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SHARE-BASED COMPENSATION | 12 Months Ended
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Oct. 31, 2024
SHARE-BASED COMPENSATION [Abstract] |
SHARE-BASED COMPENSATION | NOTE 12 - SHARE-BASED COMPENSATION In March 2016, shareholders approved the Company’s current equity incentive compensation plan (“the Plan”), under which incentive stock options, non-qualified stock options, stock grants, stock-based awards, restricted stock, restricted stock units, stock appreciation rights, performance units, performance stock, and other stock or cash awards may be granted. Shares to be issued under the Plan may be authorized and unissued shares, issued shares that have been reacquired by the Company (in the open market or in private transactions), or a combination thereof. The maximum number of shares of common stock approved that may be issued under the Plan was four million shares. On March 16, 2023, at its annual meeting of shareholders, the shareholders of Photronics, Inc., approved amendments to the Plan to increase the number of shares available for issuance by an additional one million shares, thereby increasing the shares available for issuance under the Plan from four million to five million. Awards may be granted to officers, employees, directors, consultants, advisors, and independent contractors of Photronics or its subsidiaries. In the event of a change in control (as defined in the Plan) or at the discretion of the compensation committee; the vesting of awards may be accelerated. The Plan, aspects of which are more fully described below, prohibits further awards from being issued under prior plans. The table below presents information on the Company’s share-based compensation expenses for the three most recent fiscal years.
|  | Year Ended |
|  | October 31, 2024 |  |  | October 31, 2023 |  |  | October 31, 2022 |
Expense reported in: |  |  |  |  |  |  |  |  |
Cost of goods sold |  | $ | 2,704 |  |  | $ | 1,259 |  |  | $ | 868 |
Selling, general, and administrative |  |  | 10,124 |  |  |  | 5,962 |  |  |  | 4,803 |
Research and development |  |  | 1,062 |  |  |  | 780 |  |  |  | 637 |
Total expense incurred |  | $ | 13,890 |  |  | $ | 8,001 |  |  | $ | 6,308 |
Expense by award type: |  |  |  |  |  |  |  |  |  |  |  |
Restricted stock awards * |  | $ | 13,868 |  |  | $ | 7,909 |  |  | $ | 5,800 |
Stock options |  |  | - |  |  |  | 1 |  |  |  | 298 |
Employee stock purchase plan |  |  | 22 |  |  |  | 91 |  |  |  | 210 |
Total expense incurred |  | $ | 13,890 |  |  | $ | 8,001 |  |  | $ | 6,308 |
Income tax benefits of share-based compensation |  | $ | 1,156 |  |  | $ | 715 |  |  | $ | 449 |
* During the year ended October 31, 2024, upon the departure of two executives from the Company and in accordance with the terms of their separation agreements, previously granted time-vesting restricted stock awards accelerated vesting. The Company accounted for the effects of the accelerated vesting of these stock awards as a modification, and recognized $1.2 million of incremental stock-based compensation for the acceleration of restricted stock awards, within selling, general and administrative expenses on the Consolidated Statements of Income for the year ended October 31, 2024. Restricted Stock Awards We periodically grant restricted stock awards, the restrictions on which typically lapse over a service period of one to four years. The fair values of the awards are determined on the date of grant, based on the closing stock price of the Company’s common stock. A summary of restricted stock award activity during 2024 and the status of the Company’s restricted stock awards as of October 31, 2024, is presented below.
Restricted Stock |  | Shares |  |  | Weighted-Average Fair Value at Grant Date |
Outstanding at October 31, 2023 |  |  | 1,238,297 |  |  | $ | 16.27 |
Granted |  |  | 865,050 |  |  |  | 29.50 |
Vested |  |  | (550,069 | ) |  |  | 17.74 |
Cancelled |  |  | (129,676 | ) |  |  | 21.90 |
Outstanding at October 31, 2024 |  |  | 1,423,602 |  |  |  | 23.23 |
Expected to vest as of October 31, 2024 |  |  | 1,292,883 |  |  |  | 23.14 |
The table below presents additional information on the Company’s restricted stock awards for the three most recent fiscal years.
|  | Year Ended |
|  | October 31, 2024 |  |  | October 31, 2023 |  |  | October 31, 2022 |
Number of shares granted |  |  | 865,050 |  |  |  | 791,925 |  |  |  | 654,224 |
Weighted-average grant-date fair value of awards (in dollars per share) |  | $ | 29.50 |  |  | $ | 16.84 |  |  | $ | 18.73 |
Compensation costs not yet recognized |  | $ | 21,303 |  |  | $ | 12,760 |  |  | $ | 8,949 |
Weighted-average amortization period (in years) |  |  | 2.8 |  |  |  | 2.8 |  |  |  | 2.7 |
Fair value of awards for which restrictions lapsed |  | $ | 9,755 |  |  | $ | 6,256 |  |  | $ | 5,212 |
Shares outstanding at balance sheet date |  |  | 1,423,602 |  |  |  | 1,238,297 |  |  |  | 893,704 |
Stock Options Option awards generally vest in one to four years and have a ten-year contractual term. All incentive and non-qualified stock option grants must have an exercise price no less than the market value of the underlying common stock on the date of grant. The grant-date fair values of options are based on closing prices of the Company’s common stock on the dates of grant and are calculated using the Black-Scholes option pricing model. Expected volatility is based on the historical volatility of the Company’s common stock. The Company uses historical option exercise behavior and employee termination data to estimate expected term, which represents the period of time that options granted are expected to remain outstanding. The risk-free rate of return for the estimated term of an option is based on the U.S. Treasury yield curve in effect at the date of grant. The table below presents a summary of stock options activity during 2024 and information on stock options outstanding at October 31, 2024.
|  | Shares |  |  | Weighted-Average Exercise Price |  | Weighted-Average Remaining Contractual Life |  | Aggregate Intrinsic Value |
Outstanding at October 31, 2023 |  |  | 472,275 |  |  | $ | 10.18 |  |  |  |  |
Granted |  |  | - |  |  | $ | - |  |  |  |  |
Exercised |  |  | (191,650 | ) |  | $ | 9.86 |  |  |  |  |
Cancellations, forfeitures, and adjustments |  |  | (3,000 | ) |  | $ | 10.43 |  |  |  |  |
Outstanding at October 31, 2024 |  |  | 277,625 |  |  | $ | 10.39 |  | 1.94 years |  | $ | 3,445 |
Exercisable at October 31, 2024 |  |  | 277,625 |  |  | $ | 10.39 |  | 1.94 years |  | $ | 3,445 |
Expected to vest as of October 31, 2024 |  |  | - |  |  | $ | - |  | - years |  | $ | - |
The table below presents additional information on stock option awards for the three most recent fiscal years.
|  | Year Ended |
|  | October 31, 2024 |  |  | October 31, 2023 |  |  | October 31, 2022 |
Number of options granted in period |  |  | - |  |  |  | - |  |  |  | - |
Total intrinsic value of options exercised |  | $ | 2,981 |  |  | $ | 1,654 |  |  | $ | 5,108 |
Cash received from option exercises |  | $ | 1,888 |  |  | $ | 1,101 |  |  | $ | 5,275 |
Compensation cost not yet recognized |  | $ | - |  |  | $ | - |  |  | $ | 13 |
Weighted-average amortization period for cost not yet recognized (in years) |  |  | - |  |  |  | - |  |  |  | 0.2 |
Employee Stock Purchase Plan The Company’s Employee Stock Purchase Plan (“ESPP”) permits employees to purchase Photronics, Inc. common shares at 85% of the lower of the closing market price at the commencement or ending date of the Plan year (which is approximately one year from the commencement date). The Company recognizes the ESPP expense over that same period. As of October 31, 2024, the maximum number of shares of common stock approved by the Company’s shareholders to be purchased under the ESPP was 1.85 million shares, of which approximately 1.6 million shares had been issued through October 31, 2024. As of October 31, 2024, there is unrecognized compensation cost of $0.2 million.

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