☒
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Connecticut
|
06-0854886
|
|
(State or other jurisdiction of incorporation or organization)
|
(IRS Employer Identification No.)
|
Title of each class
|
Name of each exchange on which registered
|
|
Common Stock, $.01 par value
|
NASDAQ Global Select Market
|
DOCUMENTS INCORPORATED BY REFERENCE
|
|
Proxy Statement for the 2017
|
|
Annual Meeting of Shareholders
|
Incorporated into Part III
|
to be held in March 2017
|
of this Form 10-K
|
ITEM 1. |
BUSINESS
|
AU Optronics Corp.
|
MagnaChip Semiconductor Corporation
|
Dongbu HiTek Co., Ltd.
|
Micron Technology, Inc.
|
Epcos AG
|
Nanya Technology Corporation
|
Global Foundries, Inc.
|
ON Semiconductor Corporation
|
Himax Display, Inc.
|
Powerchip Technology Corporation
|
Infineon Technologies AG
|
Samsung Electronics Co., Ltd.
|
Innolux Corporation
|
STMicroelectronics N.V.
|
Inotera Memories, Inc.
|
Texas Instruments, Incorporated
|
Intel Corporation
|
Tower Semiconductor, Ltd.
|
LG Display Co., Ltd
|
United Microelectronics Corp.
|
ITEM 1A. |
RISK FACTORS
|
· |
it will be able to adequately protect its technology;
|
· |
competitors will not independently develop similar technology; or
|
· |
international intellectual property laws will adequately protect its intellectual property rights.
|
ITEM 1B. |
UNRESOLVED STAFF COMMENTS
|
ITEM 2. |
PROPERTIES
|
Location
|
Type of
Interest
|
|||
|
|
|||
Allen, Texas
|
Owned
|
|||
Boise, Idaho
|
Owned
|
|||
Brookfield, Connecticut
|
Owned
|
|||
Bridgend, Wales
|
Leased
|
|||
Cheonan, Korea
|
Owned
|
|||
Dresden, Germany
|
Leased
|
|||
Hsinchu, Taiwan
|
Owned
|
(1)
|
||
Hsinchu, Taiwan
|
Leased
|
|||
Taichung, Taiwan
|
Owned
|
(1)
|
ITEM 3. |
LEGAL PROCEEDINGS
|
ITEM 4. |
MINE SAFETY DISCLOSURES
|
ITEM 5.
|
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
|
High
|
Low
|
|||||||
Fiscal Year Ended October 30, 2016:
|
||||||||
Quarter Ended January 31, 2016
|
$
|
13.05
|
$
|
9.57
|
||||
Quarter Ended May 1, 2016
|
12.39
|
9.30
|
||||||
Quarter Ended July 31, 2016
|
10.69
|
8.56
|
||||||
Quarter Ended October 30, 2016
|
10.90
|
8.81
|
||||||
Fiscal Year Ended November 1, 2015:
|
||||||||
Quarter Ended February 1, 2015
|
$
|
9.18
|
$
|
7.88
|
||||
Quarter Ended May 3, 2015
|
9.13
|
8.14
|
||||||
Quarter Ended August 2, 2015
|
10.55
|
8.13
|
||||||
Quarter Ended November 1, 2015
|
9.89
|
7.68
|
ITEM 6. |
SELECTED FINANCIAL DATA
|
Year Ended
|
||||||||||||||||||||
October 30,
2016
|
November 1,
2015
|
November 2,
2014
|
November 3,
2013
|
October 28,
2012
|
||||||||||||||||
OPERATING DATA:
|
||||||||||||||||||||
Net sales
|
$
|
483,456
|
$
|
524,206
|
$
|
455,527
|
$
|
422,180
|
$
|
450,439
|
||||||||||
Cost and expenses:
|
||||||||||||||||||||
Cost of sales
|
(364,750
|
)
|
(381,070
|
)
|
(355,181
|
)
|
(322,540
|
)
|
(338,519
|
)
|
||||||||||
Selling, general and administrative
|
(44,577
|
)
|
(48,983
|
)
|
(49,638
|
)(d)
|
(48,213
|
)(f)
|
(46,706
|
)
|
||||||||||
Research and development
|
(21,654
|
)
|
(21,920
|
)
|
(21,913
|
)
|
(20,758
|
)
|
(19,371
|
)
|
||||||||||
Consolidation, restructuring and related charges
|
-
|
-
|
-
|
-
|
(1,428
|
)(g)
|
||||||||||||||
Operating income
|
52,475
|
72,233
|
28,795
|
30,669
|
44,415
|
|||||||||||||||
Other income (expense):
|
||||||||||||||||||||
Gains on sales of investments
|
8,940
|
(a)
|
-
|
-
|
-
|
-
|
||||||||||||||
Gain on acquisition
|
-
|
-
|
16,372
|
(e) |
-
|
-
|
||||||||||||||
Interest expense
|
(3,365
|
)
|
(4,990
|
)
|
(7,247
|
)
|
(7,756
|
)
|
(7,488
|
)
|
||||||||||
Interest and other income (expense), net
|
2,424
|
2,797
|
(c)
|
3,410
|
3,892
|
3,721
|
(h) | |||||||||||||
Income before income tax provision
|
60,474
|
70,040
|
41,330
|
26,805
|
40,648
|
|||||||||||||||
Income tax provision
|
(4,798
|
)(b)
|
(13,181
|
)
|
(9,295
|
)
|
(7,229
|
)
|
(10,793
|
)
|
||||||||||
Net income
|
55,676
|
56,859
|
(c)
|
32,035
|
(d)(e) |
19,576
|
(f) |
29,855
|
(g) (h) | |||||||||||
Net income attributable to noncontrolling interests
|
(9,476
|
)
|
(12,234
|
)
|
(6,039
|
)
|
(1,610
|
)
|
(1,987
|
)
|
||||||||||
Net income attributable to Photronics, Inc. shareholders
|
$
|
46,200
|
(a)(b)
|
$
|
44,625
|
(c) |
$
|
25,996
|
(d)(e) |
$
|
17,966
|
(f) |
$
|
27,868
|
(g) (h) | |||||
Earnings per share:
|
||||||||||||||||||||
Basic
|
$
|
0.68
|
(a)(b)
|
$
|
0.67
|
(c) |
$
|
0.42
|
(d)(e) |
$
|
0.30
|
(f) |
$
|
0.46
|
(g) (h) | |||||
Diluted
|
$
|
0.64
|
(a)(b)
|
$
|
0.63
|
(c) |
$
|
0.41
|
(d)(e) |
$
|
0.29
|
(f) |
$
|
0.44
|
(g) (h) | |||||
Weighted-average number of common shares outstanding:
|
||||||||||||||||||||
Basic
|
67,539
|
66,331
|
61,779
|
60,644
|
60,055
|
|||||||||||||||
Diluted
|
76,354
|
78,383
|
66,679
|
61,599
|
76,464
|
BALANCE SHEET DATA
|
||||||||||||||||||||
As of
|
||||||||||||||||||||
October 30,
2016
|
November 1,
2015
|
November 2,
2014
|
November 3,
2013
|
October 28,
2012
|
||||||||||||||||
Working capital
|
$
|
360,269
|
$
|
168,068
|
$
|
190,152
|
$
|
212,797
|
$
|
233,082
|
||||||||||
Property, plant and equipment, net
|
506,434
|
547,284
|
550,069
|
422,740
|
380,808
|
|||||||||||||||
Total assets
|
988,267
|
1,043,376
|
1,026,739
|
885,505
|
849,094
|
|||||||||||||||
Long-term debt
|
62,139
|
67,120
|
131,805
|
182,203
|
168,956
|
|||||||||||||||
Total Photronics, Inc. shareholders’ equity
|
710,363
|
646,555
|
628,050
|
585,314
|
551,386
|
FY 2015
|
FY 2014
|
FY 2013
|
FY 2012
|
|||||||||||||
Working Capital (i):
|
||||||||||||||||
Previously reported
|
$
|
171,422
|
$
|
197,375
|
$
|
213,879
|
$
|
234,281
|
||||||||
ASU 2015-17 adjustment
|
(3,354
|
)
|
(7,223
|
)
|
(1,082
|
)
|
(1,199
|
)
|
||||||||
Retrospectively adjusted
|
$
|
168,068
|
$
|
190,152
|
$
|
212,797
|
$
|
233,082
|
||||||||
Total Assets (i):
|
||||||||||||||||
Previously reported
|
$
|
1,045,555
|
$
|
1,029,183
|
$
|
885,929
|
$
|
849,234
|
||||||||
ASU 2015-17 adjustment
|
(2,179
|
)
|
(2,444
|
)
|
(424
|
)
|
(140
|
)
|
||||||||
Retrospectively adjusted
|
$
|
1,043,376
|
$
|
1,026,739
|
$
|
885,505
|
$
|
849,094
|
(a) |
Includes $8.8 million gain on sale of investment in a foreign entity and $0.2 million gain on the sale of the Company’s 49.99% interest in the MP Mask joint venture
|
(b) |
Includes tax benefits in Taiwan of $4.8 million primarily related to the recognition of prior period tax benefits and other tax positions no longer deemed necessary.
|
(c) |
Includes $0.9 million of financing expenses related to the exchange of $57.5 million of 3.25% convertible senior notes.
|
(d) |
Includes $2.5 million, net of tax, of expenses related to the acquisition of DPTT.
|
(e) |
Includes non-cash gain of $16.4 million, net of tax, on acquisition of DPTT.
|
(f) |
Includes $0.8 million, net of tax, of expenses related to the acquisition of DPTT.
|
(g) |
Includes consolidation and restructuring charges of $1.4 million in connection with the discontinuance of manufacturing operations at the Company's Singapore facility.
|
(h) |
Includes non-cash gain of $0.1 million in connection with subsequent measurement at fair value of warrants issued to purchase the Company’s common stock.
|
(i) |
Balances reflect the impact of the adoption of a new accounting standard in fiscal year 2016 (ASU 2015-17) related to the balance sheet classification of deferred taxes. See Note 11 for additional information.
|
ITEM 7. |
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
Year Ended
|
||||||||||||
October 30,
2016
|
November 1,
2015
|
November 2,
2014
|
||||||||||
Net sales
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
||||||
Cost of sales
|
(75.4
|
)
|
(72.7
|
)
|
(78.0
|
)
|
||||||
Gross margin
|
24.6
|
27.3
|
22.0
|
|||||||||
Selling, general and administrative expenses
|
(9.2
|
)
|
(9.3
|
)
|
(10.9
|
)
|
||||||
Research and development expenses
|
(4.5
|
)
|
(4.2
|
)
|
(4.8
|
)
|
||||||
Operating income
|
10.9
|
13.8
|
6.3
|
|||||||||
Gains on sales of investments
|
1.8
|
-
|
-
|
|||||||||
Gain on acquisition
|
-
|
-
|
3.6
|
|||||||||
Interest expense
|
(0.7
|
)
|
(1.0
|
)
|
(1.6
|
)
|
||||||
Interest and other income (expense), net
|
0.5
|
0.5
|
0.8
|
|||||||||
Income before income tax provision
|
12.5
|
13.3
|
9.1
|
|||||||||
Income tax provision
|
(1.0
|
)
|
(2.5
|
)
|
(2.1
|
)
|
||||||
Net income
|
11.5
|
10.8
|
7.0
|
|||||||||
Net income attributable to noncontrolling interests
|
(1.9
|
)
|
(2.3
|
)
|
(1.3
|
)
|
||||||
Net income attributable to Photronics, Inc. shareholders
|
9.6
|
%
|
8.5
|
%
|
5.7
|
%
|
Percent Change
|
||||||||||||||||||||
2016
|
2015
|
2014
|
2015 to
2016
|
2014 to
2015
|
||||||||||||||||
IC
|
$
|
364.6
|
$
|
420.8
|
$
|
352.7
|
(13.4
|
)%
|
19.3
|
%
|
||||||||||
FPD
|
118.9
|
103.4
|
102.8
|
15.0
|
0.5
|
|||||||||||||||
Total net sales
|
$
|
483.5
|
$
|
524.2
|
$
|
455.5
|
(7.8
|
)%
|
15.1
|
%
|
Percent Change
|
||||||||||||||||||||
2016
|
2015
|
2014
|
2015 to
2016
|
2014 to
2015
|
||||||||||||||||
Gross profit
|
$
|
118.7
|
$
|
143.1
|
$
|
100.3
|
(17.1
|
)%
|
42.6
|
%
|
||||||||||
Gross margin %
|
24.6
|
%
|
27.3
|
%
|
22.0
|
%
|
Percent Change
|
||||||||||||||||||||
2016
|
2015
|
2014
|
2015 to
2016
|
2014 to
2015
|
||||||||||||||||
S,G&A expenses
|
$
|
44.6
|
$
|
49.0
|
$
|
49.6
|
(9.0
|
)%
|
(1.3
|
)%
|
||||||||||
% of net sales
|
9.2
|
%
|
9.3
|
%
|
10.9
|
%
|
Percent Change
|
||||||||||||||||||||
2016
|
2015
|
2014
|
2015 to
2016
|
2014 to
2015
|
||||||||||||||||
R&D expense
|
$
|
21.7
|
$
|
21.9
|
$
|
21.9
|
(1.2
|
)%
|
0.0
|
%
|
||||||||||
% of net sales
|
4.5
|
%
|
4.2
|
%
|
4.8
|
%
|
2016
|
2015
|
2014
|
||||||||||
Gains on sales of investments
|
$
|
8.9
|
$
|
-
|
$
|
-
|
||||||
Gain on acquisition
|
-
|
-
|
16.4
|
|||||||||
Interest expense
|
(3.3
|
)
|
(5.0
|
)
|
(7.2
|
)
|
||||||
Interest and other income (expense), net
|
2.4
|
2.8
|
3.3
|
|||||||||
Total other income (expense), net
|
$
|
8.0
|
$
|
(2.2
|
)
|
$
|
12.5
|
2016
|
2015
|
2014
|
||||||||||
Income tax provision
|
$
|
4.8
|
$
|
13.2
|
$
|
9.3
|
||||||
Effective income tax rate
|
7.9
|
%
|
18.8
|
%
|
22.5
|
%
|
October 30,
2016
|
November 1,
2015
|
November 2,
2014
|
||||||||||
(in millions)
|
(in millions)
|
(in millions)
|
||||||||||
Cash and cash equivalents
|
$
|
314.1
|
$
|
205.9
|
$
|
192.9
|
||||||
Net cash provided by operating activities
|
$
|
122.1
|
$
|
133.2
|
$
|
96.4
|
||||||
Net cash provided by(used in) investing activities
|
$
|
52.3
|
$
|
(104.3
|
)
|
$
|
(87.5
|
)
|
||||
Net cash used in financing activities
|
$
|
(67.0
|
)
|
$
|
(7.1
|
)
|
$
|
(29.5
|
)
|
Payment due by period
|
||||||||||||||||||||
Contractual Obligations
|
Total
|
Less
Than
1 Year
|
1 - 3
Years
|
3 - 5
Years
|
More
Than
5 Years
|
|||||||||||||||
Long-term borrowings
|
$
|
57,500
|
$
|
-
|
$
|
57,500
|
$
|
-
|
$
|
-
|
||||||||||
Operating leases
|
6,015
|
2,148
|
1,689
|
774
|
1,404
|
|||||||||||||||
Capital leases
|
10,067
|
5,428
|
4,639
|
-
|
-
|
|||||||||||||||
Unconditional purchase obligations
|
59,927
|
57,087
|
2,840
|
-
|
-
|
|||||||||||||||
Interest
|
5,191
|
2,204
|
2,987
|
-
|
-
|
|||||||||||||||
Other noncurrent liabilities
|
13,208
|
80
|
2,479
|
2,585
|
8,064
|
|||||||||||||||
Total
|
$
|
151,908
|
$
|
66,947
|
$
|
72,134
|
$
|
3,359
|
$
|
9,468
|
ITEM 7A. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 8. |
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
Page
|
|
33
|
|
34
|
|
35
|
|
36
|
|
37
|
|
38
|
|
39
|
October 30,
2016
|
November 1,
2015
|
|||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
314,074
|
$
|
205,867
|
||||
Accounts receivable, net of allowance of $3,901 in 2016 and $3,301 in 2015
|
92,636
|
110,056
|
||||||
Inventories
|
22,081
|
24,157
|
||||||
Other current assets
|
12,795
|
20,680
|
||||||
Total current assets
|
441,586
|
360,760
|
||||||
Property, plant and equipment, net
|
506,434
|
547,284
|
||||||
Investment in joint venture
|
-
|
93,021
|
||||||
Intangible assets, net
|
19,854
|
24,616
|
||||||
Deferred income taxes
|
16,322
|
13,083
|
||||||
Other assets
|
4,071
|
4,612
|
||||||
Total assets
|
$
|
988,267
|
$
|
1,043,376
|
||||
LIABILITIES AND EQUITY
|
||||||||
Current liabilities:
|
||||||||
Current portion of long-term borrowings
|
$
|
5,428
|
$
|
65,495
|
||||
Accounts payable
|
48,906
|
79,143
|
||||||
Payables – related parties
|
2,743
|
8,840
|
||||||
Accrued liabilities
|
24,240
|
39,214
|
||||||
Total current liabilities
|
81,317
|
192,692
|
||||||
Long-term borrowings
|
62,139
|
67,120
|
||||||
Deferred income taxes
|
1,491
|
2,209
|
||||||
Other liabilities
|
17,846
|
19,289
|
||||||
Total liabilities
|
162,793
|
281,310
|
||||||
Commitments and contingencies
|
||||||||
Equity:
|
||||||||
Preferred stock, $0.01 par value, 2,000 shares authorized, none issued and outstanding
|
-
|
-
|
||||||
Common stock, $0.01 par value, 150,000 shares authorized, 68,080 shares issued and outstanding at October 30, 2016, 66,602 shares issued and outstanding at November 1, 2015
|
681
|
666
|
||||||
Additional paid-in capital
|
541,093
|
526,402
|
||||||
Retained earnings
|
176,260
|
130,060
|
||||||
Accumulated other comprehensive loss
|
(7,671
|
)
|
(10,573
|
)
|
||||
Total Photronics, Inc. shareholders' equity
|
710,363
|
646,555
|
||||||
Noncontrolling interests
|
115,111
|
115,511
|
||||||
Total equity
|
825,474
|
762,066
|
||||||
Total liabilities and equity
|
$
|
988,267
|
$
|
1,043,376
|
Year Ended
|
||||||||||||
October 30,
2016
|
November 1,
2015
|
November 2,
2014
|
||||||||||
Net sales
|
$
|
483,456
|
$
|
524,206
|
$
|
455,527
|
||||||
Cost and expenses:
|
||||||||||||
Cost of sales
|
(364,750
|
)
|
(381,070
|
)
|
(355,181
|
)
|
||||||
Selling, general and administrative
|
(44,577
|
)
|
(48,983
|
)
|
(49,638
|
)
|
||||||
Research and development
|
(21,654
|
)
|
(21,920
|
)
|
(21,913
|
)
|
||||||
Operating income
|
52,475
|
72,233
|
28,795
|
|||||||||
Other income (expense):
|
||||||||||||
Gains on sales of investments
|
8,940
|
-
|
-
|
|||||||||
Gain on acquisition
|
-
|
-
|
16,372
|
|||||||||
Interest expense
|
(3,365
|
)
|
(4,990
|
)
|
(7,247
|
)
|
||||||
Interest and other income (expense), net
|
2,424
|
2,797
|
3,410
|
|||||||||
Income before income tax provision
|
60,474
|
70,040
|
41,330
|
|||||||||
Income tax provision
|
(4,798
|
)
|
(13,181
|
)
|
(9,295
|
)
|
||||||
Net income
|
55,676
|
56,859
|
32,035
|
|||||||||
Net income attributable to noncontrolling interests
|
(9,476
|
)
|
(12,234
|
)
|
(6,039
|
)
|
||||||
Net income attributable to Photronics, Inc. shareholders
|
$
|
46,200
|
$
|
44,625
|
$
|
25,996
|
||||||
Earnings per share:
|
||||||||||||
Basic
|
$
|
0.68
|
$
|
0.67
|
$
|
0.42
|
||||||
Diluted
|
$
|
0.64
|
$
|
0.63
|
$
|
0.41
|
||||||
Weighted-average number of common shares outstanding:
|
||||||||||||
Basic
|
67,539
|
66,331
|
61,779
|
|||||||||
Diluted
|
76,354
|
78,383
|
66,679
|
Year Ended
|
||||||||||||
October 30,
2016
|
November 1,
2015
|
November 2,
2014
|
||||||||||
Net income
|
$
|
55,676
|
$
|
56,859
|
$
|
32,035
|
||||||
Other comprehensive income (loss), net of tax of $0:
|
||||||||||||
Foreign currency translation adjustments
|
6,334
|
(40,154
|
)
|
(5,916
|
)
|
|||||||
Amortization of cash flow hedge
|
129
|
128
|
128
|
|||||||||
Other
|
(589
|
)
|
(381
|
)
|
(41
|
)
|
||||||
Net other comprehensive income (loss)
|
5,874
|
(40,407
|
)
|
(5,829
|
)
|
|||||||
Comprehensive income
|
61,550
|
16,452
|
26,206
|
|||||||||
Less: comprehensive income attributable to noncontrolling interests
|
12,448
|
4,174
|
5,238
|
|||||||||
Comprehensive income attributable to Photronics, Inc. shareholders
|
$
|
49,102
|
$
|
12,278
|
$
|
20,968
|
Common Stock
|
Additional
Paid-In
|
Retained
|
Accumulated
Other
Comprehensive
|
Non-
Controlling
|
Total
|
|||||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Earnings
|
Income (Loss)
|
Interests
|
Equity
|
||||||||||||||||||||||
Balance at November 3, 2013
|
61,083
|
$
|
611
|
$
|
498,861
|
$
|
59,439
|
$
|
26,403
|
$
|
2,517
|
$
|
587,831
|
|||||||||||||||
Net income
|
-
|
-
|
-
|
25,996
|
-
|
6,039
|
32,035
|
|||||||||||||||||||||
Other comprehensive loss
|
-
|
-
|
-
|
-
|
(5,028
|
)
|
(801
|
)
|
(5,829
|
)
|
||||||||||||||||||
Sale of common stock through employee
|
||||||||||||||||||||||||||||
stock option and purchase plan
|
337
|
3
|
1,424
|
-
|
-
|
-
|
1,427
|
|||||||||||||||||||||
Restricted stock awards vestings and expense
|
172
|
2
|
1,295
|
-
|
-
|
-
|
1,297
|
|||||||||||||||||||||
Share-based compensation expense
|
-
|
-
|
2,774
|
-
|
-
|
-
|
2,774
|
|||||||||||||||||||||
Acquisition of DPTT
|
-
|
-
|
(6,291
|
)
|
-
|
410
|
105,403
|
99,522
|
||||||||||||||||||||
Conversion of debt to common stock
|
4,338
|
43
|
22,011
|
-
|
-
|
-
|
22,054
|
|||||||||||||||||||||
Repurchase of common stock by subsidiary
|
-
|
-
|
108
|
-
|
(11
|
)
|
(1,714
|
)
|
(1,617
|
)
|
||||||||||||||||||
Balance at November 2, 2014
|
65,930
|
659
|
520,182
|
85,435
|
21,774
|
111,444
|
739,494
|
|||||||||||||||||||||
Net income
|
-
|
-
|
-
|
44,625
|
-
|
12,234
|
56,859
|
|||||||||||||||||||||
Other comprehensive loss
|
-
|
-
|
-
|
-
|
(32,347
|
)
|
(8,060
|
)
|
(40,407
|
)
|
||||||||||||||||||
Sale of common stock through employee stock option and purchase plan
|
513
|
5
|
2,505
|
-
|
-
|
-
|
2,510
|
|||||||||||||||||||||
Restricted stock awards vestings and expense
|
159
|
2
|
1,064
|
-
|
-
|
-
|
1,066
|
|||||||||||||||||||||
Share-based compensation expense
|
-
|
-
|
2,623
|
-
|
-
|
-
|
2,623
|
|||||||||||||||||||||
Repurchase of common stock by subsidiary
|
-
|
-
|
28
|
-
|
-
|
(107
|
)
|
(79
|
)
|
|||||||||||||||||||
Balance at November 1, 2015
|
66,602
|
666
|
526,402
|
130,060
|
(10,573
|
)
|
115,511
|
762,066
|
||||||||||||||||||||
Net income
|
-
|
-
|
-
|
46,200
|
-
|
9,476
|
55,676
|
|||||||||||||||||||||
Other comprehensive income
|
-
|
-
|
-
|
-
|
2,902
|
2,972
|
5,874
|
|||||||||||||||||||||
Sale of common stock through employee stock option and purchase plan
|
618
|
6
|
3,441
|
-
|
-
|
-
|
3,447
|
|||||||||||||||||||||
Restricted stock awards vestings and expense
|
143
|
2
|
1,190
|
-
|
-
|
-
|
1,192
|
|||||||||||||||||||||
Share-based compensation expense
|
-
|
-
|
2,637
|
-
|
-
|
-
|
2,637
|
|||||||||||||||||||||
Conversion of debt to common stock
|
717
|
7
|
7,431
|
-
|
-
|
-
|
7,438
|
|||||||||||||||||||||
Dividends to noncontrolling interests
|
-
|
-
|
-
|
-
|
-
|
(11,901
|
)
|
(11,901
|
)
|
|||||||||||||||||||
Return of capital to noncontrolling interest
|
-
|
-
|
-
|
-
|
-
|
(955
|
)
|
(955
|
)
|
|||||||||||||||||||
Repurchase of common stock by subsidiary
|
-
|
-
|
(8
|
)
|
-
|
-
|
8
|
-
|
||||||||||||||||||||
Balance at October 30, 2016
|
68,080
|
$
|
681
|
$
|
541,093
|
$
|
176,260
|
$
|
(7,671
|
)
|
$
|
115,111
|
$
|
825,474
|
Year Ended
|
||||||||||||
October 30,
2016
|
November 1,
2015
|
November 2,
2014
|
||||||||||
Cash flows from operating activities:
|
||||||||||||
Net income
|
$
|
55,676
|
$
|
56,859
|
$
|
32,035
|
||||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||||||
Depreciation and amortization of property, plant and equipment
|
77,613
|
75,684
|
72,859
|
|||||||||
Amortization of deferred financing costs and intangible assets
|
5,228
|
6,729
|
7,277
|
|||||||||
Gains on sales of investments
|
(8,940
|
)
|
-
|
-
|
||||||||
Gain on acquisition
|
-
|
-
|
(16,372
|
)
|
||||||||
Share-based compensation
|
3,827
|
3,689
|
4,071
|
|||||||||
Deferred income taxes
|
(3,816
|
)
|
3,401
|
4,215
|
||||||||
Changes in assets and liabilities:
|
||||||||||||
Accounts receivable
|
18,807
|
(21,815
|
)
|
5,271
|
||||||||
Inventories
|
2,268
|
(2,893
|
)
|
(2,552
|
)
|
|||||||
Other current assets
|
7,936
|
(2,557
|
)
|
1,781
|
||||||||
Accounts payable, accrued liabilities and other
|
(36,462
|
)
|
14,098
|
(12,224
|
)
|
|||||||
Net cash provided by operating activities
|
122,137
|
133,195
|
96,361
|
|||||||||
Cash flows from investing activities:
|
||||||||||||
Purchases of property, plant and equipment
|
(50,147
|
)
|
(104,033
|
)
|
(91,085
|
)
|
||||||
Proceeds from sales of investments
|
101,853
|
-
|
-
|
|||||||||
Cash from acquisition
|
-
|
-
|
4,508
|
|||||||||
Purchases of intangible assets
|
(13
|
)
|
(771
|
)
|
(364
|
)
|
||||||
Other
|
597
|
499
|
(544
|
)
|
||||||||
Net cash provided by (used in) investing activities
|
52,290
|
(104,305
|
)
|
(87,485
|
)
|
|||||||
Cash flows from financing activities:
|
||||||||||||
Repayments of long-term borrowings
|
(57,609
|
)
|
(9,571
|
)
|
(29,782
|
)
|
||||||
Dividends paid to noncontrolling interests
|
(11,890
|
)
|
-
|
-
|
||||||||
Return of capital to noncontrolling interests
|
(966
|
)
|
-
|
-
|
||||||||
Proceeds from share-based arrangements
|
3,463
|
2,651
|
1,298
|
|||||||||
Payments of deferred financing fees
|
-
|
-
|
(346
|
)
|
||||||||
Other
|
(20
|
)
|
(179
|
)
|
(711
|
)
|
||||||
Net cash used in financing activities
|
(67,022
|
)
|
(7,099
|
)
|
(29,541
|
)
|
||||||
Effects of exchange rate changes on cash and cash equivalents
|
802
|
(8,853
|
)
|
(2,021
|
)
|
|||||||
Net increase (decrease) in cash and cash equivalents
|
108,207
|
12,938
|
(22,686
|
)
|
||||||||
Cash and cash equivalents at beginning of year
|
205,867
|
192,929
|
215,615
|
|||||||||
Cash and cash equivalents at end of year
|
$
|
314,074
|
$
|
205,867
|
$
|
192,929
|
||||||
Supplemental disclosure of non-cash information:
|
||||||||||||
Accrual for property, plant and equipment purchased during year
|
$
|
7,866
|
$
|
25,858
|
$
|
28,672
|
||||||
Conversion of debt to common stock
|
7,439
|
-
|
22,054
|
|||||||||
Noncash net assets from acquisition
|
-
|
-
|
110,211
|
October 30,
2016
|
November 1,
2015
|
|||||||
Finished goods
|
$
|
142
|
$
|
861
|
||||
Work in process
|
2,987
|
4,177
|
||||||
Raw materials
|
18,952
|
19,119
|
||||||
$
|
22,081
|
$
|
24,157
|
Cash and cash equivalents
|
$
|
4,508
|
||
Accounts receivable (gross amount of $28,560, of which $500 was estimated to be uncollectable)
|
28,060
|
|||
Inventory
|
1,279
|
|||
Deferred tax asset
|
9,787
|
|||
Other current assets
|
11,517
|
|||
Property, plant and equipment
|
95,431
|
|||
Identifiable intangible assets
|
1,552
|
|||
Other long-term assets
|
1,328
|
|||
Accounts payable and accrued expenses
|
(32,410
|
)
|
||
Deferred tax liability
|
(3,042
|
)
|
||
Other long-term liabilities
|
(3,291
|
)
|
||
Total net assets acquired
|
114,719
|
|||
Noncontrolling interests retained by DNP
|
57,348
|
|||
57,371
|
||||
Consideration – 49.99% of fair value of PSMC
|
40,999
|
|||
Gain on acquisition
|
$
|
16,372
|
Year Ended
|
||||
November 2,
2014
|
||||
Revenues
|
$
|
499,968
|
||
Net income
|
23,969
|
|||
Net income attributable to Photronics, Inc. shareholders
|
12,169
|
|||
Diluted earnings per share
|
0.19
|
October 30,
2016
|
November 1,
2015
|
|||||||
Land
|
$
|
8,036
|
$
|
8,172
|
||||
Buildings and improvements
|
121,873
|
121,472
|
||||||
Machinery and equipment
|
1,475,755
|
1,458,623
|
||||||
Leasehold improvements
|
19,224
|
18,856
|
||||||
Furniture, fixtures and office equipment
|
12,700
|
12,700
|
||||||
Construction in progress
|
23,961
|
6,657
|
||||||
1,661,549
|
1,626,480
|
|||||||
Less: Accumulated depreciation and amortization
|
1,155,115
|
1,079,196
|
||||||
$
|
506,434
|
$
|
547,284
|
October 30,
2016
|
November 1,
2015
|
|||||||
Machinery and equipment
|
$
|
34,917
|
$
|
56,245
|
||||
Less accumulated amortization
|
10,352
|
16,054
|
||||||
$
|
24,565
|
$
|
40,191
|
As of October 30, 2016
|
Gross
Amount
|
Accumulated
Amortization
|
Net
Amount
|
|||||||||
Technology license agreement
|
$
|
59,616
|
$
|
(41,400
|
)
|
$
|
18,216
|
|||||
Customer relationships
|
8,657
|
(7,522
|
)
|
1,135
|
||||||||
Software and other
|
6,444
|
(5,941
|
)
|
503
|
||||||||
$
|
74,717
|
$
|
(54,863
|
)
|
$
|
19,854
|
||||||
As of November 1, 2015
|
||||||||||||
Technology license agreement
|
$
|
59,616
|
$
|
(37,426
|
)
|
$
|
22,190
|
|||||
Customer relationships
|
8,616
|
(7,229
|
)
|
1,387
|
||||||||
Supply agreements
|
6,959
|
(6,828
|
)
|
131
|
||||||||
Software and other
|
6,577
|
(5,669
|
)
|
908
|
||||||||
$
|
81,768
|
$
|
(57,152
|
)
|
$
|
24,616
|
Fiscal Years:
|
||||
2017
|
$
|
4,557
|
||
2018
|
4,130
|
|||
2019
|
4,092
|
|||
2020
|
4,092
|
|||
2021
|
2,436
|
As of Fiscal Year End
|
||||||||
2016
|
2015
|
|||||||
Current assets
|
$
|
-
|
$
|
30,567
|
||||
Noncurrent assets
|
-
|
173,840
|
||||||
Current liabilities
|
-
|
18,234
|
||||||
Noncurrent liabilities
|
-
|
-
|
Fiscal Year
|
||||||||||||
2016
|
2015
|
2014
|
||||||||||
Net sales
|
$
|
49,626
|
$
|
96,068
|
$
|
81,399
|
||||||
Gross profit
|
2,736
|
1,215
|
3,427
|
|||||||||
Net income (loss)
|
-
|
(151
|
)
|
1,259
|
October 30,
2016
|
November 1,
2015
|
|||||||
3.25% convertible senior notes due in April 2019
|
$
|
57,500
|
$
|
57,500
|
||||
3.25% convertible senior notes due in April 2016
|
-
|
57,500
|
||||||
2.77% capital lease obligation payable through July 2018
|
10,067
|
15,346
|
||||||
3.09% capital lease obligation payable through March 2016
|
-
|
2,269
|
||||||
67,567
|
132,615
|
|||||||
Less current portion
|
5,428
|
65,495
|
||||||
$
|
62,139
|
$
|
67,120
|
Fiscal Years:
|
||||
2017
|
$
|
5,638
|
||
2018
|
4,698
|
|||
10,336
|
||||
Less interest
|
269
|
|||
Net minimum lease payments under capital lease
|
10,067
|
|||
Less current portion of net minimum lease payments
|
5,428
|
|||
Long-term portion of minimum lease payments
|
$
|
4,639
|
2017
|
$
|
2,108
|
||
2018
|
1,059
|
|||
2019
|
630
|
|||
2020
|
394
|
|||
2021
|
380
|
|||
Thereafter
|
1,404
|
|||
$
|
5,975
|
Year Ended
|
||||||||||||
October 30,
2016
|
November 1,
2015
|
November 2,
2014
|
||||||||||
Expected volatility
|
48.4
|
%
|
53.7
|
%
|
61.0
|
%
|
||||||
Risk-free rate of return
|
1.2 – 1.7
|
%
|
1.3 – 1.6
|
%
|
1.4
|
%
|
||||||
Dividend yield
|
0.0
|
%
|
0.0
|
%
|
0.0
|
%
|
||||||
Expected term
|
5.1 years
|
4.7 years
|
4.6 years
|
Options
|
Shares
|
Weighted-
Average
Exercise Price
|
Weighted-
Average
Remaining
Contractual Life
|
|
Aggregate
Intrinsic Value
|
||||||||
|
|
||||||||||||
Outstanding at November 1, 2015
|
3,803,168
|
$
|
7.29
|
||||||||||
Granted
|
667,250
|
11.83
|
|||||||||||
Exercised
|
(572,033
|
)
|
5.37
|
||||||||||
Cancelled and forfeited
|
(363,050
|
)
|
15.68
|
||||||||||
Outstanding at
October 30, 2016
|
3,535,335
|
$
|
7.59
|
6.4 years
|
$
|
9,413
|
|||||||
Exercisable at
October 30, 2016
|
1,973,635
|
$
|
5.93
|
4.8 years
|
$
|
7,837
|
|||||||
Vested and expected to vest as of
October 30, 2016
|
3,438,261
|
$
|
7.53
|
6.3 years
|
$
|
9,309
|
Restricted Stock
|
Shares
|
Weighted-Average
Fair Value at
Grant Date
|
||||||
Outstanding at November 1, 2015
|
189,588
|
$
|
7.34
|
|||||
Granted
|
115,225
|
12.13
|
||||||
Vested
|
(142,438
|
)
|
8.62
|
|||||
Cancelled
|
-
|
-
|
||||||
Outstanding at
October 30, 2016
|
162,375
|
$
|
9.61
|
|||||
Vested and expected to vest as of
October 30, 2016
|
154,245
|
$
|
9.64
|
Year Ended
|
||||||||||||
October 30,
2016
|
November 1,
2015
|
November 2,
2014
|
||||||||||
United States
|
$
|
6,270
|
$
|
6,646
|
$
|
(23,083
|
)
|
|||||
Foreign
|
54,204
|
63,394
|
64,413
|
|||||||||
$
|
60,474
|
$
|
70,040
|
$
|
41,330
|
Year Ended
|
||||||||||||
October 30,
2016
|
November 1,
2015
|
November 2,
2014
|
||||||||||
Current:
|
||||||||||||
Federal
|
$
|
492
|
$
|
160
|
$
|
354
|
||||||
State
|
(2
|
)
|
(109
|
)
|
-
|
|||||||
Foreign
|
8,115
|
9,729
|
4,726
|
|||||||||
Deferred:
|
||||||||||||
Federal
|
-
|
-
|
-
|
|||||||||
State
|
10
|
7
|
(5
|
)
|
||||||||
Foreign
|
(3,817
|
)
|
3,394
|
4,220
|
||||||||
Total
|
$
|
4,798
|
$
|
13,181
|
$
|
9,295
|
Year Ended
|
||||||||||||
October 30,
2016
|
November 1,
2015
|
November 2,
2014
|
||||||||||
U.S. federal income tax at statutory rate
|
$
|
21,166
|
$
|
24,514
|
$
|
14,465
|
||||||
Changes in valuation allowances
|
(9,516
|
)
|
(11,471
|
)
|
(7,575
|
)
|
||||||
Distributions from foreign subsidiaries
|
3,438
|
448
|
12,674
|
|||||||||
Foreign tax rate differentials
|
(9,620
|
)
|
(4,356
|
)
|
(4,864
|
)
|
||||||
Tax credits
|
(944
|
)
|
(2,729
|
)
|
(2,847
|
)
|
||||||
Uncertain tax positions, including reserves, settlements and resolutions
|
134
|
(175
|
)
|
(2,255
|
)
|
|||||||
Gain on acquisition of DPTT
|
-
|
-
|
(5,748
|
)
|
||||||||
Intercompany gain elimination
|
-
|
-
|
4,759
|
|||||||||
Tax on foreign subsidiary earnings
|
225
|
6,589
|
-
|
|||||||||
Other, net
|
(85
|
)
|
361
|
686
|
||||||||
$
|
4,798
|
$
|
13,181
|
$
|
9,295
|
As of
|
||||||||
October 30,
2016
|
November 1,
2015
|
|||||||
Deferred income tax assets
:
|
||||||||
Net operating losses
|
$
|
46,158
|
$
|
56,582
|
||||
Reserves not currently deductible
|
7,876
|
8,158
|
||||||
Alternative minimum tax credits
|
3,772
|
3,281
|
||||||
Tax credit carryforwards
|
8,814
|
8,809
|
||||||
Other
|
1,719
|
1,782
|
||||||
68,339
|
78,612
|
|||||||
Valuation allowances
|
(29,315
|
)
|
(38,763
|
)
|
||||
39,024
|
39,849
|
|||||||
Deferred income tax liabilities:
|
||||||||
Undistributed earnings of foreign subsidiaries
|
(3,962
|
)
|
(5,953
|
)
|
||||
Property, plant and equipment
|
(19,977
|
)
|
(17,874
|
)
|
||||
Investments
|
74
|
(4,596
|
)
|
|||||
Other
|
(328
|
)
|
(552
|
)
|
||||
(24,193
|
)
|
(28,975
|
)
|
|||||
Net deferred income tax assets
|
$
|
14,831
|
$
|
10,874
|
||||
Reported per adoption of new accounting standard (see below):
|
||||||||
Deferred income tax assets
|
$
|
16,322
|
$
|
13,083
|
||||
Deferred income tax liabilities
|
(1,491
|
)
|
(2,209
|
)
|
||||
$
|
14,831
|
$
|
10,874
|
Operating Loss Carryforwards
|
Amount
|
Expiration
Periods
|
||||||
Federal
|
$
|
98,525
|
2025-2033
|
|||||
State
|
211,665
|
2017-2036
|
||||||
Foreign
|
27,403
|
2018-2023
|
Tax Credit Carryforwards
|
Amount
|
Expiration
Period
|
||||||
Federal research and development
|
$
|
5,121
|
2019-2036
|
|||||
Federal alternative minimum tax
|
3,772
|
Indefinite
|
||||||
State tax
|
5,681
|
2017-2030
|
Year Ended
|
||||||||||||
October 30,
2016
|
November 1,
2015
|
November 2,
2014
|
||||||||||
Balance at beginning of year
|
$
|
4,029
|
$
|
4,993
|
$
|
4,757
|
||||||
Additions (reductions) for tax positions in prior years
|
744
|
(212
|
)
|
3,437
|
||||||||
Additions based on current year tax positions
|
268
|
318
|
272
|
|||||||||
Settlements
|
(378
|
)
|
(720
|
)
|
(3,155
|
)
|
||||||
Lapses of statutes of limitations
|
(57
|
)
|
(350
|
)
|
(318
|
)
|
||||||
Balance at end of year
|
$
|
4,606
|
$
|
4,029
|
$
|
4,993
|
Classification
|
Previously
Reported
|
Change Due
to Adoption
|
Retrospectively
Adjusted
|
|||||||||
|
|
|||||||||||
Current assets
|
$
|
3,354
|
$
|
(3,354
|
)
|
$
|
-
|
|||||
Noncurrent assets
|
11,908
|
1,175
|
13,083
|
|||||||||
Noncurrent liabilities
|
4,388
|
(2,179
|
)
|
2,209
|
Year Ended
|
||||||||||||
October 30,
2016
|
November 1,
2015
|
November 2,
2014
|
||||||||||
Net income attributable to Photronics, Inc. shareholders
|
$
|
46,200
|
$
|
44,625
|
$
|
25,996
|
||||||
Effect of dilutive securities:
|
||||||||||||
Interest expense on convertible notes, net of related tax effects
|
2,938
|
4,363
|
1,426
|
|||||||||
Earnings for diluted earnings per share
|
$
|
49,138
|
$
|
48,988
|
$
|
27,422
|
||||||
Weighted-average common shares computations:
|
||||||||||||
Weighted-average common shares used for basic earnings per share
|
67,539
|
66,331
|
61,779
|
|||||||||
Effect of dilutive securities:
|
||||||||||||
Convertible notes
|
7,841
|
11,085
|
3,945
|
|||||||||
Share-based payment awards
|
974
|
967
|
955
|
|||||||||
Dilutive common shares
|
8,815
|
12,052
|
4,900
|
|||||||||
Weighted-average common shares used for diluted earnings per share
|
76,354
|
78,383
|
66,679
|
|||||||||
Basic earnings per share
|
$
|
0.68
|
$
|
0.67
|
$
|
0.42
|
||||||
Diluted earnings per share
|
$
|
0.64
|
$
|
0.63
|
$
|
0.41
|
Year Ended
|
||||||||||||
October 30,
2016
|
November 1,
2015
|
November 2,
2014
|
||||||||||
Share based payment awards
|
1,635
|
1,641
|
1,911
|
|||||||||
Convertible notes
|
-
|
-
|
11,085
|
|||||||||
Total potentially dilutive shares excluded
|
1,635
|
1,641
|
12,996
|
Year Ended
|
||||
November 2,
2014
|
||||
Net income attributable to Photronics, Inc. shareholders
|
$
|
25,996
|
||
Decrease in Photronics, Inc.'s additional paid-in capital
|
(6,183
|
)
|
||
Increase in Photronics, Inc.’s accumulated other comprehensive income
|
399
|
|||
Change from net income attributable to Photronics, Inc. shareholders due to issuance of shares of PDMC and transfers to or from noncontrolling interests
|
$
|
20,212
|
Year Ended
|
||||||||||||
October 30,
2016
|
November 1,
2015
|
November 2,
2014
|
||||||||||
Net sales
|
||||||||||||
Taiwan
|
$
|
193,216
|
$
|
205,141
|
$
|
167,075
|
||||||
Korea
|
141,017
|
147,921
|
140,386
|
|||||||||
United States
|
113,670
|
132,792
|
106,740
|
|||||||||
Europe
|
33,384
|
35,792
|
38,726
|
|||||||||
All other Asia
|
2,169
|
2,560
|
2,600
|
|||||||||
$
|
483,456
|
$
|
524,206
|
$
|
455,527
|
|||||||
IC
|
$
|
364,531
|
$
|
420,833
|
$
|
352,679
|
||||||
FPD
|
118,925
|
103,373
|
102,848
|
|||||||||
$
|
483,456
|
$
|
524,206
|
$
|
455,527
|
As of
|
||||||||||||
October 30,
2016
|
November 1,
2015
|
November 2,
2014
|
||||||||||
Long-lived assets
|
||||||||||||
Taiwan
|
$
|
176,644
|
$
|
185,087
|
$
|
207,324
|
||||||
United States
|
173,658
|
184,282
|
158,325
|
|||||||||
Korea
|
146,515
|
167,618
|
176,141
|
|||||||||
Europe
|
9,617
|
10,287
|
8,259
|
|||||||||
All other Asia
|
-
|
10
|
20
|
|||||||||
$
|
506,434
|
$
|
547,284
|
$
|
550,069
|
Year Ended October 30, 2016
|
||||||||||||||||
Foreign Currency
Translation
Adjustments
|
Amortization
of Cash
Flow Hedge
|
Other
|
Total
|
|||||||||||||
Balance at November 1, 2015
|
$
|
(9,634
|
)
|
$
|
(306
|
)
|
$
|
(633
|
)
|
$
|
(10,573
|
)
|
||||
Other comprehensive income (loss) before reclassifications
|
6,334
|
-
|
(589
|
)
|
5,745
|
|||||||||||
Amounts reclassified from other accumulated comprehensive income
|
-
|
129
|
-
|
129
|
||||||||||||
Net current period other comprehensive income (loss)
|
6,334
|
129
|
(589
|
)
|
5,874
|
|||||||||||
Less: other comprehensive (income) loss attributable to noncontrolling interests
|
(3,267
|
)
|
-
|
295
|
(2,972
|
)
|
||||||||||
Balance at October 30, 2016
|
$
|
(6,567
|
)
|
$
|
(177
|
)
|
$
|
(927
|
)
|
$
|
(7,671
|
)
|
Year Ended November 1, 2015
|
||||||||||||||||
Foreign Currency
Translation
Adjustments
|
Amortization
of Cash
Flow Hedge
|
Other
|
Total
|
|||||||||||||
Balance at November 2, 2014
|
$
|
22,651
|
$
|
(434
|
)
|
$
|
(443
|
)
|
$
|
21,774
|
||||||
Other comprehensive loss before reclassifications
|
(40,154
|
)
|
-
|
(381
|
)
|
(40,535
|
)
|
|||||||||
Amounts reclassified from other accumulated comprehensive income
|
-
|
128
|
-
|
128
|
||||||||||||
Net current period other comprehensive income (loss)
|
(40,154
|
)
|
128
|
(381
|
)
|
(40,407
|
)
|
|||||||||
Less: other comprehensive loss attributable to noncontrolling interests
|
7,869
|
-
|
191
|
8,060
|
||||||||||||
Balance at November 1, 2015
|
$
|
(9,634
|
)
|
$
|
(306
|
)
|
$
|
(633
|
)
|
$
|
(10,573
|
)
|
October 30, 2016
|
November 1, 2015
|
|||||||||||||||
Fair Value
|
Carrying Value
|
Fair Value
|
Carrying Value
|
|||||||||||||
3.25% convertible senior notes due 2019
|
$
|
68,230
|
$
|
57,500
|
$
|
64,550
|
$
|
57,500
|
||||||||
3.25% convertible senior notes due 2016
|
$
|
-
|
$
|
-
|
$
|
60,375
|
$
|
57,500
|
First
|
Second
|
Third
|
Fourth
|
Year
|
||||||||||||||||
Fiscal 2016:
|
||||||||||||||||||||
(a)
|
(b)
|
(c)
|
(a)(d)
|
|||||||||||||||||
Net sales
|
$
|
129,956
|
$
|
122,923
|
$
|
123,209
|
$
|
107,368
|
$
|
483,456
|
||||||||||
Gross profit
|
35,436
|
31,287
|
31,450
|
20,533
|
118,706
|
|||||||||||||||
Net income
|
23,501
|
14,153
|
11,453
|
6,569
|
55,676
|
|||||||||||||||
Net income attributable to Photronics, Inc. shareholders
|
21,002
|
11,854
|
8,088
|
5,256
|
46,200
|
|||||||||||||||
Earnings per share:
|
||||||||||||||||||||
Basic
|
$
|
0.31
|
$
|
0.18
|
$
|
0.12
|
$
|
0.08
|
$
|
0.68
|
||||||||||
Diluted
|
$
|
0.28
|
$
|
0.16
|
$
|
0.12
|
$
|
0.08
|
$
|
0.64
|
||||||||||
Fiscal 2015:
|
||||||||||||||||||||
(e)
|
(e)
|
|||||||||||||||||||
Net sales
|
$
|
123,505
|
$
|
127,309
|
$
|
131,699
|
$
|
141,693
|
$
|
524,206
|
||||||||||
Gross profit
|
28,184
|
33,095
|
37,243
|
44,614
|
143,136
|
|||||||||||||||
Net income
|
7,142
|
12,156
|
15,410
|
22,151
|
56,859
|
|||||||||||||||
Net income attributable to Photronics, Inc. shareholders
|
3,837
|
10,060
|
12,106
|
18,622
|
44,625
|
|||||||||||||||
Earnings per share:
|
||||||||||||||||||||
Basic
|
$
|
0.06
|
$
|
0.15
|
$
|
0.18
|
$
|
0.28
|
$
|
0.67
|
||||||||||
Diluted
|
$
|
0.06
|
$
|
0.14
|
$
|
0.17
|
$
|
0.25
|
$
|
0.63
|
(a) |
Includes $8.8 million gain on sale of investment in a foreign entity.
|
(b) |
Includes a tax benefit in Taiwan of $1.8 million related to prior years.
|
(c) |
Includes a tax benefit in Taiwan of $3.0 million related to the recognition of prior period tax benefits and other tax positions no longer deemed necessary.
|
(d) |
Includes tax benefits in Taiwan of $4.8 million primarily related to the recognition of prior period tax benefits and other tax positions no longer deemed necessary.
|
(e) |
Includes expenses of $0.9 million of financing expenses related to the exchange of $57.5 million 3.25% convertible senior notes.
|
ITEM 9. |
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
ITEM 9A.
|
CONTROLS AND PROCEDURES
|
ITEM 9B. |
OTHER INFORMATION
|
ITEM 10.
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
ITEM 11. |
EXECUTIVE COMPENSATION
|
ITEM 12. |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
ITEM 13. |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|
ITEM 14.
|
PRINCIPAL ACCOUNTANT FEES AND SERVICES
|
ITEM 15. |
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|
Page
No.
|
||
|
||
1.
|
Financial Statements: See "INDEX TO CONSOLIDATED FINANCIAL STATEMENTS" in Part II, Item 8 of this Form 10-K.
|
32
|
2.
|
Financial Statement Schedules:
|
|
Report of Independent Registered Public Accounting Firm
|
66
|
|
Schedule II - Valuation and Qualifying Accounts for the years ended
October 30, 2016
, November 1, 2015 and November 2, 2014
|
67
|
|
All other schedules are omitted because they are not applicable.
|
||
3.
|
Exhibits
|
67
|
Schedule II
Valuation and Qualifying Accounts
for the Years Ended October 30, 2016, November 1, 2015
and November 2, 2014
(in thousands)
|
||||||||||||||||||
Balance at
Beginning of
Year
|
Charged to
Costs and
Expenses
|
Deductions
|
Balance at
End of
Year
|
|||||||||||||||
Allowance for Doubtful Accounts
|
||||||||||||||||||
Year ended October 30, 2016
|
$
|
3,301
|
$
|
642
|
$
|
(42
|
)
|
(a)
|
$
|
3,901
|
||||||||
Year ended November 1, 2015
|
$
|
3,078
|
$
|
730
|
$
|
(507
|
)
|
(a)
|
$
|
3,301
|
||||||||
Year ended November 2, 2014
|
$
|
3,541
|
$
|
(740
|
)
|
$
|
277
|
(a)
|
$
|
3,078
|
||||||||
Deferred Tax Asset Valuation Allowance
|
||||||||||||||||||
Year ended October 30, 2016
|
$
|
38,763
|
$
|
(4,262
|
)
|
(b)
|
$
|
(5,186
|
)
|
(c)
|
$
|
29,315
|
||||||
Year ended November 1, 2015
|
$
|
49,548
|
$
|
(2,364
|
)
|
(b)
|
$
|
(8,421
|
)
|
(c)
|
$
|
38,763
|
||||||
Year ended November 2, 2014
|
$
|
56,661
|
$
|
-
|
$
|
(7,113
|
)
|
(c)
|
$
|
49,548
|
(a) |
Uncollectible accounts written off, net, and impact of foreign currency translation.
|
(b) |
Reversal of valuation allowance.
|
(c) |
Increase in deferred tax liability and utilization of net operating losses.
|
Exhibit
Number
|
Description
|
3.1
|
Certificate of Incorporation as amended July 9, 1986, April 9, 1990, March 16, 1995, November 13, 1997, April 15, 2002 and June 20, 2005 (incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K filed January 3, 2014).
|
3.2
|
Amended and Restated By-laws of the Company dated as of September 7, 2016 (incorporated by reference to the Company’s Current Report on Form 8-K filed on September 13, 2016).
|
4.4
|
Indenture dated January 22, 2015, by and between the Company and the Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on January 28, 2015).
|
10.1
|
The Company’s 1992 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.24 to the Company’s Registration Statement on Form S-8, File Number 33-47446 which was filed April 24, 1994).
+
|
Amendment to the Employee Stock Purchase Plan as of March 24, 2004*
+
|
|
10.3
|
Amendment to the Employee Stock Purchase Plan as of April 8, 2010
(incorporated by reference to Exhibit 10.4 to the Company’s Annual Report on Form 10-K filed on January 7, 2016).+
|
10.4
|
Amendment to the Employee Stock Purchase Plan as of March 28, 2012 (incorporated by reference to Exhibit 10.9 of the Company’s Quarterly Report on Form 10-Q filed September 5, 2012).
+
|
10.5 |
2016 Equity Incentive Compensation Plan (incorporated by reference to the Company’s Definitive Proxy Statement filed on February 26, 2016)+
|
10.6
|
The Company’s 2007 Long-Term Equity Incentive Plan (incorporated by reference to the Company’s Definitive Proxy Statement filed on March 3, 2014).
+
|
10.7
|
Amendment to the 2007 Long Term Equity Incentive Plan as of April 8, 2010. (incorporated by reference to Exhibit 10.7 of the Company’s Annual Report on Form 10-K filed January 7, 2016).
+
|
10.8
|
Amendment to the 2007 Long Term Equity Incentive Plan as of April 11, 2014 (incorporated by reference to Exhibit 10.8 of the Company’s Annual Report on Form 10-K filed January 6, 2015).
+
|
10.9
|
2011 Executive Incentive Compensation Plan effective as of November 1, 2010
(incorporated by reference to Exhibit 10.9 of the Company’s Annual Report on Form 10-K filed January 6, 2015).
+
|
10.10
|
Executive Employment Agreement between the Company and Constantine Macricostas dated May 4, 2015 (incorporated by reference to Exhibit 10.31 to the Company’s Quarterly Report on Form 10-Q filed on September 9, 2015). +
|
10.11
|
Executive Employment Agreement between the Company and Sean T. Smith dated February 20, 2003 (incorporated by reference to Exhibit 10.12 of the Company’s Annual Report on Form 10-K filed January 6, 2015).
+
|
10.12
|
Limited Liability Company Operating Agreement of MP Mask Technology Center, LLC (MP Mask) between Micron Technology, Inc. ("Micron") and Photronics, Inc. ("Photronics") dated May 5, 2006 (incorporated by reference to Exhibit 10.14 to the Company’s Annual Report on Form 10-K filed on January 13, 2012).
#
|
10.13
|
Contribution and Units Purchase Agreement between Micron, Photronics and MP Mask dated May 5, 2006 (incorporated by reference to Exhibit 10.15 to the Company’s Annual Report on Form 10-K filed on January 13, 2012).
#
|
10.14
|
Technology License Agreement among Micron, Photronics and MP Mask dated May 5, 2006 (incorporated by reference to Exhibit 10.16 to the Company’s Annual Report on Form 10-K filed on January 13, 2012).
#
|
10.15
|
Photronics to Micron Supply Agreement between Micron and Photronics dated May 5, 2006 (incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K filed on January 13, 2012).
#
|
10.16
|
MP Mask to Photronics Supply Agreement between MP Mask and Photronics dated May 5, 2006 (incorporated by reference to Exhibit 10.18 to the Company’s Annual Report on Form 10-K filed on January 13, 2012).
#
|
10.17
|
Special Warranty Deed dated as of February 29, 2012 (incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K filed on March 6, 2012).
|
10.18
|
Outsource Supply Agreement between Micron and Photronics dated March 24, 2015 (incorporated by reference to Exhibit 10.18 to the Company’s Quarterly Report on Form 10-Q filed on June 4, 2015).
#
|
10.19
|
Bridge License Agreement between Micron and Photronics dated March 24, 2015 (incorporated by reference to Exhibit 10.16 to the Company’s Quarterly Report on Form 10-Q filed on June 4, 2015).
#
|
10.20
|
Joint Venture Framework Agreement dated November 20, 2013, between the Company and Dai Nippon Printing Co., Ltd (incorporated by reference to Exhibit 10.19 of the Company’s Annual Report on Form 10-K/A filed July 8, 2015).
#
|
10.21
|
Joint Venture Operating Agreement dated November 20, 2013, between the Company and Dai Nippon Printing Co., Ltd. (incorporated by reference to Exhibit 10.20 of the Company’s Annual Report on Form 10-K/A filed July 8, 2015).
#
|
10.22
|
Outsourcing Agreement dated November 20, 2013, among the Company, Dai Nippon Printing Co., Ltd and Photronics Semiconductor Mask Corporation (incorporated by reference to Exhibit 10.21 of the Company’s Annual Report on Form 10-K/A filed July 8, 2015).
#
|
10.23
|
License Agreement dated November 20, 2013, between the Company and Photronics Semiconductor Mask Corporation (incorporated by reference to Exhibit 10.22 of the Company’s Annual Report on Form 10-K/A filed July 8, 2015).
#
|
10.24
|
License Agreement dated November 20, 2013, between Dai Nippon Printing Co., Ltd and Photronics Semiconductor Mask Corporation (incorporated by reference to Exhibit 10.23 of the Company’s Annual Report on Form 10-K/A filed July 8, 2015).
#
|
10.25
|
Margin Agreement dated November 20, 2013, among the Company, Dai Nippon Printing Co., Ltd and Photronics Semiconductor Mask Corporation (incorporated by reference to Exhibit 10.24 of the Company’s Annual Report on Form 10-K/A filed July 8, 2015).
#
|
10.26
|
Merger Agreement dated January 16, 2014, between Photronics Semiconductor Mask Corporation and DNP Photomask Technology Taiwan Co., Ltd. (incorporated by reference to Exhibit 10.25 of the Company’s Annual Report on Form 10-K/A filed July 8, 2015).
#
|
Executive Employment Agreement between the Company and Soo Hong Jeong dated May 31, 2011 *
+
|
|
10.28
|
Executive Employment Agreement between the Company and Christopher J. Progler, Vice President, Chief Technology Officer dated September 10, 2007 (incorporated by reference to Exhibit 10.22 to the Company’s Annual Report on Form 10-K filed on January 9, 2013).
+
|
10.29
|
Executive Employment Agreement between the Company and Peter S. Kirlin dated May 4, 2015 (incorporated by reference to Exhibit 10.28 of the Company's Quarterly Report on Form 10-Q filed on September 9, 2015).
+
|
10.30
|
Executive Employment Agreement between the Company and Richelle E. Burr dated May 21, 2010 (incorporated by reference to Exhibit 10.30 of the Company's Annual Report on Form 10-K filed on January 7, 2016).
+
|
10.31
|
Form of Amendment to Executive Employment Agreement dated March 16, 2012 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 16, 2012).
+
|
10.32
|
Third Amended and Restated Credit Agreement Dated as of December 5, 2013 (incorporated by reference to Exhibit 10.24 to the Company’s Annual Report on Form 10-K filed on January 3, 2014).
|
10.33
|
Amendment No. 1 Dated as of August 22, 2014 to the Third Amended and Restated Credit Agreement Dated as of December 5, 2013 (incorporated by reference to Exhibit 10.32 of the Company’s Annual Report on Form 10-K filed on January 6, 2015).
|
10.34
|
Second Amended and Restated Security Agreement (incorporated by reference to Exhibit 10.33 of the Company’s Annual Report on Form 10-K filed on January 6, 2015).
|
PHOTRONICS, INC.
|
|||
(Registrant)
|
|||
By
|
/s/ SEAN T. SMITH
|
January 6, 2017
|
|
Sean T. Smith
Senior Vice President
Chief Financial Officer
(Principal Accounting Officer/
Principal Financial Officer)
|
By
|
/s/ PETER S. KIRLIN
|
January 6, 2017
|
|
Peter S. Kirlin
Chief Executive Officer
Director
(Principal Executive Officer)
|
|||
By
|
/s/ SEAN T. SMITH
|
January 6, 2017
|
|
Sean T. Smith
Senior Vice President
Chief Financial Officer
(Principal Accounting Officer/
Principal Financial Officer)
|
|||
By
|
/s/ CONSTANTINE S. MACRICOSTAS
|
January 6, 2017
|
|
Constantine S. Macricostas
Executive Chairman of the Board
|
|||
By
|
/s/ WALTER M. FIEDEROWICZ
|
January 6, 2017
|
|
Walter M. Fiederowicz
Director
|
|||
By
|
/s/ JOSEPH A. FIORITA, JR.
|
January 6, 2017
|
|
Joseph A. Fiorita, Jr.
Director
|
|||
By
|
/s/ LIANG-CHOO HSIA
|
January 6, 2017
|
|
Liang-Choo Hsia
Director
|
|||
By
|
/s/ GEORGE MACRICOSTAS
|
January 6, 2017
|
|
George Macricostas
Director
|
|||
By
|
/s/ MITCHELL G. TYSON
|
January 6, 2017
|
|
Mitchell G. Tyson
Director
|
By: | /s/ Richelle Burr |
Name: Richelle Burr | |
Title: |
/s/ Soo Hoo Jeong |
Name: Dr. Soo Hoo Jeong |
Address: 272-3 Gumi-Dong, Bundang, Seongnam, Kyeonggi, Korea 463-802 |
/s/ Soo Hoo Jeong |
Name: Dr. Soo Hoo Jeong |
Title: |
Dr. Soo Hoo Jeong |
/s/ Soo Hoo Jeong |
Signature |
State or Jurisdiction of
Incorporation or Organization
|
|
Align-Rite International, Ltd.
|
(United Kingdom)
|
Photronics (Wales) Limited
|
(United Kingdom)
|
Photronics California, Inc.
|
(California, USA)
|
Photronics Idaho, Inc.
|
(Idaho, USA)
|
Photronics Texas Allen, Inc.
|
(Texas, USA)
|
Photronics MZD, GmbH
|
(Germany)
|
Photronics Advanced Mask Corporation
|
(Taiwan, R.O.C.)
|
Photronics DNP Mask Corporation (1)
|
(Taiwan, R.O.C.)
|
PDMC Shanghai, Ltd.
|
(Shanghai, P.R.C.)
|
Photronics Singapore Pte, Ltd.
|
(Singapore)
|
Xiamen American Japan Photronics Mask Co., Ltd.
|
(Xiamen, P.R.C.)
|
Photronics UK, Ltd.
|
(United Kingdom)
|
PK, Ltd. (2)
|
(Republic of Korea)
|
PKLT Co., Ltd.
|
(Taiwan, R.O.C.)
|
Trianja Technologies, Inc.
|
(Texas, USA)
|
(1) |
50.01% owned by Photronics, Inc. and 49.99% owned by DNPJ
|
(2) |
99.75% owned by Photronics, Inc., and 0.25% owned by minority shareholders
|
1. |
I have reviewed this Annual Report on Form 10-K of Photronics, Inc.
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.
|
4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a) |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b) |
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c) |
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and
|
d) |
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a) |
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/s/ PETER S. KIRLIN
|
|
Peter S. Kirlin
|
|
Chief Executive Officer
|
|
January 6, 2017
|
1. |
I have reviewed this Annual Report on Form 10-K of Photronics, Inc.
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.
|
4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a) |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b) |
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c) |
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and
|
d) |
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a) |
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/s/ SEAN T. SMITH
|
|
Sean T. Smith
|
|
Chief Financial Officer
|
|
January 6, 2017
|
1. |
the Annual Report on Form 10-K of the Company for the year ended October 30, 2016 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2. |
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ PETER S. KIRLIN
|
|
Peter S. Kirlin
|
|
Chief Executive Officer
|
|
January 6, 2017
|
(1) |
the Annual Report on Form 10-K of the Company for the year ended October 30, 2016 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2) |
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ SEAN T. SMITH
|
|
Sean T. Smith
|
|
Chief Financial Officer
|
|
January 6, 2017
|