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PDMCX JOINT VENTURE | 9 Months Ended
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Jul. 30, 2023
PDMCX JOINT VENTURE [Abstract] |
PDMCX JOINT VENTURE | 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 semiconductors. We entered into this joint venture to enable us to compete more effectively for the merchant photomask business in China, and to benefit from the additional resources and investment that DNP provides to enable us to offer advanced-process technology to our customers. In 2020, in combination with local financing obtained by PDMCX, Photronics and DNP fulfilled their investment obligations under the PDMCX operating agreement (“the Agreement”). As discussed in Note 6, liens were granted to the local financing entity on property, plant, and equipment and were paid off during fiscal year 2023. These liens had an October 31, 2022, total carrying value of $70.7 million, as collateral for the loans. Under the Agreement, DNP is afforded, under certain circumstances, the right to put its interest in PDMCX to Photronics. 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 six consecutive months. Under all such circumstances, the sales of ownership interests would be at the exiting party’s ownership percentage of the joint venture’s net book value, with closing to take place within three business days of obtaining required approvals and clearance. The following table presents net income we recorded from the operations of PDMCX during the reporting periods.
| Three Months Ended |  |  | Nine Months Ended |
| July 30, 2023 |  | July 31, 2022 |  |  | July 30, 2023 |  |  | July 31, 2022 |
Net income from PDMCX |  | $ | 7,130 |  |  | $ | 5,356 |  |  | $ | 19,700 |  |  | $ | 12,129 |
As required by the guidance in Topic 810 - “Consolidation” of the Accounting Standards Codification (“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 following table presents the carrying amounts of PDMCX assets and liabilities included in our condensed consolidated balance sheets. General creditors of PDMCX do not have recourse to the assets of Photronics (other than the net assets of PDMCX); therefore, our maximum exposure to loss from PDMCX is our interest in the carrying amount of the net assets of the joint venture.
|  | July 30, 2023 |  |  | October 31, 2022 |
Classification |  | Carrying Amount |  |  | Photronics Interest |  |  | Carrying Amount |  |  | Photronics Interest |
Current assets |  | $ | 133,729 |  |  | $ | 66,878 |  |  | $ | 127,542 |  |  | $ | 63,784 |
Noncurrent assets |  |  | 142,718 |  |  |  | 71,373 |  |  |  | 119,392 |  |  |  | 59,708 |
Total assets |  |  | 276,447 |  |  |  | 138,251 |  |  |  | 246,934 |  |  |  | 123,492 |
Current liabilities |  |  | 46,517 |  |  |  | 23,263 |  |  |  | 51,274 |  |  |  | 25,643 |
Noncurrent liabilities |  |  | 1,468 |  |  |  | 734 |  |  |  | 9,161 |  |  |  | 4,581 |
Total liabilities |  |  | 47,985 |  |  |  | 23,997 |  |  |  | 60,435 |  |  |  | 30,224 |
Net assets |  | $ | 228,462 |  |  | $ | 114,254 |  |  | $ | 186,499 |  |  | $ | 93,268 |

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- Definition The entire disclosure for a variable interest entity (VIE), including but not limited to, judgments and assumptions in determining whether to consolidate and in identifying the primary beneficiary, gain (loss) recognized on the initial consolidation of the VIE, terms of arrangements, amounts and classification of the VIE's assets and liabilities, and the entity's maximum exposure to loss. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 810 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//810/tableOfContent + Details
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