include unrecognized tax benefits in Other liabilities, and we include any applicable interests and penalties related to uncertain tax positions in our income tax provision. Although the timing of reversal of uncertain tax positions may be uncertain, as they can be dependent upon the settlement of tax audits, we believe that the amount of uncertain tax positions (including interest and penalties, and net of tax benefits) that may be resolved over the next twelve months is immaterial. Resolution of these uncertain tax positions may result from either or both the lapses of statutes of limitations and tax settlements. We are no longer subject to tax authority examinations in the U.S., major foreign, or state tax jurisdictions for years prior to fiscal year 2017. The table below presents information on our unrecognized tax benefits as of the balance sheet dates.

	April 30, 2023		October 31, 2022
Unrecognized tax benefits related to uncertain tax positions	$	7,128	$	5,599
Unrecognized tax benefits that, if recognized, would impact the effective tax rate	$	7,128	$	5,599
Accrued interest and penalties related to uncertain tax positions	$	549	$	395

XML

EARNINGS PER SHARE

6 Months Ended

Apr. 30, 2023

EARNINGS PER SHARE [Abstract]

EARNINGS PER SHARE

NOTE 10 - EARNINGS PER SHARE

The calculations of basic and diluted earnings per share are presented below.

	Three Months Ended				Six Months Ended
	April 30, 2023		May 1, 2022		April 30, 2023		May 1, 2022
Net income attributable to Photronics, Inc. shareholders	$	39,929	$	27,432	$	53,915	$	50,496
Effect of dilutive securities		-		-		-		-
Earnings used for diluted earnings per share	$	39,929	$	27,432	$	53,915	$	50,496
Weighted-average common shares computations:
Weighted-average common shares used for basic earnings per share		61,138		60,606		61,016		60,382
Effect of dilutive securities:
Share-based payment awards		369		539		473		659
Potentially dilutive common shares		369		539		473		659
Weighted-average common shares used for diluted earnings per share		61,507		61,145		61,489		61,041
Basic earnings per share	$	0.65	$	0.45	$	0.88	$	0.84
Diluted earnings per share	$	0.65	$	0.45	$	0.88	$	0.83

The table below illustrates 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 or, under application of the treasury stock method, they were otherwise determined to be antidilutive.

	Three Months Ended				Six Months Ended
	April 30, 2023		May 1, 2022		April 30, 2023		May 1, 2022
Share-based payment awards		267		427		535		626
Total potentially dilutive shares excluded		267		427		535		626

XML

COMMITMENTS AND CONTINGENCIES

6 Months Ended

Apr. 30, 2023

COMMITMENTS AND CONTINGENCIES [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 11 - COMMITMENTS AND CONTINGENCIES

As of April 30, 2023, we had commitments outstanding for capital expenditures of approximately $113.1 million, primarily for purchases of high-end equipment.

In May 2022, we were informed of a customs audit in one of our China operations. We estimated a contingency ranging from $2.2 million to $3.7 million, which included unpaid additional customs duties and related interest and penalties for the previous three years (the period under audit). In the three and six-month periods ended May 1, 2022, we recorded a contingent loss of $2.2 million, as we believed this was the most likely outcome. The $2.2 million amount was recorded with a charge to Cost of goods sold in the condensed consolidated statements of income and Accrued liabilities in the condensed consolidated balance sheets. In November 2022, upon settlement of the audit, we reversed $1.0 million of the accrual.

We are subject to various other claims that arise in the ordinary course of business. We believe that our potential liability under such claims, individually or in the aggregate, will not have a material effect on our consolidated financial statements.

XML

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME BY COMPONENT

6 Months Ended

Apr. 30, 2023

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME BY COMPONENT [Abstract]

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME BY COMPONENT

NOTE 12 - CHANGES IN ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME BY COMPONENT

The following tables set forth the changes in our accumulated other comprehensive (loss) income by component (net of tax of $0) for the three and six-month periods ended April 30, 2023, and May 1, 2022.

	Three Months Ended April 30, 2023
	Foreign Currency Translation Adjustments			Other			Total
Balance at January 29, 2023	$	(23,737	)	$	(683	)	$	(24,420	)
Other comprehensive (loss) income		(39,813	)		66			(39,747	)
Less: Other comprehensive (loss) income attributable to noncontrolling interests		(4,760	)		98			(4,662	)
Balance at April 30, 2023	$	(58,790	)	$	(715	)	$	(59,505	)

	Three Months Ended May 1, 2022
	Foreign Currency Translation Adjustments			Other			Total
Balance at January 30, 2022	$	11,451		$	(886	)	$	10,565
Other comprehensive (loss) income		(44,118	)		129			(43,989	)
Less: Other comprehensive (loss) income attributable to noncontrolling interests		(10,570	)		65			(10,505	)
Balance at May 1, 2022	$	(22,097	)	$	(822	)	$	(22,919	)

	Six Months Ended April 30, 2023
	Foreign Currency Translation Adjustments			Other			Total
Balance at October 31, 2022	$	(97,790	)	$	(666	)	$	(98,456	)
Other comprehensive income		50,707			11			50,718
Less: Other comprehensive income attributable to noncontrolling interests		11,707			60			11,767
Balance at April 30, 2023	$	(58,790	)	$	(715	)	$	(59,505	)

	Six Months Ended May 1, 2022
	Foreign Currency Translation Adjustments			Other			Total
Balance at October 31, 2021	$	21,476		$	(905	)	$	20,571
Other comprehensive (loss) income		(53,949	)		166			(53,783	)
Less: Other comprehensive (loss) income attributable to noncontrolling interests		(10,376	)		83			(10,293	)
Balance at May 1, 2022	$	(22,097	)	$	(822	)	$	(22,919	)

XML

FAIR VALUE MEASUREMENTS

6 Months Ended

Apr. 30, 2023

FAIR VALUE MEASUREMENTS [Abstract]

FAIR VALUE MEASUREMENTS

NOTE 13 - 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 market 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 fair values of our cash and certain cash equivalents (Level 1 measurements), accounts receivable, accounts payable, and certain other current assets and current liabilities (Level 2 measurements) approximate their carrying values due to their short-term maturities. The fair values of our Short-term investments are Level 1 measurements. (Please refer to “Investments” within Note 2 for additional fair value information on our Short-term investments.) The fair values of certain cash equivalents are Level 2 measurements that are provided by independent third-party pricing services or other independent entities, which may use matrix pricing, valuation models, or other methods which utilize observable market data. The fair values of our variable-rate debt instruments are Level 2 measurements and approximate their carrying values due to the variable nature of their underlying interest rates. Other than our Short-term investments, we did not have any assets or liabilities measured at fair value, on a recurring or a nonrecurring basis, at April 30, 2023, or October 31, 2022.

XML

SHARE REPURCHASE PROGRAMS

6 Months Ended

Apr. 30, 2023

SHARE REPURCHASE PROGRAMS [Abstract]

SHARE REPURCHASE PROGRAMS

NOTE 14 - SHARE REPURCHASE PROGRAMS

In September 2020, the Company’s board of directors authorized the repurchase of up to $100 million of its common stock, pursuant to a repurchase plan under Rule 10b5-1 of the Securities Act. We commenced repurchasing shares under this authorization on September 16, 2020. All of the shares repurchased under this authorization prior to January 30, 2022, have been retired prior to that date. As of April 30, 2023, $31.7 million was available under this authorization for the purchase of additional shares. The table below presents information on this repurchase program for the three and six-month periods ended April 30, 2023, and May 1, 2022.

	Three Months Ended						Six Months Ended
	April 30, 2023			May 1, 2022			April 30, 2023		May 1, 2022
Number of shares repurchased			-			-		-		188
Cost of shares repurchased		$	-		$	-	$	-	$	2,522
Average price paid per share		$	-		$	-	$	-	$	13.43

XML

RECENT ACCOUNTING PRONOUNCEMENTS

6 Months Ended

Apr. 30, 2023

RECENT ACCOUNTING PRONOUNCEMENTS [Abstract]

RECENT ACCOUNTING PRONOUNCEMENTS

NOTE 15 - RECENT ACCOUNTING PRONOUNCEMENTS

Accounting Standards Updates to be Adopted

In November 2021, the FASB issued ASU 2021-10, “Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance”, to increase the transparency of government assistance including the disclosure of the types of assistance an entity receives, an entity’s method of accounting for government assistance, and the effect of the assistance on an entity’s financial statements. The guidance in this Update will be effective for Photronics in its fiscal year 2023 Form 10-K, with early application of the amendments allowed. The amendments are to be applied prospectively to all transactions within the scope of the amendments that are reflected in financial statements at the date of initial application and new transactions that are entered into after the date of initial application or, retrospectively to those transactions. We are currently evaluating the effect the adoption of this ASU may have on our disclosures.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”, which provides optional expedients and exceptions to applying the guidance on contract modifications, hedge accounting, and other transactions, to simplify the accounting for transitioning from LIBOR, and other interbank offered rates expected to be discontinued, to alternative reference rates. The guidance in this Update was effective upon its issuance; if elected, it was to be applied prospectively from December 31, 2022. In December 2022, the FASB issued ASU 2022-06 “Deferral of the Sunset Date of Topic 848” which extended the time that the optional expedients and exceptions may be adopted to December 31, 2024.  We do not expect the impact of this ASU to be material to our consolidated financial statements.

XML

BASIS OF FINANCIAL STATEMENT PRESENTATION (Policies)

6 Months Ended

Apr. 30, 2023

BASIS OF FINANCIAL STATEMENT PRESENTATION [Abstract]

Consolidation

The accompanying unaudited condensed consolidated financial statements (“the financial statements”) have been prepared in accordance with U.S. GAAP 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 U.S. GAAP 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 financial statements include the accounts of Photronics, its wholly owned subsidiaries, and the majority-owned subsidiaries, which it controls. All intercompany balances and transactions have been eliminated in consolidation. These financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our Form 10-K for the fiscal year ended October 31, 2022, where we discuss and provide additional information about our accounting policies and the methods and assumptions used in our estimates.

Estimates and Assumptions

The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect amounts reported in them. Our estimates, including those on the impact of COVID-19, are based on historical experience and on various assumptions that we believe to be reasonable under the facts and circumstances at the time they are made. Subsequent actual results may differ from such estimates. We review these estimates periodically and reflect any effects of revisions in the period in which they are determined.

XML

INVENTORIES (Policies)	6 Months Ended
	Apr. 30, 2023
INVENTORIES [Abstract]
Inventories	Inventories are stated at the lower of cost, determined under the first-in, first-out (“FIFO”) method, or net realizable value.

XML

PDMCX JOINT VENTURE (Policies)

6 Months Ended

Apr. 30, 2023

PDMCX JOINT VENTURE [Abstract]

Variable Interest Entities

As required by the guidance in Topic 810 - “Consolidation” of the Accounting Standards Codification (“ASC”), we evaluated our involvement in PDMCX for the purpose of determining whether we should consolidate its results in our financial statements. The initial step of our evaluation was to determine whether PDMCX was a variable interest entity (“VIE”). Due to its lack of sufficient equity at risk to finance its activities without additional subordinated financial support, we determined that it was a VIE. Having made this determination, we then assessed whether we were the primary beneficiary of the VIE and concluded that we were the primary beneficiary during the current and prior year reporting periods; thus, as required, the PDMCX financial results have been consolidated with Photronics. Our conclusion was based on the facts that we held a controlling financial interest in PDMCX (which resulted from our having the power to direct the activities that most significantly impacted its economic performance) and had the obligation to absorb losses and the right to receive benefits that could potentially be significant to PDMCX. Our conclusions that we had the power to direct the activities that most significantly affected the economic performance of PDMCX during the current and prior year reporting periods were based on our right to appoint the majority of its board of directors, which has, among others, the powers to manage the business (through its rights to appoint and evaluate PDMCX’s management), incur indebtedness, enter into agreements and commitments, and acquire and dispose of PDMCX’s assets. In addition, as a result of the 50.01% variable interest we held during the current and prior year periods, we had the obligation to absorb losses, and the right to receive benefits, that could potentially be significant to PDMCX.

XML

REVENUE (Policies)

6 Months Ended

Apr. 30, 2023

REVENUE [Abstract]

Revenue

We recognize revenue when, or as, control of a good or service transfers to a customer, in an amount that reflects the consideration to which we expect to be entitled in exchange for transferring those goods or services. We account for an arrangement as a revenue contract when each party has approved and is committed to perform under the contract, the rights of the contracting parties regarding the goods or services to be transferred and the payment terms are identifiable, the arrangement has commercial substance, and collection of consideration is probable. Substantially all of our revenue comes from the sales of photomasks. We typically contract with our customers to sell sets of photomasks, which are comprised of multiple layers, the predominance of which we invoice as they ship to customers. As the photomasks are manufactured to customer specifications, they have no alternative use to us and, as our contracts generally provide us with the right to payment for work completed to date, we recognize revenue as we perform, or “over time”, on most of our contracts. We measure our performance to date using an input method, which is based on our estimated costs to complete the various manufacturing phases of a photomask. At the end of a reporting period, there are a number of uncompleted revenue contracts on which we have performed; for any such contracts under which we are entitled to be compensated for our costs incurred plus a reasonable profit, we recognize revenue and a corresponding contract asset for such performance. We account for shipping and handling activities that we perform after a customer obtains control of a good as being activities to fulfill our promise to transfer the good to the customer, rather than as promised services, or performance obligations, under the contract. We report our revenue net of any sales or similar taxes we collect on behalf of government entities.

As stated above, photomasks are manufactured to customer specifications in accordance with their proprietary designs; thus, they are individually unique. Due to their uniqueness and other factors, their transaction prices are individually established through negotiations with customers; consequently, our photomasks do not have standard or “list” prices. The transaction prices of the vast majority of our revenue contracts include only fixed amounts of consideration. In certain instances, such as when we offer a customer an early payment discount, an estimate of variable consideration would be included in the transaction price, but only to the extent that a significant reversal of revenue would not occur when the uncertainty related to the variability was resolved.

Contract Assets, Contract Liabilities, and Accounts Receivable

We recognize a contract asset when our performance under a contract precedes our receipt of consideration from a customer, or before payment is due, and our receipt of consideration is conditional upon factors other than the passage of time. Contract assets reflect our transfer of control of photomasks that are in process or completed but not yet shipped to customers. A receivable is recognized when we have an unconditional right to payment for our performance, which generally occurs when we ship the photomasks. Our contract assets primarily consist of a significant amount of our in-process production orders and fully manufactured photomasks which have not yet shipped, for which we have an enforceable right to collect consideration (including a reasonable profit) in the event the in-process orders are cancelled by customers. On an individual contract basis, we net contract assets with contract liabilities (deferred revenue) for financial reporting purposes. We did not identify impairment indicators for any outstanding contract assets during the three or six-month periods ended April 30, 2023, or May 1, 2022.

We generally record our accounts receivable at their billed amounts. All outstanding past due customer invoices are reviewed for collectability during, and at the end of, every reporting period. To the extent we believe a loss on the collection of a customer invoice is probable, we record the loss and credit an allowance for credit losses. In the event that an amount is determined to be uncollectible, we charge the allowance for credit losses and derecognize the related receivable. We incurred credit losses on our accounts receivable of $0.1 million during the three and six-month periods ended April 30, 2023, and there were no charges for the three and six-month periods ended May 1, 2022.

Our invoice terms generally range from net-thirty to ninety days, depending on both the geographic market in which the transaction occurs and our payment agreements with specific customers. In the event that our evaluation of a customer’s business prospects and financial condition indicate that the customer presents a collectability risk, we modify terms of sale, which may require payment in advance of performance. At the time of adoption, we elected the practical expedient allowed under ASC Topic 606 “Revenue from Contracts with Customers” (“Topic 606”) that permits us not to adjust a contract’s promised amount of consideration to reflect a financing component when the period between when we transfer control of goods or services to customers and when we are paid is one year or less.

In instances when we are paid in advance of our performance, we record a contract liability and, as allowed under the practical expedient in Topic 606, recognize interest expense only if the period between when we receive payment from the customer and the date when we expect to be entitled to the payment is greater than one year. Historically, advance payments we have received from customers have generally not preceded the completion of our performance obligations by more than one year.

XML

SHARE-BASED COMPENSATION (Policies)

6 Months Ended

Apr. 30, 2023

Restricted Stock [Member]

Stock Options [Abstract]

Share-Based Compensation

Restricted Stock Awards

We periodically grant restricted stock awards, the restrictions on which typically lapse over a service period of one to four years. The fair value of the awards is determined on the date of grant, based on the closing price of our common stock.

Employee Stock Option [Member]

Stock Options [Abstract]

Share-Based Compensation

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 must have an exercise price no less than 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 our common stock on the dates of grant and are calculated using the Black-Scholes option pricing model. Expected volatility is based on the historical volatility of our common stock. We use historical option exercise behavior and employee termination data to estimate expected term, which represents the period of time that options are expected to remain outstanding. The risk-free rate of return for the estimated term of an option is based on the U.S. Treasury yield curve in effect at the date of grant. The table below presents information on our stock options for the three and six-month periods ended April 30, 2023, and May 1, 2022.

XML

INCOME TAXES (Policies)

6 Months Ended

Apr. 30, 2023

INCOME TAXES [Abstract]

Income Taxes

We calculate our provision for income taxes at the end of each interim reporting period on the basis of an estimated annual effective tax rate adjusted for tax items that are discrete to each period. The table below sets forth the primary reasons that our effective income tax rates differed from the U.S. statutory tax rates in effect during the three and six-month periods ended April 30, 2023, and May 1, 2022.

XML

FAIR VALUE MEASUREMENTS (Policies)

6 Months Ended

Apr. 30, 2023

FAIR VALUE MEASUREMENTS [Abstract]

Fair Value Financial Instruments

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 market 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.

XML

RECENT ACCOUNTING PRONOUNCEMENTS (Policies)

6 Months Ended

Apr. 30, 2023

RECENT ACCOUNTING PRONOUNCEMENTS [Abstract]

Recent Accounting Pronouncements

Accounting Standards Updates to be Adopted

In November 2021, the FASB issued ASU 2021-10, “Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance”, to increase the transparency of government assistance including the disclosure of the types of assistance an entity receives, an entity’s method of accounting for government assistance, and the effect of the assistance on an entity’s financial statements. The guidance in this Update will be effective for Photronics in its fiscal year 2023 Form 10-K, with early application of the amendments allowed. The amendments are to be applied prospectively to all transactions within the scope of the amendments that are reflected in financial statements at the date of initial application and new transactions that are entered into after the date of initial application or, retrospectively to those transactions. We are currently evaluating the effect the adoption of this ASU may have on our disclosures.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”, which provides optional expedients and exceptions to applying the guidance on contract modifications, hedge accounting, and other transactions, to simplify the accounting for transitioning from LIBOR, and other interbank offered rates expected to be discontinued, to alternative reference rates. The guidance in this Update was effective upon its issuance; if elected, it was to be applied prospectively from December 31, 2022. In December 2022, the FASB issued ASU 2022-06 “Deferral of the Sunset Date of Topic 848” which extended the time that the optional expedients and exceptions may be adopted to December 31, 2024.  We do not expect the impact of this ASU to be material to our consolidated financial statements.

XML

SHORT-TERM INVESTMENTS (Tables)

6 Months Ended

Apr. 30, 2023

SHORT-TERM INVESTMENTS [Abstract]

Available-for-Sale Debt Securities

The table below provides information on our available-for-sale debt securities.

	April 30, 2023									October 31, 2022
	Amortized Cost		Unrealized Gains		Unrealized Losses			Carrying Value		Amortized Cost		Unrealized Gains		Unrealized Losses			Carrying Value
Government securities	$	45,492	$	-	$	(61	)	$	45,431	$	38,911	$	-	$	(91	)	$	38,820

XML

INVENTORIES (Tables)

6 Months Ended

Apr. 30, 2023

INVENTORIES [Abstract]

Inventories

Inventories are stated at the lower of cost, determined under the first-in, first-out (“FIFO”) method, or net realizable value. Presented below are the components of Inventories at the balance sheet dates.

	April 30, 2023		October 31, 2022
Raw materials	$	53,642	$	49,326
Work in process		1,203		1,408
Finished goods		95		19
	$	54,940	$	50,753

XML

PROPERTY, PLANT, AND EQUIPMENT, NET (Tables)

6 Months Ended

Apr. 30, 2023

PROPERTY, PLANT, AND EQUIPMENT, NET [Abstract]

Components of Property, Plant and Equipment, Net

Presented below are the components of Property, plant, and equipment, net at the balance sheet dates.

	April 30, 2023			October 31, 2022
Land	$	11,620		$	11,134
Buildings and improvements		190,134			168,024
Machinery and equipment		1,884,235			1,769,478
Leasehold improvements		19,835			18,802
Furniture, fixtures, and office equipment		15,523			14,355
Construction in progress		91,204			90,846
		2,212,551			2,072,639
Accumulated depreciation and amortization		(1,512,634	)		(1,428,766	)
	$	699,917		$	643,873

Information on ROU Assets from Finance Leases

Information on ROU assets resulting from finance leases, at the balance sheet dates, is presented below.

	April 30, 2023			October 31, 2022
Machinery and equipment	$	42,817		$	42,760
Accumulated amortization		(6,206	)		(4,784	)
	$	36,611		$	37,976

Depreciation Expense

The following table presents depreciation expense (including the amortization of ROU assets) related to property, plant, and equipment incurred during the reporting periods.

	Three Months Ended						Six Months Ended
	April 30, 2023			May 1, 2022			April 30, 2023		May 1, 2022
Depreciation Expense		$	19,880		$	20,506	$	38,908	$	41,229

XML

PDMCX JOINT VENTURE (Tables)

6 Months Ended

Apr. 30, 2023

PDMCX JOINT VENTURE [Abstract]

Net Income (Loss) Recorded from Operations

The following table presents net income we recorded from the operations of PDMCX during the reporting periods.

	Three Months Ended						Six Months Ended
	April 30, 2023			May 1, 2022			April 30,  2023		May 1, 2022
Net income from PDMCX		$	6,652		$	4,895	$	12,569	$	6,772

Carrying Amounts and Exposure to Loss Related to Assets and Liabilities

The following table presents the carrying amounts of PDMCX assets and liabilities included in our condensed consolidated balance sheets. General creditors of PDMCX do not have recourse to the assets of Photronics (other than the net assets of PDMCX); therefore, our maximum exposure to loss from PDMCX is our interest in the carrying amount of the net assets of the joint venture.

	April 30, 2023				October 31, 2022
Classification	Carrying Amount		Photronics Interest		Carrying Amount		Photronics Interest
Current assets	$	128,626	$	64,326	$	127,542	$	63,784
Noncurrent assets		145,471		72,750		119,392		59,708
Total assets		274,097		137,076		246,934		123,492
Current liabilities		50,925		25,468		51,274		25,643
Noncurrent liabilities		1,484		742		9,161		4,581
Total liabilities		52,409		26,210		60,435		30,224
Net assets	$	221,688	$	110,866	$	186,499	$	93,268

XML

DEBT (Tables)

6 Months Ended

Apr. 30, 2023

DEBT [Abstract]

Long-term Debt

Due to the Q2 FY23 payoff of the Xiamen Project loans, as of April 30, 2023, the Current portion of long-term debt and the Long-term debt balances were comprised of finance leases as described below:

As of April 30, 2023	Xiamen Project Loans			Finance Leases			Total
Principal due:
Next 12 months	$	-		$	7,017		$	7,017
Months 13 – 24	$	-		$	21,290		$	21,290
Months 25 – 36		-			12			12
Months 37 – 48		-			12			12
Months 49 – 60		-			8			8
Long-term debt		-			21,322			21,322
Total debt	$	-		$	28,339		$	28,339
Interest rate at balance sheet date		N/A	%		N/A
Basis spread on interest rates		0.00			N/A
Interest rate reset	Quarterly				N/A
Maturity date	December 2025				N/A
Periodic payment amount	Varies as loans mature(1)			Varies as leases mature
Periodic payment frequency	Semiannual, on individual loans			Monthly
Loan collateral (carrying amount)	$	N/A		$	36,611	(2)

⁽¹⁾ During the three-month period ended April 30, 2023, we repaid the entire balance of 26.4 million RMB (approximately $3.9 million) remaining on the loan, of which, 2.0 million RMB was due to be paid in June 2025 and 24.4 million RMB was due to be paid in December 2025.

⁽²⁾ Represents the carrying amount at the balance sheet date of the related ROU assets, in which the lessors have secured interests.

The table below provides information on our long-term debt as of October 31, 2022.

As of October 31, 2022	Xiamen Project Loans			Xiamen Working Capital Loans			Finance Leases			Total
Principal due:
Next 12 months	$	-		$	3,512		$	6,512		$	10,024
Months 13 – 24	$	-		$	-		$	6,610		$	6,610
Months 25 – 36		1,098			-			17,961			19,059
Months 37 – 48		6,641			-			-			6,641
Long-term debt	$	7,739		$	-		$	24,571		$	32,310
Interest rate at balance sheet date		4.30% - 4.45	%		4.46	%		N/A
Basis spread on interest rates		0.00			76			N/A
Interest rate reset	Quarterly			Monthly/Annually				N/A
Maturity date	December 2025			July 2023				N/A
Periodic payment amount	Varies as loans mature (1)			Increases as loans mature			Varies as leases mature
Periodic payment frequency	Semiannual, on individual loans			Semiannual, on individual loans			Monthly
Loan collateral (carrying amount)	$	70,705			N/A		$	37,976	(2)

⁽¹⁾ During the three-month period ended October 31, 2022, we repaid 81.0 million RMB (approximately $11.5 million) that had contractual maturity dates ranging from December 2023 through June 2025.

⁽²⁾ Represents the carrying amount at the balance sheet date of the related ROU assets, in which the lessors have secured interests.

XML

REVENUE (Tables)

6 Months Ended

Apr. 30, 2023

REVENUE [Abstract]

Contract Balances

The following table provides information about our contract balances at the balance sheet dates.

Classification	April 30, 2023		October 31, 2022
Contract Assets
Other current assets	$	21,385	$	15,752
Contract Liabilities
Accrued liabilities	$	19,224	$	18,872
Other liabilities		13,189		4,989
	$	32,413	$	23,861

The following table presents revenue recognized from contract liabilities that existed at the beginning of the reporting periods.

	Three Months Ended				Six Months Ended
	April 30, 2023		May 1, 2022		April 30, 2023		May 1, 2022
Revenue recognized from beginning liability	$	11,228	$	11,460	$	7,875	$	7,278

Disaggregation of Revenue

The following tables present our revenue for the three and six-month periods ended April 30, 2023, and May 1, 2022, disaggregated by product type, geographic origin, and timing of recognition.

	Three Months Ended				Six Months Ended
Revenue by Product Type	April 30, 2023		May 1, 2022		April 30, 2023		May 1, 2022
IC
High-end	$	43,920	$	51,362	$	91,923	$	98,285
Mainstream		123,134		94,437		231,720		177,275
Total IC	$	167,054	$	145,799	$	323,643	$	275,560
FPD
High-end	$	51,888	$	46,610	$	97,579	$	92,886
Mainstream		10,364		12,100		19,175		25,890
Total FPD	$	62,252	$	58,710	$	116,754	$	118,776
	$	229,306	$	204,509	$	440,397	$	394,336

	Three Months Ended				Six Months Ended
Revenue by Geographic Origin*	April 30, 2023		May 1, 2022		April 30, 2023		May 1, 2022
Taiwan	$	80,448	$	69,852	$	156,017	$	137,693
China		65,215		53,691		124,148		99,645
Korea		41,372		40,769		79,204		80,283
United States		32,495		30,335		62,377		57,511
Europe		9,276		9,506		17,722		18,420
Other		500		356		929		784
	$	229,306	$	204,509	$	440,397	$	394,336

	Three Months Ended				Six Months Ended
Revenue by Timing of Recognition	April 30, 2023		May 1, 2022		April 30, 2023		May 1, 2022
Over time	$	215,376	$	192,770	$	412,541	$	363,034
At a point in time		13,930		11,739		27,856		31,302
	$	229,306	$	204,509	$	440,397	$	394,336

XML

SHARE-BASED COMPENSATION (Tables)

6 Months Ended

Apr. 30, 2023

SHARE-BASED COMPENSATION [Abstract]

Share-based Compensation Expenses

The table below presents information on our share-based compensation expenses for the three and six-month periods ended April 30, 2023, and May 1, 2022.

	Three Months Ended				Six Months Ended
	April 30, 2023		May 1, 2022		April 30, 2023		May 1, 2022
Expense reported in:
Cost of goods sold	$	288	$	182	$	570	$	324
Selling, general, and administrative		1,531		1,243		2,908		2,424
Research and development		190		159		352		293
Total expense incurred	$	2,009	$	1,584	$	3,830	$	3,041
Expense by award type:
Restricted stock awards	$	1,974	$	1,316	$	3,738	$	2,683
Stock options		-		221		1		259
Employee stock purchase plan		35		47		91		99
Total expense incurred	$	2,009	$	1,584	$	3,830	$	3,041
Income tax benefits of share-based compensation	$	207	$	104	$	361	$	188
Share-based compensation cost capitalized	$	-	$	-	$	-	$	-

Restricted Stock Awards Activity

The table below presents information on our restricted stock awards for the three and six-month periods ended April 30, 2023, and May 1, 2022.

	Three Months Ended				Six Months Ended
	April 30, 2023		May 1, 2022		April 30, 2023		May 1, 2022
Number of shares granted in period		-		-		786,500		535,400
Weighted-average grant-date fair value of awards (in dollars per share)	$	-	$	-	$	16.77	$	19.28
Compensation cost not yet recognized	$	16,419	$	10,779	$	16,419	$	10,779
Weighted-average amortization period for cost not yet recognized (in years)		3.0		2.8		3.0		2.8
Shares outstanding at balance sheet date		1,328,572		891,429		1,328,572		891,429

Stock Options Activity

The table below presents information on our stock options for the three and six-month periods ended April 30, 2023, and May 1, 2022.

	Three Months Ended				Six Months Ended
	April 30, 2023		May 1, 2022		April 30, 2023		May 1, 2022
Number of options granted in period		-		-		-		-
Cash received from options exercised	$	20	$	438	$	583	$	4,149
Compensation cost not yet recognized	$	-	$	52	$	-	$	52
Weighted-average amortization period for cost not yet recognized (in years)		-		0.7		-		0.7

Information on Outstanding and Exercisable Option

Information on outstanding and exercisable option awards as of April 30, 2023, is presented below.

Options	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value
Outstanding and exercisable at April 30, 2023		526,926	$	10.11		2.99	$	2,293

XML

INCOME TAXES (Tables)

6 Months Ended

Apr. 30, 2023

INCOME TAXES [Abstract]

Reconciliation of Effective Income Tax Rates from U.S. Statutory Tax Rates

The table below sets forth the primary reasons that our effective income tax rates differed from the U.S. statutory tax rates in effect during the three and six-month periods ended April 30, 2023, and May 1, 2022.

Reporting Period	U.S. Statutory Tax Rates	Photronics Effective Tax Rates	Primary Reasons for Differences
Three months ended April 30, 2023	21.0%	26.5%	Non-recognition of the tax benefit of losses that, in certain jurisdictions, have been offset by valuation allowances, non-U.S. pre-tax income being taxed at higher statutory rates in the non-U.S. jurisdictions, and the establishment of uncertain tax positions in non-U.S. jurisdictions.
Three months ended May 1, 2022	21.0%	25.1%	Non-recognition of the tax benefit of losses that, in certain jurisdictions, have been offset by valuation allowances, non-U.S. pre-tax income being taxed at higher statutory rates in the non-U.S. jurisdictions, and the establishment of uncertain tax positions in non-U.S. jurisdictions.
Six months ended April 30, 2023	21.0%	27.8%	Non-recognition of the tax benefit of losses that, in certain jurisdictions, have been offset by valuation allowances, non-U.S. pre-tax income being taxed at higher statutory rates in the non-U.S. jurisdictions, and the establishment of uncertain tax positions in non-U.S. jurisdictions.
Six months ended May 1, 2022	21.0%	25.5%	Non-recognition of the tax benefit of losses that, in certain jurisdictions, have been offset by valuation allowances, non-U.S. pre-tax income being taxed at higher statutory rates in the non-U.S. jurisdictions, and the establishment of uncertain tax positions in non-U.S. jurisdictions.

Unrecognized Tax Benefits

The table below presents information on our unrecognized tax benefits as of the balance sheet dates.

	April 30, 2023		October 31, 2022
Unrecognized tax benefits related to uncertain tax positions	$	7,128	$	5,599
Unrecognized tax benefits that, if recognized, would impact the effective tax rate	$	7,128	$	5,599
Accrued interest and penalties related to uncertain tax positions	$	549	$	395

XML

EARNINGS PER SHARE (Tables)

6 Months Ended

Apr. 30, 2023

EARNINGS PER SHARE [Abstract]

Calculation of Basic and Diluted Earnings Per Share

The calculations of basic and diluted earnings per share are presented below.

	Three Months Ended				Six Months Ended
	April 30, 2023		May 1, 2022		April 30, 2023		May 1, 2022
Net income attributable to Photronics, Inc. shareholders	$	39,929	$	27,432	$	53,915	$	50,496
Effect of dilutive securities		-		-		-		-
Earnings used for diluted earnings per share	$	39,929	$	27,432	$	53,915	$	50,496
Weighted-average common shares computations:
Weighted-average common shares used for basic earnings per share		61,138		60,606		61,016		60,382
Effect of dilutive securities:
Share-based payment awards		369		539		473		659
Potentially dilutive common shares		369		539		473		659
Weighted-average common shares used for diluted earnings per share		61,507		61,145		61,489		61,041
Basic earnings per share	$	0.65	$	0.45	$	0.88	$	0.84
Diluted earnings per share	$	0.65	$	0.45	$	0.88	$	0.83

Outstanding Securities Excluded from Calculation of Diluted Earnings or Loss Per Share

The table below illustrates 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 or, under application of the treasury stock method, they were otherwise determined to be antidilutive.

	Three Months Ended				Six Months Ended
	April 30, 2023		May 1, 2022		April 30, 2023		May 1, 2022
Share-based payment awards		267		427		535		626
Total potentially dilutive shares excluded		267		427		535		626

XML

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME BY COMPONENT (Tables)

6 Months Ended

Apr. 30, 2023

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME BY COMPONENT [Abstract]

Changes in Accumulated Other Comprehensive (Loss) Income by Component

The following tables set forth the changes in our accumulated other comprehensive (loss) income by component (net of tax of $0) for the three and six-month periods ended April 30, 2023, and May 1, 2022.

	Three Months Ended April 30, 2023
	Foreign Currency Translation Adjustments			Other			Total
Balance at January 29, 2023	$	(23,737	)	$	(683	)	$	(24,420	)
Other comprehensive (loss) income		(39,813	)		66			(39,747	)
Less: Other comprehensive (loss) income attributable to noncontrolling interests		(4,760	)		98			(4,662	)
Balance at April 30, 2023	$	(58,790	)	$	(715	)	$	(59,505	)

	Three Months Ended May 1, 2022
	Foreign Currency Translation Adjustments			Other			Total
Balance at January 30, 2022	$	11,451		$	(886	)	$	10,565
Other comprehensive (loss) income		(44,118	)		129			(43,989	)
Less: Other comprehensive (loss) income attributable to noncontrolling interests		(10,570	)		65			(10,505	)
Balance at May 1, 2022	$	(22,097	)	$	(822	)	$	(22,919	)

	Six Months Ended April 30, 2023
	Foreign Currency Translation Adjustments			Other			Total
Balance at October 31, 2022	$	(97,790	)	$	(666	)	$	(98,456	)
Other comprehensive income		50,707			11			50,718
Less: Other comprehensive income attributable to noncontrolling interests		11,707			60			11,767
Balance at April 30, 2023	$	(58,790	)	$	(715	)	$	(59,505	)

	Six Months Ended May 1, 2022
	Foreign Currency Translation Adjustments			Other			Total
Balance at October 31, 2021	$	21,476		$	(905	)	$	20,571
Other comprehensive (loss) income		(53,949	)		166			(53,783	)
Less: Other comprehensive (loss) income attributable to noncontrolling interests		(10,376	)		83			(10,293	)
Balance at May 1, 2022	$	(22,097	)	$	(822	)	$	(22,919	)

XML

SHARE REPURCHASE PROGRAMS (Tables)

6 Months Ended

Apr. 30, 2023

SHARE REPURCHASE PROGRAMS [Abstract]

Shares Repurchase Programs

The table below presents information on this repurchase program for the three and six-month periods ended April 30, 2023, and May 1, 2022.

	Three Months Ended						Six Months Ended
	April 30, 2023			May 1, 2022			April 30, 2023		May 1, 2022
Number of shares repurchased			-			-		-		188
Cost of shares repurchased		$	-		$	-	$	-	$	2,522
Average price paid per share		$	-		$	-	$	-	$	13.43

XML

BASIS OF FINANCIAL STATEMENT PRESENTATION (Details)	6 Months Ended
	Apr. 30, 2023 Facility
Manufacturing Facilities [Abstract]
Number of manufacturing facilities	11
Taiwan [Member]
Manufacturing Facilities [Abstract]
Number of manufacturing facilities	3
Korea [Member]
Manufacturing Facilities [Abstract]
Number of manufacturing facilities	1
China [Member]
Manufacturing Facilities [Abstract]
Number of manufacturing facilities	2
United States [Member]
Manufacturing Facilities [Abstract]
Number of manufacturing facilities	3
Europe [Member]
Manufacturing Facilities [Abstract]
Number of manufacturing facilities	2

XML

SHORT-TERM INVESTMENTS (Details) - Government securities [Member] - USD ($) $ in Thousands	Apr. 30, 2023	Oct. 31, 2022
Available-for-sale [Abstract]
Amortized Cost	$ 45,492	$ 38,911
Unrealized Gains	0	0
Unrealized Losses	(61)	(91)
Carrying Value	$ 45,431	$ 38,820

XML

INVENTORIES (Details) - USD ($) $ in Thousands	Apr. 30, 2023	Oct. 31, 2022
INVENTORIES [Abstract]
Raw materials	$ 53,642	$ 49,326
Work in process	1,203	1,408
Finished goods	95	19
Inventories	$ 54,940	$ 50,753

XML

PROPERTY, PLANT, AND EQUIPMENT, NET (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Apr. 30, 2023	May 01, 2022	Apr. 30, 2023	May 01, 2022	Oct. 31, 2022
Property, plant and equipment [Abstract]
Property, plant and equipment, gross	$ 2,212,551		$ 2,212,551		$ 2,072,639
Accumulated depreciation and amortization	(1,512,634)		(1,512,634)		(1,428,766)
Property, plant and equipment, net	699,917		699,917		643,873
Finance lease, Right-of-use asset [Abstract]
Finance lease, right-of-use asset, gross	42,817		42,817		42,760
Accumulated amortization	(6,206)		(6,206)		(4,784)
Finance lease, right-of-use asset, net	36,611		36,611		37,976
Depreciation Expense [Abstract]
Depreciation Expense	19,880	$ 20,506	38,908	$ 41,229
Land [Member]
Property, plant and equipment [Abstract]
Property, plant and equipment, gross	11,620		11,620		11,134
Buildings and Improvements [Member]
Property, plant and equipment [Abstract]
Property, plant and equipment, gross	190,134		190,134		168,024
Machinery and Equipment [Member]
Property, plant and equipment [Abstract]
Property, plant and equipment, gross	1,884,235		1,884,235		1,769,478
Leasehold Improvements [Member]
Property, plant and equipment [Abstract]
Property, plant and equipment, gross	19,835		19,835		18,802
Furniture, Fixtures and Office Equipment [Member]
Property, plant and equipment [Abstract]
Property, plant and equipment, gross	15,523		15,523		14,355
Construction in Progress [Member]
Property, plant and equipment [Abstract]
Property, plant and equipment, gross	$ 91,204		$ 91,204		$ 90,846

XML

PDMCX JOINT VENTURE, VIE (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended		6 Months Ended
	Jan. 31, 2018	Apr. 30, 2023	May 01, 2022	Apr. 30, 2023	May 01, 2022	Oct. 31, 2022
Photronics and DNP [Member]
Variable Interest Entity [Abstract]
Term from inception after which interest holder may put their interest in the VIE				2 years
Period before put or purchase option can be exercised				6 months
Number of business days for obtaining required approvals and clearance for exiting party				3 days
Net Income (Loss) from Operations [Abstract]
Net income from PDMCX		$ 6,652	$ 4,895	$ 12,569	$ 6,772
Photronics and DNP [Member] | Minimum [Member]
Variable Interest Entity [Abstract]
Ownership percentage				20.00%
PDMCX [Member]
Variable Interest Entity [Abstract]
Collateral amount						$ 70,700
Photronics Interest [Member]
Variable Interest Entity [Abstract]
Ownership percentage				50.01%
DNP [Member]
Variable Interest Entity [Abstract]
Ownership percentage	49.99%

XML

PDMCX JOINT VENTURE, Carrying Amounts of Assets and Liabilities (Details) - USD ($) $ in Thousands	Apr. 30, 2023	Oct. 31, 2022
Carrying amounts of assets and liabilities [Abstract]
Current assets	$ 720,116	$ 644,652
Total assets	1,451,025	1,315,830
Current liabilities	185,168	193,797
Total liabilities	246,341	253,741
Carrying Amount [Member]
Carrying amounts of assets and liabilities [Abstract]
Current assets	128,626	127,542
Noncurrent assets	145,471	119,392
Total assets	274,097	246,934
Current liabilities	50,925	51,274
Noncurrent liabilities	1,484	9,161
Total liabilities	52,409	60,435
Net assets	221,688	186,499
Photronics Interest [Member]
Carrying amounts of assets and liabilities [Abstract]
Current assets	64,326	63,784
Noncurrent assets	72,750	59,708
Total assets	137,076	123,492
Current liabilities	25,468	25,643
Noncurrent liabilities	742	4,581
Total liabilities	26,210	30,224
Net assets	$ 110,866	$ 93,268

XML

DEBT, Long-term Debt (Details) $ in Thousands, ¥ in Millions		1 Months Ended				3 Months Ended		6 Months Ended		12 Months Ended
		Feb. 28, 2023 USD ($)	Feb. 28, 2023 CNY (¥)	Dec. 31, 2022 USD ($)	Dec. 31, 2022 CNY (¥)	Apr. 30, 2023 USD ($)	Apr. 30, 2023 CNY (¥)	Apr. 30, 2023 USD ($)		Oct. 31, 2022 USD ($)		Oct. 31, 2022 CNY (¥)
Long Term Debt Maturing In Year One [Abstract]
Next 12 months						$ 7,017		$ 7,017		$ 10,024
Long-term Debt [Abstract]
Months 13 - 24						21,290		21,290		6,610
Months 25 - 36						12		12		19,059
Months 37 - 48						12		12		6,641
Months 49 - 60						8		8
Long-term debt						21,322		21,322		32,310
Total debt						28,339		28,339
Xiamen Project Loans [Member]
Long Term Debt Maturing In Year One [Abstract]
Next 12 months						0		0		0
Long-term Debt [Abstract]
Months 13 - 24						0		0		0
Months 25 - 36						0		0		1,098
Months 37 - 48						0		0		6,641
Months 49 - 60						0		0
Long-term debt						0		0		$ 7,739
Total debt						0		$ 0
Basis spread on interest rates								0.00%		0.00%		0.00%
Maturity date								Dec. 01, 2025		Dec. 01, 2025		Dec. 01, 2025
Periodic payment amount								Varies as loans mature	[1]	Varies as loans mature	[2]	Varies as loans mature	[2]
Periodic payment frequency								Semiannual, on individual loans		Semiannual, on individual loans		Semiannual, on individual loans
Loan collateral (carrying amount)										$ 70,705
Repayment of long term debt		$ 3,900	¥ 26.4			3,900	¥ 26.4			$ 11,500		¥ 81.0
Xiamen Project Loans [Member] | Minimum [Member]
Long-term Debt [Abstract]
Interest rate at balance sheet date										4.30%		4.30%
Xiamen Project Loans [Member] | Maximum [Member]
Long-term Debt [Abstract]
Interest rate at balance sheet date										4.45%		4.45%
Xiamen Project Loans [Member] | Due Date June 2025 [Member]
Long-term Debt [Abstract]
Repayment of long term debt | ¥							2.0
Xiamen Project Loans [Member] | Due Date December 2025 [Member]
Long-term Debt [Abstract]
Repayment of long term debt | ¥							¥ 24.4
Xiamen Working Capital Loans [Member]
Long Term Debt Maturing In Year One [Abstract]
Next 12 months										$ 3,512
Long-term Debt [Abstract]
Months 13 - 24										0
Months 25 - 36										0
Months 37 - 48										0
Long-term debt										$ 0
Total debt						0		$ 0
Interest rate at balance sheet date										4.46%		4.46%
Basis spread on interest rates										0.76%		0.76%
Maturity date										Jul. 01, 2023		Jul. 01, 2023
Periodic payment amount										Increases as loans mature		Increases as loans mature
Periodic payment frequency										Semiannual, on individual loans		Semiannual, on individual loans
Repayment of long term debt				$ 3,600	¥ 25.6
Finance Leases [Member]
Long Term Debt Maturing In Year One [Abstract]
Next 12 months						7,017		7,017		$ 6,512
Long-term Debt [Abstract]
Months 13 - 24						21,290		21,290		6,610
Months 25 - 36						12		12		17,961
Months 37 - 48						12		12		0
Months 49 - 60						8		8
Long-term debt						21,322		21,322		$ 24,571
Total debt						28,339		$ 28,339
Periodic payment amount								Varies as leases mature		Varies as leases mature		Varies as leases mature
Periodic payment frequency								Monthly		Monthly		Monthly
Loan collateral (carrying amount)	[3]					$ 36,611		$ 36,611		$ 37,976

[1] During the three-month period ended April 30, 2023, we repaid the entire balance of 26.4 million RMB (approximately $3.9 million) remaining on the loan, of which, 2.0 million RMB was due to be paid in June 2025 and 24.4 million RMB was due to be paid in December 2025.

[2] During the three-month period ended October 31, 2022, we repaid 81.0 million RMB (approximately $11.5 million) that had contractual maturity dates ranging from December 2023 through June 2025.

[3] Represents the carrying amount at the balance sheet date of the related ROU assets, in which the lessors have secured interests.

XML

DEBT, Finance Leases (Details) - USD ($) $ in Thousands	1 Months Ended
	Feb. 28, 2021	Jan. 31, 2021	Apr. 30, 2023	Dec. 31, 2020
$7.2 Million Finance Lease [Member]
Finance Lease, [Abstract]
Finance lease contract term			5 years
Finance lease amount	$ 7,200
Early buyout option to purchase tool	$ 2,400
Finance lease interest implicit rate	1.08%
$7.2 Million Finance Lease [Member] | Monthly [Member]
Finance Lease, [Abstract]
Finance lease monthly payments	$ 100
$35.5 Million Finance Lease [Member]
Finance Lease, [Abstract]
Finance lease contract term			5 years
Finance lease amount				$ 35,500
Early buyout option to purchase tool		$ 14,100
Finance lease interest implicit rate		1.58%
$35.5 Million Finance Lease [Member] | First Three Months [Member]
Finance Lease, [Abstract]
Finance lease monthly payments		$ 40
$35.5 Million Finance Lease [Member] | Following Nine Months [Member]
Finance Lease, [Abstract]
Finance lease monthly payments		600
$35.5 Million Finance Lease [Member] | Forty Eight Months [Member]
Finance Lease, [Abstract]
Finance lease monthly payments		500
$35.5 Million Finance Lease [Member] | Minimum [Member]
Finance Lease, [Abstract]
Outstanding committed balance for cross default provision		$ 5,000

XML

DEBT, Xiamen Project Loans (Details) $ in Thousands, ¥ in Millions	1 Months Ended		3 Months Ended		12 Months Ended
	Feb. 28, 2023 USD ($)	Feb. 28, 2023 CNY (¥)	Apr. 30, 2023 USD ($)	Apr. 30, 2023 CNY (¥)	Oct. 31, 2022 USD ($)	Oct. 31, 2022 CNY (¥)	Nov. 30, 2018 CNY (¥)
Project Loans [Abstract]
Amount outstanding			$ 28,339
Xiamen Project Loans [Member]
Project Loans [Abstract]
Maximum borrowing capacity | ¥							¥ 345.0
Amount outstanding			0
Repayments of Long-Term Debt	$ 3,900	¥ 26.4	$ 3,900	¥ 26.4	$ 11,500	¥ 81.0

XML

DEBT, Xiamen Working Capital Loans (Details) $ in Thousands, ¥ in Millions	1 Months Ended		6 Months Ended
	Dec. 31, 2022 USD ($)	Dec. 31, 2022 CNY (¥)	Apr. 30, 2023 USD ($)	Nov. 30, 2018 USD ($)
Debt Instruments [Abstract]
Amount outstanding			$ 28,339
Xiamen Working Capital Loans [Member]
Debt Instruments [Abstract]
Maximum borrowing capacity				$ 25,000
Expiration date			Nov. 30, 2023
Repayments of Long-Term Debt	$ 3,600	¥ 25.6
Amount outstanding			$ 0

XML

DEBT, Corporate Credit Agreement (Details) - USD ($) $ in Thousands	6 Months Ended
	Apr. 30, 2023	Sep. 30, 2018
Debt Instruments [Abstract]
Amount outstanding	$ 28,339
Amended and Restated Credit Agreement [Member]
Debt Instruments [Abstract]
Term of loan	5 years
Current borrowing capacity		$ 50,000
Maximum borrowing capacity		100,000
Cash limit for dividends, distributions and redemption on equity		$ 50,000
Amount outstanding	$ 0
Effective interest rate	6.02%

XML

DEBT, Hefei Equipment Loan (Details) - Hefei Equipment Loan [Member] ¥ in Millions, $ in Millions	1 Months Ended
	Jul. 31, 2022 CNY (¥)	Jul. 31, 2022 USD ($)	Oct. 31, 2020 CNY (¥) Tool
Debt Instruments [Abstract]
Maximum borrowing capacity | ¥			¥ 200.0
Repayment of long term debt	¥ 120.7	$ 18.0
Number of lithography tools purchased | Tool			2

XML

REVENUE, Contract Assets, Liabilities and Accounts Receivable (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Apr. 30, 2023	May 01, 2022	Apr. 30, 2023	May 01, 2022	Oct. 31, 2022
Contract with Customer, Asset and Liability [Abstract]
Impairment of credit losses on accounts receivable	$ 0	$ 0	$ 0	$ 0
Credit losses on accounts receivable	100	0	100	0
Contract liabilities	32,413		32,413		$ 23,861
Change in Contract with Customer, Liability [Abstract]
Revenue recognized from beginning liability	11,228	$ 11,460	7,875	$ 7,278
Other Current Assets [Member]
Contract with Customer, Asset and Liability [Abstract]
Contract assets	21,385		21,385		15,752
Accrued Liabilities [Member]
Contract with Customer, Asset and Liability [Abstract]
Contract liabilities	19,224		19,224		18,872
Other Liabilities [Member]
Contract with Customer, Asset and Liability [Abstract]
Contract liabilities	$ 13,189		$ 13,189		$ 4,989
Minimum [Member]
Revenue, Performance Obligation [Abstract]
Product invoice term			30 days
Product warranty period			1 month
Maximum [Member]
Revenue, Performance Obligation [Abstract]
Product invoice term			90 days
Product warranty period			24 months
IC [Member] | Minimum [Member]
Backlog of Orders [Abstract]
Customer order, expected satisfaction period			7 days
Customer order, extended satisfaction period			2 months
IC [Member] | Maximum [Member]
Backlog of Orders [Abstract]
Customer order, expected satisfaction period			14 days
Customer order, extended satisfaction period			3 months
FPD [Member] | Minimum [Member]
Backlog of Orders [Abstract]
Customer order, expected satisfaction period			14 days
FPD [Member] | Maximum [Member]
Backlog of Orders [Abstract]
Customer order, expected satisfaction period			21 days

XML

REVENUE, Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Apr. 30, 2023	May 01, 2022	Apr. 30, 2023	May 01, 2022
Disaggregation of Revenue [Abstract]
Revenue	$ 229,306	$ 204,509	$ 440,397	$ 394,336
IC [Member]
Disaggregation of Revenue [Abstract]
Revenue	167,054	145,799	323,643	275,560
High-end [Member]
Disaggregation of Revenue [Abstract]
Revenue	43,920	51,362	91,923	98,285
Mainstream [Member]
Disaggregation of Revenue [Abstract]
Revenue	123,134	94,437	231,720	177,275
FPD [Member]
Disaggregation of Revenue [Abstract]
Revenue	62,252	58,710	116,754	118,776
High-end [Member]
Disaggregation of Revenue [Abstract]
Revenue	51,888	46,610	97,579	92,886
Mainstream [Member]
Disaggregation of Revenue [Abstract]
Revenue	10,364	12,100	19,175	25,890
Taiwan [Member]
Disaggregation of Revenue [Abstract]
Revenue	80,448	69,852	156,017	137,693
China [Member]
Disaggregation of Revenue [Abstract]
Revenue	65,215	53,691	124,148	99,645
Korea [Member]
Disaggregation of Revenue [Abstract]
Revenue	41,372	40,769	79,204	80,283
United States [Member]
Disaggregation of Revenue [Abstract]
Revenue	32,495	30,335	62,377	57,511
Europe [Member]
Disaggregation of Revenue [Abstract]
Revenue	9,276	9,506	17,722	18,420
Other [Member]
Disaggregation of Revenue [Abstract]
Revenue	500	356	929	784
Over Time [Member]
Disaggregation of Revenue [Abstract]
Revenue	215,376	192,770	412,541	363,034
At a Point in Time [Member]
Disaggregation of Revenue [Abstract]
Revenue	$ 13,930	$ 11,739	$ 27,856	$ 31,302

XML

SHARE-BASED COMPENSATION (Details) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended		6 Months Ended
	Mar. 16, 2023	Apr. 30, 2023	May 01, 2022	Apr. 30, 2023	May 01, 2022	Mar. 15, 2023
Share-based Compensation [Abstract]
Maximum number of shares of common stock that may be issued (in shares)	5,000,000					4,000,000
Additional shares available for issuance (in shares)	1,000,000
Expense incurred		$ 2,009	$ 1,584	$ 3,830	$ 3,041
Income tax benefits of share-based compensation		207	104	361	188
Share-based compensation cost capitalized		0	0	0	0
Cost of Goods Sold [Member]
Share-based Compensation [Abstract]
Expense incurred		288	182	570	324
Selling, General and Administrative [Member]
Share-based Compensation [Abstract]
Expense incurred		1,531	1,243	2,908	2,424
Research and Development [Member]
Share-based Compensation [Abstract]
Expense incurred		190	159	352	293
Restricted Stock [Member]
Share-based Compensation [Abstract]
Expense incurred		$ 1,974	$ 1,316	$ 3,738	$ 2,683
Restricted Stock [Abstract]
Number of shares granted in period (in shares)		0	0	786,500	535,400
Weighted-average grant-date fair value of awards (in dollars per share)		$ 0	$ 0	$ 16.77	$ 19.28
Shares outstanding at balance sheet date (in shares)		1,328,572	891,429	1,328,572	891,429
Estimated Expenses Not Yet Incurred [Abstract]
Compensation cost not yet recognized		$ 16,419	$ 10,779	$ 16,419	$ 10,779
Weighted-average amortization period for cost not yet recognized (in years)		3 years	2 years 9 months 18 days	3 years	2 years 9 months 18 days
Restricted Stock [Member] | Minimum [Member]
Share-based Compensation [Abstract]
Award vesting period				1 year
Restricted Stock [Member] | Maximum [Member]
Share-based Compensation [Abstract]
Award vesting period				4 years
Stock Options [Member]
Share-based Compensation [Abstract]
Expense incurred		$ 0	$ 221	$ 1	$ 259
Stock options activity [Abstract]
Contractual term				10 years
Number of options granted in period (in shares)		0	0	0	0
Cash received from options exercised		$ 20	$ 438	$ 583	$ 4,149
Estimated Expenses Not Yet Incurred [Abstract]
Compensation cost not yet recognized		$ 0	$ 52	$ 0	$ 52
Weighted-average amortization period for cost not yet recognized (in years)			8 months 12 days		8 months 12 days
Outstanding and exercisable option awards [Roll Forward]
Outstanding at end of period (in shares)		526,926		526,926
Exercisable at end of period (in shares)		526,926		526,926
Weighted-Average Exercise Price [Abstract]
Outstanding at end of period (in dollars per share)		$ 10.11		$ 10.11
Exercisable at end of period (in dollars per share)		$ 10.11		$ 10.11
Weighted-Average Remaining Contractual Life (in years) [Abstract]
Outstanding at end of period				2 years 11 months 26 days
Exercisable at end of period				2 years 11 months 26 days
Aggregate Intrinsic Value [Abstract]
Outstanding at end of period		$ 2,293		$ 2,293
Exercisable at end of period		2,293		$ 2,293
Stock Options [Member] | Minimum [Member]
Share-based Compensation [Abstract]
Award vesting period				1 year
Stock Options [Member] | Maximum [Member]
Share-based Compensation [Abstract]
Award vesting period				4 years
Employee Stock Purchase Plan [Member]
Share-based Compensation [Abstract]
Expense incurred		$ 35	$ 47	$ 91	$ 99

XML

INCOME TAXES (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Apr. 30, 2023	May 01, 2022	Apr. 30, 2023	May 01, 2022	Oct. 31, 2022
Effective Income and Statutory Tax Rates [Abstract]
U.S. statutory tax rates	21.00%	21.00%	21.00%	21.00%
Effective tax rates	26.50%	25.10%	27.80%	25.50%
Income Tax Examination [Abstract]
Earliest open tax year			2017
Unrecognized Tax Benefits [Abstract]
Unrecognized tax benefits related to uncertain tax positions	$ 7,128		$ 7,128		$ 5,599
Unrecognized tax benefits that, if recognized, would impact the effective tax rate	7,128		7,128		5,599
Accrued interest and penalties related to uncertain tax positions	$ 549		$ 549		$ 395

XML

EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Apr. 30, 2023	May 01, 2022	Apr. 30, 2023	May 01, 2022
Calculation of Basic and Diluted Earnings Per Share [Abstract]
Net income attributable to Photronics, Inc. shareholders	$ 39,929	$ 27,432	$ 53,915	$ 50,496
Effect of dilutive securities	0	0	0	0
Earnings used for diluted earnings per share	$ 39,929	$ 27,432	$ 53,915	$ 50,496
Weighted-average Common Shares Computations [Abstract]
Weighted-average common shares used for basic earnings per share (in shares)	61,138	60,606	61,016	60,382
Effect of Dilutive Securities [Abstract]
Share-based payment awards (in shares)	369	539	473	659
Potentially dilutive common shares (in shares)	369	539	473	659
Weighted-average common shares used for diluted earnings per share (in shares)	61,507	61,145	61,489	61,041
Basic earnings per share (in dollars per share)	$ 0.65	$ 0.45	$ 0.88	$ 0.84
Diluted earnings per share (in dollars per share)	$ 0.65	$ 0.45	$ 0.88	$ 0.83
Antidilutive Securities [Abstract]
Total potentially dilutive shares excluded (in shares)	267	427	535	626
Share-based Payment Awards [Member]
Antidilutive Securities [Abstract]
Total potentially dilutive shares excluded (in shares)	267	427	535	626

XML

COMMITMENTS AND CONTINGENCIES (Details) $ in Millions	1 Months Ended	3 Months Ended	6 Months Ended
	Nov. 30, 2022 USD ($)	May 01, 2022 USD ($) Operation	Apr. 30, 2023 USD ($)	May 01, 2022 USD ($)
Commitment and Contingencies [Abstract]
Outstanding commitments for capital expenditure			$ 113.1
Period of audit			3 years
Contingency loss recorded		$ 2.2		$ 2.2
Reversal of loss contingency accrual	$ 1.0
Minimum [Member]
Commitment and Contingencies [Abstract]
Range of estimated contingency loss		2.2		2.2
Maximum [Member]
Commitment and Contingencies [Abstract]
Range of estimated contingency loss		$ 3.7		$ 3.7
China [Member]
Commitment and Contingencies [Abstract]
Number of operations | Operation		1

XML

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME BY COMPONENT (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Apr. 30, 2023	May 01, 2022	Apr. 30, 2023	May 01, 2022
CHANGES IN ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME BY COMPONENT [Abstract]
Other comprehensive income, tax	$ 0	$ 0	$ 0	$ 0
Changes in Accumulated Other Comprehensive Income [Roll Forward]
Beginning Balance			831,527
Ending Balance	928,047		928,047
Accumulated Other Comprehensive Income [Member]
Changes in Accumulated Other Comprehensive Income [Roll Forward]
Beginning Balance	(24,420)	10,565	(98,456)	20,571
Ending Balance	(59,505)	(22,919)	(59,505)	(22,919)
Foreign Currency Translation Adjustments [Member]
Changes in Accumulated Other Comprehensive Income [Roll Forward]
Beginning Balance	(23,737)	11,451	(97,790)	21,476
Ending Balance	(58,790)	(22,097)	(58,790)	(22,097)
Other [Member]
Changes in Accumulated Other Comprehensive Income [Roll Forward]
Beginning Balance	(683)	(886)	(666)	(905)
Ending Balance	(715)	(822)	(715)	(822)
AOCI Including Portion Attributable to Noncontrolling Interest [Member]
Changes in Accumulated Other Comprehensive Income [Roll Forward]
Other comprehensive (loss) income	(39,747)	(43,989)	50,718	(53,783)
Foreign Currency Translation Adjustments [Member]
Changes in Accumulated Other Comprehensive Income [Roll Forward]
Other comprehensive (loss) income	(39,813)	(44,118)	50,707	(53,949)
Other [Member]
Changes in Accumulated Other Comprehensive Income [Roll Forward]
Other comprehensive (loss) income	66	129	11	166
AOCI Attributable to Noncontrolling Interest [Member]
Changes in Accumulated Other Comprehensive Income [Roll Forward]
Other comprehensive loss (income) attributable to noncontrolling interests	(4,662)	(10,505)	11,767	(10,293)
Foreign Currency Translation Adjustments [Member]
Changes in Accumulated Other Comprehensive Income [Roll Forward]
Other comprehensive loss (income) attributable to noncontrolling interests	(4,760)	(10,570)	11,707	(10,376)
Other [Member]
Changes in Accumulated Other Comprehensive Income [Roll Forward]
Other comprehensive loss (income) attributable to noncontrolling interests	$ 98	$ 65	$ 60	$ 83

XML

FAIR VALUE MEASUREMENTS (Details) - USD ($) $ in Thousands	Apr. 30, 2023	Oct. 31, 2022
Fair Value, Assets and Liability [Abstract]
Total assets	$ 0	$ 0
Total liabilities	$ 0	$ 0

XML

SHARE REPURCHASE PROGRAMS (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Apr. 30, 2023	May 01, 2022	Apr. 30, 2023	May 01, 2022	Sep. 30, 2020
Shares Repurchase Programs and Preferred Stock Purchase Rights [Abstract]
Stock repurchased authorized amount					$ 100,000
Stock repurchase program - commencement date			Sep. 16, 2020
Amount remaining under authorization for purchase of additional shares	$ 31,700		$ 31,700
Number of shares repurchased (in shares)	0	0	0	188
Cost of shares repurchased	$ 0	$ 0	$ 0	$ 2,522
Average price paid per share (in dollars per share)	$ 0	$ 0	$ 0	$ 13.43