XML 25 R14.htm IDEA: XBRL DOCUMENT
v3.19.2

REVENUE | 9 Months Ended
--- | ---
Jul. 28, 2019
REVENUE [Abstract] |
REVENUE | NOTE 6 - REVENUE We adopted Accounting Standards Update 2014-09 and all subsequent amendments which are collectively codified in Accounting Standards Codification Topic 606 - “Revenue from Contracts with Customers” (“Topic 606”) - on November 1, 2018, under the modified retrospective transition method, only with respect to contracts that were not complete as of the date of adoption. This approach required prospective application of the guidance with a cumulative effect adjustment to retained earnings to reflect the impact of the adoption on contracts that were not complete as of the date of the adoption. In accordance with the modified retrospective transition method, the results of the prior year period presented have not been adjusted for the effects of Topic 606. Under Topic 606, we recognize revenue when, or as, control of a good or service transfers to a customer, in an amount that reflects the consideration to which we expect to be entitled in exchange for transferring those goods or services, whereas, prior to our adoption of Topic 606, we recognized revenue when we shipped to customers or, under some arrangements, when the customers received the goods. The following tables present the impacts of our adoption of Topic 606 on our July 28, 2019, condensed consolidated balance sheet, and condensed consolidated statements of income for the three and nine months ended July 28, 2019, and cash flows for the nine-months ended July 28, 2019. Condensed Consolidated Balance Sheet July 28, 2019
|  | As Reported |  |  | Adjustments |  |  | Balance without Adoption of Topic 606 |
Assets |  |  |  |  |  |  |  |  |
Accounts receivable |  | $ | 134,369 |  |  | $ | (363 | ) |  | $ | 134,006 |
Inventory |  |  | 39,982 |  |  |  | 4,744 |  |  |  | 44,726 |
Other current assets |  |  | 38,434 |  |  |  | (6,209 | ) |  |  | 32,225 |
Deferred income taxes |  |  | 17,498 |  |  |  | 103 |  |  |  | 17,601 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |
Accrued liabilities |  | $ | 65,236 |  |  | $ | 743 |  |  | $ | 65,979 |
Deferred income taxes |  |  | 518 |  |  |  | (326 | ) |  |  | 192 |
Equity |  |  |  |  |  |  |  |  |  |  |  |
Photronics, Inc. shareholders’ equity |  | $ | 763,394 |  |  | $ | (1,728 | ) |  | $ | 761,666 |
Noncontrolling interests |  |  | 136,944 |  |  |  | (414 | ) |  |  | 136,530 |
Condensed Consolidated Statement of Income Three Months Ended July 28, 2019
|  | As Reported |  |  | Adjustments |  |  | Balance without Adoption of Topic 606 |
Revenue |  | $ | 138,112 |  |  | $ | 340 |  |  | $ | 138,452 |
Cost of goods sold |  |  | 107,542 |  |  |  | 87 |  |  |  | 107,629 |
Gross profit |  |  | 30,570 |  |  |  | 253 |  |  |  | 30,823 |
Provision for taxes |  |  | 3,218 |  |  |  | (15 | ) |  |  | 3,203 |
Net income |  |  | 9,834 |  |  |  | 238 |  |  |  | 10,072 |
Noncontrolling interests |  |  | 3,487 |  |  |  | 53 |  |  |  | 3,540 |
Income attributable to Photronics, Inc. shareholders |  | $ | 6,347 |  |  | $ | 185 |  |  | $ | 6,532 |
Condensed Consolidated Statement of Income Nine Months Ended July 28, 2019
|  | As Reported |  |  | Adjustments |  |  | Balance without Adoption of Topic 606 |
Revenue |  | $ | 394,404 |  |  | $ | (2,180 | ) |  | $ | 392,224 |
Cost of goods sold |  |  | 311,721 |  |  |  | (987 | ) |  |  | 310,734 |
Gross profit |  |  | 82,683 |  |  |  | (1,193 | ) |  |  | 81,490 |
Provision for taxes |  |  | 7,883 |  |  |  | (149 | ) |  |  | 7,734 |
Net income |  |  | 27,454 |  |  |  | (1,044 | ) |  |  | 26,410 |
Noncontrolling interests |  |  | 7,361 |  |  |  | (300 | ) |  |  | 7,061 |
Income attributable to Photronics, Inc. shareholders |  | $ | 20,093 |  |  | $ | (744 | ) |  | $ | 19,349 |
Condensed Consolidated Statement of Cash Flows Nine Months Ended July 28, 2019
|  | As Reported |  |  | Adjustments |  |  | Balance without Adoption of Topic 606 |
Net Income |  | $ | 27,454 |  |  | $ | (1,044 | ) |  | $ | 26,410 |
Changes in operating accounts: |  |  |  |  |  |  |  |  |  |  |  |
Accounts receivable |  | $ | (14,185 | ) |  | $ | (223 | ) |  | $ | (14,408 | )
Inventories |  |  | (15,083 | ) |  |  | (1,268 | ) |  |  | (16,351 | )
Other current assets |  |  | (9,406 | ) |  |  | 1,926 |  |  |  | (7,480 | )
Accounts payable, accrued liabilities, and other |  |  | (25,663 | ) |  |  | 609 |  |  |  | (25,054 | )
We account for an arrangement as a revenue contract when each party has approved and is committed to perform under the contract, the rights of the contracting parties regarding the goods or services to be transferred and the payment terms are identifiable, the arrangement has commercial substance, and collection of consideration is probable. Substantially all of our revenue comes from the sales of photomasks. We typically contract with our customers to sell sets of photomasks (referred to as “mask sets”), which are comprised of multiple layers, the predominance of which we invoice as they ship to customers. As the photomasks are manufactured to customer specifications, they have no alternative use to us and, as our contracts generally provide us with the right to payment for work completed to date, we recognize revenue as we perform, or “over time” on most of our contracts. We measure our performance to date using an input method, which is based on our estimated costs to complete the various manufacturing phases of a photomask. At the end of a reporting period, there will be a number of revenue contracts on which we have performed; for any such contracts that we are entitled to be compensated for our costs incurred plus a reasonable profit, we recognize revenue and a corresponding contract asset for such performance. We account for shipping and handling activities that we perform after a customer obtains control of a good as being activities to fulfill our promise to transfer the good to the customer, rather than as promised services, or performance obligations, under the contract. As stated above, photomasks are manufactured in accordance with proprietary designs provided by our customers; thus, they are individually unique. Due to their uniqueness and other factors, their transaction prices are individually established through negotiations with customers; consequently, our photomasks do not have standard or “list” prices. The transaction prices of the vast majority of our revenue contracts include only fixed amounts of consideration. In certain instances, such as when we offer a customer an early payment discount, an estimate of variable consideration would be included in the transaction price, but only to the extent that a significant reversal of revenue would not occur when the uncertainty related to the variability is resolved. Contract Assets, Contract Liabilities and Accounts Receivable We recognize a contract asset when our performance under a contract precedes our receipt of consideration from a customer, or before payment is due, and our receipt of consideration is conditional upon factors other than the passage of time. Contract assets reflect our transfer of control to customers of photomasks that are in process or completed but not yet shipped. A receivable is recognized when we have an unconditional right to payment for our performance, which generally occurs when we ship the photomasks. Our contract assets primarily consist of a significant amount of our work-in-process inventory and fully manufactured photomasks which have not yet shipped, for which we have an enforceable right to collect consideration (including a reasonable profit) in the event the in-process orders are cancelled by customers. On an individual contract basis, we net contract assets with contract liabilities (deferred revenue) for financial reporting purposes. Our contract assets and liabilities are typically classified as current, as our production cycle and our lead times are both under one year. Contract assets of $6.2 million are included in “Other” current assets, and contract liabilities of $10.2 million are included in “Other” current liabilities in our July 28, 2019 condensed consolidated balance sheet. At November 1, 2018, our date of adoption of Topic 606, we had contract assets of $4.6 million and contract liabilities of $7.8 million. We did not impair any contract assets during the nine-month period ended July 28, 2019, and, during the respective three and nine-month periods ended July 28, 2019, we recognized $0.8 million and $1.1 million of revenue from the settlement of contract liabilities that existed at the beginning of those periods. We generally record our accounts receivable at their billed amounts. All outstanding past due customer invoices are reviewed during, and at the end of, every period for collectibility. To the extent we believe a loss on the collection of a customer invoice is probable, we record the loss and credit the allowance for doubtful accounts. In the event that an amount is determined to be uncollectible, we charge the allowance for doubtful accounts and derecognize the related receivable. Credit losses incurred on our accounts receivable during the nine-month period ended July 28, 2019 were immaterial. Our invoice terms generally range from net thirty to ninety days, depending on both the geographic market in which the transaction occurs and our payment agreements with specific customers. In the event that our evaluation of a customer’s business prospects and financial condition indicate that the customer presents a collectibility risk, we require payment in advance of performance. We have elected the practical expedient allowed under Topic 606 that permits us not to adjust a contract’s promised amount of consideration to reflect a financing component when the period between when we transfer control of goods or services to customers and when we are paid is one year or less. In instances when we are paid in advance of our performance, we record a contract liability and, as allowed under the practical expedient in Topic 606, recognize interest expense only if the period between when we receive payment from the customer and the date when we expect to be entitled to the payment is greater than one year. Historically, advance payments we’ve received from customers have not preceded the completion of our performance obligations by more than one year. Disaggregation of Revenue The following tables present our revenue for the three and nine-month periods ended July 28, 2019, disaggregated by product type, geographic location, and timing of recognition.
Revenue by Product Type |  | Three Months Ended July 28, 2019 |  |  | Nine Months Ended July 28, 2019 |
IC |  |  |  |  |  |
High-end |  | $ | 38,460 |  |  | $ | 111,455 |
Mainstream |  |  | 61,725 |  |  |  | 182,197 |
Total IC |  | $ | 100,185 |  |  | $ | 293,652 |
FPD |  |  |  |  |  |  |  |
High-end |  | $ | 25,939 |  |  | $ | 70,361 |
Mainstream |  |  | 11,988 |  |  |  | 30,391 |
Total FPD |  | $ | 37,927 |  |  | $ | 100,752 |
|  | $ | 138,112 |  |  | $ | 394,404 |
Revenue by Geographic Location |  |  |  |  |
Taiwan |  | $ | 61,273 |  |  | $ | 175,482 |
Korea |  |  | 37,120 |  |  |  | 110,395 |
United States |  |  | 25,364 |  |  |  | 74,579 |
Europe |  |  | 7,937 |  |  |  | 24,725 |
China |  |  | 5,963 |  |  |  | 7,693 |
Other |  |  | 455 |  |  |  | 1,530 |
|  | $ | 138,112 |  |  | $ | 394,404 |
Revenue by Timing of Recognition |  |  |  |  |
Over time |  | $ | 122,938 |  |  | $ | 362,078 |
At a point in time |  |  | 15,174 |  |  |  | 32,326 |
|  | $ | 138,112 |  |  | $ | 394,404 |
Contract Costs We pay commissions to third party sales agents for certain sales that they obtain for us. However, the bases of the commissions are the transaction prices of the sales, which are completed in less than one year; thus, no relationship is established with a customer that will result in future business. Therefore, we would not recognize any portion of these sales commissions as costs of obtaining a contract, nor do we currently foresee other circumstances under which we would recognize such assets. Remaining Performance Obligations As we are typically required to fulfill customer orders within a short time period, our backlog of orders is generally not in excess of one to two weeks for IC photomasks and two to three weeks for FPD photomasks. As allowed under Topic 606, we have elected not to disclose our remaining performance obligations, which represent the costs associated with the completion of the manufacturing process of in-process photomasks related to contracts that have an original duration of one year or less. Sales and Similar Taxes We report our revenue net of any sales or similar taxes we collect on behalf of governmental entities. Product Warranty Our photomasks are sold under warranties that generally range from 1 to 24 months. We warrant that our photomasks conform to customer specifications, and will typically repair, replace, or issue a refund, at our option, any photomasks that fail to do so. The warranties do not represent separate performance obligations in our revenue contracts. Historically, customer claims under warranty have been immaterial.

X
- References No definition available. + Details
Name: | us-gaap_RevenueFromContractWithCustomerAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -URI http://asc.fasb.org/topic&trid=49130388 + Details
Name: | us-gaap_RevenueFromContractWithCustomerTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration