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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
                                               


FORM 10-Q

x

     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

    

For the quarterly period ended May 4, 2003

     

OR

o

     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          

PHOTRONICS, INC.

(Exact name of registrant as specified in its charter)

Connecticut
(State or other jurisdiction
of incorporation of organization
)

                                                                        

06-0854886
(IRS Employer
Identification Number)

15 Secor Road, Brookfield, Connecticut 06804

(Address of principal executive offices and zip code)

(203) 775-9000

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:    None

Securities registered pursuant to Section 12(g) of the Act:   Common Stock, $0.01 par value per share


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 12b-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.

Class

                                    

Outstanding at June 2, 2003

Common Stock, $0.01 par value

                                 

32,086,546 Shares


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 November 3, 2002. Any forward looking statements should be considered in light of these factors.

-2-


PHOTRONICS, INC.
AND SUBSIDIARIES

INDEX

          

  

                                  

    

Page

       

    

                                                                                 

   


PART I.

FINANCIAL INFORMATION

   

   

   

Item 1.

 

Condensed Consolidated Financial Statements

   

   

 

 

                                                                                  

 

    

 

 

Condensed Consolidated Balance Sheets at
May 4, 2003 (unaudited) and November 3, 2002

 


4

 

 

                                                                                      

 

 

 

 

Condensed Consolidated Statements of Operations
for the Three and Six Months Ended
May 4, 2003 (unaudited) and April 30, 2002 (unaudited)

 



5

 

 

                                                                               

 

 

 

 

Condensed Consolidated Statements of Cash Flows
for the Six Months Ended
May 4, 2003 (unaudited) and April 30, 2002 (unaudited)

 



6

 

 

                                                                                   

 

 

 

 

Notes to Condensed Consolidated Financial Statements
(unaudited)

 


7 - 12

  

  

                                                                                         

  

  

Item 2.

 

Management's Discussion and Analysis of
Results of Operations and Financial Condition

 


12 - 17

 

 

              

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

17 - 18

    

    

Item 4.

Controls and Procedures

18

           

   

   

 

     

 

 

PART II.

   

OTHER INFORMATION

 

  

 

 

 

 

 

Item 4.

Submission of Matters to a Vote of Security Holders

19

 

 

 

Item 6.

 

Exhibits and Reports on Form 8-K

 

19

-3-


PART I.     FINANCIAL INFORMATION

                                                                                         

Item 1.        Condensed Consolidated Financial Statements

PHOTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands, except per share amounts)

May 4,
2003

November 3,
2002

                                                                                                               


      


(unaudited)

ASSETS

                                                                        

              

      

              

Current assets:

  Cash and cash equivalents

$243,272 

$113,944 

   Short-term investments

15,791 

15,148 

   Accounts receivable, net

61,630 

62,545 

   Inventories

17,285 

19,948 

   Deferred income taxes and other current assets

38,140 

37,475 



    Total current assets

376,118 

249,060 

                                                                                                    

Property, plant and equipment, net

389,464 

443,860 

Intangible and other assets

140,334 

139,522 



$905,916 

$832,442 



LIABILITIES AND SHAREHOLDERS' EQUITY

                                                                       

Current liabilities:

   Current portion of long-term debt

$   8,081 

$  10,649 

   Accounts payable

40,719 

57,401 

   Other accrued liabilities

38,583 

38,982 



     Total current liabilities

87,383 

107,032 

                                            

Long-term debt

433,791 

296,785 

Deferred income taxes and other liabilities

43,724 

44,539 

Minority interest

48,877 

44,971 

                                                                        

Shareholders' equity:

  Preferred stock, $0.01 par value,

     2,000 shares authorized, none issued and outstanding

   Common stock, $0.01 par value,

     150,000 shares authorized, 32,082 shares issued and outstanding

     at May 4, 2003 and 32,033 shares issued and outstanding

     at November 3, 2002

321 

320 

   Additional paid-in capital

196,229 

195,588 

   Retained earnings

105,805 

158,363 

   Accumulated other comprehensive loss

(10,111)

(14,999)

   Deferred compensation on restricted stock

(103)

(157)



     Total shareholders' equity

292,141 

339,115 



$905,916 

$832,442 



                                                                 

See accompanying notes to condensed consolidated financial statements.

 

 

 

-4-


PHOTRONICS, INC. AND SUBSIDIARIES

                                    

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

                                       

(unaudited)

                                       

Three Months Ended

    

Six Months Ended

                                            


 



                                                

May 4,
2003

    

April 30,
2002

   

 May 4,
2003

    

April 30,
2002

                            





 

 

 

 

 

 

 

 

Net sales

$  85,548 

$103,057 

$166,942 

$198,743 

                                    

 

      

 

 

Costs and expenses:

 

 

 

 

 

 

 

            

 

 

 

 

 

 

 

  Cost of sales

62,808 

 

71,319 

 

126,564 

 

139,073 

         

 

 

 

 

 

 

 

  Selling, general and administrative

14,612 

14,656 

28,985 

28,501 

          

 

 

 

 

 

 

 

  Research and development

7,531 

7,451 

15,153 

14,584 

 

 

 

 

 

 

 

 

  Consolidation, restructuring and related charges

42,000 

 

 

42,000 

 

          





    Operating income (loss)

(41,403)

 

9,631 

 

(45,760)

 

16,585 

     

 

 

 

 

 

 

 

Other expenses, net

(3,298)

 

(4,122)

 

(6,328)

 

(7,191)

           


 


 


 


    Income (loss) before income taxes and minority interest

(44,701)

 

5,509 

 

(52,088)

 

9,394 

         

 

 

 

 

 

 

 

Income tax provision (benefit)

(1,874)

 

800 

 

(2,371)

 

1,300 

         





    Income (loss) before minority interest

(42,827)

 

4,709 

 

(49,717)

 

8,094 

         

 

 

 

 

 

 

 

Minority interest

(1,243)

 

(2,190)

 

(2,840)

 

(3,828)

         





    Net income (loss)

$(44,070)

 

$   2,519

 

$(52,557)

 

$   4,266 

         





Earnings (loss) per share:

 

 

 

 

 

 

 

           

 

 

 

 

 

 

 

     Basic

$  (1.37)

$  0.08 

$  (1.64)

$  0.14 

            





     Diluted

$  (1.37)

$  0.08 

$  (1.64)

$  0.14 

            





Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

           

 

 

 

 

 

 

 

     Basic

32,053 

 

30,833 

 

32,045 

 

30,573 

         





     Diluted

32,053 

 

31,909 

 

32,045 

 

31,556 

           


 


 


 


   

   

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

 

 

 

-5-


PHOTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

Six Months Ended


May 4,
2003

April 30,
2002



Cash flows from operating activities:

              

       

                

     Net income (loss)

$(52,557)

$  4,266 

     Adjustments to reconcile net income (loss)
         to net cash provided by operating activities:

             Depreciation and amortization

43,576 

39,918 

             Consolidation, restructuring and related charges

42,000 

             Changes in assets and liabilities:

 

                  Accounts receivable

1,499 

(1,931)

                  Inventories

2,899 

(287)

                 Other current assets

1,008 

(341)

                 Accounts payable and other

(20,334)

2,578 



Net cash provided by operating activities

18,091 

44,203 



Cash flows from investing activities:

     Deposits on and purchases of property,
        plant and equipment


(17,638)


(68,702)

    Other

(938)

139 



Net cash used in investing activities

(18,576) 

(68,563)



Cash flows from financing activities:

       Repayments of long-term debt, net

(17,267)

(62,884)

       Proceeds from issuance of common stock

335 

1,075 

       Proceeds from issuance of convertible debt, net

145,170 

193,431 



Net cash provided by financing activities

128,238 

131,622 



Effect of exchange rate changes on cash flows

1,575 



Net increase in cash and cash equivalents

129,328 

107,269 

Cash and cash equivalents at beginning of period

113,944 

34,684 



Cash and cash equivalents at end of period

$243,272 

$141,953 



 

See accompanying notes to condensed consolidated financial statements.

-6-


PHOTRONICS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Three Months and Six Months Ended May 4, 2003 and April 30, 2002
(unaudited)

NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION

     Photronics, Inc. and its subsidiaries (the "Company" or "Photronics") manufacture 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 are used as masters to transfer circuit patterns onto semiconductor wafers during the fabrication of integrated circuits and, to a lesser extent, other types of electrical components. The Company operates principally from nine 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 November 2, 2003. 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 November 3, 2002.

NOTE 2 - COMPREHENSIVE INCOME

      The following table summarizes comprehensive income for the three and six months ended May 4, 2003 and April 30, 2002 (in thousands):

                                                       

           

Three Months Ended

         

Six Months Ended

                                                      

       


 


                                                      

        

May 4,
2003

      

April 30,
2002

 

May 4,
2003

       

April 30,
2002

                                                                  



 


 


     

    

  

   

Net income (loss) 

$(44,070)

 

$  2,519 

 

$(52,557)

 

$  4,266 

                                                      

 

 

 

 

 

Other comprehensive income:

 

 

 

 

   Unrealized gains (losses) on investments

425 

 

(1,306)

 

403 

 

(1,182)

   Foreign currency translation adjustments

(5,154)

 

2,289 

 

4,484 

 

1,843 

   Net change in cash flow hedges

 

 

 

(690)

                                                      


 


 


 


                                                      

(4,729)

 

983 

 

4,887 

 

(29)

                                                      


 


 


 


Total comprehensive income (loss)

$(48,799)

 

$  3,502 

 

$(47,670)

 

$  4,237 

                                                     


 


 


 


NOTE 3 - EARNINGS (LOSS) PER SHARE

      Earnings (loss) per share ("EPS") amounts are calculated in accordance with the provisions of Statement of Financial Standards ("SFAS") No. 128, "Earnings Per Share." Basic EPS is based on the weighted average number of common shares outstanding for the period, excluding any dilutive common share equivalents. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted.

     A reconciliation of basic and diluted EPS for the three and six months ended May 4, 2003 and April 30, 2002, respectively, follows (in thousands, except per share amounts):

-7-


                                      

Net
Income
(Loss)

    

Average
Shares
Outstanding

     

Earnings (Loss)
Per
Share

                                      


   


 


Three Months

 

 

 

 

 

 

 

 

 

 

 

2003:

    

   

     

   

   

Basic and diluted (a)

$(44,070)

32,053 

$(1.37)

                                       




2002:

 

 

 

 

 

Basic

$   2,519 

 

30,883 

 

$  0.08 

                                      

 

 

 

 

 

Effect of potential dilution from
 exercise of stock options (b)



1,026 


                                     




Diluted

$   2,519 

31,909 

$  0.08 

                                      




 

 

 

 

 

 

 

 

 

 

 

 

                                         

Net
Income
(Loss)

    

Average
Shares
Outstanding

   

Earnings (Loss)
Per
Share

                                      


   


 


Six Months

 

 

 

 

 

 

 

 

 

 

 

2003:

    

   

     

 

   

Basic and diluted (a)

$(52,557)

 

32,045 

 

$(1.64)

                                            




2002:

 

 

 

 

 

Basic

$   4,266 

30,573 

$  0.14 

                                          

 

 

 

 

 

Effect of potential dilution from
 exercise of stock options (b)


 


983 

 


                                                   


 


 


Diluted

$   4,266 

 

31,556 

 

$  0.14 

                                         




(a)  The effect of stock options and the conversion of the Company's convertible notes for the three and six months ended May 4, 2003 is anti-dilutive. If the assumed exercise of stock options and conversion of convertible subordinated notes had been dilutive, the incremental additional shares outstanding would have been 9,755 and 8,728 for the three and six months ended May 4, 2003, respectively.

(b)  The effect of the conversion of the Company's convertible notes for the three and six months ended April 30, 2002 is anti-dilutive. If the assumed conversion of convertible subordinated notes had been dilutive, the incremental additional shares outstanding would have been 9,098 and 7,747 for the three and six months ended April 30, 2002, respectively.

NOTE 4 - LONG-TERM DEBT

     On April 15, 2003 the Company sold $150.0 million, 2.25% convertible subordinated notes due 2008 in a private offering pursuant to SEC Rule 144A. Those notes are convertible into the Company's common stock at a conversion price of $15.89 per share. Net proceeds from the issuance amounted to approximately $145.2 million. On June 2, 2003 a portion of the net proceeds were used to redeem the $62.1 million of the Company's outstanding 6% convertible subordinated notes due 2004. Pursuant to the terms of the agreement, the 6% convertible subordinated notes were redeemed at 100.8571% of the principal amount plus accrued interest of $1.9 million for an aggregate redemption price of $64.5 million, including a premium of $0.5 million.

     The Company's $100 million revolving credit facility (the "credit facility") which expires July 2005, was amended April 9, 2003 to relax certain financial covenants and definitions as a result of the Company's March 2003 consolidation plan and April 2003 issuance of $150.0 million convertible subordinated notes.

-8-


NOTE 5 - CONSOLIDATION, RESTRUCTURING AND RELATED CHARGES

     In March 2003, the Company initiated a plan to 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 the total charge, $34.2 million was non-cash.  Components of the charge include $3.4 million for workforce reductions, $4.4 million for facility lease payments, and $34.2 million non-cash charges for the impairment of the carrying value of fixed assets.

     In August 2002, the Company initiated a consolidation plan that included the ceasing of photomask manufacturing at its Milpitas, California site and a reduction of its workforce in the United States. The total charge associated with this plan was $14.5 million which included $2.5 million for workforce reduction, $1.5 million for facility lease payments, and $10.5 million 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. 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 charges expended were $35.9 million and $37.8 million for the three and six months ended May 4, 2003, respectively. These charges relate to severance and benefits for terminated employees and non-cancelable facility lease payments. From the dates the above three plans were initiated through May 4, 2003, the Company has expended, including non-cash charges, $84.4 million.

     The following table sets forth the Company's restructuring reserves as of May 4, 2003 and reflects the activity affecting the reserve for the three and six months ending May 4, 2003:


Three Months Ended

 

 

May 4, 2003

 

 


 

 

February 2,

    

 

    

 

    

May 4,

 

 

2003

 

 

 

 

 

2003

 

 

Balance

 

Charges

 

Credits

 

Balance

 

 


 


 


 


Manufacturing capacity reduction
  and other

 


$ 3,619

 


$38,575

 


$(35,042)

 


$ 7,152

                   

Workforce reductions

 

   454

 

 3,425

 

     (862)

 

 3,017

 

 


 


 


 


Total

 

$ 4,073

 

$42,000

 

$(35,904)

 

$10,169





 

 

 

 

 

 

Six Months Ended

 

 

May 4, 2003

 

 


 

 

November 3,

 

 

 

 

 

May 4,

 

 

2002

 

 

 

 

 

2003

 

 

Balance

 

Charges

 

Credits

 

Balance

 

 


 


 


 


Manufacturing capacity reduction
  and other

 


$ 4,268

 


$38,575

 


$(35,691)

 


$ 7,152

                                   

Workforce reductions

 

 1,691

 

 3,425

 

 (2,099)

 

 3,017

 

 


 


 


 


Total

 

$ 5,959

 

$42,000

 

$(37,790)

 

$10,169





-9-


     The Company anticipates that substantially all of the $3.0 million relating to workforce reductions will be paid by the end of the fiscal year 2003. Non-cancelable lease obligations of $7.2 million will be paid over the respective lease terms through 2009.

     For the three and six months ended April 30, 2002, the Company expended $1.0 million and $2.6 million respectively, for severance and benefits for terminated employees and non-cancelable facility lease payments. From the date these plans were initiated, until April 30, 2002, the Company has expended $33.1 million.

     The following table sets forth the Company's restructuring reserves as of April 30, 2002 and reflects the activity affecting the reserve for the three and six months ending April 30, 2002:

 

 

Three Months Ended

 

 

April 30, 2002

 

 


 

 

January 31,

    

 

    

 

     

April 30,

 

 

2002

 

 

 

 

 

2002

 

 

Balance

 

Charges

 

Credits

 

Balance

 

 


 


 


 


Manufacturing capacity reduction
  and other

 


$3,880


-

 


$(713)

 


$3,167

                                    

Workforce reductions

 

2,107

 

-

 

(276)

 

1,831

 

 





Total

 

$5,987

-

 

$(989)

 

$4,998





 

 

 

 

 

 

 

 

Six Months Ended

 

 

April 30, 2002

 

 


 

 

October 31,

 

 

 

 

 

April 30,

 

 

2001

 

 

 

 

 

2002

 

 

Balance

 

Charges

 

Credits

 

Balance

 

 


 


 


 


Manufacturing capacity reduction
  and other

 


$4,990

 


-

 


$(1,823)

 


$3,167

                         

Workforce reductions

 

2,567

-

 

(736)

 

1,831

 

 


 


 


 


Total

 

$7,557

 

-

 

$(2,559)

 

$4,998





     Effective November 4, 2002, the Company adopted SFAS No.'s 144 "Accounting for the Impairment or Disposal of Long-Lived Assets" and 146 "Accounting for Costs Associated with Exit or Disposal Activities."  The adoption of SFAS No.'s 144 and 146 did not have a material impact on the Company's financial statements for the three or six months ended May 4, 2003.

NOTE 6 - STOCK-BASED COMPENSATION

     In December 2002, the Financial Accounting Standards Board ("FASB") issued SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure, an amendment of FASB Statement No. 123." SFAS No. 148 became effective for the Company's second quarter of fiscal year 2003, and requires quarterly disclosure of pro-forma stock compensation information.

     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 APB Opinion No. 25, "Accounting for Stock Issued to Employees,"and related Interpretations. No stock-based employee compensation cost is reflected in net income (loss), as all options granted under those plans had an exercise price equal to the market value of

-10-


the underlying common stock on the date of grant. The following table illustrates the effect on net income (loss) and earnings per share if the Company had applied the fair value recognition provisions of FASB Statement No. 123, "Accounting for Stock-Based Compensation," to stock-based employee compensation.

 

 

Three Months Ended

     

Six Months Ended

 

 


 


 

 

May 4,

    

April 30,

 

May 4,

    

April 30,

 

 

2003

 

2002

 

2003

 

2002

 

 


 


 


 


 

 

 

 

 

 

 

 

 

Reported net income (loss)

 

$(44,070)

 

$ 2,519 

 

$(52,557)

 

$ 4,266 

 

 

 

 

 

 

 

 

 

Effect of total stock-based
  employee compensation expense
  determined under fair value based
  method for all awards, net of
  related tax effects

 





(1,213)

 





(1,155)

 





(2,611)

 





(1,884)

 

 


 


 


 


Pro forma net income (loss)

 

$(45,283)

 

$ 1,364 

 

$(55,168)

 

$ 2,382 





Reported earnings (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Basic and diluted - as reported

 

$(1.37)

 

$ 0.08 

 

$(1.64)

 

$ 0.14 

 

 

 

 

 

 

 

 

 

  Basic and diluted - pro forma

 

$(1.41)

 

$ 0.04 

 

$(1.72)

 

$ 0.08 

     In preparing the above quarterly disclosures of pro-forma stock compensation information for 2002, the Company identified certain stock options issued from 2000 - 2002 which were inadvertently not included in the Company's Black-Scholes options pricing model (the "model") utilized for the pro-forma disclosure in the Company's 2002 Annual Report on Form 10-K. These options were, however, properly disclosed as granted. The exclusion of these options in the model had no effect on the Company's previously reported consolidated balance sheets as of November 3, 2002 and October 31, 2001 and the consolidated statements of operations, shareholders' equity and cash flows for the three years ended November 3, 2002, October 31, 2001 and October 31, 2000. The Company expects to file an amended 2002 Annual Report on Form 10-K as soon as practicable. The following table summarizes changes in previously reported footnote information:

Year Ended


                                                      

November 3,
2002

    

October 31,
2001

     

October 31,
2000

                                          


   


 


                             

      

      

     

Reported net income (loss)

$(4,857)

$(4,026)

$10,176 

 

 

 

 

 

 

Previously reported effect of total
  stock-based employee compensation
  expense determined under fair value
  based method for all awards, net of
  related tax effects





(100)

   





(400)

   





(1,400)

                   

  Adjustment

(3,972)

(2,819)

  (1,301)




Pro-forma net income (loss), as adjusted

$(8,929)

     

$(7,245)

    

$ 7,475 

                       




Pro-forma diluted earnings (loss) per share:

  As previously reported

$(0.16)

$(0.14)

$0.29 

  As adjusted

$(0.29)

 

$(0.24)

$0.25 

-11-


NOTE 7 - INCOME TAXES

     The income tax provision (benefit) differs from the amount computed by applying the United States statutory rate of 35% to income (loss) before income taxes due to the Company's reduced tax rates in certain Asian jurisdictions and valuation allowances for certain deferred tax assets resulting from net operating loss carryforwards.

NOTE 8 - OTHER RECENT ACCOUNTING PRONOUNCEMENTS

     In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 supersedes previous guidance for financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This statement applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and (or) the normal operation of a long-lived asset.

     In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." SFAS 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under Statement 133. This statement is effective for contracts entered into or modified after June 30, 2003.  Management is currently evaluating the provisions of this statement, and does not believe that it will have a significant impact on the Company's consolidated financial statements.

     In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." This statement requires than an issuer classify financial instruments that are within its scope as a liability.  Many of those instruments were classified as equity under previous guidance.  Most of the guidance in SFAS No. 150 is effective for all financial instruments entered into or modified after May 31, 2003, and otherwise effective at the beginning of the first interim period beginning after June 15, 2003.  Management is currently evaluating the provisions of this statement, and does not believe that it will have an impact on the Company's consolidated financial statements.

     In November 2002, the FASB issued FASB Interpretation ("FIN") No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." FIN No. 45 clarifies and expands existing disclosure requirements for guarantees, including loan guarantees.

     In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest Entities - an Interpretation of Accounting Research Bulletin No. 51." FIN No. 46 clarifies rules for consolidation of special purpose entities.

     SFAS No. 143 and FIN No's. 45 and 46 became effective for the Company's financial statements for fiscal year 2003. These statements did not have a material impact on its consolidated financial statements.

Item 2.    Management's Discussion and Analysis of Results
                of Operations and Financial Condition

Overview

      In 2001, the Company completed the acquisition of a majority equity interest (approximately 51%) in PKL LTD. ("PKL"), a leading Korean photomask supplier, for  $56 million. In April 2002, the Company acquired an additional 28% of PKL in exchange for 1,212,218 shares of Photronics common stock. In the six month period ended May 4, 2003, PKL stock options were exercised which changed the Company's total majority equity interest to approximately 78%. The acquisition was accounted for as a purchase and accordingly goodwill in the aggregate of $69.4 million was recorded. The operating results of PKL have been included in the Company's consolidated statements of operations since August 27, 2001.

     In August 2002, the Company implemented a plan to reduce its operating cost structure by reducing its workforce in the United States by approximately 135 employees and by ceasing the manufacture of photomasks at its Milpitas, California facility. Total consolidation and related charges of $14.5 million were recorded in the fourth quarter of 2002. Of the total charge, $10.5 million was non-cash for the impairment in carrying value of fixed assets, $2.5 million of cash

-12-


charges for severance and benefits for terminated employees that will be paid during their entitlement periods and $1.5 million of cash charges for facilities closing costs as well as lease termination costs.

     In March 2003, the Company initiated a plan to 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 the total charge, $34.2 million was non-cash.  Components of the charge include $3.4 million for workforce reductions, $4.4 million for facility lease payments, and $34.2 million non-cash charges for the impairment of the carrying value of fixed assets.

     The Company's growth in recent years has been affected by the rapid technological changes taking place in the semiconductor industry resulting in a greater mix of high-end photomask requirements for more complex integrated circuit designs. During the latter half of 2001 and continuing through fiscal 2003, the Company has been impacted by the downturn in the semiconductor industry which resulted in decreased demand and increased competitive pricing pressures. The Company cannot predict the duration of such cyclical industry conditions or their impact on its future operating results.

     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.

Material Changes in Results of Operations
Three and Six Months ended May 4, 2003 versus April 30, 2002

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

                                                                   

       

Three Months Ended

      

Six Months Ended

                                                       


 


                                                       

May 4,
2003

         

April 30,
2002

          

May 4,
2003

       

April 30,
2002

                                                       


 


 


 


                                                       

 

 

 

 

Net sales 

100%

 

100% 

 

100% 

 

100%

                                                       

 

 

 

Cost of sales

73.4 

 

69.2 

 

75.8 

 

70.0 

 


 


 


 


Gross margin 

26.6 

 

30.8 

 

24.2 

 

30.0 

                                                       

 

 

 

Selling, general and administrative expenses

17.1 

 

14.2 

 

17.4 

 

14.3 

                                                       

 

 

 

Research and development expenses

8.8 

 

7.3 

 

9.1 

 

7.4 

 

 

 

 

Consolidation, restructuring and related charges

49.1 

 

 

25.1 

 

 


 


 


 


Operating income (loss)

(48.4%)

 

9.3%

 

(27.4%)

 

8.3%

                                                           


 


 


 


     Net sales for the three months ended May 4, 2003 decreased 17.0% to $85.5 million as compared to $103.1 million for the three months ended April 30, 2002. Net sales for the six months ended May 4, 2003 decreased 16.0% to $166.9 million as compared to $198.7 million for the six months ended April 30, 2002. For the three and six months ended May 4, 2003, by geographic area, net sales in Asia increased $3.3 million and $9.1 million, respectively, to $34.9 million and $68.8 million, respectively; North American sales decreased $20.2 million and $41.7 million, to $34.9 million and $68.0 million, respectively; and European sales decreased $0.7 million to $15.7 million for the three months, but increased $0.8 million to $30.1 million for the six months ended May 4, 2003. The decrease in sales was attributable to a slow-down in new design releases, due in part, to decreased end user demand, both consumer and corporate, for devices utilizing semiconductors and continued increased competitive pricing pressures for mature products as compared to the prior year periods. Design releases were also negatively impacted in 2003 by increased fab closures during the North American, European and Asian holiday periods.

-13-


     Gross margins decreased to 26.6% and 24.2% for the three and six months ended May 4, 2003, respectively, as compared to 30.8% and 30.0% for the three and six months ended April 30, 2002, respectively. The decrease is primarily associated with the decreased utilization of the Company's expanded fixed equipment cost base, due in part, to decreased demand associated with fewer designs released into production, increased wafer fab closures during the holiday periods in 2003 and competitive pricing pressures for mature product technologies.

     Selling, general and administrative expenses decreased 0.3% to $14.6 million and increased 1.7% to $29.0 million for the three and six months ended May 4, 2003, respectively, compared with $14.7 million and $28.5 million for the same periods in the prior fiscal year. As a percentage of net sales, selling, general and administrative expenses increased to 17.1% and 17.4% for the three and six month periods ended May 4, 2003, respectively, compared with 14.2% and 14.3% for the same periods in the prior fiscal year.

      Research and development expenses increased 1.1% to $7.5 million and 3.9% to $15.2 million for the three and six months ended May 4, 2003, respectively, compared with $7.5 million and $14.6 million for the same periods in the prior fiscal year.  As a percentage of net sales, research and development expenses increased to 8.8% and 9.1 % for the three and six months ended May 4, 2003, respectively, compared with 7.3% and 7.4% for the same periods in the prior fiscal year. The increase is attributable to the continuing global development efforts of high-end process technologies for advanced, sub wavelength reticle solutions in Next Generation Lithography applications, which include the Company's five installed nano-technology line tool sets.

     Net other expenses of $3.3 million and $6.3 million for the three and six months ended May 4, 2003, respectively, decreased $0.8 million and $0.9 million, respectively. Net other expense is primarily comprised of interest expense, interest income and foreign currency gains or losses.

     The income tax benefit of $1.9 million and $2.4 million for the three and six months ended May 4, 2003, respectively, as compared to an income tax provision of $0.8 million and $1.3 million for the three and six months ended April 30, 2002, respectively. The Company's effective tax benefit rate for the three and six months ended May 4, 2003 was lower than the United States statutory rate of 35% due to reduced tax rates in certain Asian jurisdictions and valuation allowances for certain deferred tax assets generated by net operating loss carryforwards.

     Minority interest for the three and six months ended May 4, 2003 was $1.2 million and $2.8 million, respectively, as compared to $2.2 million and $3.8 million for the three and six months ended April 30, 2002, respectively, and reflects the minority interest in earnings of the Company's subsidiaries in Taiwan and Korea.

     Net loss was $44.1 million, or $1.37 per basic and diluted share and $52.6 million, or $1.64 per basic and diluted share for the three and six months ended May 4, 2003, respectively. As compared to net income of $2.5 million and $4.3 million or $0.08 and $0.14 per basic and diluted share for the three and six months ended April 30, 2002, respectively. The net loss for the three and six months ended May 4, 2003 include the effect of the consolidation and related charges amounting to $39.9 million after tax, or $1.24 per diluted share.

Liquidity and Capital Resources

     On April 15, 2003 the Company sold $150.0 million of its 2.25% convertible subordinated notes due 2008 in a private offering pursuant to SEC Rule 144A. Those notes are convertible into the Company's common stock at a conversion price of $15.89 per share. Net proceeds from the issuance amounted to approximately $145.2 million. On June 2, 2003 a portion of the net proceeds were used to redeem all $62.1 million of the Company's outstanding 6% convertible subordinated notes due 2004. Pursuant to the terms of the agreement, the 6% convertible subordinated notes were redeemed at 100.8571% of the principal amount plus accrued interest of $1.9 million for an aggregate redemption price of $64.5 million.

     The Company's working capital at May 4, 2003 was $288.7 million compared with $142.0 million at November 3, 2002. Cash, cash equivalents and short-term investments at May 4, 2003 were $259.1 million compared to $129.1 million at November 3, 2002 as a result of the sale of $150.0 million convertible subordinated notes in April 2003. Cash provided by operating activities was $18.1 million for the six months ended May 4, 2003, as compared to $44.0 million for the six months ended April 30, 2002, primarily due to the net loss incurred, increased depreciation and amortization, and the timing of progress payments to vendors, primarily for equipment which was accrued for at November 3, 2002. Cash used

-14-


in investing activities was $18.6 million, primarily comprised of capital expenditures, for the six months ended May 4, 2003. The Company expects capital expenditures for fiscal 2003 to be approximately $60.0 million. Cash provided by financing activities was $128.2 million for the six months ended May 4, 2003 primarily due from net proceeds from the issuance of convertible debt of $145.2 million offset by the Company's repayment of long-term debt.  On June 2, 2003, the Company redeemed the remaining $62.1 million 6% subordinated convertible notes due 2004.

     The Company's $100 million revolving credit facility (the "credit facility") which expires July 2005, was amended April 9, 2003 to relax certain financial covenants and definitions as a result of the Company's March 2003 consolidation plan and April 2003 issuance of $150.0 million convertible subordinated notes.

     The Company's commitments represent investments in additional manufacturing capacity as well as advanced equipment for the production of high-end photomasks. As of May 4, 2003, Photronics had commitments outstanding for capital expenditures of approximately $34.3 million. Additional commitments for capital expenditures are expected to be incurred during the remainder of fiscal 2003. The Company will continue to use its working capital to finance its capital expenditures. Photronics believes that its currently available resources, together with its capacity for growth and its access to other debt and equity financing sources, are sufficient to satisfy its currently planned capital expenditures, as well as its anticipated working capital requirements for the foreseeable future.

Contractual Cash Obligations and Other Commercial Commitments and Contingencies

     The following tables quantify the Company's future contractual obligations as of May 4, 2003 (in millions):

Contractual Obligations

                  

     

Payments Due in Fiscal

               

 


                  

 

Total

 

2003

 

2004 & 2005

 

2006 & 2007

 

Thereafter

                 

 


 


 


 


 


Long-term debt

$441.9

 

$ 5.7

 

$81.8

 

$204.4

 

$150.0

                  

 

 

 

 

Operating leases

8.4

 

1.9

 

3.6

 

2.0

 

0.9

                   

 

 

 

 

Unconditional purchase
  obligations


46.1

 


36.6

 


7.6

 


1.9

 


-

                 






Total

$496.4

 

$44.2

 

$93.0

 

$208.3

 

$150.9

                






     Payments due in 2004 and 2005 include the Company's $62.1 million 6% convertible subordinated notes which were redeemed by the Company on June 1, 2003.

Application of Critical Accounting Policies

     The Company's condensed consolidated financial statements are based on the selection and application of significant accounting policies, which require management to make significant estimates and assumptions. The Company believes that the following are some of the more critical judgment areas in the application of our accounting policies that affect its financial condition and results of operations.

     Consolidation

     The condensed consolidated financial statements include the accounts of Photronics, Inc. and its majority-owned subsidiaries ("Photronics" or the "Company"), in which the Company exercises control. All significant intercompany balances and transactions have been eliminated in consolidation.

-15-


     Estimates and Assumptions

     The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect amounts reported in them. Actual results may differ from such estimates.

     Derivative Investments and Hedging Activities

     The Company records derivatives on the condensed consolidated balance sheets as assets or liabilities, measured at fair value. Gains or losses resulting from changes in the values of those derivatives are reported in the condensed consolidated statements of operations or as accumulated other comprehensive income (loss), a separate component of shareholders' equity, depending on the use of the derivatives and whether they qualify for hedge accounting. In order to qualify for hedge accounting, the derivative must be highly effective in achieving offsetting changes in fair value or cash flows of the hedged items during the term of the hedge.

     Property, Plant and Equipment

     Property, plant and equipment is stated at cost less accumulated depreciation and amortization. Repairs and maintenance as well as renewals and replacements of a routine nature are charged to operations as incurred, while those which improve or extend the lives of existing assets are capitalized. Upon sale or other disposition, the cost of the asset and accumulated depreciation are eliminated from the accounts, and any resulting gain or loss is reflected in income.

     For financial reporting purposes, depreciation and amortization are computed on the straight-line method over the estimated useful lives of the related assets. Buildings and improvements are depreciated over 15 to 40 years, machinery and equipment over 3 to 10 years and furniture, fixtures and office equipment over 3 to 5 years. Leasehold improvements are amortized over the life of the lease or the estimated useful life of the improvement, whichever is less. The Company periodically reviews property, plant, and equipment for any potential impairment in carrying value.

     Business Acquisitions

     Assets, including acquired identifiable intangibles, and liabilities acquired in business combinations are recorded at their estimated fair values at the acquisition date.  At May 4, 2003, the Company had approximately $115.9 million of goodwill, representing the cost of acquisitions in excess of the fair values assigned to the underlying net assets of acquired companies.  In accordance with SFAS No. 142, goodwill and intangible assets deemed to have indefinite lives are not amortized, but are subject to annual impairment testing.  The assessment of goodwill involves the estimation of the fair value of the Company's "reporting unit," as defined by SFAS No. 142.  Management completes this assessment annually and based on information available as of the latest assessment date determined that no impairment existed.

     Income Taxes

     The provision for income taxes is computed on the basis of condensed consolidated financial statement income or loss. Deferred income taxes reflect the tax effects of differences between the carrying amounts of assets and liabilities for financial reporting and the amounts used for income tax purposes. In the event the Company determines that future taxable income is not expected to be sufficient, a valuation allowance for deferred income tax assets may be required.

     Foreign Currency Translation

     The Company's foreign subsidiaries maintain their accounts in their respective local currencies. Assets and liabilities of such subsidiaries are translated to U.S. dollars at month-end exchange rates. Income and expenses are translated at average rates of exchange prevailing during the year. Foreign currency translation adjustments are accumulated and reported as other comprehensive income (loss) as a separate component of shareholders' equity. The effects of changes in exchange rates on foreign currency transactions are included in income.

     Revenue Recognition

     The Company recognizes revenue upon shipment of goods to customers.

-16-


Effect of New Accounting Standards

     In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 supersedes previous guidance for financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This statement applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and (or) the normal operation of a long-lived asset.

     Effective November 4, 2002, the Company adopted SFAS No's. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" and 146, "Accounting for Costs Associated with Exit or Disposal Activities," and effective February 3, 2003 adopted SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure, an Amendment of FASB Statement No. 123."  The adoption of these statements did not have a material impact on the Company's financial statements.

     In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." SFAS 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under Statement 133. This statement is effective for contracts entered into or modified after June 30, 2003.  Management is currently evaluating the provisions of this statement, and does not believe that it will have a significant impact on the Company's consolidated financial statements.

     In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." This statement requires than an issuer classify financial instruments that are within its scope as a liability.  Many of those instruments were classified as equity under previous guidance.  Most of the guidance in SFAS No. 150 is effective for all financial instruments entered into or modified after May 31, 2003, and otherwise effective at the beginning of the first interim period beginning after June 15, 2003.  Management is currently evaluating the provisions of this statement, and does not believe that it will have an impact on the Company's consolidated financial statements.

     In November 2002, the FASB issued FIN No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." FIN No. 45 clarifies and expands existing disclosure requirements for guarantees, including loan guarantees.

     In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest Entities - an Interpretation of Accounting Research Bulletin No. 51." FIN No. 46 clarifies rules for consolidation of special purpose entities.

     SFAS No.'s 143, FIN No's. 45 and 46 become effective for the Company's financial statements for fiscal year 2003. The Company does not expect the adoption of these statements to have a material impact on its consolidated financial statements.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

     The Company records derivatives on the balance sheet as assets or liabilities, measured at fair value. Gains or losses resulting from changes in the values of those derivatives are reported in the condensed consolidated statement of operations or as accumulated other comprehensive income (loss), a separate component of shareholders' equity, depending on the use of the derivatives and whether they qualify for hedge accounting. In order to qualify for hedge accounting, the derivative must be highly effective in achieving offsetting changes in fair value or cash flows of the hedged items during the term of the hedge. In general, the types of risks hedged are those relating to the variability of future cash flows caused by movements in foreign currency exchange rates. The Company documents its risk management strategy and hedge effectiveness at the inception of and during the term of each hedge.

     In the fourth quarter of fiscal year 2002, the Company entered into an interest rate swap contract (the "Contract"), which effectively converted $100 million of its 4.75% fixed rate convertible notes to a variable rate. Contract payments are made on a LIBOR based variable rate (2.61% at May 4, 2003) and are received at the 4.75% fixed rate. The Contract is used to adjust the proportion of total debt that is subject to fixed interest rates. This Contract is considered to be a hedge against changes in the fair value of the Company's fixed rate debt obligation. Accordingly, the Contract has been reflected at fair value in the Company's consolidated balance sheet and the related portion of fixed rate debt being hedged is

-17-


reflected at an amount equal to the sum of its carrying value plus an adjustment representing the change in fair value of the debt obligation attributable to the interest rate risk being hedged. In addition, changes during any accounting period in the fair value of the Contract, as well as offsetting changes in the adjusted carrying value of the related portion of fixed rate debt being hedged, are recognized as adjustments to interest expense in the Company's consolidated statement of operations. The net effect of this accounting on the Company's operations results is that the interest expense portion of fixed rate debt being hedged is generally recorded based on variable rates.

Foreign Currency Exchange Rate Risk

      The Company conducts business in several major international currencies through its worldwide operations and is subject to changes in foreign exchange rates of such currencies. Changes in exchange rates can positively or negatively affect the Company's sales, gross margins and retained earnings. The Company attempts to minimize currency exposure risk by producing its products in the same country or region in which the products are sold and thereby generating revenues and incurring expenses in the same currency and by managing its working capital; there can be no assurance that this approach will be successful, especially in the event of a significant and sudden decline in the value of any of the international currencies of the Company's worldwide operations. The Company does not engage in purchasing forward exchange contracts for speculative purposes. The Company does not believe that a 10% change in exchange rates would have a material effect on its consolidated financial position, results of operations or cash flows.

Interest Rate Risk

     The majority of the Company's borrowings are in the form of its convertible subordinated notes, which bear interest rates ranging from 2.25% to 6.0% (subsequent to May 4, 2003, the Company's $62.1 million, 6% convertible subordinated notes were redeemed by the Company) and certain foreign secured and unsecured notes payable which bear interest between approximately 1.3% and 6.95%. In addition, the interest rate swap contract discussed above subjects the Company to market risk as interest rates fluctuate and impact the interest payments due on the $100 million notional amount of the contract. The Company does not expect changes in interest rates to have a material effect on income or cash flows in 2003 although there can be no assurances that interest rates will not change significantly. The Company does not believe that a 10% change in interest rates would have a material effect on its consolidated financial position, results of operations or cash flows.

Item 4 - Controls and Procedures

Evaluation of Disclosure Controls and Procedures

      Within the 90 days prior to the date of this report, the Company performed an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. The Company's disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in its periodic SEC filings is recorded, processed and reported within the time periods specified in the SEC's rules and forms. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective.

Changes in Internal Controls

     There were no significant changes in the Company's internal controls or in other factors that could significantly affect internal controls subsequent to the date of their evaluation.

-18-


PART II.  OTHER INFORMATION

Item 4.

     

Submission of Matters to a Vote of Security Holders

     

  

  

    

    

    

    

   

(a)

The matters set forth in this Item 4 were submitted to a vote of security holders of
the Company at an Annual Meeting of Shareholders held on March 26, 2003.

   

   

   

   

   

   

   

   

(b)

The following directors, constituting the entire Board of Directors, were elected at
the Annual Meeting of Shareholders held on March 26, 2003. Also indicated are
the affirmative, negative and authority withheld votes for each director.

 

           


For

     


Against

    

Authority
Withheld

 

     


 


 


Daniel Del Rosario

23,797,724

 

-

 

4,342,738

Walter M. Fiederowicz

      

26,181,471

 

-

 

1,958,991

Joseph A. Fiorita, Jr.

     

26,210,246

 

-

 

1,930,216

Constantine S. Macricostas

     

23,626,079

 

-

 

4,514,383

George Macricostas

     

26,135,646

 

-

 

2,004,816

Willem D. Maris

     

26,216,766

 

-

 

1,923,696

Michael J. Yomazzo

     

26,211,691

 

-

 

1,928,771

Item 6.

   

Exhibits and Reports on Form 8-K

 

 

 

 

 

 

      

 

(a)

   

Exhibits

   

     

  

  

 

  

  

  

  

     

   

 

   

Exhibit
Number

   


Description

       

      

 

  

      

    

    

     

    

 

   

10.1

   

Second Amendment Agreement Dated as of April 9, 2003 among Photronics, Inc., The
Borrowing Subsidiaries Party Hereto, The Guarantors Party Hereto, The Lenders Party
Hereto and JPMorgan Chase Bank, as Administrative Agent.

       

   

 

   

    

   

   

   

   

 

   

99.1

   

Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.

       

    

 

  

   

   

   

       

   

 

  

99.2

   

Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.

   

   

   

   

   

   

   

  

  

(b)

  

Report on Form 8-K

       

    

  

  

   

   

   

       

  

  

  

  (i)

  

Form 8-K dated February 25, 2003.

       

  

  

  

  

  

  

   

  

  

  

  

  

Form 8-K dated April 2, 2003.

  

  

  

  

  

  

  

  

  

  

  

  

  

Form 8-K dated April 22, 2003.

  

  

  

  

  

  

  

  

  

  

  

  

  

Form 8-K dated May 8, 2003

  

  

  

  

  

  

  

  

  

  

  

  

  

Form 8-K dated May 20, 2003.

  

  

  

  

  

  

  

  

  

  

  

  

  

Form 8-K dated June 4, 2003.

-19-


SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Photronics, Inc.

(Registrant)

               

                         

By:

/s/ SEAN T. SMITH


Sean T. Smith

Vice President

Chief Financial Officer

(Duly Authorized Officer and

Principal Financial Officer)

Date:  June 16, 2003

-20-


CERTIFICATIONS

 

 

I, Daniel Del Rosario:

          

1.

I have reviewed this quarterly report on Form 10-Q of Photronics, Inc.

 

2.

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report.

 

3.

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report.

 

4.

The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

 

      

a)  

designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

 

     

b)   

evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

 

     

c)  

presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date.

 

5.

The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

 

      

a)    

all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

 

     

b)   

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls.

 

6.

The registrants other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

      

June 16, 2003

                                     

/s/ DANIEL DEL ROSARIO

   

                        

                                    


    

                                          

                                     

Daniel Del Rosario
Chief Executive Officer

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I, Sean T. Smith, certify that:

 

 

1.

I have reviewed this quarterly report on Form 10-Q of Photronics, Inc.

 

2.

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report.

 

3.

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report.

 

4.

The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

 

 

a)

designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

 

 

b)

evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

 

 

c)

presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date.

 

5.

The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

 

      

a)     

all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

 

 

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls.

 

6.

The registrants other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

      

June 16, 2003

                                            

/s/ SEAN T. SMITH

   

                          

                         


    

                      

                          

Sean T. Smith
Chief Financial Officer

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