UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended August 1, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___ to ___
Commission file number 0-15451
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
(Address of principal executive offices) |
(Zip Code) |
Registrant's telephone number, including area code |
( |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
PREFERRED STOCK PURCHASE RIGHTS |
N/A |
N/A |
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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
☒ |
Accelerated Filer |
☐ |
Non-Accelerated Filer |
☐ |
|
Smaller Reporting Company |
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Common stock: $0.01 par value – 61,151,194 shares outstanding as of September 1, 2021.
PHOTRONICS, INC.
QUARTERLY REPORT ON FORM 10-Q
AUGUST 1, 2021
3 |
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4 |
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PART I. |
FINANCIAL INFORMATION |
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Item 1. |
5 |
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5 |
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6 |
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7 |
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8 |
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10 |
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11 |
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Item 2. |
26 |
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Item 3. |
33 |
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Item 4. |
33 |
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PART II. |
OTHER INFORMATION |
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Item 1. |
34 |
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Item 2. |
34 |
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Item 6. |
35 |
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Definitions of certain terms and acronyms that appear in this report are provided below.
AMOLED |
Active-matrix organic light-emitting diode. A technology used in mobile devices. |
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ASC |
Accounting Standards Codification |
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ASU |
Accounting Standards Update |
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DNP |
Dai Nippon Printing Co., Ltd. |
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EUV |
A wafer lithography technology using the industry standard extreme ultraviolet (EUV) wavelength. EUV photomasks function by selectively reflecting or blocking light, in contrast to conventional photomasks which function by selectively transmitting or blocking light. |
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Exchange Act |
The Securities Exchange Act of 1934 (as amended) |
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FASB |
Financial Accounting Standards Board |
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Form 10-K |
Annual Report on Form 10-K |
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Form 10-Q |
Quarterly Report on Form 10-Q |
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FPDs |
Flat-panel displays, or “displays” |
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High-end (photomasks) |
For IC, photomasks that are 28nm or smaller; for FPD, AMOLED, G10.5+, and LTPS photomasks. |
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ICs |
Integrated circuits, or semiconductors |
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LIBOR |
London Inter-Bank Offered Rate |
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LTPS |
Low-Temperature Poly Silicon, a polycrystalline silicon synthesized at relatively low temperatures; polycrystalline silicon in thin-film transistors (TFTs) are used in liquid-crystal displays (LCD) flat panels and to drive organic light-emitting diode (OLED) displays. |
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MLA |
Master Lease Agreement |
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PDMCX |
Xiamen American Japan Photronics Mask Co., Ltd., a joint venture of Photronics and DNP. |
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RMB |
Chinese renminbi |
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ROU (assets) |
Right-of-use asset |
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SEC |
Securities and Exchange Commission |
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Securities Act |
The Securities Act of 1933 (as amended) |
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Wafer |
A wafer, or silicon wafer, is a thin slice of semiconductor material that, in the fabrication of microelectronics, serves as the substrate for microelectronic devices built in and upon the wafer. |
This Form 10-Q contains forward-looking statements, as defined by the SEC. The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements made by us, or on our behalf. Forward-looking statements are statements other than statements of historical fact, including, without limitation, those statements that include such words as “anticipates”, “believes”, “estimates”, “expects”, “intends”, “may”, “plans”, “predicts”, “would”, and similar expressions, and, without limitation, may address our future plans, objectives, goals, strategies, events, or performance, as well as underlying assumptions and other statements that are other than statements of historical facts. On occasion, in other documents filed with the SEC, press releases, conferences, or by other means, we may discuss, publish, disseminate, or otherwise make available, forward-looking statements, including statements contained within Item 2 – “Management’s Discussion & Analysis of Financial Condition and Results of Operations” of this Form 10-Q.
Forward-looking statements involve risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed. Our expectations, beliefs and projections are expressed in good faith and are believed by us to have a reasonable basis, including, without limitation, management’s examination of historical operating trends, information contained in our records, and information we’ve obtained from other parties. However, we can offer no assurance that our expectations, beliefs, or projections will be realized, accomplished, or achieved.
Forward-looking statements within this Form 10-Q speak only as of the date of its filing, and we undertake no obligation to update any such statements to reflect changes in events or circumstances that may subsequently occur. Users of this Report are cautioned that various factors may cause actual results to differ materially from those contained in any forward-looking statements found within this Form 10-Q and that they should not place undue reliance on any forward-looking statement. In addition, all forward-looking statements, whether written or oral and whether made by us or on our behalf, are expressly qualified by the risk factors provided in Item 1A “Risk Factors” of our Form 10-K, as well as any additional risk factors we may provide in our Quarterly Reports on Form 10-Q.
| PART I. | FINANCIAL INFORMATION |
| Item 1. | CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
PHOTRONICS, INC.
(in thousands, except per share amounts)
(unaudited)
August 1, 2021 |
October 31, 2020 |
|||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ |
$ |
||||||
Accounts receivable, net of allowance for credit losses of $ |
||||||||
Inventories |
||||||||
Other current assets |
||||||||
Total current assets |
||||||||
Property, plant and equipment, net |
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Intangible assets, net |
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Deferred income taxes |
||||||||
Other assets |
||||||||
Total assets |
$ |
$ |
||||||
LIABILITIES AND EQUITY |
||||||||
Current liabilities: |
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Short-term debt |
$ |
$ |
||||||
Current portion of long-term debt |
||||||||
Accounts payable |
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Accrued liabilities |
||||||||
Total current liabilities |
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Long-term debt |
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Other liabilities |
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Total liabilities |
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Commitments and contingencies |
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Equity: |
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Preferred stock, $ |
||||||||
Common stock, $ |
||||||||
Additional paid-in capital |
||||||||
Retained earnings |
||||||||
Accumulated other comprehensive income |
||||||||
Total Photronics, Inc. shareholders' equity |
||||||||
Noncontrolling interests |
||||||||
Total equity |
||||||||
Total liabilities and equity |
$ |
$ |
||||||
See accompanying notes to condensed consolidated financial statements.
PHOTRONICS, INC.
(in thousands, except per share amounts)
(unaudited)
Three Months Ended |
Nine Months Ended |
|||||||||||||||
August 1, 2021 |
August 2, 2020 |
August 1, 2021 |
August 2, 2020 |
|||||||||||||
Revenue |
$ |
$ |
$ |
$ |
||||||||||||
Cost of goods sold |
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Gross profit |
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Operating expenses: |
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Selling, general and administrative |
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Research and development |
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Total operating expenses |
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Other operating income, net |
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Operating income |
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Other non-operating income (expense): |
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Foreign currency transactions impact, net |
( |
) |
||||||||||||||
Interest expense, net |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||
Interest income and other income (expense), net |
||||||||||||||||
Income before income tax provision |
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Income tax provision |
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Net income |
||||||||||||||||
Net income attributable to noncontrolling interests |
||||||||||||||||
Net income attributable to Photronics, Inc. shareholders |
$ |
$ |
$ |
$ |
||||||||||||
Earnings per share: |
||||||||||||||||
Basic |
$ |
$ |
$ |
$ |
||||||||||||
Diluted |
$ |
$ |
$ |
$ |
||||||||||||
Weighted-average number of common shares outstanding: |
||||||||||||||||
Basic |
||||||||||||||||
Diluted |
||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
PHOTRONICS, INC.
(in thousands)
(unaudited)
Three Months Ended |
Nine Months Ended |
|||||||||||||||
August 1, 2021 |
August 2, 2020 |
August 1, 2021 |
August 2, 2020 |
|||||||||||||
Net income |
$ |
$ |
$ |
$ |
||||||||||||
Other comprehensive (loss) income, net of tax of $ |
||||||||||||||||
Foreign currency translation adjustments |
( |
) |
||||||||||||||
Other |
||||||||||||||||
Net other comprehensive (loss) income |
( |
) |
||||||||||||||
Comprehensive income |
||||||||||||||||
Less: comprehensive income attributable to noncontrolling interests |
||||||||||||||||
Comprehensive income attributable to Photronics, Inc. shareholders |
$ |
$ |
$ |
$ |
||||||||||||
See accompanying notes to condensed consolidated financial statements.
PHOTRONICS, INC.
(in thousands)
(unaudited)
Three Months Ended August 1, 2021 |
||||||||||||||||||||||||||||||||
Photronics, Inc. Shareholders |
||||||||||||||||||||||||||||||||
Additional Paid-in Capital |
Retained Earnings |
Treasury Stock |
Accumulated Other Comprehensive Income |
Non- controlling Interests |
Total Equity |
|||||||||||||||||||||||||||
Common Stock |
||||||||||||||||||||||||||||||||
Shares |
Amount |
|||||||||||||||||||||||||||||||
Balance at May 2, 2021 |
$ |
$ |
$ |
$ |
( |
) |
$ |
$ |
$ |
|||||||||||||||||||||||
Net income |
- |
|||||||||||||||||||||||||||||||
Other comprehensive loss |
- |
( |
) |
( |
) |
( |
) |
|||||||||||||||||||||||||
Shares issued under equity plans |
||||||||||||||||||||||||||||||||
Share-based compensation expense |
- |
|||||||||||||||||||||||||||||||
Purchase of treasury stock |
( |
) |
( |
) |
||||||||||||||||||||||||||||
Retirement of treasury stock |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||
Balance at August 1, 2021 |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||||||
Three Months Ended August 2, 2020 |
||||||||||||||||||||||||||||||||
Photronics, Inc. Shareholders |
||||||||||||||||||||||||||||||||
Common Stock |
Additional Paid-in |
Retained |
Treasury |
Accumulated Other Comprehensive |
Non- controlling |
Total |
||||||||||||||||||||||||||
Shares |
Amount |
Capital |
Earnings |
Stock |
Loss |
Interests |
Equity |
|||||||||||||||||||||||||
Balance at May 3, 2020 |
$ |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
$ |
|||||||||||||||||||||
Net income |
- |
|||||||||||||||||||||||||||||||
Other comprehensive income |
- |
|||||||||||||||||||||||||||||||
Shares issued under equity plans |
||||||||||||||||||||||||||||||||
Share-based compensation expense |
- |
|||||||||||||||||||||||||||||||
Contribution from noncontrolling interest |
- |
|||||||||||||||||||||||||||||||
Balance at August 2, 2020 |
$ |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
$ |
|||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
Nine Months Ended August 1, 2021 |
||||||||||||||||||||||||||||||||
Photronics, Inc. Shareholders |
||||||||||||||||||||||||||||||||
Additional Paid-in Capital |
Retained Earnings |
Treasury Stock |
Accumulated Other Comprehensive Income |
Non- controlling Interests |
Total Equity |
|||||||||||||||||||||||||||
Common Stock |
||||||||||||||||||||||||||||||||
Shares |
Amount |
|||||||||||||||||||||||||||||||
Balance at October 31, 2020 |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||||||
Net income |
- |
|||||||||||||||||||||||||||||||
Other comprehensive income |
- |
|||||||||||||||||||||||||||||||
Shares issued under equity plans |
||||||||||||||||||||||||||||||||
Share-based compensation expense |
- |
|||||||||||||||||||||||||||||||
Purchase of treasury stock |
( |
) |
( |
) |
||||||||||||||||||||||||||||
Retirement of treasury stock |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||
Balance at August 1, 2021 |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||||||
Nine Months Ended August 2, 2020 |
||||||||||||||||||||||||||||||||
Photronics, Inc. Shareholders |
||||||||||||||||||||||||||||||||
Common Stock |
Additional Paid-in |
Retained |
Treasury |
Accumulated Other Comprehensive |
Non- controlling |
Total |
||||||||||||||||||||||||||
Shares |
Amount |
Capital |
Earnings |
Stock |
Loss |
Interests |
Equity |
|||||||||||||||||||||||||
Balance at October 31, 2019 |
$ |
$ |
$ |
$ |
$ |
( |
) |
$ |
$ |
|||||||||||||||||||||||
Net income |
- |
|||||||||||||||||||||||||||||||
Other comprehensive income |
- |
|||||||||||||||||||||||||||||||
Shares issued under equity plans |
||||||||||||||||||||||||||||||||
Share-based compensation expense |
- |
|||||||||||||||||||||||||||||||
Purchase of treasury stock |
- |
( |
) |
( |
) |
|||||||||||||||||||||||||||
Contribution from noncontrolling interest |
- |
|||||||||||||||||||||||||||||||
Repurchase of common stock of subsidiary |
- |
( |
) |
( |
) |
|||||||||||||||||||||||||||
Balance at August 2, 2020 |
$ |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
$ |
|||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
PHOTRONICS, INC.
(in thousands)
(unaudited)
Nine Months Ended |
||||||||
August 1, 2021 |
August 2, 2020 |
|||||||
Cash flows from operating activities: |
||||||||
Net income |
$ |
$ |
||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
||||||||
Share-based compensation |
||||||||
Changes in assets and liabilities: |
||||||||
Accounts receivable |
( |
) |
( |
) |
||||
Inventories |
( |
) |
||||||
Other current assets |
( |
) |
( |
) |
||||
Accounts payable, accrued liabilities, and other |
( |
) |
||||||
Net cash provided by operating activities |
||||||||
Cash flows from investing activities: |
||||||||
Purchases of property, plant and equipment |
( |
) |
( |
) |
||||
Government incentives |
||||||||
Purchases of intangible assets |
( |
) |
( |
) |
||||
Net cash used in investing activities |
( |
) |
( |
) |
||||
Cash flows from financing activities: |
||||||||
Proceeds from debt |
||||||||
Purchases of treasury stock |
( |
) |
( |
) |
||||
Repayments of debt |
( |
) |
( |
) |
||||
Contribution from noncontrolling interest |
||||||||
Proceeds from share-based arrangements |
||||||||
Net settlements of restricted stock awards |
( |
) |
( |
) |
||||
Net cash (used in) provided by financing activities |
( |
) |
||||||
Effects of exchange rate changes on cash, cash equivalents, and restricted cash |
||||||||
Net increase in cash, cash equivalents, and restricted cash |
||||||||
Cash, cash equivalents, and restricted cash at beginning of period |
||||||||
Cash, cash equivalents, and restricted cash at end of period |
$ |
$ |
||||||
Supplemental disclosures of non-cash information: |
||||||||
Accruals for property, plant and equipment purchased during the period |
$ |
$ |
||||||
See accompanying notes to condensed consolidated financial statements.
PHOTRONICS, INC.
(unaudited)
(in thousands, except share amounts and per share data)
NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION
Photronics, Inc. (“Photronics”, “the Company”, “we”, “our”, or “us”) is one of the world's leading manufacturers of photomasks, which are high-precision photographic quartz or glass plates containing microscopic images of electronic circuits. Photomasks are a key element in the manufacture of ICs and FPDs, and are used as masters to transfer circuit patterns onto semiconductor wafers and FPD substrates during the fabrication of integrated circuits, a variety of FPDs and, to a lesser extent, other types of electrical and optical components. We currently have eleven manufacturing facilities, which are located in Taiwan (3 ), , the United States (3 ), Europe (2 ), and China (2 ). Our FPD facility in Hefei, China, commenced production in the second quarter of fiscal 2019, and our IC facility in Xiamen, China, commenced production in the third quarter of fiscal 2019.
The accompanying unaudited condensed consolidated financial statements (“the 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, adjustments, all of which are of a normal recurring nature, considered necessary for a fair presentation have been included. The financial statements include the accounts of Photronics, its wholly owned subsidiaries, and the majority-owned subsidiaries that it controls. All intercompany balances and transactions have been eliminated in consolidation.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect amounts reported in them. Estimates are based on historical experience and on various assumptions that are believed to be reasonable under the circumstances. Our estimates are 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.
In fiscal year 2021, we segregated share-based compensation activity into the two categories of Shares issued under equity plans and Share-based compensation expense in the condensed consolidated statements of equity; in previous reports, we segregated this activity into three categories. Reclassified prior period amounts have been conformed to the current period presentation.
Our business is typically impacted during the first quarter of our fiscal year by the North American, European, and Asian holiday periods, as some customers reduce their development and buying activities during those periods; consequently, operating results for interim periods are not necessarily indicative of the results that may be expected for the fiscal year ending October 31, 2021. For further information, refer to the consolidated financial statements, and notes thereto, included in our Form 10-K for the year ended October 31, 2020.
NOTE 2 - CASH, CASH EQUIVALENTS AND RESTRICTED CASH
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.
Restricted cash is included in Other assets in our August 1, 2021 and October 31, 2020, condensed consolidated balance sheets, respectively. The restrictions on these amounts are primarily related to land lease agreements and customs requirements.
The following table presents cash and cash equivalents as reported in our condensed consolidated balance sheets, as well as the sum of cash, cash equivalents and restricted cash, as reported in our condensed consolidated statements of cash flows.
August 1, 2021 |
October 31, 2020 |
|||||||
Cash and cash equivalents |
$ |
$ |
||||||
Restricted Cash |
||||||||
$ |
$ |
|||||||
NOTE 3 - INVENTORIES
August 1, 2021 |
October 31, 2020 |
|||||||
Raw materials |
$ |
$ |
||||||
Work in process |
||||||||
Finished goods |
||||||||
$ |
$ |
|||||||
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net consists of the following:
August 1, 2021 |
October 31, 2020 |
|||||||
Land |
$ |
$ |
||||||
Buildings and improvements |
||||||||
Machinery and equipment |
||||||||
Leasehold improvements |
||||||||
Furniture, fixtures and office equipment |
||||||||
Construction in progress |
||||||||
Accumulated depreciation and amortization |
( |
) |
( |
) |
||||
$ |
$ |
|||||||
ROU assets resulting from finance leases are included in the table above as follows:
August 1, 2021 |
October 31, 2020 |
|||||||
Machinery and equipment |
$ |
$ |
||||||
Accumulated amortization |
( |
) |
||||||
$ |
$ |
|||||||
Depreciation and amortization expense for property, plant and equipment (including amortization expense for ROU assets) was $21.7 million and $66.6 million for the three and nine-month periods ended August 1, 2021, respectively, and $22.1 million and $67.6 million for the three and nine-month periods ended August 2, 2020, respectively.
In the third quarter of fiscal 2021, we recorded a $3.5 million gain on the trade-in of a lithography tool with a tool vendor as partial compensation for a more advanced tool.
NOTE 5 - PDMCX JOINT VENTURE
In January 2018, Photronics, Inc. through its wholly owned Singapore subsidiary (hereinafter, within this Note “we”, “Photronics”, “us”, or “our”), and DNP, through its wholly owned subsidiary “DNP Asia Pacific PTE, Ltd.” entered into a joint venture under which DNP obtained a 49.99 % interest in our IC business in Xiamen, China. The joint venture, which we refer to as “PDMCX”, was established to develop and manufacture photomasks for leading-edge and advanced-generation semiconductors. We entered into this joint venture to enable us to compete more effectively for the merchant photomask business in China, and to benefit from the additional resources and investment that DNP provides to enable us to offer advanced-process technology to our customers. No gain or loss was recorded upon the formation of this joint venture.
The minimum combined investment per the PDMCX operating agreement (the “Agreement”), was $160 million. As of August 1, 2021, Photronics and DNP had each contributed cash of approximately $65 50 million. As discussed in Note 6, liens were granted to the local financing entity on assets with an August 1, 2021, total carrying value of $91.3 million, as collateral for the loans.
Under the Agreement, DNP is afforded, under certain circumstances, the right to put its interest in PDMCX to Photronics. These circumstances include disputes regarding the strategic direction of PDMCX that may arise after the initial two-year term of the Agreement and 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 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 business days of obtaining required approvals and clearance.
We recorded net income from the operations of PDMCX of $1.8 million, and $4.0 million during the three and nine-month periods ended August 1, 2021, respectively, and losses of $0.8 million and $4.8 million during the three and nine-month periods ended August 2, 2020, respectively. General creditors of PDMCX do not have recourse to the assets of Photronics (other than the net assets of PDMCX), and our maximum exposure to loss from PDMCX at August 1, 2021, was $60.9 million.
As required by the guidance in Topic 810 - “Consolidation” of the ASC, we evaluated our involvement in PDMCX for the purpose of determining whether we should consolidate its results in our financial statements. The initial step of our evaluation was to determine whether PDMCX was a variable interest entity (“VIE”). Due to its lack of sufficient equity at risk to finance its activities without additional subordinated financial support, we determined that it was 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 year reporting periods; thus, as required, the PDMCX financial results have been consolidated with Photronics. Our conclusion was based on the facts 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 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 reporting periods were based on our right to appoint the majority of its board of directors, which has, among others, the powers to manage the business (through its rights to appoint and evaluate PDMCX’s management), incur indebtedness, enter into agreements and commitments, and acquire and dispose of PDMCX’s assets. In addition, as a result of the 50.01 % variable interest we held during the current and prior-year periods, we had the obligation to absorb losses, and the right to receive benefits, that could potentially be significant to PDMCX.
The carrying amounts of PDMCX assets and liabilities included in our condensed consolidated balance sheets are presented in the following table, together with our exposure to loss related to these assets and liabilities.
August 1, 2021 |
October 31, 2020 |
|||||||||||||||
Classification |
Carrying Amount |
Photronics Interest |
Carrying Amount |
Photronics Interest |
||||||||||||
Current assets |
$ |
$ |
$ |
$ |
||||||||||||
Non-current assets |
||||||||||||||||
Total assets |
||||||||||||||||
Current liabilities |
||||||||||||||||
Non-current liabilities |
||||||||||||||||
Total liabilities |
||||||||||||||||
Net assets |
$ |
$ |
$ |
$ |
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NOTE 6 - DEBT
Short-term debt was $0.0 million, and $4.7 million as of August 1, 2021 and October 31, 2020, respectively. The 2020 amount represents an advance payment under an MLA to fund equipment purchased or leased in the U.S., and short duration borrowings in Xiamen, China, to fund operations. See below for further information. The weighted-average interest rate on our short-term debt as of October 31, 2020 was 2.02 %.
The tables below provide information on our long-term debt.
As of August 1, 2021 |
Xiamen Project Loans |
Xiamen Working Capital Loans |
Hefei Equipment Loan |
Finance Leases |
Total |
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Principal due: |
||||||||||||||||||||
Next 12 months |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||
Months 13 – 24 |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||
Months 25 – 36 |
||||||||||||||||||||
Months 37 – 48 |
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