What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-12-26 compared with 2022-12-23 · 526 added, 516 removed, 607 unchanged (63% of the section changed)

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm Deloitte & Touche LLP

(PCAOB ID 34 )

Consolidated Balance Sheets

Report of Independent Registered Public Accounting Firm Deloitte & Touche LLP (PCAOB ID 34 )

Balance Sheets

Consolidated Statements of Income

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We have audited the accompanying consolidated balance sheets of Photronics, Inc.

(the “Company”) as of October 31, 2022 and 2021, the related consolidated statements of

income, comprehensive income, equity, and cash flows for each of the three years in the period ended October 31, 2022, and the related notes (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, 2022 and October 31, 2021, and the results of its operations and its cash flows for each of the three years in the period ended October 31, 2022, 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, 2022, 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 23, 2022,

expressed an unqualified opinion on the Company’s internal control over financial reporting.

(the “Company”) as of October 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the three

years in the period ended October 31, 2023, and the related notes (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, 2023 and October 31, 2022, and the results of its operations and its cash flows for each of the three years in the period ended October 31, 2023, in conformity with accounting principles generally accepted in the United States of

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, 2023, 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 22, 2023, expressed an unqualified opinion on the Company’s internal control over financial

Basis for Opinion

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.

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 audit 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 that 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.

Those standards require that we plan and perform the audit 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 that 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 opinion.

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 7 to the financial statements

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 1 & 9 of 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, including 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.

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, including a reasonable profit, in the event the

in-process orders are cancelled by the customers.

In addition, as photomasks are manufactured to customer specifications, they have no alternative use to the Company.

This results in the Company recording a corresponding contract asset as of

period-end for these contracts.

cycle at which the production orders stand in relation to the Company’s enforceable right within the contract.

Pursuant to these contracts, revenue recognized over time and the associated contract asset as of October 31, 2023 was $11 million.

We identified the determination of revenue recognized over time for in-process productions orders as of October 31, 2022 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, 2022.

We identified the determination of revenue recognized over time for in-process productions orders as of October 31, 2023 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, 2023.

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, 2022 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 tested the accuracy and completeness of the in-process orders report by performing physical observation.

- We selected a sample of in-process production orders as of October 31, 2022, and performed the following procedures for each selection:

- Obtained and read the contract.

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

- Tested management’s 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.

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, 2023 included the following:

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 tested the accuracy

and completeness of the in-process orders report by performing physical observation.

- We selected a sample of

in-process production orders as of October 31, 2023 and performed the following procedures for each selection:

- Obtained and read the customer

agreement/purchase order, invoice, and quote to determine whether the company has an enforceable right to bill and collect consideration.

- Evaluated management’s

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

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

/s/ Deloitte & Touche LLP

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Preferred stock, $ 0.01 par value, 2,000 shares authorized, none issued and outstanding

Common stock, $ 0.01 par value, 150,000 shares authorized, 60,791 shares issued and outstanding at October 31, 2022 , and 60,024 shares issued and outstanding at October 31, 2021

Common stock, $ 0.01 par value, 150,000 shares authorized, 61,310 shares issued and outstanding at October 31, 2023 ,

and 60,791 shares issued and outstanding at October 31, 2022

Additional paid-in capital

Retained earnings

Accumulated other comprehensive (loss) income

Accumulated other comprehensive loss

Total Photronics, Inc.

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PHOTRONICS, INC.

Consolidated Statements of Income

Statements of Income

(in thousands, except per share amounts)

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Foreign currency transactions impacts, net

Interest expense, net of subsidies

Interest income and other income, net

Interest expense, net of subsidies

Income before income tax provision

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PHOTRONICS, INC.

Consolidated Statements of Comprehensive

(Loss) Income

Consolidated Statements of

Comprehensive (Loss) Income

(in thousands)

Other comprehensive (loss) income, net of tax of $ 0 :

Other comprehensive income (loss), net of tax of $ 0 :

Foreign currency translation adjustments

Net other comprehensive (loss) income

Net other comprehensive income (loss)

Comprehensive income

comprehensive income attributable to noncontrolling interests

Comprehensive (loss) income attributable to Photronics, Inc.

Comprehensive income (loss) attributable to Photronics, Inc.

See accompanying notes to consolidated financial statements.

PHOTRONICS, INC.

Consolidated Statements of Equity

Statements of Equity

Years Ended October 31, 2023, 2022 and 2021

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Share-based compensation expense

Contribution from noncontrolling interest

Dividends to noncontrolling interest

Repurchase of common stock of subsidiary

Purchases of treasury stock

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Balance at October 31, 2021

Other comprehensive income

Other comprehensive loss

Shares issued under equity plans

Share-based compensation expense

Dividends to noncontrolling interest

Contribution from noncontrolling interest

Purchases of treasury stock

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Balance at October 31, 2022

Other comprehensive loss

Other comprehensive income (loss)

Shares issued under equity plans

Share-based compensation expense

Contribution from noncontrolling interest

Purchases of treasury stock

Retirement of treasury stock

Balance at October 31, 2023

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Purchases of available-for-sale debt securities

Proceeds from maturities of available-for-sale debt securities

Government incentives

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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.

(“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, located in Taiwan ( 3 ), China ( 2 ), Korea , the United States ( 3 ), and Europe ( 2 ).

Consolidation

The accompanying consolidated financial

statements include the accounts of Photronics, Inc.

The accompanying consolidated financial statements include the

accounts of Photronics, Inc.

, its wholly owned subsidiaries, and the majority-owned subsidiaries which it controls.

intercompany balances and transactions have been eliminated in consolidation.

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.

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, 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

Certain immaterial prior periods amounts in the consolidated financial statements and notes thereto have been reclassified

to conform to the current period presentation.

We review these estimates periodically and reflect any effects of revisions in the period in which they are determined.

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

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.

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government securities and are classified as available-for-sale.

available-for-sale securities on our consolidated balance sheet as follows:

We classify available-for-sale

securities on our consolidated balance sheet as follows:

Maturing within three months or less from the date of purchase

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Long-term marketable investments

As of October 31, 2022, all of our available-for-sale securities had remaining maturities of more than three months, but

less than one year, and have been classified as Short-term investments .

As of October 31, 2021, we did no t

hold any investments.

Available-for-sale debt investments are reported at fair value, with unrealized gains or losses (net of tax) reported

in Accumulated other comprehensive (loss) income .

As of October 31, 2023, and October 31, 2022, all of our available-for-sale securities had remaining maturities less than one

year, and have been classified as Short-term investments .

Available-for-sale debt investments are reported at fair value, with unrealized gains or losses (net of tax) reported in Accumulated other comprehensive (loss) income .

The fair values of our available-for-sale securities are Level 1 measurements, based on quoted prices from active markets for identical assets.

event of a sale of an available-for-sale debt investment, we would determine the cost of the investment sold at the specific individual security level, and would include any gain or loss in Interest income and

other income, net, where we also report periodic interest earned and the amortization (accretion) of discounts (premiums) related to these investments.

In the event of a

sale of an available-for-sale debt investment, we would determine the cost of the investment sold at the specific individual security level, and would include any gain or loss in Interest income and other

income, net, where we also report periodic interest earned and the amortization (accretion) of discounts (premiums) related to these investments.

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

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Periodically, at the individual security level, we review our investments to determine if they are impaired.

investment would be impaired if its amortized cost exceeds its fair value.

An investment would

be impaired if its amortized cost exceeds its fair value.

In the event that an investment’s amortized cost exceeds its fair value, we would determine whether the impairment is temporary or other than temporary.

Factors indicating

that an other than temporary impairment had occurred that we would consider in our determination include whether we have decided to sell the security and whether it is more likely than not that we may be required to sell the security before its

amortized cost basis is recovered.

In addition, for certain types of securities, we would assess whether the discounted cash flows we expect to collect on an investment are less than its amortized cost and, under such a circumstance, recognize

the existing credit loss as an impairment.

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.

Inventories are stated at the lower of cost, determined under the first-in, first-out (“FIFO”) method, or net realizable

The components of Inventories at the balance sheet dates are presented below.

Raw materials

Work in process

Finished goods

Factors indicating that an other

than temporary impairment had occurred that we would consider in our determination include whether we have decided to sell the security and whether it is more likely than not that we may be required to sell the security before its amortized cost

basis is recovered.

credit loss as an impairment.

Accounts Receivable, Unbilled Receivables and Allowance for Credit Losses

We generally record our accounts receivable at their billed

The Company recognizes unbilled receivables when the Company has

satisfied its performance obligations, has an unconditional right to consideration, but has not yet issued an invoice.

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.

Inventories are stated at the lower of cost, determined under the

first-in, first-out (“FIFO”) method, or net realizable value.

Please refer to Note 4 of our consolidated financial statements for additional information on our inventories.

Inventory reserves are established when conditions indicate that the net

realizable value is less than costs due to assigned expiration dates or other causes based on individual facts and circumstances.

If net realizable value is less than cost at the balance sheet date, the carrying amount is reduced to the realizable

value, and the difference is recognized as a loss on valuation of inventories within cost of sales.

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.

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.

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.

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 lessor of the life of the lease or the estimated useful life of the improvement.

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 lesser of the life of the lease or the estimated useful life of the improvement.

We employ judgment when making assumptions about the

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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.

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 changes in 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 changes in 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.

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.

Restricted Cash

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Treasury Stock

We record treasury stock purchases under the cost method, recording the entire cost of the acquired stock as treasury

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.

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.

When we retire our treasury stock, any excess of the

repurchase price paid over par value is allocated between additional paid-in capital and retained earnings.

Revenue Recognition

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As stated above, photomasks are manufactured to customer specifications in accordance with their proprietary designs;

they are individually unique.

thus, they are

individually unique.

Due to their uniqueness and other factors, their transaction prices are individually established through negotiations with customers;

consequently, our photomasks do not have standard or “list” prices.

The transaction

prices of the vast majority of our revenue contracts include only fixed amounts of consideration.

In certain instances, such as when we offer a customer an early payment discount, an estimate of variable consideration would be included in the

transaction price, but only to the extent that a significant reversal of revenue would not occur when the uncertainty related to the variability was resolved.

The transaction prices of

the vast majority of our revenue contracts include only fixed amounts of consideration.

In certain instances, such as when we offer a customer an early payment discount, an estimate of variable consideration would be included in the transaction

price, but only to the extent that a significant reversal of revenue would not occur when the uncertainty related to the variability was resolved.

Contract Assets, Contract Liabilities, and Accounts Receivable

We recognize a contract asset when our performance under a contract precedes our receipt of consideration from a customer,

or before payment is due, and our receipt of consideration is conditional upon factors other than the passage of time.

Contract assets reflect our transfer of control to customers of photomasks that are in process or completed but not yet shipped to

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.

impair any contract assets or accounts receivable in 2022, 2021, or 2020 .

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

Classification

Contract Assets

Other current assets

Contract Liabilities

Accrued liabilities

Other liabilities

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

reporting periods.

Revenue recognized from beginning liability

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.

Our contract assets primarily consist of a significant amount of our in-process production orders and

fully manufactured photomasks which have not yet shipped, for which we have an enforceable right to collect consideration (including a reasonable profit) in the event the in-process orders are cancelled by customers.

On an individual contract basis,

we net contract assets with contract liabilities (deferred revenue) for financial reporting purposes.

We did no t impair any contract

assets or accounts receivable in 2023, 2022, or 2021 .

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;

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.

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commissions as costs of obtaining a contract, nor do we currently foresee other circumstances under which we would recognize such assets.

Remaining Performance

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

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.

However, the demand for some IC photomasks has expanded beyond the industry’s capacity to supply them within the traditional time period;

thus the backlog, in some individual cases, can expand to as long as two to three months .

As allowed under

Topic 606, we have elected not to disclose our remaining performance obligations, which represent the costs associated with the completion of the manufacturing process of in-process photomasks related to contracts that have an original duration of

one year or less.

However, the demand for some IC photomasks can extend beyond the traditional time period;

thus the backlog, in some individual cases, can extend to as long as two to three months .

As allowed under Topic 606, we have elected not to disclose

our remaining performance obligations, which represent the costs associated with the completion of the manufacturing process of in-process photomasks related to contracts that have an original duration of one year or less.

Product Warranties

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Historically, customer claims under warranties have been immaterial .

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 and evaluate at that time whether the lease is an operating lease or a finance lease.

We recognize right-of-use assets and lease liabilities for operating and finance leases with terms greater than 12 months.

to Note 10 of our consolidated financial statements for additional information.

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.

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.

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

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when a lessor makes an asset underlying a lease having a term in excess of twelve months available for our use.

As allowed under ASC Topic 842 – “Leases” (“Topic 842”), we have elected to 1) 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 and 2) for all classes of assets, the practical expedient to not

separate lease components of a contract from nonlease components of a contract .

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 rights to use the underlying assets, and lease liabilities which represent our obligation to make payments for such rights.

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.

Variable lease payments, other than those that are dependent on an index or on a rate (at which they are measured on their commencement dates), are not included in the measurement of ROU assets and

their related lease liabilities.

As allowed under ASC Topic 842 – “Leases” (“Topic 842”), we have elected 1) 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 and 2) for all classes of assets, the practical expedient to

not separate lease components of a contract from nonlease components of a contract .

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

rights to use the underlying assets, and lease liabilities which represent our obligation to make payments for such rights.

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.

Variable lease payments, other than those that are dependent on an index or on a rate (at which they are measured on their commencement dates), 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.

The initial measurement process for finance leases and operating leases is the same, except that, for operating leases,

we generally apply our incremental borrowing rates for collateralized borrowings over terms similar to those of the leases to determine the lease liability while, for finance leases, we use the interest rates implicit in the leases.

The initial measurement process for finance leases and operating leases is the same, except that, for operating leases, we

generally apply our incremental borrowing rates for collateralized borrowings over terms similar to those of the leases to determine the lease liability while, for finance leases, we use the interest rates implicit in the leases.

measurement of ROU assets may require further adjustments for lease prepayments and initial direct costs we incur.

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 expenses are 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.

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 expenses are 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.

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.

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.

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

subsidiaries maintain their accounts in their respective local currencies, which are their functional

subsidiaries maintain their books of account in their respective local currencies, which are their functional

Assets and liabilities of such subsidiaries are translated to U.S.

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Government Grants

We account for funds we receive from government grants by reducing the costs of the assets or expenses to which we apply

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

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 employ judgment and make assumptions when establishing valuation allowances for deferred income tax assets, if their realization is not deemed to be 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

We are eligible for investment tax credits in U.S.

The Company receives grants from governments in support of

certain of the Company’s business activities, primarily related to capital expenditures and research and development activities.

Grants are generally received in the form of cash as either a recovery for expenses incurred, qualified assets

purchased or as an incentive for meeting certain eligibility requirements that may be part of a grant agreement.

Grant agreements terms generally extend for a period of up to 4 years.

We account for funds we receive from government grants by either reducing the costs of the assets (if the grant relates to capital expenditures) or expenses which could be Cost of

goods sold, Selling, general and administrative, and Research and development expenses in the consolidated statements of income once the conditions and restrictions of the grant have been met and payment has been received.

If the funds we receive

cannot be attributed to specific assets or expenses, they would be recognized as other income, and included in Interest income and other income, net in the consolidated statements of income.

Funds we receive from government grants are classified in

our consolidated statements of cash flows as either Net cash provided by operating activities or Net cash provided by investing activities, in accordance with how we expend the funds.

When a grant is received before conditions of the grant have

been met, the grant is recorded in Accrued liabilities or Other liabilities in the Consolidated Balance Sheets.

For the year ended October 31, 2023, grants recorded in the Company’s Consolidated Financial Statements were not material.

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.

operating losses and tax credit carryforwards.

We employ judgment and make assumptions when establishing valuation allowances for deferred income tax assets, if their realization is not deemed to be 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.

eligible for investment tax credits in U.S.

tax jurisdictions.

We account for investment tax credits under the “flow-through” method of accounting.

As permitted in ASC 740 “Income Taxes”, under the flow-through method

of accounting, the tax benefit from an investment tax credit is recorded as a reduction of income taxes in the period in which the credit is generated.

We consider income taxes in each of the tax jurisdictions in which we operate in order to determine our effective income

As permitted in ASC 740 “Income Taxes”, under the flow-through method of accounting, the

tax benefit from an investment tax credit is recorded as a reduction of income taxes in the period in which the credit is generated.

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, which are

presented on our consolidated balance sheets, and deferred tax liabilities, which are included in Other liabilities on 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.

These differences result in deferred tax assets, which are presented on

our consolidated balance sheets, and deferred tax liabilities, which are included in Other liabilities on 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 the liability and 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.

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 were exercised or earned.

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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”.

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.

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.

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

We would 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.

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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.

NOTE 2 – ACCOUNTS RECEIVABLE

components of Accounts Receivable at the

balance sheet dates are presented below.

Accounts Receivable

Unbilled Receivable

Allowance for Credit Losses

NOTE 3 - OTHER CURRENT ASSETS

Presented below are the components of Other

current assets at the balance sheet dates.

Presented below are the components of Other current assets at

the balance sheet dates.

Contract assets

Prepaid and refundable income taxes

Prepaid expenses

Prepaid and refundable income taxes

Recoverable value added taxes

NOTE 4 - INVENTORIES

The components of Inventories at the balance sheet dates are presented below.

Raw materials

Work in process

Finished goods

NOTE 5 - PROPERTY, PLANT AND EQUIPMENT, NET

Presented below are the components of Property, plant and equipment, net at the

balance sheet dates.

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

Buildings and improvements

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Accumulated amortization

The following table presents depreciation expense (including the amortization of ROU assets) related to property, plant

and equipment incurred during the reporting periods.

The following table presents depreciation expense (including the amortization of ROU assets) related to property, plant and

equipment incurred during the reporting periods.

Depreciation Expense

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.

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 6 - PDMCX JOINT VENTURE

In January 2018, Photronics, Inc.

wholly owned Singapore subsidiary (hereinafter, within this Note “we”, “Photronics”, “ us ”, or “our”), and DNP, through its wholly owned subsidiary “DNP Asia Pacific PTE, Ltd.” entered into a joint venture under which DNP obtained a 49.99 % interest in our IC business in Xiamen, China.

The joint venture, which

we refer to as “PDMCX”, was established to develop and manufacture photomasks for semiconductors.

We entered into this joint venture to enable us to compete more effectively for the merchant photomask business in China, and to benefit from the

additional resources and investment that DNP provides to enable us to offer advanced-process technology to our customers .

In 2020, in combination with local financing obtained by PDMCX, Photronics and DNP fulfilled their investment obligations under the PDMCX

operating agreement ( “ the Agreement ” ).

discussed in Note 6, liens were granted to the local financing entity on property, plant and equipment with an October 31, 2022, and October 31, 2021, total carrying value of $ 70.7 and $ 90.1 million, respectively, as collateral for the loans.

through its wholly-owned subsidiary, Photronics Singapore PTE.

LTD., (hereinafter, within this Note “we”, “Photronics”, “ us ”, or “our”), and DNP, through its wholly-owned subsidiary “DNP Asia Pacific PTE, Ltd.” entered into a joint venture under

which DNP obtained a 49.99 % interest in our

IC business in Xiamen, China.

The joint venture, which we refer to as “PDMCX”, was established to develop and manufacture photomasks for semiconductors.

We entered into this joint venture to enable us to compete more effectively for the

merchant photomask business in China, and to benefit from the additional resources and investment that DNP provides to enable us to offer advanced-process technology to our customers .

In 2020, in combination with local financing obtained by PDMCX, Photronics and DNP fulfilled their investment obligations under the PDMCX operating

agreement ( “ the Agreement ” ).

As discussed in Note 8, liens were granted to the local financing entity on property, plant, and equipment and were paid off during fiscal year 2023.

These liens had an October 31, 2022, total carrying value of $ 70.7 million, as collateral for the loans.

Under the Agreement, DNP is afforded, under certain circumstances, the right to put its interest in PDMCX to Photronics.

These circumstances include disputes regarding the strategic direction of PDMCX that may arise after the initial two-year term of the

Agreement that cannot be resolved between the two parties.

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.

In addition, both Photronics and DNP have the option to purchase, or put, their

interest from, or to, the other party, should their ownership interest fall below twenty percent for a period of more than six consecutive months.

Under all such circumstances, the sales of ownership interests would be at the exiting party’s ownership percentage of the joint

venture’s net book value, with closing to take place within three business days of obtaining required approvals and clearance.

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

Net income (loss) from PDMCX

As required by the guidance in ASC Topic 810 - “Consolidation”, we evaluated our involvement in PDMCX for the purpose of determining

whether we should consolidate its results in our financial statements.

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

Net income from PDMCX

As required by the guidance in ASC Topic 810 - “Consolidation”, 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

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.

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

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The following table presents the carrying amounts of PDMCX assets and liabilities included in our consolidated balance sheets.

creditors of PDMCX do not have recourse to the assets of Photronics (other than the net assets of PDMCX);

General creditors of PDMCX

do not have recourse to the assets of Photronics (other than the net assets of PDMCX);

therefore, our maximum exposure to loss from PDMCX is our interest in the carrying amount of the net assets of the joint venture.

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NOTE 7 - ACCRUED LIABILITIES

Presented below are the components of Accrued liabilities at the balance sheet dates.

below are the components of Accrued liabilities at the balance sheet dates.

Prior year amounts have been reclassified to conform to the current year presentation.

Compensation related expenses

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Value added and other taxes

Service Contracts

Operating leases

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NOTE 8 - DEBT

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

Due to the Q2 FY23 payoff of the Xiamen Project loans, as of October 31, 2023, the Current portion of long-term debt and the Long-term debt balances

were comprised of finance leases as described below:

As of October 31, 2023

Xiamen Project

Xiamen Working

Capital Loans

Hefei Equipment

Project Loans

Principal due:

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Months 37 – 48

Months 49 – 60

Long-term debt

Interest rate at balance sheet date

4.30 % - 4.45

Basis spread on interest rates

Interest rate reset

Monthly/Annually

Maturity date

December 2025

Paid July 2022

Periodic payment amount

Varies as loans mature (1)

Increases as loans mature

Varies as Lease mature

Periodic payment frequency

Semiannual, on individual loans

Loan collateral (carrying amount)

During the three month period ended October 31, 2022,

we repaid 81,000,000 RMB (approximately $ 11.5 million) that had contractual maturity dates ranging from December 2023 through June 2025.

See Note 8 for interest rates on lease liabilities,

maturity dates, and periodic payment amounts.

Represents the carrying amount at the balance sheet

date of the related ROU assets, in which the lessors have secured interests.

During Q2 FY23, we

repaid the entire balance of RMB 26.4 million (approximately $ 3.9 million) remaining on the loan, of which, RMB 2.0

million was due to be paid in June 2025 and RMB 24.4 million was due to be paid in December 2025.

Represents the carrying amount at the balance sheet date of the related ROU assets, in which the lessors have secured

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

As of October 31, 2022

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Months 37 – 48

Months 49 – 60

Long-term debt

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Basis spread on interest rates

67.75 - 76.00

Interest rate reset

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December 2025

September 2025

Paid July 2022

Periodic payment amount

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Semiannual, on individual loans

Semiannual (2)

Loan collateral (carrying amount)

First five loan repayments were scheduled to be

for 7.5 percent of the approved 200 million RMB loan principal;

last five installments were scheduled to be for 12.5

percent of the approved loan principal.

Semiannual repayments commence in March 2022;

remaining outstanding amount paid in July 2022.

See Note 8 for interest rates on

lease liabilities, maturity dates, and periodic payment amounts.

Represents the carrying amount at the balance

sheet date of the related ROU assets, in which the lessors have secured interests.

During the three month period ended October 31, 2022, we repaid

RMB 81.0 million (approximately $ 11.5

million) that had contractual maturity dates ranging from December 2023 through June 2025.

See Note 10 for interest rates on lease liabilities, maturity

dates, and periodic payment amounts.

Represents the carrying amount at the balance sheet date of the

related ROU assets, in which the lessors have secured interests.

Finance Leases

In February 2021, we entered into a five-year $ 7.2 million finance lease for a high-end inspection tool.

Monthly payments on the lease,

which commenced in February 2021, are $ 0.1 million per month.

Upon the payment of the fiftieth monthly payment and prior to payment of

the fifty-first monthly payment, we may exercise an early buyout option to purchase the tool for $ 2.4 million.

If we do not exercise

the early buyout option, then at the end of the five-year lease term, the lease shall continue to renew on a month-to-month basis at

the same rental terms;

at our option, after the original term or any renewal periods, we may return the tool, elect to extend the lease, or purchase the tool at its fair market value.

Since we are reasonably certain that we will exercise the

early buyout option, our lease liability reflects such exercise and we have classified the lease as a finance lease.

The interest rate implicit in the lease is 1.08 %.

December 2020, we entered into a five-year $ 35.5 million finance lease for a high-end lithography tool.

Monthly payments on the lease, which commenced in January 2021, increased from $ 0.04 million during the first three months to $ 0.6 million

for the following nine months, followed by forty-eight monthly payments of $ 0.5 million.

As of the due date of the forty-eighth

monthly payment, we may exercise an early buyout option to purchase the tool for $ 14.1 million.

If we do not exercise the early

buyout option, then at the end of the five-year lease term, at our option, we may return the tool, elect to extend the lease term

for a period and a lease payment to be agreed with lessor at the time, or purchase the tool for its then-fair market value, as determined by the lessor.

Since we are reasonably certain that we will exercise the early buyout option, our lease

liability reflects such exercise and we have classified the lease as a finance lease.

The interest rate implicit in the lease is 1.58 %.

The lease agreement incorporates the covenants included in our former Corporate Credit Agreement, which are detailed below, and includes a cross-default provision for any agreement or instrument with an outstanding, committed balance greater

than $ 5.0 million in which we are the indebted party.

Xiamen Project Loans

In November 2018, PDMCX obtained approval to borrow 345 million RMB from the Industrial and Commercial Bank of China.

In November 2018, PDMCX obtained approval to borrow RMB 345.0 million 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, 2022, 56.4 million RMB ($ 7.7 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 was eligible for

reimbursement through incentives provided by the Xiamen Torch Hi-Tech Industrial Development Zone, which afforded 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, 2022.

approved amount.

In February 2023, PDMCX repaid the entire outstanding balance of RMB 26.4 million ($ 3.9 million).

As of October 31, 2023, PDMCX had no

amount outstanding and the amounts may not be re-borrowed.

The Project Loans were used to finance certain capital expenditures at the PDMCX facility and were collateralized by liens granted on the land use right, building, and certain equipment

located at the facility.

The interest rates on the Project Loans were variable (based on the RMB Loan Prime Rate of the National Interbank Funding Center), and interest incurred on the loans was eligible for reimbursement through incentives

provided by the Xiamen Torch Hi-Tech Industrial Development Zone, which provided for such reimbursements up to a prescribed limit and duration.

The Project Loans were subject to covenants and provisions, certain of which related to the assets

pledged as security for the loans, all of which we were in compliance with at the time of repayment.

Xiamen Working Capital Loans

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This facility is subject to annual reviews

and extension.

Unless extended, this facility will expire in November 2023 .

As of October 31, 2022, PDMCX had 25.6 million RMB ($ 3.5 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 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.

and extensions, with the most recent extension set to expire in July 2024 .

In December 2022, we repaid our entire outstanding balance of

RMB 25.6 million ($ 3.6

million) and the amounts may not be re-borrowed.

As of October 31, 2023, PDMCX had no amount outstanding against the approval.

interest rates are variable, based on the RMB Loan Prime Rate of the National Interbank Funding Center.

Interest incurred on the loans related to the amount borrowed was eligible for reimbursement through incentives provided by the Xiamen Torch

Hi-Tech Industrial Development Zone, which provided for such reimbursements up to a prescribed limit and duration.

Corporate Credit Agreement

In September 2018, we

entered into a five-year amended and restated credit agreement (the “Credit Agreement”), which had a $ 50 million borrowing limit, with an expansion capacity to $ 100

The Credit Agreement was secured by substantially all of our assets located in the United States and common stock we own in certain subsidiaries.

The Credit Agreement was subject to covenants around minimum interest coverage ratio,

total leverage ratio, and minimum unrestricted cash balance (all of which we were in compliance with at the termination of the agreement in September 2023), and limited the amount of cash dividends, distributions, and redemptions we could pay

on our common stock to an aggregate annual amount of $ 50 million.

The Credit Agreement expired, and was not renewed as of October 31,

There were no outstanding borrowings against the Credit Agreement at its expiration.

Hefei Equipment Loan

In October 2020, our Hefei, China, facility was approved to borrow 200 million RMB from the China Construction Bank Corporation.

In July 2022, we repaid our entire outstanding balance of 120.7 million RMB ($ 18.0 million).

In October 2020, our Hefei, China, facility was approved to borrow RMB 200 million from the China Construction Bank Corporation.

In July 2022, we repaid our entire outstanding balance of RMB 120.7 million ($ 18.0 million).

credit facility was subject to annual reviews and extension;

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we were in compliance with at the time of repayment.

Finance Leases

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.

See Note 8 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.

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, 2022), and limits the amount of cash dividends,

distributions, and redemptions we can pay on our common stock to an aggregate annual amount of $ 50 million.

We had no outstanding borrowings against the Credit Agreement at October 31, 2022.

The interest rate on the Credit Agreement ( 4.75 % at October 31, 2022) is based on our total leverage ratio at LIBOR plus a spread, as defined in the Credit Agreement.

Interest Paid for Debt

payments, including capitalized interest of $ 0.1 million in both 2021 and 2020, were $ 2.8 million in 2022, $ 3.8 million in 2021, and $ 2.6 million in 2020.

Interest payments, including capitalized interest of $ 0.1 million in 2021, were $ 0.5 million in

2023, $ 2.8 million in 2022, and $ 3.8

million in 2021.

The weighted-average interest rate on our current portion of long-term debt for the periods ended October 31, 2023 and October 31, 2022 was 1.5 % and 2.5 %, respectively.

NOTE 9 - REVENUE

The following tables present our revenue for the years ended October 31, 2022, October 31, 2021, and October 31, 2020,

disaggregated by product type, geographic origin, and timing of recognition.

The following tables present our revenue for the years ended October 31, 2023, October 31, 2022, and October 31, 2021, disaggregated

by product type, geographic origin, and timing of recognition.

Revenue by Product Type

October 31, 2022

October 31, 2021

October 31, 2020

Revenue by Geographic Origin*

October 31, 2022

October 31, 2021

October 31, 2020

United States

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At a point in time

Contract Assets, Contract Liabilities, and

Accounts Receivable

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

Classification

Contract Assets

Other current assets

Contract Liabilities

Accrued liabilities

Other liabilities

The following table presents revenue recognized

from contract liabilities that existed at the beginning of the reporting periods.

Revenue recognized from beginning liability

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.

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.

NOTE 10 - LEASES

In February 2021, we entered into a five-year $ 7.2 million finance lease for a high-end inspection tool.

Monthly payments on the lease, which commenced in February 2021, are $ 0.1 million per month.

Upon the payment of the fiftieth monthly payment and prior to payment of the fifty-first monthly payment, we may exercise an early buyout option to purchase the tool for

$ 2.4 million.

If we do not exercise the early buyout option, then at the end of the five-year lease term, the lease shall continue to renew on a month-to-month basis at the same rental terms;

at our option, after the original term or any renewal periods, we may return the

tool, elect to extend the lease, or purchase the tool at its fair market value.

Since we are reasonably certain that we will exercise the early buyout option, our lease liability reflects such exercise and we have classified the lease as a finance

The interest rate implicit in the lease is 1.08 %.

In December 2020, we entered into a five-year $ 35.5 million finance lease for a high-end lithography tool.

Monthly payments on the lease, which commenced in January 2021, increased from $ 0.04 million during the first three months to $ 0.6 million for the

following nine months, followed by forty-eight monthly payments of $ 0.5 million.

As of the due date of the forty-eighth monthly payment, we

may exercise an early buyout option to purchase the tool for $ 14.1 million.

If we do not exercise the early buyout option, then at the end

of the five-year lease term, at our option, we may return the tool, elect to extend the lease term for a period and a lease payment to be

agreed with lessor at the time, or purchase the tool for its then-fair market value as determined by the lessor.

Since we are reasonably certain that we will exercise the early buyout option, our lease liability reflects such exercise and we have

classified the lease as a finance lease.

The interest rate implicit in the lease is 1.58 %.

The lease agreement incorporates the covenants

included in our Corporate Credit Agreement, which are detailed in Note 6, 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.

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Imputed interest represents the difference between undiscounted cash flows and discounted cash flows.

Operating Leases

Finance Leases

Total lease payments

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Classification

Weighted-average

remaining lease

term (in years)

Weighted-average

lease term (in

discount rate

Weighted-average

remaining lease

term (in years)

Weighted-average

lease term (in

discount rate

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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.

On March 16, 2023,

at its annual meeting of shareholders, the shareholders of Photronics, Inc., approved amendments to the Plan to increase the number of shares available for issuance by an additional one million shares, thereby increasing the shares available for issuance under the Plan from four

million to five million.

Awards may be granted to officers, employees, directors, consultants, advisors, and independent

contractors of Photronics or its subsidiaries.

In the event of a change in control (as defined in the Plan) or at the discretion of the compensation committee;

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.

Expense reported in:

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The fair values of the awards are determined on the date of grant, based on the closing stock price of our common stock.

A summary of restricted stock award activity during 2022 and the status of our restricted stock awards as of October 31,

2022, is presented below.

A summary of restricted stock award activity during 2023 and the status of our restricted stock awards as

of October 31, 2023, is presented below.

Restricted Stock

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Intrinsic Value

at October 31 , 2021

Outstanding at

October 31, 2022

Cancellations,

forfeitures, and adjustments

at October 31 , 2022

to vest as of October 31 , 2022

Outstanding at

October 31, 2023

Exercisable at

October 31, 2023

Expected to vest as

of October 31, 2023

The table below presents additional information on stock option awards for the three most recent fiscal years.

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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, 2022, 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 1.6 million shares had been issued through October 31, 2022.

As of October 31, 2022, less than 0.1 million shares, with unrecognized compensation cost of

less than $ 0.1 million (all of which will be recognized in fiscal 2023) were subject to outstanding subscriptions.

Our Employee Stock Purchase Plan (“ESPP”) permits employees to purchase Photronics,

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, 2023, 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 1.6 million shares had been issued through October 31, 2023.

As of October 31, 2023, there is no unrecognized compensation cost.

As of October 31, 2022, there were less than 0.1 million shares with unrecognized compensation cost of less than $ 0.1

million that was recognized in fiscal year 2023.

NOTE 12 - 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.

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.

employer contributions for all of our defined contribution plans were $ 0.7 million, $ 0.8 million and $ 0.7 million in 2022, 2021, and 2020, respectively.

The total employer

contributions for all of our defined contribution plans were $ 0.8 million, $ 0.7 million and $ 0.8 million in 2023, 2022, and 2021, respectively.

NOTE 13 - INCOME TAXES

On December 15, 2022, the European Union (EU) Member States formally adopted the EU’s Pillar Two Directive, which generally provides for a minimum

effective tax rate of 15%, as established by the Organization for Economic Co-operation and Development (OECD) Pillar Two Framework.

The EU effective dates are January 1, 2024, and January 1, 2025, for different aspects of the directive.

significant number of other countries are expected to also implement similar legislation with varying effective dates in the future.

The Company is continuing to evaluate the potential impact on future periods of the Pillar Two Framework, pending

legislative adoption by additional individual countries.

Income before the income tax provisions consists of the following:

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The table below presents a reconciliation of income taxes calculated by applying the statutory U.S.

federal income tax rate

to our income tax provisions of the reporting periods.

federal income tax rate to our

income tax provisions of the reporting periods.

federal income tax at statutory rate

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Uncertain tax positions, including reserves, settlements and resolutions

Income tax holiday

Income tax provision

Reporting Period

Photronics Effective Tax Rates

Statutory Tax

Photronics Effective

Primary Reasons for Differences

pre-tax income being taxed at higher statutory rates in non-U.S.

jurisdictions, the establishment of uncertain tax positions in

jurisdiction and loss jurisdiction pre-tax losses not being benefited due to valuation allowances.

pre-tax income being taxed at higher statutory rates in non-U.S.

jurisdictions;

and the establishment of uncertain tax

positions in non-U.S.

and the establishment of uncertain tax positions

jurisdiction.

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.

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.

Deferred Income

Tax Assets and Liabilities

The net deferred income tax assets consist of the following:

jurisdictions, and investment credits in foreign jurisdictions.

Deferred Income Tax Assets

and Liabilities

The net deferred income tax assets consist of the following:

Deferred income tax

Net operating losses

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Other liabilities

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 2022 the valuation allowance decreased as a result of management’s determination that tax benefits on deferred tax assets would

more likely than not be realized and, therefore, decreased the valuation allowance to include these deferred tax assets.

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 2023 the valuation allowance decreased as a result of management’s determination that tax benefits on deferred tax assets 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.

deferred taxes were no longer provided on

the undistributed earnings of non-U.S.

subsidiaries.

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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.

state and foreign withholding taxes.

Tax Credits and Carryforwards

The following tables present our available operating loss and credit carryforwards as of October 31, 2022, and their

related expiration periods.

The following tables present our available operating loss and credit carryforwards as of October 31, 2023, and their related

expiration periods.

Operating Loss Carryforwards

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2024 -Indefinite

Tax Credit Carryforwards

Federal research and development

Uncertain Tax

Uncertain Tax Positions

We include unrecognized tax benefits in Other liabilities , and we include any applicable interest and penalties related to uncertain tax positions in our income tax provision.

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

The amounts in the

table include settlements of non-U.S.

The amounts in the table

include settlements of non-U.S.

Balance at beginning of year before interest and penalties

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Accrued interest and penalties related to uncertain tax positions

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 $ 0.4 million.

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 $ 0.4 million.

Resolution of these uncertain tax positions may result from either or both the lapses of statutes of limitations and tax settlements.

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Diluted earnings 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.

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.

Share based payment awards

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NOTE 16 - CHANGES IN ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME BY COMPONENT

The following tables set forth the changes in our accumulated other comprehensive (loss) income by component (net of tax of

$ 0 ) for the years ended October 31, 2022, and October 31, 2021.

The following tables set forth the changes in our accumulated other comprehensive (loss) income by component (net of tax of $ 0 ) for the years ended October 31, 2023, and October 31, 2022.

Year Ended October 31,

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Balance at October 31, 2022

Other comprehensive (loss) income

Other comprehensive loss (income) attributable to noncontrolling interests

Other comprehensive income (loss)

Other comprehensive (income) loss attributable to noncontrolling interests

Balance at October 31, 2023

2 unchanged sentences

Balance at October 31, 2021

Other comprehensive income (loss)

Other comprehensive (income) loss attributable to noncontrolling interests

Other comprehensive (loss) income

Other comprehensive loss (income) attributable to noncontrolling interests

Balance at October 31, 2022

NOTE 17 - RISKS AND CONCENTRATIONS

Financial instruments that potentially subject us to credit risk principally consist of trade accounts receivable and

short-term cash investments.

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 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.

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.

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.

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accounts receivable attributable to customers that accounted for more than ten percent of the total balance as of the balance sheet dates.

The following table presents the percentages of our revenue attributable to customers that accounted for more than ten

percent of the total revenue during the reporting periods.

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.

The following table presents the percentages of our revenue attributable to customers that accounted for more than ten percent of

the total revenue during the reporting periods.

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 long-lived assets and net assets were, by geographic area, as presented below.

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Our chief executive officer is related to an individual in a position of authority at one of our largest customers.

recorded revenue from this customer of $ 119.0 million, $ 111.0 million and $ 96.4 million, in 2022, 2021, and 2020, respectively.

October 31, 2022, and October 31, 2021, we had accounts receivable of $ 32.4 million and $ 34.5 million, respectively, from this customer.

We believe that the terms of the transaction described above was negotiated at arm’s length and were no less favorable to

us than terms we could have obtained from unrelated third parties.

revenue from this customer of $ 126.5 million, $ 119.0

million and $ 111.0 million, in 2023, 2022, and 2021, respectively.

As of October 31, 2023, and October 31, 2022, we had accounts receivable

of $ 41.5 million and $ 32.4

million, respectively, from this customer.

We believe that the terms of the transaction 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 19 - FAIR VALUE MEASUREMENTS

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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 .

The most recent 10b5-1 plan expired on September 15, 2022 , and has not been renewed.

Share repurchases under this authorization commenced on September 16, 2020 .

The repurchase authorization by the Board of Directors has no expiration date, does not obligate us to acquire any common stock, and is subject to market conditions.

2023, we did not repurchase any further shares as part of this program.

In 2022, we repurchased 0.2 million shares at a cost of $ 2.5 million (an average of $ 13.43 per

share) and, since the program’s inception, we have repurchased 5.8 million shares at a cost of $ 68.3 million (an average of $ 11.70 per share).

There is $ 31.7 million remaining under the Board of Director authorization.

All shares repurchased under the program have been retired.

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 .

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.

As of October 31, 2022, $ 31.7 million was available under this authorization for

the purchase of additional shares.

The share repurchase program

commenced on September 25, 2019 , and was terminated on March 20, 2020 .

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.

As of October 31, 2023, $ 31.7 million was available under this authorization for the purchase

of additional shares.

The table below presents information on the repurchase programs for the three most recent fiscal years .

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NOTE 21 - SUBSIDIARY DIVIDENDS

In 2021 and 2020, PDMC, the Company’s majority owned subsidiary in Taiwan, paid dividends of

which 49.99 %, or approximately $ 9.6

million and $ 16.2 million , respectively, were paid to

noncontrolling interests.

In 2021 , PDMC, the Company’s majority owned subsidiary in Taiwan, paid dividends of which 49.99 %, or approximately $ 9.6 million were

paid to noncontrolling interests.

Dividends were no t paid in the years ended 2022 and 2023.

NOTE 22 - RECENT ACCOUNTING PRONOUNCEMENTS

Accounting Standards Updates Adopted

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 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.

We adopted ASU

2019-12 on November 1, 2021;

the adoption of this guidance did not have a material impact on our consolidated financial statements and accompanying disclosures.

Accounting Standards Updates to be Adopted

In April 2022, the FASB issued ASU 2022-02, “Financial Instruments – Credit Losses (Topic 326):

Troubled Debt Restructurings and

Vintage Disclosures”, which requires:

1) an entity to measure and record the lifetime expected credit losses of an asset that is within the scope of the Update upon origination or acquisition;

as a result, credit losses from loans modified as

troubled debt restructurings are to be incorporated into the allowance for credit losses and, 2) public business entities to disclose current-period gross writeoffs by year of origination for financing receivables and net investments in leases

within the scope of Subtopic 326-20, “Financial Instruments—Credit Losses—Measured at Amortized Cost”.

The guidance in this Update will be effective for Photronics in its first quarter of fiscal 2024.

The amendments are to be applied

prospectively, with the exception of the transition method related to the recognition and measurement of troubled debt restructurings for which an entity has the option to apply a modified retrospective transition method.

We are currently

evaluating the effect the adoption of this ASU may have on our disclosures.

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

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.

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 was

effective for annual disclosures beginning our fiscal year 2023, and early adoption was permitted.

We adopted the guidance as of the effective date.

The guidance did not have a material impact in the consolidated financial statements.

Refer to Note

1 of our consolidated financial statements for additional information.

Accounting Standards Updates to be Adopted

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting

Improvements to Reportable Segment Disclosures”, which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

The guidance in this Update is effective for all

public entities for fiscal years beginning after December 15, 2023, with early adoption permitted.

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.

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 from December 31, 2022.

We do not expect the impact of this ASU to be

material to our consolidated financial statements.

In December 2022, the FASB issues

ASU 2022-06, “Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848”, which extends the period of time entities can utilize the reference rate reform relief guidance under ASU 2020-04 from December 31, 2022 to December 31,

We are currently evaluating the effect the adoption of this ASU may have on our disclosures .

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data