PHOTRONICS INCPLAB
PHOTRONICS INC Income Taxes Disclosure
NOTE 14 – INCOME TAXES
On December 15, 2022, the European Union (EU) Member States formally adopted the EU’s Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the Organization
for Economic Co-operation and Development (OECD) Pillar Two Framework. The EU effective dates are January 1, 2024, and January 1, 2025, for different aspects of the directive. A significant number of other countries are expected to continue
to implement similar legislation with varying effective dates.
The Company is currently subject to Pillar Two, but we estimate that the financial impact is immaterial. We will continue to monitor further developments to determine any potential impact in the countries in
which we operate.
Income before the income tax provisions consists of the following:
|
Year Ended
|
||||||||||||
|
October 31,
2025
|
October 31,
2024
|
October 31,
2023
|
||||||||||
|
United States
|
$
|
10,225 |
$
|
20,145 |
$
|
(1,737 |
)
|
|||||
|
Foreign
|
211,559 |
227,270 |
271,683 |
|||||||||
|
$
|
221,784 |
$
|
247,415 |
$
|
269,946 |
|||||||
Income Tax Provision
The components of our income tax provisions are presented below.
|
Year Ended
|
||||||||||||
|
October 31,
2025
|
October 31,
2024
|
October 31,
2023
|
||||||||||
|
Current:
|
||||||||||||
|
Federal
|
$
|
- |
$
|
- |
$
|
- |
||||||
|
State
|
60 |
95 |
14 |
|||||||||
|
Foreign
|
48,658 |
64,861 |
71,225 |
|||||||||
| 48,718 |
64,956 |
71,239 |
||||||||||
|
Deferred:
|
||||||||||||
|
Federal
|
(14,320 |
)
|
- |
- |
||||||||
|
State
|
(731 |
)
|
13 |
12 |
||||||||
|
Foreign
|
(2,117 |
)
|
(1,402 |
)
|
(939 |
)
|
||||||
| (17,168 |
)
|
(1,389 |
)
|
(927 |
)
|
|||||||
|
Total
|
$
|
31,550 |
$
|
63,567 |
$
|
70,312 |
||||||
The table below presents a reconciliation of income taxes calculated by applying the statutory U.S. federal income tax rate to our income tax provisions of the reporting periods.
|
Year Ended
|
||||||||||||
|
October 31,
2025
|
October 31,
2024
|
October 31,
2023
|
||||||||||
|
U.S. federal income tax at statutory rate
|
$
|
46,575 |
$
|
51,957 |
$
|
56,689 |
||||||
|
Changes in valuation allowance
|
(19,858 |
)
|
(1,986 |
)
|
(256 |
)
|
||||||
|
Foreign rate differential
|
7,075 |
10,695 |
11,394 |
|||||||||
|
Tax credits
|
(4,648 |
)
|
(5,209 |
)
|
(2,425 |
)
|
||||||
|
Uncertain tax positions, including reserves, settlements and resolutions
|
(2,790 |
)
|
6,226 |
3,328 |
||||||||
|
Lease Buyout
|
3,402 |
- |
- |
|||||||||
|
Other, net
|
1,794 |
1,884 |
1,582 |
|||||||||
|
Income tax provision
|
$
|
31,550 |
$
|
63,567 |
$
|
70,312 |
||||||
|
Reporting
Period
|
U.S. Statutory
Tax Rates
|
Photronics
Effective Tax
Rates
|
Primary Reasons for Differences
|
|||
|
2025
|
21.0% |
14.2% |
Non-U.S. pre-tax income being taxed at higher statutory rates in non-U.S. jurisdictions, the establishment of uncertain tax positions in
non-U.S. jurisdiction and release of valuation allowance against certain U.S. Federal and state tax attributes that have been determined to be partially realizable
|
|||
|
2024
|
21.0% |
25.7% |
Non-U.S. pre-tax income being taxed at higher statutory rates in non-U.S. jurisdictions, the establishment of uncertain tax positions in non-U.S. jurisdiction and loss
jurisdiction pre-tax losses not being benefited due to valuation allowances.
|
|||
|
2023
|
21.0% |
26.0% |
Non-U.S. pre-tax income being taxed at higher statutory rates in non-U.S. jurisdictions, the establishment of uncertain tax positions in non-U.S. jurisdiction and loss
jurisdiction pre-tax losses not being benefited due to valuation allowances.
|
Deferred Income Tax Assets and Liabilities
The net deferred income tax assets consist of the following:
|
As of
|
||||||||
|
October 31,
2025
|
October 31,
2024
|
|||||||
|
Deferred income tax assets
|
||||||||
|
Net operating losses
|
$
|
15,150 |
$
|
18,941 |
||||
|
Reserves not currently deductible
|
9,134 |
9,892 |
||||||
|
Tax credit carryforwards
|
12,658 |
12,550 |
||||||
|
Share-based compensation
|
3,327 |
3,102 |
||||||
|
Property, plant and equipment
|
5,402 |
10,710 |
||||||
|
Research intangibles
|
3,904 |
2,721 |
||||||
|
Lease liabilities
|
32 |
4,116 |
||||||
|
Other
|
2,999 |
1,857 |
||||||
| 52,606 |
63,889 |
|||||||
|
Valuation allowances
|
(10,777 |
)
|
(30,633 |
)
|
||||
| 41,829 |
33,256 |
|||||||
|
Deferred income tax liabilities
|
||||||||
|
ROU assets
|
(32 |
)
|
(7,351 |
)
|
||||
|
Other
|
(2,126 |
)
|
(3,315 |
)
|
||||
| (2,158 |
)
|
(10,666 |
)
|
|||||
|
Net deferred income tax assets
|
$
|
39,671 |
$
|
22,590 |
||||
|
Classification
|
||||||||
|
Deferred income tax assets
|
$
|
40,207 |
$
|
23,059 |
||||
|
Other liabilities
|
(536 |
)
|
(469 |
)
|
||||
|
$
|
39,671 |
$
|
22,590 |
|||||
We have established a valuation allowance for the portion of our deferred tax assets that, based on the weight of all available evidence, we believe is more likely than not to expire before it can be utilized.
In 2025, the valuation allowance against certain federal and state tax attributes was released as a result of management’s determination that these deferred tax asset benefits are now more likely than not to be realized. The portion of
deferred tax assets that is still not expected to be realizable before expiration continues to be subject to a valuation allowance.
Due to the Tax Cuts and Jobs Act, which was signed into law in December 2017, as of fiscal year end 2018, U.S. deferred taxes were no longer provided on the undistributed earnings of non-U.S. subsidiaries. Our policy to indefinitely reinvest these earnings in non-U.S. operations remains unchanged for the purpose of determining deferred tax liabilities for U.S. state and foreign withholding taxes. Therefore, should we elect in the future to repatriate the remaining foreign earnings deemed to be indefinitely reinvested, we may incur additional state and foreign withholding tax expense on those earnings, the amount of which is not practicable to compute.
Tax Credits and Carryforwards
The following tables present our available operating loss and credit carryforwards as of October 31, 2025, and their related expiration periods.
|
Operating Loss Carryforwards
|
Amount
|
Expiration Period
|
||||||
|
Federal
|
$
|
38,499 |
||||||
|
State
|
131,012 |
|||||||
|
Foreign
|
1,023 |
|||||||
|
Tax Credit Carryforwards
|
Amount
|
Expiration Period
|
||||||
|
Federal research and development
|
$
|
5,943 |
||||||
|
CHIPS Act (Federal 48D credit)
|
2,273 |
|||||||
|
State
|
5,624 |
|||||||
Uncertain Tax Positions
We include unrecognized tax benefits in Other liabilities, and we include any applicable interest and penalties related to uncertain tax positions in our income tax provision.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits is presented below. The amounts in the table include settlements of non-U.S. audits.
|
Year Ended
|
||||||||||||
|
October 31,
2025
|
October 31,
2024
|
October 31,
2023
|
||||||||||
|
Balance at beginning of year before interest and penalties
|
$
|
13,692 |
$
|
8,332 |
$
|
5,204 |
||||||
| (Reductions) additions of tax positions in prior years |
(2,230 |
) |
86 |
209 |
||||||||
|
Additions based on current year tax positions
|
3,918 |
6,139 |
3,361 |
|||||||||
|
Settlements
|
(4,515 |
)
|
(835 |
)
|
(423 |
)
|
||||||
|
Lapses of statutes of limitations
|
(37 |
)
|
(30 |
)
|
(19 |
)
|
||||||
|
Balance at end of year before interest and penalties
|
10,828 |
13,692 |
8,332 |
|||||||||
|
Interest and penalties
|
551 |
1,028 |
576 |
|||||||||
|
Balance at end of year including interest and penalties
|
$
|
11,379 |
$
|
14,720 |
$
|
8,908 |
||||||
The following table presents additional information on our uncertain tax positions, as of the balance sheet dates.
|
October 31,
2025
|
October 31,
2024
|
|||||||
|
Unrecognized tax benefits that, if recognized, would impact the effective tax rate
|
$
|
11,379 |
$
|
14,720 |
||||
|
Accrued interest and penalties related to uncertain tax positions
|
$
|
551 |
$
|
1,028 |
||||
Although the timing of the reversal of uncertain tax positions may be uncertain, as they can be dependent upon the settlement of tax audits or expirations of statutes of limitations, the Company believes that the amount of uncertain tax positions (including accrued interest and penalties, and net of tax benefits) that may be resolved over the next twelve months is approximately $1.0 million. Resolution of these uncertain tax positions may result from either or both the lapses of statutes of limitations and tax settlements. The Company is no longer subject to tax authority examinations in the U.S., major foreign, or state tax jurisdictions for years prior to fiscal year 2019. During Q4 FY25, the Company resolved a routine income tax audit by authorities in a foreign jurisdiction and as a result released approximately $4.0 million of related income tax reserves at October 31, 2025.
Subsequent to the balance sheet date one of the subsidiaries in a foreign jurisdiction reached a settlement with the local tax authority for the FY24 income tax audit, the impact is immaterial and will be recorded in Q1 FY26. In addition, the Company was also notified that it will be subject to a routine income tax audit by authorities in another foreign jurisdiction. The audit process is in its initial stages, and at this time, the Company is unable to reasonably estimate any potential impact from the tax audit.
Income Tax Payments and Refunds
The table below presents income taxes paid and refunds of income taxes received during the reporting periods.
|
Year Ended
|
||||||||||||
|
October 31,
2025
|
October 31,
2024
|
October 31,
2023
|
||||||||||
|
Income taxes paid
|
$
|
60,374 |
$
|
62,520 |
$
|
70,362 |
||||||
|
Income tax refunds received
|
$
|
356 |
$
|
2,519 |
$
|
485 |
||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Dec 17, 2025 | Showing above |
| 2024 | Dec 19, 2024 | |
| 2023 | Dec 26, 2023 | |
| 2022 | Dec 23, 2022 | |
| 2021 | Dec 17, 2021 | |
| 2020 | Jan 15, 2021 | |
| 2019 | Dec 23, 2019 | |
| 2018 | Dec 21, 2018 | |
| 2017 | Dec 20, 2017 | |
| 2016 | Jan 6, 2017 | |
| 2015 | Jan 7, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.