Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x  No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 126-2 of the Exchange Act).
Yes  x No  o

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

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Forward Looking Information

     Certain statements in this report are considered "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All forward looking statements involve risks and uncertainties. For a description of the factors that could cause the actual results of the Company to be materially different from those projected, please review the Company's SEC reports that detail these risks and uncertainties and the section captioned "Forward Looking Information" contained in the Company's Annual Report on Form 10-K for the year ended October 31, 2004.  Any forward looking statements should be considered in light of these factors.

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PHOTRONICS, INC.
AND SUBSIDIARIES

INDEX

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PHOTRONICS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Three and Six Months Ended May 1, 2005 and May 2, 2004
(unaudited)

NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION

      Photronics, Inc. and its subsidiaries (the "Company" or "Photronics") is one of the world's leading manufacturers of photomasks, which are high precision photographic quartz plates containing microscopic images of electronic circuits. Photomasks are a key element in the manufacture of semiconductors and flat panel displays ("FPD"), and are used as masters to transfer circuit patterns onto semiconductor wafers and flat panel substrates during the fabrication of integrated circuits ("IC") and a variety of FPD and, to a lesser extent, other types of electrical and optical components. The Company operates principally from nine manufacturing facilities, three of which are located in the United States, three in Europe, and one each in Korea, Singapore and Taiwan.

     The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the interim period are not necessarily indicative of the results that may be expected for the year ending October 30, 2005. Certain amounts in the condensed consolidated financial statements for prior periods have been reclassified to conform to the current presentation. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended October 31, 2004.

NOTE 2 - STOCK BASED COMPENSATION

     The Company has several stock option plans under which incentive and non-qualified stock options may be granted. The Company accounts for those plans under the recognition and measurement principles of Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees,and related interpretations." Under this method, stock-based employee compensation cost is reflected in net income only if options granted under those plans had an exercise price less than the market value of the underlying common stock on the date of grant. The Company uses the Black-Scholes-Merton model to calculate the fair value of stock-based compensation for pro forma disclosure purposes. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of Financial Accounting Standards Board (FASB) Statement No. 123, "Accounting for Stock Based Compensation," to stock-based employee compensation (in thousands, except per share amounts).

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     In December 2004, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 123, "Share-Based Payments (revised 2004)," (SFAS No. 123R). This statement eliminates the option to apply the intrinsic value measurement provisions of APB Opinion No. 25 to stock compensation awards issued to employees. Rather this statement requires companies to measure the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. That cost will be recognized over the period during which an employee is required to provide services in exchange for the award - the requisite service period (usually the vesting period). SFAS No. 123R will also require companies to measure the cost of employee services received in exchange for Employee Stock Purchase Plan (ESPP) awards and the Company will be required to expense the grant date fair value of the Company's ESPP awards.  On April 14, 2005, the Securities and Exchange Commission deferred the effective date of SFAS No. 123R for certain companies, thereby deferring the effective date for the Company from its quarter beginning August 1, 2005 to its quarter beginning October 31, 2005.  Based on the number of stock options outstanding as of May 1, 2005, the effect of the adoption of SFAS No. 123R would be to increase compensation expense by approximately $0.2 million in the Company’s fiscal quarter beginning October 31, 2005.

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NOTE 3 - COMPREHENSIVE INCOME

      The following table summarizes comprehensive income for the three and six months ended May 1, 2005 and May 2, 2004 (in thousands):

NOTE 4 - EARNINGS PER SHARE

     The calculation of basic earnings per common share and diluted earnings per common share is presented below (in thousands, except per share amounts):

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     The effect of the potential conversion of some of the Company's convertible subordinated notes and the exercise of certain stock options would have been antidilutive. The following table shows the amount of incremental shares outstanding that would have been added if the assumed conversion of the remaining convertible subordinated notes and stock options had been dilutive.

NOTE 5 - INVESTMENTS

      Investments, comprised of fixed income bonds and marketable equity securities, are classified as available-for-sale, and are carried at fair value based on quoted market prices.  Investments available for current operations are classified in the condensed consolidated balance sheets as current assets, investments held for long-term purposes are included in "Other Assets".  Unrealized gains on investments are as follows (in thousands):

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NOTE 6 - CONSOLIDATION, RESTRUCTURING AND RELATED CHARGES

     Since 2001, the Company has closed four manufacturing facilities in North America and one in Europe due in part to the migration of semiconductor manufacturing to Asia, excess capacity and competitive pricing pressures. Decisions regarding which facilities to close were based on sales volume projections, customer base and production qualifications.

     In March 2003, the Company implemented a plan to close its Phoenix, Arizona manufacturing facility and further consolidate its North American manufacturing network in order to increase capacity utilization and manufacturing efficiencies. Total consolidation and related charges of $42.0 million were recorded during the second quarter of fiscal 2003. Components of the charge include $3.4 million for workforce reductions of approximately 170 employees in the United States, $4.4 million for facility lease payments, and $34.2 million of non-cash charges for the impairment of the carrying value of fixed assets.

     In August 2002, the Company implemented a consolidation plan that included the discontinuation of photomask manufacturing at its Milpitas, California site and a reduction of its workforce of approximately 135 employees in the United States. The total charge associated with this plan was $14.5 million, which included $2.5 million for workforce reductions, $1.5 million for facility lease payments, and $10.5 million of non-cash charges for the impairment of the carrying value of fixed assets.

     In April 2001, as part of the Company's final phase of its merger with Align-Rite, the Company initiated a consolidation plan to consolidate its global photomask manufacturing network and reduce its global workforce by approximately 120 employees. The total charge of $38.1 million consisted of non-cash charges of $29.6 million for the impairment of fixed assets and intangible assets, $4.0 million for severance and benefits and $4.5 million for facility closing costs and lease payments.

     For these previously announced actions, the Company's restructuring expenditures were $0.6 million and $1.2 million for the three and six months ended May 1, 2005 respectively, and $0.6 million and $1.4 million for the three and six months ended May 2, 2004, respectively. These payments relate to severance and benefits for terminated employees, and non-cancelable facility leases and other payments. From April 2001 through May 1, 2005, the Company had expended, including non-cash charges, approximately $91.1 million.

     The following tables set forth the Company's restructuring reserve as of May 1, 2005 and reflects the activity affecting the reserve for the three and six months then ended (in thousands):

     As of May 1, 2005, "manufacturing capacity reduction and other" of $3.5 million primarily represents non-cancelable lease obligations that will be paid over the respective lease terms through 2009.

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     The following table sets forth the Company's restructuring reserve as of May 2, 2004 and reflects the activity affecting the reserve for the three and six months ended May 2, 2004 (in thousands):

NOTE 7 - SEGMENT INFORMATION

     The Company operates in a single industry segment as a manufacturer of photomasks, which are high precision photographic quartz plates containing microscopic images of electronic circuits for use in the fabrication of semiconductors and FPD.  The Company's net sales, operating income (loss) and identifiable assets by geographic area as of and for the three and six months ended May 1, 2005 and May 2, 2004 were as follows (in thousands):

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NOTE 8 - INCOME TAXES

     The income tax provision differs from the amount computed by applying the United States statutory rate of 35% to income before income taxes due to the Company’s reduced tax rates in certain Asian jurisdictions and valuation allowances placed on certain deferred tax assets generated by net operating loss carry forwards.

     The American Jobs Creation Act (AJCA) was signed into law on October 22, 2004. The AJCA includes a provision for an 85% deduction for the repatriation of certain foreign earnings. The Company may elect to apply this provision to qualifying earnings repatriations in fiscal 2005. Currently, the Company is reviewing the published guidance and expects to complete its evaluation within a reasonable period of time following the issuance of final guidance. The range of possible amounts that the Company is considering for repatriation is between zero and $129 million. The related potential range of income tax effects is estimated to be between zero and $22 million taking into account the Company’s tax attributes.

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NOTE 9 - ACQUISITION OF ADDITIONAL SHARES OF PK LTD.

     During the first quarter of fiscal 2005, Photronics invested $40.4 million to purchase 5.4 million additional shares of PK Ltd. (PKL), its non-wholly owned subsidiary in Korea.  This transaction increased the Company's ownership in PKL by 15%, resulting in a total ownership of 90%.  As the Company has previously consolidated PKL, the additional incremental ownership has been initially allocated to goodwill with a reduction in minority interests.  The Company is in the process of analyzing fair value attributes of the additional ownership.

NOTE 10 - REDEMPTIONS OF SUBORDINATED CONVERTIBLE NOTES

     On April 14, 2005 and November 10, 2004, the Company redeemed $10.0 million and $41.4 million, respectively, of its outstanding 4.75% subordinated convertible notes, resulting in an early extinguishment charge recorded in other income (expense), net, in the condensed consolidated statement of operations of $0.2 million and $1.6 million for the three and six month periods ended May 1, 2005.

     These redemptions resulted in a total principal balance outstanding of its 4.75% subordinated convertible notes after the redemptions of $100.1 million as of May 1, 2005.

NOTE 11 - OTHER RECENT ACCOUNTING PRONOUNCEMENTS

     In November of 2004, the FASB issued SFAS No. 151, "Inventory Costs, an amendment of Accounting Research Bulletin (ARB) No. 43, Chapter 4."  The purpose of this statement is to clarify the accounting of abnormal amounts of idle facility expense, freight, handling costs and waste material. ARB No. 43 stated that under some circumstances these costs may be so abnormal that they are required to be treated as current period costs.  SFAS 151 requires that these costs be treated as current period costs, regardless if they meet the criteria of "so abnormal." In addition, the statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The provision of this statement shall be effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The early adoption of SFAS 151 did not have a material impact on the Company's results of operations or financial position.

     In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29."  SFAS No. 153 is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005, with earlier application permitted. The Company is evaluating SFAS No. 153, and does not believe it will have a material impact on its 2005 consolidated financial statements.

Item 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Overview

     Management’s discussion and analysis of the Company’s financial condition, business results and outlook should be read in conjunction with its condensed consolidated financial statements and related notes.  Various segments of this MD&A do contain forward looking statements, all of which are presented based on current expectations and may be adversely affected by uncertainties and risk factors presented throughout this filing and the Company's Annual Report on Form 10-K for the 2004 fiscal year, leading actual results to materially differ from these expectations.

     The Company sells the majority of its photomasks to semiconductor designers and manufacturers. Further, photomask technology is also being applied to the fabrication of higher performance electronic products such as flat panel displays ("FPD"), micro-electronic mechanical systems and certain nanotechnology applications. Thus, the Company’s selling cycle is tightly interwoven with the development and release of new semiconductor designs and flat panel applications, particularly as it relates to these customers' migration to more advanced design methodologies and fabrication processes. The Company believes that the demand for photomasks primarily depends on design activity rather than sales volumes from products produced using photomask technologies. Consequently, an increase in semiconductor sales does not necessarily result in a corresponding increase in photomask sales. In addition, the reduced use of customized integrated circuits ("IC"), a reduction in design complexity or other changes in the technology or methods of manufacturing semiconductors, or a slowdown in the introduction of new semiconductor designs could reduce demand for photomasks

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even if demand for semiconductors increases. Further, advances in design and production methods for semiconductors and other high performance electronics could reduce the demand for photomasks. Historically, the semiconductor industry has been volatile, with sharp periodic downturns and slowdowns. These downturns have been characterized by, among other things, diminished product demand, excess production capacity and accelerated erosion of selling prices.

     At this time, state-of-the-art for IC and FPD masks are considered to be 65 nanometer and G6 - G7 process technology, respectively, while 90 nanometer is in the early stages of being moved into volume production, and 130 and 180 nanometer and the G3 through G5 technology for FPD constitute the majority of designs being fabricated in volume today.  The Company expects there to be a steady increase in 130 nanometer designs moving to wafer fabrication throughout fiscal 2005 and believes it is well positioned to service an increasing volume of this business through investments in manufacturing processes and technology in the global regions where its customers are located.

     In addition to its cyclical nature, the global semiconductor industry experienced tremendous technology-based difficulties in transitioning from the 180 nanometer process node to the 130 nanometer process node. The Company believes that these technological issues have been addressed, as seen by improving yields and utilization rates in the Company's mask fabrication facilities and its customers' wafer fabrication facilities. End markets leading the global semiconductor industry out of a downturn in 2004 have been closely tied to consumer driven applications for high performance semiconductor devices, including, but not limited to, communications and mobile computing solutions. The Company cannot predict the degree of difficulty in future process node transitions; the timing of the industry’s transition to volume production of next generation technology nodes; or the timing of up and down cycles with precise accuracy, but believes that such transitions and cycles will continue into the future, which could affect its business, financial condition and operating results in the near term. The Company’s ability to remain successful in these environments is based upon achieving its goals of being a service and technology leader, an efficient solutions supplier, and a company able to continually reinvest in its global infrastructure.

     The photomask industry has been, and is expected to continue to be, characterized by technological change and evolving industry standards. In order to remain competitive, the Company will be required to continually anticipate, respond to and utilize changing technologies. In particular, the Company believes that as semiconductor geometries continue to become smaller and FPD sizes larger and resolution improved, it will be required to manufacture complex optically enhanced reticles, including optical proximity correction and phase-shift photomasks. Additionally, demand for photomasks has been, and could in the future be adversely affected by changes in methods of manufacturing (which could affect the type or quantity of photomasks utilized), such as changes in semiconductor and FPD demand that favor field programmable gate arrays and other semiconductor designs that replace application-specific IC. Through the first six months of fiscal 2005, the Company has not experienced a significant loss of revenue as a result of alternative semiconductor design methodologies. Additionally, increased market acceptance of alternative methods of transferring circuit designs onto semiconductor wafers, such as imprint or direct-write lithography, could reduce or eliminate the need for certain types or all photomasks entirely. Through the first six months of fiscal 2005, direct-write lithography has not been proven to be a commercially viable alternative to photomasks, as it is considered too slow for high volume semiconductor wafer production. However, should direct-write or other alternative methods of transferring IC designs to semiconductor wafers be done without the use of photomasks, the Company's business and results of operations would be materially adversely affected.  If the Company is unable to anticipate, respond to, or utilize these or other changing technologies, due to resource, technological or other constraints, its business and results of operations could be materially adversely affected.

     Both revenues and costs have been affected by the increased demand for high-end technology photomasks that require more advanced manufacturing capabilities but generally command higher average selling prices. To meet the technological demands of its customers and position the Company for future growth, the Company continues to make substantial investments in high-end manufacturing capability both at existing and new facilities. The Company's capital expenditures for new facilities and equipment to support its customers' requirements for high technology products was an aggregate of approximately $254 million for the three fiscal years ended October 31, 2004, plus $31.8 million during the first six months of fiscal 2005.  Based on the anticipated technological changes in the industry, the Company expects these trends to continue.  The Company anticipates capital expenditures to be in the range of $105 million to $125 million for the fiscal year ending October 30, 2005.

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     The manufacture of photomasks for use in fabricating IC and other related products built using comparable photomask-based process technologies has been, and continues to be, capital intensive, based upon the need to maintain a technology-based infrastructure. The Company's integrated global manufacturing network and employees, which consist of nine sites, represent a significant portion of its fixed operating cost base. Should sales volumes decrease based upon the flow of design releases from the Company's customers, the Company may have excess and underutilized production capacity that could significantly impact operating margins.

     Currently, the vast majority of photomasks produced for the semiconductor industry employ geometries of 130 nanometers or larger. In the FPD market, the majority of photomasks produced are to support Generation 3 to Generation 5 processes.  At these technologies, the Company can produce full lines of photomasks and there is no significant technology employed by the Company's competitors that is not available to the Company. Recently, a limited amount of semiconductor fabrication has begun utilizing 90 nanometer and Generation 6 and Generation 7 processes. The Company is currently capable of producing a broad range of photomasks at still smaller geometries, and has begun accelerating its efforts to support the development and production of photomasks for both the 65 nanometer and 45 nanometer technology nodes in semiconductors and Generation 8 in FPD. However, as is typical of industries in the midst of technological change, some of the Company's competitors may be able to achieve higher manufacturing yields than the Company when producing these more complex photomasks, in part because these competitors may have completed more cycles of learning than the Company in this area, and in part because of the Company's need to replicate production of these complex photomasks at its four advanced technology locations world-wide. The Company believes that these cases are not material to its business.

Material Changes in Results of Operations
Three and Six Months ended May 1, 2005 versus May 2, 2004

     The following table represents selected operating information expressed as a percentage of net sales:

     Note:  All of the following tabular comparisons, unless otherwise indicated, are for the quarters ended May 1, 2005 (Q2 2005) and May 2, 2004 (Q2 2004) and for the six months ended May 1, 2005 (YTD 2005) and May 2, 2004 (YTD 2004) in thousands:

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Net Sales

     Net sales for the three months ended May 1, 2005 increased 16.2% to $112.9 million as compared to $97.2 million for the three months ended May 2, 2004.  Sales increased for photomasks used for both IC and FPD (which typically have higher average selling prices than IC photomasks) as a result of increased design releases for IC photomasks and improved FPD revenue associated with increased demand for FPD.  The increase in sales is also related to an improved high-end mix which is defined as mask sets for semiconductor designs at and below 130 nanometer, and for FPD sets utilizing G6 and G7 technology.  By geographic area, net sales in Asia increased $14.3 million or 33.3%, North American sales decreased $0.5 million or 1.3% and European sales increased $1.9 million or 10.2%.

     Net sales for the six months ended May 1, 2005 increased 14.1% to $214.1million as compared to $187.7 million for the six months ended May 2, 2004.  The increase is a result of increased sales of FPD photomasks and improved design releases for IC photomasks associated with the improved, year over year, semiconductor market.

Gross Margin

     Gross margin was 34.0% of net sales for both the three months ended May 1, 2005 and May 2, 2004, and 32.9% of net sales for both the six months ended May 1, 2005 and May 2, 2004.  The Company's respective gross margin did not experience an increase that would typically result from a 16.2% and 14.1% increase in sales as compared to the respective prior year periods as a result of increased infrastructure costs related to additional equipment and production capability, primarily in Asia.  To a lesser extent, gross margin was impacted in 2005 by increased material costs associated with increased FPD sales and increased equipment and infrastructure costs in Asia. The Company operates in a high fixed cost environment and to the extent that the Company’s revenues and capacity utilization increases or decreases, gross margin will be positively or negatively impacted.

     The gross margin percentage throughout the remainder of fiscal 2005 could be negatively impacted by increased depreciation expense associated with the Company’s capital expenditures for additional tool sets and corresponding infrastructure for FPD and advanced photomask technologies.

Selling, General and Administrative Expenses

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      Selling, general and administrative expenses increased $1.7% for the three months ended May 1, 2005, as compared to the same period in the prior fiscal year.

     For the six months ended May 1, 2005, selling, general and administrative expenses decreased $0.6 million to $26.2 million, compared to the same period in the prior year, primarily due to lower salary and wages that were in part offset by additional costs associated with the Company's expansion in Asia, primarily related to the Company’s Taiwan FPD and China facilities.

Research and Development

     Research and development expenses increased $0.6 million to $8.1 million for the three months ended May 1, 2005, compared with $7.5 million for the same period in the prior fiscal year.  Research and development expenses for the six months ended May 1, 2005 increased $1.0 million to $15.9 million compared to the same period in the prior fiscal year. Research and development expenditures consist primarily of global development efforts relating to high-end process technologies for advanced sub wavelength reticle solutions at and below 65 nanometers and next generation FPD technologies.

Operating Income (Loss)

     The following table sets forth the operating income (loss) by geographic area for the three and six months ended May 1, 2005 and May 2, 2004:

Other Expense, Net