What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-12-19 compared with 2023-12-26 · 591 added, 601 removed, 532 unchanged (69% of the section changed)

4 unchanged sentences

Consolidated Statements of Income

Consolidated Statements of Comprehensive (Loss) Income

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Statements of Equity

4 unchanged sentences

Opinion on the Financial Statements

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

(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

We have audited the accompanying consolidated balance sheets of Photronics, Inc., and subsidiaries (the “Company”) as of October 31, 2024 and 2023, the

related consolidated statements of income, comprehensive income, equity, and cash flows for each of the three years in the period ended October 31, 2024, and the related notes (collectively referred to as the “financial statements”).

opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of October 31, 2024 and October 31, 2023, and the results of its operations and its cash flows for each of the three years in the

period ended October 31, 2024, 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, 2024, 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

18, 2024, expressed an unqualified opinion on the Company’s internal control over financial reporting.

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.

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 & 10 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.

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.

Significant judgment is exercised by the Company in determining the amount of revenue to recognize for these contracts and the corresponding contract asset, specifically in estimating the point within the production

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

Pursuant to these contracts, 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, 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.

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.

Significant judgment is exercised by the Company in determining the amount of revenue to recognize for these contracts

and the corresponding contract asset, specifically in estimating the point within the production cycle at which the production orders stand in relation to the Company’s enforceable right within the contract.

Pursuant to these contracts, revenue

recognized over time and the associated contract asset as of October 31, 2024 was $11.5 million.

We identified the determination of revenue recognized over time for in-process productions orders as of October 31, 2024 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, 2024.

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, 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.

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, 2024 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, 2024 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.

- Evaluated management estimate of the production point for the in-process order corresponding revenue

recognition and contract asset based on the Company’s enforceable right within the contract.

/s/ Deloitte & Touche LLP

3 unchanged sentences

PHOTRONICS, INC.

Consolidated Balance Sheets

Balance Sheets

(in thousands, except per share amounts)

16 unchanged sentences

Total liabilities

Commitments and contingencies

Commitments and contingencies (Note 16)

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

10 unchanged sentences

PHOTRONICS, INC.

Statements of Income

Statements of

(in thousands, except per share amounts)

4 unchanged sentences

Total operating expenses

Other operating (loss) income, net

Other operating expense

Operating income

12 unchanged sentences

Consolidated Statements of

Comprehensive (Loss) Income

Comprehensive Income (Loss)

(in thousands)

7 unchanged sentences

PHOTRONICS, INC.

Statements of Equity

Statements of

Years Ended October 31, 2024, 2023 and 2022

3 unchanged sentences

Income (loss)

Balance at October 31, 2020

Other comprehensive income

Shares issued under equity plans

Share-based compensation expense

Dividends to noncontrolling interest

Purchases of treasury stock

Retirement of treasury stock

Balance at October 31, 2021

Balance as of October 31, 2021

Other comprehensive loss

4 unchanged sentences

Retirement of treasury stock

Balance at October 31, 2022

Balance as of October 31, 2022

Other comprehensive income (loss)

1 unchanged sentence

Share-based compensation expense

Balance at October 31, 2023

Balance as of October 31, 2023

Other comprehensive income

Shares issued under equity plans

Share-based compensation expense

Balance as of October 31, 2024

See accompanying notes to consolidated financial statements.

PHOTRONICS, INC.

Cons olidated Statements of Cash Flows

Cons olidated Statements of

(in thousands)

10 unchanged sentences

Net cash provided by operating activities

Cash flows from investing activities:

Cash flows used in investing activities:

Purchases of property, plant and equipment

Purchases of available-for-sale debt securities

Proceeds from maturities of available-for-sale debt securities

Purchases of short-term investments

Proceeds from maturities of short-term investments

Government incentives

1 unchanged sentence

Net cash used in investing activities

Cash flows from financing activities:

Cash flows used in financing activities:

Repayments of debt

1 unchanged sentence

Contributions from noncontrolling interests

Dividends paid to noncontrolling interests

Proceeds from share-based arrangements

Proceeds from long-term debt

Net settlements of restricted stock awards

1 unchanged sentence

Effects of exchange rate changes on cash, cash equivalents, and restricted cash

Net increase (decrease) in cash, cash equivalents, and restricted cash

Net increase in cash, cash equivalents, and restricted cash

Cash, cash equivalents, and restricted cash at beginning of year

3 unchanged sentences

Supplemental disclosure of non-cash information:

Accruals for property, plant and equipment purchased during year

Accruals for property, plant and equipment not yet paid

Expected refundable federal investment tax credit

See accompanying notes to consolidated financial statements.

4 unchanged sentences

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business and Basis of Presentation

Description of Business

Photronics, Inc.

(“Photronics”, “the Company”, “we”, “our”, or “us”) is one of the world’s leading manufacturers of photomasks, which are high-precision

photographic quartz or glass plates containing microscopic images of electronic circuits.

Photomasks are a key element in the manufacture of ICs and FPDs, and are used as masters to transfer circuit patterns onto semiconductor wafers and FPD

substrates during the fabrication of integrated circuits, a variety of FPDs and, to a lesser extent, other types of electrical and optical components.

We currently have eleven manufacturing facilities, 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.

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

All intercompany balances and

transactions have been eliminated in consolidation.

(“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.

The Company currently has eleven manufacturing facilities, located in Taiwan ( 3 ),

China ( 2 ), Korea ( 1 ), the

United States ( 3 ), and Europe ( 2 ).

The Company operates 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.

In accordance with ASC 280 – “ Segment Reporting ”, the Company’s chief operating decision maker has been identified as the Chief Executive Officer, who reviews operating

results to make decisions about allocating resources and assessing performance for the entire Company.

Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information

quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue.

All material operating units qualify for aggregation under

“Segment Reporting” due to their similar customer base and similarities in:

economic characteristics;

nature of products and services;

and procurement, manufacturing and distribution processes.

Since the Company operates in one segment, all

financial information required by “Segment Reporting” can be found in the accompanying notes to consolidated financial statements.

Basis of Presentation

The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S.

The accounting policies used to prepare these financial statements are the same as

those used to prepare the consolidated financial statements in prior years, except as described in these notes or for the adoption of new standards as outlined below.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Photronics, Inc., its

wholly owned subsidiaries, in which Photronics is considered the primary beneficiary, and the majority-owned subsidiaries which it controls.

All intercompany balances and transactions have been eliminated in consolidation.

Noncontrolling interests in subsidiaries related to Photronics ownership interests of

less than 100 % are reported as Noncontrolling interests in the consolidated balance sheets.

The results of noncontrolling ownership

interests held by Photronics, net of tax, are reported as Net (income) attributable to noncontrolling interests in the consolidated statements of income.

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, based on the facts and

circumstances available at the time they are made.

conformity with U.S.

GAAP requires Photronics to make estimates and assumptions that affect amounts reported in them.

The Company’s 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.

The Company reviews these estimates periodically and reflect any effects of revisions in the period in which they are

Translation of Foreign Currency Financial Statements

Photronics reporting currency is the U.S.

The functional currency of the majority of Photronics foreign subsidiaries is their local currency.

As such, amounts included in the consolidated

statements of income, comprehensive income, cash flows, and changes in equity are translated using average exchange rates during each period.

Assets and liabilities are translated at period-end exchange rates and resulting foreign currency

translation adjustments are recorded in the consolidated balance sheets as a component of Accumulated other comprehensive loss.

Foreign Currency Transactions

Monetary assets and liabilities denominated in

currencies other than the functional currency are remeasured into their respective functional currencies at exchange rates in effect at the balance sheet date.

The resulting exchange gain or loss is included in Photronics ’ consolidated statements of income as Foreign currency transactions impacts, net .

Cash and Cash Equivalents

Cash and cash equivalents include cash and highly liquid investments

with an original maturity of three months or less , readily convertible to known amounts of cash, and so near to their maturity that they present insignificant risk of changes in value because of changes in interest rates.

The carrying values of cash equivalents approximate their fair values, due to the short-term maturities of these instruments.

Investments consist of U.

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

We classify available-for-sale

securities on our consolidated balance sheet as follows:

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.

Restricted cash is included with cash and

cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the consolidated statements of cash flows.

The carrying values of cash equivalents approximate their fair values, due to the short-term maturities of

these instruments.

Restricted Cash

Restricted cash in the amounts of $ 2.8 million and $ 2.6 million are included in Other assets on the

Company’s October 31, 2024 and October 31, 2023, consolidated balance sheets, respectively.

The restrictions on these amounts are primarily related to land lease agreements and customs requirements.

The Company invests in various bank time deposits, money markets and U.S.

Government Securities.

The Company’s classification

of investments is as follows:

Maturing within three months or less from the date of purchase

5 unchanged sentences

Long-term marketable investments

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.

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.

October 31, 2024 and 2023, all of the Company’s investments from their dates of purchase had remaining maturities of more than three months, but less than one year, and have been classified as short-term investments.

upon the Company’s intent and ability to hold its time deposits to maturity (which maturities range up to twelve months at purchase), such securities have been classified as held-to-maturity and are carried at amortized cost, which approximates

market value.

Money markets are classified as cash and cash equivalents.

The Company’s U.S.

Government Securities are classified as available-for-sale.

Available-for-sale investments are reported at fair value, with unrealized gains or losses

(net of tax) reported in Accumulated other comprehensive income (loss).

In the event of a sale of these securities, the Company 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 the Company also reports periodic interest earned and the amortization (accretion) of discounts (premiums) related to these investments.

table below provides information on the Company’s available-for-sale debt securities and time deposits classified as short-term investments.

October 31, 2024

1 unchanged sentence

Government Securities (1)

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

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.

Time deposits

Matured during 2024

Company’s investments in marketable securities consist primarily of investments in time deposits and U.S.

Government Securities.

Market values were determined for each individual security in the investment portfolio.

When evaluating the

investments for other-than-temporary impairment, the Company reviews factors such as length of time and extent to which fair value has been below cost basis, the financial condition of the issuer, and the Company’s ability and intent to hold

the investment for a period of time, which may be sufficient for anticipated recovery in market values.

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.

We generally record the Company’s accounts receivable at their billed amounts.

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 the Company believes a loss on the collection of a customer invoice is probable, the Company records the loss and credits an allowance for credit losses.

event that an amount is determined to be uncollectible, the Company charges the allowance for credit losses and derecognizes the related receivable.

Refer to the Company’s revenue recognition policy, below, for additional information on the

Company’s 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 for additional information on the Company’s inventories.

Inventory reserves are established when conditions indicate that the net

2 unchanged sentences

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, Net

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.

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.

sale or other disposition, the cost of the asset and its related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in earnings.

Depreciation and amortization, essentially all of which are included in Cost of goods sold

in the Company’s 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

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

estimated useful lives and depreciation periods we assign to property, plant and equipment, and when events or changes in circumstances such as a significant industry downturn, plant closures, technological obsolescence, or other occurrences indicate

that their carrying amounts may not be recoverable.

The Company employs judgment when making assumptions about the estimated useful lives and depreciation periods the

Company assigns to property, plant and equipment, and when events or changes in circumstances such as a significant industry downturn, plant closures, technological obsolescence, or other occurrences indicate that their carrying amounts may not be

Impairment of Long-Lived Assets

1 unchanged sentence

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.

Restricted Cash

Restricted cash in the amounts of $ 2.6

million and $ 2.7 million are included in Other assets on our October 31, 2023 and October 31,

2022, consolidated balance sheets, respectively.

The restrictions on these amounts are primarily related to land lease agreements and customs requirements.

Determinations of recoverability are based upon the Company’s 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 the Company expects 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.

Property, plant and equipment and other long-lived assets to be sold or otherwise disposed of are

reported at the lower of carrying amount or fair value less cost to sell.

Treasury Stock

We record treasury stock purchases under the cost method, recording

the entire cost of the acquired stock as treasury stock.

Gains and losses on subsequent reissuances would be credited or charged to additional paid-in capital, and we would employ the average cost method (with average cost being determined separately

for each share repurchase program), in the event that we subsequently reissue shares.

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.

The Company records 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 the Company would employ the average cost method (with average cost being

determined separately for each share repurchase program), in the event that the Company subsequently reissues shares.

When the Company retires the Company’s treasury stock, any excess of the repurchase price paid over par value is allocated between

additional paid-in capital and retained earnings.

Revenue Recognition

We recognize revenue when, or as, control of a good or service transfers to a customer, in an amount that reflects the

consideration to which we expect to be entitled in exchange for transferring those goods or services.

We account for an arrangement as a revenue contract when each party has approved and is committed to perform under the contract, the rights of the

contracting parties regarding the goods or services to be transferred and the payment terms are identifiable, the arrangement has commercial substance, and collection of consideration is probable.

Substantially all of our revenue comes from the sales

of photomasks.

We typically contract with our customers to sell sets of photomasks, which are comprised of multiple layers, the predominance of which we invoice as they ship to customers.

As the photomasks are manufactured to customer specifications,

they have no alternative use to us and, as our contracts generally provide us with the right to payment for work completed to date, we recognize revenue as we perform, or “over time,” on most of our contracts.

We measure our performance to date using

an input method, which is based on our estimated costs to complete the various manufacturing phases of a photomask.

At the end of a reporting period, there are a number of uncompleted revenue contracts on which we have performed;

contracts under which we are entitled to be compensated for our costs incurred plus a reasonable profit, we recognize revenue and a corresponding contract asset for such performance.

We account for shipping and handling activities that we perform

after a customer obtains control of a good as being activities to fulfill our promise to transfer the good to the customer, rather than as promised services, or performance obligations, under the contract.

We report our revenue net of any sales or

similar taxes we collect on behalf of governmental entities.

The Company recognizes revenue when, or as, control of a good or service transfers to a customer, in

an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring those goods or services.

The Company accounts for an arrangement as a revenue contract when each party has approved and is committed

to perform under the contract, the rights of the contracting parties regarding the goods or services to be transferred and the payment terms are identifiable, the arrangement has commercial substance, and collection of consideration is probable.

Substantially all of the Company’s revenue comes from the sales of photomasks.

The Company typically contracts with the Company’s customers to sell sets of photomasks, which are comprised of multiple layers, the predominance of which the Company

invoices as they ship to customers.

As the photomasks are manufactured to customer specifications, they have no alternative use to the Company and, as the Company’s contracts generally provide the Company with the right to payment for work

completed to date, the Company recognizes revenue as the Company performs, or “over time,” on most of the Company’s contracts.

The Company measures the Company’s performance to date using an input method, which is based on the Company’s estimated

costs to complete the various manufacturing phases of a photomask.

At the end of a reporting period, there are a number of uncompleted revenue contracts on which the Company has performed;

for any such contracts under which the Company is entitled

to be compensated for the Company’s costs incurred plus a reasonable profit, the Company recognizes revenue and a corresponding contract asset for such performance.

The Company accounts for shipping and handling activities that the Company performs

after a customer obtains control of a good as being activities to fulfill the Company’s promise to transfer the good to the customer, rather than as promised services, or performance obligations, under the contract.

The Company reports the

Company’s revenue net of any sales or similar taxes the Company collects on behalf of governmental entities.

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

2 unchanged sentences

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

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

The transaction prices of

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

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

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

Contract Assets, Contract Liabilities, and Accounts Receivable

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

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

Contract assets reflect our transfer of control 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.

We did no t impair any contract

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

consequently, the Company’s photomasks do not have standard or “list” prices.

The transaction

prices of the vast majority of the Company’s revenue contracts include only fixed amounts of consideration.

In certain instances, such as when the Company offers 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 and Contract Liabilities

The Company recognizes a contract asset when the Company’s performance under a contract precedes the Company’s receipt of

consideration from a customer, or before payment is due, and the Company’s receipt of consideration is conditional upon factors other than the passage of time.

Contract assets reflect the Company’s transfer of control to customers of photomasks that

are in process or completed but not yet shipped to customers.

A receivable is recognized when the Company has an unconditional right to payment for the Company’s performance, which generally occurs when the Company ships the photomasks.

The Company’s

contract assets primarily consist of a significant amount of the Company’s in-process production orders and fully manufactured photomasks which have not yet shipped, for which the Company has 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, the Company nets contract assets with contract liabilities (deferred revenue) for financial reporting purposes.

The Company’s net

credit losses on the accounts receivable during 2024 were insignificant.

The Company did no t impair any contract assets or accounts

receivable in 2024 or 2023.

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;

The Company pays commissions to third-party sales agents for certain sales that they procure on the Company’s behalf.

bases of the commissions are the transaction prices of the sales, which are completed in less than one year;

thus, no relationship is established with a customer that will result in future business.

Therefore, we would not recognize any portion of these sales

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

Therefore, the Company would not recognize any

portion of these sales commissions as costs of obtaining a contract, nor does the Company currently foresee other circumstances under which the Company would recognize such assets.

Remaining Performance Obligations

As we are typically required to fulfill customer orders within a short time period, our backlog of orders is generally not in

excess of one to two weeks

for IC photomasks and two to three

weeks for FPD photomasks.

As the Company is typically required to fulfill customer orders within a short time period, the

Company’s 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 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.

thus the backlog, in some

individual cases, can extend to as long as two to three months .

More recently however, backlogs for most high demand products have returned to historical levels of less than a month.

As allowed under ASC 606 – Revenue Contracts

with Customers, the Company has elected not to disclose the Company’s remaining performance obligations, which represent the costs associated with the completion of the manufacturing process of in-process photomasks related to contracts

that have an original duration of one year or less.

Product Warranties

Our photomasks are sold under warranties that generally range from one to twenty-four months .

We warrant that our photomasks conform to customer

specifications, and we will typically repair, replace, or issue a refund for any photomasks that fail to do so.

The warranties do not represent separate performance obligations in our revenue contracts.

The Company’s photomasks are sold under warranties that generally range from one to twenty-four months .

The Company warrants that the Company’s

photomasks conform to customer specifications, and the Company will typically repair, replace, or issue a refund for any photomasks that fail to do so.

The warranties do not represent separate performance obligations in the Company’s revenue

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.

An arrangement is determined to be a lease when it conveys to us the right to control the use of an identified asset for a period of time in

exchange for consideration.

Our having the right to control an identified asset is determined by whether we are entitled to substantially all of its economic benefits and can direct its use.

We recognize leases on our consolidated balance sheet

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

As allowed under 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.

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 Company determines if an agreement is, or contains, a lease on the earlier of the date of the agreement or the date on which the

Company commits to entering the agreement and evaluates at that time whether the lease is an operating lease or a finance lease.

The Company recognizes right-of-use assets and lease liabilities for operating and finance leases with terms greater

than 12 months.

Please refer to Note 11 – Leases for additional information.

The Company’s involvement in lease arrangements has typically been as a lessee.

The Company determines if an agreement is, or contains, a lease on the earlier of the date of the agreement or the date on which the Company commits to

entering the agreement.

An arrangement is determined to be a lease when it conveys to the Company the right to control the use of an identified asset for a period of time in exchange for consideration.

The Company’s having the right to control an

identified asset is determined by whether the Company is entitled to substantially all of its economic benefits and can direct its use.

The Company recognizes leases on the Company’s consolidated balance sheet when a lessor makes an asset

underlying a lease having a term in excess of twelve months available for the Company’s use.

As allowed under ASC Topic 842 – “ Leases ” (“Topic 842”), the Company has 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 the Company is reasonably certain to exercise and 2) for all classes of

assets, the practical expedient to not separate lease components of a contract from non-lease components of a contract.

If an arrangement is determined to be, or includes a lease, the Company then applies the classification criteria in ASC 842 - Leases 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 the Company’s use), the Company recognizes Right-of-Use (“ROU”) assets, which represent the

Company’s rights to use the underlying assets, and lease liabilities which represent the Company’s 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 the Company is reasonably certain to exercise.

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

Company’s incremental borrowing rates for collateralized borrowings over terms similar to those of the leases to determine the lease liability while, for finance leases, the Company uses the interest rates implicit in the leases.

measurement of ROU assets may require further adjustments for lease prepayments and initial direct costs the Company incurs.

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.

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.

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.

compensation expense includes the estimated effects of forfeitures, which are adjusted over the requisite service period to the extent actual forfeitures differ, or are expected to differ, from such estimates.

Changes in estimated forfeitures are

recognized in the period of change and will impact the amount of expense to be recognized in future periods.

Determining the appropriate option pricing model, calculating the grant date fair value of share-based awards, and estimating forfeiture

rates requires considerable judgment, including estimations of stock price volatility and the expected term of options granted.

We use the Black-Scholes option pricing model to value employee stock options.

We estimate stock price volatility based on daily

averages of our common stock’s historical volatility over a term approximately equal to the estimated time period the grant will remain outstanding.

The expected term of options and forfeiture rate assumptions are derived from historical data.

We recognize share-based compensation expense on a straight-line basis over the requisite service period during which the awards

are expected to vest.

Share-based compensation expense includes the estimated effects of forfeitures, which are adjusted over the requisite service period to the extent actual forfeitures differ, or are expected to differ, from such estimates.

Changes in estimated forfeitures are recognized in the period of change and will impact the amount of expense to be recognized in future periods.

Determining the appropriate option pricing model, calculating the grant date fair value of share-based

awards, and estimating forfeiture rates requires considerable judgment, including estimations of stock price volatility and the expected term of options granted.

We use the Black-Scholes option pricing model to value employee stock

The Company estimates stock price volatility based on daily averages of the Company’s 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

1 unchanged sentence

technologies for advanced subwavelength reticle solutions for IC and FPD photomask technologies.

Foreign Currency Translation

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.

dollars at year-end exchange rates.

Income and expenses are translated at average rates of exchange prevailing during the year.

Foreign currency translation adjustments

are accumulated and reported in Accumulated other comprehensive (loss) income , a component of equity on our consolidated balance sheets.

Research and development expenses were $ 16.6

million, $ 13.7 million, and $ 18.3

million for the years ended October 31, 2024, 2023 and 2022, respectively.

Government Grants

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 Company receives or expects to receive in the future, various types of

government assistance, primarily in the form of grants or refundable tax credits.

Government assistance is recognized when there is reasonable assurance that:

(1) the Company will comply with the relevant conditions and (2) the assistance will

Government assistance related to reimbursing fixed asset purchases, such as reimbursement grants and refundable federal investment tax credits, are recorded as a reduction to the related asset(s), which then reduces depreciation

expense over the expected useful life of the asset on a straight-line basis.

If some, or all, of the amount of government assistance becomes repayable (e.g.

due to non-fulfillment of the grant conditions) or there is no longer reasonable

assurance the amount will be received (e.g.

due to additional interpretive guidance) then the adjustment is accounted for prospectively as a change in accounting estimate.

The effect of the change in estimate is recognized in the period in which

management concludes that it is no longer reasonably assured that all of the grant conditions will be met.

A corresponding financial liability is recognized for the amount of the repayment, if any .

The Company accounts for funds the Company receives 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, or Research and development expenses in the consolidated statements of income.

If the funds the Company receives 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 the Company receive from government grants are classified in

the Company’s consolidated statements of cash flows as either Net cash

provided by operating activities or Net cash provided by investing activities , in accordance with how the Company expends 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 years ended October 31, 2024, October 31, 2023, and October 31, 2022, grants recorded in the Company’s Consolidated Financial Statements were not material.

The Company expects to receive refundable

federal investment tax credits through the CHIPS Act in connection with ongoing expansion projects.

As of October 31, 2024, the Company has reduced property, plant and equipment, net by $ 5.0 million as a result of expected refundable tax credits in connection with the CHIPS Act .

The Company has also applied for direct capital grants through the CHIPS Act in connection with proposed projects.

The income tax provision is computed on the basis of the income or loss before income taxes for each entity in its respective tax

14 unchanged sentences

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 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.

Diluted EPS reflects the potential dilution that could occur if certain share-based payment awards were exercised or earned.

Basic earnings per share (“EPS”) attributed to Photronics shareholders for both basic and diluted is

computed independently for each period presented and 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.

Variable Interest Entities

We account for the investments we make in certain legal entities in which equity investors do not have:

1) sufficient equity at risk

for the legal entity to finance its activities without additional subordinated financial support or, 2) as a group, the holders of the equity investment at risk do not have either the power, through voting or similar rights, to direct the activities

of the legal entity that most significantly impact the entity’s economic performance or, 3) the obligation to absorb the expected losses of the legal entity or the right to receive expected residual returns of the legal entity as “variable interest

entities”, or “VIEs”.

We consolidate the results of any such entity in which we have determined that we have a controlling financial interest.

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 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.

An investment

not meeting the parameters to be accounted for under the equity method would be accounted for using the cost method, unless the investment had a readily determinable fair value, at which value it would then be reported.

We account for the investments the Company makes in certain legal entities in which equity investors do not have:

1) sufficient

equity at risk for the legal entity to finance its activities without additional subordinated financial support or, 2) as a group, the holders of the equity investment at risk do not have either the power, through voting or similar rights, to direct

the activities of the legal entity that most significantly impact the entity’s economic performance or, 3) the obligation to absorb the expected losses of the legal entity or the right to receive expected residual returns of the legal entity as

“variable interest entities”, or “VIEs”.

We consolidate the results of any such entity in which the Company has determined that the Company has a controlling financial

The Company would have a “controlling financial interest” (and thus be considered the “primary beneficiary” of the entity) in such an entity when the Company has 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, the Company reassesses whether the Company has a controlling

financial interest in any investments the Company has in these entities.

We would account for investments the Company makes in VIEs in which the Company has determined that the Company does 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.

An investment not meeting the parameters to be accounted for under the equity method would be accounted for using the cost method, unless the investment had a readily determinable fair value, at which value it would then be reported.

Recent Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740):

Improvements to

Income Tax Disclosures”, to enhance the transparency and decision usefulness of income tax disclosures.

The amendments in this Update related to the rate reconciliation and income taxes paid disclosures to improve the transparency of income tax

disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction.

The amendments allow investors to better assess, in their capital

allocation decisions, how an entity’s worldwide operations and related tax risks and tax planning and operational opportunities affect its income tax rate and prospects for future cash flows.

The guidance in this Update will be effective for

Photronics in its fiscal year 2026 Form 10-K, with early application of the amendments allowed.

The Company is currently evaluating the effect the adoption of this ASU may have on the Company’s disclosures.

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280):

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 Photronics in its fiscal year

2025 Form 10-K, with early adoption permitted.

The Company is currently evaluating the effect the adoption of this ASU may have on the Company’s disclosures.

NOTE 2 – ACCOUNTS RECEIVABLE

9 unchanged sentences

Prepaid expenses

Prepaid and refundable income taxes

Recoverable value added taxes

Prepaid and refundable income taxes

The Company expects to receive refundable federal investment tax

credits of $ 5 million through CHIPS Act in connection with the Company’s ongoing expansion projects.

NOTE 4 - INVENTORIES

16 unchanged sentences

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.

Depreciation and amortization expense

NOTE 6 - PDMCX JOINT VENTURE

In January 2018, Photronics, Inc.

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 January 2018, Photronics , Inc., through its wholly owned Photronics Singapore PTE.

(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 the Company’s IC business in Xiamen, China.

joint venture, which the Company refers to as “PDMCX”, was established to develop and manufacture photomasks for semiconductors.

The Company entered into this joint venture to enable the Company 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 the Company 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.

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

that cannot be resolved between the two parties.

As of the date of issuance of these financial statements, DNP had not indicated its intention to exercise this right.

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

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

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

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

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

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 and there was no remaining debt at October 31, 2023.

Under the Agreement, should either Photronics’ or DNP’s ownership interest fall below 20.0 %

for a period of more than six consecutive months, such party (an “exiting party”) has the option to sell to the other party, and the other

party has the option to purchase from such exiting party, the exiting party’s remaining ownership interest.

In either case, 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 the Company 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 periods;

As required by the guidance in ASC Topic 810 - “ Consolidation ”, the Company evaluated the Company’s involvement

in PDMCX for the purpose of determining whether the Company should consolidate its results in the Company’s financial statements.

The initial step of the Company’s 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, the Company determined that it is a VIE.

Having made this determination, the Company then assessed whether the Company was the primary beneficiary of the VIE,

and concluded that the Company was the primary beneficiary during the current and prior years reporting periods;

thus, as required, the PDMCX financial results have been consolidated with Photronics.

Our conclusion was based on the fact that we held a controlling financial interest in PDMCX (which resulted from our having the power to direct the activities that

most significantly impacted its economic performance) and had both the obligation to absorb losses and the right to receive benefits that could potentially be significant to PDMCX.

Our conclusions that we had the power to direct the activities that

most significantly affected the economic performance of PDMCX during the current and prior year periods were based on our right to appoint the majority of its board of directors, which has, among others, the powers to manage the business (through its

rights to appoint and evaluate PDMCX’s management), incur indebtedness, enter into agreements and commitments, and acquire and dispose of PDMCX’s assets.

In addition, as a result of the 50.01 % variable interest we held during the current and prior year periods, we had the obligation to absorb losses, and the right to receive benefits, that could potentially be

significant to PDMCX.

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

General creditors of PDMCX

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

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

October 31, 2023

October 31, 2022

The Company’s conclusion was based on the fact

that the Company held a controlling financial interest in PDMCX (which resulted from the Company’s 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.

The Company’s conclusion that the Company 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 the Company’s 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

the Company held during the current and prior year periods, the Company had the obligation to absorb losses, and the right to receive benefits, that could potentially be significant to PDMCX.

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

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

therefore, the Company’s maximum exposure to loss from PDMCX is the Company’s interest in the carrying amount of the net assets of the joint

Classification

6 unchanged sentences

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

Contract liabilities

Property, plant, and equipment

Value added and other taxes

Service Contracts

Property, plant, and equipment

Operating leases

Telecommunications and utilities

Service Contracts

Accrued liabilities

NOTE 8 - 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, 2024, 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, 2024

Project Loans

Principal due:

9 unchanged sentences

Maturity date

December 2025

Periodic payment amount

Varies as loans mature (1)

Varies as Lease mature

Varies as Lease matures

Periodic payment frequency

Semiannual, on individual loans

Loan collateral (carrying amount)

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.

Represents the

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

The table below provides information on the Company’s long-term debt as of October 31, 2023.

As of October 31, 2023

Xiamen Project

Xiamen Working

Capital Loans

Hefei Equipment

Principal due:

3 unchanged sentences

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 matures

Periodic payment frequency

Semiannual, on individual loans

Loan collateral (carrying amount)

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.

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.

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

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, the Company may exercise an early buyout option to purchase the tool for $ 2.4

After the original term or any renewal periods, the Company may return the tool, elect to extend the lease, or purchase the tool at its fair market value.

Management has determined that the Company will exercise its early buyout option

during the first half of 2025.

December 2020, the Company 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, the Company may exercise an early buyout option to purchase the tool for $ 14.1 million.

At the Company’s option, after the original term, the Company 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.

The lease agreement incorporates the covenants included in the Company’s Credit Agreement, as defined below (expired in

September 2023), 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 the Company is the indebted party.

Management has determined that the Company will exercise its early buyout option during the first half of 2025.

Xiamen Project Loans

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.

From November 2018 through July 2020, PDMCX entered into separate loan agreements (the “Project Loans”) for the

entire approved amount.

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

6 unchanged sentences

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.

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

Xiamen Working Capital Loans

In November 2018, PDMCX obtained approval for revolving, unsecured credit of the equivalent of $ 25.0 million, pursuant to which PDMCX may enter into separate loan agreements with varying terms to maturity.

This facility is subject to annual reviews

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

In November 2018, PDMCX obtained approval for revolving, unsecured credit of RMB 200 million ($ 25 million), pursuant to which PDMCX may enter into

separate loan agreements with varying terms to maturity.

In December 2022, the Company repaid the Company’s entire outstanding balance of RMB 25.6

million ($ 3.6 million).

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

Interest incurred on the loans related to the amount borrowed was eligible for reimbursement through incentives provided by the Xiamen Torch Hi-Tech Industrial Development Zone, which provided for such reimbursements up to a prescribed limit and

This facility is subject to annual reviews and extensions.

In August 2024, the Company was issued an extension to the revolving, unsecured credit agreement for RMB 200 million (approximately $ 28.1 million) with an expiration date

of July 31, 2025 .

As of October 31, 2024, PDMCX had no outstanding borrowings against the approval.

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.

In September 2018, the

Company 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 million.

The Credit Agreement was secured by substantially all of the Company’s assets located in the United

States and common stock the Company owns 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 the Company were

in compliance with at the termination of the agreement in September 2023), and limited the amount of cash dividends, distributions, and redemptions the Company could pay on the Company’s common stock to an aggregate annual amount of $ 50 million.

The Credit Agreement expired and was not renewed as of October 31, 2023.

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 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;

the most recent extension expired in August 2022 , and we did not apply for

an extension.

The loan proceeds were used to fund purchases of two lithography tools at the Hefei facility.

The interest rate on the

loan was variable and based on the RMB Loan Prime Rate of the National Interbank Funding Center.

The borrowings were secured by the Hefei facility, its related land use right, and certain manufacturing equipment.

The Hefei Equipment Loan was

subject to covenants and provisions, certain of which relate to the assets pledged as security for the loan, including covenants for the ratio of total liabilities to total assets and the ratio of current assets to current liabilities, all of which

we were in compliance with at the time of repayment.

There were no outstanding borrowings against the

Credit Agreement at its expiration.

Interest Paid for Debt

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.

Interest payments were $ 0.3 million in 2024, $ 0.5 million in

2023, and $ 2.8 million in 2022.

The weighted-average interest rate on the Company’s current portion of long-term debt for the periods

ended October 31, 2024 and October 31, 2023 was 1.5 % and 1.5 %, respectively.

NOTE 9 - OTHER LIABILITIES

Presented below are the components of Other liabilities at

the balance sheet dates.

Unrecognized tax benefit

Post employment benefit

Contract liabilities

Operating lease

Other liabilities

NOTE 10 - REVENUE

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.

The following tables present the Company’s revenue for the years ended October 31, 2024, October 31, 2023, and October 31, 2022,

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

Revenue by Product Type

4 unchanged sentences

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.

Contract Assets and Contract Liabilities

following table provides information about the Company’s contract balances at the balance sheet dates.

Classification

7 unchanged sentences

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.

The Company’s invoice terms generally

range from net thirty to ninety days ,

depending on both the geographic market in which the transaction occurs and the Company’s payment agreements with specific customers.

In the event that the Company’s evaluation of a customer’s business prospects and financial condition indicate

that the customer presents a collectability risk, the Company will modify terms of sale, which may require payment in advance of performance.

At the time of adoption, the Company elected the practical expedient allowed under ASC Topic 606 “Revenue

from Contracts with Customers” (“Topic 606”) that permits the Company not to adjust a contract’s promised amount of consideration to reflect a financing component when the period between when the Company transfers control of goods or services to

customers and when the Company is paid is one year or less.

instances when the Company is paid in advance of the Company’s performance, the Company records a contract liability and, as allowed under the practical expedient in Topic 606, recognize interest expense only if the period between when the

Company receives payment from the customer and the date when the Company expects to be entitled to the payment is greater than one year.

Historically, advance payments the Company has received from customers have generally not preceded the

completion of the Company’s performance obligations by more than one year.

NOTE 11 - LEASES

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

The following table provides information on operating and finance leases included in the Company’s consolidated balance sheets.

Classification

10 unchanged sentences

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

2029 and thereafter

Total lease payments

7 unchanged sentences

Amortization of ROU assets

following table presents statistical information related to our operating and finance leases.

following table presents statistical information related to the Company’s operating and finance leases.

The information presented is as of the balance sheet dates.

3 unchanged sentences

lease term (in

discount rate

average discount

lease term (in

2 unchanged sentences

Finance leases

The following table presents the effects of leases on our 2023, 2022, and 2021 consolidated statements of cash flows, and provides leases-related non-cash information for those years.

The following table presents the effects of leases on the Company’s 2024, 2023, and 2022 consolidated statements of cash flows, and provides leases-related non-cash information for those years.

Operating cash flows used for operating leases

2 unchanged sentences

ROU assets obtained in exchange for operating lease obligations

ROU assets obtained in exchange for finance lease obligations

NOTE 12 - SHARE-BASED

In March 2016, shareholders

approved our current equity incentive compensation plan (“the Plan”), under which incentive stock options, non-qualified stock options, stock grants, stock-based awards, restricted stock, restricted stock units, stock appreciation rights,

approved the Company’s current equity incentive compensation plan (“the Plan”), under which incentive stock options, non-qualified stock options, stock grants, stock-based awards, restricted stock, restricted stock units, stock appreciation rights,

performance units, performance stock, and other stock or cash awards may be granted.

Shares to be issued under the Plan may be authorized and unissued shares, issued shares that have been reacquired by us (in the open market or in private

transactions), or a combination thereof.

The maximum number of shares of common stock approved that may be issued under the Plan is four

million shares.

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.

Shares to be issued under the Plan may be authorized and unissued shares, issued shares that have been reacquired by the Company (in the open market or in private transactions), or a combination thereof.

number of shares of common stock approved that may be issued under the Plan was four million shares.

On March 16, 2023, at its annual meeting of shareholders,

the shareholders of Photronics, Inc., approved amendments to the Plan to increase the number of shares available for issuance by an additional one

million shares, thereby increasing the shares available for issuance under the Plan from four million to five million.

Awards may be granted to officers, employees, directors, consultants, advisors, and independent contractors of Photronics or its

subsidiaries.

In the event of a change in control (as defined in the Plan) 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.

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 the Company’s share-based compensation expenses for the three most recent fiscal years.

Expense reported in:

9 unchanged sentences

Income tax benefits of share-based compensation

Share-based compensation cost capitalized

* During the year ended October 31, 2024, upon the departure of two executives

from the Company and in accordance with the terms of their separation agreements, previously granted time-vesting restricted stock awards accelerated vesting.

The Company accounted for the effects of the accelerated vesting of these stock awards as

a modification, and recognized $ 1.2 million of incremental stock-based compensation for the acceleration of restricted stock awards,

within selling, general and administrative expenses on the Consolidated Statements of Income for the year ended October 31, 2024.

Restricted Stock Awards

1 unchanged sentence

typically lapse over a service period of one to four years .

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

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.

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

A summary of restricted stock award activity during 2024 and the status of the Company’s restricted stock awards as of October 31, 2024, is presented below.

Restricted Stock

4 unchanged sentences

Expected to vest as of October 31, 2024

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

The table below presents additional information on the Company’s restricted stock awards for the three most recent fiscal years.

Number of shares granted

8 unchanged sentences

common stock on the date of grant.

The grant-date fair values of options are based on closing prices of our common stock on the dates of grant and are calculated using the Black-Scholes option pricing model.

Expected volatility is based on the

historical volatility of our common stock.

We use historical option exercise behavior and employee termination data to estimate expected term, which represents the period of time that options granted are expected to remain outstanding.

The risk-free

rate of return for the estimated term of an option is based on the U.S.

The grant-date fair values of options are based on closing prices of the Company’s common stock on the dates of grant and are calculated using the Black-Scholes option pricing model.

Expected volatility is based on

the historical volatility of the Company’s common stock.

The Company uses historical option exercise behavior and employee termination data to estimate expected term, which represents the period of time that options granted are expected to remain

The risk-free rate of return for the estimated term of an option is based on the U.S.

Treasury yield curve in effect at the date of grant.

23 unchanged sentences

Employee Stock Purchase Plan

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.

The Company’s 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).

The Company recognizes the ESPP expense over that same period.

October 31, 2024, the maximum number of shares of common stock approved by the Company’s 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, 2024.

As of October 31, 2024, there is

unrecognized compensation cost of $ 0.2 million.

NOTE 13 - EMPLOYEE RETIREMENT PLANS

3 unchanged sentences

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.

their salary, subject to certain maximum amounts, which will be matched by the Company at 100 % of the employee’s contributions that are up

to 4 % of the employee’s compensation.

Employee and employer contributions vest immediately upon contribution.

The total employer

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

contributions for all of the Company’s defined contribution plans were $ 1.2 million, $ 0.8 million and $ 0.7 million in 2024, 2023, and 2022, respectively.

NOTE 14 - INCOME TAXES

2 unchanged sentences

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.

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

The Company is currently not subject to Pillar Two but is continuously evaluating the potential impact of the Pillar Two

Framework to ensure we are compliant in the future.

Income before the income tax provisions consists of the following:

6 unchanged sentences

federal income tax at statutory rate

Changes in valuation allowances

Foreign tax rate differentials

Changes in valuation allowance

Foreign rate differential

Uncertain tax positions, including reserves, settlements and resolutions

Income tax provision

Reporting Period

Statutory Tax

Photronics Effective

Effective Tax

Primary Reasons for Differences

3 unchanged sentences

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

and the establishment of uncertain tax positions in non-U.S.

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.

Deferred Income Tax Assets

7 unchanged sentences

Property, plant and equipment

Research intangibles

Lease liabilities

21 unchanged sentences

Operating Loss Carryforwards

2029 -Indefinite

Expiration Period

2030 -Indefinite

1 unchanged sentence

Tax Credit Carryforwards

Expiration Period

Federal research and development

Federal 48D credit

Uncertain Tax Positions

24 unchanged sentences

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

(in thousands, except for per share data)

Net income attributable to Photronics, Inc.

1 unchanged sentence

Earnings used for diluted earnings per share

Weighted-average common shares computations:

Weighted-average common shares used for basic earnings per share

Weighted-average common shares outstanding:

Effect of dilutive securities:

1 unchanged sentence

Potentially dilutive common shares

Weighted-average common shares used for diluted earnings per share

Basic earnings per share

Diluted earnings per share

Weighted-average common shares-Diluted

Earnings per share:

Net Income attributable to Photronics shareholders - Basic

Net Income attributable to Photronics shareholders - Diluted

The table below sets forth the outstanding weighted-average share-based payment awards that were excluded from the calculation of

3 unchanged sentences

NOTE 16 - COMMITMENTS AND CONTINGENCIES

Presented below are our unrecognized commitments, as of October 31, 2023.

Included in these amounts are commitments of $ 106.8 million for the purchase of capital equipment.

The amounts below do not include our commitments under our debt and lease arrangements, which are

presented in Notes 8 and 10, respectively.

Presented below are the Company’s unrecognized unconditional purchase obligations, which are mainly payments for the acquisition of property, plant and

equipment, with a remaining term in excess of one year as of October 31, 2024.

The amounts below do not include the Company’s

commitments under the Company’s debt and lease arrangements, which are presented in Notes 8 and 11, respectively.

We are subject to various claims that arise in the ordinary course of business.

We believe that our potential liability under such

claims, individually and in the aggregate, will not have a material effect on our consolidated financial statements.

As of October 31, 2023, and October 31, 2022, we were not involved in environmental litigation to which a government was a party.

The Company believes that the Company’s potential

liability under such claims, individually and in the aggregate, will not have a material effect on the Company’s consolidated financial statements.

As of October 31, 2024, and October 31, 2023, the Company was not involved in environmental

litigation to which a government was a party.

NOTE 17 - 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, 2023, and October 31, 2022.

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

of $ 0 ) for the years ended October 31, 2024, and October 31, 2023.

Year Ended October 31,

2 unchanged sentences

Other comprehensive income (loss)

Other comprehensive (income) loss attributable to noncontrolling interests

Other comprehensive (loss) income attributable to noncontrolling interests

Balance at October 31, 2024

2 unchanged sentences

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

NOTE 18 - RISKS AND CONCENTRATIONS

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

cash investments.

We sell our products primarily to semiconductor and FPD manufacturers in Asia, North America, and Europe.

We believe that the concentration of credit risk in our trade receivables is substantially mitigated by our ongoing credit

evaluation process and relatively short collection terms.

We do not generally require collateral from customers.

We establish an allowance for credit losses based upon factors surrounding the credit risk of specific customers, historical trends, and

other information.

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

short-term cash investments.

The Company sells the Company’s products primarily to semiconductor and FPD manufacturers in Asia, North America, and Europe.

The Company believes that the concentration of credit risk in the Company’s trade receivables

is substantially mitigated by the Company’s ongoing credit evaluation process and relatively short collection terms.

The Company does not generally require collateral from customers.

The Company establishes 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.

countries in which the Company manufactures photomasks.

Portions of deposits in some of these institutions may exceed the amount of insurance available for such deposits at these institutions.

As these deposits are generally redeemable upon demand and are held

by high quality, reputable institutions, we consider them to bear minimal credit risk.

We further mitigate credit risks related to our cash and cash equivalents by spreading such risk among a number of institutions.

The following table presents the percentages of our net

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.

As of the balance sheet dates, our long-lived assets and net assets were, by geographic area, as presented below.

As these deposits are generally redeemable upon demand

and are held by high quality, reputable institutions, the Company considers them to bear minimal credit risk.

The Company further mitigates credit risks related to the Company’s cash and cash equivalents by spreading such risk among a number of

institutions.

The following table presents the percentages of the

Company’s net 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 the Company’s revenue attributable to customers that accounted for more than ten

percent of the total revenue during the reporting periods.

We operate as a single reporting 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 ICs and FPDs.

As of the balance sheet dates, the Company’s long-lived assets and net assets were, by geographic area, as presented below.

October 31, 2024

October 31, 2023

Long-lived Assets

United States

Europe and Other

United States

NOTE 19 - RELATED PARTY TRANSACTIONS

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

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.

Our chief executive officer is related to an individual in a position of authority at one of the Company’s largest customers.

Company recorded revenue from this customer of $ 127.0 million, $ 126.5 million and $ 119.0 million, in 2024, 2023, and 2022,

respectively.

As of October 31, 2024, and October 31, 2023, the Company had accounts receivable of $ 38.8 million and $ 41.5 million, respectively, from this customer.

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

the Company than terms the Company could have obtained from unrelated third parties.

NOTE 20 - FAIR VALUE MEASUREMENTS

2 unchanged sentences

The fair value hierarchy consists of three tiers as follows:

Level 1, defined as quoted market prices

(unadjusted) in active markets for identical securities;

Level 2, defined as inputs other than Level 1 that are observable, either directly or indirectly;

and Level 3, defined as unobservable inputs that are not corroborated by market data.

The fair values of our cash and certain cash equivalents (Level 1 measurements), accounts receivable, accounts payable, and certain

other current assets and current liabilities (Level 2 measurements) approximate their carrying values due to their short-term maturities.

The fair values of our Short-term

investments are Level 1 measurements.

(Please refer to “Investments” within Note 1 for additional fair value information on our Short-term investments .)

The fair values of certain cash equivalents are Level 2 measurements that are provided by independent third-party pricing services or other independent entities, which may use matrix pricing, valuation models, or other methods which utilize

observable market data.

The fair values of our variable-rate debt instruments are Level 2 measurements and approximate their carrying values due to the variable nature of their underlying interest rates.

Other than our Short-term investments, we did no t have any assets or liabilities

measured at fair value, on a recurring or a nonrecurring basis, at October 31, 2023, or October 31, 2022.

Level 1- These are investments where values are based on unadjusted quoted prices for identical assets in an active market the Company has the ability to access.

Level 2- These are investments where values are based on quoted market prices that are not active or model derived valuations in which all significant inputs are

observable in active markets.

Level 3- These are investments where values are derived from techniques in which one or more significant inputs are unobservable.

The following are the major categories of assets measured at fair value on a recurring basis using quoted prices in active markets for identical assets (Level 1),

significant other observable inputs (Level 2) and significant unobservable inputs (Level 3):

October 31, 2024

October 31, 2023

Government Securities

Time deposits

Money market funds

NOTE 21 - SHARE REPURCHASE PROGRAMS

In September 2020, the Company’s Board of Directors authorized the repurchase of up to $ 100 million of its common stock, pursuant to a repurchase plan under Rule 10b5-1 of the Securities Act.

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

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.

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, 2023, $ 31.7 million was available under this authorization for the purchase

of additional shares.

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

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

All shares repurchased under the program have been retired prior to the end of the fiscal year in which they were purchased.

On August 28, 2024, the Board of Directors authorized an increase to the Company’s existing share repurchase program from the

remaining $ 31.7 million up to $ 100 million

under the Board of Director authorization.

In 2024, we did no t repurchase any further shares as part of this program.

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

2 unchanged sentences

Average price paid per share

NOTE 21 - SUBSIDIARY DIVIDENDS

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 November 2021, the FASB issued ASU 2021-10, “Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance”, to increase the transparency of

government assistance including the disclosure of the types of assistance an entity receives, an entity’s method of accounting for government assistance, and the effect of the assistance on an entity’s financial statements.

The guidance 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.

The guidance in this Update was effective upon its issuance;

if elected, it is to be applied prospectively from December 31, 2022.

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