e10vk
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
FORM 10-K
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(MARK ONE)
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x ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the Fiscal
Year Ended December 31, 2009
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OR
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o TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For
the transition period
from to
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Commission File
No. 000-27965
RUDOLPH TECHNOLOGIES,
INC.
(Exact name of registrant as
specified in its charter)
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Delaware
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22-3531208
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(State or other jurisdiction
of
incorporation or organization)
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(I.R.S. Employer
Identification Number)
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One Rudolph Road, P.O. Box 1000, Flanders, NJ
07836
(Address of principal executive
offices) (Zip Code)
Registrants telephone number, including area code:
(973) 691-1300
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE
ACT:
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Title of Each Class
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Name of Exchange on Which Registered
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Common Stock, $0.001 par value per share
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The NASDAQ Stock Market LLC (NASDAQ Global Select Market)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE
ACT:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No x
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No x
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 period 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 has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such
files). Yes o No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the
Exchange Act. (Check one):
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Large
accelerated
filer o
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Accelerated
filer x
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Non-accelerated
filer o
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Smaller
reporting
company o
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(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the
Act). Yes o No x
The aggregate market value of the voting stock held by
non-affiliates of the registrant based on the closing price of
the registrants stock price on June 30, 2009 of $5.52
was approximately $149,785,675.
The registrant had 31,037,307 shares of Common Stock
outstanding as of February 22, 2010.
DOCUMENTS INCORPORATED BY REFERENCE
The following document is incorporated by reference in
Part III of this Annual Report on
Form 10-K:
Items 10, 11, 12, 13 and 14 of Part III incorporate by
reference information from the definitive proxy statement for
the registrants annual meeting of stockholders to be held
on May 19, 2010.
FORWARD
LOOKING STATEMENTS
Certain statements in this Annual Report on
Form 10-K
are forward-looking statements, including those concerning our
expectations of future revenues, gross profits, research and
development and engineering expenses, selling, general and
administrative expenses, product introductions, technology
development, manufacturing practices, cash requirements and
anticipated trends and developments in and management plans for,
our business and the markets in which we operate. The statements
contained in this Annual Report on
Form 10-K
that are not purely historical are forward-looking statements
within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934
and within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements may be identified
by the words such as, but not limited to,
anticipate, believe, expect,
intend, plan, should,
may, could, will and words
or phrases of similar meaning, as they relate to our management
or us.
The forward-looking statements contained herein reflect our
current expectations with respect to future events and are
subject to certain risks, uncertainties and assumptions. The
forward-looking statements reflect our position as of the date
of this report and we undertake no obligation to update any
forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by
law. Actual results may differ materially from those projected
in such forward-looking statements for a number of reasons
including, but not limited to, the following: variations in the
level of orders which can be affected by general economic
conditions and growth rates in the semiconductor manufacturing
industry and in the markets served by our customers, the
international economic and political climates, difficulties or
delays in product functionality or performance, the delivery
performance of sole source vendors, the timing of future product
releases, failure to respond adequately to either changes in
technology or customer preferences, changes in pricing by us or
our competitors, ability to manage growth, risk of nonpayment of
accounts receivable, changes in budgeted costs and the
Risk Factors set forth in Item 1A. Our
stockholders should carefully review the cautionary statements
contained in this Annual Report on
Form 10-K.
You should also review any additional disclosures and cautionary
statements we make from time to time in our quarterly reports on
Form 10-Q,
current reports on
Form 8-K
and other filings we make with the Securities and Exchange
Commission.
PART I
General
Rudolph Technologies, Inc. is a worldwide leader in the design,
development, and manufacture of high-performance process control
defect inspection, metrology, and process control software
systems used by semiconductor device manufacturers. We provide
yield management solutions used in both wafer processing and
final manufacturing through a family of standalone systems for
both macro-defect inspection and transparent and opaque thin
film measurements. All of these systems feature sophisticated
software and production-worthy automation. Rudolph systems are
backed by worldwide customer service and applications support.
The acquisition of Adventa Control Technologies, Inc. was
announced on August 3, 2009, and has been successfully
integrated into the Company. As a result, multiple software
systems have been added to our software portfolio, making
Rudolph the No. 2 supplier of process control software
solutions for device manufacturers, according to Gartner
Dataquest.
Inspection Systems. Chip manufacturers deploy
advanced macro-defect inspection (defects greater in size than
0.5 micron) throughout the fab to monitor key process steps,
gather process-enhancing information and ultimately, lower
manufacturing costs. Field-established tools such as the
AXitm
and
NSX®
are found in wafer processing (front-end) and final
manufacturing (back-end) facilities around the world. These
high-speed tools incorporate features such as waferless recipe
creation,
tool-to-tool
correlation, multiple inspection resolutions and proprietary
review and classification software that are required in
todays high-volume integrated circuit
(IC) manufacturing environments. In addition to wafer
frontside inspection, Rudolphs innovative
Explorer®
Cluster
1
incorporates wafer edge and backside inspection in one
integrated platform to enhance productivity and continuously
improve fab yield.
Metrology Systems. The industrys first
production-oriented microprocessor-controlled ellipsometer for
thin transparent film measurements was introduced by Rudolph in
1977. Since that time, we have consistently provided innovative
product developments designed to meet manufacturers most
advanced measurement requirements. Our patented transparent film
technology uses up to four lasers operating simultaneously at
multiple angles and multiple wavelengths, providing powerful
analysis and measurement capabilities to handle the most
challenging requirements of todays advanced processes and
tomorrows new materials. Unlike the white-light sources
used in spectroscopic ellipsometers, laser light sources make
our metrology tools inherently stable, increase measurement
speed and accuracy, and reduce maintenance costs by minimizing
the time required to re-qualify a light source when it is
replaced. Our systems also employ a proprietary reflectometer
technology that allows the characterization of films and film
stacks that cannot be performed using conventional reflectometry
or ellipsometry alone.
For opaque film characterization, we brought patented optical
acoustic metal film metrology technology to the semiconductor
manufacturing floor that allows customers to simultaneously
measure the thickness and other properties of up to six metal or
other opaque film layers in a non-contact manner on product
wafers.
PULSEtm
Technology uses an ultra-fast laser to generate sound waves that
pass down through a stack of opaque films such as those used in
copper or aluminum interconnect processes, sending back to the
surface an echo that indicates film thickness, density, and
other process critical parameters. We believe we are a leader in
providing systems that can non-destructively measure opaque
thin-film stacks with the speed and accuracy semiconductor
device manufacturers demand in order to achieve high yields with
the latest fabrication processes. The technology is ideal for
characterizing copper interconnect structures and the majority
of all systems sold have been for copper applications.
Data Analysis & Review Systems. Rudolph
has a comprehensive offering of total process control software
solutions for both front-end fabs, back-end packaging facilities
as well as the rapidly maturing photovoltaic market. The vast
amount of data gathered through automated inspection can be
analyzed to determine trends that ultimately affect yield. In
addition, Rudolph now provides a wide range of Advanced Process
Control (APC) technologies specifically for tool automation,
run-to-run
control and fault detection and classification, all designed to
improve factory profitability.
Technology
We believe that our expertise in engineering and our continued
investment in research and development enable us to rapidly
develop new technologies and products in response to emerging
industry trends. The breadth of our technology enables us to
offer our customers a diverse combination of measurement
technologies that provide process control for the majority of
thin films used in semiconductor manufacturing. Additionally,
our defect detection and classification technologies allow us to
provide yield enhancement for critical front-end processes such
as photolithography, diffusion, etch, CMP, and outgoing quality
control. Information learned through post-fab inspection is
critical. Advanced macro-defect inspection within the final
manufacturing (back-end) process provides our customers with
critical quality assurance and process information. Defects may
be created during probing, bumping, dicing or general handling,
and can have a major impact on device and process quality.
Automated Defect Detection and
Classification. Automating the defect detection and
classification process is best done by a system that can mimic,
or even extend, the response of the human eye, but at a much
higher speed, with high resolution and more consistently. To do
this, our systems capture full-color whole wafer images using
simultaneous dark and bright field illumination. The resulting
bright and dark field images are compared to those from an
ideal wafer having no defects. When a difference is
detected, its image is broken down into mathematical vectors
that allow rapid and accurate comparison with a library of known
classified defects stored in the tools database. Patented
and proprietary enhancements of this approach enable very fast
and highly repeatable image classification. The system is
pre-programmed with an extensive library of default local,
global, and color defects and can also absorb a virtually
unlimited amount of new defect classes. This allows customers to
define defects based on their existing defect classification
system, provides more reliable automated rework decisions, and
enables more accurate statistical process control data.
2
All-surface Inspection. All-surface refers to
inspection of the wafer frontside, edge, and backside as well as
post-fab die. The edge inspection process focuses on the area
near the wafer edge, an area that poses difficulty for
traditional wafer frontside inspection technology due to its
varied topography and process variation. Edge bevel inspection
looks for defects on the side edge of a wafer. The edge bead
removal and edge exclusion metrology involve a topside surface
measurement required exclusively in the photolithography
process, primarily to determine if wafers have been properly
aligned for the edge exclusion region. The primary reason for
wafer backside inspection is to determine if contamination has
been created that may spread throughout the fab. For instance,
it is critical that the wafer backside be free of defects prior
to the photolithography process to prevent focus and exposure
problems on the wafer front-side.
In addition to the wafer processing floor, Rudolph automated
inspection systems are used in several post-fab processes such
as bump inspection, wafer probe, wafer saw and quality control.
Classification. Classifying defects off-line enables
automated inspection systems to maintain their high throughput.
Using defect image files captured by automated inspection
systems, operators are able to view high-resolution defect
images to determine defects that cause catastrophic failure of a
device, or killer defects. Classifying defects enables faster
analysis by grouping defects found together as one larger
defect, a scratch for example, and defects of similar types
across a wafer lot to be grouped based on size, repeating
defects and other user-defined specifications. Automatically
classifying defects provides far greater yield learning than
human classification.
Yield Analysis. Using wafer maps, charts and graphs,
the vast amounts of data gathered through automated inspection
can be analyzed to determine trends across bumps, die, wafers
and lots. This analysis may determine where in the process an
inconsistency is being introduced, allowing for enhancements to
be made and yields improved. Defect data analysis is performed
to identify, analyze and locate the source of defects and other
manufacturing process excursions. Using either a single wafer
map or a composite map created from multiple wafer maps, this
analysis enables identification of defect patterns and
distribution. When combined with inspection data from
strategically-placed inspection points, this analysis may
pinpoint the source of the defects so corrective action can be
taken.
Probe Card Test and Analysis. The combination of
Fast
3D-OCM®
(optical comparative metrology) Technology with improved testing
accuracy and repeatability is designed to reduce total test time
for even the most advanced large area probe cards.
3-D
capabilities enable users to analyze probe marks and probe tips
in a rapid and information-rich format.
Optical Acoustics. Optical acoustic metrology
involves the use of ultra-fast laser induced sonar for metal and
opaque thin film measurement. This technology sends ultrasonic
waves into multi-layer opaque films and then analyzes the
resulting echoes to simultaneously determine the thickness of
each individual layer in complex multi-layer metal film stacks.
The echos amplitude and phase can be used to detect film
properties, missing layers, and interlayer problems. Since
different phenomena affect amplitude and phase uniquely, a
variety of process critical interlayer problems can be detected
in a single measurement.
The use of optical acoustics to measure multi-layer metal and
opaque films was pioneered by scientists at Brown University
(Brown) in collaboration with engineers at Rudolph.
The proprietary optical acoustic technology in our
PULSEtm
Technology systems measures the thickness of single or
multi-layer opaque films ranging from less than 40 Angstroms to
greater than five microns. It provides these measurements at a
rate of up to 70 wafers per hour within one to two percent
accuracy and typically less than one percent repeatability. This
range of thicknesses covers the majority of thick and thin metal
films projected by the International Roadmap for Semiconductors
to be used through the end of this decade. Our non-contact,
non-destructive optical acoustic technology and small spot size
enable our PULSE Technology systems to measure film properties
directly on product wafers.
Ellipsometry. Ellipsometry is a non-contact,
non-destructive optical technique for transparent thin film
measurement. We have been an industry leader in ellipsometry
technology for the last three decades. We hold patents on
several ellipsometry technologies, including our proprietary
technique that uses four lasers for multiple-angle of incidence,
multiple wavelength ellipsometry. Laser ellipsometry technology
enables our transparent film
3
systems to continue to provide the increasingly higher level of
accuracy needed as thinner films and newer materials are
introduced for future generations of semiconductor devices. We
extended this same optical technology to characterize the
scatterometry signal from patterned surfaces, allowing
measurement of critical dimensions.
Reflectometry. For applications requiring broader
spectral coverage, some of our ellipsometry tools are also
equipped with a reflectometer. Reflectometry uses a white or
ultraviolet light source to determine the properties of
transparent thin films by analyzing the wavelength and intensity
of light reflected from the surface of a wafer. This optical
information is processed with software algorithms to determine
film thickness and other material properties. By combining data
from both the laser ellipsometer and broad spectrum
reflectometer, it is possible to characterize films and film
stacks that cannot be adequately analyzed by either method
individually.
Process Control. Advanced Process Control (APC)
employs software to automatically detect or predict tool failure
(fault detection) as well as calculate recipe settings for a
process that will drive the process output to target despite
variations in the incoming material and disturbances within the
process equipment. Process control software enables the factory
to increase capacity and yield and to decrease rework and scrap.
It enables reduced production costs by lowering consumables,
process engineering time and manufacturing cycle time.
Products
We market and sell products to all major logic, memory, data
storage and application-specific integrated circuit (ASIC)
device manufacturers. Our customers rely on Rudolph for
versatile full-fab inspection and metrology systems as well as
process control software solutions. These systems are designed
for high-volume production facilities and offer automated wafer
handling for 200 and 300mm configurations. Our systems operate
at high throughput with ultraclean operation and high
reliability.
4
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Type of Fab
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Wafer
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Final
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Product
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Introduced
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Functionality
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Processing
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Manufacturing
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Inspection & Test Systems
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Advanced detection of defects >0.5 micron
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AXitm
Module
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2003
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Inspection of patterned and unpatterned wafers
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In line, high-speed, 100% inspection
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Full color review and waferless recipe creation
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X
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2D defect detection of the wafers edge
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E30tm
Module
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2003
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Metrology of edge feature
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Incorporated into the Explorer Cluster
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X
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X
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2D defect detection of the wafers backside
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B30tm
Module
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2003
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Darkfield, brightfield and color imaging
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Incorporated into the Explorer Cluster
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Explorer®
Inspection
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A family of multi surface inspection tools, using one or more
inspection modules
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Cluster
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2009
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Automated handling platform
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Intelligent wafer scheduling
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Fully automated defect detection >0.5 micron
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NSX®
Series
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1997
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2D wafer, die & bump inspection
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In line, high-speed, 100% inspection
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Wafer
Scannertm
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2D/3D bump dimensional inspection
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Series
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1999
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2D bump/surface defect inspection
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In line, high-speed, 100% inspection
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X
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Probe card test & analysis
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PrecisionWoRx®
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2008
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Configurable channels
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High load forces
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Probe card production metrology
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ProbeWoRx®
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2003
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3D Optical Comparative Metrology
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High-speed test times
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Automated, one-touch measurements
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Probing process analysis
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WaferWoRx®
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2006
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3D probe tip analysis
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Proprietary, advanced software
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Probe card analyzer
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PrecisionPoint®
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2002
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Tests devices simultaneously
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Upgradable
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5
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Type of Fab
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Wafer
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Final
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Product
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Introduced
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Functionality
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Processing
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Manufacturing
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Metrology Systems
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Non-contact system for thin opaque films
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Patented Picosecond Ultrasonic Laser Sonar Technology
(PULSEtm)
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MetaPULSE®
Series
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1997
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Designed for advanced copper and non-copper applications
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Improved throughput and repeatability
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Superior accuracy for transparent film measurements
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Incorporates ellipsometry technology for transparent film
application
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S3000tm
Series
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2006
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Optimized price/performance for fabwide applications
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Available with pattern recognition software
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Enhanced data review mode
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6
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Type of Fab
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Wafer
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Final
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Product
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Introduced
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Functionality
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Processing
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Manufacturing
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Process Control
Software
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Real-time monitoring software
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ARTIST®
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2003
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Enables development of human-readable models
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Frees users from manual monitoring
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Minimize scrap and rework
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X
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AutoShell®
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1998
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Equipment automation software that interfaces to both tools and
external resources
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X
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Designed to control process equipment
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ControlWORKS®
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1994
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-
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Minimizes the expense and time-to-market associated with
developing control applications
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X
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Discover®
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2007
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Fabwide software for archival and retrieval of process related
data
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Facilitates root cause analysis, yield enhancement and yield
learning
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X
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In line, all surface defect analysis and data management
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Discover®
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2005
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Trend analysis and visualization tools
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Enterprise
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Wafer maps visualize all-surface defects
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Identifies root cause of defects and process excursions
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X
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Helps photovoltaic (PV) cell manufacturers reduce manufacturing
costs and increase average cell efficiencies
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Discover
Solartm
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2008
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Designed for high volume c-Si cell and thin film production
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Controls and optimizes the performance of the line
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X
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Connects applications to tools
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Gamma2tm
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2004
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Add applications to factory control architecture without
changing host software
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X
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Intercepts message traffic between the equipment and the host
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GateWaytm
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2003
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Preserves value of existing automation investments
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Increases reliability and function with zero development time
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Diagnostic tool for solving communication problems
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X
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-
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Off line defect review and classification
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HarmonyASRtm
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2005
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Defects displayed in real time
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Rapid classification of unknown defects; review of
previously-classified defects
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X
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X
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Fabwide spatial process control system
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Traces patterns back to yield-killing process issues
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Process
Sentineltm
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2006
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Combined defect and sort solution
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Quickly isolates systemic faults
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Advanced segmentation and wafer stacking capability
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X
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ProcessWORKS®
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1998
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Advanced process control software deployed in CMOS, high-mix
ASIC, memory and disk head fabs
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Proven in all major process areas
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Reduces impact on tool time
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Stores recipes in a central repository
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RecipeWORKStm
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1998
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Enables engineers to manage recipes remotely
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Allows users to setup security
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Accepts settings from any run-to-run control application
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X
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Configures and schedules preventive maintenance
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TrackWORKS®
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1998
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-
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View factory entities using operator-defined parameters
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X
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-
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Automatic defect classification
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TrueADCtm
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2005
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-
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High accuracy, consistency and scalability
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Patented feature-based defect matching technology
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-
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Utilizes dynamic defect library method
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X
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X
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-
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Serving the entire fab
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TrueADCtm
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Defect classification with a high level of accuracy
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Enterprise
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2007
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-
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Ensures database lookup, classification and timely response to
the tool
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-
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Minimum impact to throughput
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X
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X
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-
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Builds predictive models
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Yield
Optimizertm
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2006
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-
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Optimizes yield and reduces excursions
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-
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Identifies the most critical metrology measurements for
controlling yield
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X
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X
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7
Customers
Over 90 semiconductor device manufacturers have purchased
Rudolph tools and software for installation at multiple sites.
We support a diverse customer base in terms of both geographic
location and type of semiconductor device manufactured. Our
customers are located in 20 countries. See Note 15 to our
consolidated financial statements in this Annual Report on
Form 10-K
for information concerning our geographic information.
We depend on a relatively small number of customers and end
users for a large percentage of our revenues. In the years 2007,
2008 and 2009, sales to end user customers that individually
represented at least five percent of our revenues accounted for
37.1%, 36.3% and 44.8% of our revenues, respectively. In 2007,
2008 and 2009, sales to Intel Corporation accounted for 11.5%,
10.9% and 13.6% of our revenues, respectively. No other
individual end user customer accounted for more than 10% of our
revenues in 2007, 2008 and 2009. We do not have purchase
contracts with any of our customers that obligate them to
continue to purchase our products.
Research
and Development
The macro-defect inspection, thin film transparent and opaque
process control metrology market is characterized by continuous
technological development and product innovations. We believe
that the rapid and ongoing development of new products and
enhancements to existing products is critical to our success.
Accordingly, we devote a significant portion of our technical,
management and financial resources to research and development
programs.
The core competencies of our research and development team
include metrology systems for high volume manufacturing,
ellipsometry, ultra-fast optics, picosecond acoustic and optical
design, advanced metrology application development and algorithm
development. To leverage our internal research and development
capabilities, we maintain close relationships with leading
research institutions in the metrology field, including Brown
University. Our relationship with Brown University has resulted
in the development of the optical acoustic technology underlying
our MetaPULSE product line. We have been granted
exclusive licenses from Brown University Research Foundation,
subject to rights retained by Brown and the United States
government for their own non-commercial uses for several patents
relating to this technology.
Our research and development expenditures in 2007, 2008 and 2009
were $30.0 million, $31.6 million and
$26.0 million, respectively. We plan to continue our strong
commitment to new product development in the future, and we
expect that our level of research and development expenses will
increase in absolute dollar terms in future periods.
Sales,
Customer Service and Application Support
We maintain an extensive network of direct sales, customer
service and application support offices in several locations
throughout the world. We maintain sales, service or applications
offices in locations including but not limited to, New Jersey,
Minnesota, Massachusetts, Texas, Washington, New York, Germany,
Scotland, Ireland, Israel, Korea, Singapore, Taiwan, China and
Japan.
We provide our customers with comprehensive support before,
during and after the delivery of our products. For example, in
order to facilitate the smooth integration of our tools into our
customers operations, we often assign dedicated,
site-specific field service and applications engineers to
provide long-term support at selected customer sites. We also
provide comprehensive service and applications training for
customers at our training facility in Budd Lake, New Jersey and
at customer locations. In addition, we maintain a group of
highly skilled applications scientists at strategically located
facilities throughout the world and at selected customer
locations.
Manufacturing
Our principal manufacturing activities include assembly, final
test and calibration. These activities are conducted in our
manufacturing facilities in Minnesota and New Jersey. During the
three months ended December 31, 2009, we initiated a
consolidation of a portion of our facility in Budd Lake, NJ and
will move the New Jersey manufacturing operations to our
facility in Bloomington, MN. Our core manufacturing competencies
include electrical, optical and mechanical assembly and testing
as well as the management of new product
8
transitions. While we use standard components and subassemblies
wherever possible, most mechanical parts, metal fabrications and
critical components used in our products are engineered and
manufactured to our specifications. We expect to rely
increasingly on subcontractors and turnkey suppliers to
fabricate components, build assemblies and perform other
non-core activities in a cost-effective manner.
We rely on a number of limited source suppliers for certain
parts and subassemblies. This reliance creates a potential
inability to obtain an adequate supply of required components,
and reduced control over pricing and time of delivery of
components. An inability to obtain adequate supplies would
require us to seek alternative sources of supply or might
require us to redesign our systems to accommodate different
components or subassemblies. To date, we have not experienced
any significant delivery delays. However, if we were forced to
seek alternative sources of supply, manufacture such components
or subassemblies internally, or redesign our products, this
could prevent us from shipping our products to our customers on
a timely basis, which could have a material adverse effect on
our operations.
Intellectual
Property
We have a policy of seeking patents on inventions governing new
products or technologies as part of our ongoing research,
development, and manufacturing activities. As of
December 31, 2009, we have been granted, or hold exclusive
licenses to, 165 U.S. and foreign patents. The patents we
own, jointly own or exclusively license have expiration dates
ranging from 2010 to 2025. We also have 97 pending regular and
provisional applications in the U.S. and other countries.
Our patents and applications principally cover various aspects
of macro-defect detection and classification, transparent thin
film measurement and altered material characterization.
We have been granted exclusive licenses from Brown University
Research Foundation, subject to rights retained by Brown and the
United States government for their own non-commercial uses, for
several patents relating to the optical acoustic technology
underlying our MetaPULSE product family. The terms of
these exclusive licenses are equal to the lives of the patents.
We pay royalties to Brown based upon a percentage of our
revenues from the sale of systems that incorporate technology
covered by the Brown patents. We also have the right to support
patent activity with respect to new ultra-fast acoustic
technology developed by Brown scientists, and to acquire
exclusive licenses to this technology. Brown may terminate the
licenses if we fail to pay royalties to Brown or if we
materially breach our license agreement with Brown.
Our pending patents may never be issued, and even if they are,
these patents, our existing patents and the patents we license
may not provide sufficiently broad protection to protect our
proprietary rights, or they may prove to be unenforceable. To
protect our proprietary rights, we also rely on a combination of
copyrights, trademarks, trade secret laws, contractual
provisions and licenses. There can be no assurance that any
patents issued to or licensed by us will not be challenged,
invalidated or circumvented or that the rights granted
thereunder will provide us with a competitive advantage.
The laws of some foreign countries do not protect our
proprietary rights to the same degree as do the laws of the
United States, and many U.S. companies have encountered
substantial infringement problems in protecting their
proprietary rights against infringement in such countries, some
of which are countries in which we have sold and continue to
sell products. There is a risk that our means of protecting our
proprietary rights may not be adequate. For example, our
competitors may independently develop similar technology or
duplicate our products. If we fail to adequately protect our
intellectual property, it would be easier for our competitors to
sell competing products.
Competition
The market for semiconductor capital equipment is highly
competitive. We face substantial competition from established
companies in each of the markets that we serve. We principally
compete with KLA-Tencor and Camtek. We compete to a lesser
extent with companies such as Nanometrics, Vistec, and Nikon.
Each of our products also competes with products that use
different metrology techniques. Some of our competitors have
greater financial, engineering, manufacturing and marketing
resources, broader product offerings and service capabilities
and larger installed customer bases than we do.
9
Significant competitive factors in the market for metrology
systems include system performance, ease of use, reliability,
cost of ownership, technical support and customer relationships.
We believe that, while price and delivery are important
competitive factors, the customers overriding requirement
is for a product that meets their technical capabilities. To
remain competitive, we believe we will need to maintain a high
level of investment in research and development and process
applications. No assurances can be given that we will continue
to be competitive in the future.
Backlog
We schedule production of our systems based upon order backlog
and informal customer forecasts. We include in backlog only
those orders to which the customer has assigned a purchase order
number and for which delivery has been specified within
12 months. Because shipment dates may be changed and
customers may cancel or delay orders with little or no penalty,
our backlog as of any particular date may not be a reliable
indicator of actual sales for any succeeding period. At
December 31, 2009, we had a backlog of approximately
$54.1 million compared with a backlog of approximately
$20.4 million at December 31, 2008.
Employees
As of December 31, 2009, we had 497 employees. Our
employees are not represented by any collective bargaining
agreements, and we have never experienced a work stoppage. We
believe our employee relations are good.
Available
Information
We were incorporated in New Jersey in 1958 and reincorporated in
Delaware in 1999. The Internet website address of Rudolph
Technologies, Inc. is
http://www.rudolphtech.com.
The information on our website is not incorporated into this
Annual Report. The Companys Annual Reports on
Form 10-K,
Quarterly Reports on
Form 10-Q
and Current Reports on
Form 8-K
(and any amendments to those reports) are made available free of
charge, on or through our Internet website, as soon as
reasonably practicable after such material is electronically
filed with or furnished to the Securities and Exchange
Commission, or SEC. All reports we file with the SEC are also
available free of charge via EDGAR through the SECs
website at
http://www.sec.gov.
We also make available, free of charge, through the investors
page on our corporate website Rudolph Technologies
corporate summary, Code of Business Conduct and Ethics and
Financial Code of Ethics, charters of the committees of our
Board of Directors, as well as other information and materials,
including information about how to contact our Board of
Directors, its committees and their members. To find this
information and obtain copies, visit our website at
http://www.rudolphtech.com.
Risks
Related to Rudolph
Our
operating results have varied and will likely continue to vary
significantly from quarter to quarter in the future, causing
volatility in our stock price
Our quarterly operating results have varied in the past and will
likely continue to vary significantly from quarter to quarter in
the future, causing volatility in our stock price. Some of the
factors that may influence our operating results and subject our
stock to extreme price and volume fluctuations include:
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changes in customer demand for our systems, which is influenced
by economic conditions in the semiconductor device industry,
demand for products that use semiconductors, market acceptance
of our systems and products of our customers and changes in our
product offerings;
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seasonal variations in customer demand, including the tendency
of European sales to slow significantly in the third quarter of
each year;
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the timing, cancellation or delay of customer orders, shipments
and acceptance;
|
10
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product development costs, including increased research,
development, engineering and marketing expenses associated with
our introduction of new products and product
enhancements; and
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the levels of our fixed expenses, including research and
development costs associated with product development, relative
to our revenue levels.
|
In light of these factors and the cyclical nature of the
semiconductor industry, we expect to continue to experience
significant fluctuations in quarterly and annual operating
results. Moreover, many of our expenses are fixed in the
short-term which, together with the need for continued
investment in research and development, marketing and customer
support, limits our ability to reduce expenses quickly. As a
result, declines in net sales could harm our business and the
price of our common stock could substantially decline.
Our
largest customers account for a significant portion of our
revenues, and our revenues and cash flows would significantly
decline if one or more of these customers were to purchase
significantly fewer of our systems or they delayed or cancelled
a large order
Sales to end user customers that individually represent at least
five percent of our revenues typically account for, in the
aggregate, a considerable amount of our revenues. We operate in
the highly concentrated, capital-intensive semiconductor device
manufacturing industry. Historically, a significant portion of
our revenues in each quarter and year has been derived from
sales to relatively few customers, and this trend is expected to
continue. If any of our key customers were to purchase
significantly fewer of our systems in the future, or if a large
order were delayed or cancelled, our revenues and cash flows
would significantly decline. We expect that we will continue to
depend on a small number of large customers for a significant
portion of our revenues for at least the next several years. In
addition, as large semiconductor device manufacturers seek to
establish closer relationships with their suppliers, we expect
that our customer base will become even more concentrated.
Our
customers may be unable to pay us for our products and
services
Our customers include some companies that may from time to time
encounter financial difficulties, especially in light of the
current economic environment and the turmoil in the credit
markets. If a customers financial difficulties become
severe, the customer may be unwilling or unable to pay our
invoices in the ordinary course of business, which could
adversely affect collections of both our accounts receivable and
unbilled services. The bankruptcy of a customer with a
substantial account receivable could have a material adverse
effect on our financial condition and results of operations. In
addition, if a customer declares bankruptcy after paying us
certain invoices, a court may determine that we are not properly
entitled to that payment and may require repayment of some or
all of the amount we received, which could adversely affect our
financial condition and results of operations.
Our
revenue may vary significantly each quarter due to relatively
small fluctuations in our unit sales
During any quarter, a significant portion of our revenue may be
derived from the sale of a relatively small number of systems.
Our macro-defect inspection and probe card and test analysis
systems range in selling price from approximately $250,000 to
$1.4 million per system, our transparent film measurement
systems range in selling price from approximately $250,000 to
$1.0 million per system and our opaque film measurement
systems range in selling price from approximately
$1.0 million to $2.0 million per system. Accordingly,
a small change in the number of systems we sell may cause
significant changes in our operating results. This, in turn,
could cause fluctuations in the market price of our common stock.
Variations
in the amount of time it takes for us to sell our systems may
cause fluctuations in our operating results, which could cause
our stock price to decline
Variations in the length of our sales cycles could cause our
revenues and cash flows, and consequently, our business,
financial condition, operating results and cash flows, to
fluctuate widely from period to period. This variation could
cause our stock price to decline. Our customers generally take a
long time to evaluate our inspection
and/or film
metrology systems and many people are involved in the evaluation
process. We expend significant resources educating and providing
information to our prospective customers regarding the uses and
benefits of our
11
systems in the semiconductor fabrication process. The length of
time it takes for us to make a sale depends upon many factors
including, but not limited to:
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the efforts of our sales force;
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the complexity of the customers fabrication processes;
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the internal technical capabilities and sophistication of the
customer;
|
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the customers budgetary constraints; and
|
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the quality and sophistication of the customers current
metrology
and/or
inspection equipment.
|
Because of the number of factors influencing the sales process,
the period between our initial contact with a customer and the
time when we recognize revenue from that customer and receive
payment, if ever, varies widely in length. Our sales cycles,
including the time it takes for us to build a product to
customer specifications after receiving an order to the time we
recognize revenue, typically range from six to 15 months.
Sometimes our sales cycles can be much longer, particularly with
customers in Japan. During these cycles, we commit substantial
resources to our sales efforts in advance of receiving any
revenue, and we may never receive any revenue from a customer
despite our sales efforts. If we do make a sale, our customers
often purchase only one of our systems, and then evaluate its
performance for a lengthy period before purchasing any more of
our systems. The number of additional products a customer
purchases, if any, depends on many factors, including the
customers capacity requirements. The period between a
customers initial purchase and any subsequent purchases
can vary from six months to a year or longer, and variations in
the length of this period could cause further fluctuations in
our operating results and possibly in our stock price.
Most of
our revenues have been derived from customers outside of the
United States subjecting us to operational, financial and
political risks, such as unexpected changes in regulatory
requirements, tariffs, political and economic instability,
outbreaks of hostilities, and difficulties in managing foreign
sales representatives and foreign branch operations
Due to the significant level of our international sales, we are
subject to a number of material risks, including:
Compliance with foreign laws. Our business is
subject to risks inherent in doing business internationally,
including compliance with, inconsistencies among, and unexpected
changes in, a wide variety of foreign laws and regulatory
environments with which we are not familiar, including, among
other issues, with respect to employees, protection of our
intellectual property, and a wide variety of operational
regulations and trade and export controls under domestic,
foreign, and international law.
Unexpected changes in regulatory requirements including
tariffs and other market barriers. The semiconductor
device industry is a high-visibility industry in many of the
European and Asian countries in which we sell our products.
Because the governments of these countries have provided
extensive financial support to our semiconductor device
manufacturing customers in these countries, we believe that our
customers could be disproportionately affected by any trade
embargoes, excise taxes or other restrictions imposed by their
governments on trade with United States companies such as
ourselves. Any restrictions of these types could result in a
reduction in our sales to customers in these countries.
Political and economic instability. We are subject
to various global risks related to political and economic
instabilities in countries in which we derive sales. If
terrorist activities, armed conflict, civil or military unrest
or political instability occurs outside of the U.S., these
events may result in reduced demand for our products. There is
considerable political instability in Taiwan related to its
disputes with China and in South Korea related to its disputes
with North Korea. In addition, several Asian countries,
particularly Japan, have experienced significant economic
instability. An outbreak of hostilities or other political
upheaval in China, Taiwan or South Korea, or an economic
downturn in Japan or other countries, would likely harm the
operations of our customers in these countries. The effect of
these types of events on our revenues and cash flows could be
material because we derive substantial revenues from sales to
semiconductor device foundries in Taiwan such as Taiwan
Semiconductor Manufacturing Company Ltd. and United
Microelectronics Corporation, from memory chip manufacturers in
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South Korea such as Hynix and Samsung, and from semiconductor
device manufacturers in Japan such as NEC and Toshiba.
Difficulties in staffing and managing foreign branch
operations. During periods of tension between the
governments of the United States and certain other countries, it
is often difficult for United States companies such as ourselves
to staff and manage operations in such countries. Language and
other cultural differences may also inhibit our sales and
marketing efforts and create internal communication problems
among our U.S. and foreign research and development teams,
increasing the difficulty of managing multiple, remote locations
performing various development, quality assurance, and yield
ramp analysis projects.
Currency fluctuations as compared to the
U.S. Dollar. A substantial portion of our
international sales are denominated in U.S. dollars. As a
result, if the dollar rises in value in relation to foreign
currencies, our systems will become more expensive to customers
outside the United States and less competitive with systems
produced by competitors outside the United States. These
conditions could negatively impact our international sales.
Foreign sales also expose us to collection risk in the event it
becomes more expensive for our foreign customers to convert
their local currencies into U.S. dollars. Additionally, in
the event a larger portion of our revenue becomes denominated in
foreign currencies, we would be subject to a potentially
significant exchange rate risk.
If we
deliver systems with defects, our credibility will be harmed and
the sales and market acceptance of our systems will
decrease
Our systems are complex and have occasionally contained errors,
defects and bugs when introduced. Defects may be created during
probing, bumping, dicing or general handling, and can have a
major impact on device and process quality. When this occurs,
our credibility and the market acceptance and sales of our
systems could be harmed. Further, if our systems contain errors,
defects or bugs, we may be required to expend significant
capital and resources to alleviate these problems. Defects could
also lead to product liability as a result of product liability
lawsuits against us or against our customers. We have agreed to
indemnify our customers under certain circumstances against
liability arising from defects in our systems. Our product
liability policy currently provides $2.0 million of
coverage per claim, with an overall umbrella limit of
$14.0 million. In the event of a successful product
liability claim, we could be obligated to pay damages
significantly in excess of our product liability insurance
limits.
If we are
not successful in developing new and enhanced products for the
semiconductor device manufacturing industry we will lose market
share to our competitors
We operate in an industry that is highly competitive and subject
to evolving industry standards, rapid technological changes,
rapid changes in consumer demands and the rapid introduction of
new, higher performance systems with shorter product life
cycles. To be competitive in our demanding market, we must
continually design, develop and introduce in a timely manner new
inspection and film metrology systems that meet the performance
and price demands of semiconductor device manufacturers. We must
also continue to refine our current systems so that they remain
competitive. We expect to continue to make significant
investments in our research and development activities. We may
experience difficulties or delays in our development efforts
with respect to new systems, and we may not ultimately be
successful in our product enhancement efforts to improve and
advance products or in responding effectively to technological
change, as not all research and development activities result in
viable commercial products. In addition, we cannot provide
assurance that we will be able to develop new products for the
most opportunistic new markets and applications. Any significant
delay in releasing new systems could cause our products to
become obsolete, adversely affect our reputation, give a
competitor a
first-to-market
advantage or cause a competitor to achieve greater market share.
In addition, new product offerings that are highly complex in
terms of software or hardware may require application or service
work such as bug fixing prior to acceptance, thereby delaying
revenue recognition.
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If new
products developed by us do not gain general market acceptance,
we will be unable to generate revenues and recover our research
and development costs
Metrology and inspection product development is inherently risky
because it is difficult to foresee developments in semiconductor
device manufacturing technology, coordinate technical personnel,
and identify and eliminate system design flaws. Further, our
products are complex and often the applications to our
customers businesses are unique. Any new systems we
introduce may not achieve or sustain a significant degree of
market acceptance and sales.
We expect to spend a significant amount of time and resources
developing new systems and refining our existing systems. In
light of the long product development cycles inherent in our
industry, these expenditures will be made well in advance of the
prospect of deriving revenue from the sale of those systems. Our
ability to commercially introduce and successfully market new
systems are subject to a wide variety of challenges during the
development cycle, including
start-up
bugs, design defects, and other matters that could delay
introduction of these systems. In addition, since our customers
are not obligated by long-term contracts to purchase our
systems, our anticipated product orders may not materialize, or
orders that are placed may be cancelled. As a result, if we do
not achieve market acceptance of new products, we may be unable
to generate sufficient revenues and cash flows to recover our
research and development costs and our market share, revenue,
operating results or stock price would be negatively impacted.
Even if
we are able to develop new products that gain market acceptance,
sales of these new products could impair our ability to sell
existing products
Competition from our new systems could have a negative effect on
sales of our existing systems and the prices that we could
charge for these systems. We may also divert sales and marketing
resources from our current systems in order to successfully
launch and promote our new or next generation systems. This
diversion of resources could have a further negative effect on
sales of our current systems and the value of inventory.
If our
relationships with our large customers deteriorate, our product
development activities could be adversely affected
The success of our product development efforts depends on our
ability to anticipate market trends and the price, performance
and functionality requirements of semiconductor device
manufacturers. In order to anticipate these trends and ensure
that critical development projects proceed in a coordinated
manner, we must continue to collaborate closely with our largest
customers. Our relationships with these and other customers
provide us with access to valuable information regarding trends
in the semiconductor device industry, which enables us to better
plan our product development activities. If our current
relationships with our large customers are impaired, or if we
are unable to develop similar collaborative relationships with
important customers in the future, our product development
activities could be adversely affected.
Our
ability to reduce costs is limited by our ongoing need to invest
in research and development and to provide customer support
activities
Our industry is characterized by the need for continual
investment in research and development as well as customer
service and support. As a result, our operating results could be
materially affected if operating costs associated with our
research and development as well as customer support activities
increase in the future or we are unable to reduce those
activities.
We may
fail to adequately protect our intellectual property and,
therefore, lose our competitive advantage
Our future success and competitive position depend in part upon
our ability to obtain and maintain proprietary technology for
our principal product families, and we rely, in part, on patent
and trade secret law and confidentiality agreements to protect
that technology. If we fail to adequately protect our
intellectual property, it will give our competitors a
significant advantage. We own or have licensed a number of
patents relating to our transparent and opaque thin film
metrology and macro-defect inspection systems, and have filed
applications for additional patents.
14
Any of our pending patent applications may be rejected, and we
may be unable to develop additional proprietary technology that
is patentable in the future.
In addition, the patents that we do own or that have been issued
or licensed to us may not provide us with competitive advantages
and may be challenged by third parties. Further, third parties
may also design around these patents. In addition to patent
protection, we rely upon trade secret protection for our
confidential and proprietary information and technology. We
routinely enter into confidentiality agreements with our
employees and other third parties. Even though these agreements
are in place there can be no assurances that trade secrets and
proprietary information will not be disclosed, that others will
not independently develop substantially equivalent proprietary
information and techniques or otherwise gain access to our trade
secrets, or that we can fully protect our trade secrets and
proprietary information. Violations by others of our
confidentiality agreements and the loss of employees who have
specialized knowledge and expertise could harm our competitive
position and cause our sales and operating results to decline as
a result of increased competition. Costly and time-consuming
litigation might be necessary to enforce and determine the scope
of our proprietary rights, and failure to obtain or maintain
trade secret protection might adversely affect our ability to
continue our research or bring products to market.
Protection
of our intellectual property rights, or the efforts of third
parties to enforce their own intellectual property rights
against us, may result in costly and time-consuming litigation,
substantial damages, lost product sales and/or the loss of
important intellectual property rights
We may be required to initiate litigation in order to enforce
any patents issued to or licensed by us, or to determine the
scope or validity of a third partys patent or other
proprietary rights. Any litigation, regardless of outcome, could
be expensive and time consuming, and could subject us to
significant liabilities or require us to re-engineer our
products or obtain expensive licenses from third parties. There
can be no assurance that any patents issued to or licensed by us
will not be challenged, invalidated or circumvented or that the
rights granted thereunder will provide us with a competitive
advantage.
In addition, our commercial success depends in part on our
ability to avoid infringing or misappropriating patents or other
proprietary rights owned by third parties. From time to time we
may receive communications from third parties asserting that our
products or systems infringe, or may infringe, the proprietary
rights of these third parties. These claims of infringement may
lead to protracted and costly litigation, which could require us
to pay substantial damages or have the sale of our products or
systems stopped by an injunction. Infringement claims could also
cause product or system delays or require us to redesign our
products or systems, and these delays could result in the loss
of substantial revenues. We may also be required to obtain a
license from the third party or cease activities utilizing the
third partys proprietary rights. We may not be able to
enter into such a license or such a license may not be available
on commercially reasonable terms. Accordingly, the loss of
important intellectual property rights could hinder our ability
to sell our systems, or make the sale of these systems more
expensive.
Our
efforts to protect our intellectual property may be less
effective in certain foreign countries, where intellectual
property rights are not as well protected as in the United
States
The laws of some foreign countries do not protect our
proprietary rights to as great an extent as do the laws of the
United States, and many U.S. companies have encountered
substantial problems in protecting their proprietary rights
against infringement abroad. For example, Taiwan is not a
signatory of the Patent Cooperation Treaty, which is designed to
specify rules and methods for defending intellectual property
internationally. The publication of a patent in Taiwan prior to
the filing of a patent in Taiwan would invalidate the ability of
a company to obtain a patent in Taiwan. Similarly, in contrast
to the United States where the contents of patents remain
confidential during the patent application process, in Taiwan
the contents of a patent are published upon filing which
provides competitors an advance view of the contents of a patent
application prior to the establishment of patent rights.
Consequently, there is a risk that we may be unable to
adequately protect its proprietary rights in certain foreign
countries. If this occurs, it would be easier for our
competitors to develop and sell competing products in these
countries.
15
Some of
our current and potential competitors have significantly greater
resources than we do, and increased competition could impair
sales of our products or cause us to reduce our prices
The market for semiconductor capital equipment is highly
competitive. We face substantial competition from established
companies in each of the markets we serve. We principally
compete with KLA-Tencor and Camtek. We compete to a lesser
extent with companies such as Nanometrics, Vistec and Nikon.
Each of our products also competes with products that use
different metrology or inspection techniques. Some of our
competitors have greater financial, engineering, manufacturing
and marketing resources, broader product offerings and service
capabilities and larger installed customer bases than we do. As
a result, these competitors may be able to respond more quickly
to new or emerging technologies or market developments by
devoting greater resources to the development, promotion and
sale of products, which, in turn, could impair sales of our
products. Further, there may be significant merger and
acquisition activity among our competitors and potential
competitors, which, in turn, may provide them with a competitive
advantage over us by enabling them to rapidly expand their
product offerings and service capabilities to meet a broader
range of customer needs.
Many of our customers and potential customers in the
semiconductor device manufacturing industry are large companies
that require global support and service for their semiconductor
capital equipment. We believe that our global support and
service infrastructure is sufficient to meet the needs of our
customers and potential customers. However, some of our
competitors have more extensive infrastructures than we do,
which could place us at a disadvantage when competing for the
business of global semiconductor device manufacturers. Many of
our competitors are investing heavily in the development of new
systems that will compete directly with our systems. We have
from time to time selectively reduced prices on our systems in
order to protect our market share, and competitive pressures may
necessitate further price reductions. We expect our competitors
in each product area to continue to improve the design and
performance of their products and to introduce new products with
competitive prices and performance characteristics. These
product introductions would likely require us to decrease the
prices of our systems and increase the level of discounts that
we grant our customers. Price reductions or lost sales as a
result of these competitive pressures would reduce our total
revenues and could adversely impact our financial results.
Because
of the high cost of switching equipment vendors in our markets,
it is sometimes difficult for us to win customers from our
competitors even if our systems are superior to theirs
We believe that once a semiconductor device manufacturer has
selected one vendors capital equipment for a
production-line application, the manufacturer generally relies
upon that capital equipment and, to the extent possible,
subsequent generations of the same vendors equipment, for
the life of the application. Once a vendors equipment has
been installed in a production line application, a semiconductor
device manufacturer must often make substantial technical
modifications and may experience production-line downtime in
order to switch to another vendors equipment. Accordingly,
unless our systems offer performance or cost advantages that
outweigh a customers expense of switching to our systems,
it will be difficult for us to achieve significant sales to that
customer once it has selected another vendors capital
equipment for an application.
We must
attract and retain key personnel with knowledge of semiconductor
device manufacturing and inspection and/or metrology equipment
to help support our future growth, and competition for such
personnel in our industry is high
Our success depends to a significant degree upon the continued
contributions of our key management, engineering, sales and
marketing, customer support, finance and manufacturing
personnel. The loss of any of these key personnel, each of whom
would be extremely difficult to replace, could harm our business
and operating results. Although we have employment and
noncompetition agreements with key members of our senior
management team, including Messrs. McLaughlin and Roth,
these individuals or other key employees may still leave us,
which could have a material adverse effect on our business. We
do not have key person life insurance on any of our executives.
In addition, to support our future growth, we will need to
attract and retain additional qualified employees. Competition
for such personnel in our industry is intense, and we may not be
successful in attracting and retaining qualified employees.
16
We obtain
some of the components and subassemblies included in our systems
from a limited group of suppliers, and the partial or complete
loss of one of these suppliers could cause production delays and
a substantial loss of revenues
We obtain some of the components and subassemblies included in
our systems from a limited group of suppliers and do not have
long-term contracts with many of our suppliers. Our dependence
on limited source suppliers of components and our lack of
long-term contracts with many of our suppliers exposes us to
several risks, including a potential inability to obtain an
adequate supply of components, price increases, late deliveries
and poor component quality. Disruption or termination of the
supply of these components could delay shipments of our systems,
damage our customer relationships and reduce our sales. From
time to time in the past, we have experienced temporary
difficulties in receiving shipments from our suppliers. The
lead-time required for shipments of some of our components can
be as long as four months. In addition, the lead time required
to qualify new suppliers for lasers could be as long as a year,
and the lead time required to qualify new suppliers of other
components could be as long as nine months. If we are unable to
accurately predict our component needs, or if our component
supply is disrupted, we may miss market opportunities by not
being able to meet the demand for our systems. Further, a
significant increase in the price of one or more of these
components or subassemblies could seriously harm our results of
operations and cash flows.
Any
prolonged disruption in the operations of our manufacturing
facilities could have a material adverse effect on our
revenues
Our manufacturing processes are highly complex and require
sophisticated and costly equipment and a specially designed
facility. As a result, any prolonged disruption in the
operations of our manufacturing facilities, whether due to
technical or labor difficulties, or destruction of or damage as
a result of a fire or any other reason, could seriously harm our
ability to satisfy our customer order deadlines. If we cannot
timely deliver our systems, our results from operations and cash
flows could be materially and adversely affected.
Failure
to adjust our orders for parts and subcomponents in an accurate
and timely manner in response to changing market conditions or
customer acceptance of our products could adversely affect our
financial position and results of operations
Our earnings could be negatively affected and our inventory
levels could materially increase if we are unable to predict our
inventory needs in an accurate and timely manner and adjust our
orders for parts and subcomponents should our needs increase or
decrease materially due to unexpected increases or decreases in
demand for our products. Any material increase in our
inventories could result in an adverse effect on our financial
position, while any material decrease in our ability to procure
needed inventories could result in an inability to supply
customer demand for our products thus adversely affecting our
revenues.
Our
ability to fulfill our backlog may have an effect on our long
term ability to procure contracts and fulfill current
contracts
Our ability to fulfill our backlog may be limited by our ability
to devote sufficient financial and human capital resources and
limited by available material supplies. If we do not fulfill our
backlog in a timely manner, we may experience delays in product
delivery which would postpone receipt of revenue from those
delayed deliveries. Additionally, if we are consistently unable
to fulfill our backlog, this may be a disincentive to customers
to award large contracts to us in the future until they are
comfortable that we can effectively manage our backlog.
We may
choose to acquire new and complementary businesses, products or
technologies instead of developing them ourselves, and may be
unable to complete these acquisitions or may not be able to
successfully integrate an acquired business in a cost-effective
and non-disruptive manner
Our success depends on our ability to continually enhance and
broaden our product offerings in response to changing
technologies, customer demands and competitive pressures. To
this end, we have, from time to time, engaged in the process of
identifying, analyzing and negotiating possible acquisition
transactions and we expect to continue to do so in the future.
We may choose to acquire new and complementary businesses,
products,
17
technologies
and/or
services instead of developing them ourselves. We may, however,
face competition for acquisition targets from larger and more
established companies with greater financial resources, making
it more difficult for us to complete acquisitions. We cannot
provide any assurance that we will be successful in consummating
future acquisitions on favorable terms or that we will realize
the benefits that we anticipate from one or more acquisitions
that we consummate. Integrating any business, product technology
or service we acquire could be expensive and time-consuming
and/or
disrupt our ongoing business. Further, there are numerous risks
associated therewith, including but not limited to:
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diversion of managements attention from
day-to-day
operational matters and current products and customers;
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lack of synergy, or the inability to realize expected synergies;
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failure to commercialize the new technology or business;
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failure to meet the expected performance of the new technology
or business;
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failure to retain key employees and customer or supplier
relationships;
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lower-than-expected market opportunities or market acceptance of
any new products; and
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unexpected reduction of sales of existing products by new
products.
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Our inability to consummate one or more acquisitions on such
favorable terms or our failure to realize the intended benefits
from one or more acquisitions, could have a material adverse
effect on our business, liquidity, financial position
and/or
results of operations, including as a result of our incurrence
of indebtedness and related interest expense and our assumption
of unforeseen contingent liabilities. In order to finance any
acquisitions, we might need to raise additional funds through
public or private equity or debt financings. In that event, we
could be forced to obtain financing on terms that are not
favorable to us and, in the case of equity financing, that
result in dilution to our stockholders. In addition, any
impairment of goodwill or other intangible assets, amortization
of intangible assets, write-down of other assets or charges
resulting from the costs of acquisitions and purchase accounting
could harm our business and operating results.
If we
cannot effectively manage our growth, our business may
suffer
Over the long-term we intend to continue to grow by increasing
our sales efforts and completing strategic acquisitions. To
effectively manage our growth, we must, among other things:
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engage, train and manage a larger sales force and additional
service personnel;
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expand the geographic coverage of our sales force;
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expand our information systems;
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identify and successfully integrate acquired businesses into our
operations; and
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administer appropriate financial and administrative control
procedures.
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Our anticipated growth will likely place a significant strain on
our management, financial, operational, technical, sales and
administrative resources. Any failure to effectively manage our
growth may cause our business to suffer and our stock price to
decline.
Changes
in tax rates or tax liabilities could affect results
As a global company, we are subject to taxation in the United
States and various other countries. Significant judgment is
required to determine and estimate worldwide tax liabilities.
Our future annual and quarterly tax rates could be affected by
numerous factors, including changes in the (1) applicable
tax laws; (2) composition of earnings in countries with
differing tax rates; or (3) valuation of our deferred tax
assets and liabilities. In addition, we are subject to regular
examination of our income tax returns by the Internal Revenue
Service and other tax authorities. We regularly assess the
likelihood of favorable or unfavorable outcomes resulting from
these examinations to determine the adequacy of our provision
for income taxes. Although we believe our tax estimates are
reasonable,
18
there can be no assurance that any final determination will not
be materially different from the treatment reflected in our
historical income tax provisions and accruals, which could
materially and adversely affect our results of operations.
Turmoil
in the credit markets and the financial services industry may
negatively impact our business, results of operations, financial
condition or liquidity
The credit markets and the financial services industry have been
experiencing a period of unprecedented turmoil and upheaval
characterized by the bankruptcy, failure, collapse or sale of
various financial institutions and an unprecedented level of
intervention from the United States federal government. While
the ultimate outcome of these events cannot be predicted, they
may have a material adverse effect on our liquidity and
financial condition if our ability to obtain credit from trade
creditors were to be impaired. In addition, the economic crisis
could also adversely impact our customers ability to
finance the purchase of systems from us or our suppliers
ability to provide us with product, either of which may
negatively impact our business and results of operations.
Risks
Related to the Semiconductor Device Industry
Cyclicality
in the semiconductor device industry has led to substantial
decreases in demand for our systems and may from time to time
continue to do so
Our operating results are subject to significant variation due
to the cyclical nature of the semiconductor device industry. Our
business depends upon the capital expenditures of semiconductor
device manufacturers, which, in turn, depend upon the current
and anticipated market demand for semiconductors and products
using semiconductors. The timing, length and severity of the
up-and-down
cycles in the semiconductor equipment industry are difficult to
predict. This cyclical nature of the industry in which we
operate affects our ability to accurately predict future revenue
and, thus, future expense levels. When cyclical fluctuations
result in lower than expected revenue levels, operating results
may be adversely affected and cost reduction measures may be
necessary in order for us to remain competitive and financially
sound. During a down cycle, we must be in a position to adjust
our cost and expense structure to prevailing market conditions
and to continue to motivate and retain our key employees. In
addition, during periods of rapid growth, we must be able to
increase manufacturing capacity and personnel to meet customer
demand. We can provide no assurance that these objectives can be
met in a timely manner in response to industry cycles. If we
fail to respond to industry cycles, our business could be
seriously harmed.
Our
future rate of growth is highly dependent on the development and
growth of the market for microelectronic device inspection and
metrology equipment
We target our products to address the needs of microelectronic
device manufacturers for defect inspection and metrology. If for
any reason the market for microelectronic device inspection or
metrology equipment fails to grow in the long term, we may be
unable to maintain current revenue levels in the short term and
maintain our historical growth in the long term. Growth in the
inspection market is dependent to a large extent upon
microelectronic manufacturers replacing manual inspection with
automated inspection technology. Growth in the metrology market
is dependent to a large extent upon new chip designs and
capacity expansion of microelectronic manufacturers. There is no
assurance that manufacturers will undertake these actions at the
rate we expect.
Risks
Related to our Stock
Provisions
of our charter documents and Delaware law, as well as our
stockholder rights plan, could discourage potential acquisition
proposals and/or delay, deter or prevent a change in control of
our company
Provisions of our certificate of incorporation and bylaws, as
well as our stockholder rights plan, may inhibit changes in
control of our company not approved by our Board of Directors.
These provisions also limit the circumstances in which a premium
can be paid for the common stock, and in which a proxy contest
for control of our board may be initiated. These provisions
provide for:
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a prohibition on stockholder actions through written consent;
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a requirement that special meetings of stockholders be called
only by our chief executive officer or Board of Directors;
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advance notice requirements for stockholder proposals and
director nominations by stockholders;
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limitations on the ability of stockholders to amend, alter or
repeal our by-laws;
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the authority of our board to issue, without stockholder
approval, preferred stock with such terms as the board may
determine; and
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the authority of our board, without stockholder approval, to
adopt a Stockholder Rights Plan. Such a Shareholder Rights Plan
was adopted by the Board of Directors on June 27, 2005.
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We are also entitled to avail ourselves of the protections of
Section 203 of the Delaware General Corporation Law, which
could inhibit changes in control of us.
Our stock
price is volatile
The market price of our common stock has fluctuated widely. From
the beginning of fiscal year 2008 through the end of fiscal year
2009, our stock price fluctuated between a high of $11.45 per
share and a low of $1.95 per share. Consequently, the current
market price of our common stock may not be indicative of future
market prices, and we may be unable to sustain or increase the
value of an investment in our common stock. Factors affecting
our stock price may include:
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variations in operating results from quarter to quarter;
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changes in earnings estimates by analysts or our failure to meet
analysts expectations;
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changes in the market price per share of our public company
customers;
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market conditions in the semiconductor and other industries into
which we sell products;
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general economic conditions;
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political changes, hostilities or natural disasters such as
hurricanes and floods;
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low trading volume of our common stock; and
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the number of firms making a market in our common stock.
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In addition, the stock market has recently experienced
significant price and volume fluctuations. These fluctuations
have particularly affected the market prices of the securities
of high technology companies like ours. These market
fluctuations could adversely affect the market price of our
common stock.
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Item 1B.
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Unresolved
Staff Comments.
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None.
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Our executive office building is located at One Rudolph Road in
Flanders, New Jersey. We own and lease facilities for
engineering, sales and service related purposes in the United
States and six other countries China, Japan, Korea,
Singapore, Taiwan and Scotland. The following table indicates
the location, the general purpose and the square footage of our
principal facilities. The expiration years of the leases
covering the leased facilities are also indicated.
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Lease
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Approximate
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Expiration
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Square
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Year, Unless
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Location
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Facility Purpose
|
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Footage
|
|
|
Owned
|
|
|
Flanders, New Jersey
|
|
Executive Office
|
|
|
20,000
|
|
|
|
Owned
|
|
Budd Lake, New Jersey
|
|
Engineering, Manufacturing and Service
|
|
|
61,500
|
|
|
|
2016
|
|
Bloomington, Minnesota
|
|
Engineering, Manufacturing and Service
|
|
|
78,500
|
|
|
|
2012
|
|
Lowell, Massachusetts
|
|
Engineering and Service
|
|
|
9,500
|
|
|
|
2010
|
|
Richardson, Texas
|
|
Engineering
|
|
|
21,000
|
|
|
|
Owned
|
|
Bohemia, New York
|
|
Engineering
|
|
|
6,000
|
|
|
|
2011
|
|
Snoqualmie, Washington
|
|
Engineering and Service
|
|
|
27,000
|
|
|
|
2018
|
|
Hsin-Chu, Taiwan
|
|
Sales and Service
|
|
|
10,500
|
|
|
|
2010
|
|
Takatsu, Japan
|
|
Sales and Service
|
|
|
5,000
|
|
|
|
2010
|
|
Sungnam-si, Korea
|
|
Sales and Service
|
|
|
9,500
|
|
|
|
2011
|
|
Shanghai, China
|
|
Sales and Service
|
|
|
3,500
|
|
|
|
2011
|
|
Singapore
|
|
Sales and Service
|
|
|
2,000
|
|
|
|
2012
|
|
Scotland, United Kingdom
|
|
Sales and Service
|
|
|
1,000
|
|
|
|
2010
|
|
We also lease office space for other smaller sales and service
offices in several locations throughout the world.
We believe that our existing facilities and capital equipment
are adequate to meet our current requirements, and that suitable
additional or substitute space is available on commercially
reasonable terms if needed.
|
|
Item 3.
|
Legal
Proceedings.
|
From time to time we are subject to legal proceedings and claims
in the ordinary course of business. We are not aware of any
legal proceedings or claims that management currently believes
would have a material adverse effect on our consolidated
financial statements taken as a whole if determined adversely to
the Company.
|
|
Item 4.
|
(Removed
and Reserved).
|
21
PART
II
|
|
Item 5.
|
Market
for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities.
|
Our common stock is traded on the NASDAQ Global Select Market
under the symbol RTEC. Set forth below is a line
graph comparing the annual percentage change in the cumulative
return to the stockholders of the Companys Common Stock
with the cumulative return of the NASDAQ Composite Index and a
custom peer group for the period commencing on December 31,
2004 and ending on December 31, 2009. The peer group is
comprised of capital equipment manufacturers for the
semiconductor industry with relatively comparable revenues and
market capitalizations to that of the Company. The peer group
was recommended by a global management consulting firm. The
companies included in the peer group are MKS Instruments, Inc.,
FEI Co., Brooks Automation, Inc., Cymer, Inc., Veeco
Instruments, Inc., Cabot Microelectronics Corp., ATMI, Inc.,
FormFactor, Inc., Axcelis Technologies, Inc., Advanced Energy
Industries, Inc., Cohu, Inc., EMCORE Corp., Mattson Technology,
Inc., LTX-Credence, Corp, Nanometrics, Inc., Ultratech, Inc.,
PDF Solutions, Inc., and AXT, Inc.
The information contained in the performance graph shall not be
deemed to be soliciting material or to be
filed with the SEC, nor shall such information be
incorporated by reference into any future filing under the
Securities Act of 1933 or the Securities Exchange Act of 1934,
except to the extent that the Company specifically incorporates
it by reference into such filing.
The graph assumes that $100 was invested on December 31,
2004 in the Companys Common Stock and in each index, and
that all dividends were reinvested. No cash dividends have been
declared or paid on the Companys Common Stock. Stockholder
returns over the indicated period should not be considered
indicative of future stockholder returns. The Company operates
on a 52-week calendar year.
COMPARISON OF 5
YEAR CUMULATIVE TOTAL RETURN*
Among
Rudolph Technologies, Inc., The NASDAQ Composite Index
And A Peer Group
|
|
|
*
|
|
$100 invested on 12/31/04 in stock
or index, including reinvestment of dividends.
Fiscal year ending December 31.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/04
|
|
|
12/05
|
|
|
12/06
|
|
|
12/07
|
|
|
12/08
|
|
|
12/09
|
|
|
Rudolph Technologies, Inc.
|
|
|
100.0
|
|
|
|
75.01
|
|
|
|
92.72
|
|
|
|
65.93
|
|
|
|
20.56
|
|
|
|
39.14
|
|
NASDAQ Composite
|
|
|
100.0
|
|
|
|
101.41
|
|
|
|
114.05
|
|
|
|
123.94
|
|
|
|
73.43
|
|
|
|
105.89
|
|
Peer Group
|
|
|
100.0
|
|
|
|
93.28
|
|
|
|
109.59
|
|
|
|
101.51
|
|
|
|
50.90
|
|
|
|
81.14
|
|
22
The following table sets forth, for the periods indicated, the
high and low sale prices per share of our common stock as
reported on the NASDAQ Global Select Market.
|
|
|
|
|
|
|
|
|
|
|
Price Range of
|
|
|
|
Common Stock
|
|
|
|
High
|
|
|
Low
|
|
|
Year Ended December 31, 2008
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
11.45
|
|
|
$
|
8.11
|
|
Second Quarter
|
|
$
|
10.99
|
|
|
$
|
7.70
|
|
Third Quarter
|
|
$
|
11.02
|
|
|
$
|
7.22
|
|
Fourth Quarter
|
|
$
|
8.44
|
|
|
$
|
2.03
|
|
Year Ended December 31, 2009
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
4.27
|
|
|
$
|
1.95
|
|
Second Quarter
|
|
$
|
6.18
|
|
|
$
|
2.96
|
|
Third Quarter
|
|
$
|
8.46
|
|
|
$
|
5.27
|
|
Fourth Quarter
|
|
$
|
8.25
|
|
|
$
|
5.70
|
|
As of February 11, 2010, there were 90 stockholders of
record of our common stock and approximately 5,723 beneficial
stockholders. The closing market value of our common stock on
February 11, 2010 was $8.18.
We have never declared or paid a cash dividend on our common
stock and do not anticipate paying any cash dividends in the
foreseeable future. We currently intend to retain our earnings,
if any, for the development of our business. The declaration of
any future dividends by us is within the discretion of our Board
of Directors and will be dependent on our earnings, financial
condition and capital requirements as well as any other factors
deemed relevant by our Board of Directors.
In July 2008, our Board of Directors approved a stock repurchase
program of up to 3 million shares. As of the time of filing
this Annual Report on
Form 10-K,
we have not purchased any shares under this program.
Certain Equity Compensation Plan Information included in
Item 12 of Part III, hereof, is hereby incorporated
into this Item 5 of Part II and will be included in
our Proxy Statement for the 2010 Annual Meeting of Stockholders.
23
|
|
Item 6.
|
Selected
Financial Data.
|
The following selected financial data should be read in
conjunction with our Consolidated Financial Statements and the
related Notes thereto appearing elsewhere in this Annual Report
on
Form 10-K,
and under Item 7. Managements Discussion and
Analysis of Financial Condition and Results of Operations.
The balance sheet data as of December 31, 2008 and 2009 and
the statement of operations data for the years ended
December 31, 2007, 2008 and 2009 set forth below were
derived from our audited consolidated financial statements
included elsewhere in this
Form 10-K.
The balance sheet data as of December 31, 2005, 2006 and
2007, and the statement of operations data for the years ended
December 31, 2005 and 2006 were derived from our audited
consolidated financial statements not included herein.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2005
|
|
|
2006(1)
|
|
|
2007(2)
|
|
|
2008(3)
|
|
|
2009(4)
|
|
|
|
(In thousands, except per share data)
|
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
82,918
|
|
|
$
|
201,168
|
|
|
$
|
160,129
|
|
|
$
|
131,040
|
|
|
$
|
78,657
|
|
Cost of revenues
|
|
|
44,390
|
|
|
|
103,726
|
|
|
|
78,889
|
|
|
|
87,388
|
|
|
|
49,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
38,528
|
|
|
|
97,442
|
|
|
|
81,240
|
|
|
|
43,652
|
|
|
|
28,852
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
11,901
|
|
|
|
29,856
|
|
|
|
29,993
|
|
|
|
31,644
|
|
|
|
25,991
|
|
In-process research and development
|
|
|
|
|
|
|
9,900
|
|
|
|
1,000
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
20,373
|
|
|
|
32,393
|
|
|
|
33,204
|
|
|
|
33,965
|
|
|
|
33,640
|
|
Impairment charge for goodwill and identifiable intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
227,105
|
|
|
|
|
|
Amortization
|
|
|
876
|
|
|
|
4,048
|
|
|
|
4,487
|
|
|
|
5,890
|
|
|
|
1,358
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
33,150
|
|
|
|
76,197
|
|
|
|
68,684
|
|
|
|
298,604
|
|
|
|
60,989
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
5,378
|
|
|
|
21,245
|
|
|
|
12,556
|
|
|
|
(254,952
|
)
|
|
|
(32,137
|
)
|
Interest income and other, net
|
|
|
1,388
|
|
|
|
3,191
|
|
|
|
4,149
|
|
|
|
1,151
|
|
|
|
270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision for income taxes
|
|
|
6,766
|
|
|
|
24,436
|
|
|
|
16,705
|
|
|
|
(253,801
|
)
|
|
|
(31,867
|
)
|
Provision (benefit) for income taxes
|
|
|
1,789
|
|
|
|
11,730
|
|
|
|
4,846
|
|
|
|
(4,115
|
)
|
|
|
(2,239
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
4,977
|
|
|
$
|
12,706
|
|
|
$
|
11,859
|
|
|
$
|
(249,686
|
)
|
|
$
|
(29,628
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.29
|
|
|
$
|
0.47
|
|
|
$
|
0.41
|
|
|
$
|
(8.16
|
)
|
|
$
|
(0.96
|
)
|
Diluted
|
|
$
|
0.29
|
|
|
$
|
0.46
|
|
|
$
|
0.40
|
|
|
$
|
(8.16
|
)
|
|
$
|
(0.96
|
)
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
16,899
|
|
|
|
27,276
|
|
|
|
29,168
|
|
|
|
30,614
|
|
|
|
30,888
|
|
Diluted
|
|
|
16,942
|
|
|
|
27,574
|
|
|
|
29,312
|
|
|
|
30,614
|
|
|
|
30,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
37,986
|
|
|
$
|
72,479
|
|
|
$
|
57,420
|
|
|
$
|
67,735
|
|
|
$
|
57,839
|
|
Marketable securities
|
|
|
42,821
|
|
|
|
33,714
|
|
|
|
16,505
|
|
|
|
10,549
|
|
|
|
3,080
|
|
Working capital
|
|
|
125,678
|
|
|
|
200,942
|
|
|
|
176,298
|
|
|
|
147,688
|
|
|
|
126,781
|
|
Total assets
|
|
|
180,001
|
|
|
|
440,486
|
|
|
|
460,216
|
|
|
|
197,432
|
|
|
|
178,203
|
|
Retained earnings (accumulated deficit)
|
|
|
20,191
|
|
|
|
32,897
|
|
|
|
44,776
|
|
|
|
(204,910
|
)
|
|
|
(234,538
|
)
|
Total stockholders equity
|
|
|
164,534
|
|
|
|
392,876
|
|
|
|
424,478
|
|
|
|
176,088
|
|
|
|
151,131
|
|
24
|
|
|
(1) |
|
Effective January 1, 2006, we adopted the provisions
prescribed by the Financial Accounting Standards Board
(FASB) in Accounting Standards Codification
(ASC) 718. Consequently, we began recognizing
compensation cost measured at fair value over the service period
for stock awards expected to vest. In addition, Statement of
Operations data reflects the results of operations of August
Technology since February 15, 2006. |
|
(2) |
|
Statement of Operations data reflects the results of operations
of PCTA since December 18, 2007. |
|
(3) |
|
Statement of Operations data reflects the results of operations
of WSPG since January 22, 2008. |
|
(4) |
|
Statement of Operations data reflects the results of operations
of PCG since August 3, 2009. |
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations.
|
Overview
We are a worldwide leader in the design, development,
manufacture and support of high-performance defect inspection,
process control metrology and data analysis systems used by
semiconductor device manufacturers. We provide yield management
solutions used in both wafer processing and final manufacturing
through a family of standalone systems for both macro-defect
inspection and transparent and opaque thin film measurements.
All of these systems feature production-worthy automation and
are backed by worldwide customer support.
On December 18, 2007, Rudolph and a wholly-owned subsidiary
entered into and consummated the transactions contemplated by,
an agreement with Applied Precision Holdings, LLC and Applied
Precision, LLC (collectively, Applied), pursuant to
which we purchased substantially all of the assets and assumed
certain liabilities of the semiconductor division of Applied to
be known as the Probe Card Test and Analysis division
(PCTA). We paid $59.1 million in cash and
acquisition costs and issued 1.3 million shares of Rudolph
common stock for a total purchase price of $73.2 million.
PCTA is engaged in the business of designing, developing,
manufacturing, marketing, selling and supporting advanced probe
card metrology and wafer probe process monitoring equipment and
is complementary to our existing business.
On January 22, 2008, we announced that we had acquired all
intellectual property and selected assets from privately-held
RVSI Inspection, LLC, headquartered in Hauppauge, New York. The
acquired business is currently known as the Rudolph Technologies
Wafer Scanner Product Group (WSPG). On
August 3, 2009, we announced that we had acquired Adventa
Control Technologies, Inc. (Adventa), headquartered
in Plano, Texas. The acquired business is currently known as the
Rudolph Technologies Process Control Group (PCG).
The impact of the acquisitions was not material to our
consolidated financial position or results of operations.
However, as a result of the Adventa acquisition, multiple
software systems have been added to our software portfolio,
making Rudolph the second largest supplier of process control
software solutions for device manufacturers, according to
Gartner Dataquest, a leading technology and research advisory
firm.
Rudolphs business is affected by the annual spending
patterns of our customers on semiconductor capital equipment.
The amount that our customers devote to capital equipment
spending depends on a number of factors, including general
worldwide economic conditions as well as other economic drivers
such as personal computer, cell phone and personal electronic
device sales. Current forecasts by industry analysts for the
semiconductor device manufacturing industry project a
year-over-year
increase in capital spending of
50-60% for
2010. We monitor capital equipment spending through announced
capital spending plans by our customers and monthly-published
industry data such as the
book-to-bill
ratio. The
book-to-bill
ratio is a
3-month
running statistic that compares bookings or orders placed with
capital equipment suppliers to billings or shipments. A
book-to-bill
ratio above 1.0 shows that semiconductor device equipment
manufacturers are ordering equipment at a pace that exceeds the
equipment suppliers shipments for the period. The three
month rolling average North American semiconductor equipment
book-to-bill
ratio was 1.0 for the month of December 2009, decreasing from
the September 2009
book-to-bill
ratio of 1.2.
Historically, a significant portion of our revenues in each
quarter and year has been derived from sales to relatively few
customers, and we expect this trend to continue. For the years
ended December 31, 2007, 2008 and 2009, sales to customers
that individually represented at least five percent of our
revenues accounted for 37.1%,
25
36.3%, and 44.8% of our revenues, respectively. For the years
ended December 31, 2007, 2008 and 2009, sales to Intel
Corporation accounted for 11.5%, 10.9% and 13.6% of our
revenues, respectively.
We do not have purchase contracts with any of our customers that
obligate them to continue to purchase our products, and they
could cease purchasing products from us at any time. A delay in
purchase or cancellation by any of our large customers could
cause quarterly revenues to vary significantly. In addition,
during a given quarter, a significant portion of our revenues
may be derived from the sale of a relatively small number of
systems. Our macro-defect inspection and probe card and test
analysis systems range in average selling price from
approximately $250,000 to $1.4 million per system, our
transparent film measurement systems range in average selling
price from approximately $250,000 to $1.0 million per
system and our opaque film measurement systems range in average
selling price from approximately $1.0 million to
$2.0 million per system.
A significant portion of our revenues has been derived from
customers outside of the United States. In 2007, approximately
77.1% of our revenues were derived from customers outside of the
United States, of which 58.5% were derived from customers in
Asia and 18.6% were derived from customers in Europe. In 2008,
approximately 76.5% of our revenues were derived from customers
outside of the United States, of which 57.0% were derived from
customers in Asia and 19.5% were derived from customers in
Europe. In 2009, approximately 72.4% of our revenues were
derived from customers outside of the United States, of which
60.8% were derived from customers in Asia and 11.6% were derived
from customers in Europe. We expect that revenues generated from
customers outside of the United States will continue to account
for a significant percentage of our revenues.
The sales cycle for our systems typically ranges from six to
15 months, and can be longer when our customers are
evaluating new technology. Due to the length of these cycles, we
invest significantly in research and development and sales and
marketing in advance of generating revenues related to these
investments.
During the three months ended December 31, 2009, the
Company initiated a consolidation of a portion of its facility
in Budd Lake, NJ and will move the New Jersey manufacturing
operations to its facility in Bloomington, MN. In connection
with this consolidation, the Company recorded a total charge of
$6,449, including $4,312 for asset write-downs, $1,949 for lease
termination charges and $188 for employee termination costs,
related to the Companys manufacturing facility. These
charges were recorded in cost of revenues and selling, general
and administrative expenses for $2,860 and $3,589, respectively.
26
Results
of Operations
The following table sets forth, for the periods indicated, our
statements of operations data as percentages of our revenues.
Our results of operations are reported as one business segment.
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|
Year Ended December 31,
|
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|
2007
|
|
|
2008
|
|
|
2009
|
|
|
Revenues
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
Cost of revenues
|
|
|
49.3
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|
|
|
66.7
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|
|
|
63.3
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Gross profit
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50.7
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|
|
|
33.3
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|
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|
36.7
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Operating expenses:
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Research and development
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|
18.7
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24.2
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|
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33.0
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|
In-process research and development
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|
0.6
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|
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Selling, general and administrative
|
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|
20.8
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|
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|
25.9
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|
|
|
42.8
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|
Impairment charge for goodwill and identifiable intangible assets
|
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|
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173.3
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Amortization
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2.8
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4.5
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|
|
1.7
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|
|
|
|
|
|
|
|
|
|
|
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|
Total operating expenses
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|
42.9
|
|
|
|
227.9
|
|
|
|
77.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
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|
7.8
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|
|
|
(194.6
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)
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|
|
(40.8
|
)
|
Interest income and other, net
|
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|
2.6
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|
|
|
0.9
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|
|
|
0.3
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision (benefit) income taxes
|
|
|
10.4
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|
|
|
(193.7
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)
|
|
|
(40.5
|
)
|
Provision (benefit) for income taxes
|
|
|
3.0
|
|
|
|
(3.1
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)
|
|
|
(2.8
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)
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|
|
|
|
|
|
|
|
|
|
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|
|
Net income (loss)
|
|
|
7.4
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%
|
|
|
(190.6
|
)%
|
|
|
(37.7
|
)%
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|
|
|
|
|
|
|
|
|
|
|
|
|
Results
of Operations 2007, 2008 and 2009
Revenues. Our revenues are derived from the sale of
our systems, services, spare parts and software licensing. Our
revenues were $160.1 million, $131.0 million and
$78.7 million in the years 2007, 2008 and 2009. This
represents a decrease of 18.2% from 2007 to 2008 and a decrease
of 40.0% from 2008 to 2009. The decreases in revenue from 2007
through 2009 are primarily due to continued weakness in the
overall semiconductor equipment manufacturing sector.
The following table lists, for the periods indicated, the
different sources of our revenues in dollars and as percentages
of our total revenues:
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|
Year Ended December 31,
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|
|
2007
|
|
|
2008
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|
|
2009
|
|
|
Systems:
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|
|
|
|
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|
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|
|
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|
Inspection
|
|
$
|
86,196
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|
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|
53
|
%
|
|
$
|
73,465
|
|
|
|
56
|
%
|
|
$
|
38,027
|
|
|
|
48
|
%
|
Metrology
|
|
|
34,738
|
|
|
|
22
|
|
|
|
21,118
|
|
|
|
16
|
|
|
|
8,921
|
|
|
|
11
|
|
Parts
|
|
|
15,261
|
|
|
|
10
|
|
|
|
20,801
|
|
|
|
16
|
|
|
|
15,428
|
|
|
|
20
|
|
Services
|
|
|
11,354
|
|
|
|
7
|
|
|
|
11,246
|
|
|
|
9
|
|
|
|
9,590
|
|
|
|
12
|
|
Software licensing
|
|
|
12,580
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|
|
|
8
|
|
|
|
4,410
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|
|
|
3
|
|
|
|
6,691
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
160,129
|
|
|
|
100
|
%
|
|
$
|
131,040
|
|
|
|
100
|
%
|
|
$
|
78,657
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Systems revenue decreased from 2007 through 2009 due to
continued weakness in the overall semiconductor equipment
manufacturing sector and reflects a decrease in inspection
systems revenue of $12.7 million, a decrease in metrology
systems revenue of $13.6 million from 2007 to 2008, a
decrease in inspection systems revenue of $35.4 million and
a decrease in metrology systems revenue of $12.2 million
from 2008 to 2009. Systems revenue generated by our latest
product releases and major enhancements in each of our product
families amounted to 29% of total revenue for 2007 compared to
40% of total revenue for 2008 and 35% of total revenue for 2009.
The
27
year-over-year
increase in parts and service revenues in absolute dollars from
2007 to 2008 reflects additional parts and service revenues from
the PCTA and WSPG acquisitions. The
year-over-year
decrease in parts and service revenues in absolute dollars from
2008 to 2009 is primarily due to overall weakness in the
semiconductor market. The
year-over-year
decrease in software licensing revenues of $8.2 million
from 2007 to 2008 reflects the sale of certain technology rights
to Tokyo Electron in 2007 not occurring in 2008 and weakness in
the semiconductor market. The
year-over-year
increase in software licensing revenues of $2.3 million
from 2008 to 2009 reflects additional software licensing
revenues from the acquisition of PCG.
Deferred revenues of $6.9 million are recorded in other
current liabilities at December 31, 2009 and primarily
consist of $2.4 million for deferred maintenance agreements
and $4.5 million for systems awaiting acceptance and
outstanding deliverables.
Gross Profit. Our gross profit has been and will
continue to be affected by a variety of factors, including
inventory
step-up from
purchase accounting, manufacturing efficiencies, excess and
obsolete inventory write-offs, pricing by competitors or
suppliers, new product introductions, production volume,
customization and reconfiguration of systems, international and
domestic sales mix, and parts and service margins. Our gross
profit was $81.2 million, $43.7 million and
$28.9 million in 2007, 2008 and 2009, respectively. The
decrease in gross profit as a percentage of revenue from 2007 to
2008 is primarily due to an inventory write down of
$14.1 million. The increase in gross profit as a percentage
of revenue from 2008 to 2009 is primarily due to an inventory
write down of $4.8 million in 2009 which had less of an
impact on gross profit than the inventory write down in 2008. We
do not track gross margin by the sources of revenue.
Operating
Expenses
The operating expenses consist of:
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|
|
|
|
Research and Development. The macro-defect
inspection, thin film transparent, opaque process control, and
probe card test analysis market is characterized by continuous
technological development and product innovations. We believe
that the rapid and ongoing development of new products and
enhancements to existing products, including the transition to
copper and low-k dielectrics, wafer level packaging, the
continuous shrinkage in critical dimensions, and the evolution
of ultra-thin gate process control, is critical to our success.
Accordingly, we devote a significant portion of our technical,
management and financial resources to research and development
programs. Research and development expenditures consist
primarily of salaries and related expenses of employees engaged
in research, design and development activities. They also
include consulting fees and the cost of related supplies. Our
research and development expense was $30.0 million,
$31.6 million and $26.0 million in 2007, 2008 and
2009, respectively. The
year-over-year
dollar increase from 2007 to 2008 is primarily due to the
addition of the engineering teams from the PCTA and WSPG
acquisitions in 2008, partially offset by headcount reductions
and lower project costs as part of our cost reduction efforts.
The
year-over-year
dollar decrease from 2008 to 2009 primarily reflects reduced
compensation cost and lower project costs as part of our
continued cost reduction efforts, offset by an increase in
litigation expenses and expenses related to the activities of
the acquisition of PCG. We continue to maintain our commitment
to investing in new product development and enhancement to
existing products in order to position ourselves for future
growth.
|
|
|
|
In-Process Research and Development
(IPRD). In 2007, the acquisition of the
PCTA resulted in the write-off of $1.0 million. At the time
of the acquisition, we determined that the IPRD had not reached
technological feasibility and that it did not have an
alternative future use. The IPRD technology project was a probe
card test project related to the next generation of our
ProbeWoRx systems with enhanced capabilities, and was
approximately 20% complete as of the date of acquisition. The
costs to complete this project consisted primarily of internal
engineering labor costs. The project was completed in the first
half of 2009. In accordance with FASB ASC 805, IPRD is no longer
written off at the acquisition date, but instead capitalized as
an intangible asset.
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|
|
|
Selling, General and Administrative. Selling,
general and administrative expense is primarily comprised of
salaries and related costs for sales, marketing, and general
administrative personnel, as well as commissions and other
non-personnel related expenses. Our selling, general and
administrative expense was $33.2 million,
$34.0 million and $33.6 million in 2007, 2008 and
2009, respectively. The
|
28
|
|
|
|
|
year-over-year
dollar increase from 2007 to 2008 in selling, general and
administrative expense was primarily due to administrative costs
associated with the merged activities of the PCTA and WSPG being
included for 2008, partially offset by foreign exchange gains
from our international operations. The
year-over-year
dollar decrease from 2008 to 2009 in selling, general and
administrative expense was primarily due to the elimination of
administrative costs associated with prior business
combinations, and lower compensation costs in the 2009 period,
offset by expenses as a result of the Adventa acquisition,
manufacturing consolidation costs and foreign exchange losses
from our international operations.
|
|
|
|
|
|
Impairment Charge for Goodwill and Identifiable Intangible
Assets. Goodwill is tested for impairment annually
or more frequently if an event or circumstance indicates that an
impairment loss may have been incurred. Impairment charge for
goodwill and identifiable intangible assets was $0 for both 2007
and 2009, and was $227.1 million for 2008. We perform our
annual goodwill impairment test on October 31st of
every year. As of December 31, 2009, the entire goodwill
balance is related to the Adventa acquisition completed in 2009.
As of October 31, 2009, it was determined that the carrying
value of this reporting unit was not less than fair value;
therefore, there was no impairment of goodwill. During our
annual goodwill impairment test in October 2008, we experienced
a significant decline in our stock price. As a result of the
decline in stock price, our market capitalization plus an
implied control premium fell significantly below the recorded
value of our consolidated net assets as of October 31,
2008. In performing the goodwill impairment test, we used
current market capitalization, control premiums, discounted cash
flows and other factors as the best evidence of fair value. The
impairment test resulted in no value attributable to our
goodwill and accordingly, we wrote off all of our
$192.9 million of goodwill as of October 31, 2008.
|
In connection with the goodwill impairment test, we determined
that our identifiable acquired intangible assets were impaired.
The determination was based on the carrying values exceeding the
future undiscounted cash flows and fair value attributable to
such intangible assets. As a result, we recorded an impairment
charge of $34.2 million as of October 31, 2008, which
represents the difference between the estimated fair values of
these long-lived assets as compared to their carrying values.
Fair values were determined based upon market conditions, the
relief from royalty approach which utilized cash flow
projections, and other factors.
Interest Income and Other, Net. Interest income and
other, net was $4.1 million, $1.2 million and
$0.3 million in 2007, 2008 and 2009, respectively. Interest
income and other, net consisted primarily of interest income and
realized gains and losses on sales of marketable securities. The
year-over-year
decrease in interest income and other, net of $2.9 million
from 2007 to 2008 and $0.9 million from 2008 to 2009 is
primarily due to lower average invested cash balances and lower
average interest rates.
Income Taxes. Income tax expense was
$4.8 million in 2007. There was an income tax benefit of
$4.1 million and $2.2 million, respectively, in 2008
and 2009. Income tax expense for the year ended
December 31, 2007 was 29.0% of income before provision for
income taxes. This differs from the federal statutory income tax
rate of 35%, primarily as a result of state income taxes offset
by benefits from research and development tax credits, the
domestic manufacturing production deduction and tax exempt
interest. In addition, our effective tax rate was impacted by
the non-deductibility of the IPRD charges for tax purposes of
$1.0 million.
The income tax benefit for the year ended December 31, 2008
was $4.1 million or 1.6% of loss before benefit for income
taxes. The income tax benefit differs from the amount that would
result from applying the federal statutory income tax rate of
35% to our loss before benefit for income taxes, primarily due
to our inability to record a full income tax benefit for the
impairments of the goodwill and long-lived assets and valuation
allowances in taxable jurisdictions.
The income tax benefit for the year ended December 31, 2009
was $2.2 million or 7.0% of loss before benefit for income
taxes. The income tax benefit differs from the amount that would
result from applying the federal statutory income tax rate of
35% to our loss before benefit for income taxes, primarily due
to valuation allowances in taxable jurisdictions.
29
We evaluate the recoverability of deferred tax assets from
future taxable income and establish valuation allowances if
recovery is deemed not likely. The valuation allowance increased
$35.2 million and $6.8 million in 2008 and 2009,
respectively.
Liquidity
and Capital Resources
At December 31, 2007, we had $73.9 million of cash,
cash equivalents and marketable securities and
$176.3 million in working capital. At December 31,
2008, we had $78.3 million of cash, cash equivalents and
marketable securities and $147.7 million in working
capital. At December 31, 2009, our cash, cash equivalents
and marketable securities totaled $60.9 million, while
working capital amounted to $126.8 million.
Typically during periods of revenue growth, changes in accounts
receivable and inventories represent a use of cash as we incur
costs and expend cash in advance of receiving cash from our
customers. Similarly, during periods of declining revenue,
changes in accounts receivable and inventories represent a
source of cash as inventory purchases decline and revenue from
prior periods is collected. However, for the year ended
December 31, 2008 as our revenues declined our change in
inventories represented a use of cash. This was primarily due to
increasing inventory related to new products and the
acceleration of the slowdown in the semiconductor industry.
Additionally, for the year ended December 31, 2009, as our
revenue declined from $131.0 million to $78.7 million,
our change in accounts receivables represented a use of cash.
This was primarily due to increasing sales in the fourth quarter
of 2009, offset by significantly lower sales in the fourth
quarter of 2008.
Net cash and cash equivalents provided by operating activities
for the years ended December 31, 2007 and 2008 totaled
$23.6 million and $15.4 million, respectively. Net
cash and cash equivalents used by operating activities for the
year ended December 31, 2009 totaled $12.1 million.
During the year ended December 31, 2007, cash provided by
operating activities was primarily due to net income, adjusted
to exclude the effect of non-cash charges, of $23.4 million
and a decrease in accounts receivable of $21.4 million,
partially offset by a decrease in deferred revenue of
$6.1 million, an increase in inventories of
$5.4 million, a decrease in accrued liabilities of
$4.0 million, a decrease in accounts payable of
$3.3 million and an increase in prepaid expenses and other
assets of $2.3 million. During the year ended
December 31, 2008, cash provided by operating activities
was primarily due to a decrease in accounts receivable of
$31.3 million, net loss, adjusted to exclude the effect of
non-cash charges, of $2.2 million, partially offset by a
decrease in accounts payable of $5.6 million, an increase
in income taxes receivable of $4.2 million, an increase in
inventories of $4.3 million, a decrease in accrued
liabilities of $2.5 million and a decrease in deferred
revenue of $1.6 million. During the year ended
December 31, 2009, cash used by operating activities was
primarily due to net loss, adjusted to exclude the effect of
non-cash charges, of $11.8 million, an increase in accounts
receivable of $13.2 million, a decrease in other current
liabilities of $1.3 million and a decrease in accrued
liabilities of $1.2 million, partially offset by a decrease
in inventories of $6.9 million, an increase in accounts
payable of $3.2 million, an increase in non-current
liabilities of $2.0 million, an increase in deferred
revenue of $1.6 million and a decrease in income taxes
receivable $1.0 million.
Net cash and cash equivalents used in investing activities for
the years ended December 31, 2007 and 2008 totaled
$40.5 million and $5.7 million, respectively. The net
cash and cash equivalents provided by investing activities for
the year ended December 31, 2009 totaled $1.7 million.
During the year ended December 31, 2007, net cash used by
investing activities included purchases of marketable securities
of $77.7 million, acquisition costs for business
combinations of $56.2 million, capital expenditures of
$1.0 million, costs incurred for capitalized software of
$0.7 million, partially offset by proceeds from sales of
marketable securities of $95.1 million. During the year
ended December 31, 2008, net cash used by investing
activities included purchases of marketable securities of
$15.5 million, acquisition costs for business combinations
of $8.5 million, capital expenditures of $3.0 million,
partially offset by proceeds from sales of marketable securities
of $21.3 million. During the year ended December 31,
2009, net cash provided by investing activities included
proceeds from sales of marketable securities of
$19.4 million, partially offset by purchases of marketable
securities of $12.2 million, acquisition costs for a
business combination of $5.0 million and purchase of
property, plant and equipment of $0.6 million. Capital
expenditures over the next twelve months are expected to be
approximately $3.0 million to $5.5 million.
Net cash provided by financing activities was $1.5 million,
$0.2 million and $0.2 million in 2007, 2008 and 2009,
respectively. In 2007, net cash provided by financing activities
was a result of proceeds received from sales of
30
shares through share-based compensation plans of
$1.3 million and tax benefit from share-based compensation
plans of $0.1 million. In both the 2008 and 2009 periods,
net cash provided by financing activities was a result of
proceeds received from sales of shares through share-based
compensation plans of $0.2 million.
From time to time we evaluate whether to acquire new or
complementary businesses, products
and/or
technologies. We may fund all or a portion of the purchase price
of these acquisitions in cash. On December 18, 2007, we
announced that our acquisition of the semiconductor division of
Applied Precision Holdings, LLC had been completed. Under the
terms of the agreement, we paid an aggregate of
$59.1 million in cash and issued an aggregate of
1.3 million shares of our common stock to Applied Precision
Holdings, LLC. On January 22, 2008, we announced that we
had acquired all intellectual property and selected assets from
privately-held RVSI Inspection, LLC, headquartered in Hauppauge,
New York and on August 3, 2009, we announced that we had
acquired Adventa Control Technologies, Inc., headquartered in
Plano, Texas. We accounted for these acquisitions as business
combinations.
In July 2008, our Board of Directors approved a stock repurchase
program of up to 3 million shares. As of the time of filing
this Annual Report on
Form 10-K,
we have not purchased any shares under this program.
Our future capital requirements will depend on many factors,
including the timing and amount of our revenues and our
investment decisions, which will affect our ability to generate
additional cash. We believe that our existing cash, cash
equivalents and marketable securities will be sufficient to meet
our anticipated cash requirements for working capital and
capital expenditures for the next twelve months. Thereafter, if
cash generated from operations and financing activities is
insufficient to satisfy our working capital requirements, we may
seek additional funding through bank borrowings, sales of
securities or other means. There can be no assurance that we
will be able to raise any such capital on terms acceptable to us
or at all.
Contractual
Obligations
The following table summarizes our significant contractual
obligations at December 31, 2009, and the effect such
obligations are expected to have on our liquidity and cash flows
in future periods. This table excludes the liability for
unrecognized tax benefits that totaled approximately
$5.5 million at December 31, 2009. We are currently
unable to provide a reasonably reliable estimate of the amount
or periods when cash settlement of this liability may occur.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments due by period
|
|
|
|
|
|
|
Less than 1
|
|
|
1-3
|
|
|
3-5
|
|
|
More than
|
|
|
|
Total
|
|
|
year
|
|
|
years
|
|
|
years
|
|
|
5 years
|
|
|
Operating lease obligations
|
|
$
|
13,306
|
|
|
$
|
2,791
|
|
|
$
|
4,048
|
|
|
$
|
2,946
|
|
|
$
|
3,521
|
|
Open and committed purchase orders
|
|
|
16,868
|
|
|
|
16,868
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
30,174
|
|
|
$
|
19,659
|
|
|
$
|
4,048
|
|
|
$
|
2,946
|
|
|
$
|
3,521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Off-Balance
Sheet Arrangements
The Company does not have any off-balance sheet arrangements
that have or are reasonably likely to have a material effect on
our financial condition, results of operations or liquidity and
capital resources.
Critical
Accounting Policies
Managements discussion and analysis of our financial
condition and results of operations are based upon our
consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the
United States of America. We review the accounting policies we
use in reporting our financial results on a regular basis. The
preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses and related
disclosure of contingent assets and liabilities. On an ongoing
basis, we evaluate our estimates, including those related to
revenue recognition, accounts receivable, inventories, business
acquisitions, intangible assets, share-based payments, income
taxes and warranty obligations. We base our estimates on
historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results
of which form the basis for making judgments about
31
the carrying value of assets and liabilities that are not
readily apparent from other sources. Results may differ from
these estimates due to actual outcomes being different from
those on which we based our assumptions. These estimates and
judgments are reviewed by management on an ongoing basis, and by
the Audit Committee at the end of each quarter prior to the
public release of our financial results. We believe the
following critical accounting policies affect our more
significant judgments and estimates used in the preparation of
our consolidated financial statements.
Revenue Recognition. Revenue is recognized when
there is persuasive evidence of an arrangement, delivery has
occurred, the sales price is fixed or determinable, and
collection of the related receivable is reasonably assured.
Certain sales of our products are sold and accounted for as
multiple element arrangements, consisting primarily of the sale
of the product, software, installation and training services. We
generally recognize product revenue upon shipment. In the
limited circumstances where customer acceptance is subjective
and not obtained prior to shipment, we defer product revenue
until such time as positive affirmation of acceptance has been
obtained from the customer. Customer acceptance is generally
based on our products meeting published performance
specifications. The amount of revenue allocated to the shipment
of products is done on a residual method basis. Under this
method, the total arrangement value is allocated first to
undelivered contract elements, based on their fair values, with
the remainder being allocated to product revenue. The fair value
of installation and training services is based upon billable
hourly rates and the estimated time to complete the service.
Revenue related to undelivered installation services is deferred
until such time as installation is completed at the
customers site. Revenue related to training services is
recognized ratably over the training period. Revenue from
software license fees is recognized upon shipment if collection
of the resulting receivable is probable, the fee is fixed or
determinable, and vendor-specific objective evidence exists to
allocate a portion of the total fee to any undelivered elements
of the arrangement. Such undelivered elements in these
arrangements typically consist of follow-on support. If
vendor-specific objective evidence does not exist for the
undelivered elements of the arrangement, all revenue is deferred
and recognized ratably over the support period.
Allowance for Doubtful Accounts. We maintain
allowances for doubtful accounts for estimated losses resulting
from the inability of our customers to make required payments.
We specifically analyze accounts receivable and analyze
historical bad debts, customer concentrations, customer
credit-worthiness, current economic trends and changes in our
customer payment terms when evaluating the adequacy of the
allowance for doubtful accounts. If the financial condition of
our customers were to deteriorate, resulting in an impairment of
their ability to make payments, or if our assumptions are
otherwise incorrect, additional allowances may be required.
Excess and Obsolete Inventory. We write down our
excess and obsolete inventory equal to the difference between
the cost of inventory and the estimated market value based upon
assumptions about future product life-cycles, product demand and
market conditions. If actual product life-cycles, product demand
and market conditions are less favorable than those projected by
management, additional inventory write-downs may be required.
Business Acquisitions. We account for acquired or
merged businesses using the purchase method of accounting which
requires that the assets acquired and liabilities assumed be
recorded at the date of acquisition or merger at their
respective fair values. The judgments made in determining the
estimated fair value assigned to each class of assets acquired
and liabilities assumed, as well as asset lives, can materially
impact our consolidated financial position and results of
operations. Accordingly, for significant items, we typically
obtain assistance from independent valuation specialists.
There are several methods that can be used to determine the fair
value of assets acquired and liabilities assumed. For intangible
assets, we normally utilize the income method. This
method starts with a forecast of all of the expected future net
cash flows. These cash flows are then adjusted to present value
by applying an appropriate discount rate that reflects the risk
factors associated with the cash flow streams. Some of the more
significant estimates and assumptions inherent in the income
method or other methods include the projected future cash flows
(including timing) and the discount rate reflecting the risks
inherent in the future cash flows. Determining the useful life
of an intangible asset also requires judgment. For example,
different types of intangible assets will have different useful
lives and certain assets may even be considered to have
indefinite useful lives. All of these judgments and estimates
can significantly impact our consolidated financial position and
results of operations.
32
Goodwill. Our formal annual impairment testing date
for goodwill is October 31st or prior to the next
annual testing date if an event occurs or circumstances change
that would make it more likely than not that the fair value of a
reporting unit is below its carrying amount. The goodwill
impairment test is a two-step process which requires us to make
judgmental assumptions regarding fair value. The first step
consists of estimating the fair value of our aggregated
reporting unit using the market value of our common stock at
October 31st, multiplied by the number of outstanding
common shares (market capitalization) and an implied control
premium as if it were to be acquired by a single stockholder. We
obtain information on completed sales of similar companies in a
comparable industry to estimate an implied control premium for
us. We compare the estimated fair value of the reporting unit to
its carrying value which includes goodwill. If the results of
the initial market capitalization test produce results which are
below the reporting unit carrying value, we will also consider
if the market capitalization is temporarily low and, if so, we
may also perform a discounted cash flow test. If the estimated
fair value is less than the carrying value, the second step is
completed to compute the impairment amount by determining the
implied fair value of goodwill. This determination
requires the allocation of the estimated fair value of the
reporting unit to the assets and liabilities of the reporting
unit. Any remaining unallocated fair value represents the
implied fair value of goodwill which is compared to
the corresponding carrying value to compute the goodwill
impairment amount.
Long-Lived Assets and Acquired Intangible Assets. We
periodically review long-lived assets, other than goodwill, for
impairment whenever changes in events or circumstances indicate
that the carrying amount of an asset may not be recoverable.
Assumptions and estimates used in the determination of
impairment losses, such as future cash flows and disposition
costs, may affect the carrying value of long-lived assets and
the impairment of such long-lived assets, if any, could have a
material effect on our consolidated financial statements.
Share-Based Compensation. The fair value of our
stock options is estimated at the date of grant using the
Black-Scholes option pricing model. The Black-Scholes valuation
calculation requires us to estimate key assumptions such as
future stock price volatility, expected terms, risk-free rates
and dividend yield. Expected stock price volatility is based on
historical volatility of our stock. We use historical data to
estimate option exercises and employee terminations within the
valuation model. The expected term of options granted is derived
from an analysis of historical exercises and remaining
contractual life of stock options, and represents the period of
time that options granted are expected to be outstanding. The
risk-free rate is based on the U.S. Treasury yield curve in
effect at the time of grant. We have never paid cash dividends,
and do not currently intend to pay cash dividends, and thus have
assumed a 0% dividend yield. If our actual experience differs
significantly from the assumptions used to compute our
share-based compensation cost, or if different assumptions had
been used, we may have recorded too much or too little
share-based compensation cost. In addition, we are required to
estimate the expected forfeiture rate of our share grants and
only recognize the expense for those shares expected to vest. If
the actual forfeiture rate is materially different from our
estimate, our share-based compensation expense could be
materially different.
Warranties. We provide for the estimated cost of
product warranties at the time revenue is recognized. While we
engage in product quality programs and processes, our warranty
obligation is affected by product failure rates, material usage
and service delivery costs incurred in correcting a product
failure. Should actual product failure rates, material usage or
service delivery costs differ from our estimates, revisions to
the estimated warranty liability would be required.
Accounting for Income Taxes. As part of the process
of preparing our consolidated financial statements, we are
required to estimate our actual current tax exposure together
with our temporary differences resulting from differing
treatment of items for tax and accounting purposes. These
temporary differences result in deferred tax assets and
liabilities, which are included within our consolidated balance
sheet. We must then assess the likelihood that our deferred tax
assets will be recovered from future taxable income and to the
extent we believe that recovery is not likely, we must establish
a valuation allowance. Significant management judgment is
required in determining our provision for income taxes and any
valuation allowance recorded against our deferred tax assets.
The need for a valuation allowance is based on our estimates of
taxable income by jurisdiction in which we operate and the
period over which our deferred taxes will be recoverable. In the
event that actual results differ from these estimates or we
adjust these estimates in future periods, we may need to adjust
the valuation allowance, which could materially impact our
financial position and results of operations. At
December 31, 2009, we had a valuation allowance of
$43.3 million on most of our deferred tax assets to reflect
the deferred tax asset at the net amount that is more likely
than not to be realized.
33
We recognize liabilities for uncertain tax positions based on a
two-step process. The first step requires us to determine if the
weight of available evidence indicates that the tax position has
met the threshold for recognition; therefore, we must evaluate
whether it is more likely than not that the position will be
sustained on audit, including resolution of any related appeals
or litigation processes. The second step requires us to measure
the tax benefit of the tax position taken, or expected to be
taken, in an income tax return as the largest amount that is
more than 50% likely of being realized when effectively settled.
This measurement step is inherently difficult and requires
subjective estimations of such amounts to determine the
probability of various possible outcomes. We reevaluate the
uncertain tax positions each quarter based on factors including,
but not limited to, changes in facts or circumstances, changes
in tax law, effectively settled issues, and new audit activity.
Such a change in recognition or measurement could result in the
recognition of a tax benefit or an additional charge to the tax
provision in the period.
Although we believe the measurement of our liabilities for
uncertain tax positions is reasonable, no assurance can be given
that the final outcome of these matters will not be different
than what is reflected in the historical income tax provisions
and accruals. If additional taxes are assessed as a result of an
audit or litigation, it could have a material effect on our
income tax provision and net income in the period or periods for
which that determination is made.
Impact of
Recent Accounting Pronouncements
In October 2009, the Financial Accounting Standards Board
(FASB) issued Accounting Standard Update
(ASU)
No. 2009-14
on FASB Accounting Standards Codification (ASC) 985,
SoftwareCertain Revenue Arrangements That Include
Software Elements-a consensus of the FASB Emerging Issues Task
Force. The objective of this ASU is to clarify which
revenue allocation and measurement guidance should be used for
arrangements that contain both tangible products and software,
in cases where the software is more than incidental to the
tangible product as a whole. More specifically, if the software
sold with or embedded within the tangible product is essential
to the functionality of the tangible product, then this software
as well as undelivered software elements that relate to this
software are excluded from the scope of existing software
revenue guidance, which is expected to decrease the amount of
revenue deferred in these cases. This ASU is to be applied
prospectively for revenue arrangements entered into or
materially modified in fiscal years beginning on or after
June 15, 2010, which for us is the year 2011. Early
adoption is permitted, but this ASU must be adopted in the same
period as, and use the same transition method that is used for,
the ASU described in the following paragraph. We are currently
evaluating the impact, if any, of this new accounting update on
or consolidated financial statements.
In October 2009, the FASB issued ASU
No. 2009-13
on FASB ASC 605, Revenue RecognitionMultiple
Deliverable Revenue Arrangementsa consensus of the FASB
Emerging Issues Task Force. The objective of this ASU is
to address the accounting for multiple-deliverable arrangements
to enable vendors to account for products or services
(deliverables) separately rather than as a combined unit.
Vendors often provide multiple products or services to their
customers. Those deliverables are often provided at different
points in time or over different time periods. This ASU provides
amendments to the criteria in FASB ASC
605-25 for
separating consideration in multiple-deliverable arrangements.
The amendments in this ASU establish a selling price hierarchy
for determining the selling price of a deliverable. The selling
price used for each deliverable will be based on vendor specific
objective evidence if available, third-party evidence if
vendor-specific objective evidence is not available, or
estimated selling price if neither vendor specific objective
evidence nor third-party evidence is available. The amendments
in this ASU also will replace the term fair value in
the revenue allocation guidance with selling price
to clarify that the allocation of revenue is based on
entity-specific assumptions rather than assumptions of a
marketplace participant. This update is effective for fiscal
years beginning on or after June 15, 2010. We are currently
evaluating the impact, if any, of this new accounting update on
our consolidated financial statements.
In June 2009, the FASB issued ASC 105 (formerly,
SFAS No. 168, Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting
Principlesa replacement of FASB Statement
No. 162), which states that the ASC will become the
source of authoritative accounting principles generally accepted
in the United States of America (GAAP)
recognized by the FASB to be applied by nongovernmental
entities. Rules and interpretive releases of the SEC under
authority of federal securities laws are also sources of
authoritative GAAP for SEC registrants. FASB ASC 105 is
effective for interim and annual periods ending after
September 15, 2009. We
34
adopted FASB ASC 105 during the quarter ended September 30,
2009 and the adoption did not have any effect on our financial
condition or results of operations.
In May 2009, the FASB issued ASC 855 (formerly
SFAS No. 165, Subsequent Events). FASB ASC
855 is effective for interim and annual periods ending after
June 15, 2009. FASB ASC 855 establishes general standards
of accounting for, and disclosure of, events that occur after
the balance sheet date but before financial statements are
issued or are available to be issued. In particular, FASB ASC
855 establishes (i) the period after the balance sheet date
during which management of a reporting entity should evaluate
events or transactions that may occur for potential recognition
or disclosure in the financial statements, (ii) the
circumstances under which an entity should recognize events or
transactions occurring after the balance sheet date in its
financial statements and (iii) the disclosures that an
entity should make about events or transactions that occurred
after the balance sheet date. We have evaluated all subsequent
events through the date of issuance of our financial statements.
We adopted FASB ASC 855 during the quarter ended June 30,
2009 and the adoption did not have any effect on our financial
condition or results of operations.
In April 2009, the FASB issued ASC 820 (formerly, FASB Staff
Position (FSP)
No. 157-4,
Determining Fair Value When the Volume and Level of
Activity for the Asset or Liability Have Significantly Decreased
and Identifying Transactions That Are Not Orderly). FASB
ASC 820 provides additional guidance for estimating fair value
in accordance with FASB ASC 820 when the volume and level of
activity for the asset or liability have significantly decreased
and requires that companies provide interim and annual
disclosures of the inputs and valuation techniques used to
measure fair value. FASB ASC 820 is effective for interim and
annual reporting periods ending after June 15, 2009 and is
to be applied prospectively. We adopted FASB ASC 820 during the
quarter ended June 30, 2009 and the adoption did not have a
significant impact on our consolidated financial position and
results of operations.
In April 2009, the FASB issued ASC 825 (formerly FSP
No. 107-b
and Accounting Principle Board Opinion
No. 28-a,
Interim Disclosures about Fair Value of Financial
Instruments). FASB ASC 825 requires disclosures about fair
value of financial instruments for interim reporting periods of
publicly traded companies as well as in annual financial
statements. FASB ASC 825 is effective for interim and annual
periods ending after June 15, 2009, but entities may early
adopt the FSP for the interim and annual periods ending after
March 15, 2009. We adopted FASB ASC 825 during the quarter
ended June 30, 2009 and the adoption did not have a
significant impact on our consolidated financial position and
results of operations.
In April 2009, the FASB issued ASC 320 (formerly FSP
No. 115-2,
Recognition and Presentation of
Other-Than-Temporary
Impairments). FASB ASC 320 amends the
other-than-temporary
impairment guidance to improve the presentation and disclosure
of
other-than-temporary
impairments on debt and equity securities in the financial
statements. FASB ASC 320 is effective for interim and annual
periods ending after June 15, 2009, but entities may early
adopt the FSP for the interim and annual periods ending after
March 15, 2009. We adopted FASB ASC 320 during the quarter
ended June 30, 2009 and the adoption did not have a
significant impact on our consolidated financial position and
results of operations.
In April 2009, the FASB issued ASC 805 (formerly FSP
No. 141(R)-1, Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination That Arise from
Contingencies). FASB ASC 805 amends and clarifies previous
authoritative guidance, to address application issues on initial
recognition and measurement, subsequent measurement and
accounting, and disclosure of assets and liabilities arising
from contingencies in a business combination. Under FASB ASC
805, an acquirer is required to recognize at fair value an asset
acquired or liability assumed in a business combination that
arises from a contingency if the acquisition date fair value can
be determined during the measurement period. If the acquisition
date fair value cannot be determined, the acquirer applies the
recognition criteria in FASB ASC 450, (formerly
SFAS No. 5, Accounting for Contingencies,
and FIN 14, Reasonable Estimation of the Amount of a
Loss), to determine whether the contingency should be
recognized as of the acquisition date or after it. We adopted
FASB ASC 805 in the quarter ended March 31, 2009 and the
adoption did not have a significant impact on our consolidated
financial position and results of operations.
35
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Item 7A.
|
Quantitative
and Qualitative Disclosures About Market Risk.
|
Interest
Rate and Credit Market Risk
We are exposed to changes in interest rates and market liquidity
primarily from our investments in certain
available-for-sale
securities. Our
available-for-sale
securities consist of fixed and variable rate income investments
(U.S. Treasury and Agency securities, asset-backed
securities, mortgage-backed securities, auction rate securities
and corporate bonds). We continually monitor our exposure to
changes in interest rates, market liquidity and credit ratings
of issuers from our
available-for-sale
securities. It is possible that we are at risk if interest
rates, market liquidity or credit ratings of issuers change in
an unfavorable direction. The magnitude of any gain or loss will
be a function of the difference between the fixed rate of the
financial instrument and the market rate and our financial
condition and results of operations could be materially
affected. Based on sensitivity analysis performed on our
financial investments held as of December 31, 2009, an
immediate adverse change of 10% in interest rates (e.g. 3.00% to
3.30%) would result in an immaterial decrease in the fair value
of our
available-for-sale
securities.
Foreign
Currency Risk
We have branch operations in Taiwan, Singapore and Korea and
wholly-owned subsidiaries in Europe, Japan and China. Our
international subsidiaries and branches operate primarily using
local functional currencies. These foreign branches and
subsidiaries are limited in their operations and level of
investment so that the risk of currency fluctuations is not
material. A substantial portion of our international systems
sales are denominated in U.S. dollars with the exception of
Japan and, as a result, we have relatively little exposure to
foreign currency exchange risk with respect to these sales.
Substantially all our sales in Japan are denominated in Japanese
yen. From time to time, we may enter into forward exchange
contracts to economically hedge a portion of, but not all,
existing and anticipated foreign currency denominated
transactions expected to occur within 12 months. The change
in fair value of the forward contracts is recognized in the
Consolidated Statements of Operations each reporting period. As
of December 31, 2008 and 2009, we had sixteen and four
forward contracts outstanding, respectively. The total notional
contract value of these outstanding forward contracts at
December 31, 2008 and 2009 was $2.3 million and
$1.0 million, respectively. We do not use derivative
financial instruments for trading or speculative purposes.
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Item 8.
|
Financial
Statements and Supplementary Data.
|
The consolidated financial statements required by this item are
set forth on the pages indicated at Item 15(a) of this
Annual Report on
Form 10-K.
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Item 9.
|
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure.
|
None.
|
|
Item 9A.
|
Controls
and Procedures.
|
Evaluation
of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed
to ensure that information we are required to disclose in
reports that we file or submit under the Securities Exchange Act
of 1934, as amended (the Exchange Act) is recorded,
processed, summarized and reported within the time period
specified in SEC rules and forms. These controls and procedures
are also designed to ensure that such information is accumulated
and communicated to our management, including our principal
executive and principal financial officers, as appropriate, to
allow timely decisions regarding required disclosure. In
designing and evaluating disclosure controls and procedures, we
have recognized that any controls and procedures, no matter how
well designed and operated, can provide only reasonable
assurance of achieving the desired control objectives.
Management is required to apply judgment in evaluating its
controls and procedures.
We performed an evaluation under the supervision and with the
participation of our management, including our principal
executive and principal financial officers, to assess the
effectiveness of the design and operation of our disclosure
controls and procedures under the Exchange Act as of
December 31, 2009. Based on that evaluation, our
36
management, including our principal executive and principal
financial officers, concluded that our disclosure controls and
procedures were effective as of December 31, 2009 at the
reasonable assurance level.
Managements
Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting, as such term
is defined in Exchange Act
Rules 13a-15(f)
and
15d-15(f).
Internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements
for external purposes in accordance with accounting principles
generally accepted in the United States of America. Under the
supervision and with the participation of our management,
including our principal executive officer and principal
financial officer, we conducted an evaluation of the
effectiveness of our internal control over financial reporting
based on the framework in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on our
evaluation, our management concluded that our internal control
over financial reporting was effective as of December 31,
2009.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
Our consolidated financial statements as of and for the year
ended December 31, 2009 have been audited by
Ernst & Young LLP, our independent registered public
accounting firm, in accordance with the standards of the Public
Company Accounting Oversight Board (United States).
Ernst & Young LLP has also audited our internal
control over financial reporting as of December 31, 2009,
as stated in its attestation report included elsewhere in this
Annual Report on
Form 10-K.
There have been no changes in the Companys internal
control over financial reporting (as defined in
Rule 13a-15(f)
under the Exchange Act) that occurred during the Companys
quarter ended December 31, 2009 that have materially
affected, or are reasonably likely to materially affect, its
internal control over financial reporting.
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Item 9B.
|
Other
Information.
|
None.
37
PART III
Certain information required by Part III is omitted from
this Annual Report on
Form 10-K
because we will file a definitive proxy statement within one
hundred twenty (120) days after the end of the fiscal year
pursuant to Regulation 14A (the Proxy
Statement) for our Annual Meeting of Stockholders
currently scheduled for May 19, 2010, and the information
included in the Proxy Statement is incorporated herein by
reference.
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Item 10.
|
Directors,
Executive Officers and Corporate Governance.
|
The information required by this Item with respect to directors
and executive officers is incorporated by reference to the Proxy
Statement. Information regarding compliance with Section 16
of the Securities Exchange Act of 1934, as amended, is
incorporated by reference to the information under the heading
Section 16(a) Beneficial Ownership Reporting
Compliance in the Proxy Statement.
Code of Ethics. We have adopted a code of ethics
that applies to our principal executive officer, principal
financial officer and controller. This code of ethics is posted
on our internet website address at
http://www.rudolphtech.com.
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Item 11.
|
Executive
Compensation.
|
The information required by this Item is incorporated by
reference to the Proxy Statement.
|
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Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.
|
The information required by this Item is incorporated by
reference to the Proxy Statement.
|
|
Item 13.
|
Certain
Relationships and Related Transactions, and Director
Independence.
|
The information required by this Item is incorporated by
reference to the Proxy Statement.
|
|
Item 14.
|
Principal
Accounting Fees and Services.
|
The information required by this Item is incorporated by
reference to the Proxy Statement.
38
PART IV
|
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Item 15.
|
Exhibits
and Financial Statement Schedule.
|
(a) The following documents are filed as part of this
Annual Report on
Form 10-K:
1. Financial Statements
The consolidated financial statements and consolidated financial
statement information required by this Item are included on
pages F-1 through F-8 of this report. The Reports of Independent
Registered Public Accounting Firms appear on pages F-2 through
F-4 of this report.
2. Financial Statement Schedule
See Index to financial statements on
page F-1
of this report.
3. Exhibits
The following is a list of exhibits. Where so indicated,
exhibits, which were previously filed, are incorporated by
reference.
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Exhibit
|
|
|
No.
|
|
Description
|
|
|
2
|
.1
|
|
Agreement and Plan of Merger, dated as of June 27, 2005, by
and among the Registrant, NS Merger Sub, Inc. and August
Technology Corporation (incorporated by reference to
Exhibit 99.2 to the Registrants Schedule 13D
filed on July 7, 2005).
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2
|
.2
|
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Amendment No. 1, dated as of December 8, 2005, by and
among the Registrant, NS Merger Sub, Inc. and August Technology
Corporation, to the Agreement and Plan of Merger, dated as of
June 27, 2005, by and among the Registrant, NS Merger Sub,
Inc. and August Technology Corporation. (incorporated by
reference to Exhibit 2.1 to the Registrants Current
Report on
Form 8-K
filed on December 9, 2005).
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2
|
.3
|
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Asset Purchase Agreement dated as of December 18, 2007, by
and among the Registrant, Mariner Acquisition Company LLC,
Applied Precision Holding, LLC and Applied Precision, LLC
(incorporated by reference to Exhibit 2.1 to the
Registrants Current Report on
Form 8-K
filed on December 21, 2007).
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3
|
.1
|
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Restated Certificate of Incorporation of Registrant
(incorporated by reference to Exhibit (3.1(b)) to the
Registrants Registration Statement on
Form S-1,
as amended (SEC File
No. 333-86871
filed on September 9, 1999).
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3
|
.2
|
|
Amended and Restated Bylaws of Registrant (incorporated by
reference to Exhibit (3.2(b) to the Registrants
Registration Statement on
Form S-1,
as amended (SEC File
No. 333-86871),
filed on September 9, 1999.
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3
|
.3
|
|
Amendment to Restated Bylaws of Registrant (incorporated by
reference to Exhibit 3.1 to the Registrants Current
Report on
Form 8-K
filed on February 15, 2006,
No. 000-27965).
|
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3
|
.4
|
|
Amendment to Restated Bylaws of Registrant (incorporated by
reference to Exhibit 3.1 to the Registrants Current
Report on
Form 8-K
filed on August 1, 2007,
No. 000-27965).
|
|
3
|
.5
|
|
Amendment to Restated Bylaws of Registrant (incorporated by
reference to Exhibit 3.1 to the Registrants Current
Report on
Form 8-K
filed on February 2, 2009,
No. 000-27965).
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|
4
|
.1
|
|
Rights Agreement (incorporated by reference to Exhibit 4.1
of the Registrants Registration Statement on
Form 8-A,
filed on June 28, 2005, No
000-27965).
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4
|
.2
|
|
August Technology Corporation 1997 Stock Incentive Plan
(incorporated by reference to the Appendix to August Technology
Corporations Proxy Statement for its 2004 Annual
Shareholders Meeting, filed on March 11, 2004,
No. 000-30637).
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10
|
.1+
|
|
License Agreement, dated June 28, 1995, between the
Registrant and Brown University Research Foundation
(incorporated by reference to Exhibit (10.1) to the
Registrants Registration Statement on
Form S-1,
as amended (SEC File
No. 333-86871),
filed on September 9, 1999).
|
|
10
|
.2*
|
|
Form of Indemnification Agreement (incorporated by reference to
Exhibit (10.3) to the Registrants Registration Statement
on
Form S-1,
as amended (SEC File
No. 333-86871),
filed on September 9, 1999).
|
|
10
|
.3*
|
|
Amended 1996 Non-Qualified Stock Option Plan (incorporated by
reference to Exhibit 10.15 to Registrants quarterly
report on
Form 10-Q
(SEC File
No. 000-27965),
filed on November 14, 2001).
|
|
10
|
.4*
|
|
Form of 1999 Stock Plan (incorporated by reference to Exhibit
(10.5) to the Registrants Registration Statement on
Form S-1,
as amended (SEC File
No. 333-86871),
filed on September 9, 1999).
|
39
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
10
|
.5*
|
|
Form of 1999 Employee Stock Purchase Plan (incorporated by
reference to Exhibit (10.6) to the Registrants
Registration Statement on
Form S-1,
as amended (SEC File
No. 333-86871),
filed on September 9, 1999).
|
|
10
|
.6*
|
|
Management Agreement, dated as of July 24, 2000, by and
between Rudolph Technologies, Inc. and Paul F. McLaughlin
(incorporated by reference to Exhibit 10.12 to
Registrants quarterly report on
Form 10-Q,
filed on November 3, 2000) as amended August 20,
2009 (incorporated by reference to Exhibit 10.1 to
Registrants quarterly report on
Form 10-Q,
filed on November 6, 2009).
|
|
10
|
.7*
|
|
Management Agreement, dated as of July 24, 2000 by and
between Rudolph Technologies, Inc. and Steven R. Roth
(incorporated by reference to Exhibit 10.14 to
Registrants quarterly report on
Form 10-Q,
filed on November 3, 2000) as amended August 20,
2009 (incorporated by reference to Exhibit 10.2 to
Registrants quarterly report on
Form 10-Q,
filed on November 6, 2009).
|
|
10
|
.8*
|
|
Registration Agreement, dated June 14, 1996 by and among
the Registrant, 11, L.L.C., Riverside Rudolph, L.L.C.,
Dr. Richard F. Spanier, Paul F. McLaughlin (incorporated by
reference to Exhibit (10.9) to the Registrants
Registration Statement on
Form S-1,
as amended (SEC File
No. 333-86871),
filed on September 9, 1999).
|
|
10
|
.9*
|
|
Stockholders Agreement, dated June 14, 1996 by and among
the Registrant, Administration of Florida, Liberty Partners
Holdings 11, L.L.C., Riverside Rudolph, L.L.C., Dr. Richard
F. Spanier, Paul McLaughlin, Dale Moorman, Thomas Cooper
and (incorporated by reference to Exhibit (10.10) to the
Registrants
Form S-1,
as amended (SEC File
No. 333-86871),
filed on September 9, 1999).
|
|
10
|
.10*
|
|
Form of option agreement under 1999 Stock Plan (incorporated by
reference to Exhibit 10.12 to Registrants quarterly
report on
Form 10-Q
(SEC File
No. 000-27965),
filed on November 5, 2004).
|
|
10
|
.11*
|
|
Form of Restricted Stock Award pursuant to the Rudolph
Technologies, Inc. 1999 Stock Plan (incorporated by reference to
the Registrants Current Report on
Form 8-K
filed on June 21, 2005).
|
|
10
|
.12
|
|
Form of Company Shareholder Voting Agreement (incorporated by
reference to Exhibit 99.2 to the Registrants
Schedule 13D filed on July 7, 2005).
|
|
10
|
.13*
|
|
Rudolph Technologies, Inc. 2009 Stock Plan (incorporated by
reference to Appendix A of the Registrants revised
Proxy Statement on Form DEFR14A, filed on May 8, 2009).
|
|
10
|
.14*
|
|
Rudolph Technologies, Inc. 2009 Employee Stock Purchase Plan, as
amended (incorporated by reference to Appendix B of the
Registrants revised Proxy Statement on Form DEFR14A,
filed on May 8, 2009).
|
|
10
|
.15*
|
|
Executive Change of Control Agreement, dated as of
August 20, 2009, by and between Rudolph Technologies, Inc.
and Nathan H. Little (incorporated by reference to
Exhibit 10.3 to Registrants quarterly report on
Form 10-Q,
filed on November 6, 2009).
|
|
14
|
.1
|
|
Rudolph Technologies Code of Business Conduct and Ethics
(incorporated by reference to Exhibit 14.1 to
Registrants annual report on
Form 10-K,
filed on March 16, 2006).
|
|
14
|
.2
|
|
Rudolph Technologies Financial Code of Ethics (incorporated by
reference to Exhibit 14.1 to Registrants annual
report on
Form 10-K,
filed on March 16, 2006).
|
|
21
|
.1
|
|
Subsidiaries.
|
|
23
|
.1
|
|
Consent of KPMG LLP, Independent Registered Public Accounting
Firm.
|
|
23
|
.2
|
|
Consent of Ernst & Young LLP, Independent Registered
Public Accounting Firm.
|
|
31
|
.1
|
|
Certification of Paul F. McLaughlin, Chief Executive Officer,
pursuant to Securities Exchange Act
Rule 13a-14(a).
|
|
31
|
.2
|
|
Certification of Steven R. Roth, Chief Financial Officer,
pursuant to Securities Exchange Act
Rule 13a-14(a).
|
|
32
|
.1
|
|
Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, signed by Paul F. McLaughlin, Chief Executive Officer
of Rudolph Technologies, Inc.
|
|
32
|
.2
|
|
Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, signed by Steven R. Roth, Chief Financial Officer of
Rudolph Technologies, Inc.
|
|
|
|
+ |
|
Confidential treatment has been granted with respect to portions
of this exhibit. |
|
* |
|
Management contract, compensatory plan or arrangement. |
40
RUDOLPH
TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE
|
|
|
|
|
|
|
Page
|
|
Consolidated Financial Statements:
|
|
|
|
|
|
|
|
F-2
|
|
|
|
|
F-5
|
|
|
|
|
F-6
|
|
|
|
|
F-7
|
|
|
|
|
F-8
|
|
|
|
|
F-9
|
|
Consolidated Financial Statement Schedule:
|
|
|
|
|
|
|
|
F-35
|
|
F-1
Report of
Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors of
Rudolph Technologies, Inc.:
We have audited the accompanying consolidated statements of
operations, stockholders equity and comprehensive income
(loss), and cash flows of Rudolph Technologies, Inc. and
subsidiaries for the year ended December 31, 2007. In
connection with our audit of the consolidated financial
statements, we also have audited the consolidated financial
statement schedule for the year ended December 31, 2007.
These consolidated financial statements and the financial
statement schedule are the responsibility of the Companys
management. Our responsibility is to express an opinion on these
consolidated financial statements and the financial statement
schedule based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the results
of operations and cash flows of Rudolph Technologies, Inc. and
subsidiaries for the year ended December 31, 2007, in
conformity with U.S. generally accepted accounting
principles. Also in our opinion, the related financial statement
schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
/s/ KPMG LLP
Short Hills, New Jersey
March 3, 2008
F-2
Report of
Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
Rudolph Technologies, Inc.
We have audited the accompanying consolidated balance sheets of
Rudolph Technologies, Inc. as of December 31, 2009 and
2008, and the related consolidated statements of operations,
stockholders equity and comprehensive income (loss), and
cash flows for the two years in the period then ended
December 31, 2009 and 2008. Our audit also included the
financial statement schedule listed in the index at
Item 15(a). These financial statements and schedule are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free from material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Rudolph Technologies, Inc. at
December 31, 2009 and 2008, and the consolidated results of
its operations and its cash flows for each of the two years in
the period ended December 31, 2009, in conformity with
U.S. generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the
information set forth therein.
As of January 1, 2009, Rudolph Technologies, Inc. adopted
Accounting Standards Codification No. 805, Business
Combinations, as discussed in Note 2 to the
consolidated financial statements.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States),
Rudolph Technologies, Inc.s internal control over
financial reporting as of December 31, 2009, based on
criteria established in Internal Control-Integrated Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission and our report dated March 5, 2010,
expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Metropark, New Jersey
March 5, 2010
F-3
Report of
Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
Rudolph Technologies, Inc.
We have audited Rudolph Technologies, Inc.s internal
control over financial reporting as of December 31, 2009,
based on criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO criteria).
Rudolph Technologies, Inc.s management is responsible for
maintaining effective internal control over financial reporting,
and for its assessment of the effectiveness of internal control
over financial reporting included in the accompanying
Managements Report on Internal Control Over Financial
Reporting. Our responsibility is to express an opinion on the
companys internal control over financial reporting based
on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, Rudolph Technologies, Inc. maintained, in all
material respects, effective internal control over financial
reporting as of December 31, 2009, based on the COSO
criteria.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Rudolph Technologies, Inc. as of
December 31, 2009 and 2008, and the related consolidated
statements of operations, stockholders equity and comprehensive
income (loss), and cash flows for the two years in the period
then ended December 31, 2009 and 2008 of Rudolph
Technologies, Inc. and our report dated March 5, 2010
expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Metropark, NJ
March 5, 2010
F-4
RUDOLPH
TECHNOLOGIES, INC. AND SUBSIDIARIES
(In
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2009
|
|
|
ASSETS
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
67,735
|
|
|
$
|
57,839
|
|
Marketable securities
|
|
|
10,549
|
|
|
|
3,080
|
|
Accounts receivable, less allowance of $659 in 2008 and $602 in
2009
|
|
|
21,764
|
|
|
|
35,312
|
|
Inventories
|
|
|
57,076
|
|
|
|
45,534
|
|
Income taxes receivable
|
|
|
4,698
|
|
|
|
3,501
|
|
Prepaid expenses and other current assets
|
|
|
1,626
|
|
|
|
1,125
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
163,448
|
|
|
|
146,391
|
|
Property, plant and equipment, net
|
|
|
19,053
|
|
|
|
12,841
|
|
Goodwill
|
|
|
|
|
|
|
3,282
|
|
Identifiable intangible assets, net
|
|
|
9,654
|
|
|
|
10,821
|
|
Capitalized software
|
|
|
1,774
|
|
|
|
1,237
|
|
Deferred income taxes
|
|
|
2,903
|
|
|
|
3,098
|
|
Other assets
|
|
|
600
|
|
|
|
533
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
197,432
|
|
|
$
|
178,203
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
2,354
|
|
|
$
|
5,683
|
|
Accrued liabilities:
|
|
|
|
|
|
|
|
|
Payroll and related expenses
|
|
|
2,805
|
|
|
|
3,163
|
|
Royalties
|
|
|
197
|
|
|
|
247
|
|
Warranty
|
|
|
1,813
|
|
|
|
700
|
|
Deferred revenue
|
|
|
4,422
|
|
|
|
6,877
|
|
Other current liabilities
|
|
|
4,169
|
|
|
|
2,940
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
15,760
|
|
|
|
19,610
|
|
Non-current liabilities
|
|
|
5,584
|
|
|
|
7,462
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
21,344
|
|
|
|
27,072
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 9)
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value, 5,000 shares
authorized, no shares issued and outstanding at
December 31, 2008 and 2009
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value, 50,000 shares
authorized, 30,703 and 30,997 issued and outstanding at
December 31, 2008 and 2009, respectively
|
|
|
31
|
|
|
|
31
|
|
Additional paid-in capital
|
|
|
383,510
|
|
|
|
387,486
|
|
Accumulated other comprehensive loss
|
|
|
(2,543
|
)
|
|
|
(1,848
|
)
|
Accumulated deficit
|
|
|
(204,910
|
)
|
|
|
(234,538
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
176,088
|
|
|
|
151,131
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
197,432
|
|
|
$
|
178,203
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
RUDOLPH
TECHNOLOGIES, INC. AND SUBSIDIARIES
(In
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
Revenues
|
|
$
|
160,129
|
|
|
$
|
131,040
|
|
|
$
|
78,657
|
|
Cost of revenues
|
|
|
78,889
|
|
|
|
87,388
|
|
|
|
49,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
81,240
|
|
|
|
43,652
|
|
|
|
28,852
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
29,993
|
|
|
|
31,644
|
|
|
|
25,991
|
|
In-process research and development
|
|
|
1,000
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
33,204
|
|
|
|
33,965
|
|
|
|
33,640
|
|
Impairment charge for goodwill and identifiable intangible assets
|
|
|
|
|
|
|
227,105
|
|
|
|
|
|
Amortization
|
|
|
4,487
|
|
|
|
5,890
|
|
|
|
1,358
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
68,684
|
|
|
|
298,604
|
|
|
|
60,989
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
12,556
|
|
|
|
(254,952
|
)
|
|
|
(32,137
|
)
|
Interest income and other, net
|
|
|
4,149
|
|
|
|
1,151
|
|
|
|
270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision (benefit) for income taxes
|
|
|
16,705
|
|
|
|
(253,801
|
)
|
|
|
(31,867
|
)
|
Provision (benefit) for income taxes
|
|
|
4,846
|
|
|
|
(4,115
|
)
|
|
|
(2,239
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
11,859
|
|
|
$
|
(249,686
|
)
|
|
$
|
(29,628
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.41
|
|
|
$
|
(8.16
|
)
|
|
$
|
(0.96
|
)
|
Diluted
|
|
$
|
0.40
|
|
|
$
|
(8.16
|
)
|
|
$
|
(0.96
|
)
|
Weighted average number of shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
29,168
|
|
|
|
30,614
|
|
|
|
30,888
|
|
Diluted
|
|
|
29,312
|
|
|
|
30,614
|
|
|
|
30,888
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Retained
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Other
|
|
|
Earnings
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Comprehensive
|
|
|
(Accumulated
|
|
|
|
|
|
Comprehensive
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Loss
|
|
|
Deficit)
|
|
|
Total
|
|
|
Income (Loss)
|
|
|
Balance at December 31, 2006
|
|
|
28,977
|
|
|
$
|
29
|
|
|
$
|
361,128
|
|
|
$
|
(1,178
|
)
|
|
$
|
32,897
|
|
|
$
|
392,876
|
|
|
|
|
|
Issuance of shares through share-based compensation plans
|
|
|
196
|
|
|
|
|
|
|
|
1,344
|
|
|
|
|
|
|
|
|
|
|
|
1,344
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,859
|
|
|
|
11,859
|
|
|
$
|
11,859
|
|
Adoption of ASC 740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|
|
20
|
|
|
|
|
|
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|
3,119
|
|
|
|
|
|
|
|
|
|
|
|
3,119
|
|
|
|
|
|
Excess tax benefit for sale of shares through share-based
compensation plans
|
|
|
|
|
|
|
|
|
|
|
148
|
|
|
|
|
|
|
|
|
|
|
|
148
|
|
|
|
|
|
Common stock issued in acquisition
|
|
|
1,307
|
|
|
|
1
|
|
|
|
14,147
|
|
|
|
|
|
|
|
|
|
|
|
14,148
|
|
|
|
|
|
Currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
812
|
|
|
|
|
|
|
|
812
|
|
|
|
812
|
|
Unrealized gain on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
152
|
|
|
|
|
|
|
|
152
|
|
|
|
152
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
12,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
|
30,480
|
|
|
|
30
|
|
|
|
379,886
|
|
|
|
(214
|
)
|
|
|
44,776
|
|
|
|
424,478
|
|
|
|
|
|
Issuance of shares through share-based compensation plans
|
|
|
223
|
|
|
|
1
|
|
|
|
219
|
|
|
|
|
|
|
|
|
|
|
|
220
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(249,686
|
)
|
|
|
(249,686
|
)
|
|
$
|
(249,686
|
)
|
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|
3,405
|
|
|
|
|
|
|
|
|
|
|
|
3,405
|
|
|
|
|
|
Currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,198
|
)
|
|
|
|
|
|
|
(2,198
|
)
|
|
|
(2,198
|
)
|
Unrealized loss on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(131
|
)
|
|
|
|
|
|
|
(131
|
)
|
|
|
(131
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(252,015
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
30,703
|
|
|
|
31
|
|
|
|
383,510
|
|
|
|
(2,543
|
)
|
|
|
(204,910
|
)
|
|
|
176,088
|
|
|
|
|
|
Issuance of shares through share-based compensation plans
|
|
|
294
|
|
|
|
|
|
|
|
217
|
|
|
|
|
|
|
|
|
|
|
|
217
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(29,628
|
)
|
|
|
(29,628
|
)
|
|
$
|
(29,628
|
)
|
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|
3,759
|
|
|
|
|
|
|
|
|
|
|
|
3,759
|
|
|
|
|
|
Currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
786
|
|
|
|
|
|
|
|
786
|
|
|
|
786
|
|
Unrealized loss on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(91
|
)
|
|
|
|
|
|
|
(91
|
)
|
|
|
(91
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(28,933
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
30,997
|
|
|
$
|
31
|
|
|
$
|
387,486
|
|
|
$
|
(1,848
|
)
|
|
$
|
(234,538
|
)
|
|
$
|
151,131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-7
RUDOLPH
TECHNOLOGIES, INC. AND SUBSIDIARIES
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
11,859
|
|
|
$
|
(249,686
|
)
|
|
$
|
(29,628
|
)
|
Adjustments to reconcile net income (loss) to net cash and cash
equivalents provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of goodwill and identifiable intangible assets
|
|
|
|
|
|
|
227,105
|
|
|
|
|
|
Amortization
|
|
|
5,700
|
|
|
|
7,243
|
|
|
|
1,895
|
|
Depreciation
|
|
|
4,500
|
|
|
|
4,500
|
|
|
|
6,751
|
|
In-process research and development
|
|
|
1,000
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange (gain) loss
|
|
|
45
|
|
|
|
(2,547
|
)
|
|
|
822
|
|
Net loss on sale of marketable securities
|
|
|
|
|
|
|
79
|
|
|
|
1
|
|
Share-based compensation
|
|
|
3,119
|
|
|
|
3,405
|
|
|
|
3,759
|
|
Provision for doubtful accounts and inventory valuation
|
|
|
496
|
|
|
|
14,569
|
|
|
|
4,775
|
|
Deferred income taxes
|
|
|
(3,314
|
)
|
|
|
(2,449
|
)
|
|
|
(217
|
)
|
Change in operating assets and liabilities excluding effects of
business combinations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
21,401
|
|
|
|
31,290
|
|
|
|
(13,196
|
)
|
Income taxes receivable
|
|
|
(1,089
|
)
|
|
|
(4,164
|
)
|
|
|
969
|
|
Inventories
|
|
|
(5,395
|
)
|
|
|
(4,287
|
)
|
|
|
6,922
|
|
Prepaid expenses and other assets
|
|
|
(2,339
|
)
|
|
|
815
|
|
|
|
707
|
|
Accounts payable
|
|
|
(3,326
|
)
|
|
|
(5,571
|
)
|
|
|
3,232
|
|
Accrued liabilities
|
|
|
(3,958
|
)
|
|
|
(2,471
|
)
|
|
|
(1,227
|
)
|
Income taxes payable
|
|
|
(537
|
)
|
|
|
|
|
|
|
|
|
Deferred revenue
|
|
|
(6,131
|
)
|
|
|
(1,581
|
)
|
|
|
1,619
|
|
Other current liabilities
|
|
|
(617
|
)
|
|
|
(1,501
|
)
|
|
|
(1,252
|
)
|
Non-current liabilities
|
|
|
2,168
|
|
|
|
640
|
|
|
|
2,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash and cash equivalents provided by (used in) operating
activities
|
|
|
23,582
|
|
|
|
15,389
|
|
|
|
(12,059
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of marketable securities
|
|
|
(77,748
|
)
|
|
|
(15,541
|
)
|
|
|
(12,161
|
)
|
Proceeds from sales of marketable securities
|
|
|
95,147
|
|
|
|
21,302
|
|
|
|
19,446
|
|
Purchases of property, plant and equipment
|
|
|
(1,007
|
)
|
|
|
(2,966
|
)
|
|
|
(587
|
)
|
Capitalized software
|
|
|
(712
|
)
|
|
|
(30
|
)
|
|
|
|
|
Purchase of business, net of cash acquired
|
|
|
(56,166
|
)
|
|
|
(8,474
|
)
|
|
|
(5,011
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash and cash equivalents provided by (used in) investing
activities
|
|
|
(40,486
|
)
|
|
|
(5,709
|
)
|
|
|
1,687
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares through share-based compensation plans
|
|
|
1,344
|
|
|
|
220
|
|
|
|
217
|
|
Tax benefit for sale of shares through share-based compensation
plans
|
|
|
148
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash and cash equivalents provided by financing activities
|
|
|
1,492
|
|
|
|
220
|
|
|
|
217
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
353
|
|
|
|
415
|
|
|
|
259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(15,059
|
)
|
|
|
10,315
|
|
|
|
(9,896
|
)
|
Cash and cash equivalents at beginning of year
|
|
|
72,479
|
|
|
|
57,420
|
|
|
|
67,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
$
|
57,420
|
|
|
$
|
67,735
|
|
|
$
|
57,839
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash paid (received) during the year for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$
|
8,170
|
|
|
$
|
1,945
|
|
|
$
|
(3,062
|
)
|
Non-cash investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition costs for business combinations
|
|
$
|
1,315
|
|
|
$
|
|
|
|
$
|
|
|
Stock issued for business combinations
|
|
$
|
14,022
|
|
|
$
|
|
|
|
$
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-8
RUDOLPH
TECHNOLOGIES, INC. AND SUBSIDIARIES
(In
thousands, except per share data)
1. Organization
and Nature of Operations:
Rudolph Technologies, Inc. (the Company) designs,
develops, manufactures and supports high-performance process
control equipment used in semiconductor device manufacturing.
The Company has branch sales and service offices in Korea,
Taiwan and Singapore and wholly-owned sales and service
subsidiaries in Europe, Japan, China and Minnesota. The Company
operates in a single segment and supports a wide variety of
applications in the areas of macro-defect detection and
classification, diffusion, etch, lithography, CVD, PVD and CMP.
2. Summary
of Significant Accounting Policies:
A. Consolidation:
The consolidated financial statements reflect the accounts of
the Company and its wholly-owned subsidiaries. All intercompany
accounts and transactions have been eliminated.
B. Revenue
Recognition:
Revenue is recognized upon shipment provided that there is
persuasive evidence of an arrangement, delivery has occurred,
the sales price is fixed or determinable, and collection of the
related receivable is reasonably assured. Certain sales of the
Companys products are sold and accounted for as multiple
element arrangements, consisting primarily of the sale of the
product, software, installation and training services. The
Company generally recognizes product revenue upon shipment. In
the limited circumstances where customer acceptance is
subjective and not obtained prior to shipment, the Company
defers product revenue until such time as positive affirmation
of acceptance has been obtained from the customer. Customer
acceptance is generally based on the Companys products
meeting published performance specifications. The amount of
revenue allocated to the shipment of products is done on a
residual method basis. Under this method, the total arrangement
value is allocated first to undelivered contract elements, based
on their fair values, with the remainder being allocated to
product revenue. The fair value of installation, training and
other services is based upon billable hourly rates and the
estimated time to complete the service. Revenue related to
undelivered installation services is deferred until such time as
installation is completed at the customers site. Revenue
related to training services is recognized ratably over the
training period. Revenue from software license fees is
recognized upon shipment if collection of the resulting
receivable is probable, the fee is fixed or determinable, and
vendor-specific objective evidence exists to allocate a portion
of the total fee to any undelivered elements of the arrangement.
If vendor specific objective evidence does not exist for the
undelivered elements of an arrangement that includes software,
all revenue is deferred and recognized ratably over the period
required to deliver the remaining elements.
Revenues from parts sales are recognized at the time of
shipment. Revenue from service contracts is recognized ratably
over the period of the contract. A provision for the estimated
cost of fulfilling warranty obligations is recorded at the time
the related revenue is recognized.
License support and maintenance revenue is recognized ratably
over the contract period.
C. Estimates:
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 the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Significant estimates
made by management include allowance for doubtful accounts,
inventory obsolescence, purchase accounting allocations,
recoverability and useful lives of property, plant and equipment
and identifiable intangible assets, recoverability of goodwill,
recoverability of deferred tax assets, liabilities for product
warranty, accruals for manufacturing
F-9
RUDOLPH
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(In
thousands, except per share data)
consolidation, contingencies and share-based payments, including
forfeitures and liabilities for tax uncertainties. Actual
results could differ from those estimates.
D. Cash
and Cash Equivalents:
Cash and cash equivalents include cash and highly liquid debt
instruments with original maturities of three months or less
when purchased.
E. Marketable
Securities:
The Company determined that all of its investment securities are
to be classified as
available-for-sale.
Available-for-sale
securities are carried at fair value, with the unrealized gains
and losses reported in stockholders equity under the
caption Accumulated other comprehensive loss.
Realized gains and losses, interest and dividends on
available-for-sale
securities are included in interest income and other, net.
Available-for-sale
securities are classified as current assets regardless of their
maturity date if they are available for use in current
operations. The Company reviews its investment portfolio to
identify and evaluate investments that have indications of
possible impairment. Factors considered in determining whether a
loss is
other-than-temporary
include the length of time and extent to which fair value has
been less than the cost basis, credit quality and the
Companys ability and intent to hold the investment for a
period of time sufficient to allow for any anticipated recovery
in market value. When a decline in fair value is determined to
be
other-than-temporary,
unrealized losses on
available-for-sale
securities are charged against earnings. The specific
identification method is used to determine the gains and losses
on marketable securities.
For additional information on the Companys marketable
securities, see Note 5 of Notes to the Consolidated
Financial Statements.
F. Allowance
for Doubtful Accounts:
The Company evaluates the collectability of accounts receivable
based on a combination of factors. In the cases where the
Company is aware of circumstances that may impair a specific
customers ability to meet its financial obligation, the
Company records a specific allowance against amounts due, and
thereby reduces the net recognized receivable to the amount
management reasonably believes will be collected. For all other
customers, the Company recognizes allowances for doubtful
accounts based on the length of time the receivables are
outstanding, industry and geographic concentrations, the current
business environment and historical experience.
G. Inventories:
Inventories are stated at the lower of cost
(first-in,
first-out) or market. Cost includes material, labor and overhead
costs. Demonstration units, which are available for sale, are
stated at their manufacturing costs and reserves are recorded to
adjust the demonstration units to their net realizable value, if
lower than cost.
H. Property,
Plant and Equipment:
Property, plant and equipment are stated at cost. Depreciation
of property, plant and equipment is computed using the
straight-line method over the estimated useful lives of the
assets which are thirty years for buildings, four to seven years
for machinery and equipment, seven years for furniture and
fixtures, and three years for computer equipment. Leasehold
improvements are amortized using the straight-line method over
the lesser of the lease term or the estimated useful life of the
related asset. Repairs and maintenance costs are expensed as
incurred and major renewals and betterments are capitalized.
F-10
RUDOLPH
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(In
thousands, except per share data)
I. Impairment
of Long-Lived Assets:
Long-lived assets, such as property, plant, and equipment, and
identifiable acquired intangible assets with definite useful
lives, are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used
is measured by a comparison of the carrying amount of an asset
to estimated undiscounted future cash flows expected to be
generated by the asset. If the carrying amount of an asset
exceeds its estimated future cash flows, an impairment charge is
recognized by the amount by which the carrying amount of the
asset exceeds the fair value of the asset, which is generally
based on discounted cash flows.
J. Goodwill
and Other Intangible Assets:
Intangible assets with definitive useful lives are amortized
using the straight-line method over their estimated useful
lives. Goodwill and intangible assets with indefinite useful
lives are not amortized but are tested for impairment at least
annually and when there are indications of impairment. Goodwill
impairment is deemed to exist if the net book value of a
reporting unit exceeds its estimated fair value. The Company
estimates the fair value of its aggregated reporting unit using
the market value of its common stock at October 31 multiplied by
the number of outstanding common shares (market capitalization)
and an implied control premium as if it were to be acquired by a
single stockholder. The Company obtains information on completed
sales of similar companies in our industry to estimate the
implied control premium for the Company. If the results of the
initial market capitalization test produce results which are
below the reporting unit carrying value, the Company may also
perform a discounted cash flow test. The Company tested for
goodwill impairment on October 31, 2009.
For additional information on the Companys goodwill and
other intangible assets, see Note 8 of Notes to the
Consolidated Financial Statements.
K. Concentration
of Credit Risk:
Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist primarily of accounts
receivable, cash and cash equivalents and marketable securities.
The Company performs ongoing credit evaluations of its customers
and generally does not require collateral for sales on credit.
The Company maintains allowances for potential credit losses.
The Company maintains cash and cash equivalents and marketable
securities with higher credit quality issuers and monitors the
amount of credit exposure to any one issuer.
L. Warranties:
The Company generally provides a warranty on its products for a
period of twelve to fifteen months against defects in material
and workmanship. The Company provides for the estimated cost of
product warranties at the time revenue is recognized.
M. Income
Taxes:
The Company accounts for income taxes using the asset and
liability approach for deferred taxes which requires the
recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been
recognized in the Companys consolidated financial
statements or tax returns. A valuation allowance is recorded to
reduce a deferred tax asset to that portion which more likely
than not will be realized. Additionally, taxes are separated
into current and non-current amounts based on the classification
of the related amounts for financial reporting purposes. The
Company does not provide for federal income taxes on the
undistributed earnings of its foreign operations as it is the
Companys intention to permanently re-invest undistributed
earnings.
F-11
RUDOLPH
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(In
thousands, except per share data)
The impact of an uncertain income tax position is recognized at
the largest amount that is more-likely-than-not to be sustained
upon audit by the relevant taxing authority and includes
consideration of interest and penalties. An uncertain income tax
position will not be recognized if it has less than a 50%
likelihood of being sustained. The liability for unrecognized
tax benefits is classified as non-current unless the liability
is expected to be settled in cash within 12 months of the
reporting date.
For additional information on the Companys income taxes,
see Note 13 of Notes to the Consolidated Financial
Statements.
N. Translation
of Foreign Currencies:
The Company has branch operations in Taiwan, Singapore and Korea
and wholly-owned subsidiaries in Europe, Japan and China. Its
international subsidiaries and branches operate primarily using
local functional currencies. These foreign branches and
subsidiaries are limited in their operations and level of
investment so that the risk of currency fluctuations is not
material. A substantial portion of the Companys
international systems sales are denominated in U.S. dollars
with the exception of Japan and, as a result, it has relatively
little exposure to foreign currency exchange risk with respect
to these sales.
Assets and liabilities are translated at exchange rates in
effect at the balance sheet date, and income and expense
accounts and cash flow items are translated at average monthly
exchange rates during the period. Net exchange gains or losses
resulting from the translation of foreign financial statements
and the effect of exchange rates on intercompany transactions of
a long-term investment nature are recorded directly as a
separate component of stockholders equity under the
caption, Accumulated other comprehensive loss. Any
foreign currency gains or losses related to transactions are
included in operating results. The Company had accumulated
exchange losses resulting from the translation of foreign
operation financial statements of $2,396 and $1,610 as of
December 31, 2008 and 2009, respectively.
O. Share-based
Compensation:
The fair value of stock options is determined using the
Black-Scholes valuation model. The Black-Scholes valuation
calculation requires the Company to estimate key assumptions
such as future stock price volatility, expected terms, risk-free
interest rates and dividend yield. Expected stock price
volatility is based on historical volatility of the
Companys stock. The Company uses historical data to
estimate option exercises and employee terminations within the
valuation model. The expected term of options granted is derived
from an analysis of historical exercises and remaining
contractual life of stock options, and represents the period of
time that options granted are expected to be outstanding. The
risk-free interest rate is based on the U.S. Treasury yield
curve in effect at the time of grant. The Company has never paid
cash dividends, and does not currently intend to pay cash
dividends, and thus has assumed a 0% dividend yield. Such value
is recognized as expense over the service period, net of
estimated forfeitures. The estimation of stock awards that will
ultimately vest requires significant judgment. The Company
considers many factors when estimating expected forfeitures,
including types of awards, employee class, and historical
experience. Actual results, and future changes in estimates, may
differ substantially from the Companys current estimates.
Compensation expense for all share-based payments includes an
estimate for forfeitures and is recognized over the expected
term of the share-based awards using the straight-line method.
For additional information on the Companys share-based
compensation plans, see Note 11 of Notes to the
Consolidated Financial Statements.
P. Research
and Development and Software Development Costs:
Expenditures for research and development are expensed as
incurred. Certain software product development costs incurred
after technological feasibility has been established are
capitalized and amortized, commencing upon
F-12
RUDOLPH
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(In
thousands, except per share data)
the general release of the software product to the
Companys customers, over the economic life of the software
product. Annual amortization of capitalized costs is computed
using the greater of: (i) the ratio of current gross
revenues for the software product over the total of current and
anticipated future gross revenues for the software product or
(ii) the straight-line basis, typically over seven years.
Software product development costs incurred prior to the product
reaching technological feasibility are expensed as incurred and
included in research and development costs. At December 31,
2008 and 2009, capitalized software development costs were
$1,774 and $1,237, respectively. During the years ended
December 31, 2007, 2008 and 2009, software development cost
amortization totaled $704, $689 and $537, respectively. During
2007 and 2008, the Company recorded write-downs of capitalized
software of $507 and $664, respectively, in research and
development expenses in the Consolidated Statement of Operations.
Q. Fair
Value of Financial Instruments:
The carrying amounts of the Companys financial
instruments, including cash and cash equivalents, accounts
receivable, accounts payable and accrued liabilities,
approximate fair value due to their short maturities.
R. Derivative
Instruments and Hedging Activities:
The Company, when it considers it to be appropriate, enters into
forward contracts to hedge the economic exposures arising from
foreign currency denominated transactions. At December 31,
2008 and 2009, these contracts included the future sale of
Japanese Yen to purchase U.S. dollars. The foreign currency
forward contracts were entered into by our Japanese subsidiary
to hedge a portion of certain intercompany obligations. The
forward contracts are not designated as hedges for accounting
purposes and therefore, the change in fair value is recorded in
selling, general and administrative expenses in the Consolidated
Statements of Operations.
The dollar equivalent of the U.S. dollar forward contracts
and related fair values as of December 31, 2008 and 2009
were as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2008
|
|
2009
|
|
Notional amount
|
|
$
|
2,322
|
|
|
$
|
1,042
|
|
Fair value of liability
|
|
$
|
226
|
|
|
$
|
3
|
|
The Company recognized a gain of $278 with respect to forward
contracts which matured during 2007. The Company recognized a
loss of $720 and $116 with respect to forward contracts which
matured during 2008 and 2009, respectively. The aggregate
notional amount of these contracts was $8,802, $6,964 and
$2,469, for 2007, 2008 and 2009, respectively.
S. Recent
Accounting Pronouncements:
In October 2009, the Financial Accounting Standards Board
(FASB) issued Accounting Standard Update
(ASU)
No. 2009-14
on FASB Accounting Standards Codification (ASC 985),
SoftwareCertain Revenue Arrangements That Include
Software Elements-a consensus of the FASB Emerging Issues Task
Force. The objective of this ASU is to clarify which
revenue allocation and measurement guidance should be used for
arrangements that contain both tangible products and software,
in cases where the software is more than incidental to the
tangible product as a whole. More specifically, if the software
sold with or embedded within the tangible product is essential
to the functionality of the tangible product, then this software
as well as undelivered software elements that relate to this
software are excluded from the scope of existing software
revenue guidance, which is expected to decrease the amount of
revenue deferred in these cases. This ASU is to be applied
prospectively for revenue arrangements entered into or
materially modified in fiscal years beginning on or after
June 15, 2010, which for the Company is its fiscal year
2011. Early adoption is permitted, but this ASU must be adopted
in the same
F-13
RUDOLPH
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(In
thousands, except per share data)
period as, and use the same transition method that is used for,
the ASU described in the following paragraph. The Company is
currently evaluating the impact, if any, of this new accounting
update on its consolidated financial statements.
In October 2009, the FASB issued ASU
No. 2009-13
on FASB ASC 605, Revenue RecognitionMultiple
Deliverable Revenue Arrangementsa consensus of the FASB
Emerging Issues Task Force. The objective of this ASU is
to address the accounting for multiple-deliverable arrangements
to enable vendors to account for products or services
(deliverables) separately rather than as a combined unit.
Vendors often provide multiple products or services to their
customers. Those deliverables are often provided at different
points in time or over different time periods. This ASU provides
amendments to the criteria in FASB Accounting Standards
Codification (ASC)
605-25 for
separating consideration in multiple-deliverable arrangements.
The amendments in this ASU establish a selling price hierarchy
for determining the selling price of a deliverable. The selling
price used for each deliverable will be based on vendor specific
objective evidence if available, third-party evidence if
vendor-specific objective evidence is not available, or
estimated selling price if neither vendor specific objective
evidence nor third-party evidence is available. The amendments
in this ASU also will replace the term fair value in
the revenue allocation guidance with selling price
to clarify that the allocation of revenue is based on
entity-specific assumptions rather than assumptions of a
marketplace participant. This update is effective for fiscal
years beginning on or after June 15, 2010. The Company is
currently evaluating the impact, if any, of this new accounting
update on its consolidated financial statements.
In June 2009, the FASB issued ASC 105 (formerly,
SFAS No. 168, Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting
Principlesa replacement of FASB Statement
No. 162), which states that the FASB ASC will become
the source of authoritative accounting principles generally
accepted in the United States of America (GAAP)
recognized by the FASB to be applied by nongovernmental
entities. Rules and interpretive releases of the SEC under
authority of federal securities laws are also sources of
authoritative GAAP for SEC registrants. FASB ASC 105 is
effective for interim and annual periods ending after
September 15, 2009. The Company adopted FASB ASC 105 during
the quarter ended September 30, 2009 and the adoption did
not have any effect on the Companys financial condition or
results of operations.
In May 2009, the FASB issued ASC 855 (formerly
SFAS No. 165, Subsequent Events). FASB ASC
855 is effective for interim and annual periods ending after
June 15, 2009. FASB ASC 855 establishes general standards
of accounting for, and disclosure of, events that occur after
the balance sheet date but before financial statements are
issued or are available to be issued. In particular, FASB ASC
855 establishes (i) the period after the balance sheet date
during which management of a reporting entity should evaluate
events or transactions that may occur for potential recognition
or disclosure in the financial statements, (ii) the
circumstances under which an entity should recognize events or
transactions occurring after the balance sheet date in its
financial statements and (iii) the disclosures that an
entity should make about events or transactions that occurred
after the balance sheet date. The Company has evaluated all
subsequent events through the date of issuance of the
Companys financial statements. The Company adopted FASB
ASC 855 during the quarter ended June 30, 2009 and the
adoption did not have any effect on the Companys financial
condition or results of operations.
In April 2009, the FASB issued ASC 820 (formerly, FASB Staff
Position (FSP)
No. 157-4,
Determining Fair Value When the Volume and Level of
Activity for the Asset or Liability Have Significantly Decreased
and Identifying Transactions That Are Not Orderly). FASB
ASC 820 provides additional guidance for estimating fair value
in accordance with FASB ASC 820 when the volume and level of
activity for the asset or liability have significantly decreased
and requires that companies provide interim and annual
disclosures of the inputs and valuation techniques used to
measure fair value. FASB ASC 820 is effective for interim and
annual reporting periods ending after June 15, 2009 and is
to be applied prospectively. The Company adopted FASB ASC 820
during the quarter ended June 30, 2009 and the adoption did
not have a significant impact on its consolidated financial
position and results of operations.
F-14
RUDOLPH
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(In
thousands, except per share data)
In April 2009, the FASB issued ASC 825 (formerly FSP
No. 107-b
and Accounting Principle Board Opinion
No. 28-a,
Interim Disclosures about Fair Value of Financial
Instruments). FASB ASC 825 requires disclosures about fair
value of financial instruments for interim reporting periods of
publicly traded companies as well as in annual financial
statements. FASB ASC 825 is effective for interim and annual
periods ending after June 15, 2009, but entities may early
adopt the FSP for the interim and annual periods ending after
March 15, 2009. The Company adopted FASB ASC 825 during the
quarter ended June 30, 2009 and the adoption did not have a
significant impact on its consolidated financial position and
results of operations.
In April 2009, the FASB issued ASC 320 (formerly FSP
No. 115-2,
Recognition and Presentation of
Other-Than-Temporary
Impairments). FASB ASC 320 amends the
other-than-temporary
impairment guidance to improve the presentation and disclosure
of
other-than-temporary
impairments on debt and equity securities in the financial
statements. FASB ASC 320 is effective for interim and annual
periods ending after June 15, 2009, but entities may early
adopt the FSP for the interim and annual periods ending after
March 15, 2009. The Company adopted FASB ASC 320 during the
quarter ended June 30, 2009 and the adoption did not have a
significant impact on its consolidated financial position and
results of operations.
In April 2009, the FASB issued ASC 805 (formerly FSP
No. 141(R)-1, Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination That Arise from
Contingencies). FASB ASC 805 amends and clarifies previous
authoritative guidance, to address application issues on initial
recognition and measurement, subsequent measurement and
accounting, and disclosure of assets and liabilities arising
from contingencies in a business combination. Under FASB ASC
805, an acquirer is required to recognize at fair value an asset
acquired or liability assumed in a business combination that
arises from a contingency if the acquisition date fair value can
be determined during the measurement period. If the acquisition
date fair value cannot be determined, the acquirer applies the
recognition criteria in FASB ASC 450, (formerly
SFAS No. 5, Accounting for Contingencies,
and FIN 14, Reasonable Estimation of the Amount of a
Loss), to determine whether the contingency should be
recognized as of the acquisition date or after it. The Company
adopted ASC 805 in the quarter ended March 31, 2009 and the
adoption did not have a significant impact on its consolidated
financial position and results of operations.
3. Business
Combinations:
PCTA
On December 18, 2007, Rudolph and a wholly-owned subsidiary
of the Company entered into, and consummated the transactions
contemplated by, an Asset Purchase Agreement with Applied
Precision Holdings, LLC and Applied Precision, LLC
(collectively, Applied), pursuant to which the
Company purchased substantially all of the assets and assumed
certain liabilities of the semiconductor division of Applied to
be known as the Rudolph Technologies Probe Card Test and
Analysis division (PCTA). The PCTA is engaged in the
business of designing, developing, manufacturing, marketing,
selling and supporting advanced probe card metrology and wafer
probe process monitoring equipment and is complementary to the
Companys existing business.
The closing under the Asset Purchase Agreement occurred on
December 18, 2007 and the Company paid $59,134 in cash and
acquisition costs, of which $57,897 was paid during 2007, and
issued 1,307 shares of Company common stock for a total
purchase price of $73,168. The measurement date was determined
to be the date the acquisition was consummated since the number
of shares to be distributed was not determinable until that
date. The market price used to value the Rudolph shares issued
as consideration for PCTA was $10.73, which represents the
average closing market price of Rudolphs common stock for
the three day period ended December 18, 2007.
The Company agreed to assume the following liabilities of the
PCTA: accounts payable, assigned contracts, licenses and leases,
warranty claims and employee liabilities, all as more fully
described in the Asset Purchase
F-15
RUDOLPH
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(In
thousands, except per share data)
Agreement. In addition, the Company agreed to assume the defense
of and all obligations relating to certain litigation currently
pending against Applied.
The results of operations of the PCTA have been included in the
Companys consolidated financial statements since the date
of acquisition. The following table summarizes the fair value of
the assets acquired and liabilities assumed at the date of
acquisition:
|
|
|
|
|
Accounts receivable
|
|
$
|
5,659
|
|
Inventories
|
|
|
9,631
|
|
Prepaid expenses and other current assets
|
|
|
61
|
|
Property, plant and equipment
|
|
|
1,122
|
|
Goodwill
|
|
|
46,175
|
|
Identifiable assets
|
|
|
16,200
|
|
Accounts payable and accrued liabilities
|
|
|
(5,521
|
)
|
Deferred revenue
|
|
|
(159
|
)
|
|
|
|
|
|
|
|
$
|
73,168
|
|
|
|
|
|
|
The fair value of inventories included a
step-up of
$2,252, of which $1,691 was recognized in cost of revenues for
the year ended December 31, 2009. At the acquisition date,
the Company formulated a plan to exit or restructure certain
activities. The Company recorded $254 for these activities
during the year ended December 31, 2007.
Factors that contributed to a purchase price that resulted in
recognition of goodwill include:
|
|
|
|
|
the combination of PCTA and Rudolph products should allow the
combined company to offer its customers a more comprehensive
suite of tools and a better integrated set of tools, thus
enhancing the Companys ability to compete more effectively;
|
|
|
|
the ability of the assembled workforce to continue to deliver
value-added solutions and develop new products and industry
leading production technologies that solve customer problems;
|
|
|
|
consolidation of territorial sales activities and common
marketing programs;
|
|
|
|
redeployment or elimination of duplicative functional and
facilities costs;
|
|
|
|
reduction of customer service costs as a result of the
consolidation of the companies global customer service and
regional support networks; and
|
|
|
|
the combined experience, financial resources, development
expertise, size and breadth of product offerings of the combined
company may allow it to respond more quickly and effectively to
technological change, increased consolidation and industry
demands
|
Of the $16,200 of acquired identifiable assets, the following
table reflects the allocation of the acquired identifiable
assets and related preliminary estimates of useful lives:
|
|
|
|
|
|
|
Developed technology
|
|
$
|
11,600
|
|
|
8 years estimated useful life
|
Customer and distributor relationships
|
|
|
2,900
|
|
|
7.2 years weighted average estimated useful life
|
Trade names
|
|
|
700
|
|
|
3 years estimated useful life
|
In-process research and development
|
|
|
1,000
|
|
|
Expensed at acquisition date
|
|
|
|
|
|
|
|
|
|
$
|
16,200
|
|
|
|
|
|
|
|
|
|
|
F-16
RUDOLPH
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(In
thousands, except per share data)
Approximately $1.0 million of the acquired identifiable
intangible assets represents the estimated fair value of
in-process research and development (IPRD) projects
that had not yet reached technological feasibility and had no
alternative future use. Accordingly, this amount was immediately
expensed in the Consolidated Statement of Operations at the
merger date. The purchased in-process technology project was a
probe card test project, related to the next generation of the
Companys ProbeWoRx systems with enhanced capabilities, and
was approximately 20% complete as of the date of acquisition.
The costs to complete this project consisted primarily of
internal engineering labor costs and the project was completed
in the first half of 2009.
Pro Forma
Combined Results of Operations
The following unaudited pro forma consolidated financial
information presents the combined results of operations of the
Company and PCTA as if the respective merger and acquisition
occurred at the beginning of the period presented, after giving
effect to certain adjustments, including interest income and
amortization expense. Due to the non-recurring nature of the
IPRD and inventory
step-up
charges, these amounts have not been included in the unaudited
pro forma consolidated financial information. The unaudited pro
forma consolidated financial information does not necessarily
reflect the results of operations that would have occurred had
the merger and acquisition been completed as of the date
indicated or of the results that may be obtained in the future.
|
|
|
|
|
|
|
Year Ended
|
|
|
December 31,
|
|
|
2007
|
|
|
(Unaudited)
|
|
Revenues
|
|
$
|
194,262
|
|
Net income
|
|
$
|
13,213
|
|
Earnings per share:
|
|
|
|
|
Basic
|
|
$
|
0.43
|
|
Diluted
|
|
$
|
0.43
|
|
RVSI
Inspection
On January 22, 2008, the Company announced that it had
acquired all intellectual property and selected assets from
privately-held RVSI Inspection, LLC, headquartered in Hauppauge,
New York. The acquired business is currently known as the
Rudolph Technologies Wafers Scanner Product Group. The impact of
the acquisition was not material to the Companys
consolidated financial position or results of operations.
Adventa
On August 3, 2009, the Company announced that it had
acquired Adventa Control Technologies, Inc.
(Adventa), headquartered in Plano, Texas. The
acquired business is currently known as the Rudolph Technologies
Process Control Group. The impact of the acquisition was not
material to the Companys consolidated financial position
or results of operations.
4. Fair
Value Measurements:
The Company applies a three-level valuation hierarchy for fair
value measurements. This hierarchy prioritizes the inputs into
three broad levels as follows. Level 1 inputs are quoted
prices (unadjusted) in active markets for identical assets or
liabilities. Level 2 inputs are quoted prices for similar
assets and liabilities in active markets or inputs that are
observable for the asset or liability, either directly or
indirectly through market corroboration, for substantially the
full term of the asset or liability. Level 3 inputs are
unobservable inputs based on managements assumptions used
to measure assets and liabilities at fair value. A financial
asset or liabilitys fair value
F-17
RUDOLPH
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(In
thousands, except per share data)
measurement classification within the hierarchy is determined
based on the lowest level input that is significant to the fair
value measurement.
The following tables provide the assets carried at fair value
measured on a recurring basis as of December 31, 2008 and
December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
|
|
|
|
|
|
|
|
|
|
Active Markets for
|
|
|
Significant Other
|
|
|
Significant
|
|
|
|
Carrying
|
|
|
Identical Assets
|
|
|
Observable Inputs
|
|
|
Unobservable Inputs
|
|
|
|
Value
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury notes
|
|
$
|
219
|
|
|
$
|
219
|
|
|
$
|
|
|
|
$
|
|
|
Auction rate securities
|
|
|
361
|
|
|
|
|
|
|
|
|
|
|
|
361
|
|
All other marketable securities
|
|
|
9,969
|
|
|
|
|
|
|
|
9,969
|
|
|
|
|
|
Foreign currency forward contracts
|
|
|
(226
|
)
|
|
|
(226
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10,323
|
|
|
$
|
(7
|
)
|
|
$
|
9,969
|
|
|
$
|
361
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury notes
|
|
$
|
212
|
|
|
$
|
212
|
|
|
$
|
|
|
|
$
|
|
|
Auction rate securities
|
|
|
248
|
|
|
|
|
|
|
|
|
|
|
|
248
|
|
All other marketable securities
|
|
|
2,620
|
|
|
|
|
|
|
|
2,620
|
|
|
|
|
|
Foreign currency forward contracts
|
|
|
(3
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,077
|
|
|
$
|
209
|
|
|
$
|
2,620
|
|
|
$
|
248
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys investments classified as Level 1 are
based on quoted prices that are available in active markets. The
forward foreign currency exchange contracts are primarily
measured based on the foreign currency spot and forward rates
quoted by the banks or foreign currency dealers. The
U.S. Treasury Notes are measured based on quoted market
prices.
Level 2 investments are valued using observable inputs to
quoted market prices, benchmark yields, reported trades,
broker/dealer quotes or alternative pricing sources with
reasonable levels of price transparency. These investments,
which are held by a custodian, include: corporate debt
securities, government-sponsored enterprise and asset-backed
securities. Investment prices are obtained from third party
pricing providers, which models prices utilizing the above
observable inputs, for each asset class.
Level 3 investments consist of auction rate securities for
which the Company uses a discounted cashflow model to value
these investments. This table presents a reconciliation for all
assets and liabilities measured at fair value on a recurring
basis using significant unobservable inputs
(Level 3) for the year ended December 31, 2009:
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
|
|
Significant Unobservable Inputs
|
|
|
|
(Level 3)
|
|
|
Balance at December 31, 2008
|
|
$
|
361
|
|
Unrealized losses in accumulated other comprehensive loss
|
|
|
(113
|
)
|
Purchases, issuances, and settlements, net
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
$
|
248
|
|
|
|
|
|
|
F-18
RUDOLPH
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(In
thousands, except per share data)
The carrying value of other financial instruments, including
cash and cash equivalents, accounts receivable, accounts
payable, and accrued liabilities approximate fair value due to
their short maturities.
See Note 5 for additional discussion regarding the fair
value of the Companys marketable securities.
5. Marketable
Securities:
The Company has evaluated its investment policies and determined
that all of its investment securities are to be classified as
available-for-sale.
Available-for-sale
securities are carried at fair value, with the unrealized gains
and losses reported in Stockholders Equity under the
caption Accumulated other comprehensive loss.
Realized gains and losses, interest and dividends on
available-for-sale
securities are included in Interest income and other,
net. Net realized losses of $0, $79 and $1 were included
in the Consolidated Statement of Operations for 2007, 2008 and
2009, respectively. The Company records
other-than-temporary
impairment charges for its
available-for-sale
investments when it intends to sell the securities, it is more
likely than not that it will be required to sell the securities
before a recovery, or when it does not expect to recover the
entire amortized cost basis of the securities. The cost of
securities sold is based on the specific identification method.
As of December 31, 2009, the Company held one auction-rate
security with a fair value of $248. The underlying asset of the
Companys auction-rate security consisted of a municipal
bond with an auction reset feature. Due to auction failures in
the marketplace, the Company will not have access to these funds
unless (a) future auctions occur and are successful,
(b) the security is called by the issuer, (c) the
Company sells the security in an available secondary market, or
(d) the underlying note matures. Currently, there are no
active secondary markets. As of December 31, 2009, the
Company has recorded a cumulative temporary unrealized
impairment loss of $252 within Accumulated other
comprehensive loss based upon its assessment of the fair
value of these securities. The Company believes that this
impairment is temporary as it does not intend to sell these
securities, the Company will not be required to sell these
securities before recovery, and the Company expects to recover
the amortized cost basis of these securities.
The Company has determined that the gross unrealized losses on
its marketable securities at December 31, 2008 and 2009 are
temporary in nature. The Company reviews its investment
portfolio to identify and evaluate investments that have
indications of possible impairment. Factors considered in
determining whether a loss is
other-than-temporary
include the length of time and extent to which fair value has
been less than the cost basis, credit quality and the
Companys ability and intent to hold the investment for a
period of time sufficient to allow for any anticipated recovery
in market value.
At December 31, 2008 and 2009, marketable securities are
categorized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
|
|
|
Gross Unrealized
|
|
|
Gross Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Holding Gains
|
|
|
Holding Losses
|
|
|
Value
|
|
|
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury notes and obligations of agencies
|
|
$
|
9,941
|
|
|
$
|
15
|
|
|
$
|
(27
|
)
|
|
$
|
9,929
|
|
Tax-free auction rate securities
|
|
|
500
|
|
|
|
|
|
|
|
(139
|
)
|
|
|
361
|
|
Asset-backed securities
|
|
|
257
|
|
|
|
2
|
|
|
|
|
|
|
|
259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total marketable securities
|
|
$
|
10,698
|
|
|
$
|
17
|
|
|
$
|
(166
|
)
|
|
$
|
10,549
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury notes and obligations of agencies
|
|
$
|
2,819
|
|
|
$
|
13
|
|
|
$
|
|
|
|
$
|
2,832
|
|
Tax-free auction rate securities
|
|
|
500
|
|
|
|
|
|
|
|
(252
|
)
|
|
|
248
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total marketable securities
|
|
$
|
3,319
|
|
|
$
|
13
|
|
|
$
|
(252
|
)
|
|
$
|
3,080
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-19
RUDOLPH
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(In
thousands, except per share data)
The amortized cost and estimated fair value of marketable
securities classified by the maturity date listed on the
security, regardless of the Consolidated Balance Sheet
classification, is as follows at December 31, 2008 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
December 31, 2009
|
|
|
|
Amortized
|
|
|
Fair
|
|
|
Amortized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Value
|
|
|
Cost
|
|
|
Value
|
|
|
Due within one year
|
|
$
|
9,401
|
|
|
$
|
9,379
|
|
|
$
|
2,452
|
|
|
$
|
2,456
|
|
Due after one through five years
|
|
|
797
|
|
|
|
809
|
|
|
|
367
|
|
|
|
376
|
|
Due after five through ten years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due after ten years
|
|
|
500
|
|
|
|
361
|
|
|
|
500
|
|
|
|
248
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total marketable securities
|
|
$
|
10,698
|
|
|
$
|
10,549
|
|
|
$
|
3,319
|
|
|
$
|
3,080
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes the estimated fair value and
gross unrealized holding losses of marketable securities,
aggregated by investment instrument and period of time in an
unrealized loss position at December 31, 2008 and 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In Unrealized Loss Position
|
|
|
In Unrealized Loss Position
|
|
|
|
for less than 12 Months
|
|
|
for greater than 12 Months
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
Gross
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury notes and obligations of agencies
|
|
$
|
6,301
|
|
|
$
|
(27
|
)
|
|
$
|
|
|
|
$
|
|
|
Tax-free auction rate securities
|
|
|
361
|
|
|
|
(139
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total marketable securities
|
|
$
|
6,662
|
|
|
$
|
(166
|
)
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury notes and obligations of agencies
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Tax-free auction rate securities
|
|
|
|
|
|
|
|
|
|
|
248
|
|
|
|
(252
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total marketable securities
|
|
$
|
|
|
|
$
|
|
|
|
$
|
248
|
|
|
$
|
(252
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Note 4 for additional discussion regarding the fair
value of the Companys marketable securities.
6. Inventories:
Inventories are comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2009
|
|
|
Materials
|
|
$
|
23,821
|
|
|
$
|
19,343
|
|
Work-in-process
|
|
|
15,202
|
|
|
|
14,577
|
|
Finished goods
|
|
|
18,053
|
|
|
|
11,614
|
|
|
|
|
|
|
|
|
|
|
Total inventories
|
|
$
|
57,076
|
|
|
$
|
45,534
|
|
|
|
|
|
|
|
|
|
|
The Company has established reserves of $11,631 and $9,474 at
December 31, 2008 and 2009, respectively, for slow moving
and obsolete inventory. During 2008, the Company recorded a
charge of $14,124 for the write-down of inventory for excess
parts, for older product lines and for parts that design and
engineering advancements rendered obsolete. In 2008, the Company
disposed of $5,887 of inventory. During 2009, the Company
recorded a
F-20
RUDOLPH
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(In
thousands, except per share data)
charge in cost of revenues of $4,832 for the write-down of
inventory for excess parts, for older product lines and for
parts that design and engineering advancements rendered
obsolete. In 2009, the Company disposed of $6,989 of inventory.
|
|
7.
|
Property,
Plant and Equipment:
|
Property, plant and equipment, net is comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2009
|
|
|
Land and building
|
|
$
|
4,927
|
|
|
$
|
4,927
|
|
Machinery and equipment
|
|
|
16,647
|
|
|
|
13,382
|
|
Furniture and fixtures
|
|
|
2,710
|
|
|
|
2,730
|
|
Computer equipment
|
|
|
6,262
|
|
|
|
6,089
|
|
Leasehold improvements
|
|
|
6,986
|
|
|
|
6,102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,532
|
|
|
|
33,230
|
|
Accumulated depreciation
|
|
|
(18,479
|
)
|
|
|
(20,389
|
)
|
|
|
|
|
|
|
|
|
|
Total property, plant and equipment, net
|
|
$
|
19,053
|
|
|
$
|
12,841
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense amounted to $4,500, $4,500 and $6,751 for
the years ended December 31, 2007, 2008, and 2009,
respectively.
|
|
8.
|
Identifiable
Intangible Assets and Goodwill:
|
Identifiable
Intangible Assets
Identifiable intangible assets as of December 31, 2008 and
2009 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Carrying
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Impairment
|
|
|
Net
|
|
|
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Developed technology
|
|
$
|
51,243
|
|
|
$
|
15,858
|
|
|
$
|
28,259
|
|
|
$
|
7,126
|
|
Customer and distributor relationships
|
|
|
7,300
|
|
|
|
1,766
|
|
|
|
4,810
|
|
|
|
724
|
|
Trade names
|
|
|
4,100
|
|
|
|
1,132
|
|
|
|
1,164
|
|
|
|
1,804
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total identifiable intangible assets
|
|
$
|
62,643
|
|
|
$
|
18,756
|
|
|
$
|
34,233
|
|
|
$
|
9,654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Developed technology
|
|
$
|
53,390
|
|
|
$
|
16,894
|
|
|
$
|
28,259
|
|
|
$
|
8,237
|
|
Customer and distributor relationships
|
|
|
7,436
|
|
|
|
1,864
|
|
|
|
4,810
|
|
|
|
762
|
|
Trade names
|
|
|
4,342
|
|
|
|
1,356
|
|
|
|
1,164
|
|
|
|
1,822
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total identifiable intangible assets
|
|
$
|
65,168
|
|
|
$
|
20,114
|
|
|
$
|
34,233
|
|
|
$
|
10,821
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible asset amortization expense amounted to $4,476, $5,890
and $1,358 for the years ended December 31, 2007, 2008 and
2009, respectively. Assuming no change in the gross carrying
value of identifiable intangible assets and estimated lives,
estimated amortization expense amounts to $1,651 for 2010,
$1,548 for 2011, $1,548 for 2012, $1,548 for 2013, and $1,338
for 2014.
F-21
RUDOLPH
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(In
thousands, except per share data)
Identifiable
Intangible Assets Impairment
In connection with the goodwill impairment test as of
October 31, 2008, the Company determined that its
identifiable acquired intangible assets were impaired. The
determination was based on the carrying values exceeding the
future undiscounted cash flows and fair value attributable to
such intangible assets. As a result, the Company recorded an
impairment charge of $34.2 million, which represents the
difference between the estimated fair values of these long-lived
assets as compared to their carrying values. Fair values were
determined based upon market conditions, the relief from royalty
approach which utilized cash flow projections, and other factors.
Goodwill
The changes in the carrying amount of goodwill are as follows:
|
|
|
|
|
Balance as of December 31, 2007
|
|
$
|
188,832
|
|
PCTA acquisition
|
|
|
2,981
|
|
Tax adjustments related to prior acquisition
|
|
|
1,059
|
|
Goodwill impairment
|
|
|
(192,872
|
)
|
|
|
|
|
|
Balance as of December 31, 2008
|
|
|
|
|
Adventa acquisition
|
|
|
3,282
|
|
|
|
|
|
|
Balance as of December 31, 2009
|
|
$
|
3,282
|
|
|
|
|
|
|
Goodwill
Impairment
The Company tests goodwill for impairment annually and when an
event occurs or circumstances change that would more likely than
not reduce the fair value of a reporting unit below its carrying
value.
During October 2008, the Company experienced a significant
decline in its stock price. As a result of the decline in stock
price, the Companys market capitalization plus an implied
control premium fell significantly below the recorded value of
its consolidated net assets as of October 31, 2008. In
performing the goodwill impairment test, the Company used
current market capitalization, control premiums, discounted cash
flows and other factors as the best evidence of fair value. The
impairment test resulted in no value attributable to the
Companys goodwill and accordingly, the Company wrote off
all of its $192.9 million of goodwill as of
October 31, 2008.
|
|
9.
|
Commitments
and Contingencies:
|
Intellectual
Property Indemnification Obligations
The Company has entered into agreements with customers that
include limited intellectual property indemnification
obligations that are customary in the industry. These guarantees
generally require the Company to compensate the other party for
certain damages and costs incurred as a result of third party
intellectual property claims arising from these transactions.
The nature of the intellectual property indemnification
obligations prevents the Company from making a reasonable
estimate of the maximum potential amount it could be required to
pay to its customers. Historically, the Company has not made any
indemnification payments under such agreements and no amount has
been accrued in the accompanying consolidated financial
statements with respect to these indemnification guarantees.
F-22
RUDOLPH
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(In
thousands, except per share data)
Warranty
Reserves
The Company generally provides a warranty on its products for a
period of twelve to fifteen months against defects in material
and workmanship. The Company estimates the costs that may be
incurred during the warranty period and records a liability in
the amount of such costs at the time revenue is recognized. The
Companys estimate is based primarily on historical
experience. The Company periodically assesses the adequacy of
its recorded warranty liabilities and adjusts the amounts as
necessary. Settlements of warranty reserves are generally
associated with sales that occurred during the 12 to
15 months prior to the year-end and warranty accruals are
related to sales during the year.
Changes in the Companys warranty reserves are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
Balance, beginning of the year
|
|
$
|
2,171
|
|
|
$
|
2,365
|
|
|
$
|
1,813
|
|
Accruals
|
|
|
2,669
|
|
|
|
1,868
|
|
|
|
894
|
|
Warranty liability assumed in merger
|
|
|
532
|
|
|
|
215
|
|
|
|
|
|
Usage
|
|
|
(3,007
|
)
|
|
|
(2,635
|
)
|
|
|
(2,007
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of the year
|
|
$
|
2,365
|
|
|
$
|
1,813
|
|
|
$
|
700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legal
Matters
From time to time the Company is subject to legal proceedings
and claims in the ordinary course of business. The Company is
not aware of any legal proceedings or claims that management
believes would have a material adverse effect on the
Companys consolidated financial statements taken as a
whole.
Lease
Agreements
The Company rents space for its manufacturing and service
operations and sales offices, which expire through 2018. Total
rent expense for these facilities amounted to $2,264, $2,821 and
$2,720 for the years ended December 31, 2007, 2008 and
2009, respectively.
The Company also leases certain equipment pursuant to operating
leases, which expire through 2013. Rent expense related to these
leases amounted to $171, $148 and $122 for the years ended
December 31, 2007, 2008 and 2009, respectively.
Total future minimum lease payments under noncancelable
operating leases as of December 31, 2009 amounted to $2,791
for 2010, $2,305 for 2011, $1,743 for 2012, $1,453 for 2013,
$1,493 for 2014 and $3,521 for all periods thereafter.
Royalty
Agreements
Under various licensing agreements, the Company is obligated to
pay royalties based on net sales of products sold. There are no
minimum annual royalty payments. Royalty expense amounted to
$1,389, $838 and $279 for the years ended December 31,
2007, 2008 and 2009, respectively.
Open and
Committed Purchase Orders
The Company has open and committed purchase orders of $16,868 as
of December 31, 2009.
F-23
RUDOLPH
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(In
thousands, except per share data)
|
|
10.
|
Preferred
Share Purchase Rights:
|
On June 27, 2005, the Board of Directors of the Company
adopted a Stockholder Rights Plan (the Rights Plan)
and declared a dividend distribution of one Preferred Share
Purchase Right (a Right) on each outstanding share
of Company common stock. Each right entitles stockholders to buy
one one-thousandth of a share of newly created Series A
Junior Participating Preferred Stock of Rudolph at an exercise
price of $120. The Companys Board is entitled to redeem
the Rights at $0.001 per Right at any time before a person has
acquired 15% or more of the outstanding Rudolph common stock.
Subject to limited exceptions, the Rights will be exercisable if
a person or group acquires 15% or more of Rudolph common stock
or announces a tender offer for 15% or more of the common stock.
Each Right other than Rights held by the Acquiring Person which
will become void entitles its holder to purchase a number of
common shares of Rudolph having a market value at that time of
twice the Rights exercise price.
The Rights Plan will expire in 2015. The adoption of the Rights
Plan had no impact on the financial position or results of
operations of the Company.
|
|
11.
|
Share-Based
Compensation and Employee Benefit Plans:
|
Share-Based
Compensation Plans
The Companys share-based compensation plans are intended
to attract and retain employees and to provide an incentive for
them to assist the Company to achieve long-range performance
goals and to enable them to participate in long-term growth of
the Company. The Company settles stock option exercises and
restricted stock awards with newly issued common shares.
The Company established the 1999 Stock Plan (the 1999
Plan) effective August 31, 1999. The 1999 Plan
provided for the grant of 2,000 stock options and stock purchase
rights, subject to annual increases, to employees, directors and
consultants at an exercise price equal to or greater than the
fair market value of the common stock on the date of grant.
Options granted under the 1999 Plan typically grade vested over
a five-year period and expired ten years from the date of grant.
Restricted stock units granted under the 1999 Plan typically
vested over a five-year period for employees and one year for
directors. Restricted stock units granted to employees had time
based vesting or performance and time based vesting. In the
fourth quarter of 2009, the 1999 Plan expired and as of
December 31, 2008 and 2009, there were 1,562 and no shares
of common stock reserved for future grants under the 1999 Plan,
respectively.
The Company established the 2009 Stock Plan (the 2009
Plan) effective November 1, 2009. The 2009 Plan
provides for the grant of 3,300 stock options and stock purchase
rights to employees, directors and consultants at an exercise
price equal to or greater than the fair market value of the
common stock on the date of grant. As the 1999 Plan expired in
the fourth quarter of 2009, shares of common stock reserved for
future grants of 753 from the 1999 Plan were carried forward
into the allocated balance of the 2009 Plan. Options granted
under the 2009 Plan typically grade vest over a five-year period
and expire ten years from the date of grant. Restricted stock
units granted under the 2009 Plan typically vest over a
five-year period for employees and one year for directors.
Restricted stock units granted to employees have time based
vesting or performance and time based vesting. As of
December 31, 2009, there were 4,050 shares of common
stock reserved for future grants under the 2009 Plan.
F-24
RUDOLPH
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(In
thousands, except per share data)
The following table reflects share-based compensation expense by
type of award:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
Share-based compensation expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
$
|
721
|
|
|
$
|
508
|
|
|
$
|
453
|
|
Restricted stock units
|
|
|
2,398
|
|
|
|
2,897
|
|
|
|
3,306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total share-based compensation
|
|
|
3,119
|
|
|
|
3,405
|
|
|
|
3,759
|
|
Tax effect on share-based compensation
|
|
|
1,279
|
|
|
|
1,396
|
|
|
|
1,541
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net effect on net income
|
|
$
|
1,840
|
|
|
$
|
2,009
|
|
|
$
|
2,218
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax effect on:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
$
|
148
|
|
|
$
|
|
|
|
$
|
|
|
Effect on earnings per sharebasic
|
|
$
|
(0.06
|
)
|
|
$
|
(0.07
|
)
|
|
$
|
(0.07
|
)
|
Effect on earnings per sharediluted
|
|
$
|
(0.06
|
)
|
|
$
|
(0.07
|
)
|
|
$
|
(0.07
|
)
|
Valuation Assumptions for Stock Options
For the years ended, December 31, 2007 and 2008, there were
no stock options granted. For year ended, December 31,
2009, there were 397 stock options granted. The fair value of
each option was estimated on the date of grant using the
Black-Scholes option-pricing model with the following
assumptions:
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31, 2009
|
|
|
Expected life (years)
|
|
|
4.9
|
|
Expected volatility
|
|
|
82.0
|
%
|
Expected dividend yield
|
|
|
0.0
|
%
|
Risk-free interest rate
|
|
|
2.0
|
%
|
Weighted average fair value per option
|
|
$
|
4.50
|
|
F-25
RUDOLPH
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(In
thousands, except per share data)
Stock
Option Activity
A summary of the Companys stock option activity with
respect to the years ended December 31, 2007, 2008 and 2009
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
|
|
|
Exercise Price
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Shares
|
|
|
Per Share
|
|
|
Term (years)
|
|
|
Value
|
|
|
Outstanding at December 31, 2006
|
|
|
3,108
|
|
|
$
|
20.98
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(96
|
)
|
|
|
11.54
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(241
|
)
|
|
|
14.39
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(16
|
)
|
|
|
21.93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2007
|
|
|
2,755
|
|
|
|
21.27
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(11
|
)
|
|
|
1.95
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(425
|
)
|
|
|
22.52
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(12
|
)
|
|
|
15.96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2008
|
|
|
2,307
|
|
|
|
21.16
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
397
|
|
|
|
6.88
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(14
|
)
|
|
|
3.07
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(485
|
)
|
|
|
16.68
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(17
|
)
|
|
|
11.96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2009
|
|
|
2,188
|
|
|
$
|
19.75
|
|
|
|
4.0
|
|
|
$
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested or expected to vest at December 31, 2009
|
|
|
2,163
|
|
|
$
|
19.89
|
|
|
|
4.0
|
|
|
$
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2009
|
|
|
1,773
|
|
|
$
|
22.64
|
|
|
|
2.8
|
|
|
$
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The total intrinsic value of the stock options exercised during
2007, 2008 and 2009 was $506, $87 and $41, respectively. In
connection with these exercises, the tax benefits realized by
the Company for 2007, 2008 and 2009 were $191, $0 and $0,
respectively.
The options outstanding and exercisable at December 31,
2009 were in the following exercise price ranges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
Range of
|
|
|
|
|
Contractual
|
|
|
Average
|
|
|
|
|
|
Average
|
|
Exercise Prices
|
|
Shares
|
|
|
Life (years)
|
|
|
Exercise Price
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
$ 3.55 - $ 9.32
|
|
|
446
|
|
|
|
8.5
|
|
|
$
|
6.97
|
|
|
|
56
|
|
|
$
|
7.58
|
|
$10.00 - $15.48
|
|
|
460
|
|
|
|
4.1
|
|
|
$
|
13.51
|
|
|
|
439
|
|
|
$
|
13.44
|
|
$15.55 - $21.13
|
|
|
449
|
|
|
|
3.5
|
|
|
$
|
17.38
|
|
|
|
445
|
|
|
$
|
17.39
|
|
$21.78 - $26.20
|
|
|
451
|
|
|
|
2.7
|
|
|
$
|
24.41
|
|
|
|
451
|
|
|
$
|
24.41
|
|
$26.75 - $50.30
|
|
|
382
|
|
|
|
1.0
|
|
|
$
|
39.41
|
|
|
|
382
|
|
|
$
|
39.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ 3.55 - $50.30
|
|
|
2,188
|
|
|
|
4.0
|
|
|
$
|
19.75
|
|
|
|
1,773
|
|
|
$
|
22.64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-26
RUDOLPH
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(In
thousands, except per share data)
As of December 31, 2009, there was $1,497 of total
unrecognized compensation cost related to stock options granted
under the plans. That cost is expected to be recognized over a
weighted average remaining period of 3.1 years.
Restricted
Stock Unit Activity
A summary of the Companys restricted stock unit activity
with respect to the years ended December 31, 2007, 2008 and
2009 follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
Number of
|
|
|
Grant Date Fair
|
|
|
|
Shares
|
|
|
Value
|
|
|
Nonvested at December 31, 2006
|
|
|
336
|
|
|
$
|
16.68
|
|
Granted
|
|
|
463
|
|
|
$
|
15.69
|
|
Vested
|
|
|
(86
|
)
|
|
$
|
16.24
|
|
Forfeited
|
|
|
(33
|
)
|
|
$
|
16.24
|
|
|
|
|
|
|
|
|
|
|
Nonvested at December 31, 2007
|
|
|
680
|
|
|
$
|
16.08
|
|
Granted
|
|
|
334
|
|
|
$
|
7.53
|
|
Vested
|
|
|
(185
|
)
|
|
$
|
14.77
|
|
Forfeited
|
|
|
(100
|
)
|
|
$
|
14.60
|
|
|
|
|
|
|
|
|
|
|
Nonvested at December 31, 2008
|
|
|
729
|
|
|
$
|
12.70
|
|
Granted
|
|
|
919
|
|
|
$
|
4.86
|
|
Vested
|
|
|
(237
|
)
|
|
$
|
11.48
|
|
Forfeited
|
|
|
(39
|
)
|
|
$
|
10.40
|
|
|
|
|
|
|
|
|
|
|
Nonvested at December 31, 2009
|
|
|
1,372
|
|
|
$
|
7.72
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009, there was $7,183 of total
unrecognized compensation cost related to restricted stock units
granted under the plans. That cost is expected to be recognized
over a weighted average period of 2.8 years.
Employee
Stock Purchase Plan
The Company established an Employee Stock Purchase Plan (the
ESPP) effective November 1, 2009. The
Companys prior employee stock purchase plan, effective
August 31, 1999, expired in the fourth quarter of 2009.
Under the terms of the ESPP, eligible employees may have up to
15% of eligible compensation deducted from their pay and applied
to the purchase of shares of Company common stock. The price the
employee must pay for each share of stock will be 95% of the
fair market value of Company common stock at the end of the
applicable six-month purchase period. The ESPP is intended to
qualify under Section 423 of the Internal Revenue Code and
is a non-compensatory plan as defined by FASB ASC 718. No
stock-based compensation expense for the ESPP was recorded for
the years ended December 31, 2007, 2008 and 2009. As of
December 31, 2008 and 2009, there were 2,273 and
300 shares available for issuance under the ESPP,
respectively.
401(k)
Savings Plan
The Company has a 401(k) savings plan that allows employees to
contribute up to 100% of their annual compensation to the Plan
on a pre-tax or after tax basis, limited to a maximum annual
amount as set periodically by the Internal Revenue Service. The
plan provides a 50% match of all employee contributions up to
6 percent of the employees salary. The Company
temporarily suspended its matching contributions to the plan for
the six months ended December 31, 2009. The Company
reinstated the matching contributions to the plan effective
January 1,
F-27
RUDOLPH
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(In
thousands, except per share data)
2010. Company matching contributions to the plan totaled $746,
$899 and $340 for the years ended December 31, 2007, 2008
and 2009, respectively.
Profit
Sharing Program
The Company has a profit sharing program, wherein a percentage
of pre-tax profits, at the discretion of the Board of Directors,
is provided to all employees who have completed a stipulated
employment period. The Company did not make contributions to
this program for the years ended December 31, 2007, 2008
and 2009.
|
|
12.
|
Interest
Income and Other, Net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
Interest income
|
|
$
|
4,143
|
|
|
$
|
1,230
|
|
|
$
|
271
|
|
Realized losses on sale of marketable securities
|
|
|
|
|
|
|
(79
|
)
|
|
|
(1
|
)
|
Rental income
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income and other, net
|
|
$
|
4,149
|
|
|
$
|
1,151
|
|
|
$
|
270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of income tax expense are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
3,827
|
|
|
$
|
(3,985
|
)
|
|
$
|
(2,640
|
)
|
State
|
|
|
939
|
|
|
|
11
|
|
|
|
(46
|
)
|
Foreign
|
|
|
3,395
|
|
|
|
2,308
|
|
|
|
230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,161
|
|
|
|
(1,666
|
)
|
|
|
(2,456
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(2,507
|
)
|
|
|
(3,155
|
)
|
|
|
157
|
|
State
|
|
|
(674
|
)
|
|
|
572
|
|
|
|
37
|
|
Foreign
|
|
|
(134
|
)
|
|
|
134
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,315
|
)
|
|
|
(2,449
|
)
|
|
|
217
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense (benefit)
|
|
$
|
4,846
|
|
|
$
|
(4,115
|
)
|
|
$
|
(2,239
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax of $2,856 and $13,849 was generated by
domestic and foreign operations, respectively, in 2007. Income
(loss) before income tax of $(263,081) and $9,280 was generated
by domestic and foreign operations, respectively, in 2008.
Income (loss) before income tax of $(32,123) and $256 was
generated by domestic and foreign operations, respectively, in
2009.
F-28
RUDOLPH
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(In
thousands, except per share data)
Deferred tax assets and liabilities are comprised of the
following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2009
|
|
|
Research and development credit carryforward
|
|
$
|
6,066
|
|
|
$
|
7,445
|
|
Reserves and accruals not currently deductible
|
|
|
1,149
|
|
|
|
1,493
|
|
Deferred revenue
|
|
|
1,507
|
|
|
|
1,015
|
|
Domestic net operating loss carryforwards
|
|
|
358
|
|
|
|
7,393
|
|
Depreciation
|
|
|
468
|
|
|
|
759
|
|
Capital losses
|
|
|
493
|
|
|
|
497
|
|
Foreign net operating loss and credit carryforwards
|
|
|
899
|
|
|
|
3,935
|
|
Intangibles
|
|
|
23,045
|
|
|
|
17,379
|
|
Tax deductible transaction costs
|
|
|
648
|
|
|
|
601
|
|
Share-based compensation
|
|
|
1,238
|
|
|
|
114
|
|
Inventory obsolescence reserve
|
|
|
5,754
|
|
|
|
5,098
|
|
Other
|
|
|
563
|
|
|
|
668
|
|
|
|
|
|
|
|
|
|
|
Gross deferred tax assets
|
|
|
42,188
|
|
|
|
46,397
|
|
Valuation allowance for deferred tax assets
|
|
|
(36,491
|
)
|
|
|
(43,267
|
)
|
|
|
|
|
|
|
|
|
|
Deferred tax assets after valuation allowance
|
|
|
5,697
|
|
|
|
3,130
|
|
|
|
|
|
|
|
|
|
|
Intangibles
|
|
|
(2,593
|
)
|
|
|
|
|
Other
|
|
|
(201
|
)
|
|
|
(32
|
)
|
|
|
|
|
|
|
|
|
|
Gross deferred tax liabilities
|
|
|
(2,794
|
)
|
|
|
(32
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
2,903
|
|
|
$
|
3,098
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2008 and 2009, we had valuation allowances
of $36,491 and $43,267 on certain of our deferred tax assets to
reflect the deferred tax asset at the net amount that is more
likely than not to be realized. Valuation allowances have been
recorded on substantially all of the Companys deferred tax
assets as of December 31, 2008 and 2009, except for $2,896
and $3,094 of research and development credits which are
reserved for in the Companys ASC 740 provision and $7 and
$4 for alternative minimum tax credits, as the Company has
incurred cumulative losses. The Company computes cumulative
losses for these purposes by adjusting pretax results for
permanent items.
F-29
RUDOLPH
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(In
thousands, except per share data)
The provision for income taxes differs from the amount of income
tax determined by applying the applicable U.S. federal
income tax rate of 35% for the years ended December 31,
2007, 2008 and 2009 to income before provision for income taxes
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
Federal income tax provision at statutory rate
|
|
$
|
5,847
|
|
|
$
|
(88,830
|
)
|
|
$
|
(11,154
|
)
|
State taxes, net of federal effect
|
|
|
306
|
|
|
|
(1,789
|
)
|
|
|
(904
|
)
|
Non-deductible goodwill impairment charges
|
|
|
|
|
|
|
50,440
|
|
|
|
|
|
Foreign taxes net of federal effect
|
|
|
|
|
|
|
1,342
|
|
|
|
525
|
|
In-process research and development write-off
|
|
|
350
|
|
|
|
|
|
|
|
|
|
Research tax credit
|
|
|
(992
|
)
|
|
|
(419
|
)
|
|
|
(37
|
)
|
Domestic manufacturing benefit
|
|
|
(279
|
)
|
|
|
|
|
|
|
|
|
Change in valuation allowance for deferred tax assets
|
|
|
331
|
|
|
|
35,196
|
|
|
|
8,312
|
|
True up of prior year benefit
|
|
|
(531
|
)
|
|
|
(45
|
)
|
|
|
580
|
|
Other
|
|
|
(186
|
)
|
|
|
(10
|
)
|
|
|
439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision (benefit) for income taxes
|
|
$
|
4,846
|
|
|
$
|
(4,115
|
)
|
|
$
|
(2,239
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
29
|
%
|
|
|
2
|
%
|
|
|
7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In assessing the realizability of deferred tax assets, the
Company uses a more likely than not standard. If it is
determined that it is more likely than not that deferred tax
assets will not be realized, a valuation allowance must be
established against the deferred tax assets. The ultimate
realization of the assets is dependent on the generation of
future taxable income during the periods in which the associated
temporary differences become deductible. Management considers
the scheduled reversal of deferred income tax liabilities,
projected future taxable income and tax planning strategies when
making this assessment.
At December 31, 2009, the Company had federal, state and
foreign net operating loss carryforwards of $16,738, $26,919 and
$1,631, respectively. The net operating loss carryforwards
expire on various dates through December 31, 2029.
Utilization of the net operating loss carry forwards may be
subject to an annual limitation in the event of a change in
ownership in future years as defined by Section 382 of the
Internal Revenue Code and similar state provisions. At
December 31, 2009, the Company had federal and state
research & development credits and foreign tax credit
carryforwards of $5,601, $2,860 and $3,243, respectively. The
federal research & development credits are set to
expire at various dates through December 31, 2029. The
state research & development credits are set to expire
at various dates through December 21, 2023. The foreign tax
credit is set to expire at various dates through
December 31, 2017.
The total amount of unrecognized tax benefits were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
Unrecognized tax benefits, opening balance
|
|
$
|
4,552
|
|
|
$
|
5,875
|
|
|
$
|
5,967
|
|
Gross increasestax positions in prior period
|
|
|
635
|
|
|
|
700
|
|
|
|
(71
|
)
|
Gross increasescurrent-period tax positions
|
|
|
1,301
|
|
|
|
225
|
|
|
|
68
|
|
Lapse of statute of limitations
|
|
|
(613
|
)
|
|
|
(833
|
)
|
|
|
(433
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognized tax benefits, ending balance
|
|
$
|
5,875
|
|
|
$
|
5,967
|
|
|
$
|
5,531
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-30
RUDOLPH
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(In
thousands, except per share data)
Included in the balance of unrecognized tax benefits at
December 31, 2008 and 2009 are unrecognized tax benefits of
$5,967 and $5,531, of which $3,306 and $3,245, would be
reflected as an adjustment to income tax expense if recognized,
respectively. It is expected that the amount of unrecognized tax
benefits will change in the next 12 months; however, we do
not expect the change to have a significant impact on our
results of operations or financial position.
The Company recognizes accrued interest and penalties related to
unrecognized tax benefits in income tax expense. During the
years ended December 31, 2007, 2008 and 2009, the Company
recognized approximately $33, $37 and $16 in interest and
penalties expense associated with uncertain tax positions,
respectively. As of December 31, 2008 and 2009, the Company
had accrued interest and penalties expense related to
unrecognized tax benefits of $143 and $170, respectively.
The Company is subject to U.S. federal income tax as well
as income tax in multiple state and foreign jurisdictions.
Presently, the Company has not been contacted by the Internal
Revenue Service for examination of income tax returns for open
periods, December 31, 2006 through December 31, 2008.
The Company is currently under examination by the State of
Minnesota for tax years 2005 through 2007. In 2009, the State of
New Jersey closed its audit for the years 2005 through 2007
without any material adjustments. The Company has not been
contacted by any other U.S. state, local or foreign tax
authority for all open tax periods beginning after
December 31, 2004.
The Workers, Homeownership, and Business Assistance Act of 2009
was signed on November 6, 2009, under which, the Company is
able to carryback its 2009 net operating loss five years to
previously profitable years that were not available to the
Company for carryback prior to the new tax legislation. The
Company intends to carry a portion of its 2009 federal loss back
and expects to receive refunds totaling approximately $3,120 in
2010.
|
|
14.
|
Manufacturing
Consolidation:
|
Budd
Lake, New Jersey, Facility
During the three months ended December 31, 2009, the
Company initiated a consolidation of a portion of its facility
in Budd Lake, NJ and will move the New Jersey manufacturing
operations to its facility in Bloomington, MN. In connection
with this consolidation, the Company recorded a total charge of
$6,449, including $4,312 for asset write-downs, $1,949 for lease
termination charges and $188 for employee termination costs,
related to the Companys manufacturing facility. These
charges were recorded in cost of revenues and selling, general
and administrative expenses for $2,860 and $3,589, respectively.
The Company expects the total cost of this manufacturing
consolidation to range between $7,000 to $9,000 through its
expected completion in 2010. The following table sets forth the
Companys reserve as of December 31, 2009 relating to
its consolidation of its manufacturing operations in Budd Lake,
NJ, and reflects the activity affecting the reserve for the year
then ended.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2009
|
|
|
|
Beginning Reserve
|
|
|
Charged to Costs
|
|
|
Payments
|
|
|
Ending Reserve
|
|
|
|
Balance
|
|
|
and Expenses
|
|
|
and Other
|
|
|
Balance
|
|
|
Asset write-down
|
|
$
|
|
|
|
$
|
4,312
|
|
|
$
|
(4,312
|
)
|
|
$
|
|
|
Employee terminations
|
|
|
|
|
|
|
188
|
|
|
|
(29
|
)
|
|
|
159
|
|
Manufacturing capacity
|
|
|
|
|
|
|
1,949
|
|
|
|
|
|
|
|
1,949
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
6,449
|
|
|
$
|
(4,341
|
)
|
|
$
|
2,108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-31
RUDOLPH
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(In
thousands, except per share data)
|
|
15.
|
Segment
Reporting and Geographic Information:
|
The Company reports one reportable segment. Operating segments
are business units that have separate financial information and
are separately reviewed by the Companys chief decision
maker. The Companys chief decision maker is the Chief
Executive Officer. The Company is engaged in the design,
development, and manufacture of high-performance control
metrology, defect inspection and data analysis systems used by
semiconductor device manufacturers. The Company and its
subsidiaries currently operate in a single reportable segment:
the design, development, manufacture, sale and service of
process control systems used in semiconductor device
manufacturing. The chief operating decision maker allocates
resources and assesses performance of the business and other
activities at the reporting segment level.
The following table lists the different sources of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
Systems:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inspection
|
|
$
|
86,196
|
|
|
|
53
|
%
|
|
$
|
73,465
|
|
|
|
56
|
%
|
|
$
|
38,027
|
|
|
|
48
|
%
|
Metrology
|
|
|
34,738
|
|
|
|
22
|
|
|
|
21,118
|
|
|
|
16
|
|
|
|
8,921
|
|
|
|
11
|
|
Parts
|
|
|
15,261
|
|
|
|
10
|
|
|
|
20,801
|
|
|
|
16
|
|
|
|
15,428
|
|
|
|
20
|
|
Services
|
|
|
11,354
|
|
|
|
7
|
|
|
|
11,246
|
|
|
|
9
|
|
|
|
9,590
|
|
|
|
12
|
|
Software licensing
|
|
|
12,580
|
|
|
|
8
|
|
|
|
4,410
|
|
|
|
3
|
|
|
|
6,691
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
160,129
|
|
|
|
100
|
%
|
|
$
|
131,040
|
|
|
|
100
|
%
|
|
$
|
78,657
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For geographical reporting, revenues are attributed to the
geographic location in which the customer is located. Revenue by
geographic region is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
Revenues from third parties:
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
36,710
|
|
|
$
|
30,744
|
|
|
$
|
21,673
|
|
Asia
|
|
|
93,631
|
|
|
|
74,661
|
|
|
|
47,883
|
|
Europe
|
|
|
29,788
|
|
|
|
25,635
|
|
|
|
9,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
160,129
|
|
|
$
|
131,040
|
|
|
$
|
78,657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One customer represented 12%, 11% and 14% of revenue for the
years ended December 31, 2007, 2008 and 2009, respectively.
The accounts receivable of that customer totaled $1,680, $1,258
and $2,582 at December 31, 2007, 2008 and 2009,
respectively. No other customer was above 10% of revenue for the
years ended December 31, 2007, 2008 or 2009.
Substantially all of the Companys assets are within the
United States of America.
|
|
16.
|
Earnings
(Loss) Per Share:
|
Basic earnings (loss) per share is calculated using the weighted
average number of shares of common stock outstanding during the
period. Diluted earnings (loss) per share is computed in the
same manner and also gives effect to all dilutive common
equivalent shares outstanding during the period. For the year
ended December 31, 2007, the weighted average number of
stock options and restricted stock units excluded from the
computation of diluted earnings per share were 2,185 and 129,
respectively. For the year ended December 31, 2008, all
outstanding stock options and restricted stock units totaling
2,307 and 729, respectively, were excluded from the computation
of
F-32
RUDOLPH
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(In
thousands, except per share data)
diluted loss per share because the effect in the period would be
anti-dilutive. For the year ended December 31, 2009, all
outstanding stock options and restricted stock units totaling
2,188 and 1,372, respectively, were excluded from the
computation of diluted loss per share because the effect in the
period would be anti-dilutive
The computations of basic and diluted loss per share for the
years ended December 31, 2007, 2008, and 2009 are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
|
|
|
Shares
|
|
|
Per-Share
|
|
|
|
(Numerator)
|
|
|
(Denominator)
|
|
|
Amount
|
|
|
For the year ended December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
11,859
|
|
|
|
29,168
|
|
|
$
|
0.41
|
|
Effect of dilutive stock options and restricted stock units
|
|
|
|
|
|
|
144
|
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
11,859
|
|
|
|
29,312
|
|
|
$
|
0.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(249,686
|
)
|
|
|
30,614
|
|
|
$
|
(8.16
|
)
|
Effect of dilutive stock options and restricted stock units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(249,686
|
)
|
|
|
30,614
|
|
|
$
|
(8.16
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(29,628
|
)
|
|
|
30,888
|
|
|
$
|
(0.96
|
)
|
Effect of dilutive stock options and restricted stock units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(29,628
|
)
|
|
|
30,888
|
|
|
$
|
(0.96
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17.
|
Share
Repurchase Program
|
In July 2008, the Board of Directors authorized a share
repurchase program of up to 3,000 shares of the
Companys common stock. As of the time of filing this
Annual Report on
Form 10-K,
the Company has not purchased any shares under this program.
The Company has evaluated all subsequent events through
March 5, 2010, which represents the filing date of this
Form 10-K
with the Securities and Exchange Commission, to ensure that this
Form 10-K
includes appropriate disclosure of events both recognized in the
financial statements as of December 31, 2009, and events
which occurred subsequent to December 31, 2009 but were not
recognized in the financial statements. As of March 5,
2010, there were no subsequent events which required recognition
or disclosure.
|
|
19.
|
Quarterly
Consolidated Financial Data (unaudited):
|
The following tables present certain unaudited consolidated
quarterly financial information for each of the eight quarters
ended December 31, 2009. In the opinion of the
Companys management, this quarterly information
F-33
RUDOLPH
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(In
thousands, except per share data)
has been prepared on the same basis as the consolidated
financial statements and includes all adjustments (consisting
only of normal recurring adjustments) necessary to present
fairly the information for the periods presented. The results of
operations for any quarter are not necessarily indicative of
results for the full year or for any future period.
Year-over-year
quarterly comparisons of the Companys results of
operations may not be as meaningful as the sequential quarterly
comparisons set forth below tend to reflect the cyclical
activity of the semiconductor industry as a whole. The 2008
fourth quarter reflects a charge of $227,105 for the impairment
of goodwill and identifiable intangible assets. Other quarterly
fluctuations in expenses are related directly to sales activity
and volume and may also reflect the timing of operating expenses
incurred throughout the year and the purchase accounting effects
of business combinations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters Ended
|
|
|
|
|
|
|
March 31,
|
|
|
June 30,
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
|
|
2008
|
|
|
2008
|
|
|
2008
|
|
|
2008
|
|
|
Total
|
|
|
Revenues
|
|
$
|
37,210
|
|
|
$
|
38,416
|
|
|
$
|
38,986
|
|
|
$
|
16,428
|
|
|
$
|
131,040
|
|
Gross profit
|
|
|
15,115
|
|
|
|
17,721
|
|
|
|
16,806
|
|
|
|
(5,990
|
)
|
|
|
43,652
|
|
Loss before income taxes
|
|
|
(3,063
|
)
|
|
|
(2,814
|
)
|
|
|
(878
|
)
|
|
|
(247,046
|
)
|
|
|
(253,801
|
)
|
Net loss
|
|
|
(1,646
|
)
|
|
|
(1,985
|
)
|
|
|
(448
|
)
|
|
|
(245,607
|
)
|
|
|
(249,686
|
)
|
Loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.05
|
)
|
|
$
|
(0.06
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(7.96
|
)
|
|
$
|
(8.16
|
)
|
Diluted
|
|
$
|
(0.05
|
)
|
|
$
|
(0.06
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(7.96
|
)
|
|
$
|
(8.16
|
)
|
Weighted average number of shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
30,533
|
|
|
|
30,669
|
|
|
|
30,781
|
|
|
|
30,842
|
|
|
|
30,614
|
|
Diluted
|
|
|
30,533
|
|
|
|
30,669
|
|
|
|
30,781
|
|
|
|
30,842
|
|
|
|
30,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters Ended
|
|
|
|
|
|
|
March 31,
|
|
|
June 30,
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
|
|
2009
|
|
|
2009
|
|
|
2009
|
|
|
2009
|
|
|
Total
|
|
|
Revenues
|
|
$
|
11,061
|
|
|
$
|
15,341
|
|
|
$
|
23,330
|
|
|
$
|
28,925
|
|
|
$
|
78,657
|
|
Gross profit
|
|
|
2,284
|
|
|
|
5,406
|
|
|
|
9,473
|
|
|
|
11,689
|
|
|
|
28,852
|
|
Loss before income taxes
|
|
|
(10,958
|
)
|
|
|
(8,669
|
)
|
|
|
(5,574
|
)
|
|
|
(6,666
|
)
|
|
|
(31,867
|
)
|
Net loss
|
|
|
(10,054
|
)
|
|
|
(8,625
|
)
|
|
|
(4,835
|
)
|
|
|
(6,114
|
)
|
|
|
(29,628
|
)
|
Loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.33
|
)
|
|
$
|
(0.28
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
(0.20
|
)
|
|
$
|
(0.96
|
)
|
Diluted
|
|
$
|
(0.33
|
)
|
|
$
|
(0.28
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
(0.20
|
)
|
|
$
|
(0.96
|
)
|
Weighted average number of shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
30,788
|
|
|
|
30,957
|
|
|
|
31,109
|
|
|
|
30,990
|
|
|
|
30,888
|
|
Diluted
|
|
|
30,788
|
|
|
|
30,957
|
|
|
|
31,109
|
|
|
|
30,990
|
|
|
|
30,888
|
|
F-34
RUDOLPH
TECHNOLOGIES, INC. AND SUBSIDIARIES
SCHEDULE OF
VALUATION AND QUALIFYING ACCOUNTS
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Column A
|
|
Column B
|
|
|
Column C
|
|
|
Column D
|
|
|
Column E
|
|
|
|
Balance at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of
|
|
|
Charged to (Recovery
|
|
|
Charged to Other
|
|
|
|
|
|
Balance at End
|
|
Description
|
|
Period
|
|
|
of) Costs and Expense
|
|
|
Accounts (net)
|
|
|
Deductions
|
|
|
of Period
|
|
|
Year 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
$
|
299
|
|
|
$
|
(85
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
214
|
|
Inventory valuation
|
|
|
2,805
|
|
|
|
661
|
|
|
|
|
|
|
|
72
|
|
|
|
3,394
|
|
Warranty
|
|
|
2,171
|
|
|
|
2,669
|
|
|
|
532
|
|
|
|
3,007
|
|
|
|
2,365
|
|
Deferred tax valuation allowance
|
|
|
964
|
|
|
|
331
|
|
|
|
|
|
|
|
|
|
|
|
1,295
|
|
Year 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
$
|
214
|
|
|
$
|
445
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
659
|
|
Inventory valuation
|
|
|
3,394
|
|
|
|
14,124
|
|
|
|
|
|
|
|
5,887
|
|
|
|
11,631
|
|
Warranty
|
|
|
2,365
|
|
|
|
1,868
|
|
|
|
215
|
|
|
|
2,635
|
|
|
|
1,813
|
|
Deferred tax valuation allowance
|
|
|
1,295
|
|
|
|
35,196
|
|
|
|
|
|
|
|
|
|
|
|
36,491
|
|
Year 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
$
|
659
|
|
|
$
|
(57
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
602
|
|
Inventory valuation
|
|
|
11,631
|
|
|
|
4,832
|
|
|
|
|
|
|
|
6,989
|
|
|
|
9,474
|
|
Warranty
|
|
|
1,813
|
|
|
|
894
|
|
|
|
|
|
|
|
2,007
|
|
|
|
700
|
|
Deferred tax valuation allowance
|
|
|
36,491
|
|
|
|
8,312
|
|
|
|
(853
|
)
|
|
|
683
|
|
|
|
43,267
|
|
F-35
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) 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.
Rudolph Technologies, INC.
|
|
|
|
By:
|
/s/ Paul
F. McLaughlin
|
Paul F. McLaughlin
Chairman and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT
OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING
PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON
THE DATES INDICATED.
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Paul
F. Mclaughlin
Paul
F. Mclaughlin
|
|
Chairman and Chief Executive Officer
|
|
March 5, 2010
|
|
|
|
|
|
/s/ Steven
R. Roth
Steven
R. Roth
|
|
Senior Vice President, Chief Financial Officer (Principal
Financial Officer and Principal Accounting Officer)
|
|
March 5, 2010
|
|
|
|
|
|
/s/ Leo
Berlinghieri
Leo
Berlinghieri
|
|
Director
|
|
March 5, 2010
|
|
|
|
|
|
/s/ Daniel
H. Berry
Daniel
H. Berry
|
|
Director
|
|
March 5, 2010
|
|
|
|
|
|
/s/ Thomas
G. Greig
Thomas
G. Greig
|
|
Director
|
|
March 5, 2010
|
|
|
|
|
|
/s/ Richard
F. Spanier
Richard
F. Spanier
|
|
Director
|
|
March 5, 2010
|
|
|
|
|
|
/s/ Aubrey
C. Tobey
Aubrey
C. Tobey
|
|
Director
|
|
March 5, 2010
|
|
|
|
|
|
/s/ John
R. Whitten
John
R. Whitten
|
|
Director
|
|
March 5, 2010
|
EXHIBIT INDEX
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
2
|
.1
|
|
Agreement and Plan of Merger, dated as of June 27, 2005, by
and among the Registrant, NS Merger Sub, Inc. and August
Technology Corporation (incorporated by reference to
Exhibit 99.2 to the Registrants Schedule 13D
filed on July 7, 2005).
|
|
2
|
.2
|
|
Amendment No. 1, dated as of December 8, 2005, by and
among the Registrant, NS Merger Sub, Inc. and August Technology
Corporation, to the Agreement and Plan of Merger, dated as of
June 27, 2005, by and among the Registrant, NS Merger Sub,
Inc. and August Technology Corporation. (incorporated by
reference to Exhibit 2.1 to the Registrants Current
Report on
Form 8-K
filed on December 9, 2005).
|
|
2
|
.3
|
|
Asset Purchase Agreement dated as of December 18, 2007, by
and among the Registrant, Mariner Acquisition Company LLC,
Applied Precision Holding, LLC and Applied Precision, LLC
(incorporated by reference to Exhibit 2.1 to the
Registrants Current Report on
Form 8-K
filed on December 21, 2007).
|
|
3
|
.1
|
|
Restated Certificate of Incorporation of Registrant
(incorporated by reference to Exhibit (3.1(b)) to the
Registrants Registration Statement on
Form S-1,
as amended (SEC File
No. 333-86871
filed on September 9, 1999).
|
|
3
|
.2
|
|
Amended and Restated Bylaws of Registrant (incorporated by
reference to Exhibit (3.2(b) to the Registrants
Registration Statement on
Form S-1,
as amended (SEC File
No. 333-86871),
filed on September 9, 1999.
|
|
3
|
.3
|
|
Amendment to Restated Bylaws of Registrant (incorporated by
reference to Exhibit 3.1 to the Registrants Current
Report on
Form 8-K
filed on February 15, 2006,
No. 000-27965).
|
|
3
|
.4
|
|
Amendment to Restated Bylaws of Registrant (incorporated by
reference to Exhibit 3.1 to the Registrants Current
Report on
Form 8-K
filed on August 1, 2007,
No. 000-27965).
|
|
3
|
.5
|
|
Amendment to Restated Bylaws of Registrant (incorporated by
reference to Exhibit 3.1 to the Registrants Current
Report on
Form 8-K
filed on February 2, 2009,
No. 000-27965).
|
|
4
|
.1
|
|
Rights Agreement (incorporated by reference to Exhibit 4.1
of the Registrants Registration Statement on
Form 8-A,
filed on June 28, 2005, No
000-27965).
|
|
4
|
.2
|
|
August Technology Corporation 1997 Stock Incentive Plan
(incorporated by reference to the Appendix to August Technology
Corporations Proxy Statement for its 2004 Annual
Shareholders Meeting, filed on March 11, 2004,
No. 000-30637).
|
|
10
|
.1+
|
|
License Agreement, dated June 28, 1995, between the
Registrant and Brown University Research Foundation
(incorporated by reference to Exhibit (10.1) to the
Registrants Registration Statement on
Form S-1,
as amended (SEC File
No. 333-86871),
filed on September 9, 1999).
|
|
10
|
.2*
|
|
Form of Indemnification Agreement (incorporated by reference to
Exhibit (10.3) to the Registrants Registration Statement
on
Form S-1,
as amended (SEC File
No. 333-86871),
filed on September 9, 1999).
|
|
10
|
.3*
|
|
Amended 1996 Non-Qualified Stock Option Plan (incorporated by
reference to Exhibit 10.15 to Registrants quarterly
report on
Form 10-Q
(SEC File
No. 000-27965),
filed on November 14, 2001).
|
|
10
|
.4*
|
|
Form of 1999 Stock Plan (incorporated by reference to Exhibit
(10.5) to the Registrants Registration Statement on
Form S-1,
as amended (SEC File
No. 333-86871),
filed on September 9, 1999)
|
|
10
|
.5*
|
|
Form of 1999 Employee Stock Purchase Plan (incorporated by
reference to Exhibit (10.6) to the Registrants
Registration Statement on
Form S-1,
as amended (SEC File
No. 333-86871),
filed on September 9, 1999).
|
|
10
|
.6*
|
|
Management Agreement, dated as of July 24, 2000, by and
between Rudolph Technologies, Inc. and Paul F. McLaughlin
(incorporated by reference to Exhibit 10.12 to
Registrants quarterly report on
Form 10-Q,
filed on November 3, 2000) as amended August 20,
2009 (incorporated by reference to Exhibit 10.1 to
Registrants quarterly report on
Form 10-Q,
filed on November 6, 2009).
|
|
10
|
.7*
|
|
Management Agreement, dated as of July 24, 2000 by and
between Rudolph Technologies, Inc. and Steven R. Roth
(incorporated by reference to Exhibit 10.14 to
Registrants quarterly report on
Form 10-Q,
filed on November 3, 2000) as amended August 20,
2009 (incorporated by reference to Exhibit 10.2 to
Registrants quarterly report on
Form 10-Q,
filed on November 6, 2009).
|
|
10
|
.8*
|
|
Registration Agreement, dated June 14, 1996 by and among
the Registrant, 11, L.L.C., Riverside Rudolph, L.L.C.,
Dr. Richard F. Spanier, Paul F. McLaughlin (incorporated by
reference to Exhibit (10.9) to the Registrants
Registration Statement on
Form S-1,
as amended (SEC File
No. 333-86871),
filed on September 9, 1999).
|
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
10
|
.9*
|
|
Stockholders Agreement, dated June 14, 1996 by and among
the Registrant, Administration of Florida, Liberty Partners
Holdings 11, L.L.C., Riverside Rudolph, L.L.C., Dr. Richard
F. Spanier, Paul McLaughlin, Dale Moorman, Thomas Cooper and
(incorporated by reference to Exhibit (10.10) to the
Registrants
Form S-1,
as amended (SEC File
No. 333-86871),
filed on September 9, 1999).
|
|
10
|
.10*
|
|
Form of option agreement under 1999 Stock Plan (incorporated by
reference to Exhibit 10.12 to Registrants quarterly
report on
Form 10-Q
(SEC File
No. 000-27965),
filed on November 5, 2004).
|
|
10
|
.11*
|
|
Form of Restricted Stock Award pursuant to the Rudolph
Technologies, Inc. 1999 Stock Plan (incorporated by reference to
the Registrants Current Report on
Form 8-K
filed on June 21, 2005).
|
|
10
|
.12
|
|
Form of Company Shareholder Voting Agreement (incorporated by
reference to Exhibit 99.2 to the Registrants
Schedule 13D filed on July 7, 2005).
|
|
10
|
.13*
|
|
Rudolph Technologies, Inc. 2009 Stock Plan (incorporated by
reference to Appendix A of the Registrants revised
Proxy Statement on Form DEFR14A, filed on May 8, 2009).
|
|
10
|
.14*
|
|
Rudolph Technologies, Inc. 2009 Employee Stock Purchase Plan, as
amended (incorporated by reference to Appendix B of the
Registrants revised Proxy Statement on Form DEFR14A,
filed on May 8, 2009).
|
|
10
|
.15*
|
|
Executive Change of Control Agreement, dated as of
August 20, 2009, by and between Rudolph Technologies, Inc.
and Nathan H. Little (incorporated by reference to
Exhibit 10.3 to Registrants quarterly report on
Form 10-Q,
filed on November 6, 2009).
|
|
14
|
.1
|
|
Rudolph Technologies Code of Business Conduct and Ethics
(incorporated by reference to Exhibit 14.1 to
Registrants annual report on
Form 10-K,
filed on March 16, 2006).
|
|
14
|
.2
|
|
Rudolph Technologies Financial Code of Ethics (incorporated by
reference to Exhibit 14.1 to Registrants annual
report on
Form 10-K,
filed on March 16, 2006).
|
|
21
|
.1
|
|
Subsidiaries.
|
|
23
|
.1
|
|
Consent of KPMG LLP, Independent Registered Public Accounting
Firm.
|
|
23
|
.2
|
|
Consent of Ernst & Young LLP, Independent Registered
Public Accounting Firm.
|
|
31
|
.1
|
|
Certification of Paul F. McLaughlin, Chief Executive Officer,
pursuant to Securities Exchange Act
Rule 13a-14(a).
|
|
31
|
.2
|
|
Certification of Steven R. Roth, Chief Financial Officer,
pursuant to Securities Exchange Act
Rule 13a-14(a).
|
|
32
|
.1
|
|
Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, signed by Paul F. McLaughlin, Chief Executive Officer
of Rudolph Technologies, Inc.
|
|
32
|
.2
|
|
Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, signed by Steven R. Roth, Chief Financial Officer of
Rudolph Technologies, Inc.
|
|
|
|
+ |
|
Confidential treatment has been granted with respect to portions
of this exhibit. |
|
* |
|
Management contract, compensatory plan or arrangement. |