10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended October 31, 2021

OR

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

For the transition period from ___ to ___

Commission file number 0-15451

PHOTRONICS, INC.

(Exact name of registrant as specified in its charter)

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

15 Secor Road, Brookfield, Connecticut 06804

(Address of principal executive offices)(Zip Code)

(203) 775-9000

(Registrant’s telephone number, including area code)

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
PREFERRED STOCK PURCHASE RIGHTS	N/A	N/A

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

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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 period 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 such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer,” “large 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act ((§15 U.S.C 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☒  No ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒

As of May 2, 2021, which was the last business day of the registrant's most recently completed second fiscal quarter, the aggregate market value of the shares of the registrant's common stock held by non-affiliates was approximately $771,696,945 (based upon the closing price of $12.70 per share as reported by the NASDAQ Global Select Market on that date).

As of December 9, 2021, 60,900,453 shares of the registrant’s common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Proxy Statement for the 2022
Annual Meeting of Shareholders	Incorporated into Part III
to be held on March 10, 2022	of this Form 10-K

PHOTRONICS, INC.

ANNUAL REPORT ON FORM 10-K

OCTOBER 31, 2021

TABLE OF CONTENTS

	Page
Glossary of Terms and Acronyms	3
Forward-Looking Statements	4
PART I:
ITEM 1. BUSINESS	5
ITEM 1A. RISK FACTORS	10
ITEM 1B. UNRESOLVED STAFF COMMENTS	20
ITEM 2. PROPERTIES	20
ITEM 3. LEGAL PROCEEDINGS	21
ITEM 4. MINE SAFETY DISCLOSURES	21
PART II:
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	21
ITEM 6. [RESERVED]	22
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	22
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	35
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	36
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	69
ITEM 9A. CONTROLS AND PROCEDURES	69
ITEM 9B. OTHER INFORMATION	71
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS	71
PART III:
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	71
ITEM 11. EXECUTIVE COMPENSATION	71
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	71
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	71
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES	72
PART IV:
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	72
ITEM 16. FORM 10-K SUMMARY	76

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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.
ASC	Accounting Standards Codification
ASP	Average Selling Price
ASU	Accounting Standards Update
Chip stacking	Placement of a computer chip on top of another computer chip, 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, after processing, into the etched image on a silicon wafer
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
RMB	Chinese renminbi
ROU (assets)	Right-of-use asset
SEC	Securities and Exchange Commission
Securities Act	The Securities Act of 1933 (as amended)
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

All references to “2021”, “2020”, and “2019” are to our fiscal years ended on October 31 of those years, unless otherwise stated.

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Forward-Looking Statements

This Form 10-K 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”, “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 Item 2 – “Management’s Discussion & Analysis of Financial Condition and Results of Operations” of this Form 10-K.

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-K 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-K 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-K 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 Item 1A “Risk Factors” of this Form 10-K.

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PART I

ITEM 1. BUSINESS

General

Photronics, Inc. (and its subsidiaries, collectively referred to herein as “Photronics”, the “Company”, “we”, “our”, or “us”) is the world's leading manufacturer 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 have eleven manufacturing facilities, including two recently constructed facilities in China. Our FPD facility in Hefei, China, and our IC facility in Xiamen, China, commenced production in the second and third quarters of 2019, respectively.

Our principal executive offices are located at 15 Secor Road, Brookfield, Connecticut, 06804, telephone (203) 775-9000. Our website address is http://www.photronics.com. We make available, free of charge through our website, our Forms 10-K, Definitive Proxy Statements on Schedule 14A, Forms 10-Q, Current Reports on Form 8-K, and any amendments to these reports as soon as reasonably practicable after such materials are electronically filed with or furnished to the SEC. The information found on, or incorporated into, our website is not part of this or any other report we file with or furnish to the SEC. The SEC also maintains a website at http://www.sec.gov that contains reports, proxy statements and other information regarding SEC registrants, including Photronics.

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. Proposed government actions, in response to the pandemic, have made it more challenging to retain and hire new employees at our facilities. To date, we have not experienced significant raw material shortages; however, supply-chain disruptions could potentially delay or prevent us from fulfilling customer orders. While our business has continued to grow over the course of the pandemic, we cannot predict its future impact on our business with a high level of certainty.

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 safety measures has not affected these employees’ abilities to support our operations.

Sales

We manufacture photomasks, which are used as masters to transfer circuit patterns onto semiconductor wafers and FPD substrates. Photomasks are manufactured incorporating circuit designs provided to us on a confidential basis by our customers. IC and FPD photomask sets are manufactured in layers, each having a distinct pattern which is etched onto a different photomask. The resulting series of photomasks is then used to image the circuit patterns onto each successive layer of a semiconductor wafer or FPD substrate. The typical manufacturing process for a photomask involves the receipt and conversion of circuit design data to manufacturing pattern data. A lithography system then exposes the circuit pattern onto the photomask blank. The exposed areas are developed and etched to produce that pattern on the photomask. The photomask is then inspected for defects and conformity to the customer's design data. After any defects are repaired, the photomask is cleaned, any required pellicles (protective translucent cellulose membranes) are applied and, after final inspection, the photomask is shipped to the customer.

High-end production for photomasks is considered to be 28 nanometer and smaller for ICs and Generation 10.5+, AMOLED, and LTPS display-based process technologies for FPDs. However, 32 nanometer and above geometries for semiconductors and Generation 8 and below (excluding AMOLED and LTPS) process technologies for displays, which we refer to as mainstream, constitute the majority of designs currently being fabricated in volume. At these geometries and at various high-end nodes, we can produce full lines of photomasks. Moreover, there is no significant technology employed by our competitors that is not available to us. We expect advanced-generation designs to continue to be developed throughout fiscal 2022, and we believe we are well positioned to service an increasing volume of this business as a result of our ongoing investments in manufacturing processes and technology in the regions where our customers are located.

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Generally, Photronics and each of its customers engage in a qualification and correlation process before we become an approved supplier. Thereafter, based on the customer’s specifications, we typically negotiate pricing parameters for the customer's order. Some prices may remain in effect for an extended period of time. In many instances, we enter into sales arrangements with an understanding that, as long as our performance is competitive, we will receive a specified percentage of that customer's photomask orders.

The first several layers of photomasks are sometimes required to be delivered to customers within 24 hours from the time we receive customer design data. Because of the short period between order and shipment dates (typically from one day to two weeks) for a significant amount of our revenue, the dollar amount of our current backlog is not a reliable indicator of future revenue.

The ability to manufacture high-quality photomasks within short time periods is dependent upon robust processes, efficient manufacturing methods, high production yield, available manufacturing capacity, and high equipment reliability. We work to meet these requirements by making significant investments in research and development, capital equipment, manufacturing and data processing systems, and by utilizing statistical process control methods to optimize our manufacturing processes and reduce cycle times.

Quality control is an integral part of the photomask manufacturing process. Photomasks are manufactured in temperature, humidity, and particulate-controlled clean rooms because of the high level of precision, quality and manufacturing yield required. Each photomask is inspected several times during the manufacturing process to ensure compliance with customer specifications. We continue to make substantial investments in equipment to produce, inspect and repair photomasks to ensure that customer specifications are met.

We conduct our sales and marketing activities primarily through a staff of full-time sales personnel and customer service representatives who work closely with the Company's management and technical personnel. We support non-U.S. customers through both our domestic and foreign facilities and consider our presence in non-U.S. markets to be an important factor in attracting new customers, as it provides global solutions to our customers, minimizes delivery time, and allows us to serve customers that utilize manufacturing foundries outside of the United States, principally in Asia. See Notes 8 and 16 to our consolidated financial statements for the amount of revenue and long-lived assets attributable to each of our geographic areas of operations.

Research and Development

We primarily conduct corporate research and development activities for IC photomasks at our Boise, Idaho, facility and, to a lesser degree, Photronics DNP Mask Corporation (“PDMC”), our joint venture subsidiary in Taiwan. Research and development for FPD photomasks is primarily conducted at Photronics Cheonan, Ltd., our subsidiary in South Korea. Additionally, we conduct site-specific research and development programs to support local, strategic customer roadmaps. All of these research and development programs and activities are undertaken to advance our competitiveness in technology and manufacturing efficiency. We also conduct application-oriented research and development, including data and service technology to support the integration of photomasks into customer processes. Currently, research and development for IC photomasks are primarily focused on photomasks enabling wafer geometries of 14 nanometer node and smaller and, for FPDs, on Generations 8 and 10 substrate size photomasks for new TV technologies, emerging opportunities for micro- and mini-LED displays, and photomask technology for the complex FPD photomasks required in the manufacture of advanced mobile displays, such as AMOLED. We believe these core competencies will continue to be a critical part of semiconductor and FPD manufacturing, as wafer and FPD substrate optical lithography continues to enable new high-end ICs and displays. We incurred research and development expenses of $18.5 million, $17.1 million, and $16.4 million in 2021, 2020 and 2019, respectively. It is our belief that we own, control, or license the proprietary information (including trade secrets and patents) that is necessary for our business, as it is presently conducted. We also believe that our intellectual property and trade secret know-how will continue to be important to our maintaining technical leadership in the field of photomasks.

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Markets

The market for photomasks primarily consists of domestic and non-U.S. semiconductor and FPD manufacturers and designers. Photomasks are manufactured by independent merchant manufacturers like Photronics, and by semiconductor and FPD manufacturers that produce photomasks for their own use (captive manufacturers). In rare instances, captive manufacturers also sell to other semiconductor or FPD manufacturers. Previously, there was a trend towards the divesture or closing of captive photomask operations by semiconductor manufacturers, and an increase in the share of the market served by independent merchant manufacturers. This trend was driven by the increased complexity and cost of capital equipment used in manufacturing photomasks and the lack of economy of scale for many semiconductor and FPD manufacturers to effectively utilize the equipment. However, more recently, to reach certain roadmap milestones, some captive mask facilities have been investing at faster rates than independent manufacturers, particularly in the foundry logic and memory spaces. Nevertheless, most captive manufacturers maintain business and technology relationships with independent photomask manufacturers for ongoing support.

We support customers across the full spectrum of IC production and FPD technologies by manufacturing photomasks using electron beam or optical (laser-based) lithography systems. For IC photomasks, the predominant writing technology used for advanced photomasks with fine-scale resolution requirements is electron beam writing systems, while FPD mask fabrication utilizes optical writing systems. These systems are capable of producing the most advanced semiconductor and display photomasks for use in an array of products. End markets served with IC photomasks include devices used for microprocessors, memory, telecommunications, and related applications. We own a number of both high-end and mature electron beam and laser-based lithography systems.

We sell our products primarily to leading semiconductor and FPD manufacturers. During 2021, we sold our products to approximately 530 customers. Revenue from United Microelectronics Corp. Co., Ltd. accounted for approximately 17%, 16% and 15% of our total revenues in 2021, 2020 and 2019, respectively, and revenue from Samsung Electronics Co., Ltd. accounted for approximately 12%, 14% and 16% of our total revenues in those respective years. Our five largest customers, in the aggregate, accounted for approximately 43%, 45% and 46% of our revenue in 2021, 2020 and 2019, respectively. A significant decrease in the amount of revenue from any of these customers could have a material adverse effect on our financial performance and business prospects.

Competition

The photomask industry is highly competitive, and most of our customers utilize multiple photomask suppliers. Our ability to compete depends primarily upon the consistency of our product quality, timeliness of delivery, competitive pricing, technical capability, and service, which we believe are the principal factors considered by customers in selecting their photomask suppliers. An inability to meet these requirements could adversely affect our financial condition, results of operations, and cash flows. We also believe that geographic proximity to customers is an important factor in certain markets where cycle time from order to delivery is critical. While some of our competitors may have greater financial, sales, marketing, or other resources than Photronics, we believe that we are able to compete effectively because of our dedication to customer service, ongoing investments in state-of-the-art photomask equipment and facilities, and experienced technical employees.

We estimate that, for the types of photomasks we manufacture (IC and FPD), the size of the total market (captive and merchant) is approximately $5.8 billion. Our competitors include Compugraphics International, Ltd., Dai Nippon Printing Co., Ltd (outside of Taiwan and China), Hoya Corporation, LG Innotek Co., Ltd., Shenzhen New Way Photomask Making Co., Ltd., Shenzhen Qingyi Photomask, Ltd., SK-Electronics Co., Ltd., Taiwan Mask Corporation, and Toppan Electronics Products Co., Ltd. We also compete with semiconductor and FPD manufacturers' captive photomask manufacturing operations that supply photomasks for internal use and, in some instances, also for external customers and foundries. We expect to face continued competition which, in the past, has led to pressure to reduce prices. We believe the pressure to reduce prices, together with the significant investment required in capital equipment to manufacture high-end photomasks, has contributed to the decrease in the number of independent manufacturers, and we expect such pressure to continue in the future.

International Operations

Revenues from our non-U.S. operations were approximately 84%, 83% and 81% of our total revenues in 2021, 2020 and 2019, respectively. We believe that our ability to serve non-U.S. markets is enhanced by our having, among other things, a local presence in the markets we serve. This requires significant investments in financial, managerial, operational, and other resources.

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Operations outside of the United States are subject to inherent risks, including fluctuations in exchange rates, political and economic conditions in various countries, legal compliance and regulatory requirements, tariffs and other trade barriers, difficulties in staffing and managing international operations, longer accounts receivable collection cycles, potential restrictions on transfers of funds, and potentially adverse tax consequences. These factors may have a material adverse effect on our ability to generate revenue outside of the United States and to deploy resources where they could otherwise be used to their greatest advantage and, consequently, may adversely affect our financial condition and results of operations. Notes 8 and 16 of our consolidated financial statements, respectively, present revenue and long-lived assets by geographic area.

Resources

Raw materials used by Photronics generally include: high precision quartz plates (including large area plates), which are used as photomask blanks and are primarily obtained from Japanese and Korean suppliers; pellicles and electronic grade chemicals, which are used in the manufacturing process; and compacts, which are durable plastic containers in which photomasks are shipped. These materials are generally sourced from several suppliers. We believe that our utilization of a select group of strategic suppliers enables us to access the most technologically advanced materials available. On an ongoing basis, we continue to consider additional supply sources.

We typically enter into annual pricing agreements with our suppliers, some of which include volume-based incentives that have resulted in substantial cost savings; these agreements do not require us to purchase minimum dollar amounts or quantities of their subject materials.

We rely on a limited number of equipment suppliers to develop and provide the equipment used in the photomask manufacturing process. Although, historically, we have been able to obtain equipment on a timely basis, an inability to obtain or repair equipment when required could adversely affect our business and results of operations.

Intellectual Property Rights

We have developed and hold ownership interests in intellectual property (“IP”) rights, in the forms of patents issued in the U.S., and other trademark and trademark registrations in the U.S. and other countries. Patents in which we hold ownership interests generally relate to the manufacture of photomasks or the use of photomasks to manufacture other products. While we believe that our IP rights are, and will continue to be, important to our technical leadership in the field of photomasks, our operations are not dependent on any one individual IP right. In addition to patenting, when practicable, we further protect our IP rights, and our other proprietary processes, by utilizing non-disclosure agreements with employees, customers, and vendors.

Seasonality

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 those periods.

Government Contracts

We are party to a limited number of fixed-price contracts with the U.S. government. Revenues earned from these contracts do not comprise a significant portion of our total revenue.

Government Regulation

We are subject to government regulations within the U.S. and in other countries in which we produce or market our products. The effects of compliance with these regulations are currently not material to our results of operations, capital expenditures, or competitive position. However, compliance with changes to existing or new regulations may have a material adverse effect on our future results of operations, capital expenditures, or competitive position. We discuss the potential impact of our not adhering to a number of these regulations in Item 1A. “Risk Factors”, of this Form 10-K. The following is a list of major subjects of the regulations that pertain to our business:

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• Regulations, such as those under the Foreign Corrupt practices Act that prohibit providing remuneration to government officials for the purpose of obtaining or securing business in the jurisdictions in which they serve;

• Regulations that require the minimization and proper disposal of the by-products of our manufacturing processes;

• Regulations that require us to provide a safe working environment for our employees;

• Regulations that restrict our ability to transfer assets between operations not within the same legal jurisdiction;

• Regulations that require us to provide information through the submission of government surveys;

• Regulations that require us to maintain an effective system of internal accounting controls;

• Regulations that prohibit us from engaging in business in specified countries, or with specified customers;

• Regulations that require us to protect the personal information of our customers and employees;

• Regulations that require us to accurately determine our liabilities to taxing authorities, and to settle such liabilities within their statutorily prescribed time periods;

• Regulations that require us to withhold and timely remit taxes on our employees’ compensation to government authorities;

• Regulations that require us to contribute to government-sponsored social insurance plans;

• Regulations that require us to contribute to employee severance plans;

• Regulations that prohibit us from disseminating material nonpublic information prior to the public announcement of such information;

• Regulations pertaining to financial reporting, insider transactions, executive compensation, and other areas overseen by the SEC and governing bodies in other countries in which our operations are located;

Human Capital

As of October 31, 2021, we had approximately 1,728 full-time and part-time employees worldwide. Our business results depend in part on our ability to successfully manage our human capital resources, including attracting, identifying, and retaining key talent. Factors that may affect our ability to attract and retain qualified employees include employee morale, our reputation, competition from other employers, and availability of qualified individuals. As of October 31, 2021, none of our employees at any of our worldwide facilities was represented by a union. We consider our employee relations to be good. We believe our commitment to our human capital resources is an important component of our mission to deliver superior photomasks and customer care. We provide all employees with the opportunity to share their opinions in open dialogues with our human resources department and senior management. We provide all employees a wide range of professional development experiences, both formal and informal. Our formal offerings include tuition reimbursement, leadership development experiences and vocational training. The safety of our employees is a paramount value for us.

We provide mandatory safety trainings in our production facilities, which are designed to focus on empowering our employees with the knowledge and tools they need to make safe choices and to minimize risks.  Supervisors complete safety management courses as well. In response to COVID-19, we implemented significant changes that we determined were in the best interest of our employees and which comply with government orders in all the states and countries where we operate. In an effort to keep our employees safe and to maintain operations during COVID-19, we have implemented a number of new health-related measures including the requirement to wear company provided facemasks at all times while on company property, temperature taking protocols, increased hygiene, cleaning and sanitizing procedures at all locations, social-distancing, restrictions on visitors to our facilities, and limiting in-person meetings and other gatherings. Additionally, we are following government policies and recommendations designed to slow the spread of COVID-19, and for US employees we required vaccinations against COVID-19.  However, we are monitoring the actions of federal courts regarding mandated vaccinations.  Further, the health and wellness of our employees are critical to our success.

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 We provide our employees with access to a variety of innovative, flexible and convenient health and wellness programs. Such programs are designed to support employees' physical and mental health by providing tools and resources to help them improve or maintain their health status and encourage engagement in healthy behaviors. Additionally, we provide robust compensation and benefits. In addition to salaries, these programs, which vary by country/region, can include annual bonuses, stock-based compensation awards, a 401(k) plan with employee matching opportunities, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, family care resources, employee assistance programs, and tuition assistance.

ITEM 1A. RISK FACTORS

Set forth below are discussions of the risk factors we believe can make an investment in our business speculative or risky.

Concentration Related Risk Factors

Our dependency on the microelectronics industry, which as a whole is volatile, could create volatility in our demand and have a negative material impact on our business.

We sell substantially all of our photomasks to semiconductor or FPD designers, manufacturers and foundries, as well as to other high-performance electronics manufacturers. We believe that the demand for photomasks depends primarily on design activity rather than sales volume from products using photomask technologies. Consequently, an increase in semiconductor or FPD sales does not necessarily result in a corresponding increase in photomask sales. In addition, the reduced use of customized ICs, a reduction in design complexity, other changes in the technology or methods of manufacturing or designing semiconductors or FPDs, or a slowdown in the introduction of new semiconductor or FPD designs could reduce demand for photomasks ‒ even if the demand for semiconductors and FPDs increases. Historically, the microelectronics industry has been volatile, with sharp periodic downturns and slowdowns. 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 depend on a limited number of suppliers for equipment and raw materials and, if those suppliers fail to timely deliver their products to us, we may be unable to fulfill orders from our customers, which could adversely affect our business and results of operations.

We rely on a limited number of photomask equipment manufacturers to develop, supply, and repair the equipment we use. These equipment manufacturers usually require lead times of twelve months or longer between the order date and the delivery of certain photomask imaging and inspection equipment. The failure of our suppliers to develop or deliver such equipment on a timely basis could have a material adverse effect on our business and results of operations. In addition, the manufacturing equipment necessary to produce advanced photomasks could become prohibitively expensive, which could similarly affect us.

We use high-precision quartz photomask blanks, pellicles, and electronic grade chemicals in our manufacturing processes. There are a limited number of suppliers of these raw materials, and we do not have long-term contracts with these suppliers. Any delays or quality problems in connection with significant raw materials, particularly photomask blanks, could cause delays in the shipments of photomasks, which could have a material adverse effect on our business and results of operations. The fluctuation of foreign currency exchange rates, with respect to prices of equipment and raw materials used in manufacturing, could also have a material adverse effect on our business and results of operations.

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We have been dependent on sales to a limited number of large customers; the loss of any of these customers or a significant reduction in orders from these customers could have a material adverse effect on our revenues and results of operations.

Historically, we have sold a significant proportion of photomasks to a limited number of IC and FPD manufacturers. During 2021, 2020 and 2019, our two largest customers accounted for 29%, 29% and 31%, respectively, of our revenue. Our five largest customers accounted for 43%, 45% and 46% of our revenue in 2021, 2020 and 2019, respectively. The loss of a significant customer, a significant reduction or delay in orders from any significant customer (including reductions or delays due to customer departures from recent buying patterns), or an unfavorable change in competitive conditions in the semiconductor or FPD industries could have a material adverse effect on our financial performance and business prospects. The consolidation of semiconductor manufacturers, or an economic downturn in the semiconductor industry, may increase the likelihood of losing a significant customer and could also have an adverse effect on our financial performance and business prospects.

Financing Related Risk Factors

Our cash flows from operations and current holdings of cash may not be adequate for our current and long-term needs.

Our liquidity, as we operate in a high fixed-cost environment, is highly dependent on our revenue volume and the timing of our capital expenditures, which can vary significantly from period to period. Depending on conditions in the semiconductor and FPD markets, our cash flows from operations and current holdings of cash may not be adequate to meet our current and long-term needs for capital expenditures, operations, and debt repayments. Historically, in certain years, we have used external financing to fund these needs. Due to conditions in the credit markets and covenant restrictions on our existing debt, some financing instruments used by us in the past may not be available. Therefore, we cannot provide assurance that additional sources of financing would be available to us on commercially favorable terms, if at all, should our cash requirements exceed our existing cash, operating cash flows, and cash available under our credit agreements.

Our credit facility restricts our business activities, limits our ability to obtain additional financing or pay cash dividends, and may obligate us to repay debt before its maturity.

Financial covenants related to our credit facility, which expires in September 2023, include a total leverage ratio, a minimum interest coverage ratio, and minimum unrestricted cash balances. Our credit facility may also limit our flexibility in planning for, or reacting to, changes in our business and industry, which may place us at a disadvantage with our competitors. We are also subject to covenants that limit our financing flexibility, such as a limit on the amount we can spend to repurchase shares of our common stock. Existing covenant restrictions, and noncompliance with covenants or cross-default provisions could limit our ability to draw down on current facilities or our ability to obtain additional debt financing, and limit the amounts of dividends, distributions, and redemptions we can pay on our common stock to an annual amount of $50 million. Should we be unable to meet one or more of these covenants, our lenders may require us to repay any outstanding balance prior to the expiration date of our agreements. Our ability to comply with the financial and other covenants in our credit agreements may be affected by deteriorating economic or business conditions, or other events. We cannot assure that, under such circumstances, additional sources of financing would be available to fund operating requirements or repay any long-term borrowings, to avoid default.

Our operations will continue to require substantial capital expenditures, for which we may be unable to provide or obtain funding.

The manufacture of leading-edge photomasks requires us to make substantial investments in high-end manufacturing capability. We expect that we will be required to continue to make substantial capital expenditures to meet the technological demands of our customers and to position us for future growth. Our capital expenditure payments for fiscal 2022 are expected to be approximately $100 million, of which approximately $9.7 million was included in Accounts payable and Accrued liabilities on our October 31, 2021, consolidated balance sheet. We cannot provide assurance that we will be able to obtain the additional capital required to fund our operations or capital expenditures on reasonable terms, if at all, or that any such inability will not have a material adverse effect on our business and results of operations.

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Servicing our debt requires a significant amount of cash, and we may not generate sufficient cash flows from our operations to pay our indebtedness.

Our ability to make scheduled payments of debt principal and interest, or to refinance our indebtedness, depends on our future performance, which is subject to economic, financial, competitive, and other factors beyond our control. Our business may not continue to generate sufficient cash flows from operations to fund operations, service our debt and make necessary capital expenditures. If we are unable to generate such cash flows, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt, or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness would depend upon the conditions in the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.

Industry and Competitive Related Risk Factors

Our business depends on managerial and technical personnel, who are in great demand, and our inability to attract and retain qualified employees could adversely affect our business and results of operations.

Our success depends, in part, upon key managerial and technical personnel, as well as our ability to continue to attract and retain additional qualified personnel. The loss of certain key personnel (for example, our chief executive officer and chief technology officer) could have a material adverse effect on our business and results of operations. We cannot offer assurance that we can retain our key managerial and technical employees, or that we can attract similar additional employees in the future.

The photomask industry is dependent on the semiconductor and display industries, which are subject to rapid technological change and fluctuations in capacity needs. Consequently, we might fail to adequately time our capabilities to market needs, which could have a material adverse effect on our business and results of operations.

The photomask industry has been, and we expect it to continue to be, characterized by technological change and evolving industry requirements, which recent supply chain regionalization efforts have accelerated. In order to remain competitive, we will be required to continually anticipate, respond to, and scale technologies of increasing complexity in both traditional and emerging markets that we serve. In particular, we believe that, as semiconductor geometries continue to become smaller and FPDs become larger or otherwise more advanced, we will be required to manufacture increasingly challenging photomasks. Moreover, the demand for photomasks in non-leading-edge nodes may increase beyond our ability to meet our customers’ requirements within adequate response times. Additionally, the demand for photomasks has been, and could in the future be, adversely affected by changes in semiconductor and high-performance electronics fabrication methods that affect the type or quantity of photomasks utilized, such as changes in semiconductor demand that favor field-programmable gate arrays and other semiconductor designs that replace application-specific ICs. Furthermore, evidence of the viability and the corresponding market acceptance of alternative methods of transferring IC designs onto semiconductor wafers could reduce or eliminate the need for photomasks in the production of semiconductors. As of the end of 2021, one alternative method, direct-write lithography, has not been proven to be a commercially viable alternative to photomasks, as it is considered to be too slow for high-volume semiconductor wafer production. However, should direct-write or any other alternative method of transferring IC or FPD designs without the use of photomasks achieve market acceptance, and if we are unable to anticipate, respond to, or utilize these or other technological changes, due to resource, technological, or other constraints, our business and results of operations could be materially adversely affected.

The risk of loss of our intellectual property, trade secrets or other sensitive business or customer confidential information or disruption of operations due to cyberattacks or data breaches could negatively impact our financial results.

Cyberattacks or data breaches could compromise confidential, business-critical information, cause disruptions in our operations, expose us to potential litigation, or harm our reputation. We have important assets, including intellectual property, trade secrets, and other sensitive, business-critical and/or confidential information which may be vulnerable to such incidents. While we have a comprehensive cybersecurity program that is continually reviewed, maintained, and upgraded, we cannot assure that we are invulnerable to cyberattacks and data breaches which, if significant, could negatively impact our business and financial results.

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We may be unable to enforce or defend our ownership and use of proprietary technology, and the utilization of unprotected company developed technology by our competitors could adversely affect our business, results of operations, and financial position.

We believe that the success of our business depends more on proprietary technology, information and processes, and know-how than on our patents or trademarks. Much of our proprietary information and technology related to manufacturing processes is not patented and may not be patentable. We cannot offer assurance that:

• we will be able to adequately protect our technology;

• competitors will not independently develop similar technology;

• international intellectual property laws will adequately protect our intellectual property rights.

We may become the subject of infringement claims or legal proceedings by third parties with respect to current or future products or processes. Any such claims, with or without merit, or litigation to enforce or protect our intellectual property rights that require us to defend against claimed infringements of the rights of others, could result in substantial costs, diversion of resources, and product shipment delays or could force us to enter into royalty or license agreements, rather than dispute the merits of these claims. Any of the foregoing could have a material adverse effect on our business, results of operations, and financial position.

We operate in a highly competitive environment, and, should we be unable to meet our customers’ requirements for product quality, timeliness of delivery or technical capabilities, our revenue could be adversely affected.

The photomask industry is highly competitive, and most of our customers utilize more than one photomask supplier. Our competitors include Compugraphics International, Ltd., Dai Nippon Printing Co., Ltd (outside of Taiwan and China), Hoya Corporation, LG Innotek Co., Ltd., Shenzhen New Way Photomask Making Co., Ltd., Shenzhen Qingyi Photomask, Ltd., SK-Electronics Co. Ltd., Taiwan Mask Corporation, and Toppan Electronics Products Co., Ltd. We also compete with semiconductor and FPD manufacturers' captive photomask manufacturing operations, some of which market their photomask manufacturing services to outside customers. We expect to face continued competition from these and other suppliers in the future. Some of our competitors have substantially greater financial, sales, marketing, or other resources than we do. Also, when producing smaller geometry photomasks, some of our competitors may be able to more rapidly develop and produce such masks and achieve higher manufacturing yields than we can. We believe that consistency of product quality, timeliness of delivery, competitive pricing, technical capability and service are the principal factors considered by customers when selecting their photomask suppliers. Our inability to meet these competitive requirements could have a material adverse effect on our business and results of operations. In the past, competition has led to pressure to reduce prices and the need to invest in advanced manufacturing technology, which we believe contributed to the decrease in the number of independent photomask suppliers. These pressures may continue in the future.

Investment Related Risk Factors

Joint ventures may not operate according to their business plans if our partners fail to fulfill their obligations, which may adversely affect our results of operations and compel us to dedicate additional resources to these joint ventures.

The nature of a joint venture requires us to share control in certain areas with unaffiliated third parties. If our joint venture partner does not fulfill its obligations, the affected joint venture may not be able to operate in accordance with its business plan. Under such a scenario, our results of operations may be adversely affected, and we may be compelled to increase the level of our resources devoted to the joint venture. Also, differing views among joint venture participants may result in delayed decisions, or failures to agree on major issues. If such differences caused a joint venture to deviate from its business plan, our results of operations could be adversely affected.

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Our expansion into China entails substantial risks.

In 2019, we commenced operations at our two newly constructed manufacturing facilities in China. These investments are subject to substantial risks which may include, but are not limited to: the inability to protect our intellectual property rights under Chinese law, which may not offer as high a level of protection as U.S. law; unexpectedly long negotiation periods with Chinese suppliers and customers; quality issues related to materials sourced from local vendors; limited access to electricity; unexpectedly high labor costs due to a tight labor supply; and difficulty in repatriating funds and selling or transferring assets. Our investments in China also exposed us to a significant additional foreign currency exchange risk, which we had not been subject to in prior years. In addition, as tensions have, from time to time, escalated between the U.S. and China, we believe there is an enhanced risk that our substantial investments in China may be subject to unforeseen restrictions, which may include expropriation of the investments by the Chinese government. These and other risks may result in our not realizing a return on, or losing some, or all, of our investments in China, which would have a material adverse effect on our financial condition and financial performance.

We may incur unforeseen charges related to possible future facility closures or restructurings.

We cannot provide assurance that there will not be facility closures or restructurings in the near or long term, nor can we assure that we will not incur significant charges should there be any future facility closures or restructurings.

We may not be able to consummate future acquisitions or joint ventures or integrate acquisitions into our business, which could result in unanticipated expenses and losses.

As part of our business growth strategy, we have acquired businesses and entered into joint ventures in the past, and we may pursue acquisitions and joint venture opportunities in the future. Our future efforts to grow the Company may include expanding into new or related markets or industries. Our ability to implement this component of our growth strategy may be limited by both our ability to identify appropriate acquisition or joint venture candidates and our financial resources, including our available cash and borrowing capacity. The expense incurred in consummating acquisitions or entering into joint ventures, the time it takes to integrate an acquisition, or our failure to integrate businesses successfully, could result in unanticipated expenses and losses. Furthermore, we may not be able to realize any of the anticipated benefits from acquisitions or joint ventures.

The process of integrating acquired operations into our existing operations may result in unforeseen operating difficulties, and may require significant financial resources that would otherwise be available for the ongoing development or expansion of existing operations. Some of the risks associated with the integration of acquisitions include: potential disruption of our ongoing business; distraction of management; unforeseen claims and liabilities, including unexpected environmental exposures; unforeseen adjustments, taxes, charges and write-offs; problems enforcing the indemnification obligations of sellers of businesses or joint venture partners for claims and liabilities; unexpected losses of customers of, or suppliers to, the acquired business; difficulty in conforming the acquired business’ standards, processes, procedures and controls with our operations; variability in financial performance arising from the implementation of acquisition accounting; inability to coordinate new product and process development; loss of senior managers and other critical personnel; problems with new labor unions; and challenges arising from the increased scope, geographic diversity, and complexity of our operations.

Operations Related Risk Factors

Our quarterly operating results fluctuate significantly and may continue to do so in the future.

We have experienced fluctuations in our quarterly operating results, and we anticipate that such fluctuations will continue and could intensify in the future. Fluctuations in operating results may result in volatility in the prices of our common stock and financial instruments linked to its value. Operating results may fluctuate as a result of many factors, including the size and timing of orders and shipments, the loss of significant customers, changes in product mix, the flow of customer design releases, technological change, fluctuations in manufacturing yields, the actions of our competitors, and general economic conditions. We operate in a high fixed-cost environment and, should our revenues and asset utilization decrease, our operating margins could be negatively impacted.

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Our customers generally order photomasks on an as-needed basis; thus, our revenue in any quarter is dependent primarily on orders received during that quarter. Since we operate with little backlog, and the rate of new orders may vary significantly from quarter to quarter, our capital expenditures and consequential expense levels are, to some extent, based primarily on sales forecasts and technological advancements in photomask manufacturing equipment. Consequently, if anticipated revenues in any quarter do not occur when expected, our capital investments could result in underutilized capacity and disproportionately high expense levels, causing operating results to be adversely affected. Due to the foregoing factors, we believe that quarter to quarter comparisons of our operating results cannot be relied upon as indicators of future performance. In addition, in future quarters, our operating results could be below guidance we may provide or the expectations of public market analysts and investors, which could have a material adverse effect on the market price of our common stock.

Our substantial non-U.S. operations are subject to additional risks.

Revenues from our non-U.S. operations were approximately 84%, 83% and 81% of our total revenues in 2021, 2020 and 2019, respectively. We believe that maintaining significant international operations requires us to have, among other things, a local presence in the geographic markets that we supply. This requires significant investments in financial, managerial, operational, and other resources. Since 1996, we have significantly expanded our operations in international markets by acquiring existing businesses in Europe and Asia, and building manufacturing facilities in Taiwan and China. In order to enable us to optimize our investments and other resources, we closely monitor the semiconductor and FPD manufacturing markets for indications of geographic movement and, in conjunction with these efforts, continue to assess the locations of our manufacturing facilities. These assessments may result in the opening or closing of facilities.

Operations outside of the United States are subject to inherent risks, including: fluctuations in currency exchange rates; unstable political and economic conditions in various countries; changes in economic alliances; unexpected changes in regulatory requirements; compliance with a variety of burdensome foreign laws and regulations; compliance with anti-bribery and anti-corruption laws (such as the Foreign Corrupt Practices Act); tariffs and other trade barriers; difficulties in staffing and managing international operations; and longer accounts receivable collection cycles. In addition: foreign countries may enact other restrictions on foreign trade or investment, including: currency exchange controls; trade sanctions which result in our losing access to customers and suppliers; legislation which renders agreements to be difficult to enforce; impositions on the movement of funds or other assets; or we may be subject to adverse tax consequences. These factors may have a material adverse effect on our costs or our ability to generate revenues outside of the United States and, consequently, on our business and results of operations.

We could be subject to damages based on claims brought against us by our customers, or lose customers as a result of the failure of our products to meet certain quality specifications.

Our products provide important performance attributes to our customers’ products. If a product fails to perform in a manner consistent with quality specifications, or has a shorter useful life than warrantied, a customer could seek replacement of the product or damages for costs incurred as a result of the product failing to perform, particularly if such products are sold under agreements that contain limited performance and life cycle warranties. Our customers often require us to guarantee that our products conform to certain product specifications that they provide. Any failure to comply with such specifications could result in claims or legal action. A successful claim, or series of claims, against us could have a material adverse effect on our financial condition and results of operations and could result in a loss of one or more customers.

We face risks associated with the use of sophisticated equipment and complex manufacturing processes and technologies. Our inability to effectively utilize such equipment and technologies and perform such processes could have a material adverse effect on our business and results of operations.

Our complex manufacturing processes require the use of expensive and technologically sophisticated equipment and materials, and are continually modified in an effort to improve manufacturing yields and product quality. Minute impurities, defects, or other difficulties in the manufacturing process can lower manufacturing yields and render products unmarketable. Moreover, the manufacture of leading-edge photomasks is more complex and time consuming than manufacturing less advanced photomasks, and their fabrication may result in delays in the manufacture of all levels of photomasks. We have, on occasion, experienced manufacturing difficulties and capacity limitations that have delayed our ability to deliver products within the time frames contracted for by our customers. We cannot provide assurance that we will not experience these or other manufacturing difficulties, or be subject to increased costs, which could result in a loss of customers or otherwise have a material adverse effect on our business and results of operations.

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We have a high level of fixed costs.

Because of the capital-intensive nature of the photomask manufacturing business, we have a high level of fixed costs and a high degree of operating leverage. Accordingly, should our sales volumes decline as a result of a decrease in design releases from our customers or for any other reason, we may have excess or underutilized production capacity which could significantly impact our operating margins or result in write-offs from asset impairments.

Regulatory Related Risk Factors

COVID-19 vaccination mandates could adversely affect our ability to attract and maintain employees.

In response to COVID-19, we implemented significant changes that we determined were in the best interest of our employees and which comply with government orders in all the states and countries where we operate. In an effort to keep our employees safe and to maintain operations during COVID-19, we have implemented a number of new health-related measures including the requirement to wear company provided facemasks at all times while on company property, temperature taking protocols, increased hygiene, cleaning and sanitizing procedures at all locations, social-distancing, restrictions on visitors to our facilities, and limiting in-person meetings and other gatherings. Additionally, we are following government policies and recommendations designed to slow the spread of COVID-19 and for US employees we required vaccinations against COVID-19. We may not be able to attract or retain employees as a result of this mandate, and though we believe these actions are appropriate and prudent to safeguard our employees, contractors, suppliers and customers while allowing us to safely continue operations, we cannot predict how the steps we, our team members, government entities, suppliers or customers take in response to COVID-19 will ultimately impact our business, outlook, or results of operations.

Additional taxes could adversely affect our financial results.

Our tax filings are subject to audits by tax authorities in the various jurisdictions in which we do business. These audits may result in assessments of additional taxes that are subsequently resolved with the taxing authorities or through the courts. Currently, we believe there are no outstanding assessments whose resolution would result in a material adverse financial result. However, we cannot offer assurances that unasserted or potential future assessments would not have a material adverse effect on our financial condition or results of operations.

Our products and technology could be subject to and negatively impacted by the recent expansion of the foreign-produced direct product rule.

       In May 2019, the U.S. Department of Commerce, Bureau of Industry and Security (“BIS”) amended export administration regulations by adding Huawei Technologies Co., Ltd. (“Huawei”) and certain affiliates to the “Entity List” for actions contrary to the national security and foreign policy interests of the United States, imposing significant new restrictions on export, re-export and transfer of U.S. regulated technologies and products to Huawei. On August 17, 2020, BIS issued a final rule adding additional Huawei non-U.S. affiliates to the Entity List, confirming the expiration of a temporary general license applicable to Huawei, and amended the foreign-produced direct product rule in a manner that represents a significant expansion of its application to Huawei.

       Expansion of the foreign-produced direct product rule and additional companies being added to the entity list may adversely affect our business in various ways, including by: increasing the cost of regulatory compliance for the export of our products, equipment, services, and technology from the United States and abroad; increasing the time necessary to obtain required authorizations; increasing the risk of monetary fines and other penalties for non-compliance, and negatively impacting our customers who may no longer be able to supply their customers and thereby reducing demand for their or our products. Any of these effects could result in lost revenue, additional product costs, increased lead times and deployment delays that could harm our business and customer relationships.

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Our products and technology could be subject to U.S. export control laws and the export control laws of the foreign jurisdictions where we operate.

We are subject to various laws relating to the export of products we manufacture, and the technology related thereto, and our failure to comply with these laws could subject us to substantial fines, penalties, and even injunctions, the imposition of which could have a material adverse effect on the success of our business.

We are subject to the export control laws of the United States and the export control laws of the foreign jurisdictions where we operate. On April 28, 2020, the U.S. administration significantly expanded the reach of U.S. export controls over certain products and certain countries. The U.S. Department of Commerce has, among other things: expanded license requirements to China, Russia and Venezuela; broadened the list of products covered by these expanded license requirements; expanded the definition of “military end use”; created a new “reason for control”; created a new review policy for certain items to certain countries; added substantial electronic export information filing requirements; eliminated the license exception for civil end use for certain countries, including China, Russia and Venezuela; and proposed to remove those same countries from the list of those eligible for additional re-exports license exceptions. The final rules relating to most of these changes were effective June 29, 2020. Application of these laws may adversely affect our business in various ways, including by regulating the export of our products, equipment, services, and technology from the United States and abroad, increasing the time necessary to obtain required authorizations, and the possibility of monetary fines and other penalties for non-compliance.

We may be unprepared for changes to environmental laws and regulations and may incur liabilities arising from environmental matters.

We are subject to numerous environmental laws and regulations that impose various environmental controls on, among other things, the discharge of pollutants into the air and water and the handling, use, storage, disposal, and cleanup of solid and hazardous wastes. Changes in these laws and regulations may have a material adverse effect on our financial position and results of operations, and inadequate compliance with their requirements could give rise to significant liabilities.

If we violate environmental, health or safety laws or regulations, in addition to being required to correct such violations, we can be held liable in administrative, civil, or criminal proceedings, and substantial fines and other sanctions could be imposed that could disrupt or limit our operations. Liabilities associated with the investigation and cleanup of hazardous substances, as well as personal injury, property damages or natural resource damages arising from the release of, or exposure to, such hazardous substances, may be imposed in many situations without regard to violations of laws or regulations or other fault, and may also be imposed jointly and severally (so that a responsible party may be held liable for more than its share of the losses involved, or even the entire loss). Such liabilities may also be imposed on many different entities with a relationship to the hazardous substances at issue, including, for example, entities that formerly owned or operated the property affected by the hazardous substances and entities that arranged for the disposal of the hazardous substances at the affected property, as well as entities that currently own or operate such property. The nature of our business, including historical operations at our current and former facilities, exposes us to risks of liability under these laws and regulations due to the production, storage, use, transportation and sale of materials that can cause contamination or personal injury if released into the environment. Additional information may arise in the future concerning the nature or extent of our liability with respect to identified sites and additional sites that may be identified, for which we are alleged to be liable.

General Risk Factors

Ineffective internal controls could impact our business and operating results.

Our internal controls over financial reporting may not prevent or detect misstatements because of their inherent limitations in detecting human errors, the circumvention or overriding of controls, or fraud; even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. If we: fail to maintain the adequacy of our internal controls, including any failure to implement required new or improved controls; otherwise fail to prevent financial reporting misstatements; or experience difficulties in implementing internal controls, our business and operating results could be harmed, and we could fail to meet our financial reporting obligations.

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Our business could be adversely impacted by global or regional catastrophic events.

Our business could be adversely affected by terrorist acts, widespread outbreaks of infectious diseases (such as COVID-19), government responses such as shelter-in-place directives to limit the impact of infectious diseases, or the outbreak or escalation of wars, especially in the Asian markets in which we generate a significant portion of our sales and in Japan where we purchase raw materials and capital equipment. Such events in the geographic regions in which we do business, including escalations of political tensions and military conflicts within the Korean Peninsula, or between the People’s Republic of China and the U.S. or the Republic of China (Taiwan), could have material adverse impacts on our revenue, cost and availability of raw materials, results of operations, cash flows, and financial condition.

Our production facilities could be damaged or disrupted by natural disasters or labor strikes, either of which could adversely affect our financial position, results of operations, and cash flows.

A major catastrophe, such as an earthquake or other natural disaster, labor strike, or work stoppage at any of our manufacturing facilities, or a manufacturing facility of our suppliers or customers, could result in a prolonged interruption of our business. A disruption resulting from any one of these events could cause significant delays in shipments of our products and the loss of revenue and customers, which could have a material adverse effect on our financial position, results of operations, and cash flows. Our facilities in Taiwan are located in a seismically-active area.

Our sales can be impacted by the health and stability of the general economy, which could adversely affect our results of operations and cash flows.

Unfavorable general economic conditions in the U.S. or other countries in which we or our customers conduct business may have the effect of reducing the demand for photomasks. Economic downturns may lead to a decrease in demand for end products whose manufacturing processes involve the use of photomasks, which may result in a reduction in new product design and development by semiconductor or FPD manufacturers, and adversely affect our results of operations and cash flows.

Technology failures or cyber security breaches could have a material adverse effect on our operations.

We rely on information technology systems to process, transmit, store, and protect electronic information. For example, a significant portion of the communications between our personnel, customers, and suppliers depends on information technology. Our information technology systems may be vulnerable to a variety of interruptions due to events beyond our control, including, but not limited to, natural disasters, terrorist attacks, telecommunications failures, computer viruses, hackers, and other security issues. Although we have technology and information security processes and disaster recovery plans in place to mitigate our risks to these vulnerabilities, these measures may not be adequate to ensure that our operations will not be disrupted, should such an event occur.

The General Data Protection Regulation (“GDPR”), which went into effect in the European Union (EU) on May 25, 2018, applies to the collection, use, retention, security, processing, and transfer of personally identifiable information of residents of EU countries. The GDPR created a range of new compliance obligations and imposes significant fines and sanctions for violations. It is possible that the GDPR may be interpreted or applied in a manner that is adverse to, or unforeseen by us, including requirements that are inconsistent with our practices, or that we may otherwise fail to construe its requirements in ways that are satisfactory to the EU authorities. Upon leaving the E.U. on January 31, 2021, the U.K. enacted a new domestic data privacy law called the “U.K. – General Data Protection Regulation” (“UK-GDPR”). Although somewhat less restrictive than the GDPR, the UK-GDPR is similar to the GDPR with respect to both an entity’s obligation to protect personal information and the imposition of significant fines for violations.

Any failure, or perceived failure, by us to comply with the GDPR or the UK-GDPR, or with any applicable regulatory requirements or orders, including but not limited to privacy, data protection, information security, or consumer protection related privacy laws and regulations, in one or more jurisdictions within the EU, the U.K. or elsewhere, could: result in proceedings or actions against us by governmental entities or individuals; subject us to significant fines, penalties, and/or judgments; require us to change our business practices; limit access to our products and services in certain countries, or otherwise adversely affect our business, as we would be at risk to lose both customers and revenue, and incur substantial costs.

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We may, in the future, incur net losses.

Although the Company has been profitable since fiscal 2010, it has, in the past, incurred net losses. We cannot provide assurance that the Company will not incur net losses in the future.

Market Related Risk Factors

Changes in foreign currency exchange rates could have a material adverse effect on our results of operations, financial condition, or cash flows.

Our consolidated financial statements are prepared in accordance with U.S. GAAP and are reported in U.S. dollars. Our operations have transactions and balances denominated in currencies other than the U.S. dollar; primarily the South Korean won, New Taiwan dollar, Japanese yen, Chinese renminbi, euro, Singapore dollar, and the British pound sterling. In 2021, we recorded a net gain from changes in foreign currency exchange rates of $8.0 million in our statement of income, while our net assets increased by $8.5 million as a result of the translation of foreign currency financial statements to U.S. dollars. Significant foreign currency fluctuations may adversely affect our results of operations, financial condition, or cash flows.

Our hedging activity could negatively impact our results of operations and cash flows.

We may enter into derivatives to manage our exposures to interest rate and currency movements. If we do not accurately forecast our results of operations, execute contracts that do not effectively mitigate our economic exposures to interest rates and currency rates, elect to not apply hedge accounting (when doing so would have mitigated our losses), or fail to comply with the complex accounting requirements for hedging transactions, our results of operations and cash flows could be volatile, as well as negatively impacted.

The market price of our common stock is subject to volatility and could fluctuate widely in response to various factors, many of which are beyond our control.

Factors that may influence the price of our common stock include, but are not limited to, the following:

• loss of any of our key customers or suppliers;

• additions or departures of key personnel;

• third party sales of common stock;

• our ability to execute our business plan, including but not limited to, our expansion into China;

• announcements and consummations of business acquisitions;

• operating results that fall below or exceed expectations;

• announcements of forecasted earnings or material transactions;

• issuances or repurchases of our common stock;

• intellectual property disputes;

• industry developments;

• news or disclosures by competitors or customers;

• business combinations, divestitures, or bankruptcies by customers, suppliers, or competitors;

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• economic and other external factors including (but not limited to) recessions, natural disasters, military actions, political instability, or social unrest; and

• period to period fluctuations in our financial results.

In addition, securities markets have from time-to-time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock. Such fluctuations may be the result of imbalances between buy and sell offers, or low trading volume which can magnify the effects of a small number of transactions on the price of a stock.

We operate in a global, competitive environment which gives rise to operating and market risk exposure.

We sell our products in a competitive, global environment, and compete worldwide for sales on the basis of product quality, price, technology, and customer service. Sales of our products are also subject to federal, state, local, and foreign taxes, laws and regulations, trade agreements, import and export controls, duties, and tariffs. The imposition of additional regulations or controls including export controls, duties, tariffs, or changes to bilateral and regional trade agreements, could negatively impact our results of operations.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

The following table presents certain information about the Company's photomask manufacturing facilities:

Location	Type of Interest
Allen, Texas	Owned
Boise, Idaho	Owned
Brookfield, Connecticut	Owned
Bridgend, Wales	Leased
Cheonan, Korea	Owned
Hefei, China	Owned (1)
Dresden, Germany	Leased
Hsinchu, Taiwan	Owned (1)
Hsinchu, Taiwan	Leased
Taichung, Taiwan	Owned (1)
Xiamen, China	Owned (1)

(1)  We own our manufacturing facilities in Hefei, Taichung, Xiamen, and one of our manufacturing facilities in Hsinchu. However, we lease the related land at these sites. We believe our facilities are adequate to support our current and near-term requirements.

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ITEM 3. LEGAL PROCEEDINGS

Please refer to Note 14 in Part II, Item 8 of this report for information on legal proceedings involving the Company.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is traded on the NASDAQ Global Select Market ("NASDAQ") under the symbol PLAB. On December 9, 2021, the closing sale price of our common stock, per the NASDAQ Global Select Market, was $17.61. Based on available information, we have 253 registered shareholders.

To date, we have not paid any cash dividends on Photronics shares, and, for the foreseeable future, we anticipate that earnings will continue to be retained for use in our business. Further, our credit agreement limits the amount that can be paid as cash dividends on Photronics stock.

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. Share repurchases under the program commenced on September 16, 2020.

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All of the shares purchased under the program in 2020 were retired prior to the end of 2020, and all of the shares purchased under the program in 2021 were retired prior to the end of the fiscal year. The table below presents additional information on shares repurchased during the fourth quarter of 2021.

	Total Number of Shares Purchased (in millions)		Average Price Paid Per share		Total Number of Shares Purchased as Part of Publicly Announced Program (in millions)		Dollar Value of Shares That May Yet Be Purchased (in millions)
August 2, 2021 – August 29, 2021		0.67	$	13.31		0.67	$	37.8
August 30, 2021 – September 26, 2021		0.02	$	13.51		0.02	$	37.6
September 27, 2021 – October 31, 2021		0.25	$	13.42		0.25	$	34.3
Total		0.94				0.94

Securities authorized for issuance under equity compensation plans

The information regarding our equity compensation required to be disclosed by Item 201(d) of Regulation S-K is incorporated by reference from the Photronics, Inc. 2022 Definitive Proxy Statement in Item 12 of Part III of this report. The 2022 Definitive Proxy Statement will be filed within 120 days after our fiscal year ended October 31, 2021.

ITEM 6. [RESERVED]

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

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, micro-electronic 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 FPDs 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 microelectronic 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.

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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 orders, typically one to two weeks of backlog for IC photomasks and two to three weeks of backlog for FPD photomasks.

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.

We are focused on improving our competitiveness by advancing our technology and reducing costs and, in connection therewith, have invested and plan to continue to invest in manufacturing equipment to serve the high-end markets. As we face challenges that require us to make significant improvements in our competitiveness, we continue to evaluate further cost reduction initiatives.

State-of-the-art production for semiconductor masks is considered to be 28 nanometer and smaller for ICs and Generation 10.5+ and AMOLED and LTPS display-based process technologies for FPDs. However, 32 nanometer and above geometries for semiconductors and Generation 8 and below (excluding AMOLED and LTPS) process technologies for displays constitute the majority of designs currently being fabricated in volume. At these geometries, we can produce full lines of photomasks, and there is no significant technology employed by our competitors that is not available to us. We expect advanced-generation designs to continue to move to production throughout fiscal 2022, and we believe we are well positioned to service an increasing volume of this business as a result of our investments in manufacturing processes and technology in the regions where our customers are located.

The photomask industry has been, and is expected to continue to be characterized by technological change and evolving industry standards. In order to remain competitive, we will be required to continually anticipate, respond to, and utilize changing technologies. In particular, we believe that, as semiconductor geometries continue to become smaller, and display designs become larger or otherwise more advanced, we will be required to manufacture even more complex optically-enhanced reticles, including optical proximity correction and phase-shift photomasks. Additionally, demand for photomasks has been, and could, in the future be adversely affected by changes in high-performance electronics fabrication methods that affect the type or quantity of photomasks used, such as changes in semiconductor demand that favor field-programmable gate arrays and other semiconductor designs that replace application-specific ICs, or the use of certain chip-stacking methodologies that lessen the emphasis on conventional lithography technology. Furthermore, increased market acceptance of alternative methods of transferring circuit designs onto semiconductor wafers could reduce or eliminate the need for photomasks in the production of semiconductors. As of the end of 2021, one alternative method, direct-write lithography, has not been proven to be a commercially viable alternative to photomasks, as it is considered to be too slow for high-volume semiconductor wafer production, and we have not experienced a significant loss of revenue as a result of this or other alternative semiconductor design methodologies. However, should direct-write lithography or any other alternative method of transferring IC designs to semiconductor wafers without the use of photomasks achieve market acceptance, and we do not anticipate, respond to, or utilize these or other changing technologies due to resource, technological, or other constraints, our business and results of operations could be materially adversely affected.

Both our revenues and costs have been affected by the increased demand for high-end-technology photomasks that require more advanced manufacturing capabilities, but generally command higher ASPs. Our capital expenditure payments were $109.1 million, $70.8 million and $178.3 million in 2021, 2020 and 2019, respectively, and the depreciation on these purchases has significantly contributed to our cost of goods sold. We intend to continue to make the required investments to support the technological demands of our customers that we believe will position the Company for future growth. In support of this effort, we expect capital expenditure payments to be approximately $100 million in fiscal year 2022.

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The manufacture of photomasks for use in fabricating ICs, FPDs, and other related products built using comparable photomask-based process technologies has been, and continues to be, capital intensive. Our employees and our integrated global manufacturing network represent a significant portion of our fixed operating cost base. Should our revenue decrease as a result of a decrease in design releases from our customers, we may have excess or underutilized production capacity, which could significantly impact our operating margins, or result in write-offs from asset impairments.

Recent Developments

 In the second quarter of 2021, under an MLA which we entered into effective October 2020, 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 the first quarter of 2021, under an MLA which we entered into effective July 2019, 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 after the first three months to $0.6 million for the following nine months, to be 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 in Note 9 of Part II, Item 8 of this report, 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.

In the fourth quarter of 2020, we entered into a MLA with a financing entity for the lease of an inspection tool with a maximum value of $10 million.  The tool was delivered during the fourth quarter of 2020, and the financing entity made a progress payment to the vendor of $6.5 million in the first quarter of 2021. The progress payment accrued interest at 1.56% payable monthly until the final payment for the tool was made in the second quarter of 2021, at which point the $7.2 million lease described above began.

In the fourth quarter of 2020, our Hefei, China, facility was approved to borrow 200 million RMB (approximately $31.3 million, at the balance sheet date) from the China Construction Bank Corporation. This credit facility is subject to annual reviews and extension, with the most recent extension allowing us to borrow additional funds set to expire in August 2022. The loan proceeds were used to fund purchases of two lithography tools at the Hefei facility. As of October 31, 2021, we had borrowed 135.7 million RMB ($21.2 million) against this approval (all of which was then outstanding), and 64.3 million RMB ($10.1 million) remained available to borrow. The interest rate on the loan is variable and based on the RMB Loan Prime Rate of the National Interbank Funding Center. The borrowings are secured by the Hefei facility, its related land use right, and certain manufacturing equipment. The Hefei Equipment Loan is 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 October 31, 2021.

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In the fourth quarter of 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. Through October 31, 2021, we had repurchased 5.6 million shares at a cost of $65.7 million (an average price of $11.64 per share) under this authorization. All shares repurchased in 2020 were retired in 2020, and all shares repurchased in 2021 were retired in 2021.

In the first quarter of 2020, we acquired the remaining 0.2% of noncontrolling interests in Photronics Cheonan, Ltd. for $0.6 million.

In the first quarter of 2020, we adopted ASU 2016-02 and all subsequent amendments, collectively codified in Accounting Standards Codification Topic 842 - “Leases” (“Topic 842”). This guidance requires modified retrospective adoption, either at the beginning of the earliest period presented or at the beginning of the period of adoption; we elected to apply the guidance at the beginning of the period of adoption, and recognized right-of-use leased assets of approximately $6.5 million, and corresponding lease liabilities, which were discounted at our incremental borrowing rates, on our November 1, 2019, consolidated balance sheet to reflect our adoption of the guidance. Our adoption of Topic 842 did not affect our cash flows or our ability to comply with covenants under our credit agreements.

In the fourth quarter of 2019, our board of directors declared a dividend of one preferred stock purchase right (a “Right”), payable on or about October 1, 2019, for each share of common stock, par value $0.01 per share, of the Company outstanding on September 30, 2019, to the stockholders of record on that date. In connection with the distribution of the Rights, we entered into a Section 382 Rights Agreement (the “Rights Agreement”), dated as of September 23, 2019, between the Company and Computershare Trust Company, N.A., a federally chartered trust company, as rights agent. The purpose of the Rights Agreement is to deter trading of our common stock that would result in a change in control (as defined in Internal Revenue Control Section 382), thereby preserving our future ability to use our historical federal net operating losses and other Tax Attributes (as defined in the Rights Agreement). Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A Preferred Stock, par value $0.01 per share, at a price of $33.63, subject to adjustment. The Rights, which are described in the Company’s Current Report on Form 8-K filed on September 24, 2019, are in all respects subject to and governed by the provisions of the Rights Agreement. The Rights will expire at the earliest to occur of (i) the date on which our board of directors determines, in its sole discretion, that the Rights Agreement is no longer necessary for the preservation of material valuable tax attributes, or the tax attributes have been fully utilized and may no longer be carried forward, and (ii) the close of business on September 22, 2022.

In the fourth quarter of 2019, upon our request, a financing entity made an advance payment of $3.5 million to an equipment vendor. We entered into an MLA with this financing entity, which became effective in July 2019. The MLA enabled us to request advance payments or other funds to finance equipment to be leased or purchased in the U.S. In connection with this MLA, we had been approved for financing of $35 million for the purchase of a high-end lithography tool. Interest on this borrowing was variable and payable monthly at thirty-day LIBOR plus 1% and was to continue to accrue until the borrowing was repaid or, as allowed under the MLA, we entered into a lease for the equipment. During the first quarter of 2021, this financing entity made an additional payment of $28 million to the equipment vendor on our behalf and we subsequently entered into the $35.5 million finance lease described above.

In the fourth quarter of 2019, 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 of 1933 (as amended). We repurchased 2.5 million shares at a cost of $27.9 million (an average price of $11.34 per share) under this authorization. The repurchase program was terminated on March 20, 2020.

In the second quarter of 2019, we repaid, upon maturity, the entire $57.5 million principal amount of the convertible senior notes we issued in April 2016.

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In the first quarter of 2019, 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 and, as of October 31, 2021, 255.0 million RMB ($39.9 million) remained outstanding. The Project Loans were used to finance certain capital expenditures at the PDMCX facility, and are collateralized by liens granted on the land use right, building, and certain equipment located at the facility. The interest rates on the Project Loans are variable (based on the RMB Loan Prime Rate of the National Interbank Funding Center), and interest incurred on the loans is eligible for reimbursement through incentives provided by the Xiamen Torch Hi-Tech Industrial Development Zone, which provide for such reimbursements up to a prescribed limit and duration. The Project Loans are subject to covenants and provisions, certain of which relate to the assets pledged as security for the loans, all of which we were in compliance with at October 31, 2021.

In the first quarter of 2019, 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 extension. Unless extended, this facility will expire in October 2022. As of October 31, 2021, PDMCX had 78.0 million RMB ($12.2 million) 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 are eligible for reimbursement through incentives provided by the Xiamen Torch Hi-Tech Industrial Development Zone, which provide for such reimbursements up to a prescribed limit and duration.

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Results of Operations

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

	Three Months Ended
	October 31, 2021			August 1, 2021			October 31, 2020
Revenue		100.0	%		100.0	%		100.0	%
Cost of goods sold		71.3			73.4			78.6
Gross profit		28.7			26.6			21.4
Selling, general and administrative expenses		7.9			8.8			8.6
Research and development expenses		2.3			3.1			2.8
Other operating income, net		-			2.1			-
Operating income		18.5			16.7			10.0
Non-operating income (expense), net		2.1			2.2			(1.9	)
Income before income tax provision		20.6			18.9			8.1
Income tax provision		4.8			4.6			2.3
Net income		15.8			14.3			5.8
Net income attributable to noncontrolling interests		4.9			4.3			1.5
Net income attributable to Photronics, Inc. shareholders		10.9	%		10.0	%		4.3	%

	Year Ended
	October 31, 2021			October 31, 2020			October 31, 2019
Revenue		100.0	%		100.0	%		100.0	%
Cost of goods sold		74.8			77.9			78.1
Gross profit		25.2			22.1			21.9
Selling, general and administrative expenses		8.7			8.8			9.5
Research and development expenses		2.8			2.8			2.9
Other operating income, net		0.5			-			-
Operating income		14.2			10.5			9.5
Non-operating income (expense), net		1.1			(0.4	)		(0.3	)
Income before income tax provision		15.4			10.1			9.2
Income tax provision		3.5			3.5			1.9
Net income		11.9			6.6			7.3
Net income attributable to noncontrolling interests		3.5			1.1			1.9
Net income attributable to Photronics, Inc. shareholders		8.4	%		5.5	%		5.4	%

Note: All the following tabular comparisons, unless otherwise indicated, are for the three months ended October 31, 2021 (Q4 FY21), August 1, 2021 (Q3 FY21) and October 31, 2020 (Q4 FY20), and for the fiscal years ended October 31, 2021 (FY21) and October 31, 2020 (FY20). Please refer to the MD&A in our 2020 Annual Report on Form 10-K for comparative discussion of our fiscal years ended October 31, 2020, and October 31, 2019. Table 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.

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At the beginning of 2020, we changed the threshold for the definition of high-end FPD, from G8 and above and AMOLED display screens, to G10.5⁺, AMOLED, and LTPS display screens, to reflect the overall advancement of technology in the FPD industry. Our definition of high-end IC products remained as 28 nanometer or smaller. High-end photomasks typically have higher ASPs than mainstream products.

The following tables present changes in revenue disaggregated by product type and geographic origin, in Q4 FY21 and FY21 from revenue in prior reporting periods.

Quarterly Changes in Revenue by Product Type

	Q4 FY21 from Q3 FY21							Q4 FY21 from Q4 FY20
	Revenue in Q4 FY21		Increase (Decrease)		Percent Change			Increase (Decrease)		Percent Change
IC
High-end*	$	42.6	$	0.2		0.5	%	$	4.4		11.6	%
Mainstream		82.9		7.4		9.9	%		15.1		22.3	%
Total IC	$	125.4	$	7.7		6.5	%	$	19.5		18.4	%
FPD
High-end*	$	41.0	$	0.3		0.8	%	$	9.7		30.9	%
Mainstream		14.9		2.6		21.5	%		2.8		23.2	%
Total FPD	$	55.8	$	3.0		5.6	%	$	12.5		28.8	%
Total Revenue	$	181.3	$	10.6		6.2	%	$	32.0		21.4	%

 * High-end photomasks typically have higher ASPs than mainstream products.

Quarterly Changes in Revenue by Geographic Origin**

	Q4 FY21 from Q3 FY21								Q4 FY21 from Q4 FY20
	Revenue in Q4 FY21		Increase (Decrease)			Percent Change			Increase (Decrease)			Percent Change
Taiwan	$	69.2	$	5.3			8.3	%	$	12.5			22.1	%
Korea		37.8		(1.8	)		(4.5	)%		1.2			3.4	%
China		38.3		5.7			17.4	%		17.3			82.6	%
United States		26.6		1.9			7.6	%		(0.1	)		(0.4	)%
Europe		9.0		(0.5	)		(4.9	)%		1.0			13.0	%
Other		0.4		0.0			5.4	%		0.0			(4.6	)%
Total revenue	$	181.3	$	10.6			6.2	%	$	32.0			21.4	%

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

Revenue in Q4 FY21 of $181.3 million increased 6.2% compared with Q3 FY21 and 21.4% from Q4 FY20; on a year-to-date basis, revenue increased 8.9% in FY21, compared with FY20, to $663.8 million.

A 6.5% increase in IC revenue in Q4 FY21, compared with Q3 FY21, was primarily the result of strong demand for mainstream masks, particularly at the most advanced levels. Industry-wide capacity constraints led to improved pricing for both high-end and mainstream products that resulted in IC revenue increasing 18.4% in Q4 FY21, compared with Q4 FY20. Increased demand from logic customers and Asia-based foundries were the sources of the increase, while demand for memory masks remained stable.

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FPD revenue increased 5.6% in Q4 FY21, compared with Q3 FY21, and 28.8% in Q4 FY21, compared with Q4 FY20. The increase from Q3 FY21 was primarily the result of increased demand attributable to new design releases of mainstream photomasks for liquid crystal displays (“LCD”), as panel manufacturers began to shift to introducing new designs to maintain or increase market share. This trend, and an increase in demand for AMOLED photomasks for displays used in mobile applications, were the primary drivers of the increase from the prior year quarter.

Year-over-Year Changes in Revenue by Product Type

	FY21 from FY20
	Revenue in FY21		Increase (Decrease)			Percent Change
IC
High-end*	$	163.0	$	6.8			4.4	%
Mainstream		297.2		34.9			13.3	%
Total IC	$	460.2	$	41.8			10.0	%
FPD
High-end*	$	155.7	$	16.1			11.5	%
Mainstream		47.9		(3.8	)		(7.4	)%
Total FPD	$	203.6	$	12.3			6.4	%
Total Revenue	$	663.8	$	54.1			8.9	%

* High-end photomasks typically have higher ASPs than mainstream photomasks.

Year-over-Year Changes in Revenue by Geographic Origin**

	FY21 from FY20
	Revenue in FY21		Increase (Decrease)		Percent Change
Taiwan	$	248.6	$	9.5		4.0	%
Korea		156.4		3.3		2.2	%
China		115.7		36.4		45.8	%
United States		105.0		0.1		0.1	%
Europe		36.2		4.7		15.0	%
Other		1.8		0.1		3.6	%
Total Revenue	$	663.8	$	54.1		8.9	%

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

Revenue increased 8.9% in YTD FY21, compared with YTD FY20, to $663.8 million. IC revenue increased 10.0%, due to both improved pricing for mainstream photomasks, and improved pricing and increased demand for high-end masks at the largest node levels. We believe that the increased demand for high-end photomasks at the largest node levels may be indicative of a trend towards chipmakers differentiating their products through the design of application specific integrated circuits (“ASIC”), in lieu of migrating to smaller tech-node photomasks. FPD revenue increased 6.4% from YTD FY20, due to both increased demand and improved pricing for AMOLED photomasks and, to a lesser extent, LTPS photomasks.

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Gross Margin

										Percent Change
	Q4 FY21			Q3 FY21			Q4 FY20			Q4 FY21 from Q3 FY21			Q4 FY21 from Q4 FY20
Gross profit	$	51.9		$	45.3		$	31.9			14.6	%		62.9	%
Gross margin		28.7	%		26.6	%		21.4	%

Gross margin increased by 2.1 percentage points in Q4 FY21, from Q3 FY21, primarily as a result of the increase in revenue from the prior quarter. Material costs increased 3.4% from the prior quarter, but decreased, as a percentage of revenue, by 80 basis points. Labor costs decreased 0.3% and fell 70 basis points, as a percentage of revenue. Equipment and other overhead costs increased 4.3%, but decreased 60 basis points as a percentage of revenue, with higher outsourced manufacturing costs, partially offset by decreased equipment maintenance costs, most significantly contributing to the net cost increase.

Gross margin increased by 7.3 percentage points in Q4 FY21, from Q4 FY20, primarily as a result of the increase in revenue from the prior year quarter. Material costs increased 14.7% from the prior year quarter, but decreased 160 basis points, as a percentage of revenue. Labor costs increased 10.9% from the prior year quarter, but fell 100 basis points as a percent of revenue, while equipment and other overhead costs rose 6.3%, but fell 460 basis points, as a percentage of revenue. Increased outsourced manufacturing costs and equipment service contract costs were the most significant contributors to the rise in equipment and other overhead costs.

	FY21			FY20			Percent Change FY21 from FY20
Gross profit	$	167.0		$	134.7			24.1	%
Gross margin		25.2	%		22.1	%

Gross margin increased by 3.1 percentage points in YTD FY21, from YTD FY20, primarily as a result of the increase in revenue from the prior year period. Material costs increased 6.2% from the prior year period, but decreased 70 basis points as a percentage of revenue. Labor costs increased 10.7% from the prior year, but rose only 10 basis points when compared to revenue. Equipment and other overhead costs increased by 1.2%, but decreased 250 basis points as a percentage of revenue, with increased equipment service contract costs most significantly contributing to the overall cost increase.

As we operate in a high fixed cost environment, increases or decreases in our revenues and capacity utilization will generally positively or negatively impact our gross margin.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $14.3 million in Q4 FY21, compared with $15.1 million in Q3 FY21, and $12.8 million in Q4 FY20. The decrease from Q3 FY21 was primarily the result of decreased professional fees of $0.3 million and compensation and related expenses of $0.2 million, and the increase from the prior year quarter was primarily the result of increased compensation and related expenses of $1.7 million and increased export duties (primarily incurred in Asia) of $0.2 million; these increases were partially offset by decreased professional fees of $0.9 million. Selling, general and administrative expenses increased $3.9 million, or 7.4%, in YTD FY21, from YTD FY20, primarily due to an increase in compensation and related expenses of $3.9 million.

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Research and Development Expenses

Research and development expenses, which primarily consist of development and qualification efforts related to high-end process technologies for high-end IC and FPD applications, were $4.1 million in Q4 FY21, compared with $5.3 million in Q3 FY21; the decrease was primarily caused by a decline in development activities in the U.S.  Research and development expenses in Q4 FY21 were unchanged from Q4 FY20. On a year-to-date basis, research and development expenses increased $1.3 million, primarily due to increased development activities in the U.S. exceeding a decline in such activities at our China-based FPD facility.

Other Operating Income, Net

In the third quarter of 2021, we recorded a $3.5 million gain on the trade-in of a lithography tool with a tool vendor as partial compensation for a more advanced tool.

Non-Operating Income (Expense)

	Q4 FY21			Q3 FY21			Q4 FY20
Foreign currency transactions impact, net	$	4.3		$	4.3		$	(2.2	)
Interest expense, net		(1.0	)		(1.1	)		(0.8	)
Interest income and other income, net		0.5			0.5			0.1
Total other income (expense)	$	3.8		$	3.7		$	(2.9	)

Non-operating income and expense was essentially unchanged in Q4 FY21 from Q3 FY21, primarily due to favorable movements of the RMB against the U.S. dollar offsetting unfavorable movements of the South Korean won against the U.S. dollar, and interest expense, net decreasing due to our reduced loan and finance lease balances. Non-operating income and expense changed favorably from a loss of $2.9 million in Q4 FY20 to income of $3.8 million in Q4 FY21. The $6.7 million favorable change was primarily due to favorable movements of the New Taiwan dollar and the South Korean won against the U.S. dollar, which were partially offset by unfavorable movements of the RMB against the U.S. dollar.

	FY21			FY20
Foreign currency transactions impact, net	$	8.0		$	(0.5	)
Interest expense, net		(1.7	)		(2.4	)
Interest income and other income, net		1.2			0.5
Total other income (expense)	$	7.5		$	(2.3	)

Non-operating income and expense increased $9.8 million in YTD FY21, compared with YTD FY20, primarily due to favorable movements of the South Korean won and the RMB against the U.S. dollar. Interest expense, net decreased year over year, due to a lower weighted-average interest rate on our debt, which offset a year over year increase in our average debt balance.

Income Tax Provision

	Q4 FY21			Q3 FY21			Q4 FY20
Income tax provision	$	8.7		$	7.8		$	3.5
Effective income tax rate		23.3	%		24.4	%		28.8	%

The effective income tax rates are sensitive to the jurisdictional mix of our earnings, due, in part, to the non-recognition of tax provisions and benefits on losses in jurisdictions with valuation allowances.

31

The effective income tax rate decreased slightly in Q4 FY21, compared with Q3 FY21, primarily due to changes in the period-to-period mix of jurisdictional earnings. The effective income tax rate decrease in Q4 FY21, compared with Q4 FY20, is primarily due to the benefits of investment credits in certain non-U.S. jurisdictions in Q4 FY21, as well as changes in the jurisdictional mix of earnings.

	FY21			FY20
Income tax provision	$	23.2		$	21.3
Effective income tax rate		22.7	%		34.5	%

The decrease in the effective income tax rate on a full-year basis in FY21, compared with FY20, is primarily due to the establishment of a valuation allowance for a loss carryforward in a non-U.S. jurisdiction in YTD-FY20, as well as changes in the jurisdictional mix of earnings.

We consider all available evidence when evaluating the potential future realization of deferred tax assets, and when, based on the weight of all available evidence, we determine that it is more likely than not that some portion or all of our deferred tax assets will not be realized, we reduce our deferred tax assets by a valuation allowance. We also regularly assess the potential outcomes of ongoing and future tax examinations and, accordingly, have recorded accruals for such contingencies. Included in the balance of unrecognized tax benefits as of October 31, 2021 and October 31, 2020, are $3.8 million and $2.0 million respectively, recorded in Other liabilities in the consolidated balance sheets that, if recognized, would impact the effective tax rates.

Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests was $8.8 million in Q4 FY21, compared with $7.3 million in Q3 FY21, and $2.1 million in Q4 FY20. On a year-to-date basis, net income attributable to noncontrolling interests increased $16.8 million from $6.5 million in YTD FY20 to $23.4 million in YTD FY21. All of these increases resulted from improved net income at both our Taiwan-based and China-based IC facilities.

Liquidity and Capital Resources

Cash and cash equivalents totaled $276.7 million and $278.7 million as of October 31, 2021 and October 31, 2020, respectively. As of the most recent balance sheet date, total cash and cash equivalents included $216.5 million held by foreign subsidiaries. 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 facility since 2011, it continues to afford us financial flexibility. In addition, in China, we currently have approximately $22.9 million of borrowing capacity to support local operations. Please refer to Note 7 to the consolidated financial statements for additional information on our current borrowing capacity.

We continually evaluate alternatives for efficiently funding our capital expenditures and ongoing operations. These reviews may result in our engagement in a variety of 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, 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. In addition, we stand ready to invest in mergers, acquisitions, or strategic partnerships, should the right opportunity be available.

We estimate capital expenditures for our fiscal year 2022 will be approximately $100 million; these investments will be targeted towards high-end and mainstream point tools that will increase our operating capacity and efficiency, and enable us to support our customers’ near-term demands. As of October 31, 2021, we had outstanding capital commitments of approximately $73.7 million and recognized liabilities related to capital equipment purchases of approximately $9.7 million. Although payment timing could vary, primarily as a result of the timing of tool installation and testing, we currently estimate that we will fund $61.4 million of our total $83.4 million committed and recognized obligations for capital expenditures over the next twelve months. Please refer to Notes 9 and 14 to our consolidated financial statements for additional information on our lease liabilities and unrecognized commitments, respectively.

32

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 October 31, 2021, there was approximately $34.3 million remaining under that authorization. Depending on market conditions, we may utilize some or the entire remaining approved amount to reacquire additional shares.

Cash Flows

	Year Ended
	October 31, 2021			October 31, 2020			October 31, 2019
Net cash provided by operating activities	$	150.8		$	143.0		$	68.4
Net cash used in investing activities	$	(103.5	)	$	(65.7	)	$	(151.4	)
Net cash used in financing activities	$	(53.9	)	$	(16.0	)	$	(42.1	)

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 effects of changes in operating assets and liabilities. Net cash provided by operating activities increased by $7.7 million in 2021, compared with 2020, due to increased net income and share based compensation, partially offset by lower depreciation and other noncash adjustments and net changes in working capital, predominantly in Asia.

Investing Activities:  Net cash flows used in investing activities primarily consisted of purchases of property, plant and equipment. Purchases of property, plant and equipment were $109.1 million in 2021, compared with $70.8 million in 2020, as we increased our tool purchases in the current year, primarily in response to market demands in Asia.

Financing Activities: Net cash flows used in financing activities primarily consist of share repurchases, proceeds from and repayments of debt, and contributions from and distributions to noncontrolling interests. Net cash used in financing activities increased by $37.9 million in 2021, compared with 2020, due to increased share repurchases of $13.9 million, an excess of the change in distributions to, as compared with contributions from, noncontrolling interests of $11.0 million, and increased debt repayments of $13.0 million.

In January 2018, Photronics, through its wholly owned Singapore subsidiary, 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 leading edge and advanced generation semiconductors. Under the joint venture’s operating 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 operating agreement that cannot be resolved between the two parties. As of the date of issuance of this report, 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 20% 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. Should DNP exercise an option to put their, or purchase our, interest in PDMCX we may, depending on the relationship of the fair and book value of PDMCX’s net assets, incur a loss. As of October 31, 2021, Photronics and DNP each had net investments in PDMCX of approximately $64.0 million.

33

Business Outlook

Our current business outlook and guidance was provided in our Full Year and Fourth Quarter Fiscal 2021 Results earnings call, and related slide deck. 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 our Full Year and Fourth Quarter Fiscal 2021 Results earnings call and presentation involve a number of risks and uncertainties, some of which are discussed in Part I, Item 1A of this report. A number of other unforeseeable factors could cause actual results to differ materially from our expectations.

Critical Accounting Estimates

Our consolidated financial statements are based on the selection and application of accounting policies, which require management to make significant estimates and assumptions. We believe the following to be the more critical areas that require judgment when applying our accounting policies:

• Revenue Recognition: Application of GAAP related to the measurement and recognition of revenue requires us to make judgments and estimates. Specifically, the determination of whether revenues related to our revenue contracts should be recognized over time or at a point in time, as these determinations impact the timing and amount of our reported revenues and net income. Other significant judgments include the estimation of the point in the manufacturing process at which we are entitled to receive payment, as well as the progress of the job order to completion in order to determine the amount of arrangement consideration earned for contractual revenue recognized over time.

• Property, Plant and Equipment: Significant judgment and assumptions are employed when we establish estimated useful lives, depreciation periods and when depreciation should begin on such assets as this evaluation can significantly impact our gross margin and research and development expenses. Significant judgement is also required when we periodically review property, plant and equipment for any potential impairment in carrying values, whenever events such as a significant industry downturn, plant closures, technological obsolescence, or other change in circumstances indicate that their carrying amounts may not be recoverable as the recoverability assessment requires us to forecast future cash flows related to these assets; this evaluation can significantly impact our gross margin and operating expense.

• Leases: Significant judgement is applied in the determination of whether an arrangement is, or contains, a lease and, in certain instances, whether the lease should be classified as an operating lease or a finance lease, which can impact the timing and classification of lease costs.

• Contingencies: We are subject to the possibility of losses from various contingencies. Significant judgment is necessary to estimate the probability and amount of a loss, if any, from such contingencies. An accrual is made when it is probable that a liability has been incurred or an asset has been impaired and the amount of loss can be reasonably estimated. In accounting for the resolution of contingencies, significant judgment may be necessary to estimate amounts pertaining to periods prior to the resolution that are charged to operations in the period of resolution and amounts related to future periods.

• Income Taxes:  Our annual tax rate is determined based on our income and the jurisdictions where it is earned, statutory tax rates, and the tax impacts of items treated differently for tax purposes than for financial reporting purposes. Also inherent in determining our annual tax rate are judgments and assumptions regarding the recoverability of certain deferred tax balances, and our ability to uphold certain tax positions. We are subject to complex tax laws, in the U.S. and numerous foreign jurisdictions, and the manner in which they apply can be open to interpretation. Realization of deferred tax assets is dependent upon generating sufficient taxable income in the appropriate jurisdiction in future periods, which involves business plans, planning opportunities, and expectations about future outcomes. Our assessment relies on estimates and assumptions, and may involve a series of complex judgments about future events.

34

There are a number of estimates and assumptions inherent in calculating the various components of our tax provision. Future events such as changes in tax legislation, geographic mix of earnings, completion of tax audits or earnings repatriation plans could have an impact on those estimates and our effective tax rate.

Please refer to Notes 3, 8, 9, 12 and 14 to our consolidated financial statements in Part II, Item 8 for additional information related to these critical accounting estimates and our other significant accounting policies.

Effect of Recent Accounting Pronouncements

See “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 21 Recent Accounting Pronouncements” for recent accounting pronouncements that may affect our financial reporting.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Exchange Rate Risk

We conduct business in several major 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 Chinese renminbi and the Singapore dollar. The functional currencies of our European subsidiaries are the British pound and the euro. In addition, we engage in transactions 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. In addition, to the extent practicable, we attempt to reduce our exposure to foreign currency exchange fluctuations by converting cash and cash equivalents into the functional currency of the subsidiary which holds the cash. We may also enter into derivative contracts to mitigate our exposure to foreign currency fluctuations when we have a significant purchase obligation or 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 October 31, 2021, included the South Korean won, the Japanese yen, the New Taiwan dollar, the Chinese renminbi, the Singapore dollar, the British pound sterling, and the euro. As of October 31, 2021, a 10% adverse movement in the value of these currencies against the functional currencies of our subsidiaries would have resulted in a net unrealized pre-tax loss of $35.2 million, which represents an increase of $3.3 million from the same movement as of October 31, 2020. The increase in foreign currency rate change risk is primarily the result of increased net exposures of the New Taiwan dollar and the RMB against the U.S. dollar. We do not believe that a 10% change in the exchange rates of other non-U.S. dollar currencies would have had a material effect on our October 31, 2021, consolidated financial statements.

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 October 31, 2021, consolidated financial statements.

35

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
	Page
Report of Independent Registered Public Accounting Firm	37
Consolidated Balance Sheets	39
Consolidated Statements of Income	40
Consolidated Statements of Comprehensive Income	41
Consolidated Statements of Equity	42
Consolidated Statements of Cash Flows	43
Notes to Consolidated Financial Statements	44

36

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Photronics, Inc.

Opinions on the Financial Statements

We have audited the accompanying consolidated balance sheets of Photronics, Inc. (the "Company") as of October 31, 2021, and October 31, 2020, the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the three years in the period ended October 31, 2021, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of October 31, 2021, and October 31, 2020, and the results of its operations and its cash flows for each of the three years in the period ended October 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of October 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated December 17, 2021, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinions

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinions.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue — Contracts with Customers— Refer to Note 8 to the financial statements

Critical Audit Matter Description

The Company recognizes revenue over time for in-process production orders that have not shipped for contracts with customers for which it has an enforceable right to bill and collect consideration, inclusive of a reasonable profit, in the event the in-process orders are cancelled by the customers. This results in the Company recording a corresponding contract asset as of period end for these contracts. Significant judgment is exercised by the Company in determining the amount of revenue to recognize for these contracts and the corresponding contract asset, specifically in estimating the point within the production cycle at which the production orders stand in relation to the Company’s enforceable right within the contract. Pursuant to these contracts, the contract asset associated with revenue recognized over time as of October 31, 2021, was $9.9 million.

37

We identified the determination of revenue recognized over time for in-process productions orders as of October 31, 2021 as a critical auditing matter because of the significant estimates and assumptions management makes in determining the amount of revenue to recognize for these contracts. This required a high degree of audit judgment and an increased extent of effort when performing audit procedures to evaluate the reasonableness of management’s determination of the progress point of in-process orders and the amount of revenue recognized over time and the corresponding contract asset as of October 31, 2021.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the Company’s determination of the progress point of in-process orders and resulting revenue recognized over time and corresponding contract asset as of October 31, 2021 included the following:

- We tested the operating effectiveness of controls over management’s determination of the point in the production process and correlation to stated contractual rights.

- We tested the mathematical accuracy of management’s calculations of revenue and the associated timing of revenue recognized in the consolidated financial statements.

- We selected a sample of in-process production orders as of October 31, 2021, and performed the following procedures for each selection:

- Obtained and read the contract.

- Physically observed existence of the in-process production order.

- Tested management’s identification of significant contract terms and resulting revenue recognition for the in-process production order.

- Tested management estimate of the production point for the in-process order and corresponding revenue recognition and contract asset based on the Company’s enforceable right within the contract.

/s/ Deloitte & Touche LLP

Boston, Massachusetts

December 17, 2021

We have served as the Company’s auditor since 1991.

38

PHOTRONICS, INC.

Consolidated Balance Sheets

(in thousands, except per share amounts)

	October 31, 2021		October 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	276,670	$	278,665
Accounts receivable, net of allowance of $1,218 in 2021 and $1,324 in 2020		174,447		134,470
Inventories		55,249		57,269
Other current assets		44,250		29,735
Total current assets		550,616		500,139
Property, plant and equipment, net		696,553		631,475
Intangible assets, net		774		3,437
Deferred income taxes		24,353		22,070
Other assets		21,906		31,061
Total assets	$	1,294,202	$	1,188,182
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt	$	-	$	4,708
Current portion of long-term debt		22,248		8,970
Accounts payable		81,534		75,378
Accrued liabilities		72,366		53,883
Total current liabilities		176,148		142,939
Long-term debt		89,446		54,980
Other liabilities		28,046		27,997
Total liabilities		293,640		225,916
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, 60,024 shares issued and outstanding at October 31, 2021, and 63,138 shares issued and outstanding at  October 31, 2020		600		631
Additional paid-in capital		484,672		507,336
Retained earnings		317,849		279,037
Accumulated other comprehensive income		20,571		17,958
Total Photronics, Inc. shareholders' equity		823,692		804,962
Noncontrolling interests		176,870		157,304
Total equity		1,000,562		962,266
Total liabilities and equity	$	1,294,202	$	1,188,182
See accompanying notes to consolidated financial statements.

39

PHOTRONICS, INC.

Consolidated Statements of Income

(in thousands, except per share amounts)

	Year Ended
	October 31, 2021			October 31, 2020			October 31, 2019
Revenue	$	663,761		$	609,691		$	550,660
Cost of goods sold		496,717			475,037			429,819
Gross profit		167,044			134,654			120,841
Operating expenses:
Selling, general and administrative		57,525			53,582			52,326
Research and development		18,490			17,144			16,394
Total operating expenses		76,015			70,726			68,720
Other operating income, net		3,525			-			-
Operating income		94,554			63,928			52,121
Non-operating income (expense):
Foreign currency transactions’ impacts, net		7,972			(501	)		(1,266	)
Interest expense, net		(1,685	)		(2,367	)		(1,425	)
Interest income and other income, net		1,165			541			1,271
Income before income tax provision		102,006			61,601			50,701
Income tax provision		23,190			21,258			10,210
Net income		78,816			40,343			40,491
Net income attributable to noncontrolling interests		23,367			6,523			10,698
Net income attributable to Photronics, Inc. shareholders	$	55,449		$	33,820		$	29,793
Earnings per share:
Basic	$	0.90		$	0.52		$	0.45
Diluted	$	0.89		$	0.52		$	0.44
Weighted-average number of common shares outstanding:
Basic		61,407			64,866			66,347
Diluted		61,999			65,470			69,155

See accompanying notes to consolidated financial statements.

40

PHOTRONICS, INC.

Consolidated Statements of Comprehensive Income

(in thousands)

	Year Ended
	October 31, 2021			October 31, 2020			October 31, 2019
Net income	$	78,816		$	40,343		$	40,491
Other comprehensive income (loss), net of tax of $0:
Foreign currency translation adjustments		8,478			36,381			(2,877	)
Other		(69	)		(390	)		(74	)
Net other comprehensive income (loss)		8,409			35,991			(2,951	)
Comprehensive income		87,225			76,334			37,540
Less: comprehensive income attributable to noncontrolling interests		29,163			15,551			11,786
Comprehensive income attributable to Photronics, Inc. shareholders	$	58,062		$	60,783		$	25,754

See accompanying notes to consolidated financial statements.

41

PHOTRONICS, INC.

Consolidated Statements of Equity

Years Ended October 31, 2021, October 31, 2020 and October 31, 2019

(in thousands)

	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, 2019		69,700		$	697		$	555,606		$	231,445		$	(23,111	)	$	(4,966	)	$	144,898		$	904,569
Adoption of ASU 2014-09		-			-			-			1,083			-			-			121			1,204
Adoption of ASU 2016-16		-			-			-			(1,130	)		-			-			(3	)		(1,133	)
Net income		-			-			-			29,793			-			-			10,698			40,491
Other comprehensive (loss) income		-			-			-			-			-			(4,039	)		1,088			(2,951	)
Shares issued under equity plans		586			6			2,524			-			-			-			-			2,530
Share-based compensation expense		-			-			3,680			-			-			-			-			3,680
Contribution from noncontrolling interest		-			-			-			-			-			-			29,394			29,394
Dividends to noncontrolling interest		-			-			-			-			-			-			(44,939	)		(44,939	)
Repurchase of common stock of subsidiary		-			-			-			-			-			-			(57	)		(57	)
Purchases of treasury stock		-			-			-			-			(21,696	)		-			-			(21,696	)
Retirement of treasury stock		(4,691	)		(47	)		(37,491	)		(7,269	)		44,807			-			-			-
Balance at October 31, 2019		65,595			656			524,319			253,922			-			(9,005	)		141,200			911,092
Net income		-			-			-			33,820			-			-			6,523			40,343
Other comprehensive income		-			-			-			-			-			26,963			9,028			35,991
Shares issued under equity plans		737			7			3,492			-			-			-			-			3,499
Share-based compensation expense		-			-			4,927			-			-			-			-			4,927
Contribution from noncontrolling interest		-			-			-			-			-			-			17,596			17,596
Dividends to noncontrolling interest		-			-			-			-			-			-			(16,151	)		(16,151	)
Repurchase of common stock of subsidiary		-			-			255			-			-			-			(892	)		(637	)
Purchases of treasury stock		-			-			-			-			(34,394	)		-			-			(34,394	)
Retirement of treasury stock		(3,194	)		(32	)		(25,657	)		(8,705	)		34,394			-			-			-
Balance at October 31, 2020		63,138			631			507,336			279,037			-			17,958			157,304			962,266
Net income		-			-			-			55,449			-			-			23,367			78,816
Other comprehensive income		-			-			-			-			-			2,613			5,796			8,409
Shares issued under equity plans		805			8			3,561			-			-			-			-			3,569
Share-based compensation expense		-			-			5,348			-			-			-			-			5,348
Dividends to noncontrolling interest		-			-			-			-			-			-			(9,597	)		(9,597	)
Purchases of treasury stock		-			-			-			-			(48,249	)		-			-			(48,249	)
Retirement of treasury stock		(3,919	)		(39	)		(31,573	)		(16,637	)		48,249			-			-			-
Balance at October 31, 2021		60,024		$	600		$	484,672		$	317,849		$	-		$	20,571		$	176,870		$	1,000,562

See accompanying notes to consolidated financial statements.

42

PHOTRONICS, INC.

Consolidated Statements of Cash Flows

(in thousands)

	Year Ended
	October 31, 2021			October 31, 2020			October 31, 2019
Cash flows from operating activities:
Net income	$	78,816		$	40,343		$	40,491
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property, plant and equipment		87,535			89,171			79,238
Amortization of intangible assets		2,861			4,643			4,641
Share-based compensation		5,348			4,927			3,680
Deferred income taxes		(2,110	)		(444	)		(3,662	)
Changes in assets, liabilities, and other:
Accounts receivable		(36,620	)		6,986			(12,321	)
Inventories		2,987			(6,938	)		(23,088	)
Other current assets		(13,472	)		7,849			(8,631	)
Accounts payable, accrued liabilities and other		25,427			(3,491	)		(11,962	)
Net cash provided by operating activities		150,772			143,046			68,386
Cash flows from investing activities:
Purchases of property, plant and equipment		(109,099	)		(70,815	)		(178,375	)
Government incentives		5,775			5,263			27,003
Purchases of intangible assets		(170	)		(159	)		(95	)
Other		-			-			61
Net cash used in investing activities		(103,494	)		(65,711	)		(151,406	)
Cash flows from financing activities:
Proceeds from debt		20,858			20,340			54,633
Purchases of treasury stock		(48,249	)		(34,394	)		(21,696	)
Repayments of debt		(20,352	)		(7,392	)		(61,319	)
Dividends paid to noncontrolling interests		(9,597	)		(16,151	)		(45,050	)
Proceeds from share-based arrangements		3,874			4,239			2,071
Contributions from noncontrolling interests		-			17,596			29,394
Other		(437	)		(248	)		(92	)
Net cash used in financing activities		(53,903	)		(16,010	)		(42,059	)
Effects of exchange rate changes on cash, cash equivalents, and restricted cash		4,703			10,986			2,381
Net (decrease) increase in cash, cash equivalents, and restricted cash		(1,922	)		72,311			(122,698	)
Cash, cash equivalents, and restricted cash at beginning of year		281,602			209,291			331,989
Cash, cash equivalents, and restricted cash at end of year		279,680			281,602			209,291
Less: Ending restricted cash		3,010			2,937			2,761
Cash and cash equivalents at end of year	$	276,670		$	278,665		$	206,530
Supplemental disclosure of non-cash information:
Accrual for property, plant and equipment purchased during year	$	7,794		$	13,062		$	13,671

See accompanying notes to consolidated financial statements.

43

PHOTRONICS, INC.

Notes to Consolidated Financial Statements

Years Ended October 31, 2021, October 31, 2020 and October 31, 2019

(in thousands, except share amounts)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

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 integrated circuits, a variety of FPDs and, to a lesser extent, other types of electrical and optical components. We currently have eleven manufacturing facilities, which are located in Taiwan (3), Korea, the United States (3), Europe (2), and China (2). Our FPD facility in Hefei, China, commenced production in the second quarter of 2019, and our IC facility in Xiamen, China, commenced production in the third quarter of 2019.

Consolidation

The accompanying consolidated financial statements include the accounts of Photronics, Inc., its wholly owned subsidiaries, and the majority-owned subsidiaries which it controls. All intercompany balances and transactions have been eliminated in consolidation.

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 are based on historical experience and on various assumptions that are believed to be reasonable, including estimates of the impact of COVID 19, based on the facts and circumstances available 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.

Reclassifications

In 2021, we separated share-based compensation activity into the two categories of Shares issued under equity plans and Share-based compensation expense in the consolidated statements of equity; in previous reports, we separated this activity into three categories. Reclassified prior period amounts have been made to conform to the current period presentation.

Cash and Cash Equivalents

Cash and cash equivalents include cash and highly liquid investments with an original maturity of three months or less, readily convertible to known amounts of cash, and so near to their maturity that they present insignificant risk of changes in value because of changes in interest rates. The carrying values of cash equivalents approximate their fair values, due to the short-term maturities of these instruments.

Accounts Receivable and Allowance for Credit Losses

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 that 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. Refer to our revenue recognition policy, below, for additional information on our accounting for accounts receivable.

44

On November 1, 2020, we adopted ASU 2016-13 – “Measurement of Credit Losses” (“ASU 2016-13) which replaced the incurred loss model (which was required to be used to measure credit losses under previous accounting guidance) with an expected credit loss model. Our adoption of ASU 2016-13 did not have a material effect on our financial statements.

Inventories

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

	October 31, 2021		October 31, 2020
Raw materials	$	54,019	$	56,389
Work in process		1,121		767
Finished goods		109		113
	$	55,249	$	57,269

Property, Plant and Equipment

Property, plant and equipment, except as explained below under "Impairment of Long-Lived Assets," is stated at cost less accumulated depreciation and amortization. Repairs and maintenance, as well as renewals and replacements of a routine nature, are charged to operations as incurred, while those that improve or extend the lives of existing assets are capitalized. Upon sale or other disposition, the cost of the asset and its related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in earnings.

Depreciation and amortization, essentially all of which are included in Cost of goods sold in our consolidated statements of income, are computed using the straight-line method over the estimated useful lives of the related assets. Buildings and improvements are depreciated over 10 to 39 years, machinery and equipment over 5 to 15 years, and furniture, fixtures, and office equipment over 3 to 5 years. Leasehold improvements are amortized over the life of the lease or the estimated useful life of the improvement, whichever is less. We employ judgment and assumptions when we establish estimated useful lives and depreciation periods, as well as when we periodically review property, plant, and equipment for any potential impairment in carrying values, whenever events such as a significant industry downturn, plant closures, technological obsolescence, or other change in circumstances indicate that their carrying amounts may not be recoverable.

Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determinations of recoverability are based upon our judgment and estimates of undiscounted future cash flows resulting from the use of the assets and their eventual disposition. Measurement of an impairment loss for long-lived assets that we expect to hold and use is based on the fair value of the assets, determined using a market or income approach, compared with the carrying value of the asset. The carrying values of assets determined to be impaired would be reduced to their estimated fair values.

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Intangible Assets

Intangible assets are stated at fair value as of the date acquired, less accumulated amortization. Amortization is calculated based on the estimated useful lives of the assets, which range from 3 to 15 years, using the straight-line method or another method that more fairly represents the utilization of the assets.

We periodically evaluate the remaining useful lives of our intangible assets to determine whether events or circumstances warrant a revision to the remaining periods of amortization. In the event that the estimate of an intangible asset’s remaining useful life has changed, the remaining carrying amount of the intangible asset is amortized prospectively over that revised remaining useful life. If it is determined that an intangible asset has an indefinite useful life, that intangible asset would be subject to impairment testing annually or whenever events or circumstances indicate that its carrying value may not, based on future undiscounted cash flows or market factors, be recoverable. An impairment loss, the recorded amount of which would be based on the fair value of the intangible asset at the measurement date, would be recorded in the period in which the impairment determination was made.

Restricted Cash

Restricted cash in the amounts of $3.0 million and $2.9 million are included in Other assets on our October 31, 2021 and October 31, 2020, consolidated balance sheets, respectively. The restrictions on these amounts are primarily related to land lease agreements and customs requirements.

Treasury Stock

We record treasury stock purchases under the cost method, recording the entire cost of the acquired stock as treasury stock. Gains and losses on subsequent reissuances would be credited or charged to additional paid-in capital, and we would employ the average cost method (with average cost being determined separately for each share repurchase program), in the event that we subsequently reissue shares.

Revenue Recognition

 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 governmental 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 is resolved.

46

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 to customers 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. Contract assets of $9.9 million are included in Other current assets, and contract liabilities of $14.7 million and $5.2 million are included in Accrued liabilities and Other liabilities, respectively, in our October 31, 2021, consolidated balance sheet. Our October 31, 2020, condensed consolidated balance sheet includes contract assets of $6.3 million, included in Other current assets, and contract liabilities of $8.0 and $5.2 million, included in Accrued liabilities and Other liabilities, respectively. We did not impair any contract assets in 2021, 2020, or 2019. In 2021, 2020, and 2019, we recognized revenue of $5.3 million, $2.8 million, and $1.3 million, respectively, from the settlement of contract liabilities that existed at the beginning of those years.

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’ve received from customers have generally not preceded the completion of our performance obligations by more than one year.

Contract Costs

 We pay commissions to third-party sales agents for certain sales that 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 would 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 such assets.

 Remaining Performance Obligations

 As we are typically required to fulfill customer orders within a short time period, our backlog of orders is generally not in excess of one to two weeks for IC photomasks and two to three weeks for FPD photomasks. 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 we 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.

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Leases

We adopted ASU 2016-02 - “Leases (Topic 842)” (“Topic 842”) on November 1, 2019. As allowed by the guidance, we elected to adopt ASU 2016-02 using the modified retrospective method at the beginning of the period of adoption; our adoption resulted in our recognition of $6.5 million of ROU assets and $6.5 million of lease liabilities on our opening 2020 balance sheet. At the time of transition, we elected a number of practical expedients offered by the guidance, which are described in Note 9. The following discussion is germane to our accounting for leases under Topic 842.

We determine if an arrangement is, or contains a lease, at the inception of the arrangement. An arrangement is determined to be a lease when it conveys to us the right to control the use of an identified asset for a period of time in exchange for consideration. Our determination as to whether we have the right to control the use of an identified asset centers on whether the arrangement conveys to us the rights to 1) obtain substantially all of the economic benefits of the identified asset and 2) direct the use of the identified asset.

If an arrangement is determined to be, or include, a lease, we then apply the classification criteria in Topic 842 to determine whether the lease is a finance lease or an operating lease. For both types of leases, at their commencement dates (which are the dates on which a lessor makes an underlying asset available for our use), we recognize ROU assets, which represent our use of the underlying assets, and lease liabilities which represent our obligation to make payments for our right to use the related assets. The initial measurement process for both types of leases is the same, except that, for operating leases, we generally apply our incremental borrowing rate for collateralized borrowings over terms similar to the lease’s terms to determine the lease liability, while for finance leases, we use the interest rates implicit in the leases. The initial measurement of ROU assets may require further adjustments for lease prepayments and initial direct costs we incur. As allowed under Topic 842, we elected not to recognize short-term leases, which are defined as leases that have a term (at their commencement dates) of twelve months or less and do not include an option to purchase the underlying asset that we are reasonably certain to exercise.

Operating leases are expensed on a straight-line basis over the terms of the leases, and are included in the consolidated statement of income in Cost of goods sold, Selling, general and administrative, or Research and development expense in accordance with the use of the underlying asset. Finance lease ROU assets are amortized over the estimated useful life of the underlying asset; the expense is included in the consolidated statement of income in Cost of goods sold. Finance lease liabilities are subsequently remeasured by increasing the liability to reflect interest accrued during a period and decreasing the liability to reflect payments made during the period. Interest expense incurred on finance leases is included in Interest expense on the consolidated statements of income.

Cash paid for operating leases and interest paid for finance leases are included in the consolidated statement of cash flows as operating activities in Accounts payable, accrued liabilities and other; cash paid for finance lease principal is included in Repayments of debt in the financing activities section of the consolidated statement of cash flows.

Share-Based Compensation

We recognize share-based compensation expense over the service period during which the awards are expected to vest. Share-based compensation expense includes the estimated effects of forfeitures, which are adjusted over the requisite service period to the extent actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures are recognized in the period of change and will impact the amount of expense to be recognized in future periods. Determining the appropriate option pricing model, calculating the grant date fair value of share-based awards, and estimating forfeiture rates requires considerable judgment, including estimations of stock price volatility and the expected term of options granted.

We use the Black-Scholes option pricing model to value employee stock options. We estimate stock price volatility based on daily averages of our common stock’s historical volatility over a term approximately equal to the estimated time period the grant will remain outstanding. The expected term of options and forfeiture rate assumptions are derived from historical data.

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Research and Development

Research and development costs are expensed as incurred and consist primarily of development efforts related to high-end process technologies for advanced subwavelength reticle solutions for IC and FPD photomask technologies.

Foreign Currency Translation

Our non-U.S. subsidiaries maintain their accounts in their respective local currencies. Assets and liabilities of such subsidiaries are translated to U.S. dollars at year-end exchange rates. Income and expenses are translated at average rates of exchange prevailing during the year. Foreign currency translation adjustments are accumulated and reported in Accumulated other comprehensive income, a component of equity on our consolidated balance sheets.

Government Grants

 We account for funds we receive from government grants by reducing the costs of the assets or expenses to which we apply the funds. Funds we receive that cannot be attributed to specific assets or expenses would be recognized as other income, and included in Interest income and other income (expense), net in the consolidated statements of income. Funds we receive from government grants are classified in our consolidated statements of cash flows as either cash flows from operating activities or cash flows from investing activities, in accordance with how we expend the funds.

Income Taxes

The income tax provision is computed on the basis of the income or loss before income taxes for each entity in its respective tax jurisdiction. Deferred income taxes reflect the tax effects of differences between the carrying amounts of assets and liabilities for financial reporting purposes and their amounts used for income tax purposes, as well as the tax effects of net operating losses and tax credit carryforwards. We use judgment and make assumptions to determine if valuation allowances for deferred income tax assets are required, if their realization is not more likely than not, by considering future market growth, operating forecasts, future taxable income, and the mix of earnings among the tax jurisdictions in which we operate. Accordingly, income taxes charged against earnings may have been impacted by changes in the valuation allowances.

We consider income taxes in each of the tax jurisdictions in which we operate in order to determine our effective income tax rate. Our current income tax expense is thus identified, and temporary differences resulting from differing treatments of items for tax and financial reporting purposes are assessed. These differences result in deferred tax assets and liabilities, which are included in our consolidated balance sheets.

We account for uncertain tax positions by recording a liability for unrecognized tax benefits resulting from uncertain tax positions taken, or expected to be taken, in our tax returns. We include any applicable interest and penalties related to uncertain tax positions in our income tax provision.

Earnings Per Share

Basic earnings per share (“EPS”) is based on the weighted-average number of common shares outstanding for the period, excluding any dilutive common share equivalents. Diluted EPS reflects the potential dilution that could occur if certain share-based payment awards or financial instruments were exercised, earned or converted.

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Variable Interest Entities

We account for the investments we make in certain legal entities in which equity investors do not have: 1) sufficient equity at risk for the legal entity to finance its activities without additional subordinated financial support or, 2) as a group, the holders of the equity investment at risk do not have either the power, through voting or similar rights, to direct the activities of the legal entity that most significantly impact the entity’s economic performance or, 3) the obligation to absorb the expected losses of the legal entity or the right to receive expected residual returns of the legal entity as “variable interest entities”, or “VIEs”.

We consolidate the results of any such entity in which we have determined that we have a controlling financial interest. We would have a “controlling financial interest” (and thus be considered the “primary beneficiary” of the entity) in such an entity when we have both the power to direct the activities that most significantly affect the VIE’s economic performance and the obligation to absorb the losses of, or right to receive the benefits from, the VIE that could be potentially significant to the VIE. On a quarterly basis, we reassess whether we have a controlling financial interest in any investments we have in these entities.

We account for investments we make in VIEs in which we have determined that we do not have a controlling financial interest but have a significant influence over, and hold at least a twenty percent ownership interest in, using the equity method. Any such investment not meeting the parameters to be accounted for under the equity method would be accounted for using the cost method, unless the investment had a readily determinable fair value, at which value it would then be reported.

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NOTE 2 - OTHER CURRENT ASSETS

Other current assets consists of the following:

	October 31, 2021		October 31, 2020
Recoverable value added taxes	$	24,213	$	16,539
Contract assets		9,859		6,313
Prepaid expenses		7,999		6,153
Prepaid and refundable income taxes		1,550		122
Other		629		608
	$	44,250	$	29,735

NOTE 3 - PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net consists of the following:

	October 31, 2021			October 31, 2020
Land	$	12,442		$	12,422
Buildings and improvements		181,922			179,162
Machinery and equipment		1,961,474			1,812,791
Leasehold improvements		21,751			21,157
Furniture, fixtures and office equipment		15,534			15,665
Construction in progress		35,009			70,915
		2,228,132			2,112,112
Accumulated depreciation and amortization		(1,531,579	)		(1,480,637	)
	$	696,553		$	631,475

Depreciation expense for property, plant and equipment (excluding amortization expense for ROU assets) was $85.7 million, $89.2 million and $79.2 million for 2021, 2020 and 2019, respectively.

ROU assets resulting from finance leases are included in the table above as follows:

	October 31, 2021			October 31, 2020
Machinery and equipment	$	42,760		$	-
Accumulated amortization		(1,933	)		-
	$	40,827		$	-

      In the third quarter of 2021, we recorded a $3.5 million gain on the trade-in of a lithography tool with a tool vendor as partial compensation for a more advanced tool.

NOTE 4 - INTANGIBLE ASSETS, NET

Intangible assets, net consist of the following:

October 31, 2021	Gross Amount		Accumulated Amortization			Net Amount
Customer relationships	$	1,647	$	(1,041	)	$	606
Software and other		6,056		(5,888	)		168
	$	7,703	$	(6,929	)	$	774
October 31, 2020
Technology license agreement	$	59,616	$	(57,298	)	$	2,318
Customer relationships		2,060		(1,245	)		815
Software and other		6,496		(6,192	)		304
	$	68,172	$	(64,735	)	$	3,437

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Amortization expense of the Company’s finite-lived intangible assets was $2.9 million, $4.6 million and $4.6 million in 2021, 2020 and 2019, respectively.

The weighted-average amortization periods of intangible assets acquired in 2021 and 2020, which are comprised of software, is three years.

Intangible asset amortization over the next five years and thereafter is estimated to be as follows:

Fiscal Year
2022	$	269
2023	$	171
2024	$	136
2025	$	136
2026	$	62
Thereafter	$	-

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 leading-edge and advanced-generation 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. No gain or loss was recorded upon the formation of this joint venture.

The total investment per the PDMCX operating agreement (“the Agreement”) is $160 million. In 2020, in combination with local financing obtained by PDMCX, Photronics and DNP had fulfilled their investment obligations under the Agreement. As discussed in Note 7, liens were granted to the local financing entity on property, plant and equipment with an October 31, 2021, total carrying value of $90.1 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 that 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.

We recorded net income (losses) from the operations of PDMCX of approximately $6.4 million, $(4.7) million and $(4.9) million in 2021, 2020 and 2019, respectively. General creditors of PDMCX do not have recourse to the assets of Photronics (other than the assets of PDMCX), and our maximum exposure to loss from PDMCX at October 31, 2021, was $64.0 million.

As required by the guidance in Topic 810 - “Consolidation” of the 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 VIE. Due to its lack of sufficient equity at risk to finance its activities without additional subordinated financial support, we determined that it is 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 years reporting periods; thus, as required, the PDMCX financial results have been consolidated with Photronics. Our conclusion was based on the fact 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 both 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 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.

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The carrying amounts of PDMCX assets and liabilities included in our consolidated balance sheets are presented in the following table, together with our maximum exposures to loss related to these assets and liabilities.

	October 31, 2021				October 31, 2020
Classification	Carrying Amount		Photronics Interest		Carrying Amount		Photronics Interest
Current assets	$	59,745	$	29,879	$	56,095	$	28,053
Noncurrent assets		137,799		68,913		141,097		70,562
Total assets		197,544		98,792		197,192		98,615
Current liabilities		26,559		13,282		31,922		15,964
Noncurrent liabilities		42,917		21,463		55,676		27,844
Total liabilities		69,476		34,745		87,598		43,808
Net assets	$	128,068	$	64,047	$	109,594	$	54,807

NOTE 6 - ACCRUED LIABILITIES

Accrued liabilities consist of the following:

	October 31, 2021		October 31, 2020
Compensation related expenses	$	22,632	$	16,405
Income taxes		15,596		11,432
Contract liabilities		14,717		8,024
Property, plant, and equipment		3,331		2,355
Value added and other taxes		2,540		1,925
Operating leases		2,273		2,175
Contract manufacturing		1,210		1,275
Telecommunications and utilities		1,067		1,006
Professional fees		665		1,254
Inventory		605		1,026
Other		7,730		7,006
Accrued liabilities	$	72,366	$	53,883

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NOTE 7 - DEBT

Short-term debt was $0.0 million, and $4.7 million as of October 31, 2021, and October 31, 2020, respectively. The 2020 amount represents an advance payment, under an MLA, to fund equipment purchased or leased in the U.S., and short duration borrowings in Xiamen, China, to fund operations. See below for further information. The weighted-average interest rate on our short-term debt as of October 31, 2020, was 2.02%. Interest payments, including capitalized interest of $0.1 million in both 2021 and 2020, were $3.8 million in 2021, $2.6 million in 2020, and $2.6 million in 2019.

The tables below provide information on our long-term debt.

As of October 31, 2021	Xiamen Project Loans			Xiamen Working Capital Loans			Hefei Equipment Loan			Finance Leases			Total
Principal due:
Next 12 months	$	2,068		$	8,197		$	4,694		$	7,289		$	22,248
Months 13 – 24	$	10,071		$	4,005		$	4,693		$	6,512		$	25,281
Months 25 – 36		10,278			-			6,257			6,610			23,145
Months 37 – 48		9,902			-			5,585			17,961			33,448
Months 49 – 60		7,572			-			-			-			7,572
Long-term debt	$	37,823		$	4,005		$	16,535		$	31,083		$	89,446
Interest rate at balance sheet date		4.65	%		4.53% - 4.61	%		4.20	%			(3)
Basis spread on interest rates		0.00			67.75 - 76.00			(45.00	)		N/A
Interest rate reset	Quarterly			Monthly/Annually			Annually				N/A
Maturity date	December 2025			July 2023			September 2025					(3)
Periodic payment amount	Increases as loans mature			Increases as loans mature			Varies (1)					(3)
Periodic payment frequency	Semiannual, on individual loans			Semiannual, on individual loans			Semiannual(2)			Monthly
Loan collateral (carrying amount)	$	90,096			N/A		$	86,487		$	40,826	(4)

⁽¹⁾ First five loan repayments will each be for 7.5 percent of the approved 200 million RMB loan principal; last five installments will each be for 12.5 percent of the approved loan principal.

⁽²⁾ Semiannual repayments commence in March 2022.

⁽³⁾ See Note 9 for interest rates on lease liabilities, maturity dates, and periodic payment amounts.

⁽⁴⁾ Represents the carrying amount at the balance sheet date of the related ROU assets, in which the lessors have secured interests.

As of October 31, 2020	Xiamen Project Loans			Xiamen Working Capital Loans			Total
Principal due:
Next 12 months	$	6,705		$	2,265		$	8,970
Months 13 – 24	$	7,334		$	7,808		$	15,142
Months 25 – 36		9,592			3,814			13,406
Months 37 – 48		9,789			-			9,789
Months 49 – 60		9,432			-			9,432
Thereafter		7,211			-			7,211
Long-term debt	$	43,358		$	11,622		$	54,980
Interest rate at balance sheet date		4.90	%		4.53% - 4.61	%
Basis spread on interest rates		25.00			40.00 - 76.00
Loan collateral (carrying amount)	$	94,459			N/A

Xiamen Project Loans

   In November 2018, PDMCX obtained approval to borrow 345 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 and, as of October 31, 2021, 255.0 million RMB ($39.9 million) remained outstanding. The Project Loans were used to finance certain capital expenditures at the PDMCX facility, and are collateralized by liens granted on the land use right, building, and certain equipment located at the facility. The interest rates on the Project Loans are variable (based on the RMB Loan Prime Rate of the National Interbank Funding Center), and interest incurred on the loans is eligible for reimbursement through incentives provided by the Xiamen Torch Hi-Tech Industrial Development Zone, which provide for such reimbursements up to a prescribed limit and duration. The Project Loans are subject to covenants and provisions, certain of which relate to the assets pledged as security for the loan, all of which we were in compliance with at October 31, 2021.

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 extension. Unless extended, this facility will expire in October 2022. As of October 31, 2021, PDMCX had 78.0 million RMB ($12.2 million) 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 are eligible for reimbursement through incentives provided by the Xiamen Torch Hi-Tech Industrial Development Zone, which provide for such reimbursements up to a prescribed limit and duration.

Hefei Equipment Loan

   In October 2020, our Hefei, China, facility was approved to borrow 200 million RMB (approximately $31.3 million, at the balance sheet date) from the China Construction Bank Corporation. This credit facility is subject to annual reviews and extension, with the most recent extension allowing us to borrow additional funds set to expire in August 2022. The loan proceeds were used to fund purchases of two lithography tools at the Hefei facility. As of October 31, 2021, we had borrowed 135.7 million RMB ($21.2 million) against this approval (all of which was then outstanding), and 64.3 million RMB ($10.1 million) remained available to borrow. The interest rate on the loan is variable and based on the RMB Loan Prime Rate of the National Interbank Funding Center. The borrowings are secured by the Hefei facility, its related land use right, and certain manufacturing equipment. The Hefei Equipment Loan is 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 October 31, 2021.

Finance Leases

   In February 2021, under an MLA which we entered into effective October 2020, we entered into a five-year $7.2 million finance lease for a high-end inspection tool and, in December 2020, under an MLA which we entered into effective July 2019, we entered into a $35.5 million lease for a high-end lithography tool. Upon entering into the latter lease, our prior $3.5 million short-term obligation to the lessor became a portion of the lease liability. See Note 9 for additional information on these leases.

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 certain of the common stock we own in certain foreign 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 October 31, 2021), 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. The interest rate on the Credit Agreement (1.09% at October 31, 2021) is based on our total leverage ratio at LIBOR plus a spread, as defined in the Credit Agreement.We had no outstanding borrowings against the Credit Agreement at October 31, 2021.

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NOTE 8 - REVENUE

We adopted ASU 2014-09 and all subsequent amendments, which are collectively codified in ASC Topic 606 - “Revenue from Contracts with Customers” (“Topic 606”), on November 1, 2018, under the modified retrospective transition method, only with respect to contracts that were not complete as of the date of adoption. This approach required prospective application of the guidance with a cumulative effect adjustment to retained earnings to reflect the impact of the adoption on contracts that were not complete as of the date of the adoption. Please refer to Note 1 for information on our revenue recognition policies.

Disaggregation of Revenue

The following tables present our revenue for the years ended October 31, 2021, October 31, 2020 and October 31, 2019, disaggregated by product type, geographic origin, and timing of recognition.

	Year Ended
Revenue by Product Type	October 31, 2021		October 31, 2020		October 31, 2019
IC
High-end	$	162,973	$	156,129	$	156,418
Mainstream		297,198		262,281		249,773
Total IC	$	460,171	$	418,410	$	406,191
FPD
High-end	$	155,670	$	139,558	$	98,832
Mainstream		47,920		51,723		45,637
Total FPD	$	203,590	$	191,281		144,469
	$	663,761	$	609,691	$	550,660

Revenue by Geographic Origin*
Taiwan	$	248,597	$	239,101	$	244,377
Korea		156,391		153,052		147,734
China		115,732		79,374		19,010
United States		105,023		104,949		105,045
Europe		36,242		31,501		32,585
Other		1,776		1,714		1,909
	$	663,761	$	609,691	$	550,660

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

Revenue by Timing of Recognition
Over time	$	606,332	$	535,071	$	497,942
At a point in time		57,429		74,620		52,718
	$	663,761	$	609,691	$	550,660

NOTE 9 - LEASES

We adopted ASU 2016-02 and all subsequent amendments, collectively codified in ASC Topic 842 “Leases” (“Topic 842”), on November 1, 2019. The guidance requires modified retrospective adoption, either at the beginning of the earliest period presented or at the beginning of the period of adoption. We elected to apply the guidance at the beginning of the period of adoption and recorded, as of November 1, 2019, ROU leased assets of $6.5 million. In conjunction with this, we recorded lease liabilities, which had been discounted at our incremental borrowing rates, of $6.5 million. The impact of our adoption of Topic 842 on our current and deferred income taxes was immaterial.

The guidance allows a number of elections and practical expedients, of which we elected the following:

- Election not to recognize short-term leases on the balance sheet.

- Practical expedient to not separate lease and non-lease components in a contract.

- Practical expedient “package” for transitioning to the new guidance:

- Not reassessing whether any expired or existing contracts are, or contain, leases.

- Not reassessing lease classification for any existing or expired leases.

- Not reassessing initial direct costs for any existing leases.

Our involvement in lease arrangements has typically been as a lessee. We determine if an agreement is or contains a lease on the earlier of the date of the agreement or the date on which we commit to entering the agreement. Our evaluation considers whether the agreement includes an identified asset and whether it affords us the right to control the asset. Our having the right to control the identified asset is determined by whether we are entitled to substantially all of its economic benefits and can direct its use.

We recognize leases on our consolidated balance sheet when a lessor makes an asset underlying a lease having a term in excess of twelve months available for our use. As allowed under Topic 842, we have elected not to apply the recognition requirements to leases that, at their commencement dates, have lease terms of twelve months or less and do not include options to purchase their underlying assets that we are reasonably certain to exercise. The present value of lease payments over the term of the lease provides the basis for the initial measurement of ROU assets and their related lease liabilities. We measure finance lease liabilities using the rates implicit in the leases; operating lease liabilities are measured using our incremental borrowing rate, for collateralized loans, at the commencement date. Variable lease payments, other than those that are dependent on an index or on a rate, are not included in the measurement of ROU assets and their related lease liabilities. Lease terms include extension periods if the lease agreement includes an option to extend the lease that we are reasonably certain to exercise. As allowed under Topic 842, we have elected, for all classes of assets, the practical expedient to not separate lease components of a contract from non-lease components of a contract.

 In February 2021, under an MLA which we entered into effective October 2020, 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; 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, under an MLA which we entered into effective July 2019, 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, to be 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 in Note 7, 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.

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    The following table provides information on operating and finance leases included in our consolidated balance sheets.

Classification	October 31, 2021		October 31, 2020
ROU Assets – Operating Leases
Other assets	$	5,581	$	7,706
ROU Assets – Finance Leases
Property, plant and equipment, net	$	40,827	$	-
Lease Liabilities – Operating Leases
Accrued liabilities	$	2,273	$	2,175
Other liabilities		3,246		5,008
	$	5,519	$	7,183
Lease Liabilities – Finance Leases
Current portion of long-term debt	$	7,289	$	-
Long-term debt		31,083		-
	$	38,372	$	-

     The following table presents future lease payments under noncancelable operating and finance leases as of October 31, 2021. Imputed interest represents the difference between undiscounted cash flows and discounted cash flows.

Fiscal Year	Operating Leases		Finance Leases
2022	$	2,351	$	7,856
2023		1,374		6,938
2024		819		6,938
2025		646		18,012
2026		398		-
Thereafter		157		-
Total lease payments		5,745		39,744
Imputed interest		226		1,372
Lease liabilities	$	5,519	$	38,372

     The following table presents lease costs for 2021 and 2020. Rent expense, as calculated under guidance in effect prior to our adoption of Topic 842, was $3.0 million in 2019.

	Year Ended
	October 31, 2021		October 31, 2020
Operating lease costs	$	2,904	$	3,076
Short-term lease costs	$	232	$	359
Variable lease costs	$	498	$	378
Interest on lease liabilities	$	510	$	-
Amortization of ROU assets	$	1,867	$	-

The following table presents statistical information related to our operating and finance leases. The information presented is as of the balance sheet dates.

	October 31, 2021					October 31, 2020
Classification	Weighted-average remaining lease term (in years)		Weighted-average discount rate			Weighted-average remaining lease term (in years)		Weighted-average discount rate
Operating leases		3.5		2.4	%		4.1		2.37	%
Finance leases		3.3		1.5	%		-		-

The following table presents the effects of leases on our 2021 and 2020 consolidated statements of cash flows, and provides leases-related non-cash information for those years.

	Year Ended
	October 31, 2021		October 31, 2020
Operating cash flows used for operating leases	$	2,442	$	3,584
Operating cash flows used for finance leases	$	464	$	-
Financing cash flows used for finance leases	$	4,323	$	-
ROU assets obtained in exchange for operating lease obligations	$	457	$	2,681
ROU assets obtained in exchange for finance lease obligations	$	42,672	$	-

NOTE 10 - 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 is four million shares. 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 most recent fiscal years.

	Year Ended
	October 31, 2021		October 31, 2020		October 31, 2019
Expense reported in:
Cost of goods sold	$	446	$	337	$	250
Selling, general and administrative		4,446		4,590		3,430
Research and development		456		-		-
Total expense incurred	$	5,348	$	4,927	$	3,680
Income tax benefits of share-based compensation (in millions)	$	0.2	$	0.2	$	-
Share-based compensation cost capitalized	$	-	$	-	$	-

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 The table below presents information on estimated expenses not yet incurred on our share-based compensation awards.

	October 31, 2021
	Restricted Stock Awards		Stock Options
Compensation cost not yet recognized	$	7,300	$	109
Weighted-average amortization period (in years)		2.6		1.1

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 values of the awards are determined on the date of grant, based on the closing stock price of our common stock. As of October 31, 2021, there were 929,147 shares of restricted stock outstanding.

A summary of restricted stock award activity during fiscal year 2021 and the status of our outstanding restricted stock awards as of October 31, 2021, is presented below:

Restricted Stock	Shares			Weighted-Average Fair Value at Grant Date
Outstanding at October 31, 2020		812,316		$	12.55
Granted		564,800		$	11.20
Vested		(383,177	)	$	11.72
Cancelled		(64,792	)	$	12.44
Outstanding at October 31, 2021		929,147		$	12.08
Expected to vest as of October 31, 2021		862,143		$	12.08

The table below presents information on restricted stock awards granted and lapsed in the three most recent fiscal years.

	Year Ended
	October 31, 2021		October 31, 2020		October 31, 2019
Number of shares granted		564,800		538,000		435,000
Weighted-average grant-date fair value of awards (in dollars per share)	$	11.20	$	15.08	$	9.80
Fair value of awards for which restrictions lapsed	$	4,491	$	2,957	$	1,888

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 granted 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.

There were no stock option awards granted during 2021 and 2020. The weighted-average grant date fair value of options granted during 2019 was $3.31. The weighted-average inputs and risk-free rate of return ranges used to calculate the grant-date fair value of stock options granted during 2019 are presented in the following table.

	Year Ended
	October 31, 2019
Expected volatility		33.1	%
Risk-free rate of return		2.5 – 2.9	%
Dividend yield		0.0	%
Expected term	5.1 years

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The table below presents a summary of stock options activity during 2021 and information on stock options outstanding at October 31, 2021.

	Shares			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding at October 31, 2020		1,621,117		$	9.27
Granted		-			-
Exercised		(401,114	)	$	8.58
Cancelled and forfeited		(46,900	)	$	9.74
Outstanding at October 31, 2021		1,173,103		$	9.49	4.0 years	$	4,109
Exercisable at October 31, 2021		1,077,914		$	9.51	3.8 years	$	3,750
Expected to vest as of October 31, 2021		93,500		$	9.20	6.7 years	$	353

The table below presents information on options exercised in the three most recent fiscal years.

	Year Ended
	October 31, 2021		October 31, 2020		October 31, 2019
Total intrinsic value of options exercised	$	1,910	$	3,184	$	1,262
Cash received from option exercises	$	3,441	$	3,746	$	2,071

Employee Stock Purchase Plan

Our Employee Stock Purchase Plan ("ESPP") permits employees to purchase Photronics, Inc. common shares at 85% of the lower of the closing market price at the commencement or ending date of the Plan year (which is approximately one year from the commencement date). We recognize the ESPP expense over that same period. As of October 31, 2021, the maximum number of shares of common stock approved by our shareholders to be purchased under the ESPP was 1.85 million shares, of which approximately 1.5 million shares had been issued through October 31, 2021. As of October 31, 2021, less than 0.1 million shares, with unrecognized compensation cost of less than $0.1 million (all of which will be recognized in the first quarter of fiscal 2022) were subject to outstanding subscriptions.

NOTE 11 - EMPLOYEE RETIREMENT PLANS

We maintain a 401(k) Savings and Profit-Sharing Plan ("401(k) Plan") which covers all full and certain part-time U.S. employees who have completed three months of service and are 18 years of age or older. Under the terms of the 401(k) Plan, employees may contribute up to 50% of their salary, subject to certain maximum amounts, which will be matched by the Company at 50% of the employee's contributions that are not in excess of 4% of the employee's compensation. Employee and employer contributions vest immediately upon contribution. The total employer contributions for all of our defined contribution plans were $0.8 million, $0.7 million and $0.7 million in 2021, 2020 and 2019, respectively.

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NOTE 12 - INCOME TAXES

Income before the income tax provisions consists of the following:

	Year Ended
	October 31, 2021			October 31, 2020			October 31, 2019
United States	$	(19,447	)	$	(10,672	)	$	(8,379	)
Foreign		121,453			72,273			59,080
	$	102,006		$	61,601		$	50,701

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The income tax provisions consist of the following:

	Year Ended
	October 31, 2021			October 31, 2020			October 31, 2019
Current:
Federal	$	-		$	-		$	(3,916	)
State		4			4			11
Foreign		25,296			21,698			17,777
		25,300			21,702			13,872
Deferred:
Federal		-			-			3,673
State		103			8			10
Foreign		(2,213	)		(452	)		(7,345	)
		(2,110	)		(444	)		(3,662	)
Total	$	23,190		$	21,258		$	10,210

The income tax provisions differ from the amount computed by applying the statutory U.S. federal income tax rate to income before income taxes as a result of the following:

	Year Ended
	October 31, 2021			October 31, 2020			October 31, 2019
U.S. federal income tax at statutory rate	$	21,421		$	12,936		$	10,647
Changes in valuation allowances		364			6,942			2,673
Foreign tax rate differentials		3,244			1,718			218
Tax credits		(3,942	)		(1,562	)		(1,268	)
Uncertain tax positions, including reserves, settlements and resolutions		1,037			1,637			134
Income tax holiday		-			(318	)		(2,234	)
Other, net		1,066			(95	)		40
	$	23,190		$	21,258		$	10,210
Effective tax rate		22.7	%		34.5	%		20.1	%

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The 2021 effective tax rate differs from the U.S. federal blended rate of 21% primarily due to loss jurisdiction pre-tax losses not being benefited due to valuation allowances, non-U.S. pre-tax income being taxed at higher statutory rates in the non-U.S. jurisdictions, and investment credits in foreign jurisdictions.

The 2020 effective tax rate differs from the U.S. statutory rate of 21% primarily due to loss jurisdiction pre-tax losses not being benefited due to valuation allowances, non-U.S. pre-tax income being taxed at higher statutory rates in the non-U.S. jurisdictions (partially offset by the benefits of a tax holiday), and investment credits in foreign jurisdictions.

The 2019 effective tax rate differs from the U.S. statutory rate of 21% due to the recognition of a benefit related to previously unrecognized tax positions, loss jurisdiction pre-tax losses being benefited at higher statutory rates than pre-tax income in income jurisdictions was taxed, changes in deferred tax asset valuation allowance, the benefits of a tax holiday, and investment credits in foreign jurisdictions.

We were granted a five-year tax holiday in Taiwan that expired on December 31, 2019. This tax holiday reduced foreign taxes by $0.1 million and $2.2 million in 2020 and 2019, respectively, with a two cents per share impact in 2019, and an immaterial per share effect in 2020.

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The net deferred income tax assets consist of the following:

	As of
	October 31, 2021			October 31, 2020
Deferred income tax assets:
Net operating losses	$	31,657		$	34,457
Reserves not currently deductible		8,201			6,287
Tax credit carryforwards		9,877			9,481
Share-based compensation		1,500			1,306
Property, plant and equipment		7,566			3,887
Lease liabilities		9,134			-
Other		157			398
		68,092			55,816
Valuation allowances		(34,337	)		(33,973	)
		33,755			21,843
Deferred income tax liabilities:
ROU assets		(9,698	)		-
		(9,698	)		-
Net deferred income tax assets	$	24,057		$	21,843
Classification
Deferred income tax assets	$	24,353		$	22,070
Other liabilities		(296	)		(227	)
	$	24,057		$	21,843

We have established a valuation allowance for a portion of our deferred tax assets because we believe, based on the weight of all available evidence, that it is more likely than not that a portion of our deferred tax assets will expire prior to utilization. In 2021 the valuation allowance decreased as a result of management’s determination that tax benefits on deferred tax assets in a non-U.S. jurisdiction would more likely than not be realized and, therefore, decreased the valuation allowance to include these deferred tax assets.

Due to the Tax Cuts and Jobs Act, which was signed into law in December 2017, as of fiscal year end 2018, U.S. deferred taxes were no longer provided on the undistributed earnings of non-U.S. subsidiaries. Our policy to indefinitely reinvest these earnings in non-U.S. operations remains unchanged for the purpose of determining deferred tax liabilities for U.S. state and foreign withholding taxes. Therefore, should we elect in the future to repatriate the remaining foreign earnings deemed to be indefinitely reinvested, we may incur additional state and foreign withholding tax expense on those earnings, the amount of which is not practicable to compute.

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The following tables present our available operating loss and credit carryforwards as of October 31, 2021, and their related expiration periods:

Operating Loss Carryforwards	Amount		Expiration Period
Federal	$	99,636	2029-Indefinite
State		187,044		2022-Indefinite
Foreign		113		2024-2031

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Tax Credit Carryforwards	Amount		Expiration Period
Federal research and development	$	5,204		2024-2041
State	$	5,915		2022-2035

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is presented below.

	Year Ended
	October 31, 2021			October 31, 2020			October 31, 2019
Balance at beginning of year before interest and penalties	$	2,550		$	1,758		$	1,775
Additions (reductions) for tax positions in prior years		181			227			(466	)
Additions based on current year tax positions		1,313			1,576			1,286
Settlements		(489	)		(992	)		(204	)
Lapses of statutes of limitations		(21	)		(19	)		(633	)
Balance at end of year before interest and penalties		3,534			2,550			1,758
Interest and penalties		223			131			177
Balance at end of year including interest and penalties	$	3,757		$	2,681		$	1,935

At October 31, 2021, October 31, 2020 and October 31, 2019, unrecognized tax benefits, which are included in Other liabilities, include $3.8 million, $2.0 million, and $1.9 million, respectively, that, if recognized, would impact the effective tax rates. We include any applicable interest and penalties related to uncertain tax positions in our income tax provision. The amounts reflected in the table above include settlements of non-U.S. audits.

Although the timing of the reversal of uncertain tax positions may be uncertain, as they can be dependent upon the settlement of tax audits or expirations of statutes of limitations, the Company believes that the amount of uncertain tax positions (including accrued interest and penalties, and net of tax benefits) that may be resolved over the next twelve months is $0.5 million. Resolution of these uncertain tax positions may result from either or both the lapses of statutes of limitations and tax settlements. The Company is no longer subject to tax authority examinations in the U.S., major foreign, or state tax jurisdictions for years prior to fiscal year 2016.

Income tax payments were $22.7 million, $23.0 million and $15.9 million in 2021, 2020 and 2019, respectively. Cash received as refunds of income taxes paid in prior years amounted to $0.7 million in 2021, $4.3 million in 2020, and an immaterial amount in 2019.

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NOTE 13 - EARNINGS PER SHARE

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

	Year Ended
	October 31, 2021		October 31, 2020		October 31, 2019
Net income attributable to Photronics, Inc. shareholders	$	55,449	$	33,820	$	29,793
Effect of dilutive securities:
Interest expense on convertible notes, net of tax		-		-		845
Earnings used for diluted earnings per share	$	55,449	$	33,820	$	30,638
Weighted-average common shares computations:
Weighted-average common shares used for basic earnings per share		61,407		64,866		66,347
Effect of dilutive securities:
Share-based payment awards		592		604		448
Convertible notes		-		-		2,360
Potentially dilutive common shares		592		604		2,808
Weighted-average common shares used for diluted earnings per share		61,999		65,470		69,155
Basic earnings per share	$	0.90	$	0.52	$	0.45
Diluted earnings per share	$	0.89	$	0.52	$	0.44

The table below sets forth 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.

	Year Ended
	October 31, 2021		October 31, 2020		October 31, 2019
Share based payment awards		331		795		1,250
Total potentially dilutive shares excluded		331		795		1,250

NOTE 14 - COMMITMENTS AND CONTINGENCIES

Presented below are our unrecognized commitments, as of October 31, 2021. Included in these are commitments of $73.7 million for the purchase of capital equipment. The amounts below do not include our commitments under our debt and lease arrangements, which are presented in Notes 7 and 9, respectively.

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Fiscal Year	Unrecognized Commitments
2022	$	82,323
2023		25,630
2024		3,654
2025		-
2026		-
Thereafter		-
Total	$	111,607

We are subject to various claims that arise in the ordinary course of business. We believe that our potential liability under such claims, individually and in the aggregate, will not have a material effect on our consolidated financial statements.  As of October 31, 2021 and October 31, 2020, we were not involved in environmental litigation to which a government was a party.

NOTE 15 - CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME BY COMPONENT

The following tables set forth the changes in our accumulated other comprehensive income by component (net of tax of $0) for the years ended October 31, 2021 and October 31, 2020.

	Year Ended October 31, 2021
	Foreign Currency Translation Adjustments		Other			Total
Balance at October 31, 2020	$	18,828	$	(870	)	$	17,958
Other comprehensive income (loss)		8,478		(69	)		8,409
Less: other comprehensive income (loss) attributable to noncontrolling interests		5,830		(34	)		5,796
Balance at October 31, 2021	$	21,476	$	(905	)	$	20,571

	Year Ended October 31, 2020
	Foreign Currency Translation Adjustments			Other			Total
Balance at October 31, 2019	$	(8,331	)	$	(674	)	$	(9,005	)
Other comprehensive loss		36,381			(390	)		35,991
Less: other comprehensive income (loss) attributable to noncontrolling interests		9,222			(194	)		9,028
Balance at October 31, 2020	$	18,828		$	(870	)	$	17,958

NOTE 16 – RISKS AND CONCENTRATIONS

Financial instruments that potentially subject us to credit risk principally consist of trade accounts receivable and short-term cash investments. We sell our products primarily to semiconductor and FPD manufacturers in Asia, North America, and Europe. We believe that the concentration of credit risk in our trade receivables is substantially mitigated by our ongoing credit evaluation process and relatively short collection terms. We do not generally require collateral from customers. We establish an allowance for credit losses based upon factors surrounding the credit risk of specific customers, historical trends and other information.

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Our cash and cash equivalents are deposited in several financial institutions, including institutions located within all of the countries in which we manufacture photomasks. Portions of deposits in some of these institutions may exceed the amount of insurance available for such deposits at these institutions. As these deposits are generally redeemable upon demand and are held by high quality, reputable institutions, we consider them to bear minimal credit risk. We further mitigate credit risks related to our cash and cash equivalents by spreading such risk among a number of institutions.

As of October 31, 2021 and October 31, 2020, one customer accounted for 20% and 24% of our net accounts receivable, respectively, and, as of October 31, 2021, another customer accounted for 12% of our net accounts receivable balance. One customer accounted for 17%, 16% and 15%, of our revenue in 2021, 2020 and 2019, respectively, and another customer accounted for 12%, 14% and 16% of our revenue in 2021, 2020 and 2019, respectively.

We operate as a single operating segment as a manufacturer of photomasks, which are high precision quartz or glass plates containing microscopic images of electronic circuits for use in the fabrication of IC’s and FPDs.

As of the balance sheet dates, our property, plant, and equipment, net and net assets were, by geographic area, as presented below.

	October 31, 2021				October 31, 2020
	Property, Plant and Equipment		Net Assets		Property, Plant and Equipment		Net Assets
China	$	285,756	$	210,437	$	262,800	$	180,404
Taiwan		129,660		341,291		123,979		309,911
United States		137,049		173,062		130,164		225,411
Korea		140,380		254,357		110,815		228,579
Europe and Other		3,708		21,415		3,717		17,961
	$	696,553	$	1,000,562	$	631,475	$	962,266

NOTE 17 - RELATED PARTY TRANSACTIONS

On January 20, 2018, we entered into a four-year consulting agreement with DEMA Associates, LLC, of which the chairman of our board of directors is a member, for $0.4 million per year. In 2019, we incurred expenses for services provided by this entity of $0.4 million. Effective March 9, 2020, the agreement was amended to reduce the consideration under the contract to $0.1 million per year for its remaining term; in 2021 and 2020, we incurred expenses for services provided by this entity of $0.1 million and $0.2 million, respectively.

An officer of our company is related to an individual in a position of authority at one of our largest customers. We recorded revenue from this customer of $111.0 million, $96.4 million and $87.0 million, in 2021, 2020 and 2019, respectively. As of October 31, 2021 and October 31, 2020, we had accounts receivable of $34.5 million and $32.7 million, respectively, from this customer.

We believe that the terms of our transactions with the related parties described above were negotiated at arm’s length and were no less favorable to us than terms we could have obtained from unrelated third parties.

NOTE 18 - 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 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 variable rate debt instruments are a Level 2 measurement and approximate their carrying values due to the variable nature of the underlying interest rates. We did not have any assets or liabilities measured at fair value, on a recurring or a nonrecurring basis, at October 31, 2021 or October 31, 2020.

NOTE 19 - 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. The company commenced repurchasing shares under this authorization on September 16, 2020.

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In August 2019, 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 25, 2019, and was terminated on March 20, 2020.

In October 2018, the Company’s board of directors authorized the repurchase of up to $25 million of its common stock, to have been executed in open-market transactions or in accordance with a repurchase plan under Rule 10b5-1 of the Securities Act. The share repurchase program commenced on October 22, 2018, and was terminated on February 1, 2019.

All of the shares purchased under the above repurchase programs were retired prior to the end of the fiscal year in which they were purchased. The table below presents information on the repurchase programs.

	2021 Purchases		2020 Purchases		2019 Purchases
Number of shares repurchased		3,919		3,194		2,133
Cost of shares repurchased	$	48,249	$	34,394	$	21,696
Average price paid per share	$	12.31	$	10.77	$	10.17

NOTE 20 - SUBSIDIARY DIVIDENDS

In 2021, 2020 and 2019, PDMC, the Company’s majority owned subsidiary in Taiwan, paid dividends of which 49.99%, or approximately $9.6 million, $16.2 million and $45.1 million, respectively, were paid to noncontrolling interests.

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NOTE 21 - RECENT ACCOUNTING PRONOUNCEMENTS

Accounting Standards Updates Adopted

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses”, the main objective of which is to provide more useful information about expected credit losses on financial instruments and other commitments of an entity to extend credit. In support of this objective, the ASU replaced the incurred loss impairment methodology, found in previous guidance, with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This ASU requires a cumulative-effect adjustment as of the beginning of the first reporting period in which the guidance is adopted. ASU 2016-13 was effective for Photronics in its first quarter of 2021. We adopted ASU 2016-13 on November 1, 2020; the effect of the adoption was immaterial.

  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 is to be applied prospectively through December 31, 2022. We are currently evaluating the effect the potential adoption of this ASU may have on our consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (ASC 740)—Simplifying the Accounting for Income Taxes,” which simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC 740, Income Taxes. The amendments also improve consistent application of and simplify US GAAP for other areas of ASC 740 by clarifying and amending existing guidance. This guidance is effective for Photronics in Q1 of fiscal year 2022. We are currently evaluating the effect the adoption of this ASU may have on our consolidated financial statements and disclosures.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of October 31, 2021. 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 our reports filed under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to management, including 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. Based on an evaluation of our disclosure controls and procedures as of October 31, 2021, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at a reasonable assurance level.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the Company conducted an evaluation of the effectiveness of the internal control over financial reporting based on criteria established in the Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of our internal control over financial reporting as of October 31, 2021, based on the criteria set forth by the COSO. Management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, concluded that our internal control over financial reporting was effective as of October 31, 2021.

The Company’s independent registered public accounting firm, Deloitte & Touche LLP, has audited the effectiveness of the Company’s internal control over financial reporting as of October 31, 2021, as stated in their report on page 70 of this Form 10-K.

Changes in Internal Control over Financial Reporting

Remediation of Material Weakness

To address the previously reported material weakness in our internal control over financial reporting discussed in Part II, Item 9A. Controls and Procedures to our Form 10-K for the fiscal year ended October 31, 2020, we changed organizational reporting structures, designed and implemented new controls and tools to ensure that personnel with the appropriate level of authority and competence monitor, review and approve the types of transactions that gave rise to the material weakness.  Based on the actions taken, as well as the evaluation of the design and operating effectiveness of the new controls, we determined that the previously reported material weakness has been remediated as of October 31, 2021.

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Other than the remediation of the material weakness discussed above, there were no changes to our internal control over financial reporting during 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Photronics, Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Photronics, Inc. (the “Company”) as of October 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of October 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended October 31, 2021, of the Company and our report dated December 17, 2021, expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Management’s Report on Internal Control Over Financial Reporting.” Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Deloitte & Touche LLP

Boston, Massachusetts

December 17, 2021

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ITEM 9B. OTHER INFORMATION

None.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTION

Not applicable.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information as to Directors required by Items 401, 405 and 407(c)(3)(d)(4) and (d)(5) of Regulation S-K is set forth in our 2022 Definitive Proxy Statement which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A of the Exchange Act within 120 days after the end of the fiscal year covered by this Form 10-K under the caption “PROPOSAL 1 - ELECTION OF DIRECTORS,” “ DELINQUENT SECTION 16(A) REPORTS” and in the third paragraph under the caption “MEETINGS AND COMMITTEES OF THE BOARD”, and is incorporated in this report by reference. The information as to Executive Officers is included in our 2022 Definitive Proxy Statement under the caption “EXECUTIVE OFFICERS” and is incorporated in this report by reference.

We have adopted a code of ethics that applies to our principal executive officer, chief financial officer or principal financial officer and principal accounting officer. A copy of the code of ethics may be obtained, free of charge, by writing to the executive vice president, general counsel of Photronics, Inc. at 15 Secor Road, Brookfield, Connecticut 06804.

ITEM 11. EXECUTIVE COMPENSATION

The information required by Item 402 of Regulation S-K and paragraph (e)(4) and (e)(5) of Item 407 is set forth in our 2022 Definitive Proxy Statement under the captions “EXECUTIVE COMPENSATION”, “CERTAIN AGREEMENTS”, “DIRECTORS’ COMPENSATION”, “COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION” and “COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION”, respectively, and is incorporated in this report by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by Item 201(d) of Regulation S-K is set forth in our 2022 Definitive Proxy Statement under the caption “EQUITY COMPENSATION PLAN INFORMATION” and is incorporated in this report by reference. The information required by Item 403 of Regulation S-K is set forth in our 2022 Definitive Proxy Statement under the caption “OWNERSHIP OF COMMON STOCK BY DIRECTORS, OFFICERS AND CERTAIN BENEFICIAL OWNERS”, and is incorporated in this report by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by Items 404 and Item 407(a) of Regulation S-K is set forth in our 2022 Definitive Proxy Statement under the captions “MEETINGS AND COMMITTEES OF THE BOARD” and “RELATED PARTY TRANSACTIONS”, respectively, and is incorporated in this report by reference.

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ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by Item 9(e) of Rule 14a-101 of the Exchange Act is set forth in our 2022 Definitive Proxy Statement under the captions “Independent Registered Public Accounting Firm Fees” and “AUDIT COMMITTEE REPORT”, and is incorporated in this report by reference.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following documents are filed as part of this report:

		Page No.
1.	Financial Statements: See “INDEX TO CONSOLIDATED FINANCIAL STATEMENTS” in Part II, Item 8 of this Form 10-K for a list of financial statements filed as part of this report.	36
2.	Financial Statement Schedules
	All schedules are omitted because they are immaterial or not applicable.
3.	Exhibit Index	73

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EXHIBIT INDEX

		Incorporated by Reference			Filed or Furnished Herewith
Exhibit Number	Description	Form	Exhibit	Filing Date
3.1	Certificate of Incorporation as amended July 9, 1986, April 9, 1990, March 16, 1995, November 13, 1997, April 15, 2002 and June 20, 2005	10-K	3.1	12/23/2019
3.2	Amended and Restated By-laws of the Company dated as of September 7, 2016	8-K	3.2	9/13/2016
4.1	Description of Securities of the Company	10-K	4.1	12/20/2019
4.2	Certificate of Amendment with Respect to Series A Preferred Stock, dated September 24, 2019	8-K	3.1	9/24/2019
10.1	The Company’s 1992 Employee Stock Purchase Plan	10-K	10.1	12/20/2017
10.2	Amendment to the Employee Stock Purchase Plan as of March 24, 2004+	10-K	10.2	1/6/2017
10.3	Amendment to the Employee Stock Purchase Plan as of April 8, 2010+	10-K	10.4	1/7/2016

10.4	Amendment to the Employee Stock Purchase Plan as of March 28, 2012+	10-K	10.4	12/21/2018
10.5	Amendment to the Employee Stock Plan as of December 18, 2019*	10-K	10.5	12/23/2019
10.6	2016 Equity Incentive Compensation Plan+	DEF 14A		2/29/2016
10.7	The Company’s 2007 Long-Term Equity Incentive Plan+	DEF 14A		2/23/2007

10.8	Amendment to the 2007 Long-Term Equity Incentive Plan as of April 8, 2010+	10-K	10.7	1/7/2016
10.9	Amendment to the 2007 Long Term Equity Incentive Plan as of April 11, 2014+	10-K	10.7	12/23/2019
10.10	2011 Executive Incentive Compensation Plan effective as of November 1, 2010+	10-K	10.9	1/6/2015
10.11	Joint Venture Framework Agreement dated November 20, 2013, between the Company and Dai Nippon Printing  Co., Ltd.#	10-K/A	10.19	7/8/2015
10.12	Joint Venture Operating Agreement dated November 20, 2013, between the Company and Dai Nippon Printing Co., Ltd.#	10-K/A	10.20	7/8/2015
10.13	Outsourcing Agreement dated November 20, 2013, among the Company, Dai Nippon Printing Co., Ltd and Photronics Semiconductor Mask Corporation#	10-K/A	10.21	7/8/2015

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10.14	License Agreement dated November 20, 2013, between the Company and Photronics Semiconductor Mask Corporation#	10-K/A	10.22	7/8/2015
10.15	License Agreement dated November 20, 2013, between Dai Nippon Printing Co., Ltd and Photronics Semiconductor Mask Corporation#	10-K/A	10.23	7/8/2015
10.16	Margin Agreement dated November 20, 2013, among the Company, Dai Nippon Printing Co., Ltd and Photronics Semiconductor Mask Corporation#	10-K/A	10.24	7/8/2015
10.17	Merger Agreement dated November 20, 2013, between Photronics Semiconductor Mask Corporation and DNP Photomask Technology Taiwan Co., Ltd.#	10-K/A	10.25	7/8/2015
10.18	Executive Employment Agreement between the Company and Christopher J. Progler, Vice President, Chief Technology Officer dated September 10, 2007+	10-K	10.18	12/23/2019
10.19	Executive Employment Agreement between the Company and Peter S. Kirlin dated May 4, 2015+	10-Q	10.28	9/9/2015
10.20	Executive Employment Agreement between the Company and Richelle E. Burr dated May 21, 2010+	10-K	10.30	1/7/2016
10.21	Executive Employment Agreement between the Company and John P. Jordan dated September 5, 2017+	10-K	10.31	12/20/2017
10.22	Employment Agreement dated March 9, 2020, between Photronics Dai Nippon Mask Corporation and Frank Lee	10-Q	10.36	3/11/2020
10.23	Consulting Agreement between the Company and DEMA Associates, LLC dated January 20, 2018	10-Q	10.37	3/11/2020
10.24	Amendment dated March 9, 2020, between DEMA Associates, LLC and the Company	10-Q	10.37	3/11/2020
10.25	Form of Amendment to Executive Employment Agreement dated March 16, 2012+	10-K	10.23	12/23/2019
10.26	Fourth Amended and Restated Credit Agreement dated as of September 27, 2018, among Photronics, Inc. the Foreign Subsidiary Borrower Party Thereto, the Lender Party Thereto, JPMorgan Chase Bank, N.A. as Administrative and Collateral Agent and Bank of America, N.A. as syndication agent	10-K	10.24	12/21/2018
10.27	Third Amended and Restated Security Agreement entered into as of September 27, 2018, by and among Photronics, Inc., the subsidiaries of the Company and JPMorgan Chase Bank N.A	10-K	10.25	12/21/2018
10.28	Fixed Asset Loan Agreement between Photronics DNP Mask Corporation Xiamen and Industrial and Commercial Bank China Limited Xiamen Xiang’an Branch	10-K	10.26	12/21/2018
10.29	Working Capital Loan Agreement between Industrial and Commercial Bureau China Limited Xiamen Xiang’an Branch and Photronics DNP Mask Corporation Xiamen effective as of November 7, 2018	10-K	10.27	12/21/2018
10.30	Investment Agreement between Xiamen Torch Hi-Tech Industrial Development Zone Management Committee and Photronics Singapore Pte. Ltd.	10-Q	10.35	9/2/2016

74

10.31	Amendment No. 1 to the Investment Agreement between Xiamen Torch Hi-Tech Industrial Development Zone Management Committee and Photronics Singapore Pte, Ltd. #	10-Q	10.29	12/23/2019
10.32	Contribution Agreement dated May 16, 2017 among Dai Nippon Printing Co., Ltd. (“DNP), DNP Asia Pacific Pte. Ltd. (“DNP Asia Pacific”), Photronics, Inc. (“Photronics”), Photronics Singapore Pte. Ltd., (“Photronics Singapore”), and Xiamen American Japan Photronics Mask Co., Ltd. (“PDMCX”)#	10-Q/A	10.26	12/19/2017
10.33	Joint Venture Operating Agreement dated May 16, 2017, among Photronics, Photronics Singapore, DNP, and DNP Asia Pacific#	10-Q/A	10.27	12/19/2017
10.34	Outsourcing Agreement dated May 16, 2017, among Photronics, DNP, Photronics DNP Photomask Corporation (“PDMC”) and PDMCX#	10-Q/A	10.28	12/19/2017
10.35	Amended and Restated License Agreement dated May 16, 2017 between DNP and PDMC#	10-Q/A	10.29	12/19/2017
10.36	Investment Cooperation Agreement between Hefei State Hi-tech Industry Development Zone and Photronics UK, Ltd.	10-K	10.42	12/20/2017
10.37	Section 382 Rights Agreement, dated September 23, 2019, between Photronics, Inc. and Computershare Trust Company, N.A. as rights agent	8-K	4.1	9/24/2019
10.38	Master Lease Agreement dated October 12, 2020, between TD Equipment Finance and the Company	10-K	10.38	1/15/2021
10.39	Fixed Asset Loan Contract dated October 1, 2020, Hefei Photronics Mask Corporation and China Construction Bank Corporation	10-K	10.39	1/15/2021
10.40	Maximum Mortgage Contract dated October 1, 2020 between Photronics Mask Corporation Hefei and China Construction Bank Corporation Hefei Shusshan  Branch	10-K	10.40	1/15/2021
21	List of Subsidiaries of the Company	10-K	21	12/17/2021
23.1	Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm	10-K	23.1	12/17/2021
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	10-K	31.1	12/17/2021
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	10-K	32.2	12/17/2021
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	10-K	32.1	12/17/2021
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	10-K	32.2	12/17/2021

75

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)	10-K	101.INS
101.SCH	Inline XBRL Taxonomy Extension Schema Document	10-K	101.SCH
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document	10-K	101.CAL
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document	10-K	101.DEF
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document	10-K	101.LAB
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document	10-K	101.PRE
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)			X

⁺ Represents a management contract or compensatory plan or arrangement.

# Portions of this exhibit have been omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

The Company will provide a copy of any exhibit upon receipt of a written request for the particular exhibit or exhibits desired. All requests should be addressed to the Company’s general counsel at the address of the Company’s principal executive offices.

ITEM 16. FORM 10-K SUMMARY

Not applicable.

76

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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 Executive Vice President, Chief Financial Officer (Principal Financial Officer)		Eric Rivera Vice President, Corporate Controller (Principal Accounting Officer)
	December 17, 2021		December 17, 2021

Pursuant to the requirements of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By	/s/ Peter S. Kirlin
	Peter S. Kirlin Chief Executive Officer Director (Principal Executive Officer)	December 17, 2021
By	/s/ John P. Jordan
	John P. Jordan Executive Vice President, Chief Financial Officer (Principal Financial Officer)	December 17, 2021
By	/s/ Eric Rivera
	Eric Rivera Vice President, Corporate Controller (Principal Accounting Officer)	December 17, 2021
By	/s/ Constantine S. Macricostas
	Constantine S. Macricostas Chairman of the Board	December 17, 2021
By	/s/ Walter M. Fiederowicz
	Walter M. Fiederowicz Director	December 17, 2021
By	/s/ Daniel Liao
	Daniel Liao Director	December 17, 2021
By	/s/ George Macricostas
	George Macricostas Director	December 17, 2021
By	/s/ Mary Paladino
	Mary Paladino Director	December 17, 2021
By	/s/ Mitchell G. Tyson
	Mitchell G. Tyson Director	December 17, 2021

77

EX-21

Exhibit 21

SUBSIDIARIES OF PHOTRONICS, INC.

	State or Jurisdiction of Incorporation or Organization
Align-Rite International, Ltd.	(United Kingdom)
Photronics (Wales) Limited	(United Kingdom)
Photronics California, Inc.	(California, USA)
Photronics Idaho, Inc.	(Idaho, USA)
Photronics Texas Allen, Inc.	(Texas, USA)
Photronics MZD, GmbH	(Germany)
Photronics Advanced Mask Corporation	(Taiwan, R.O.C.)
Photronics DNP Mask Corporation (1)	(Taiwan, R.O.C.)
PDMC Shanghai, Ltd.	(Shanghai, P.R.C.)
Photronics Singapore Pte, Ltd.	(Singapore)
Xiamen American Japan Photronics Mask Co., Ltd. (1)	(Xiamen, P.R.C.)
Photronics UK, Ltd.	(United Kingdom)
Photronics Mask Corporation Hefei (2)	(Hefei, P.R.C.)
Photronics Cheonan Co., Ltd.	(Republic of Korea)
Photronics Mask Corporation Hefei (2)	(Hefei, P.R.C.)
PKLT Co., Ltd.	(Taiwan, R.O.C.)

Note: Entities directly owned by subsidiaries of Photronics, Inc. are indented and listed below their immediate parent. Ownership is 100% unless otherwise indicated.

⁽¹⁾ 50.01% owned by Photronics, Inc. and 49.99% owned by Dai Nippon Printing Co., Ltd.

⁽²⁾ 64.00% owned by Photronics UK, Ltd. and 36.00% owned by Photronics Cheonan Co., Ltd.

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 333-252486, 333-169296, 333-169295, 333-151763, 333-197890and 333-217676 on Form S-8 of our report dated December 17, 2021, relating to the consolidated financial statements and financial statement schedule of Photronics, Inc., and the effectiveness of Photronics, Inc.’s internal control over financial reporting appearing in this Annual Report on Form 10-K of Photronics, Inc. for the year ended October 31, 2021.

/s/ Deloitte & Touche LLP

Boston, Massachusetts

December 17, 2021

EX-31.1

EXHIBIT 31.1

I, Peter S. Kirlin, certify that:

1. I have reviewed this Annual Report on Form 10-K 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 annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and

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

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

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

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

 /s/ PETER S. KIRLIN

Peter S. Kirlin

Chief Executive Officer

December 17, 2021

EX-31.2

EXHIBIT 31.2

I, John P. Jordan, certify that:

1. I have reviewed this Annual Report on Form 10-K 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 annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual 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

December 17, 2021

EX-32.1

EXHIBIT 32.1

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

1. the Annual Report on Form 10-K of the Company for the year ended October 31, 2021 (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.

/s/ PETER S. KIRLIN

Peter S. Kirlin

Chief Executive Officer

December 17, 2021

EX-32.2

EXHIBIT 32.2

I, John P. Jordan, Chief Financial Officer of Photronics, Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1. the Annual Report on Form 10-K of the Company for the year ended October 31, 2021 (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.

/s/ JOHN P. JORDAN

John P. Jordan

Chief Financial Officer

December 17, 2021

XML

Document and Entity Information - USD ($)	12 Months Ended
	Oct. 31, 2021	Dec. 09, 2021	May 02, 2021
Cover [Abstract]
Document Type	10-K
Amendment Flag	false
Document Annual Report	true
Document Period End Date	Oct. 31, 2021
Current Fiscal Year End Date	--10-31
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	FY
Document Transition Report	false
Entity File Number	0-15451
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 Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
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
ICFR Auditor Attestation Flag	true
Entity Shell Company	false
Entity Public Float			$ 771,696,945
Entity Common Stock, Shares Outstanding		60,900,453

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Oct. 31, 2021	Oct. 31, 2020
Current assets:
Cash and cash equivalents	$ 276,670	$ 278,665
Accounts receivable, net of allowance of $1,218 in 2021 and $1,324 in 2020	174,447	134,470
Inventories	55,249	57,269
Other current assets	44,250	29,735
Total current assets	550,616	500,139
Property, plant and equipment, net	696,553	631,475
Intangible assets, net	774	3,437
Deferred income taxes	24,353	22,070
Other assets	21,906	31,061
Total assets	1,294,202	1,188,182
Current liabilities:
Short-term debt	0	4,708
Current portion of long-term debt	22,248	8,970
Accounts payable	81,534	75,378
Accrued liabilities	72,366	53,883
Total current liabilities	176,148	142,939
Long-term debt	89,446	54,980
Other liabilities	28,046	27,997
Total liabilities	293,640	225,916
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, 60,024 shares issued and outstanding at October 31, 2021, and 63,138 shares issued and outstanding at October 31, 2020	600	631
Additional paid-in capital	484,672	507,336
Retained earnings	317,849	279,037
Accumulated other comprehensive income	20,571	17,958
Total Photronics, Inc. shareholders' equity	823,692	804,962
Noncontrolling interests	176,870	157,304
Total equity	1,000,562	962,266
Total liabilities and equity	$ 1,294,202	$ 1,188,182

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) shares in Thousands, $ in Thousands	Oct. 31, 2021	Oct. 31, 2020
Current assets:
Accounts receivable, allowance	$ 1,218	$ 1,324
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)	60,024	63,138
Common stock, shares outstanding (in shares)	60,024	63,138

XML

Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands		12 Months Ended
		Oct. 31, 2021	Oct. 31, 2020	Oct. 31, 2019
Consolidated Statements of Income [Abstract]
Revenue	[1]	$ 663,761	$ 609,691	$ 550,660
Cost of goods sold		496,717	475,037	429,819
Gross profit		167,044	134,654	120,841
Operating expenses:
Selling, general and administrative		57,525	53,582	52,326
Research and development		18,490	17,144	16,394
Total operating expenses		76,015	70,726	68,720
Other operating income, net		3,525	0	0
Operating income		94,554	63,928	52,121
Non-operating income (expense):
Foreign currency transactions' impacts, net		7,972	(501)	(1,266)
Interest expense		(1,685)	(2,367)	(1,425)
Interest income and other income, net		1,165	541	1,271
Income before income tax provision		102,006	61,601	50,701
Income tax provision		23,190	21,258	10,210
Net income		78,816	40,343	40,491
Net income attributable to noncontrolling interests		23,367	6,523	10,698
Net income attributable to Photronics, Inc. shareholders		$ 55,449	$ 33,820	$ 29,793
Earnings per share:
Basic (in dollars per share)		$ 0.90	$ 0.52	$ 0.45
Diluted (in dollars per share)		$ 0.89	$ 0.52	$ 0.44
Weighted-average number of common shares outstanding:
Basic (in shares)		61,407	64,866	66,347
Diluted (in shares)		61,999	65,470	69,155

[1] This table disaggregates revenue by the location in which it was earned.

XML

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	12 Months Ended
	Oct. 31, 2021	Oct. 31, 2020	Oct. 31, 2019
Consolidated Statements of Comprehensive Income [Abstract]
Net income	$ 78,816	$ 40,343	$ 40,491
Other comprehensive income (loss), net of tax of $0:
Foreign currency translation adjustments	8,478	36,381	(2,877)
Other	(69)	(390)	(74)
Net other comprehensive income (loss)	8,409	35,991	(2,951)
Comprehensive income	87,225	76,334	37,540
Less: comprehensive income attributable to noncontrolling interests	29,163	15,551	11,786
Comprehensive income attributable to Photronics, Inc. shareholders	$ 58,062	$ 60,783	$ 25,754

XML

Condensed Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Oct. 31, 2021	Oct. 31, 2020	Oct. 31, 2019
Consolidated Statements of Comprehensive Income [Abstract]
Other comprehensive (loss) income, tax	$ 0	$ 0	$ 0

XML

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	Cumulative Effect, Period of Adoption, Adjustment [Member] Common Stock [Member]	Cumulative Effect, Period of Adoption, Adjustment [Member] Additional Paid-in Capital [Member]	Cumulative Effect, Period of Adoption, Adjustment [Member] Retained Earnings [Member]	Cumulative Effect, Period of Adoption, Adjustment [Member] Treasury Stock [Member]	Cumulative Effect, Period of Adoption, Adjustment [Member] Accumulated Other Comprehensive Income (Loss) [Member]	Cumulative Effect, Period of Adoption, Adjustment [Member] Non-Controlling Interests [Member]	Cumulative Effect, Period of Adoption, Adjustment [Member]
Balance at Oct. 31, 2018	$ 697	$ 555,606	$ 231,445	$ (23,111)	$ (4,966)	$ 144,898	$ 904,569
Balance (ASU 2014-09 [Member]) at Oct. 31, 2018								$ 0	$ 0	$ 1,083	$ 0	$ 0	$ 121	$ 1,204
Balance (ASU 2016-16 [Member]) at Oct. 31, 2018								$ 0	$ 0	$ (1,130)	$ 0	$ 0	$ (3)	$ (1,133)
Balance (in shares) at Oct. 31, 2018	69,700
Net income	$ 0	0	29,793	0	0	10,698	40,491
Other comprehensive (loss) income	0	0	0	0	(4,039)	1,088	(2,951)
Shares issued under equity plans	$ 6	2,524	0	0	0	0	2,530
Shares issued under equity plans (in shares)	586
Share-based compensation expense	$ 0	3,680	0	0	0	0	3,680
Contribution from noncontrolling interest	0	0	0	0	0	29,394	29,394
Dividends to noncontrolling interest	0	0	0	0	0	(44,939)	(44,939)
Repurchase of common stock of subsidiary	0	0	0	0	0	(57)	(57)
Purchase of treasury stock	$ 0	0	0	(21,696)	0	0	(21,696)
Purchase of treasury stock (in shares)	0
Retirement of treasury stock	$ (47)	(37,491)	(7,269)	44,807	0	0	0
Retirement of treasury stock (in shares)	(4,691)
Balance at Oct. 31, 2019	$ 656	524,319	253,922	0	(9,005)	141,200	911,092
Balance (in shares) at Oct. 31, 2019	65,595
Net income	$ 0	0	33,820	0	0	6,523	40,343
Other comprehensive (loss) income	0	0	0	0	26,963	9,028	35,991
Shares issued under equity plans	$ 7	3,492	0	0	0	0	3,499
Shares issued under equity plans (in shares)	737
Share-based compensation expense	$ 0	4,927	0	0	0	0	4,927
Contribution from noncontrolling interest	0	0	0	0	0	17,596	17,596
Dividends to noncontrolling interest	0	0	0	0	0	(16,151)	(16,151)
Repurchase of common stock of subsidiary	0	255	0	0	0	(892)	(637)
Purchase of treasury stock	$ 0	0	0	(34,394)	0	0	(34,394)
Purchase of treasury stock (in shares)	0
Retirement of treasury stock	$ (32)	(25,657)	(8,705)	34,394	0	0	0
Retirement of treasury stock (in shares)	(3,194)
Balance at Oct. 31, 2020	$ 631	507,336	279,037	0	17,958	157,304	962,266
Balance (in shares) at Oct. 31, 2020	63,138
Net income	$ 0	0	55,449	0	0	23,367	78,816
Other comprehensive (loss) income	0	0	0	0	2,613	5,796	8,409
Shares issued under equity plans	$ 8	3,561	0	0	0	0	3,569
Shares issued under equity plans (in shares)	805
Share-based compensation expense	$ 0	5,348	0	0	0	0	5,348
Dividends to noncontrolling interest	0	0	0	0	0	(9,597)	(9,597)
Purchase of treasury stock	$ 0	0	0	(48,249)	0	0	(48,249)
Purchase of treasury stock (in shares)	0
Retirement of treasury stock	$ (39)	(31,573)	(16,637)	48,249	0	0	0
Retirement of treasury stock (in shares)	(3,919)
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

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Oct. 31, 2021	Oct. 31, 2020	Oct. 31, 2019
Cash flows from operating activities:
Net income	$ 78,816	$ 40,343	$ 40,491
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property, plant and equipment	87,535	89,171	79,238
Amortization of intangible assets	2,861	4,643	4,641
Share-based compensation	5,348	4,927	3,680
Deferred income taxes	(2,110)	(444)	(3,662)
Changes in assets, liabilities, and other:
Accounts receivable	(36,620)	6,986	(12,321)
Inventories	2,987	(6,938)	(23,088)
Other current assets	(13,472)	7,849	(8,631)
Accounts payable, accrued liabilities, and other	25,427	(3,491)	(11,962)
Net cash provided by operating activities	150,772	143,046	68,386
Cash flows from investing activities:
Purchases of property, plant and equipment	(109,099)	(70,815)	(178,375)
Government incentives	5,775	5,263	27,003
Purchases of intangible assets	(170)	(159)	(95)
Other	0	0	61
Net cash used in investing activities	(103,494)	(65,711)	(151,406)
Cash flows from financing activities:
Proceeds from debt	20,858	20,340	54,633
Purchases of treasury stock	(48,249)	(34,394)	(21,696)
Repayments of debt	(20,352)	(7,392)	(61,319)
Dividends paid to noncontrolling interests	(9,597)	(16,151)	(45,050)
Proceeds from share-based arrangements	3,874	4,239	2,071
Contributions from noncontrolling interests	0	17,596	29,394
Other	(437)	(248)	(92)
Net cash used in financing activities	(53,903)	(16,010)	(42,059)
Effects of exchange rate changes on cash, cash equivalents, and restricted cash	4,703	10,986	2,381
Net (decrease) increase in cash, cash equivalents, and restricted cash	(1,922)	72,311	(122,698)
Cash, cash equivalents, and restricted cash at beginning of year	281,602	209,291	331,989
Cash, cash equivalents, and restricted cash at end of year	279,680	281,602	209,291
Less: Ending restricted cash	3,010	2,937	2,761
Cash and cash equivalents at end of year	276,670	278,665	206,530
Supplemental disclosure of non-cash information:
Accrual for property, plant and equipment purchased during year	$ 7,794	$ 13,062	$ 13,671

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Oct. 31, 2021

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

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 integrated circuits, a variety of FPDs and, to a lesser extent, other types of electrical and optical components. We currently have eleven manufacturing facilities, which are located in Taiwan (3), Korea, the United States (3), Europe (2), and China (2). Our FPD facility in Hefei, China, commenced production in the second quarter of 2019, and our IC facility in Xiamen, China, commenced production in the third quarter of 2019.

Consolidation

The accompanying consolidated financial statements include the accounts of Photronics, Inc., its wholly owned subsidiaries, and the majority-owned subsidiaries which it controls. All intercompany balances and transactions have been eliminated in consolidation.

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 are based on historical experience and on various assumptions that are believed to be reasonable, including estimates of the impact of COVID 19, based on the facts and circumstances available 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.

Reclassifications

In 2021, we separated share-based compensation activity into the two categories of Shares issued under equity plans and Share-based compensation expense in the consolidated statements of equity; in previous reports, we separated this activity into three categories. Reclassified prior period amounts have been made to conform to the current period presentation.

Cash and Cash Equivalents

Cash and cash equivalents include cash and highly liquid investments with an original maturity of three months or less, readily convertible to known amounts of cash, and so near to their maturity that they present insignificant risk of changes in value because of changes in interest rates. The carrying values of cash equivalents approximate their fair values, due to the short-term maturities of these instruments.

Accounts Receivable and Allowance for Credit Losses

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 that 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. Refer to our revenue recognition policy, below, for additional information on our accounting for accounts receivable.

On November 1, 2020, we adopted ASU 2016-13 – “Measurement of Credit Losses” (“ASU 2016-13) which replaced the incurred loss model (which was required to be used to measure credit losses under previous accounting guidance) with an expected credit loss model. Our adoption of ASU 2016-13 did not have a material effect on our financial statements.

Inventories

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

	October 31, 2021		October 31, 2020
Raw materials	$	54,019	$	56,389
Work in process		1,121		767
Finished goods		109		113
	$	55,249	$	57,269

Property, Plant and Equipment

Property, plant and equipment, except as explained below under "Impairment of Long-Lived Assets," is stated at cost less accumulated depreciation and amortization. Repairs and maintenance, as well as renewals and replacements of a routine nature, are charged to operations as incurred, while those that improve or extend the lives of existing assets are capitalized. Upon sale or other disposition, the cost of the asset and its related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in earnings.

Depreciation and amortization, essentially all of which are included in Cost of goods sold in our consolidated statements of income, are computed using the straight-line method over the estimated useful lives of the related assets. Buildings and improvements are depreciated over 10 to 39 years, machinery and equipment over 5 to 15 years, and furniture, fixtures, and office equipment over 3 to 5 years. Leasehold improvements are amortized over the life of the lease or the estimated useful life of the improvement, whichever is less. We employ judgment and assumptions when we establish estimated useful lives and depreciation periods, as well as when we periodically review property, plant, and equipment for any potential impairment in carrying values, whenever events such as a significant industry downturn, plant closures, technological obsolescence, or other change in circumstances indicate that their carrying amounts may not be recoverable.

Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determinations of recoverability are based upon our judgment and estimates of undiscounted future cash flows resulting from the use of the assets and their eventual disposition. Measurement of an impairment loss for long-lived assets that we expect to hold and use is based on the fair value of the assets, determined using a market or income approach, compared with the carrying value of the asset. The carrying values of assets determined to be impaired would be reduced to their estimated fair values.

Intangible Assets

Intangible assets are stated at fair value as of the date acquired, less accumulated amortization. Amortization is calculated based on the estimated useful lives of the assets, which range from 3 to 15 years, using the straight-line method or another method that more fairly represents the utilization of the assets.

We periodically evaluate the remaining useful lives of our intangible assets to determine whether events or circumstances warrant a revision to the remaining periods of amortization. In the event that the estimate of an intangible asset’s remaining useful life has changed, the remaining carrying amount of the intangible asset is amortized prospectively over that revised remaining useful life. If it is determined that an intangible asset has an indefinite useful life, that intangible asset would be subject to impairment testing annually or whenever events or circumstances indicate that its carrying value may not, based on future undiscounted cash flows or market factors, be recoverable. An impairment loss, the recorded amount of which would be based on the fair value of the intangible asset at the measurement date, would be recorded in the period in which the impairment determination was made.

Restricted Cash

Restricted cash in the amounts of $3.0 million and $2.9 million are included in Other assets on our October 31, 2021 and October 31, 2020, consolidated balance sheets, respectively. The restrictions on these amounts are primarily related to land lease agreements and customs requirements.

Treasury Stock

We record treasury stock purchases under the cost method, recording the entire cost of the acquired stock as treasury stock. Gains and losses on subsequent reissuances would be credited or charged to additional paid-in capital, and we would employ the average cost method (with average cost being determined separately for each share repurchase program), in the event that we subsequently reissue shares.

Revenue Recognition

 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 governmental 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 is 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 to customers 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. Contract assets of $9.9 million are included in Other current assets, and contract liabilities of $14.7 million and $5.2 million are included in Accrued liabilities and Other liabilities, respectively, in our October 31, 2021, consolidated balance sheet. Our October 31, 2020, condensed consolidated balance sheet includes contract assets of $6.3 million, included in Other current assets, and contract liabilities of $8.0 and $5.2 million, included in Accrued liabilities and Other liabilities, respectively. We did not impair any contract assets in 2021, 2020, or 2019. In 2021, 2020, and 2019, we recognized revenue of $5.3 million, $2.8 million, and $1.3 million, respectively, from the settlement of contract liabilities that existed at the beginning of those years.

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’ve received from customers have generally not preceded the completion of our performance obligations by more than one year.

Contract Costs

 We pay commissions to third-party sales agents for certain sales that 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 would 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 such assets.

 Remaining Performance Obligations

 As we are typically required to fulfill customer orders within a short time period, our backlog of orders is generally not in excess of one to two weeks for IC photomasks and two to three weeks for FPD photomasks. 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 we 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.

Leases

We adopted ASU 2016-02 - “Leases (Topic 842)” (“Topic 842”) on November 1, 2019. As allowed by the guidance, we elected to adopt ASU 2016-02 using the modified retrospective method at the beginning of the period of adoption; our adoption resulted in our recognition of $6.5 million of ROU assets and $6.5 million of lease liabilities on our opening 2020 balance sheet. At the time of transition, we elected a number of practical expedients offered by the guidance, which are described in Note 9. The following discussion is germane to our accounting for leases under Topic 842.

We determine if an arrangement is, or contains a lease, at the inception of the arrangement. An arrangement is determined to be a lease when it conveys to us the right to control the use of an identified asset for a period of time in exchange for consideration. Our determination as to whether we have the right to control the use of an identified asset centers on whether the arrangement conveys to us the rights to 1) obtain substantially all of the economic benefits of the identified asset and 2) direct the use of the identified asset.

If an arrangement is determined to be, or include, a lease, we then apply the classification criteria in Topic 842 to determine whether the lease is a finance lease or an operating lease. For both types of leases, at their commencement dates (which are the dates on which a lessor makes an underlying asset available for our use), we recognize ROU assets, which represent our use of the underlying assets, and lease liabilities which represent our obligation to make payments for our right to use the related assets. The initial measurement process for both types of leases is the same, except that, for operating leases, we generally apply our incremental borrowing rate for collateralized borrowings over terms similar to the lease’s terms to determine the lease liability, while for finance leases, we use the interest rates implicit in the leases. The initial measurement of ROU assets may require further adjustments for lease prepayments and initial direct costs we incur. As allowed under Topic 842, we elected not to recognize short-term leases, which are defined as leases that have a term (at their commencement dates) of twelve months or less and do not include an option to purchase the underlying asset that we are reasonably certain to exercise.

Operating leases are expensed on a straight-line basis over the terms of the leases, and are included in the consolidated statement of income in Cost of goods sold, Selling, general and administrative, or Research and development expense in accordance with the use of the underlying asset. Finance lease ROU assets are amortized over the estimated useful life of the underlying asset; the expense is included in the consolidated statement of income in Cost of goods sold. Finance lease liabilities are subsequently remeasured by increasing the liability to reflect interest accrued during a period and decreasing the liability to reflect payments made during the period. Interest expense incurred on finance leases is included in Interest expense on the consolidated statements of income.

Cash paid for operating leases and interest paid for finance leases are included in the consolidated statement of cash flows as operating activities in Accounts payable, accrued liabilities and other; cash paid for finance lease principal is included in Repayments of debt in the financing activities section of the consolidated statement of cash flows.

Share-Based Compensation

We recognize share-based compensation expense over the service period during which the awards are expected to vest. Share-based compensation expense includes the estimated effects of forfeitures, which are adjusted over the requisite service period to the extent actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures are recognized in the period of change and will impact the amount of expense to be recognized in future periods. Determining the appropriate option pricing model, calculating the grant date fair value of share-based awards, and estimating forfeiture rates requires considerable judgment, including estimations of stock price volatility and the expected term of options granted.

We use the Black-Scholes option pricing model to value employee stock options. We estimate stock price volatility based on daily averages of our common stock’s historical volatility over a term approximately equal to the estimated time period the grant will remain outstanding. The expected term of options and forfeiture rate assumptions are derived from historical data.

Research and Development

Research and development costs are expensed as incurred and consist primarily of development efforts related to high-end process technologies for advanced subwavelength reticle solutions for IC and FPD photomask technologies.

Foreign Currency Translation

Our non-U.S. subsidiaries maintain their accounts in their respective local currencies. Assets and liabilities of such subsidiaries are translated to U.S. dollars at year-end exchange rates. Income and expenses are translated at average rates of exchange prevailing during the year. Foreign currency translation adjustments are accumulated and reported in Accumulated other comprehensive income, a component of equity on our consolidated balance sheets.

Government Grants

 We account for funds we receive from government grants by reducing the costs of the assets or expenses to which we apply the funds. Funds we receive that cannot be attributed to specific assets or expenses would be recognized as other income, and included in Interest income and other income (expense), net in the consolidated statements of income. Funds we receive from government grants are classified in our consolidated statements of cash flows as either cash flows from operating activities or cash flows from investing activities, in accordance with how we expend the funds.

Income Taxes

The income tax provision is computed on the basis of the income or loss before income taxes for each entity in its respective tax jurisdiction. Deferred income taxes reflect the tax effects of differences between the carrying amounts of assets and liabilities for financial reporting purposes and their amounts used for income tax purposes, as well as the tax effects of net operating losses and tax credit carryforwards. We use judgment and make assumptions to determine if valuation allowances for deferred income tax assets are required, if their realization is not more likely than not, by considering future market growth, operating forecasts, future taxable income, and the mix of earnings among the tax jurisdictions in which we operate. Accordingly, income taxes charged against earnings may have been impacted by changes in the valuation allowances.

We consider income taxes in each of the tax jurisdictions in which we operate in order to determine our effective income tax rate. Our current income tax expense is thus identified, and temporary differences resulting from differing treatments of items for tax and financial reporting purposes are assessed. These differences result in deferred tax assets and liabilities, which are included in our consolidated balance sheets.

We account for uncertain tax positions by recording a liability for unrecognized tax benefits resulting from uncertain tax positions taken, or expected to be taken, in our tax returns. We include any applicable interest and penalties related to uncertain tax positions in our income tax provision.

Earnings Per Share

Basic earnings per share (“EPS”) is based on the weighted-average number of common shares outstanding for the period, excluding any dilutive common share equivalents. Diluted EPS reflects the potential dilution that could occur if certain share-based payment awards or financial instruments were exercised, earned or converted.

Variable Interest Entities

We account for the investments we make in certain legal entities in which equity investors do not have: 1) sufficient equity at risk for the legal entity to finance its activities without additional subordinated financial support or, 2) as a group, the holders of the equity investment at risk do not have either the power, through voting or similar rights, to direct the activities of the legal entity that most significantly impact the entity’s economic performance or, 3) the obligation to absorb the expected losses of the legal entity or the right to receive expected residual returns of the legal entity as “variable interest entities”, or “VIEs”.

We consolidate the results of any such entity in which we have determined that we have a controlling financial interest. We would have a “controlling financial interest” (and thus be considered the “primary beneficiary” of the entity) in such an entity when we have both the power to direct the activities that most significantly affect the VIE’s economic performance and the obligation to absorb the losses of, or right to receive the benefits from, the VIE that could be potentially significant to the VIE. On a quarterly basis, we reassess whether we have a controlling financial interest in any investments we have in these entities.

We account for investments we make in VIEs in which we have determined that we do not have a controlling financial interest but have a significant influence over, and hold at least a twenty percent ownership interest in, using the equity method. Any such investment not meeting the parameters to be accounted for under the equity method would be accounted for using the cost method, unless the investment had a readily determinable fair value, at which value it would then be reported.

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OTHER CURRENT ASSETS

12 Months Ended

Oct. 31, 2021

OTHER CURRENT ASSETS [Abstract]

OTHER CURRENT ASSETS

NOTE 2 - OTHER CURRENT ASSETS

Other current assets consists of the following:

	October 31, 2021		October 31, 2020
Recoverable value added taxes	$	24,213	$	16,539
Contract assets		9,859		6,313
Prepaid expenses		7,999		6,153
Prepaid and refundable income taxes		1,550		122
Other		629		608
	$	44,250	$	29,735

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PROPERTY, PLANT AND EQUIPMENT, NET

12 Months Ended

Oct. 31, 2021

PROPERTY, PLANT AND EQUIPMENT, NET [Abstract]

PROPERTY, PLANT AND EQUIPMENT, NET

NOTE 3 - PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net consists of the following:

	October 31, 2021			October 31, 2020
Land	$	12,442		$	12,422
Buildings and improvements		181,922			179,162
Machinery and equipment		1,961,474			1,812,791
Leasehold improvements		21,751			21,157
Furniture, fixtures and office equipment		15,534			15,665
Construction in progress		35,009			70,915
		2,228,132			2,112,112
Accumulated depreciation and amortization		(1,531,579	)		(1,480,637	)
	$	696,553		$	631,475

Depreciation expense for property, plant and equipment (excluding amortization expense for ROU assets) was $85.7 million, $89.2 million and $79.2 million for 2021, 2020 and 2019, respectively.

ROU assets resulting from finance leases are included in the table above as follows:

	October 31, 2021			October 31, 2020
Machinery and equipment	$	42,760		$	-
Accumulated amortization		(1,933	)		-
	$	40,827		$	-

      In the third quarter of 2021, we recorded a $3.5 million gain on the trade-in of a lithography tool with a tool vendor as partial compensation for a more advanced tool.

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INTANGIBLE ASSETS, NET

12 Months Ended

Oct. 31, 2021

INTANGIBLE ASSETS, NET [Abstract]

INTANGIBLE ASSETS, NET

NOTE 4 - INTANGIBLE ASSETS, NET

Intangible assets, net consist of the following:

October 31, 2021	Gross Amount		Accumulated Amortization			Net Amount
Customer relationships	$	1,647	$	(1,041	)	$	606
Software and other		6,056		(5,888	)		168
	$	7,703	$	(6,929	)	$	774
October 31, 2020
Technology license agreement	$	59,616	$	(57,298	)	$	2,318
Customer relationships		2,060		(1,245	)		815
Software and other		6,496		(6,192	)		304
	$	68,172	$	(64,735	)	$	3,437

Amortization expense of the Company’s finite-lived intangible assets was $2.9 million, $4.6 million and $4.6 million in 2021, 2020 and 2019, respectively.

The weighted-average amortization periods of intangible assets acquired in 2021 and 2020, which are comprised of software, is three years.

Intangible asset amortization over the next five years and thereafter is estimated to be as follows:

Fiscal Year
2022	$	269
2023	$	171
2024	$	136
2025	$	136
2026	$	62
Thereafter	$	-

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PDMCX JOINT VENTURE

12 Months Ended

Oct. 31, 2021

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 leading-edge and advanced-generation 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. No gain or loss was recorded upon the formation of this joint venture.

The total investment per the PDMCX operating agreement (“the Agreement”) is $160 million. In 2020, in combination with local financing obtained by PDMCX, Photronics and DNP had fulfilled their investment obligations under the Agreement. As discussed in Note 7, liens were granted to the local financing entity on property, plant and equipment with an October 31, 2021, total carrying value of $90.1 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 that 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.

We recorded net income (losses) from the operations of PDMCX of approximately $6.4 million, $(4.7) million and $(4.9) million in 2021, 2020 and 2019, respectively. General creditors of PDMCX do not have recourse to the assets of Photronics (other than the assets of PDMCX), and our maximum exposure to loss from PDMCX at October 31, 2021, was $64.0 million.

As required by the guidance in Topic 810 - “Consolidation” of the 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 VIE. Due to its lack of sufficient equity at risk to finance its activities without additional subordinated financial support, we determined that it is 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 years reporting periods; thus, as required, the PDMCX financial results have been consolidated with Photronics. Our conclusion was based on the fact 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 both 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 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 carrying amounts of PDMCX assets and liabilities included in our consolidated balance sheets are presented in the following table, together with our maximum exposures to loss related to these assets and liabilities.

	October 31, 2021				October 31, 2020
Classification	Carrying Amount		Photronics Interest		Carrying Amount		Photronics Interest
Current assets	$	59,745	$	29,879	$	56,095	$	28,053
Noncurrent assets		137,799		68,913		141,097		70,562
Total assets		197,544		98,792		197,192		98,615
Current liabilities		26,559		13,282		31,922		15,964
Noncurrent liabilities		42,917		21,463		55,676		27,844
Total liabilities		69,476		34,745		87,598		43,808
Net assets	$	128,068	$	64,047	$	109,594	$	54,807

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ACCRUED LIABILITIES

12 Months Ended

Oct. 31, 2021

ACCRUED LIABILITIES [Abstract]

ACCRUED LIABILITIES

NOTE 6 - ACCRUED LIABILITIES

Accrued liabilities consist of the following:

	October 31, 2021		October 31, 2020
Compensation related expenses	$	22,632	$	16,405
Income taxes		15,596		11,432
Contract liabilities		14,717		8,024
Property, plant, and equipment		3,331		2,355
Value added and other taxes		2,540		1,925
Operating leases		2,273		2,175
Contract manufacturing		1,210		1,275
Telecommunications and utilities		1,067		1,006
Professional fees		665		1,254
Inventory		605		1,026
Other		7,730		7,006
Accrued liabilities	$	72,366	$	53,883

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DEBT

12 Months Ended

Oct. 31, 2021

DEBT [Abstract]

DEBT

NOTE 7 - DEBT

Short-term debt was $0.0 million, and $4.7 million as of October 31, 2021, and October 31, 2020, respectively. The 2020 amount represents an advance payment, under an MLA, to fund equipment purchased or leased in the U.S., and short duration borrowings in Xiamen, China, to fund operations. See below for further information. The weighted-average interest rate on our short-term debt as of October 31, 2020, was 2.02%. Interest payments, including capitalized interest of $0.1 million in both 2021 and 2020, were $3.8 million in 2021, $2.6 million in 2020, and $2.6 million in 2019.

The tables below provide information on our long-term debt.

As of October 31, 2021	Xiamen Project Loans			Xiamen Working Capital Loans			Hefei Equipment Loan			Finance Leases			Total
Principal due:
Next 12 months	$	2,068		$	8,197		$	4,694		$	7,289		$	22,248
Months 13 – 24	$	10,071		$	4,005		$	4,693		$	6,512		$	25,281
Months 25 – 36		10,278			-			6,257			6,610			23,145
Months 37 – 48		9,902			-			5,585			17,961			33,448
Months 49 – 60		7,572			-			-			-			7,572
Long-term debt	$	37,823		$	4,005		$	16,535		$	31,083		$	89,446
Interest rate at balance sheet date		4.65	%		4.53% - 4.61	%		4.20	%			(3)
Basis spread on interest rates		0.00			67.75 - 76.00			(45.00	)		N/A
Interest rate reset	Quarterly			Monthly/Annually			Annually				N/A
Maturity date	December 2025			July 2023			September 2025					(3)
Periodic payment amount	Increases as loans mature			Increases as loans mature			Varies (1)					(3)
Periodic payment frequency	Semiannual, on individual loans			Semiannual, on individual loans			Semiannual(2)			Monthly
Loan collateral (carrying amount)	$	90,096			N/A		$	86,487		$	40,826	(4)

⁽¹⁾ First five loan repayments will each be for 7.5 percent of the approved 200 million RMB loan principal; last five installments will each be for 12.5 percent of the approved loan principal.

⁽²⁾ Semiannual repayments commence in March 2022.

⁽³⁾ See Note 9 for interest rates on lease liabilities, maturity dates, and periodic payment amounts.

⁽⁴⁾ Represents the carrying amount at the balance sheet date of the related ROU assets, in which the lessors have secured interests.

As of October 31, 2020	Xiamen Project Loans			Xiamen Working Capital Loans			Total
Principal due:
Next 12 months	$	6,705		$	2,265		$	8,970
Months 13 – 24	$	7,334		$	7,808		$	15,142
Months 25 – 36		9,592			3,814			13,406
Months 37 – 48		9,789			-			9,789
Months 49 – 60		9,432			-			9,432
Thereafter		7,211			-			7,211
Long-term debt	$	43,358		$	11,622		$	54,980
Interest rate at balance sheet date		4.90	%		4.53% - 4.61	%
Basis spread on interest rates		25.00			40.00 - 76.00
Loan collateral (carrying amount)	$	94,459			N/A

Xiamen Project Loans

   In November 2018, PDMCX obtained approval to borrow 345 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 and, as of October 31, 2021, 255.0 million RMB ($39.9 million) remained outstanding. The Project Loans were used to finance certain capital expenditures at the PDMCX facility, and are collateralized by liens granted on the land use right, building, and certain equipment located at the facility. The interest rates on the Project Loans are variable (based on the RMB Loan Prime Rate of the National Interbank Funding Center), and interest incurred on the loans is eligible for reimbursement through incentives provided by the Xiamen Torch Hi-Tech Industrial Development Zone, which provide for such reimbursements up to a prescribed limit and duration. The Project Loans are subject to covenants and provisions, certain of which relate to the assets pledged as security for the loan, all of which we were in compliance with at October 31, 2021.

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 extension. Unless extended, this facility will expire in October 2022. As of October 31, 2021, PDMCX had 78.0 million RMB ($12.2 million) 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 are eligible for reimbursement through incentives provided by the Xiamen Torch Hi-Tech Industrial Development Zone, which provide for such reimbursements up to a prescribed limit and duration.

Hefei Equipment Loan

   In October 2020, our Hefei, China, facility was approved to borrow 200 million RMB (approximately $31.3 million, at the balance sheet date) from the China Construction Bank Corporation. This credit facility is subject to annual reviews and extension, with the most recent extension allowing us to borrow additional funds set to expire in August 2022. The loan proceeds were used to fund purchases of two lithography tools at the Hefei facility. As of October 31, 2021, we had borrowed 135.7 million RMB ($21.2 million) against this approval (all of which was then outstanding), and 64.3 million RMB ($10.1 million) remained available to borrow. The interest rate on the loan is variable and based on the RMB Loan Prime Rate of the National Interbank Funding Center. The borrowings are secured by the Hefei facility, its related land use right, and certain manufacturing equipment. The Hefei Equipment Loan is 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 October 31, 2021.

Finance Leases

   In February 2021, under an MLA which we entered into effective October 2020, we entered into a five-year $7.2 million finance lease for a high-end inspection tool and, in December 2020, under an MLA which we entered into effective July 2019, we entered into a $35.5 million lease for a high-end lithography tool. Upon entering into the latter lease, our prior $3.5 million short-term obligation to the lessor became a portion of the lease liability. See Note 9 for additional information on these leases.

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 certain of the common stock we own in certain foreign 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 October 31, 2021), 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. The interest rate on the Credit Agreement (1.09% at October 31, 2021) is based on our total leverage ratio at LIBOR plus a spread, as defined in the Credit Agreement.We had no outstanding borrowings against the Credit Agreement at October 31, 2021.

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REVENUE

12 Months Ended

Oct. 31, 2021

REVENUE [Abstract]

REVENUE

NOTE 8 - REVENUE

We adopted ASU 2014-09 and all subsequent amendments, which are collectively codified in ASC Topic 606 - “Revenue from Contracts with Customers” (“Topic 606”), on November 1, 2018, under the modified retrospective transition method, only with respect to contracts that were not complete as of the date of adoption. This approach required prospective application of the guidance with a cumulative effect adjustment to retained earnings to reflect the impact of the adoption on contracts that were not complete as of the date of the adoption. Please refer to Note 1 for information on our revenue recognition policies.

Disaggregation of Revenue

The following tables present our revenue for the years ended October 31, 2021, October 31, 2020 and October 31, 2019, disaggregated by product type, geographic origin, and timing of recognition.

	Year Ended
Revenue by Product Type	October 31, 2021		October 31, 2020		October 31, 2019
IC
High-end	$	162,973	$	156,129	$	156,418
Mainstream		297,198		262,281		249,773
Total IC	$	460,171	$	418,410	$	406,191
FPD
High-end	$	155,670	$	139,558	$	98,832
Mainstream		47,920		51,723		45,637
Total FPD	$	203,590	$	191,281		144,469
	$	663,761	$	609,691	$	550,660

Revenue by Geographic Origin*
Taiwan	$	248,597	$	239,101	$	244,377
Korea		156,391		153,052		147,734
China		115,732		79,374		19,010
United States		105,023		104,949		105,045
Europe		36,242		31,501		32,585
Other		1,776		1,714		1,909
	$	663,761	$	609,691	$	550,660

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

Revenue by Timing of Recognition
Over time	$	606,332	$	535,071	$	497,942
At a point in time		57,429		74,620		52,718
	$	663,761	$	609,691	$	550,660

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LEASES

12 Months Ended

Oct. 31, 2021

LEASES [Abstract]

LEASES

NOTE 9 - LEASES

We adopted ASU 2016-02 and all subsequent amendments, collectively codified in ASC Topic 842 “Leases” (“Topic 842”), on November 1, 2019. The guidance requires modified retrospective adoption, either at the beginning of the earliest period presented or at the beginning of the period of adoption. We elected to apply the guidance at the beginning of the period of adoption and recorded, as of November 1, 2019, ROU leased assets of $6.5 million. In conjunction with this, we recorded lease liabilities, which had been discounted at our incremental borrowing rates, of $6.5 million. The impact of our adoption of Topic 842 on our current and deferred income taxes was immaterial.

The guidance allows a number of elections and practical expedients, of which we elected the following:

- Election not to recognize short-term leases on the balance sheet.

- Practical expedient to not separate lease and non-lease components in a contract.

- Practical expedient “package” for transitioning to the new guidance:

- Not reassessing whether any expired or existing contracts are, or contain, leases.

- Not reassessing lease classification for any existing or expired leases.

- Not reassessing initial direct costs for any existing leases.

Our involvement in lease arrangements has typically been as a lessee. We determine if an agreement is or contains a lease on the earlier of the date of the agreement or the date on which we commit to entering the agreement. Our evaluation considers whether the agreement includes an identified asset and whether it affords us the right to control the asset. Our having the right to control the identified asset is determined by whether we are entitled to substantially all of its economic benefits and can direct its use.

We recognize leases on our consolidated balance sheet when a lessor makes an asset underlying a lease having a term in excess of twelve months available for our use. As allowed under Topic 842, we have elected not to apply the recognition requirements to leases that, at their commencement dates, have lease terms of twelve months or less and do not include options to purchase their underlying assets that we are reasonably certain to exercise. The present value of lease payments over the term of the lease provides the basis for the initial measurement of ROU assets and their related lease liabilities. We measure finance lease liabilities using the rates implicit in the leases; operating lease liabilities are measured using our incremental borrowing rate, for collateralized loans, at the commencement date. Variable lease payments, other than those that are dependent on an index or on a rate, are not included in the measurement of ROU assets and their related lease liabilities. Lease terms include extension periods if the lease agreement includes an option to extend the lease that we are reasonably certain to exercise. As allowed under Topic 842, we have elected, for all classes of assets, the practical expedient to not separate lease components of a contract from non-lease components of a contract.

 In February 2021, under an MLA which we entered into effective October 2020, 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; 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, under an MLA which we entered into effective July 2019, 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, to be 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 in Note 7, 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.

    The following table provides information on operating and finance leases included in our consolidated balance sheets.

Classification	October 31, 2021		October 31, 2020
ROU Assets – Operating Leases
Other assets	$	5,581	$	7,706
ROU Assets – Finance Leases
Property, plant and equipment, net	$	40,827	$	-
Lease Liabilities – Operating Leases
Accrued liabilities	$	2,273	$	2,175
Other liabilities		3,246		5,008
	$	5,519	$	7,183
Lease Liabilities – Finance Leases
Current portion of long-term debt	$	7,289	$	-
Long-term debt		31,083		-
	$	38,372	$	-

     The following table presents future lease payments under noncancelable operating and finance leases as of October 31, 2021. Imputed interest represents the difference between undiscounted cash flows and discounted cash flows.

Fiscal Year	Operating Leases		Finance Leases
2022	$	2,351	$	7,856
2023		1,374		6,938
2024		819		6,938
2025		646		18,012
2026		398		-
Thereafter		157		-
Total lease payments		5,745		39,744
Imputed interest		226		1,372
Lease liabilities	$	5,519	$	38,372

     The following table presents lease costs for 2021 and 2020. Rent expense, as calculated under guidance in effect prior to our adoption of Topic 842, was $3.0 million in 2019.

	Year Ended
	October 31, 2021		October 31, 2020
Operating lease costs	$	2,904	$	3,076
Short-term lease costs	$	232	$	359
Variable lease costs	$	498	$	378
Interest on lease liabilities	$	510	$	-
Amortization of ROU assets	$	1,867	$	-

The following table presents statistical information related to our operating and finance leases. The information presented is as of the balance sheet dates.

	October 31, 2021					October 31, 2020
Classification	Weighted-average remaining lease term (in years)		Weighted-average discount rate			Weighted-average remaining lease term (in years)		Weighted-average discount rate
Operating leases		3.5		2.4	%		4.1		2.37	%
Finance leases		3.3		1.5	%		-		-

The following table presents the effects of leases on our 2021 and 2020 consolidated statements of cash flows, and provides leases-related non-cash information for those years.

	Year Ended
	October 31, 2021		October 31, 2020
Operating cash flows used for operating leases	$	2,442	$	3,584
Operating cash flows used for finance leases	$	464	$	-
Financing cash flows used for finance leases	$	4,323	$	-
ROU assets obtained in exchange for operating lease obligations	$	457	$	2,681
ROU assets obtained in exchange for finance lease obligations	$	42,672	$	-

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SHARE-BASED COMPENSATION

12 Months Ended

Oct. 31, 2021

SHARE-BASED COMPENSATION [Abstract]

SHARE-BASED COMPENSATION

NOTE 10 - 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 is four million shares. 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 most recent fiscal years.

	Year Ended
	October 31, 2021		October 31, 2020		October 31, 2019
Expense reported in:
Cost of goods sold	$	446	$	337	$	250
Selling, general and administrative		4,446		4,590		3,430
Research and development		456		-		-
Total expense incurred	$	5,348	$	4,927	$	3,680
Income tax benefits of share-based compensation (in millions)	$	0.2	$	0.2	$	-
Share-based compensation cost capitalized	$	-	$	-	$	-

 The table below presents information on estimated expenses not yet incurred on our share-based compensation awards.

	October 31, 2021
	Restricted Stock Awards		Stock Options
Compensation cost not yet recognized	$	7,300	$	109
Weighted-average amortization period (in years)		2.6		1.1

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 values of the awards are determined on the date of grant, based on the closing stock price of our common stock. As of October 31, 2021, there were 929,147 shares of restricted stock outstanding.

A summary of restricted stock award activity during fiscal year 2021 and the status of our outstanding restricted stock awards as of October 31, 2021, is presented below:

Restricted Stock	Shares			Weighted-Average Fair Value at Grant Date
Outstanding at October 31, 2020		812,316		$	12.55
Granted		564,800		$	11.20
Vested		(383,177	)	$	11.72
Cancelled		(64,792	)	$	12.44
Outstanding at October 31, 2021		929,147		$	12.08
Expected to vest as of October 31, 2021		862,143		$	12.08

The table below presents information on restricted stock awards granted and lapsed in the three most recent fiscal years.

	Year Ended
	October 31, 2021		October 31, 2020		October 31, 2019
Number of shares granted		564,800		538,000		435,000
Weighted-average grant-date fair value of awards (in dollars per share)	$	11.20	$	15.08	$	9.80
Fair value of awards for which restrictions lapsed	$	4,491	$	2,957	$	1,888

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 granted 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.

There were no stock option awards granted during 2021 and 2020. The weighted-average grant date fair value of options granted during 2019 was $3.31. The weighted-average inputs and risk-free rate of return ranges used to calculate the grant-date fair value of stock options granted during 2019 are presented in the following table.

	Year Ended
	October 31, 2019
Expected volatility		33.1	%
Risk-free rate of return		2.5 – 2.9	%
Dividend yield		0.0	%
Expected term	5.1 years

The table below presents a summary of stock options activity during 2021 and information on stock options outstanding at October 31, 2021.

	Shares			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding at October 31, 2020		1,621,117		$	9.27
Granted		-			-
Exercised		(401,114	)	$	8.58
Cancelled and forfeited		(46,900	)	$	9.74
Outstanding at October 31, 2021		1,173,103		$	9.49	4.0 years	$	4,109
Exercisable at October 31, 2021		1,077,914		$	9.51	3.8 years	$	3,750
Expected to vest as of October 31, 2021		93,500		$	9.20	6.7 years	$	353

The table below presents information on options exercised in the three most recent fiscal years.

	Year Ended
	October 31, 2021		October 31, 2020		October 31, 2019
Total intrinsic value of options exercised	$	1,910	$	3,184	$	1,262
Cash received from option exercises	$	3,441	$	3,746	$	2,071

Employee Stock Purchase Plan

Our Employee Stock Purchase Plan ("ESPP") permits employees to purchase Photronics, Inc. common shares at 85% of the lower of the closing market price at the commencement or ending date of the Plan year (which is approximately one year from the commencement date). We recognize the ESPP expense over that same period. As of October 31, 2021, the maximum number of shares of common stock approved by our shareholders to be purchased under the ESPP was 1.85 million shares, of which approximately 1.5 million shares had been issued through October 31, 2021. As of October 31, 2021, less than 0.1 million shares, with unrecognized compensation cost of less than $0.1 million (all of which will be recognized in the first quarter of fiscal 2022) were subject to outstanding subscriptions.

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EMPLOYEE RETIREMENT PLANS

12 Months Ended

Oct. 31, 2021

EMPLOYEE RETIREMENT PLANS [Abstract]

EMPLOYEE RETIREMENT PLANS

NOTE 11 - EMPLOYEE RETIREMENT PLANS

We maintain a 401(k) Savings and Profit-Sharing Plan ("401(k) Plan") which covers all full and certain part-time U.S. employees who have completed three months of service and are 18 years of age or older. Under the terms of the 401(k) Plan, employees may contribute up to 50% of their salary, subject to certain maximum amounts, which will be matched by the Company at 50% of the employee's contributions that are not in excess of 4% of the employee's compensation. Employee and employer contributions vest immediately upon contribution. The total employer contributions for all of our defined contribution plans were $0.8 million, $0.7 million and $0.7 million in 2021, 2020 and 2019, respectively.

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INCOME TAXES

12 Months Ended

Oct. 31, 2021

INCOME TAXES [Abstract]

INCOME TAXES

NOTE 12 - INCOME TAXES

Income before the income tax provisions consists of the following:

	Year Ended
	October 31, 2021			October 31, 2020			October 31, 2019
United States	$	(19,447	)	$	(10,672	)	$	(8,379	)
Foreign		121,453			72,273			59,080
	$	102,006		$	61,601		$	50,701

The income tax provisions consist of the following:

	Year Ended
	October 31, 2021			October 31, 2020			October 31, 2019
Current:
Federal	$	-		$	-		$	(3,916	)
State		4			4			11
Foreign		25,296			21,698			17,777
		25,300			21,702			13,872
Deferred:
Federal		-			-			3,673
State		103			8			10
Foreign		(2,213	)		(452	)		(7,345	)
		(2,110	)		(444	)		(3,662	)
Total	$	23,190		$	21,258		$	10,210

The income tax provisions differ from the amount computed by applying the statutory U.S. federal income tax rate to income before income taxes as a result of the following:

	Year Ended
	October 31, 2021			October 31, 2020			October 31, 2019
U.S. federal income tax at statutory rate	$	21,421		$	12,936		$	10,647
Changes in valuation allowances		364			6,942			2,673
Foreign tax rate differentials		3,244			1,718			218
Tax credits		(3,942	)		(1,562	)		(1,268	)
Uncertain tax positions, including reserves, settlements and resolutions		1,037			1,637			134
Income tax holiday		-			(318	)		(2,234	)
Other, net		1,066			(95	)		40
	$	23,190		$	21,258		$	10,210
Effective tax rate		22.7	%		34.5	%		20.1	%

The 2021 effective tax rate differs from the U.S. federal blended rate of 21% primarily due to loss jurisdiction pre-tax losses not being benefited due to valuation allowances, non-U.S. pre-tax income being taxed at higher statutory rates in the non-U.S. jurisdictions, and investment credits in foreign jurisdictions.

The 2020 effective tax rate differs from the U.S. statutory rate of 21% primarily due to loss jurisdiction pre-tax losses not being benefited due to valuation allowances, non-U.S. pre-tax income being taxed at higher statutory rates in the non-U.S. jurisdictions (partially offset by the benefits of a tax holiday), and investment credits in foreign jurisdictions.

The 2019 effective tax rate differs from the U.S. statutory rate of 21% due to the recognition of a benefit related to previously unrecognized tax positions, loss jurisdiction pre-tax losses being benefited at higher statutory rates than pre-tax income in income jurisdictions was taxed, changes in deferred tax asset valuation allowance, the benefits of a tax holiday, and investment credits in foreign jurisdictions.

We were granted a five-year tax holiday in Taiwan that expired on December 31, 2019. This tax holiday reduced foreign taxes by $0.1 million and $2.2 million in 2020 and 2019, respectively, with a two cents per share impact in 2019, and an immaterial per share effect in 2020.

The net deferred income tax assets consist of the following:

	As of
	October 31, 2021			October 31, 2020
Deferred income tax assets:
Net operating losses	$	31,657		$	34,457
Reserves not currently deductible		8,201			6,287
Tax credit carryforwards		9,877			9,481
Share-based compensation		1,500			1,306
Property, plant and equipment		7,566			3,887
Lease liabilities		9,134			-
Other		157			398
		68,092			55,816
Valuation allowances		(34,337	)		(33,973	)
		33,755			21,843
Deferred income tax liabilities:
ROU assets		(9,698	)		-
		(9,698	)		-
Net deferred income tax assets	$	24,057		$	21,843
Classification
Deferred income tax assets	$	24,353		$	22,070
Other liabilities		(296	)		(227	)
	$	24,057		$	21,843

We have established a valuation allowance for a portion of our deferred tax assets because we believe, based on the weight of all available evidence, that it is more likely than not that a portion of our deferred tax assets will expire prior to utilization. In 2021 the valuation allowance decreased as a result of management’s determination that tax benefits on deferred tax assets in a non-U.S. jurisdiction would more likely than not be realized and, therefore, decreased the valuation allowance to include these deferred tax assets.

Due to the Tax Cuts and Jobs Act, which was signed into law in December 2017, as of fiscal year end 2018, U.S. deferred taxes were no longer provided on the undistributed earnings of non-U.S. subsidiaries. Our policy to indefinitely reinvest these earnings in non-U.S. operations remains unchanged for the purpose of determining deferred tax liabilities for U.S. state and foreign withholding taxes. Therefore, should we elect in the future to repatriate the remaining foreign earnings deemed to be indefinitely reinvested, we may incur additional state and foreign withholding tax expense on those earnings, the amount of which is not practicable to compute.

The following tables present our available operating loss and credit carryforwards as of October 31, 2021, and their related expiration periods:

Operating Loss Carryforwards	Amount		Expiration Period
Federal	$	99,636	2029-Indefinite
State		187,044		2022-Indefinite
Foreign		113		2024-2031

Tax Credit Carryforwards	Amount		Expiration Period
Federal research and development	$	5,204		2024-2041
State	$	5,915		2022-2035

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is presented below.

	Year Ended
	October 31, 2021			October 31, 2020			October 31, 2019
Balance at beginning of year before interest and penalties	$	2,550		$	1,758		$	1,775
Additions (reductions) for tax positions in prior years		181			227			(466	)
Additions based on current year tax positions		1,313			1,576			1,286
Settlements		(489	)		(992	)		(204	)
Lapses of statutes of limitations		(21	)		(19	)		(633	)
Balance at end of year before interest and penalties		3,534			2,550			1,758
Interest and penalties		223			131			177
Balance at end of year including interest and penalties	$	3,757		$	2,681		$	1,935

At October 31, 2021, October 31, 2020 and October 31, 2019, unrecognized tax benefits, which are included in Other liabilities, include $3.8 million, $2.0 million, and $1.9 million, respectively, that, if recognized, would impact the effective tax rates. We include any applicable interest and penalties related to uncertain tax positions in our income tax provision. The amounts reflected in the table above include settlements of non-U.S. audits.

Although the timing of the reversal of uncertain tax positions may be uncertain, as they can be dependent upon the settlement of tax audits or expirations of statutes of limitations, the Company believes that the amount of uncertain tax positions (including accrued interest and penalties, and net of tax benefits) that may be resolved over the next twelve months is $0.5 million. Resolution of these uncertain tax positions may result from either or both the lapses of statutes of limitations and tax settlements. The Company is no longer subject to tax authority examinations in the U.S., major foreign, or state tax jurisdictions for years prior to fiscal year 2016.

Income tax payments were $22.7 million, $23.0 million and $15.9 million in 2021, 2020 and 2019, respectively. Cash received as refunds of income taxes paid in prior years amounted to $0.7 million in 2021, $4.3 million in 2020, and an immaterial amount in 2019.

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EARNINGS PER SHARE

12 Months Ended

Oct. 31, 2021

EARNINGS PER SHARE [Abstract]

EARNINGS PER SHARE

NOTE 13 - EARNINGS PER SHARE

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

	Year Ended
	October 31, 2021		October 31, 2020		October 31, 2019
Net income attributable to Photronics, Inc. shareholders	$	55,449	$	33,820	$	29,793
Effect of dilutive securities:
Interest expense on convertible notes, net of tax		-		-		845
Earnings used for diluted earnings per share	$	55,449	$	33,820	$	30,638
Weighted-average common shares computations:
Weighted-average common shares used for basic earnings per share		61,407		64,866		66,347
Effect of dilutive securities:
Share-based payment awards		592		604		448
Convertible notes		-		-		2,360
Potentially dilutive common shares		592		604		2,808
Weighted-average common shares used for diluted earnings per share		61,999		65,470		69,155
Basic earnings per share	$	0.90	$	0.52	$	0.45
Diluted earnings per share	$	0.89	$	0.52	$	0.44

The table below sets forth 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.

	Year Ended
	October 31, 2021		October 31, 2020		October 31, 2019
Share based payment awards		331		795		1,250
Total potentially dilutive shares excluded		331		795		1,250

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COMMITMENTS AND CONTINGENCIES

12 Months Ended

Oct. 31, 2021

COMMITMENTS AND CONTINGENCIES [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 14 - COMMITMENTS AND CONTINGENCIES

Presented below are our unrecognized commitments, as of October 31, 2021. Included in these are commitments of $73.7 million for the purchase of capital equipment. The amounts below do not include our commitments under our debt and lease arrangements, which are presented in Notes 7 and 9, respectively.

Fiscal Year	Unrecognized Commitments
2022	$	82,323
2023		25,630
2024		3,654
2025		-
2026		-
Thereafter		-
Total	$	111,607

We are subject to various claims that arise in the ordinary course of business. We believe that our potential liability under such claims, individually and in the aggregate, will not have a material effect on our consolidated financial statements.  As of October 31, 2021 and October 31, 2020, we were not involved in environmental litigation to which a government was a party.

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CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME BY COMPONENT

12 Months Ended

Oct. 31, 2021

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME BY COMPONENT [Abstract]

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME BY COMPONENT

NOTE 15 - CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME BY COMPONENT

The following tables set forth the changes in our accumulated other comprehensive income by component (net of tax of $0) for the years ended October 31, 2021 and October 31, 2020.

	Year Ended October 31, 2021
	Foreign Currency Translation Adjustments		Other			Total
Balance at October 31, 2020	$	18,828	$	(870	)	$	17,958
Other comprehensive income (loss)		8,478		(69	)		8,409
Less: other comprehensive income (loss) attributable to noncontrolling interests		5,830		(34	)		5,796
Balance at October 31, 2021	$	21,476	$	(905	)	$	20,571

	Year Ended October 31, 2020
	Foreign Currency Translation Adjustments			Other			Total
Balance at October 31, 2019	$	(8,331	)	$	(674	)	$	(9,005	)
Other comprehensive loss		36,381			(390	)		35,991
Less: other comprehensive income (loss) attributable to noncontrolling interests		9,222			(194	)		9,028
Balance at October 31, 2020	$	18,828		$	(870	)	$	17,958

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RISK AND CONCENTRATIONS

12 Months Ended

Oct. 31, 2021

RISK AND CONCENTRATIONS [Abstract]

RISKS AND CONCENTRATIONS

NOTE 16 – RISKS AND CONCENTRATIONS

Financial instruments that potentially subject us to credit risk principally consist of trade accounts receivable and short-term cash investments. We sell our products primarily to semiconductor and FPD manufacturers in Asia, North America, and Europe. We believe that the concentration of credit risk in our trade receivables is substantially mitigated by our ongoing credit evaluation process and relatively short collection terms. We do not generally require collateral from customers. We establish an allowance for credit losses based upon factors surrounding the credit risk of specific customers, historical trends and other information.

Our cash and cash equivalents are deposited in several financial institutions, including institutions located within all of the countries in which we manufacture photomasks. Portions of deposits in some of these institutions may exceed the amount of insurance available for such deposits at these institutions. As these deposits are generally redeemable upon demand and are held by high quality, reputable institutions, we consider them to bear minimal credit risk. We further mitigate credit risks related to our cash and cash equivalents by spreading such risk among a number of institutions.

As of October 31, 2021 and October 31, 2020, one customer accounted for 20% and 24% of our net accounts receivable, respectively, and, as of October 31, 2021, another customer accounted for 12% of our net accounts receivable balance. One customer accounted for 17%, 16% and 15%, of our revenue in 2021, 2020 and 2019, respectively, and another customer accounted for 12%, 14% and 16% of our revenue in 2021, 2020 and 2019, respectively.

We operate as a single operating segment as a manufacturer of photomasks, which are high precision quartz or glass plates containing microscopic images of electronic circuits for use in the fabrication of IC’s and FPDs.

As of the balance sheet dates, our property, plant, and equipment, net and net assets were, by geographic area, as presented below.

	October 31, 2021				October 31, 2020
	Property, Plant and Equipment		Net Assets		Property, Plant and Equipment		Net Assets
China	$	285,756	$	210,437	$	262,800	$	180,404
Taiwan		129,660		341,291		123,979		309,911
United States		137,049		173,062		130,164		225,411
Korea		140,380		254,357		110,815		228,579
Europe and Other		3,708		21,415		3,717		17,961
	$	696,553	$	1,000,562	$	631,475	$	962,266

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RELATED PARTY TRANSACTIONS

12 Months Ended

Oct. 31, 2021

RELATED PARTY TRANSACTIONS [Abstract]

RELATED PARTY TRANSACTIONS

NOTE 17 - RELATED PARTY TRANSACTIONS

On January 20, 2018, we entered into a four-year consulting agreement with DEMA Associates, LLC, of which the chairman of our board of directors is a member, for $0.4 million per year. In 2019, we incurred expenses for services provided by this entity of $0.4 million. Effective March 9, 2020, the agreement was amended to reduce the consideration under the contract to $0.1 million per year for its remaining term; in 2021 and 2020, we incurred expenses for services provided by this entity of $0.1 million and $0.2 million, respectively.

An officer of our company is related to an individual in a position of authority at one of our largest customers. We recorded revenue from this customer of $111.0 million, $96.4 million and $87.0 million, in 2021, 2020 and 2019, respectively. As of October 31, 2021 and October 31, 2020, we had accounts receivable of $34.5 million and $32.7 million, respectively, from this customer.

We believe that the terms of our transactions with the related parties described above were negotiated at arm’s length and were no less favorable to us than terms we could have obtained from unrelated third parties.

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FAIR VALUE MEASUREMENTS

12 Months Ended

Oct. 31, 2021

FAIR VALUE MEASUREMENTS [Abstract]

FAIR VALUE MEASUREMENTS

NOTE 18 - 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 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 variable rate debt instruments are a Level 2 measurement and approximate their carrying values due to the variable nature of the underlying interest rates. We did not have any assets or liabilities measured at fair value, on a recurring or a nonrecurring basis, at October 31, 2021 or October 31, 2020.

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SHARE REPURCHASE PROGRAMS

12 Months Ended

Oct. 31, 2021

SHARE REPURCHASE PROGRAMS [Abstract]

SHARE REPURCHASE PROGRAMS

NOTE 19 - 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. The company commenced repurchasing shares under this authorization on September 16, 2020.

In August 2019, 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 25, 2019, and was terminated on March 20, 2020.

In October 2018, the Company’s board of directors authorized the repurchase of up to $25 million of its common stock, to have been executed in open-market transactions or in accordance with a repurchase plan under Rule 10b5-1 of the Securities Act. The share repurchase program commenced on October 22, 2018, and was terminated on February 1, 2019.

All of the shares purchased under the above repurchase programs were retired prior to the end of the fiscal year in which they were purchased. The table below presents information on the repurchase programs.

	2021 Purchases		2020 Purchases		2019 Purchases
Number of shares repurchased		3,919		3,194		2,133
Cost of shares repurchased	$	48,249	$	34,394	$	21,696
Average price paid per share	$	12.31	$	10.77	$	10.17

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SUBSIDIARY DIVIDENDS

12 Months Ended

Oct. 31, 2021

SUBSIDIARY DIVIDENDS [Abstract]

SUBSIDIARY DIVIDENDS

NOTE 20 - SUBSIDIARY DIVIDENDS

In 2021, 2020 and 2019, PDMC, the Company’s majority owned subsidiary in Taiwan, paid dividends of which 49.99%, or approximately $9.6 million, $16.2 million and $45.1 million, respectively, were paid to noncontrolling interests.

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RECENT ACCOUNTING PRONOUNCEMENTS

12 Months Ended

Oct. 31, 2021

RECENT ACCOUNTING PRONOUNCEMENTS [Abstract]

RECENT ACCOUNTING PRONOUNCEMENTS

NOTE 21 - RECENT ACCOUNTING PRONOUNCEMENTS

Accounting Standards Updates Adopted

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses”, the main objective of which is to provide more useful information about expected credit losses on financial instruments and other commitments of an entity to extend credit. In support of this objective, the ASU replaced the incurred loss impairment methodology, found in previous guidance, with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This ASU requires a cumulative-effect adjustment as of the beginning of the first reporting period in which the guidance is adopted. ASU 2016-13 was effective for Photronics in its first quarter of 2021. We adopted ASU 2016-13 on November 1, 2020; the effect of the adoption was immaterial.

  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 is to be applied prospectively through December 31, 2022. We are currently evaluating the effect the potential adoption of this ASU may have on our consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (ASC 740)—Simplifying the Accounting for Income Taxes,” which simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC 740, Income Taxes. The amendments also improve consistent application of and simplify US GAAP for other areas of ASC 740 by clarifying and amending existing guidance. This guidance is effective for Photronics in Q1 of fiscal year 2022. We are currently evaluating the effect the adoption of this ASU may have on our consolidated financial statements and disclosures.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Oct. 31, 2021

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]

Consolidation

Consolidation

The accompanying consolidated financial statements include the accounts of Photronics, Inc., its wholly owned subsidiaries, and the majority-owned subsidiaries which it controls. All intercompany balances and transactions have been eliminated in consolidation.

Estimates and Assumptions

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 are based on historical experience and on various assumptions that are believed to be reasonable, including estimates of the impact of COVID 19, based on the facts and circumstances available 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.

Reclassifications

Reclassifications

In 2021, we separated share-based compensation activity into the two categories of Shares issued under equity plans and Share-based compensation expense in the consolidated statements of equity; in previous reports, we separated this activity into three categories. Reclassified prior period amounts have been made to conform to the current period presentation.

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash and cash equivalents include cash and highly liquid investments with an original maturity of three months or less, readily convertible to known amounts of cash, and so near to their maturity that they present insignificant risk of changes in value because of changes in interest rates. The carrying values of cash equivalents approximate their fair values, due to the short-term maturities of these instruments.

Accounts Receivable and Allowance for Credit Losses

Accounts Receivable and Allowance for Credit Losses

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 that 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. Refer to our revenue recognition policy, below, for additional information on our accounting for accounts receivable.

On November 1, 2020, we adopted ASU 2016-13 – “Measurement of Credit Losses” (“ASU 2016-13) which replaced the incurred loss model (which was required to be used to measure credit losses under previous accounting guidance) with an expected credit loss model. Our adoption of ASU 2016-13 did not have a material effect on our financial statements.

Inventories

Inventories

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

	October 31, 2021		October 31, 2020
Raw materials	$	54,019	$	56,389
Work in process		1,121		767
Finished goods		109		113
	$	55,249	$	57,269

Property, Plant and Equipment

Property, Plant and Equipment

Property, plant and equipment, except as explained below under "Impairment of Long-Lived Assets," is stated at cost less accumulated depreciation and amortization. Repairs and maintenance, as well as renewals and replacements of a routine nature, are charged to operations as incurred, while those that improve or extend the lives of existing assets are capitalized. Upon sale or other disposition, the cost of the asset and its related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in earnings.

Depreciation and amortization, essentially all of which are included in Cost of goods sold in our consolidated statements of income, are computed using the straight-line method over the estimated useful lives of the related assets. Buildings and improvements are depreciated over 10 to 39 years, machinery and equipment over 5 to 15 years, and furniture, fixtures, and office equipment over 3 to 5 years. Leasehold improvements are amortized over the life of the lease or the estimated useful life of the improvement, whichever is less. We employ judgment and assumptions when we establish estimated useful lives and depreciation periods, as well as when we periodically review property, plant, and equipment for any potential impairment in carrying values, whenever events such as a significant industry downturn, plant closures, technological obsolescence, or other change in circumstances indicate that their carrying amounts may not be recoverable.

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determinations of recoverability are based upon our judgment and estimates of undiscounted future cash flows resulting from the use of the assets and their eventual disposition. Measurement of an impairment loss for long-lived assets that we expect to hold and use is based on the fair value of the assets, determined using a market or income approach, compared with the carrying value of the asset. The carrying values of assets determined to be impaired would be reduced to their estimated fair values.

Intangible Assets

Intangible Assets

Intangible assets are stated at fair value as of the date acquired, less accumulated amortization. Amortization is calculated based on the estimated useful lives of the assets, which range from 3 to 15 years, using the straight-line method or another method that more fairly represents the utilization of the assets.

We periodically evaluate the remaining useful lives of our intangible assets to determine whether events or circumstances warrant a revision to the remaining periods of amortization. In the event that the estimate of an intangible asset’s remaining useful life has changed, the remaining carrying amount of the intangible asset is amortized prospectively over that revised remaining useful life. If it is determined that an intangible asset has an indefinite useful life, that intangible asset would be subject to impairment testing annually or whenever events or circumstances indicate that its carrying value may not, based on future undiscounted cash flows or market factors, be recoverable. An impairment loss, the recorded amount of which would be based on the fair value of the intangible asset at the measurement date, would be recorded in the period in which the impairment determination was made.

Restricted Cash

Restricted Cash

Restricted cash in the amounts of $3.0 million and $2.9 million are included in Other assets on our October 31, 2021 and October 31, 2020, consolidated balance sheets, respectively. The restrictions on these amounts are primarily related to land lease agreements and customs requirements.

Treasury Stock

Treasury Stock

We record treasury stock purchases under the cost method, recording the entire cost of the acquired stock as treasury stock. Gains and losses on subsequent reissuances would be credited or charged to additional paid-in capital, and we would employ the average cost method (with average cost being determined separately for each share repurchase program), in the event that we subsequently reissue shares.

Revenue Recognition

Revenue Recognition

 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 governmental 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 is 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 to customers 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. Contract assets of $9.9 million are included in Other current assets, and contract liabilities of $14.7 million and $5.2 million are included in Accrued liabilities and Other liabilities, respectively, in our October 31, 2021, consolidated balance sheet. Our October 31, 2020, condensed consolidated balance sheet includes contract assets of $6.3 million, included in Other current assets, and contract liabilities of $8.0 and $5.2 million, included in Accrued liabilities and Other liabilities, respectively. We did not impair any contract assets in 2021, 2020, or 2019. In 2021, 2020, and 2019, we recognized revenue of $5.3 million, $2.8 million, and $1.3 million, respectively, from the settlement of contract liabilities that existed at the beginning of those years.

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’ve received from customers have generally not preceded the completion of our performance obligations by more than one year.

Contract Costs

 We pay commissions to third-party sales agents for certain sales that 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 would 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 such assets.

 Remaining Performance Obligations

 As we are typically required to fulfill customer orders within a short time period, our backlog of orders is generally not in excess of one to two weeks for IC photomasks and two to three weeks for FPD photomasks. 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 we 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.

Leases

Leases

We adopted ASU 2016-02 - “Leases (Topic 842)” (“Topic 842”) on November 1, 2019. As allowed by the guidance, we elected to adopt ASU 2016-02 using the modified retrospective method at the beginning of the period of adoption; our adoption resulted in our recognition of $6.5 million of ROU assets and $6.5 million of lease liabilities on our opening 2020 balance sheet. At the time of transition, we elected a number of practical expedients offered by the guidance, which are described in Note 9. The following discussion is germane to our accounting for leases under Topic 842.

We determine if an arrangement is, or contains a lease, at the inception of the arrangement. An arrangement is determined to be a lease when it conveys to us the right to control the use of an identified asset for a period of time in exchange for consideration. Our determination as to whether we have the right to control the use of an identified asset centers on whether the arrangement conveys to us the rights to 1) obtain substantially all of the economic benefits of the identified asset and 2) direct the use of the identified asset.

If an arrangement is determined to be, or include, a lease, we then apply the classification criteria in Topic 842 to determine whether the lease is a finance lease or an operating lease. For both types of leases, at their commencement dates (which are the dates on which a lessor makes an underlying asset available for our use), we recognize ROU assets, which represent our use of the underlying assets, and lease liabilities which represent our obligation to make payments for our right to use the related assets. The initial measurement process for both types of leases is the same, except that, for operating leases, we generally apply our incremental borrowing rate for collateralized borrowings over terms similar to the lease’s terms to determine the lease liability, while for finance leases, we use the interest rates implicit in the leases. The initial measurement of ROU assets may require further adjustments for lease prepayments and initial direct costs we incur. As allowed under Topic 842, we elected not to recognize short-term leases, which are defined as leases that have a term (at their commencement dates) of twelve months or less and do not include an option to purchase the underlying asset that we are reasonably certain to exercise.

Operating leases are expensed on a straight-line basis over the terms of the leases, and are included in the consolidated statement of income in Cost of goods sold, Selling, general and administrative, or Research and development expense in accordance with the use of the underlying asset. Finance lease ROU assets are amortized over the estimated useful life of the underlying asset; the expense is included in the consolidated statement of income in Cost of goods sold. Finance lease liabilities are subsequently remeasured by increasing the liability to reflect interest accrued during a period and decreasing the liability to reflect payments made during the period. Interest expense incurred on finance leases is included in Interest expense on the consolidated statements of income.

Cash paid for operating leases and interest paid for finance leases are included in the consolidated statement of cash flows as operating activities in Accounts payable, accrued liabilities and other; cash paid for finance lease principal is included in Repayments of debt in the financing activities section of the consolidated statement of cash flows.

Share-Based Compensation

Share-Based Compensation

We recognize share-based compensation expense over the service period during which the awards are expected to vest. Share-based compensation expense includes the estimated effects of forfeitures, which are adjusted over the requisite service period to the extent actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures are recognized in the period of change and will impact the amount of expense to be recognized in future periods. Determining the appropriate option pricing model, calculating the grant date fair value of share-based awards, and estimating forfeiture rates requires considerable judgment, including estimations of stock price volatility and the expected term of options granted.

We use the Black-Scholes option pricing model to value employee stock options. We estimate stock price volatility based on daily averages of our common stock’s historical volatility over a term approximately equal to the estimated time period the grant will remain outstanding. The expected term of options and forfeiture rate assumptions are derived from historical data.

Research and Development

Research and Development

Research and development costs are expensed as incurred and consist primarily of development efforts related to high-end process technologies for advanced subwavelength reticle solutions for IC and FPD photomask technologies.

Foreign Currency Translation

Foreign Currency Translation

Our non-U.S. subsidiaries maintain their accounts in their respective local currencies. Assets and liabilities of such subsidiaries are translated to U.S. dollars at year-end exchange rates. Income and expenses are translated at average rates of exchange prevailing during the year. Foreign currency translation adjustments are accumulated and reported in Accumulated other comprehensive income, a component of equity on our consolidated balance sheets.

Government Grants

Government Grants

 We account for funds we receive from government grants by reducing the costs of the assets or expenses to which we apply the funds. Funds we receive that cannot be attributed to specific assets or expenses would be recognized as other income, and included in Interest income and other income (expense), net in the consolidated statements of income. Funds we receive from government grants are classified in our consolidated statements of cash flows as either cash flows from operating activities or cash flows from investing activities, in accordance with how we expend the funds.

Income Taxes

Income Taxes

The income tax provision is computed on the basis of the income or loss before income taxes for each entity in its respective tax jurisdiction. Deferred income taxes reflect the tax effects of differences between the carrying amounts of assets and liabilities for financial reporting purposes and their amounts used for income tax purposes, as well as the tax effects of net operating losses and tax credit carryforwards. We use judgment and make assumptions to determine if valuation allowances for deferred income tax assets are required, if their realization is not more likely than not, by considering future market growth, operating forecasts, future taxable income, and the mix of earnings among the tax jurisdictions in which we operate. Accordingly, income taxes charged against earnings may have been impacted by changes in the valuation allowances.

We consider income taxes in each of the tax jurisdictions in which we operate in order to determine our effective income tax rate. Our current income tax expense is thus identified, and temporary differences resulting from differing treatments of items for tax and financial reporting purposes are assessed. These differences result in deferred tax assets and liabilities, which are included in our consolidated balance sheets.

We account for uncertain tax positions by recording a liability for unrecognized tax benefits resulting from uncertain tax positions taken, or expected to be taken, in our tax returns. We include any applicable interest and penalties related to uncertain tax positions in our income tax provision.

Earnings Per Share

Earnings Per Share

Basic earnings per share (“EPS”) is based on the weighted-average number of common shares outstanding for the period, excluding any dilutive common share equivalents. Diluted EPS reflects the potential dilution that could occur if certain share-based payment awards or financial instruments were exercised, earned or converted.

Variable Interest Entities

Variable Interest Entities

We account for the investments we make in certain legal entities in which equity investors do not have: 1) sufficient equity at risk for the legal entity to finance its activities without additional subordinated financial support or, 2) as a group, the holders of the equity investment at risk do not have either the power, through voting or similar rights, to direct the activities of the legal entity that most significantly impact the entity’s economic performance or, 3) the obligation to absorb the expected losses of the legal entity or the right to receive expected residual returns of the legal entity as “variable interest entities”, or “VIEs”.

We consolidate the results of any such entity in which we have determined that we have a controlling financial interest. We would have a “controlling financial interest” (and thus be considered the “primary beneficiary” of the entity) in such an entity when we have both the power to direct the activities that most significantly affect the VIE’s economic performance and the obligation to absorb the losses of, or right to receive the benefits from, the VIE that could be potentially significant to the VIE. On a quarterly basis, we reassess whether we have a controlling financial interest in any investments we have in these entities.

We account for investments we make in VIEs in which we have determined that we do not have a controlling financial interest but have a significant influence over, and hold at least a twenty percent ownership interest in, using the equity method. Any such investment not meeting the parameters to be accounted for under the equity method would be accounted for using the cost method, unless the investment had a readily determinable fair value, at which value it would then be reported.

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PDMCX JOINT VENTURE (Policies)

12 Months Ended

Oct. 31, 2021

PDMCX JOINT VENTURE [Abstract]

Variable Interest Entities

As required by the guidance in Topic 810 - “Consolidation” of the 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 VIE. Due to its lack of sufficient equity at risk to finance its activities without additional subordinated financial support, we determined that it is 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 years reporting periods; thus, as required, the PDMCX financial results have been consolidated with Photronics. Our conclusion was based on the fact 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 both 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 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.

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REVENUE (Policies)

12 Months Ended

Oct. 31, 2021

REVENUE [Abstract]

Revenue

We adopted ASU 2014-09 and all subsequent amendments, which are collectively codified in ASC Topic 606 - “Revenue from Contracts with Customers” (“Topic 606”), on November 1, 2018, under the modified retrospective transition method, only with respect to contracts that were not complete as of the date of adoption. This approach required prospective application of the guidance with a cumulative effect adjustment to retained earnings to reflect the impact of the adoption on contracts that were not complete as of the date of the adoption. Please refer to Note 1 for information on our revenue recognition policies.

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LEASES (Policies)

12 Months Ended

Oct. 31, 2021

LEASES [Abstract]

Leases

We adopted ASU 2016-02 and all subsequent amendments, collectively codified in ASC Topic 842 “Leases” (“Topic 842”), on November 1, 2019. The guidance requires modified retrospective adoption, either at the beginning of the earliest period presented or at the beginning of the period of adoption. We elected to apply the guidance at the beginning of the period of adoption and recorded, as of November 1, 2019, ROU leased assets of $6.5 million. In conjunction with this, we recorded lease liabilities, which had been discounted at our incremental borrowing rates, of $6.5 million. The impact of our adoption of Topic 842 on our current and deferred income taxes was immaterial.

The guidance allows a number of elections and practical expedients, of which we elected the following:

- Election not to recognize short-term leases on the balance sheet.

- Practical expedient to not separate lease and non-lease components in a contract.

- Practical expedient “package” for transitioning to the new guidance:

- Not reassessing whether any expired or existing contracts are, or contain, leases.

- Not reassessing lease classification for any existing or expired leases.

- Not reassessing initial direct costs for any existing leases.

Our involvement in lease arrangements has typically been as a lessee. We determine if an agreement is or contains a lease on the earlier of the date of the agreement or the date on which we commit to entering the agreement. Our evaluation considers whether the agreement includes an identified asset and whether it affords us the right to control the asset. Our having the right to control the identified asset is determined by whether we are entitled to substantially all of its economic benefits and can direct its use.

We recognize leases on our consolidated balance sheet when a lessor makes an asset underlying a lease having a term in excess of twelve months available for our use. As allowed under Topic 842, we have elected not to apply the recognition requirements to leases that, at their commencement dates, have lease terms of twelve months or less and do not include options to purchase their underlying assets that we are reasonably certain to exercise. The present value of lease payments over the term of the lease provides the basis for the initial measurement of ROU assets and their related lease liabilities. We measure finance lease liabilities using the rates implicit in the leases; operating lease liabilities are measured using our incremental borrowing rate, for collateralized loans, at the commencement date. Variable lease payments, other than those that are dependent on an index or on a rate, are not included in the measurement of ROU assets and their related lease liabilities. Lease terms include extension periods if the lease agreement includes an option to extend the lease that we are reasonably certain to exercise. As allowed under Topic 842, we have elected, for all classes of assets, the practical expedient to not separate lease components of a contract from non-lease components of a contract.

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SHARE-BASED COMPENSATION (Policies)

12 Months Ended

Oct. 31, 2021

Stock Options [Abstract]

Share-Based Compensation

Share-Based Compensation

We recognize share-based compensation expense over the service period during which the awards are expected to vest. Share-based compensation expense includes the estimated effects of forfeitures, which are adjusted over the requisite service period to the extent actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures are recognized in the period of change and will impact the amount of expense to be recognized in future periods. Determining the appropriate option pricing model, calculating the grant date fair value of share-based awards, and estimating forfeiture rates requires considerable judgment, including estimations of stock price volatility and the expected term of options granted.

We use the Black-Scholes option pricing model to value employee stock options. We estimate stock price volatility based on daily averages of our common stock’s historical volatility over a term approximately equal to the estimated time period the grant will remain outstanding. The expected term of options and forfeiture rate assumptions are derived from historical data.

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 values of the awards are determined on the date of grant, based on the closing stock price of our common stock. As of October 31, 2021, there were 929,147 shares of restricted stock outstanding.

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 granted 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.

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INCOME TAXES (Policies)

12 Months Ended

Oct. 31, 2021

INCOME TAXES [Abstract]

Unremitted Earnings in Foreign Investment

Due to the Tax Cuts and Jobs Act, which was signed into law in December 2017, as of fiscal year end 2018, U.S. deferred taxes were no longer provided on the undistributed earnings of non-U.S. subsidiaries. Our policy to indefinitely reinvest these earnings in non-U.S. operations remains unchanged for the purpose of determining deferred tax liabilities for U.S. state and foreign withholding taxes. Therefore, should we elect in the future to repatriate the remaining foreign earnings deemed to be indefinitely reinvested, we may incur additional state and foreign withholding tax expense on those earnings, the amount of which is not practicable to compute.

Interest and Penalties Related to Uncertain Tax Positions

At October 31, 2021, October 31, 2020 and October 31, 2019, unrecognized tax benefits, which are included in Other liabilities, include $3.8 million, $2.0 million, and $1.9 million, respectively, that, if recognized, would impact the effective tax rates. We include any applicable interest and penalties related to uncertain tax positions in our income tax provision. The amounts reflected in the table above include settlements of non-U.S. audits.

Although the timing of the reversal of uncertain tax positions may be uncertain, as they can be dependent upon the settlement of tax audits or expirations of statutes of limitations, the Company believes that the amount of uncertain tax positions (including accrued interest and penalties, and net of tax benefits) that may be resolved over the next twelve months is $0.5 million. Resolution of these uncertain tax positions may result from either or both the lapses of statutes of limitations and tax settlements. The Company is no longer subject to tax authority examinations in the U.S., major foreign, or state tax jurisdictions for years prior to fiscal year 2016.

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FAIR VALUE MEASUREMENTS (Policies)

12 Months Ended

Oct. 31, 2021

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.

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RECENT ACCOUNTING PRONOUNCEMENTS (Policies)

12 Months Ended

Oct. 31, 2021

RECENT ACCOUNTING PRONOUNCEMENTS [Abstract]

Recent Accounting Pronouncements

Accounting Standards Updates Adopted

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses”, the main objective of which is to provide more useful information about expected credit losses on financial instruments and other commitments of an entity to extend credit. In support of this objective, the ASU replaced the incurred loss impairment methodology, found in previous guidance, with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This ASU requires a cumulative-effect adjustment as of the beginning of the first reporting period in which the guidance is adopted. ASU 2016-13 was effective for Photronics in its first quarter of 2021. We adopted ASU 2016-13 on November 1, 2020; the effect of the adoption was immaterial.

  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 is to be applied prospectively through December 31, 2022. We are currently evaluating the effect the potential adoption of this ASU may have on our consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (ASC 740)—Simplifying the Accounting for Income Taxes,” which simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC 740, Income Taxes. The amendments also improve consistent application of and simplify US GAAP for other areas of ASC 740 by clarifying and amending existing guidance. This guidance is effective for Photronics in Q1 of fiscal year 2022. We are currently evaluating the effect the adoption of this ASU may have on our consolidated financial statements and disclosures.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Oct. 31, 2021

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]

Inventories

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

	October 31, 2021		October 31, 2020
Raw materials	$	54,019	$	56,389
Work in process		1,121		767
Finished goods		109		113
	$	55,249	$	57,269

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OTHER CURRENT ASSETS (Tables)

12 Months Ended

Oct. 31, 2021

OTHER CURRENT ASSETS [Abstract]

Other Current Assets

Other current assets consists of the following:

	October 31, 2021		October 31, 2020
Recoverable value added taxes	$	24,213	$	16,539
Contract assets		9,859		6,313
Prepaid expenses		7,999		6,153
Prepaid and refundable income taxes		1,550		122
Other		629		608
	$	44,250	$	29,735

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PROPERTY, PLANT AND EQUIPMENT, NET (Tables)

12 Months Ended

Oct. 31, 2021

PROPERTY, PLANT AND EQUIPMENT, NET [Abstract]

Property, Plant and Equipment

Property, plant and equipment, net consists of the following:

	October 31, 2021			October 31, 2020
Land	$	12,442		$	12,422
Buildings and improvements		181,922			179,162
Machinery and equipment		1,961,474			1,812,791
Leasehold improvements		21,751			21,157
Furniture, fixtures and office equipment		15,534			15,665
Construction in progress		35,009			70,915
		2,228,132			2,112,112
Accumulated depreciation and amortization		(1,531,579	)		(1,480,637	)
	$	696,553		$	631,475

Finance Lease, ROU Assets

ROU assets resulting from finance leases are included in the table above as follows:

	October 31, 2021			October 31, 2020
Machinery and equipment	$	42,760		$	-
Accumulated amortization		(1,933	)		-
	$	40,827		$	-

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INTANGIBLE ASSETS, NET (Tables)

12 Months Ended

Oct. 31, 2021

INTANGIBLE ASSETS, NET [Abstract]

Intangible Assets, Net

Intangible assets, net consist of the following:

October 31, 2021	Gross Amount		Accumulated Amortization			Net Amount
Customer relationships	$	1,647	$	(1,041	)	$	606
Software and other		6,056		(5,888	)		168
	$	7,703	$	(6,929	)	$	774
October 31, 2020
Technology license agreement	$	59,616	$	(57,298	)	$	2,318
Customer relationships		2,060		(1,245	)		815
Software and other		6,496		(6,192	)		304
	$	68,172	$	(64,735	)	$	3,437

Intangible Asset Amortization Over the Next Five Years

Intangible asset amortization over the next five years and thereafter is estimated to be as follows:

Fiscal Year
2022	$	269
2023	$	171
2024	$	136
2025	$	136
2026	$	62
Thereafter	$	-

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PDMCX JOINT VENTURE (Tables)

12 Months Ended

Oct. 31, 2021

PDMCX JOINT VENTURE [Abstract]

Carrying Amounts and Exposure to Loss Related to Assets and Liabilities

The carrying amounts of PDMCX assets and liabilities included in our consolidated balance sheets are presented in the following table, together with our maximum exposures to loss related to these assets and liabilities.

	October 31, 2021				October 31, 2020
Classification	Carrying Amount		Photronics Interest		Carrying Amount		Photronics Interest
Current assets	$	59,745	$	29,879	$	56,095	$	28,053
Noncurrent assets		137,799		68,913		141,097		70,562
Total assets		197,544		98,792		197,192		98,615
Current liabilities		26,559		13,282		31,922		15,964
Noncurrent liabilities		42,917		21,463		55,676		27,844
Total liabilities		69,476		34,745		87,598		43,808
Net assets	$	128,068	$	64,047	$	109,594	$	54,807

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ACCRUED LIABILITIES (Tables)

12 Months Ended

Oct. 31, 2021

ACCRUED LIABILITIES [Abstract]

Accrued Liabilities

Accrued liabilities consist of the following:

	October 31, 2021		October 31, 2020
Compensation related expenses	$	22,632	$	16,405
Income taxes		15,596		11,432
Contract liabilities		14,717		8,024
Property, plant, and equipment		3,331		2,355
Value added and other taxes		2,540		1,925
Operating leases		2,273		2,175
Contract manufacturing		1,210		1,275
Telecommunications and utilities		1,067		1,006
Professional fees		665		1,254
Inventory		605		1,026
Other		7,730		7,006
Accrued liabilities	$	72,366	$	53,883

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DEBT (Tables)

12 Months Ended

Oct. 31, 2021

DEBT [Abstract]

Long-term Debt

The tables below provide information on our long-term debt.

As of October 31, 2021	Xiamen Project Loans			Xiamen Working Capital Loans			Hefei Equipment Loan			Finance Leases			Total
Principal due:
Next 12 months	$	2,068		$	8,197		$	4,694		$	7,289		$	22,248
Months 13 – 24	$	10,071		$	4,005		$	4,693		$	6,512		$	25,281
Months 25 – 36		10,278			-			6,257			6,610			23,145
Months 37 – 48		9,902			-			5,585			17,961			33,448
Months 49 – 60		7,572			-			-			-			7,572
Long-term debt	$	37,823		$	4,005		$	16,535		$	31,083		$	89,446
Interest rate at balance sheet date		4.65	%		4.53% - 4.61	%		4.20	%			(3)
Basis spread on interest rates		0.00			67.75 - 76.00			(45.00	)		N/A
Interest rate reset	Quarterly			Monthly/Annually			Annually				N/A
Maturity date	December 2025			July 2023			September 2025					(3)
Periodic payment amount	Increases as loans mature			Increases as loans mature			Varies (1)					(3)
Periodic payment frequency	Semiannual, on individual loans			Semiannual, on individual loans			Semiannual(2)			Monthly
Loan collateral (carrying amount)	$	90,096			N/A		$	86,487		$	40,826	(4)

⁽¹⁾ First five loan repayments will each be for 7.5 percent of the approved 200 million RMB loan principal; last five installments will each be for 12.5 percent of the approved loan principal.

⁽²⁾ Semiannual repayments commence in March 2022.

⁽³⁾ See Note 9 for interest rates on lease liabilities, maturity dates, and periodic payment amounts.

⁽⁴⁾ Represents the carrying amount at the balance sheet date of the related ROU assets, in which the lessors have secured interests.

As of October 31, 2020	Xiamen Project Loans			Xiamen Working Capital Loans			Total
Principal due:
Next 12 months	$	6,705		$	2,265		$	8,970
Months 13 – 24	$	7,334		$	7,808		$	15,142
Months 25 – 36		9,592			3,814			13,406
Months 37 – 48		9,789			-			9,789
Months 49 – 60		9,432			-			9,432
Thereafter		7,211			-			7,211
Long-term debt	$	43,358		$	11,622		$	54,980
Interest rate at balance sheet date		4.90	%		4.53% - 4.61	%
Basis spread on interest rates		25.00			40.00 - 76.00
Loan collateral (carrying amount)	$	94,459			N/A

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REVENUE (Tables)

12 Months Ended

Oct. 31, 2021

REVENUE [Abstract]

Disaggregation of Revenue

The following tables present our revenue for the years ended October 31, 2021, October 31, 2020 and October 31, 2019, disaggregated by product type, geographic origin, and timing of recognition.

	Year Ended
Revenue by Product Type	October 31, 2021		October 31, 2020		October 31, 2019
IC
High-end	$	162,973	$	156,129	$	156,418
Mainstream		297,198		262,281		249,773
Total IC	$	460,171	$	418,410	$	406,191
FPD
High-end	$	155,670	$	139,558	$	98,832
Mainstream		47,920		51,723		45,637
Total FPD	$	203,590	$	191,281		144,469
	$	663,761	$	609,691	$	550,660

Revenue by Geographic Origin*
Taiwan	$	248,597	$	239,101	$	244,377
Korea		156,391		153,052		147,734
China		115,732		79,374		19,010
United States		105,023		104,949		105,045
Europe		36,242		31,501		32,585
Other		1,776		1,714		1,909
	$	663,761	$	609,691	$	550,660

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

Revenue by Timing of Recognition
Over time	$	606,332	$	535,071	$	497,942
At a point in time		57,429		74,620		52,718
	$	663,761	$	609,691	$	550,660

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LEASES (Tables)

12 Months Ended

Oct. 31, 2021

LEASES [Abstract]

Information on Operating and Finance Leases Included in Consolidated Balance Sheets

The following table provides information on operating and finance leases included in our consolidated balance sheets.

Classification	October 31, 2021		October 31, 2020
ROU Assets – Operating Leases
Other assets	$	5,581	$	7,706
ROU Assets – Finance Leases
Property, plant and equipment, net	$	40,827	$	-
Lease Liabilities – Operating Leases
Accrued liabilities	$	2,273	$	2,175
Other liabilities		3,246		5,008
	$	5,519	$	7,183
Lease Liabilities – Finance Leases
Current portion of long-term debt	$	7,289	$	-
Long-term debt		31,083		-
	$	38,372	$	-

Future Lease Payments under Noncancelable Operating and Finance Leases

 The following table presents future lease payments under noncancelable operating and finance leases as of October 31, 2021. Imputed interest represents the difference between undiscounted cash flows and discounted cash flows.

Fiscal Year	Operating Leases		Finance Leases
2022	$	2,351	$	7,856
2023		1,374		6,938
2024		819		6,938
2025		646		18,012
2026		398		-
Thereafter		157		-
Total lease payments		5,745		39,744
Imputed interest		226		1,372
Lease liabilities	$	5,519	$	38,372

Lease Costs

The following table presents lease costs for 2021 and 2020. Rent expense, as calculated under guidance in effect prior to our adoption of Topic 842, was $3.0 million in 2019.

	Year Ended
	October 31, 2021		October 31, 2020
Operating lease costs	$	2,904	$	3,076
Short-term lease costs	$	232	$	359
Variable lease costs	$	498	$	378
Interest on lease liabilities	$	510	$	-
Amortization of ROU assets	$	1,867	$	-

Weighted-Average Remaining Lease Terms And Weighted-Average Discount Rates

The following table presents statistical information related to our operating and finance leases. The information presented is as of the balance sheet dates.

	October 31, 2021					October 31, 2020
Classification	Weighted-average remaining lease term (in years)		Weighted-average discount rate			Weighted-average remaining lease term (in years)		Weighted-average discount rate
Operating leases		3.5		2.4	%		4.1		2.37	%
Finance leases		3.3		1.5	%		-		-

Cash and Non-cash Information Related to Leases

The following table presents the effects of leases on our 2021 and 2020 consolidated statements of cash flows, and provides leases-related non-cash information for those years.

	Year Ended
	October 31, 2021		October 31, 2020
Operating cash flows used for operating leases	$	2,442	$	3,584
Operating cash flows used for finance leases	$	464	$	-
Financing cash flows used for finance leases	$	4,323	$	-
ROU assets obtained in exchange for operating lease obligations	$	457	$	2,681
ROU assets obtained in exchange for finance lease obligations	$	42,672	$	-

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SHARE-BASED COMPENSATION (Tables)

12 Months Ended

Oct. 31, 2021

SHARE-BASED COMPENSATION [Abstract]

Share-based Compensation Expenses

The table below presents information on our share-based compensation expenses for the three most recent fiscal years.

	Year Ended
	October 31, 2021		October 31, 2020		October 31, 2019
Expense reported in:
Cost of goods sold	$	446	$	337	$	250
Selling, general and administrative		4,446		4,590		3,430
Research and development		456		-		-
Total expense incurred	$	5,348	$	4,927	$	3,680
Income tax benefits of share-based compensation (in millions)	$	0.2	$	0.2	$	-
Share-based compensation cost capitalized	$	-	$	-	$	-

Estimated Expenses not yet Incurred on Share-based Compensation Awards

The table below presents information on estimated expenses not yet incurred on our share-based compensation awards.

	October 31, 2021
	Restricted Stock Awards		Stock Options
Compensation cost not yet recognized	$	7,300	$	109
Weighted-average amortization period (in years)		2.6		1.1

Restricted Stock Awards Activity

A summary of restricted stock award activity during fiscal year 2021 and the status of our outstanding restricted stock awards as of October 31, 2021, is presented below:

Restricted Stock	Shares			Weighted-Average Fair Value at Grant Date
Outstanding at October 31, 2020		812,316		$	12.55
Granted		564,800		$	11.20
Vested		(383,177	)	$	11.72
Cancelled		(64,792	)	$	12.44
Outstanding at October 31, 2021		929,147		$	12.08
Expected to vest as of October 31, 2021		862,143		$	12.08

Restricted Stock Awards Granted and Lapsed

The table below presents information on restricted stock awards granted and lapsed in the three most recent fiscal years.

	Year Ended
	October 31, 2021		October 31, 2020		October 31, 2019
Number of shares granted		564,800		538,000		435,000
Weighted-average grant-date fair value of awards (in dollars per share)	$	11.20	$	15.08	$	9.80
Fair value of awards for which restrictions lapsed	$	4,491	$	2,957	$	1,888

Assumptions Used to Calculate Weighted-Average Grant Date Fair Value of Options

The weighted-average inputs and risk-free rate of return ranges used to calculate the grant-date fair value of stock options granted during 2019 are presented in the following table.

	Year Ended
	October 31, 2019
Expected volatility		33.1	%
Risk-free rate of return		2.5 – 2.9	%
Dividend yield		0.0	%
Expected term	5.1 years

Stock Options Activity

The table below presents a summary of stock options activity during 2021 and information on stock options outstanding at October 31, 2021.

	Shares			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding at October 31, 2020		1,621,117		$	9.27
Granted		-			-
Exercised		(401,114	)	$	8.58
Cancelled and forfeited		(46,900	)	$	9.74
Outstanding at October 31, 2021		1,173,103		$	9.49	4.0 years	$	4,109
Exercisable at October 31, 2021		1,077,914		$	9.51	3.8 years	$	3,750
Expected to vest as of October 31, 2021		93,500		$	9.20	6.7 years	$	353

Stock Options Exercised

The table below presents information on options exercised in the three most recent fiscal years.

	Year Ended
	October 31, 2021		October 31, 2020		October 31, 2019
Total intrinsic value of options exercised	$	1,910	$	3,184	$	1,262
Cash received from option exercises	$	3,441	$	3,746	$	2,071

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INCOME TAXES (Tables)

12 Months Ended

Oct. 31, 2021

INCOME TAXES [Abstract]

Income Before Income Tax Provision for Domestic and Foreign

Income before the income tax provisions consists of the following:

	Year Ended
	October 31, 2021			October 31, 2020			October 31, 2019
United States	$	(19,447	)	$	(10,672	)	$	(8,379	)
Foreign		121,453			72,273			59,080
	$	102,006		$	61,601		$	50,701

Income Tax Provision

The income tax provisions consist of the following:

	Year Ended
	October 31, 2021			October 31, 2020			October 31, 2019
Current:
Federal	$	-		$	-		$	(3,916	)
State		4			4			11
Foreign		25,296			21,698			17,777
		25,300			21,702			13,872
Deferred:
Federal		-			-			3,673
State		103			8			10
Foreign		(2,213	)		(452	)		(7,345	)
		(2,110	)		(444	)		(3,662	)
Total	$	23,190		$	21,258		$	10,210

Income Tax Rate Reconciliation

The income tax provisions differ from the amount computed by applying the statutory U.S. federal income tax rate to income before income taxes as a result of the following:

	Year Ended
	October 31, 2021			October 31, 2020			October 31, 2019
U.S. federal income tax at statutory rate	$	21,421		$	12,936		$	10,647
Changes in valuation allowances		364			6,942			2,673
Foreign tax rate differentials		3,244			1,718			218
Tax credits		(3,942	)		(1,562	)		(1,268	)
Uncertain tax positions, including reserves, settlements and resolutions		1,037			1,637			134
Income tax holiday		-			(318	)		(2,234	)
Other, net		1,066			(95	)		40
	$	23,190		$	21,258		$	10,210
Effective tax rate		22.7	%		34.5	%		20.1	%

Net Deferred Income Tax Assets

The net deferred income tax assets consist of the following:

	As of
	October 31, 2021			October 31, 2020
Deferred income tax assets:
Net operating losses	$	31,657		$	34,457
Reserves not currently deductible		8,201			6,287
Tax credit carryforwards		9,877			9,481
Share-based compensation		1,500			1,306
Property, plant and equipment		7,566			3,887
Lease liabilities		9,134			-
Other		157			398
		68,092			55,816
Valuation allowances		(34,337	)		(33,973	)
		33,755			21,843
Deferred income tax liabilities:
ROU assets		(9,698	)		-
		(9,698	)		-
Net deferred income tax assets	$	24,057		$	21,843
Classification
Deferred income tax assets	$	24,353		$	22,070
Other liabilities		(296	)		(227	)
	$	24,057		$	21,843

Operating Loss Carryforwards

The following tables present our available operating loss and credit carryforwards as of October 31, 2021, and their related expiration periods:

Operating Loss Carryforwards	Amount		Expiration Period
Federal	$	99,636	2029-Indefinite
State		187,044		2022-Indefinite
Foreign		113		2024-2031

Tax Credit Carryforwards

Tax Credit Carryforwards	Amount		Expiration Period
Federal research and development	$	5,204		2024-2041
State	$	5,915		2022-2035

Reconciliation of Beginning and Ending Amounts of Unrecognized Tax Benefits

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is presented below.

	Year Ended
	October 31, 2021			October 31, 2020			October 31, 2019
Balance at beginning of year before interest and penalties	$	2,550		$	1,758		$	1,775
Additions (reductions) for tax positions in prior years		181			227			(466	)
Additions based on current year tax positions		1,313			1,576			1,286
Settlements		(489	)		(992	)		(204	)
Lapses of statutes of limitations		(21	)		(19	)		(633	)
Balance at end of year before interest and penalties		3,534			2,550			1,758
Interest and penalties		223			131			177
Balance at end of year including interest and penalties	$	3,757		$	2,681		$	1,935

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EARNINGS PER SHARE (Tables)

12 Months Ended

Oct. 31, 2021

EARNINGS PER SHARE [Abstract]

Calculation of Basic and Diluted Earnings Per Share

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

	Year Ended
	October 31, 2021		October 31, 2020		October 31, 2019
Net income attributable to Photronics, Inc. shareholders	$	55,449	$	33,820	$	29,793
Effect of dilutive securities:
Interest expense on convertible notes, net of tax		-		-		845
Earnings used for diluted earnings per share	$	55,449	$	33,820	$	30,638
Weighted-average common shares computations:
Weighted-average common shares used for basic earnings per share		61,407		64,866		66,347
Effect of dilutive securities:
Share-based payment awards		592		604		448
Convertible notes		-		-		2,360
Potentially dilutive common shares		592		604		2,808
Weighted-average common shares used for diluted earnings per share		61,999		65,470		69,155
Basic earnings per share	$	0.90	$	0.52	$	0.45
Diluted earnings per share	$	0.89	$	0.52	$	0.44

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

The table below sets forth 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.

	Year Ended
	October 31, 2021		October 31, 2020		October 31, 2019
Share based payment awards		331		795		1,250
Total potentially dilutive shares excluded		331		795		1,250

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COMMITMENTS AND CONTINGENCIES (Tables)

12 Months Ended

Oct. 31, 2021

COMMITMENTS AND CONTINGENCIES [Abstract]

Unrecognized Commitments

Presented below are our unrecognized commitments, as of October 31, 2021. Included in these are commitments of $73.7 million for the purchase of capital equipment. The amounts below do not include our commitments under our debt and lease arrangements, which are presented in Notes 7 and 9, respectively.

Fiscal Year	Unrecognized Commitments
2022	$	82,323
2023		25,630
2024		3,654
2025		-
2026		-
Thereafter		-
Total	$	111,607

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CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME BY COMPONENT (Tables)

12 Months Ended

Oct. 31, 2021

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME BY COMPONENT [Abstract]

Changes in Accumulated Other Comprehensive Income by Component

The following tables set forth the changes in our accumulated other comprehensive income by component (net of tax of $0) for the years ended October 31, 2021 and October 31, 2020.

	Year Ended October 31, 2021
	Foreign Currency Translation Adjustments		Other			Total
Balance at October 31, 2020	$	18,828	$	(870	)	$	17,958
Other comprehensive income (loss)		8,478		(69	)		8,409
Less: other comprehensive income (loss) attributable to noncontrolling interests		5,830		(34	)		5,796
Balance at October 31, 2021	$	21,476	$	(905	)	$	20,571

	Year Ended October 31, 2020
	Foreign Currency Translation Adjustments			Other			Total
Balance at October 31, 2019	$	(8,331	)	$	(674	)	$	(9,005	)
Other comprehensive loss		36,381			(390	)		35,991
Less: other comprehensive income (loss) attributable to noncontrolling interests		9,222			(194	)		9,028
Balance at October 31, 2020	$	18,828		$	(870	)	$	17,958

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RISK AND CONCENTRATIONS (Tables)

12 Months Ended

Oct. 31, 2021

RISK AND CONCENTRATIONS [Abstract]

Concentrations by Geographic Areas

As of the balance sheet dates, our property, plant, and equipment, net and net assets were, by geographic area, as presented below.

	October 31, 2021				October 31, 2020
	Property, Plant and Equipment		Net Assets		Property, Plant and Equipment		Net Assets
China	$	285,756	$	210,437	$	262,800	$	180,404
Taiwan		129,660		341,291		123,979		309,911
United States		137,049		173,062		130,164		225,411
Korea		140,380		254,357		110,815		228,579
Europe and Other		3,708		21,415		3,717		17,961
	$	696,553	$	1,000,562	$	631,475	$	962,266

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SHARE REPURCHASE PROGRAMS (Tables)

12 Months Ended

Oct. 31, 2021

SHARE REPURCHASE PROGRAMS [Abstract]

Shares Repurchase Programs

All of the shares purchased under the above repurchase programs were retired prior to the end of the fiscal year in which they were purchased. The table below presents information on the repurchase programs.

	2021 Purchases		2020 Purchases		2019 Purchases
Number of shares repurchased		3,919		3,194		2,133
Cost of shares repurchased	$	48,249	$	34,394	$	21,696
Average price paid per share	$	12.31	$	10.77	$	10.17

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Business (Details)	12 Months Ended
	Oct. 31, 2021 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
United States [Member]
Manufacturing Facilities [Abstract]
Number of manufacturing facilities	3
Europe [Member]
Manufacturing Facilities [Abstract]
Number of manufacturing facilities	2
China [Member]
Manufacturing Facilities [Abstract]
Number of manufacturing facilities	2

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Inventories (Details) - USD ($) $ in Thousands	Oct. 31, 2021	Oct. 31, 2020
Inventories [Abstract]
Raw materials	$ 54,019	$ 56,389
Work in process	1,121	767
Finished goods	109	113
Inventories	$ 55,249	$ 57,269

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Property, Plant and Equipment (Details)	12 Months Ended
	Oct. 31, 2021
Buildings and Improvements [Member] | Minimum [Member]
Property, Plant and Equipment [Abstract]
Estimated useful lives	10 years
Buildings and Improvements [Member] | Maximum [Member]
Property, Plant and Equipment [Abstract]
Estimated useful lives	39 years
Machinery and Equipment [Member] | Minimum [Member]
Property, Plant and Equipment [Abstract]
Estimated useful lives	5 years
Machinery and Equipment [Member] | Maximum [Member]
Property, Plant and Equipment [Abstract]
Estimated useful lives	15 years
Furniture, Fixtures and Office Equipment [Member] | Minimum [Member]
Property, Plant and Equipment [Abstract]
Estimated useful lives	3 years
Furniture, Fixtures and Office Equipment [Member] | Maximum [Member]
Property, Plant and Equipment [Abstract]
Estimated useful lives	5 years

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Intangible Assets (Details)	12 Months Ended
	Oct. 31, 2021
Minimum [Member]
Intangible Assets [Abstract]
Estimated useful lives	3 years
Maximum [Member]
Intangible Assets [Abstract]
Estimated useful lives	15 years

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Restricted Cash (Details) - USD ($) $ in Thousands	Oct. 31, 2021	Oct. 31, 2020	Oct. 31, 2019
Restricted Cash [Abstract]
Restricted cash	$ 3,010	$ 2,937	$ 2,761

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Revenue Recognition (Details) - USD ($) $ in Thousands	12 Months Ended
	Oct. 31, 2021	Oct. 31, 2020	Oct. 31, 2019
Revenue Recognition [Abstract]
Contract assets	$ 9,859	$ 6,313
Contract liabilities current	14,717	8,024
Contract liabilities non-current	5,200	5,200
Impairment loss on contract assets	0	0	$ 0
Revenue from settlement of contract liabilities	$ 5,300	$ 2,800	$ 1,300
Minimum [Member]
Revenue Recognition [Abstract]
Product invoice term	30 days
Maximum [Member]
Revenue Recognition [Abstract]
Product invoice term	90 days
IC [Member] | Minimum [Member]
Revenue Recognition [Abstract]
Customer order, expected satisfaction period	7 days
IC [Member] | Maximum [Member]
Revenue Recognition [Abstract]
Customer order, expected satisfaction period	14 days
FPD [Member] | Minimum [Member]
Revenue Recognition [Abstract]
Customer order, expected satisfaction period	14 days
FPD [Member] | Maximum [Member]
Revenue Recognition [Abstract]
Customer order, expected satisfaction period	21 days

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Product Warranties (Details)	12 Months Ended
	Oct. 31, 2021
Minimum [Member]
Product Warranty [Abstract]
Product warranty period	1 month
Maximum [Member]
Product Warranty [Abstract]
Product warranty period	24 months

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Leases (Details) - USD ($) $ in Thousands	Oct. 31, 2021	Oct. 31, 2020	Oct. 31, 2019
Leases [Abstract]
ROU assets	$ 5,581	$ 7,706
Lease liabilities	$ 5,519	$ 7,183
ASU 2016-02 [Member]
Leases [Abstract]
ROU assets			$ 6,500
Lease liabilities			$ 6,500

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OTHER CURRENT ASSETS (Details) - USD ($) $ in Thousands	Oct. 31, 2021	Oct. 31, 2020
OTHER CURRENT ASSETS [Abstract]
Recoverable value added taxes	$ 24,213	$ 16,539
Contract assets	9,859	6,313
Prepaid expenses	7,999	6,153
Prepaid and refundable income taxes	1,550	122
Other	629	608
Total other current assets	$ 44,250	$ 29,735

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PROPERTY, PLANT AND EQUIPMENT, NET (Details) - USD ($) $ in Thousands	12 Months Ended
	Oct. 31, 2021	Oct. 31, 2020	Oct. 31, 2019
Property, plant and equipment [Abstract]
Property, plant and equipment, gross	$ 2,228,132	$ 2,112,112
Accumulated depreciation and amortization	(1,531,579)	(1,480,637)
Property, plant and equipment, net	696,553	631,475
Finance lease, Right-of-use asset [Abstract]
Finance lease, right-of-use asset, gross	42,760	0
Accumulated amortization	(1,933)	0
Finance lease, right-of-use asset, net	40,827	0
Depreciation expense (excluding amortization expense for ROU assets)	85,700	89,200	$ 79,200
Gain on trade-in of lithography tool	3,525	0	$ 0
Land [Member]
Property, plant and equipment [Abstract]
Property, plant and equipment, gross	12,442	12,422
Buildings and Improvements [Member]
Property, plant and equipment [Abstract]
Property, plant and equipment, gross	181,922	179,162
Machinery and Equipment [Member]
Property, plant and equipment [Abstract]
Property, plant and equipment, gross	1,961,474	1,812,791
Leasehold Improvements [Member]
Property, plant and equipment [Abstract]
Property, plant and equipment, gross	21,751	21,157
Furniture, Fixtures and Office Equipment [Member]
Property, plant and equipment [Abstract]
Property, plant and equipment, gross	15,534	15,665
Construction in Progress [Member]
Property, plant and equipment [Abstract]
Property, plant and equipment, gross	$ 35,009	$ 70,915

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INTANGIBLE ASSETS, NET (Details) - USD ($) $ in Thousands	12 Months Ended
	Oct. 31, 2021	Oct. 31, 2020	Oct. 31, 2019
Intangible assets, net [Abstract]
Gross Amount	$ 7,703	$ 68,172
Accumulated Amortization	(6,929)	(64,735)
Net Amount	774	3,437
Intangible Asset [Abstract]
Amortization of intangible assets	2,861	4,643	$ 4,641
Intangible asset amortization over the next five years [Abstract]
2022	269
2023	171
2024	136
2025	136
2026	62
Thereafter	0
Technology License Agreement [Member]
Intangible assets, net [Abstract]
Gross Amount		59,616
Accumulated Amortization		(57,298)
Net Amount		2,318
Customer Relationships [Member]
Intangible assets, net [Abstract]
Gross Amount	1,647	2,060
Accumulated Amortization	(1,041)	(1,245)
Net Amount	606	815
Software and Other [Member]
Intangible assets, net [Abstract]
Gross Amount	6,056	6,496
Accumulated Amortization	(5,888)	(6,192)
Net Amount	$ 168	$ 304
Intangible Asset [Abstract]
Weighted-average amortization period for intangible assets acquired during the year	3 years	3 years

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PDMCX JOINT VENTURE, VIE (Details) - USD ($) $ in Millions	1 Months Ended	12 Months Ended
	Jan. 31, 2018	Oct. 31, 2021	Oct. 31, 2020	Oct. 31, 2019
Photronics and DNP [Member]
Variable Interest Entity [Abstract]
Financial or other support, amount		$ 160.0
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
Operating income (loss)		$ 6.4	$ (4.7)	$ (4.9)
Photronics and DNP [Member] | Minimum [Member]
Variable Interest Entity [Abstract]
Ownership percentage		20.00%
PDMCX [Member]
Variable Interest Entity [Abstract]
Collateral amount		$ 90.1
Photronics Interest [Member]
Variable Interest Entity [Abstract]
Ownership percentage		50.01%
Gain (loss) on consolidation	$ 0.0
Maximum exposure to loss		$ 64.0
DNP [Member]
Variable Interest Entity [Abstract]
Ownership percentage	49.99%

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PDMCX JOINT VENTURE, Carrying Amounts of Assets and Liabilities (Details) - USD ($) $ in Thousands	Oct. 31, 2021	Oct. 31, 2020
Carrying amounts of assets and liabilities [Abstract]
Current assets	$ 550,616	$ 500,139
Total assets	1,294,202	1,188,182
Current liabilities	176,148	142,939
Total liabilities	293,640	225,916
Net assets	1,000,562	962,266
Carrying Amount [Member]
Carrying amounts of assets and liabilities [Abstract]
Current assets	59,745	56,095
Noncurrent assets	137,799	141,097
Total assets	197,544	197,192
Current liabilities	26,559	31,922
Noncurrent liabilities	42,917	55,676
Total liabilities	69,476	87,598
Net assets	128,068	109,594
Photronics Interest [Member]
Carrying amounts of assets and liabilities [Abstract]
Current assets	29,879	28,053
Noncurrent assets	68,913	70,562
Total assets	98,792	98,615
Current liabilities	13,282	15,964
Noncurrent liabilities	21,463	27,844
Total liabilities	34,745	43,808
Net assets	$ 64,047	$ 54,807

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ACCRUED LIABILITIES (Details) - USD ($) $ in Thousands	Oct. 31, 2021	Oct. 31, 2020
ACCRUED LIABILITIES [Abstract]
Compensation related expenses	$ 22,632	$ 16,405
Income taxes	15,596	11,432
Contract liabilities	14,717	8,024
Property, plant, and equipment	3,331	2,355
Value added and other taxes	2,540	1,925
Operating leases	2,273	2,175
Contract manufacturing	1,210	1,275
Telecommunications and utilities	1,067	1,006
Professional fees	665	1,254
Inventory	605	1,026
Other	7,730	7,006
Accrued liabilities	$ 72,366	$ 53,883

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DEBT, Short-term Debt (Details) - USD ($) $ in Thousands	12 Months Ended
	Oct. 31, 2021	Oct. 31, 2020	Oct. 31, 2019
Debt Instruments [Abstract]
Short-term debt	$ 0	$ 4,708
Weighted-average interest rate of short -term debt		2.02%
Capitalized interest	100	$ 100
Interest payments	$ 3,800	$ 2,600	$ 2,600

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DEBT, Long-term Debt (Details) $ in Thousands, ¥ in Millions		12 Months Ended
		Oct. 31, 2021 USD ($)	Oct. 31, 2020 USD ($)	Oct. 31, 2020 CNY (¥)	Nov. 30, 2018 USD ($)	Nov. 30, 2018 CNY (¥)
Long Term Debt Maturing In Year One [Abstract]
Next 12 months		$ 22,248	$ 8,970
Long-term debt [Abstract]
Months 13 - 24		25,281	15,142
Months 25 - 36		23,145	13,406
Months 37 - 48		33,448	9,789
Months 49 - 60		7,572	9,432
Thereafter			7,211
Long-term debt		89,446	54,980
Xiamen Project Loans [Member]
Long Term Debt Maturing In Year One [Abstract]
Next 12 months		2,068	6,705
Long-term debt [Abstract]
Months 13 - 24		10,071	7,334
Months 25 - 36		10,278	9,592
Months 37 - 48		9,902	9,789
Months 49 - 60		7,572	9,432
Thereafter			7,211
Long-term debt		$ 37,823	$ 43,358
Interest rate at balance sheet date		4.65%	4.90%
Basis spread on interest rates		0.00%	0.25%
Maturity date		Dec. 31, 2025
Periodic payment amount		Increases as loans mature
Periodic payment frequency		Semiannual, on individual loans
Loan collateral (carrying amount)		$ 90,096	$ 94,459
Maximum borrowing capacity | ¥						¥ 345
Xiamen Working Capital Loans [Member]
Long Term Debt Maturing In Year One [Abstract]
Next 12 months		8,197	2,265
Long-term debt [Abstract]
Months 13 - 24		4,005	7,808
Months 25 - 36		0	3,814
Months 37 - 48		0	0
Months 49 - 60		0	0
Thereafter			0
Long-term debt		$ 4,005	$ 11,622
Maturity date		Jul. 31, 2023
Periodic payment amount		Increases as loans mature
Periodic payment frequency		Semiannual, on individual loans
Maximum borrowing capacity					$ 25,000
Xiamen Working Capital Loans [Member] | Minimum [Member]
Long-term debt [Abstract]
Interest rate at balance sheet date		4.53%	4.53%
Basis spread on interest rates		0.6775%	0.40%
Xiamen Working Capital Loans [Member] | Maximum [Member]
Long-term debt [Abstract]
Interest rate at balance sheet date		4.61%	4.61%
Basis spread on interest rates		0.76%	0.76%
Hefei Equipment Loan [Member]
Long Term Debt Maturing In Year One [Abstract]
Next 12 months		$ 4,694
Long-term debt [Abstract]
Months 13 - 24		4,693
Months 25 - 36		6,257
Months 37 - 48		5,585
Months 49 - 60		0
Long-term debt		$ 16,535
Interest rate at balance sheet date		4.20%
Basis spread on interest rates		(0.45%)
Maturity date		Sep. 30, 2025
Periodic payment amount	[1]	Varies
Periodic payment frequency	[2]	Semiannual
Loan collateral (carrying amount)		$ 86,487
Percent of repayment on approved loan principal in each first five semiannual loan repayments			7.50%
Maximum borrowing capacity			$ 31,300	¥ 200
Percent of repayment on original approved loan amount in each last five semiannual loan repayments			12.50%
Finance Leases [Member]
Long Term Debt Maturing In Year One [Abstract]
Next 12 months		7,289
Long-term debt [Abstract]
Months 13 - 24		6,512
Months 25 - 36		6,610
Months 37 - 48		17,961
Months 49 - 60		0
Long-term debt		$ 31,083
Interest rate at balance sheet date	[3]
Maturity date	[3]
Periodic payment amount	[3]
Periodic payment frequency		Monthly
Loan collateral (carrying amount)	[4]	$ 40,826

[1] First five loan repayments will each be for 7.5 percent of the approved 200 million RMB loan principal; last five installments will each be for 12.5 percent of the approved loan principal.

[2] Semiannual repayments commence in March 2022.

[3] See Note 9 for interest rates on lease liabilities, maturity dates, and periodic payment amounts.

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

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DEBT, Xiamen Project Loans (Details) - Xiamen Project Loans [Member] ¥ in Millions, $ in Millions	Oct. 31, 2021 CNY (¥)	Oct. 31, 2021 USD ($)	Nov. 30, 2018 CNY (¥)
Project Loans [Abstract]
Maximum borrowing capacity			¥ 345.0
Amount outstanding	¥ 255.0	$ 39.9

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DEBT, Xiamen Working Capital Loans (Details) - Xiamen Working Capital Loans [Member] ¥ in Millions, $ in Millions	12 Months Ended
	Oct. 31, 2021 CNY (¥)	Oct. 31, 2021 USD ($)	Nov. 30, 2018 USD ($)
Debt Instruments [Abstract]
Maximum borrowing capacity			$ 25.0
Expiration date	Oct. 31, 2022
Amount outstanding	¥ 78.0	$ 12.2

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DEBT, Hefei Equipment Loan (Details) - Hefei Equipment Loan [Member] ¥ in Millions, $ in Millions	12 Months Ended
	Oct. 31, 2021 CNY (¥) Tool	Oct. 31, 2021 USD ($)	Oct. 31, 2020 CNY (¥)	Oct. 31, 2020 USD ($)
Debt Instruments [Abstract]
Maximum borrowing capacity			¥ 200.0	$ 31.3
Expiration date	Aug. 31, 2022
Number of lithography tools to be purchased	2
Proceeds from line of credit	¥ 135.7	$ 21.2
Available borrowing capacity	¥ 64.3	$ 10.1

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DEBT, Finance Leases (Details) - USD ($) $ in Thousands	Oct. 31, 2021	Feb. 28, 2021	Dec. 31, 2020	Oct. 31, 2020
Debt Instruments [Abstract]
Finance lease amount	$ 38,372			$ 0
Finance Leases [Member]
Debt Instruments [Abstract]
Finance lease contract term	5 years
Finance lease amount		$ 7,200	$ 35,500
Short-term obligation			$ 3,500

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DEBT, Corporate Credit Agreement (Details) - Corporate Credit Agreement [Member] - USD ($) $ in Millions	12 Months Ended
	Oct. 31, 2021	Sep. 30, 2018
Debt Instruments [Abstract]
Term of loan	5 years
Current borrowing capacity		$ 50
Maximum borrowing capacity		100
Cash limit for dividends, distributions and redemption on equity		$ 50
Effective interest rate	1.09%
Amount outstanding	$ 0

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REVENUE (Details) - USD ($) $ in Thousands		12 Months Ended
		Oct. 31, 2021	Oct. 31, 2020	Oct. 31, 2019
Disaggregation of Revenue [Abstract]
Revenue	[1]	$ 663,761	$ 609,691	$ 550,660
IC [Member]
Disaggregation of Revenue [Abstract]
Revenue		460,171	418,410	406,191
High-end [Member]
Disaggregation of Revenue [Abstract]
Revenue		162,973	156,129	156,418
Mainstream [Member]
Disaggregation of Revenue [Abstract]
Revenue		297,198	262,281	249,773
FPD [Member]
Disaggregation of Revenue [Abstract]
Revenue		203,590	191,281	144,469
High-end [Member]
Disaggregation of Revenue [Abstract]
Revenue		155,670	139,558	98,832
Mainstream [Member]
Disaggregation of Revenue [Abstract]
Revenue		47,920	51,723	45,637
Taiwan [Member]
Disaggregation of Revenue [Abstract]
Revenue	[1]	248,597	239,101	244,377
Korea [Member]
Disaggregation of Revenue [Abstract]
Revenue	[1]	156,391	153,052	147,734
China [Member]
Disaggregation of Revenue [Abstract]
Revenue	[1]	115,732	79,374	19,010
United States [Member]
Disaggregation of Revenue [Abstract]
Revenue	[1]	105,023	104,949	105,045
Europe [Member]
Disaggregation of Revenue [Abstract]
Revenue	[1]	36,242	31,501	32,585
Other [Member]
Disaggregation of Revenue [Abstract]
Revenue	[1]	1,776	1,714	1,909
Over Time [Member]
Disaggregation of Revenue [Abstract]
Revenue		606,332	535,071	497,942
At a Point in Time [Member]
Disaggregation of Revenue [Abstract]
Revenue		$ 57,429	$ 74,620	$ 52,718

[1] This table disaggregates revenue by the location in which it was earned.

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LEASES, Operating Leases (Details) - USD ($) $ in Thousands	Oct. 31, 2021	Oct. 31, 2020	Oct. 31, 2019
Leases [Abstract]
Right-of-use assets, operating leases	$ 5,581	$ 7,706
Lease Payments Under Non-cancellable Leases [Abstract]
Operating lease liabilities	$ 5,519	$ 7,183
ASU 2016-02 [Member]
Leases [Abstract]
Right-of-use assets, operating leases			$ 6,500
Lease Payments Under Non-cancellable Leases [Abstract]
Operating lease liabilities			$ 6,500

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LEASES, Finance Leases (Details) - USD ($) $ in Thousands	1 Months Ended
	Feb. 28, 2021	Jan. 31, 2021	Oct. 31, 2021	Oct. 31, 2020
Finance Leases [Abstract]
Finance lease amount			$ 38,372	$ 0
$7.2 Million Finance Lease [Member]
Finance Leases [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%
$35.5 Million Finance Lease [Member]
Finance Leases [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] | Minimum [Member]
Finance Leases [Abstract]
Outstanding committed balance for cross default provision		$ 5,000
Monthly [Member] | $7.2 Million Finance Lease [Member]
Finance Leases [Abstract]
Finance lease monthly payments	$ 100
First Three Months [Member] | $35.5 Million Finance Lease [Member]
Finance Leases [Abstract]
Finance lease monthly payments		40
Following Nine Months [Member] | $35.5 Million Finance Lease [Member]
Finance Leases [Abstract]
Finance lease monthly payments		600
Forty Eight Months [Member] | $35.5 Million Finance Lease [Member]
Finance Leases [Abstract]
Finance lease monthly payments		$ 500

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LEASES, Information on Operating and Finance Leases included on Balance Sheet (Details) - USD ($) $ in Thousands	Oct. 31, 2021	Oct. 31, 2020
Operating and Finance Leases included in Consolidated Balance Sheets [Abstract]
ROU Assets - Operating Leases	$ 5,581	$ 7,706
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List]	Other Assets, Noncurrent	Other Assets, Noncurrent
ROU Assets - Finance Leases	$ 40,827	$ 0
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List]	Property, Plant and Equipment, Net	Property, Plant and Equipment, Net
Operating Lease Liability [Abstract]
Operating Lease Liability - Current	$ 2,273	$ 2,175
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List]	Accrued Liabilities, Current	Accrued Liabilities, Current
Operating Lease Liability, Noncurrent	$ 3,246	$ 5,008
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List]	Other Liabilities, Noncurrent	Other Liabilities, Noncurrent
Lease Liabilities - Operating Leases	$ 5,519	$ 7,183
Finance Lease Liability [Abstract]
Finance Lease Liability, Current	$ 7,289	$ 0
Finance Lease, Liability, Current, Statement of Financial Position [Extensible List]	Long-term Debt, Current Maturities	Long-term Debt, Current Maturities
Finance Lease Liability, Noncurrent	$ 31,083	$ 0
Finance Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List]	Long-term Debt, Excluding Current Maturities	Long-term Debt, Excluding Current Maturities
Lease Liabilities - Finance Leases	$ 38,372	$ 0

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LEASES, Future Lease Payments Under Noncancelable Operating and Finance Leases (Details) - USD ($) $ in Thousands	Oct. 31, 2021	Oct. 31, 2020
Future Lease Payments Under Noncancelable Operating Leases [Abstract]
2022	$ 2,351
2023	1,374
2024	819
2025	646
2026	398
Thereafter	157
Total lease payments	5,745
Imputed interest	226
Operating lease liabilities	5,519	$ 7,183
Future Lease Payments Under Noncancelable Finance Leases [Abstract]
2022	7,856
2023	6,938
2024	6,938
2025	18,012
2026	0
Thereafter	0
Total lease payments	39,744
Imputed interest	1,372
Finance lease liabilities	$ 38,372	$ 0

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LEASES, Lease Cost (Details) - USD ($) $ in Thousands	12 Months Ended
	Oct. 31, 2021	Oct. 31, 2020	Oct. 31, 2019
LEASES [Abstract]
Rent expense under operating leases			$ 3,000
Lease, Cost [Abstract]
Operating lease costs	$ 2,904	$ 3,076
Short-term lease costs	232	359
Variable lease costs	498	378
Interest on lease liabilities	510	0
Amortization of ROU assets	$ 1,867	$ 0

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LEASES, Operating and Finance Leases (Details) - USD ($) $ in Thousands	12 Months Ended
	Oct. 31, 2021	Oct. 31, 2020
Weighted Average Remaining Lease Terms, Discount Rates [Abstract]
Operating leases, Weighted-average remaining lease term	3 years 6 months	4 years 1 month 6 days
Operating leases, Weighted-average discount rate	2.40%	2.37%
Finance leases, Weighted-average remaining lease term	3 years 3 months 18 days
Finance leases, Weighted-average discount rate	1.50%	0.00%
Cash and Non-cash Information Related to Leases [Abstract]
Operating cash flows used for operating leases	$ 2,442	$ 3,584
Operating cash flows used for finance leases	464	0
Financing cash flows used for finance leases	4,323	0
ROU assets obtained in exchange for operating lease obligations	457	2,681
ROU assets obtained in exchange for finance lease obligations	$ 42,672	$ 0

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SHARE-BASED COMPENSATION (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Oct. 31, 2021	Oct. 31, 2020	Oct. 31, 2019
Share-based Compensation [Abstract]
Maximum number of shares of common stock that may be issued (in shares)	4,000,000
Expense reported in:
Expense incurred	$ 5,348	$ 4,927	$ 3,680
Income tax benefits of share-based compensation	200	200	0
Share-based compensation cost capitalized	0	0	0
Cost of Goods Sold [Member]
Expense reported in:
Expense incurred	446	337	250
Selling, General and Administrative [Member]
Expense reported in:
Expense incurred	4,446	4,590	3,430
Research and Development [Member]
Expense reported in:
Expense incurred	456	$ 0	$ 0
Stock Options [Member]
Estimated Expenses Not Yet Incurred [Abstract]
Compensation cost not yet recognized	$ 109
Weighted-average amortization period (in years)	1 year 1 month 6 days
Weighted-average inputs and risk-free rate of return ranges used to calculate the grant date fair value of options [Abstract]
Weighted-average grant date fair value of options granted (in dollars per share)			$ 3.31
Expected volatility			33.10%
Dividend yield			0.00%
Expected term			5 years 1 month 6 days
Stock options [Abstract]
Contractual term	10 years
Shares [Roll Forward]
Outstanding at beginning of period (in shares)	1,621,117
Granted (in shares)	0
Exercised (in shares)	(401,114)
Cancelled and forfeited (in shares)	(46,900)
Outstanding at end of period (in shares)	1,173,103	1,621,117
Exercisable at end of period (in shares)	1,077,914
Expected to vest (in shares)	93,500
Weighted-Average Exercise Price [Abstract]
Outstanding at beginning of period (in dollars per share)	$ 9.27
Granted (in dollars per share)	0
Exercised (in dollars per share)	8.58
Cancelled and forfeited (in dollars per share)	9.74
Outstanding at end of period (in dollars per share)	9.49	$ 9.27
Exercisable at end of period (in dollars per share)	9.51
Expected to vest (in dollars per share)	$ 9.20
Weighted-Average Remaining Contractual Life [Abstract]
Outstanding at end of period	4 years
Exercisable at end of period	3 years 9 months 18 days
Expected to vest	6 years 8 months 12 days
Aggregate Intrinsic Value [Abstract]
Outstanding at end of period	$ 4,109
Exercisable at end of period	3,750
Expected to vest	353
Options Exercised [Abstract]
Total intrinsic value of options exercised	1,910	$ 3,184	$ 1,262
Cash received from options exercises	$ 3,441	$ 3,746	$ 2,071
Stock Options [Member] | Minimum [Member]
Estimated Expenses Not Yet Incurred [Abstract]
Award vesting period	1 year
Weighted-average inputs and risk-free rate of return ranges used to calculate the grant date fair value of options [Abstract]
Risk-free rate of return			2.50%
Stock Options [Member] | Maximum [Member]
Estimated Expenses Not Yet Incurred [Abstract]
Award vesting period	4 years
Weighted-average inputs and risk-free rate of return ranges used to calculate the grant date fair value of options [Abstract]
Risk-free rate of return			2.90%
Restricted Stock [Member]
Estimated Expenses Not Yet Incurred [Abstract]
Compensation cost not yet recognized	$ 7,300
Weighted-average amortization period (in years)	2 years 7 months 6 days
Shares [Rollforward]
Outstanding at beginning of period (in shares)	812,316
Granted (in shares)	564,800	538,000	435,000
Vested (in shares)	(383,177)
Cancelled (in shares)	(64,792)
Outstanding at end of period (in shares)	929,147	812,316
Expected to vest (in shares)	862,143
Weighted-Average Fair Value at Grant Date [Abstract]
Outstanding at beginning of period (in dollars per share)	$ 12.55
Granted (in dollars per share)	11.20	$ 15.08	$ 9.80
Vested (in dollars per share)	11.72
Cancelled (in dollars per share)	12.44
Outstanding at end of period (in dollars per share)	12.08	$ 12.55
Expected to vest (in dollars per share)	$ 12.08
Fair value of awards for which restrictions lapsed	$ 4,491	$ 2,957	$ 1,888
Restricted Stock [Member] | Minimum [Member]
Estimated Expenses Not Yet Incurred [Abstract]
Award vesting period	1 year
Restricted Stock [Member] | Maximum [Member]
Estimated Expenses Not Yet Incurred [Abstract]
Award vesting period	4 years
Employee Stock Purchase Plan [Member]
Share-based Compensation [Abstract]
Maximum number of shares of common stock that may be issued (in shares)	1,850,000
Estimated Expenses Not Yet Incurred [Abstract]
Award vesting period	1 year
Options Exercised [Abstract]
Percent of market price that participants pay for shares subscribed	85.00%
Total shares issued since inception (in shares)	1,500,000
Employee Stock Purchase Plan [Member] | Minimum [Member]
Shares [Rollforward]
Outstanding at end of period (in shares)	100,000
Options Exercised [Abstract]
Unrecognized compensation cost	$ 100

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EMPLOYEE RETIREMENT PLANS (Details) - USD ($) $ in Millions	12 Months Ended
	Oct. 31, 2021	Oct. 31, 2020	Oct. 31, 2019
EMPLOYEE RETIREMENT PLANS [Abstract]
Number of months of service completed to come under retirement plan	3 months
Minimum age of employees to come under retirement plan	18 years
Percentage of salary that can be contributed by the employee	50.00%
Maximum percentage of employees' contributions that Company will match	50.00%
Maximum percentage of employees' gross pay that Company will match	4.00%
Company's contribution to defined contribution retirement plans	$ 0.8	$ 0.7	$ 0.7

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INCOME TAXES, Components of Income Taxes (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Oct. 31, 2021	Oct. 31, 2020	Oct. 31, 2019
Components of Income Before Income Tax Provision [Abstract]
United States	$ (19,447)	$ (10,672)	$ (8,379)
Foreign	121,453	72,273	59,080
Income before income tax provision	102,006	61,601	50,701
Current [Abstract]
Federal	0	0	(3,916)
State	4	4	11
Foreign	25,296	21,698	17,777
Current income tax provision	25,300	21,702	13,872
Deferred [Abstract]
Federal	0	0	3,673
State	103	8	10
Foreign	(2,213)	(452)	(7,345)
Deferred income tax provision	(2,110)	(444)	(3,662)
Income tax provision, Total	23,190	21,258	10,210
Income Tax Provision Reconciliation [Abstract]
U.S. federal income tax at statutory rate	21,421	12,936	10,647
Changes in valuation allowances	364	6,942	2,673
Foreign tax rate differentials	3,244	1,718	218
Tax credits	(3,942)	(1,562)	(1,268)
Uncertain tax positions, including reserves, settlements and resolutions	1,037	1,637	134
Income tax holiday	0	(318)	(2,234)
Other, net	1,066	(95)	40
Income tax provision, Total	$ 23,190	$ 21,258	$ 10,210
Effective tax rate	22.70%	34.50%	20.10%
U.S. statutory rate	21.00%	21.00%	21.00%
Income Tax Holiday [Abstract]
Term of tax year holidays	5 years
Dollar effect of income tax holiday		$ 100	$ 2,200
Per share effect of income tax holiday (in dollars per share)			$ 0.02
Deferred Income Tax Assets [Abstract]
Net operating losses	$ 31,657	34,457
Reserves not currently deductible	8,201	6,287
Tax credit carryforwards	9,877	9,481
Share-based compensation	1,500	1,306
Property, plant and equipment	7,566	3,887
Lease liabilities	9,134	0
Other	157	398
Deferred tax assets	68,092	55,816
Valuation allowances	(34,337)	(33,973)
Deferred tax assets net of valuation allowance	33,755	21,843
Deferred Income Tax Liabilities [Abstract]
ROU assets	(9,698)	0
Deferred income taxes liabilities	(9,698)	0
Net deferred income tax assets	24,057	21,843
Classification [Abstract]
Deferred income tax assets	24,353	22,070
Other liabilities	(296)	(227)
Net deferred income tax assets	$ 24,057	$ 21,843
Foreign [Member] | Maximum [Member]
Income Tax Holiday [Abstract]
Income tax holiday termination date	December 31, 2019

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INCOME TAXES, Unrecognized Tax Benefits and Carryforwards (Details) - USD ($) $ in Thousands	12 Months Ended
	Oct. 31, 2021	Oct. 31, 2020	Oct. 31, 2019
Unrecognized Tax Benefits [Abstract]
Balance at beginning of year before interest and penalties	$ 2,550	$ 1,758	$ 1,775
Additions for tax positions in prior years	181	227
Reductions for tax positions in prior years			(466)
Additions based on current year tax positions	1,313	1,576	1,286
Settlements	(489)	(992)	(204)
Lapses of statutes of limitations	(21)	(19)	(633)
Balance at end of year before interest and penalties	3,534	2,550	1,758
Interest and penalties	223	131	177
Balance at end of year including interest and penalties	3,757	2,681	1,935
Income Tax Uncertainties [Abstract]
Uncertain tax positions that may be resolved over next twelve months	500
Income Taxes, Additional Disclosures [Abstract]
Income taxes paid	22,700	23,000	15,900
Cash received for refunds of income taxes	700	4,300
Recorded in Other Liabilities [Member]
Income Tax Uncertainties [Abstract]
Unrecognized tax benefits that would impact effective tax rate	3,800	$ 2,000	$ 1,900
Federal Research and Development [Member]
Tax Credit Carryforward [Abstract]
Tax credit carryforward amount	$ 5,204
Federal Research and Development [Member] | Minimum [Member]
Tax Credit Carryforward [Abstract]
Expiration period	Oct. 31, 2024
Federal Research and Development [Member] | Maximum [Member]
Tax Credit Carryforward [Abstract]
Expiration period	Oct. 31, 2041
State [Member]
Tax Credit Carryforward [Abstract]
Tax credit carryforward amount	$ 5,915
State [Member] | Minimum [Member]
Tax Credit Carryforward [Abstract]
Expiration period	Oct. 31, 2022
State [Member] | Maximum [Member]
Tax Credit Carryforward [Abstract]
Expiration period	Oct. 31, 2035
Federal [Member]
Operating Loss Carryforward [Abstract]
Operating loss carryforwards amount	$ 99,636
Federal [Member] | Minimum [Member]
Operating Loss Carryforward [Abstract]
Expiration periods	Oct. 31, 2029
State [Member]
Operating Loss Carryforward [Abstract]
Operating loss carryforwards amount	$ 187,044
Expiration periods	Oct. 31, 2022
Foreign [Member]
Operating Loss Carryforward [Abstract]
Operating loss carryforwards amount	$ 113
Foreign [Member] | Minimum [Member]
Operating Loss Carryforward [Abstract]
Expiration periods	Oct. 31, 2024
Foreign [Member] | Maximum [Member]
Operating Loss Carryforward [Abstract]
Expiration periods	Oct. 31, 2031

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EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	12 Months Ended
	Oct. 31, 2021	Oct. 31, 2020	Oct. 31, 2019
Calculation of Basic and Diluted Earnings Per Share [Abstract]
Net income attributable to Photronics, Inc. shareholders	$ 55,449	$ 33,820	$ 29,793
Effect of Dilutive Securities [Abstract]
Interest expense on convertible notes, net of tax	0	0	845
Earnings used for diluted earnings per share	$ 55,449	$ 33,820	$ 30,638
Weighted-average Common Shares Computations [Abstract]
Weighted-average common shares used for basic earnings per share (in shares)	61,407	64,866	66,347
Effect of Dilutive Securities [Abstract]
Share-based payment awards (in shares)	592	604	448
Convertible notes (in shares)	0	0	2,360
Potentially dilutive common shares (in shares)	592	604	2,808
Weighted-average common shares used for diluted earnings per share (in shares)	61,999	65,470	69,155
Basic earnings per share (in dollars per share)	$ 0.90	$ 0.52	$ 0.45
Diluted earnings per share (in dollars per share)	$ 0.89	$ 0.52	$ 0.44
Antidilutive Securities [Abstract]
Total potentially dilutive shares excluded (in shares)	331	795	1,250
Share-based Payment Awards [Member]
Antidilutive Securities [Abstract]
Total potentially dilutive shares excluded (in shares)	331	795	1,250

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COMMITMENTS AND CONTINGENCIES (Details) $ in Thousands	Oct. 31, 2021 USD ($)
Commitment and Contingencies [Abstract]
Commitments for purchase of capital equipment	$ 73,700
Unrecognized Commitments [Abstract]
2022	82,323
2023	25,630
2024	3,654
2025	0
2026	0
Thereafter	0
Total	$ 111,607

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CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME BY COMPONENT (Details) - USD ($) $ in Thousands	12 Months Ended
	Oct. 31, 2021	Oct. 31, 2020	Oct. 31, 2019
CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME BY COMPONENT [Abstract]
Other comprehensive income, tax	$ 0	$ 0	$ 0
Changes in Accumulated Other Comprehensive Income [Roll Forward]
Beginning Balance	804,962
Ending Balance	823,692	804,962
Accumulated Other Comprehensive Income (Loss) [Member]
Changes in Accumulated Other Comprehensive Income [Roll Forward]
Beginning Balance	17,958	(9,005)
Ending Balance	20,571	17,958	(9,005)
Foreign Currency Translation Adjustments [Member]
Changes in Accumulated Other Comprehensive Income [Roll Forward]
Beginning Balance	18,828	(8,331)
Ending Balance	21,476	18,828	(8,331)
Other [Member]
Changes in Accumulated Other Comprehensive Income [Roll Forward]
Beginning Balance	(870)	(674)
Ending Balance	(905)	(870)	$ (674)
AOCI Including Portion Attributable to Noncontrolling Interest [Member]
Changes in Accumulated Other Comprehensive Income [Roll Forward]
Other comprehensive income (loss)	8,409	35,991
Foreign Currency Translation Adjustments [Member]
Changes in Accumulated Other Comprehensive Income [Roll Forward]
Other comprehensive income (loss)	8,478	36,381
Other [Member]
Changes in Accumulated Other Comprehensive Income [Roll Forward]
Other comprehensive income (loss)	(69)	(390)
AOCI Attributable to Noncontrolling Interest [Member]
Changes in Accumulated Other Comprehensive Income [Roll Forward]
Less: other comprehensive income (loss) attributable to noncontrolling interests	5,796	9,028
Foreign Currency Translation Adjustments [Member]
Changes in Accumulated Other Comprehensive Income [Roll Forward]
Less: other comprehensive income (loss) attributable to noncontrolling interests	5,830	9,222
Other [Member]
Changes in Accumulated Other Comprehensive Income [Roll Forward]
Less: other comprehensive income (loss) attributable to noncontrolling interests	$ (34)	$ (194)

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RISK AND CONCENTRATIONS (Details) - USD ($) $ in Thousands	12 Months Ended
	Oct. 31, 2021	Oct. 31, 2020	Oct. 31, 2019
Geographical Areas [Abstract]
Property, Plant and Equipment	$ 696,553	$ 631,475
Net Assets	1,000,562	962,266
China [Member]
Geographical Areas [Abstract]
Property, Plant and Equipment	285,756	262,800
Net Assets	210,437	180,404
Taiwan [Member]
Geographical Areas [Abstract]
Property, Plant and Equipment	129,660	123,979
Net Assets	341,291	309,911
United States [Member]
Geographical Areas [Abstract]
Property, Plant and Equipment	137,049	130,164
Net Assets	173,062	225,411
Korea [Member]
Geographical Areas [Abstract]
Property, Plant and Equipment	140,380	110,815
Net Assets	254,357	228,579
Europe and Other [Member]
Geographical Areas [Abstract]
Property, Plant and Equipment	3,708	3,717
Net Assets	$ 21,415	$ 17,961
Accounts Receivable [Member] | Customer Concentration Risk [Member] | One Customer [Member]
Customer Account [Abstract]
Customer's percentage of net accounts receivable/revenue	20.00%	24.00%
Accounts Receivable [Member] | Customer Concentration Risk [Member] | 2nd Customer [Member]
Customer Account [Abstract]
Customer's percentage of net accounts receivable/revenue	12.00%
Revenue [Member] | Customer Concentration Risk [Member] | One Customer [Member]
Customer Account [Abstract]
Customer's percentage of net accounts receivable/revenue	17.00%	16.00%	15.00%
Revenue [Member] | Customer Concentration Risk [Member] | 2nd Customer [Member]
Customer Account [Abstract]
Customer's percentage of net accounts receivable/revenue	12.00%	14.00%	16.00%

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RELATED PARTY TRANSACTIONS (Details) - USD ($) $ in Thousands				12 Months Ended
		Mar. 09, 2020	Jan. 20, 2018	Oct. 31, 2021	Oct. 31, 2020	Oct. 31, 2019
Related Party Agreement [Abstract]
Revenue	[1]			$ 663,761	$ 609,691	$ 550,660
Accounts receivable				174,447	134,470
Customer One [Member]
Related Party Agreement [Abstract]
Revenue				111,000	96,400	87,000
Accounts receivable				$ 34,500	32,700
DEMA Associates, LLC [Member]
Related Party Agreement [Abstract]
Consulting agreement period				4 years
Annual cost of consulting contract		$ 100	$ 400
Expenses incurred for goods or services provided by related party during the period				$ 100	$ 200	$ 400

[1] This table disaggregates revenue by the location in which it was earned.

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FAIR VALUE MEASUREMENTS (Details) - USD ($) $ in Thousands	Oct. 31, 2021	Oct. 31, 2020
Fair Value, Assets and Liability [Abstract]
Total assets	$ 0	$ 0
Total liabilities	$ 0	$ 0

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SHARE REPURCHASE PROGRAMS (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	12 Months Ended
	Oct. 31, 2021	Oct. 31, 2020	Oct. 31, 2019	Sep. 30, 2020	Aug. 31, 2019	Oct. 31, 2018
Shares Repurchase Programs and Preferred Stock Purchase Rights [Abstract]
Cost of shares repurchased	$ 48,249	$ 34,394	$ 21,696
September 2020 Announced Program [Member]
Shares Repurchase Programs and Preferred Stock Purchase Rights [Abstract]
Stock repurchased authorized amount				$ 100,000
Stock repurchase program - commencement date	Sep. 16, 2020
August 2019 Announced Program [Member]
Shares Repurchase Programs and Preferred Stock Purchase Rights [Abstract]
Stock repurchased authorized amount					$ 100,000
Stock repurchase program - commencement date	Sep. 25, 2019
Stock repurchase program - termination date	Mar. 20, 2020
October 2018 Announced Program [Member]
Shares Repurchase Programs and Preferred Stock Purchase Rights [Abstract]
Stock repurchased authorized amount						$ 25,000
Stock repurchase program - commencement date	Oct. 22, 2018
Stock repurchase program - termination date	Feb. 01, 2019
Share Repurchase Programs [Member]
Shares Repurchase Programs and Preferred Stock Purchase Rights [Abstract]
Number of shares repurchased (in shares)	3,919	3,194	2,133
Cost of shares repurchased	$ 48,249	$ 34,394	$ 21,696
Average price paid per share (in dollars per share)	$ 12.31	$ 10.77	$ 10.17

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SUBSIDIARY DIVIDENDS (Details) - USD ($) $ in Thousands	12 Months Ended
	Oct. 31, 2021	Oct. 31, 2020	Oct. 31, 2019
Noncontrolling Interest [Abstract]
Dividend paid to noncontrolling interest	$ 9,597	$ 16,151	$ 45,050
PDMC [Member]
Noncontrolling Interest [Abstract]
Ownership percentage of noncontrolling interests	49.99%	49.99%	49.99%
Dividend paid to noncontrolling interest	$ 9,600	$ 16,200	$ 45,100