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Item 5. Market for Registrant’s Common Equity

2021-02-26 compared with 2020-03-02 · 28 added, 324 removed, 10 unchanged (97% of the section changed)

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our common stock trades on the Nasdaq Global Select Market under the symbol ACLS.

As of February 23, 2021, we had approximately 811 stockholders of record.

In December 2019, the Board approved stock repurchases of up to $50 million of our common stock through the end of 2020.

This program was suspended at the end of the first quarter of 2020, in light of uncertainties arising from the global COVID-19 pandemic.

The following table summarizes the stock repurchase activity for the 12 months ended December 31, 2020 and the approximate dollar value of shares that may yet be purchased pursuant to our stock repurchase program:

4 unchanged sentences

(in thousands except per share amounts)

May 1, 2019 through May 31, 2019

June 1, 2019 through June 30, 2019

November 1, 2019 through November 30, 2019

December 1, 2019 through December 31, 2019

* In December 2019, we announced that our Board of Directors extended and increased the stock repurchase program, authorizing up to $50 million share repurchase through the end of 2020.

As of December 31, 2019, $32.3 million remained available for stock repurchases pursuant to this program.

The pace of our repurchase activity will depend on factors such as our working capital needs, our cash requirements for business development, our stock price, and economic and market conditions.

March 1, 2020 through March 31, 2020

On January 12, 2021, we announced that our Board of Directors authorized a one-year share repurchase program of up to $100 million of our common stock.

Our stock repurchases may be effected from time to time through open market purchases or pursuant to a Rule 10b5-1 plan.

Our stock repurchase program may be accelerated, suspended, delayed or discontinued at any time.

The remainder of the information required by Item 5 of Form 10-K is incorporated by reference to the information responsive thereto contained in the section of the Axcelis Proxy Statement for the Annual Meeting of Stockholders to be held May 19, 2020 captioned “Proposal 2:

Approval of the 2020 Employee Stock Purchase Plan –

Current Equity Compensation Plan Information.”

The pace of our repurchase activity will depend on factors such as our working capital needs, our cash requirements for business development, our stock price, and economic and market conditions.

We have no obligation to repurchase shares under the authorization and we may suspend or discontinue the repurchase program at any time.

We maintain three equity compensation plans, the 2000 Stock Plan (which was terminated as to new grants on May 1, 2012), the 2012 Equity Incentive Plan (the “2012 Equity Plan”) and the 2020 Employee Stock Purchase Plan.

The number of shares issuable upon exercise of outstanding options and unvested restricted stock units granted to employees and non-employee directors, as well as the number of shares remaining available for future issuance, under our equity compensation plans as of December 31, 2020 are summarized in the following table:

Plan category

Number of shares to be issued upon exercise of outstanding options, warrants and rights (1)

Weighted ‑ average exercise price of outstanding options, warrants and rights (2)

Number of shares remaining available for future issuance under equity compensation plans (excluding shares reflected in column (A)) (3)

Equity compensation plans approved by stockholders

Equity compensation plans not approved by stockholders

Weighted average exercise price of outstanding options at December 31, 2020

Weighted average remaining term of outstanding options at December 31, 2020

(1) Represents, as of December 31, 2020:

(A) 79,125 shares issuable on exercise of outstanding options under the 2000 Stock Plan, plus (B) 425,096 shares issuable on exercise of outstanding options under the 2012 Equity Plan, plus (C) 1,092,142 shares issuable on vesting of outstanding RSUs under the 2012 Equity Plan (some of which will be withheld in respect of tax withholding obligations).

(2) For the purposes of this table, the weighted-average exercise price of outstanding options, warrants and rights includes RSUs as if they had a $0 exercise price.

The weighted-average exercise price of outstanding options alone at December 31, 2020 was $9.93.

(3) Represents the total shares available for issuance under our 2012 Equity Plan and our Employee Stock Purchase Plan, as of December 31, 2020, as follows:

1,934,898 shares were available for future issuance under the 2012 Equity Plan.

Such amount represents the total number of shares reserved for issuance under the 2012 Equity Plan (7,762,500 plus shares subject to options or restricted stock units granted under the 2000 Stock Plan that expired unexercised or were forfeited between May 2, 2012 and December 31, 2020), less the shares issuable on options and restricted stock units (counted at 1.5 shares each) outstanding under the 2012 Equity Plan included in column (A)) and the shares issued prior to such date on exercise of options and vesting of restricted stock units granted under the 2012 Equity Plan.

This plan is generally used for grants to employees and directors and was approved by our stockholders at our 2012 annual meeting.

No shares are available for future issuance under the 2000 Stock Plan, which terminated on May 1, 2012.

979,784 shares were available under our 2020 Employee Stock Purchase Plan, which represents the total number of shares reserved for issuance under the plan (1,000,000) less the shares purchased through December 31, 2020.

Selected Financial Data.

The following selected consolidated statements of operations data for each of the three years ended December 31, 2019, 2018 and 2017 and the consolidated balance sheets data as of December 31, 2019 and 2018 have been derived from the audited consolidated financial statements contained in Item 15 of Part IV of this Form 10‑K.

The selected consolidated balance sheets data as of December 31, 2017 and 2016, and the statements of operations data for the years ended December 31, 2016 and 2015, have been derived from the audited financial statements contained in our Form 10‑K filed on March 14, 2018.

The consolidated balance sheets data as of December 31, 2015 have been derived from the audited financial statements contained in our Form 10-K filed on March 14, 2017.

The historical financial information set forth below may not be indicative of our future performance and should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

our historical consolidated financial statements and notes to those statements included in Item 7 of Part II and Item 15 of Part IV, respectively, of this Form 10‑K.

Year ended December 31,

(In thousands, except per share amounts)

Consolidated statements of operations data:

Income from operations

Income before income taxes

Net income per share:

Shares used in computing basic and diluted per share amounts:

Consolidated balance sheets data:

Cash and cash equivalents

Working capital

Long-term liabilities

Stockholders’

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Certain statements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

are forward‑looking statements that involve risks and uncertainties.

Words such as may, will, should, would, anticipates, expects, intends, plans, believes, seeks, estimates and similar expressions identify such forward‑looking statements.

The forward‑looking statements contained herein are based on current expectations and entail various risks and uncertainties that could cause actual results to differ materially from those expressed in such forward‑looking statements.

Factors that might cause such a difference include, among other things, those set forth under “Liquidity and Capital Resources”

and “Risk Factors”

and others discussed elsewhere in this Form 10‑K.

Readers are cautioned not to place undue reliance on these forward‑looking statements, which reflect management’s analysis only as of the date hereof.

We assume no obligation to update these forward‑looking statements to reflect actual results or changes in factors or assumptions affecting forward‑looking statements, except as may be required by law.

The semiconductor capital equipment industry is subject to cyclical swings in capital spending by semiconductor chip manufacturers.

Capital spending is influenced by demand for semiconductors and the products using them, the utilization rate and capacity of existing semiconductor chip manufacturing facilities and changes in semiconductor technology, all of which are outside of our control.

As a result, our revenue may fluctuate from year to year and period to period.

Our established cost structure does not vary significantly with changes in volume.

We may also experience fluctuations in operating results and cash flows depending on our revenue level.

2019 was a challenging year for the industry, with memory spending remaining low throughout the year.

Revenue for 2019 was $343.0 million, a decrease of 22.5% from 2018 revenue of $442.6 million.

Systems revenue for 2019 was $202.6 million, compared to $280.4 million in 2018.

Operating profit was $24.2 million in 2019, compared to $60.0 million in 2018.

Net income for the year was $17.0 million with diluted earnings per share of $0.50.

This compares to 2018 net income of $45.9 million and earnings per diluted share of $1.35.

Despite lower year over year financial results, other metrics show Axcelis’

continuing improvement.

2019 marked the first time Axcelis has remained profitable through a full industry cycle.

We have now achieved over 5 years of consecutive quarterly profits while making investments that put the Company in a stronger competitive position as we enter what should be a period of extended growth.

A focused strategy on ion implant, combined with the hard work and dedication of our employees and the encouragement and support of our customers and suppliers, enabled us to achieve numerous critical milestones in our drive to market leadership.

In 2019, we continued to expand the Purion installed base, growing our large and diverse group of customers.

We also sharpened our focus on key market segments in the mature process technology areas, such as image sensors and power devices.

We grew our family of Purion product extensions with the launch of four new Purion implanters specifically targeted at these segments.

Through the introduction of new Purion product extensions and continuous cost out activity, we improved our gross margin year over year, making this the second consecutive year with gross margin greater than 40 percent.

Additionally, we maintained a strong balance sheet free of debt and instituted a share repurchase program.

We continue to work diligently to ensure that manufacturing and operating expense levels remain well aligned to business conditions.

The market for our systems and aftermarket products and services is represented by a relatively small number of companies.

In 2019, the top 20 semiconductor chip manufacturers accounted for approximately 88.2% of total semiconductor capital equipment spending, down from 88.8% in 2018.

Our net revenue from our ten largest customers accounted for 74.1% of total revenue for the year ended December 31, 2019 compared to 76.9% and 73.3% of revenue for the years ended December 31, 2018 and 2017, respectively.

For the year ended December 31, 2019, we had three customers representing 18.2%, 14.2% and 12.0% of total revenue, respectively.

Critical Accounting Estimates

Management’s discussion and analysis of our financial condition and results of operations are based upon Axcelis’

consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.

The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities.

On an on‑going basis, we evaluate our estimates and assumptions.

Management’s estimates are based 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 the carrying values of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions.

We believe the following accounting policies are critical in the portrayal of our financial condition and results of operations and require management’s most significant judgments and estimates in the preparation of our consolidated financial statements.

For additional accounting policies, see Note 2 to the consolidated financial statements for the year ended December 31, 2019 included in this Annual Report on Form 10-K.

Revenue Recognition

Our accounting policies relating to the recognition of revenue require management to make estimates, determinations and judgments based on historical experience and on various other assumptions, which include (i) the existence of a contract with the customer, (ii) the identification of the performance obligations in the contract, (iii) the value of any variable consideration in the contract, (iv) the standalone selling price of multiple obligations in the contract, for the purpose of allocating the consideration in the contract, and (v) determining when a performance obligation has been met.

Our revenue recognition policies are set forth in section (i) of Note 2, Summary of Significant Accounting Policies, to the consolidated financial statements for the year ended December 31, 2019 included in this Annual Report on Form 10-K.

Recognition of revenue based on incorrect judgments, including an erroneous allocation of the estimated sales price between the units of accounting, could result in inappropriate recognition of revenue, or incorrect timing of revenue recognition, which could have a material effect on our financial condition and results of operations.

Inventory—Provision for Excess and Obsolescence and Lower of Cost or Net Realizable Value

We record a provision for estimated excess and obsolete inventory and lower of cost or net realizable value.

The provision is determined using management’s assumptions of materials usage, based on estimates of forecasted and historical demand and market conditions.

Specifically, our assumptions of forecasted system sales and the size and utilization of the installed base of systems may have a significant effect on estimated materials usage.

If actual market conditions become less favorable than those projected by management, additional inventory write‑downs may be required.

Although we make every effort to ensure the accuracy of our forecasts or product demand and pricing assumptions, any significant unanticipated changes in demand, pricing, or technical developments would significantly impact the value of our inventory and our reported operating results.

In the future, if we determine that inventory needs to be written down, we will recognize such costs in our cost of revenue at the time of such determination.

If we subsequently sell product that has previously been written down, our gross margin in that period will be favorably impacted.

Product Warranty

We generally offer a one year warranty for all of our systems, the terms and conditions of which vary depending upon the product sold.

For all systems sold, we accrue a liability for the estimated cost of standard warranty at the time of system shipment and defer the portion of systems revenue attributable to the relative fair value of non‑standard warranty.

Costs for non‑standard warranty are expensed as incurred.

Factors that affect our warranty liability include the number of

installed units, historical and anticipated product failure rates, material usage and service labor costs.

We periodically assess the adequacy of our recorded liability and adjust the amount as necessary.

We record income taxes using the asset and liability method.

Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax basis, and net operating loss and tax credit carryforwards.

Our consolidated financial statements contain certain deferred tax assets which have arisen primarily as a result of operating losses, as well as other temporary differences between financial and income tax accounting.

We establish a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Significant management judgment is required in determining our provision for income taxes, the deferred tax assets and liabilities and any valuation allowance recorded against those net deferred tax assets.

We evaluate the weight of all available evidence such as historical losses, the expected timing of the reversals of existing temporary differences and projected future taxable income to determine whether it is more likely than not that some portion or all of the net deferred income tax assets will not be realized.

Our income tax expense includes the largest amount of tax benefit for an uncertain tax position that is more likely than not to be sustained upon audit based on the technical merits of the tax position.

Settlements with tax authorities, the expiration of statutes of limitations for particular tax positions, or obtaining new information on particular tax positions may cause a change to the effective tax rate.

We recognize accrued interest related to unrecognized tax benefits as interest expense and penalties as operating expense.

Results of Operations

The following table sets forth our results of operations as a percentage of total revenue:

Year ended December 31,

Total revenue

Cost of revenue:

Total cost of revenue

Operating expenses:

Research and development

Sales and marketing

General and administrative

Total operating expenses

Income from operations

Other (expense) income:

Interest income

Interest expense

Total other expense

Income before income taxes

Income tax provision (benefit)

The following table sets forth our revenue:

Period-to-Period

(dollars in thousands)

Percentage of revenue

Total revenue

2019 Compared with 2018

Product revenue, which includes new system sales, sales of spare parts, product upgrades and used system sales was $319.5 million or 93.2% of revenue in 2019, compared with $415.9 million, or 94.0% of revenue in 2018.

The decrease in product revenue in 2019 was primarily driven by a decrease in the number of Purion systems sold.

A portion of our revenue from system sales is deferred until installation and other services related to future deliverables are performed.

The total amount of deferred revenue at December 31, 2019 and 2018 was $29.3 million and $22.6 million, respectively.

The increase was primarily due to an increase in system prepayments in the current year.

Services revenue, which includes the labor component of maintenance and service contracts and fees for service hours provided by on‑site service personnel, was $23.5 million, or 6.8% of revenue for 2019, compared with $26.7 million, or 6.0% of revenue for 2018.

Although services revenue should increase with the expansion of the installed base of systems, it can fluctuate from period to period based on capacity utilization at customers’

manufacturing facilities, which affects the need for equipment service.

2018 Compared with 2017

Product revenue was $415.9 million or 94.0% of revenue in 2018, compared with $387.1 million, or 94.3% of revenue in 2017.

The increase in product revenue in 2018 was primarily driven by an increase in the number of Purion systems sold.

The total amount of deferred revenue at December 31, 2018 and 2017 was $22.6 million and $18.1 million, respectively.

The increase was primarily due to the increased number of systems sold in the current year.

Services revenue was $26.7 million, or 6.0% of revenue for 2018, compared with $23.4 million, or 5.7% of revenue for 2017.

Revenue Categories used by Management

In addition to the line item revenue categories discussed above, management also uses revenue categorizations which break down revenue into other groupings.

Management regularly disaggregates revenue in the following categories, which it finds relevant and useful:

Ion implant revenue separate from revenue from legacy non-implant product lines, given that ion implantation systems are critical to our growth and strategic objectives;

Systems and aftermarket revenues, in which “Aftermarkets”

the portion of Product revenue relating to spare parts, product upgrades and used systems combined with

Service revenue, which is the labor component of aftermarket revenues;

Aftermarket purchases reflect current fab utilization as opposed to System purchases which reflect capital investment decisions by our customers, which have differing economic drivers;

Revenue by geographic regions, since economic factors impacting customer purchasing decisions may vary by geographic region;

Revenue by our customers’

end markets, since they tend to be subject to different economic environments at different periods of time, impacting a customer’s likelihood of purchasing capital equipment during any particular period;

currently, management uses three end market categories:

Memory, mature technology processes and leading edge foundry and logic.

The ion implant and aftermarket revenue categories for recent periods are discussed below.

2019 Compared with 2018

Revenue from sales of ion implantation products and related service was $326.0 million, or 95.1% of total revenue in 2019, compared with $421.7 million, or 95.3%, of total revenue in 2018.

We refer to the business of selling spare parts, product upgrades, and used systems, combined with the sale of maintenance labor and service contracts and service hours, as the “aftermarket”

Revenue from our aftermarket business was $140.4 million in 2019, compared to $162.2 million for 2018.

Aftermarket revenue generally increases with the expansion of the installed base of systems but can fluctuate from period to period based on capacity utilization at customers’

manufacturing facilities which affects the sale of spare parts and demand for equipment service.

2018 Compared with 2017

Revenue from sales of ion implantation products and related service was $421.7 million, or 95.3% of total revenue in 2018, compared with $391.1 million, or 95.2%, of total revenue in 2017.

Revenue from our aftermarket business was $162.2 million in 2018, compared to $147.9 million for 2017.

Gross Profit / Gross Margin

The following table sets forth our gross profit:

Period-to-Period

(dollars in thousands)

Gross Profit:

Product gross margin

Services gross margin

Total gross profit

2019 Compared with 2018

Gross margin from product revenue was 45.0% for the twelve months ended December 31, 2019, compared to 43.2% for the twelve months ended December 31, 2018.

The increase in gross margin of 1.8% resulted from improved margins on Purion systems.

Gross margin from services revenue was 1.6% for the twelve months ended December 31, 2019, compared to 0.6% for the twelve months ended December 31, 2018.

The increase in gross margin is attributable to changes in the mix of service contracts.

2018 Compared with 2017

Gross margin from product revenue was 43.2% for the twelve months ended December 31, 2018, compared to 39.3% for the twelve months ended December 31, 2017.

The increase in gross margin of 3.9% resulted from improved margins on Purion systems and a lower excess reserve for inventory due to a $6.2 million write-down of legacy inventory in 2017.

Gross margin from services revenue was 0.6% for the twelve months ended December 31, 2018, compared to (8.3)% for the twelve months ended December 31, 2017.

The increase in gross margin in the recent period is primarily attributable to decreased costs on service contracts.

Operating Expenses

The following table sets forth our operating expenses:

Period-to-Period

(dollars in thousands)

Research and development

Percentage of revenue

Sales and marketing

Percentage of revenue

General and administrative

Percentage of revenue

Total operating expenses

Percentage of revenue

Our operating expenses consist primarily of personnel costs, including salaries, commissions, bonuses, stock-based compensation and related benefits and taxes;

project material costs related to the design and development of new products and enhancement of existing products;

and professional fees, travel and depreciation expenses.

Personnel costs are our largest expense, representing $70.2 million, or 58.5% of our total operating expenses, for the year ended December 31, 2019;

$74.3 million, or 62.1%, of our total operating expenses for the year ended December 31, 2018;

and $64.5 million, or 63.0%, of our total operating expenses for the year ended December 31, 2017.

Research and Development

Period-to-Period

(dollars in thousands)

Research and development

Percentage of revenue

Our ability to remain competitive depends largely on continuously developing innovative technology, with new and enhanced features and systems and introducing them at competitive prices on a timely basis.

Accordingly, based on our strategic plan, we establish annual R&D budgets to fund programs that we expect will drive competitive advantages.

2019 Compared with 2018

Research and development expense was $53.9 million in 2019, an increase of $2.1 million, or 4.0%, compared with $51.9 million in 2018.

The increase was primarily due to increased project costs to support development of new Purion products and extensions and increased depreciation associated with capital additions, partially offset by a reduction in variable incentive plan expense.

2018 Compared with 2017

Research and development expense was $51.9 million in 2018, an increase of $8.8 million, or 20.4%, compared with $43.1 million in 2017.

The increase was primarily due to increased headcount and to project costs to support development of new Purion products and extensions.

Sales and Marketing

Period-to-Period

(dollars in thousands)

Sales and marketing

Percentage of revenue

Our sales and marketing expenses result primarily from the sale of our equipment and services through our direct sales force.

2019 Compared with 2018

Sales and marketing expense was $34.3 million in 2019, relatively flat when compared with $34.6 million in 2018.

2018 Compared with 2017

Sales and marketing expense was $34.6 million in 2018, an increase of $6.1 million, or 21.3%, compared with $28.5 million in 2017.

The increase was primarily due to increased headcount.

General and Administrative

Period-to-Period

(dollars in thousands)

General and administrative

Percentage of revenue

Our general and administrative expenses result primarily from the costs associated with our executive, finance, information technology, legal and human resource functions.

2019 Compared with 2018

General and administrative expense was $31.7 million in 2019, a decrease of $1.5 million, or 4.4% compared with $33.2 million in 2018.

The decrease was primarily due to lower variable incentive plan expense.

2018 Compared with 2017

General and administrative expense was $33.2 million in 2018, an increase of $2.4 million, or 7.8% compared with $30.8 million in 2017.

The increase was primarily due to increases in professional and consulting fees and to a lesser extent, increased headcount.

Other (Expense) Income

Other (expense) income consists primarily of interest expense relating to the lease obligation we incurred in connection with the 2015 sale of our headquarters facility (“sale leaseback”) and other financing obligations, foreign exchange gains and losses attributable to fluctuations of the U.S.

dollar against the local currencies of certain of the countries in which we operate, as well as interest earned on our invested cash balances.

Period-to-Period

(dollars in thousands)

Other expense

Percentage of revenue

2019 Compared with 2018

Other expense for the year ended December 31, 2019 was $3.3 million, which includes $5.2 million of interest expense related to our sale leaseback obligation, $0.6 million of foreign currency translation losses and other miscellaneous expense of $0.5 million, partially offset by interest income of $3.0 million.

Other expense for the year ended December 31, 2018 was $5.3 million, which includes $5.1 million of interest expense related to our sale leaseback obligation, $1.3 million of foreign currency translation losses and other miscellaneous expense of $1.2 million, partially offset by interest income of $2.3 million.

2018 Compared with 2017

Other expense for the year ended December 31, 2017 was $4.0 million, which includes $5.1 million of interest expense related to our sale leaseback obligation and other miscellaneous expense of $0.7 million, partially offset by interest income of $0.7 million and $1.1 million of foreign currency translation gains.

Period-to-Period

(dollars in thousands)

Income tax provision (benefit)

Percentage of revenue

2019 Compared with 2018

Income tax expense was $3.9 million for the year ended December 31, 2019 compared to $8.8 million in the previous year.

The income tax expense of $3.9 million in 2019 reflects a net effective tax rate of 18.6% on our worldwide pre-tax income.

We have significant net operating loss carryforwards in the United States and certain European jurisdictions, and as a result, we do not currently pay significant income taxes in those jurisdictions.

At December 31, 2019, we had $68.1 million of net deferred tax assets worldwide relating to net operating loss carryforwards, tax credit carryforwards and other temporary differences, which are available to reduce income taxes in future years.

We have continued to maintain an $8.3 million valuation allowance in the U.S.

against certain tax credits and state net operating losses due to the uncertainty of their realization based on long-term Company forecasts and the expiration dates on these attributes.

If future operating results of the U.S.

or these foreign jurisdictions are significantly less than our expectations, it is reasonably possible that we would be required to record an additional valuation allowance on our deferred tax assets in the future.

2018 Compared with 2017

Income tax expense was $8.8 million for the year ended December 31, 2018 compared to an income tax benefit of $83.1 million in the previous year.

The income tax expense of $8.8 million in 2018 reflects a net effective tax rate of 16.1% on our worldwide pre-tax income.

The income tax benefit of $83.1 million in 2017 was primarily due to the release of our valuation allowance on our deferred tax assets.

Liquidity and Capital Resources

Our liquidity is affected by many factors.

Some of these relate specifically to the operations of our business.

For example, our sales and other factors are influenced by the uncertainties of global economies, including the availability of credit and the condition of the overall semiconductor capital equipment industry.

Our established cost structure does not vary significantly with changes in volume.

We experience fluctuations in operating results and cash flows depending on fluctuations in our revenue level.

In 2019, $13.6 million of cash was used in operating activities.

This compares to $47.0 million of cash provided by operations in 2018.

Cash and cash equivalents at December 31, 2019 was $139.9 million, compared to $178.0 million at December 31, 2018.

Approximately $20.9 million of cash was located in foreign jurisdictions as of December 31, 2019.

In addition to the cash and cash equivalent balance at December 31, 2019, we had $6.7 million in restricted cash which relates to a $5.9 million letter of credit associated with the security deposit for the lease on our corporate headquarters in Beverly, Massachusetts, a $0.7 million letter of credit relating to workers’

compensation insurance and a $0.1 million deposit relating to customs activity.

Working capital at December 31, 2019 was $307.0 million.

At December 31, 2019, we had no bank debt.

Capital expenditures were $12.0 million and $4.7 million for the years ended December 31, 2019 and 2018, respectively.

Total capital expenditures for 2020 are projected to be approximately $7.5 million.

Future capital expenditures beyond 2020 will depend on a number of factors, including the timing and rate of expansion of our business and our ability to generate cash to fund them.

Cash used in financing activities for the year ended December 31, 2019 was $13.4 million, which consisted of $17.7 million related to our stock repurchase program, $1.6 million related to net settlement of restricted stock issuances, partially offset by $5.1 million in proceeds of stock option exercises and $0.9 million in proceeds from our employee stock purchase plan.

Cash provided by financing activities was $1.2 million for the year ended December 31, 2018, mainly due to the exercise of stock options and proceeds received from the employee stock purchase plan.

We have outstanding letters of credit and surety bonds in the amount of $10.6 million to cover the security deposit under the lease of our headquarters, workers’

compensation insurance program, customs and bank deposits and certain value added tax claims in Europe.

On December 3, 2019, we announced that our Board of Directors authorized an increase and extension of the share repurchase program, of up to $50 million of the Company's common stock through 2020.

These shares may be purchased in the open market or through privately negotiated transactions.

We have no obligation to repurchase shares under the authorization, and the timing and actual number and value of shares which are repurchased will depend on a number of factors, including the price of the Company's common stock, general business and market conditions, and alternative investment opportunities.

We may suspend or discontinue the repurchase program at any time.

The following represents our commercial commitments as of December 31, 2019 (in thousands):

Expiration by Period

Other Commercial Commitments

Standby letters of credit and deposits

The following represents our contractual obligations as of December 31, 2019 (in thousands):

Payments Due by Period

Contractual Obligations

2025 - Beyond

Sale leaseback obligation

Purchase order commitments

Operating leases

We have no off‑balance sheet arrangements at December 31, 2019.

We have net operating loss and tax credit carryforwards, the tax effect of which aggregate $66.0 million at December 31, 2019.

These carryforwards, which expire principally between 2020 and 2039, are available to reduce future income tax liabilities in the United States and certain foreign jurisdictions.

We consider the undistributed earnings of our foreign subsidiaries as of December 31, 2019, to be indefinitely reinvested and, accordingly, no U.S.

income taxes have been provided thereon.

As of December 31, 2019, the amount of cash associated with indefinitely reinvested foreign earnings was approximately $9.7 million.

We have not, nor do we anticipate the need to, repatriate funds to the United States to satisfy domestic liquidity needs arising in the ordinary course of business, including liquidity needs associated with our domestic debt service requirements.

Upon repatriation of those earnings, in the form of dividends or otherwise, we could be subject to withholding taxes payable to the various foreign tax jurisdictions.

We believe that based on our current market, revenue, expense and cash flow forecasts, our existing cash, cash equivalents and borrowing capacity will be sufficient to satisfy our anticipated cash requirements for the short and long‑term.

We currently have no credit facility but management believes we would be able to borrow on reasonable terms if needed.

Related‑Party Transactions

There are no significant related‑party transactions that require disclosure in the consolidated financial statements for the year ended December 31, 2019, or in this Annual Report on Form 10‑K.

Recent Accounting Pronouncements

A discussion of recent accounting pronouncements, the impact of some of which may be material, is included in Note 2 to the consolidated financial statements for the year ended December 31, 2019 included in this Annual Report on Form 10‑K.

Not required.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity