What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2021-02-26 compared with 2020-03-02 · 290 added, 293 removed, 794 unchanged (42% of the section changed)

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Evaluation of Disclosure Controls and Procedures.

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a‑15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this annual report (the “Evaluation Date”).

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this annual report (the “Evaluation Date”).

Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of the Evaluation Date, these disclosure controls and procedures are effective.

Internal Control over Financial Reporting

Management’s Annual Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act.

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Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2020.

In making this assessment, management used the criteria set forth in the Committee of Sponsoring Organizations of the Treadway Commission (COSO) Internal Control—2013 Integrated Framework.

Based on this assessment, management has concluded that, as of December 31, 2020, our internal control over financial reporting is effective based on those criteria.

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Opinion on Internal Control Over Financial Reporting

We have audited Axcelis Technologies, Inc.’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

We have audited Axcelis Technologies, Inc.’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, Axcelis Technologies, Inc.

(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2019 consolidated financial statements of the Company and our report dated March 2, 2020 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2020 consolidated financial statements of the Company and our report dated February 26, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’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 Management’s Annual Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

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Definition and Limitations of Internal Control Over Financial Reporting

A company’s 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 company’s 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 company’s 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.

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Boston, Massachusetts

March 2, 2020

February 26, 2021

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) identified in connection with the evaluation of our internal control that occurred during our fourth quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Other Information

In connection with his retirement, John E.

Aldeborgh, Executive Vice President, Global Customer Operations, has submitted his resignation as an executive officer of the Company, effective March 1, 2021.

Low has assumed the title of Executive Vice President, Global Customer and Engineering Operations, and will lead both Axcelis’ engineering functions as well as global customer operations.

To facilitate this transition, Mr.

Aldeborgh will serve as a senior advisor to Dr.

Low for some period following his retirement.

Directors, Executive Officers and Corporate Governance.

A portion of the information required by Item 10 of Form 10‑K is incorporated by reference from the information responsive thereto contained in the sections in Axcelis Proxy Statement for the Annual Meeting of Stockholders to be held May 19, 2020 (the “Proxy Statement”) captioned:

“Proposal 1:

Election of Directors,”

“Board of Directors,”

“Board Committees,”

“Corporate Governance,”

The remainder of such information is set forth under the heading “Information about our Executive Officers”

at the end of Item 1 in Part I of this report and is incorporated herein by reference.

A portion of the information required by Item 10 of Form 10-K is incorporated by reference from the information responsive thereto contained in the sections in Axcelis Proxy Statement for the Annual Meeting of Stockholders to be held May 12, 2021 (the “Proxy Statement”) captioned:

● “Proposal 1:

Election of Directors,”

● “Board of Directors,”

● “Board Committees,” and

● “Corporate Governance,”

The remainder of such information is set forth under the heading “Information about our Executive Officers” at the end of Item 1 in Part I of this report and is incorporated herein by reference.

Executive Compensation.

The information required by Item 11 of Form 10-K is incorporated by reference from the information responsive thereto contained in the sections in the Proxy Statement captioned:

“Executive Compensation,”

“Board Committees—Compensation Committee Interlocks and Insider Participation.”

● “Executive Compensation,” and

● “Board Committees—Compensation Committee Interlocks and Insider Participation.”

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by Item 12 of Form 10-K is incorporated by reference from the information responsive thereto contained in the sections in the Proxy Statement captioned:

“Share Ownership of 5% Stockholders,”

“Share Ownership of Directors and Executive Officers,”

● “Share Ownership of 5% Stockholders,” and

● “Share Ownership of Directors and Executive Officers,”

Certain Relationships and Related Transactions and Director Independence.

The information required by Item 13 of Form 10-K is incorporated by reference from the information responsive thereto contained in the sections in the Proxy Statement captioned:

“Executive Compensation,”

“Board of Directors,”

“Corporate Governance—Certain Relationships and Related Transactions.”

● “Executive Compensation,”

● “Board of Directors,” and

● “Corporate Governance—Certain Relationships and Related Transactions.”

Principal Accounting Fees and Services

The information required by Item 14 of Form 10‑K is incorporated by reference from the information responsive thereto contained in the section captioned “Proposal 3:

Ratification of the Appointment of our Independent Registered Public Accounting Firm”

in the Proxy Statement.

The information required by Item 14 of Form 10-K is incorporated by reference from the information responsive thereto contained in the section captioned “Proposal 2:

Ratification of the Appointment of our Independent Registered Public Accounting Firm” in the Proxy Statement.

Exhibits, Financial Statement Schedules.

(a) The following documents are filed as part of this Report:

The following documents are filed as part of this Report:

1) Financial Statements:

Report of Independent Registered Public Accounting Firm

Consolidated Statements of Operations —

For the years ended December 31, 2019, 2018 and 2017

Consolidated Statements of Comprehensive Income —

For the years ended December 31, 2019, 2018 and 2017

Consolidated Balance Sheets —

December 31, 2019 and 2018

Consolidated Statements of Stockholders’

Equity —

For the years ended December 31, 2019, 2018 and 2017

Consolidated Statements of Cash Flows —

For the years ended December 31, 2019, 2018 and 2017

Consolidated Statements of Operations — For the years ended December 31, 2020, 2019 and 2018

Consolidated Statements of Comprehensive Income — For the years ended December 31, 2020, 2019 and 2018

Consolidated Balance Sheets — December 31, 2020 and 2019

Consolidated Statements of Stockholders’ Equity — For the years ended December 31, 2020, 2019 and 2018

Consolidated Statements of Cash Flows — For the years ended December 31, 2020, 2019 and 2018

Notes to Consolidated Financial Statements

2) Financial Statement Schedules:

Schedule II—Valuation and Qualifying Accounts for the years ended December 31, 2019, 2018 and 2017.

Schedule II—Valuation and Qualifying Accounts for the years ended December 31, 2020, 2019 and 2018.

The exhibits filed as part of this Form 10-K are listed on the Exhibit Index immediately preceding the signature page, which Exhibit Index is incorporated herein by reference.

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We have audited the accompanying consolidated balance sheets of Axcelis Technologies, Inc.

(the Company) as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income, stockholders’

equity and cash flows for each of the three years in the period ended December 31, 2019, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”).

(the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 2, 2020 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 26, 2021 expressed an unqualified opinion thereon.

Adoption of New Accounting Standards

As discussed in Note 9 to the consolidated financial statements, the Company changed its method for accounting for leases in 2019.

As discussed in Note 2 to the consolidated financial statements, the Company changed its method for accounting for revenue in 2018.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Systems Revenue recognition

Description of the Matter

As discussed in Note 2 and Note 3 to the consolidated financial statements, the Company generates revenue from the sale of ion implantation and other processing equipment used in the manufacture of semiconductor chips (“systems revenue”).

The Company’s revenue contracts for systems have

multiple performance obligations, including the systems themselves and obligations that are not delivered simultaneously with the systems.

Systems revenue accounted for $293.6 million of the Company’s total revenue of $474.6 million in 2020.

Auditing the Company’s determination of the distinct performance obligations related to its systems revenue contracts involved extensive audit effort to identify all of the promised products and services in an arrangement and assess distinct performance obligations.

These determinations have a significant effect on the pattern of revenue recognition.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s systems revenue recognition process.

For example, we tested management’s controls over the identification of distinct performance obligations in systems revenue contracts.

To test systems revenue recognition, our procedures included, among others, independently identifying promises and determining the interdependence of the performance obligations.

For example, we selected and read a sample of arrangements to evaluate the completeness of the promised products and services.

We also confirmed directly with certain of the Company’s customers the terms of the selected system revenue arrangement.

Estimate of Excess Inventory

Description of the Matter

The Company’s inventories totaled $161.1 million, net, as of December 31, 2020.

As described in Note 2 and Note 6 to the consolidated financial statements, the Company records a provision for estimated excess inventory.

Management determines the provision using its assumptions of future materials usage, based on estimates of demand and market conditions.

Auditing the Company’s provision for excess inventory is complex due to the highly judgmental nature of the factors used to estimate demand and market conditions.

Specifically, the Company’s estimated materials usage may be significantly affected by management’s assumptions of forecasted system sales and the size and utilization of the installed base of systems.

Management’s identification and measurement of these factors are forward looking and could be affected by future economic and market conditions that could have a significant effect on the excess inventory reserve.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls, including management review controls, over the Company’s excess inventory reserve estimation process.

This included management’s assessment of the assumptions and data underlying the excess inventory provision.

For example, we tested controls over management’s review of its systems sales forecasts, as well as management’s review of the assumptions relating to the market size and utilization of installed systems.

We also tested management’s controls over the completeness and accuracy of the data used in the estimation model.

Our substantive audit procedures included, among others, evaluating the significant assumptions stated above and testing the accuracy and completeness of the underlying data used by management to compute the value of excess inventory.

For example, we compared the quantities of on-hand inventories to historical and forecasted materials usage and evaluated adjustments to forecasts for specific product considerations, such as technological changes or alternative uses.

We also assessed the historical accuracy of management’s estimates and performed sensitivity analyses over the significant assumptions to evaluate the changes in the excess inventory estimates that would result from changes in the underlying assumptions.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 1999.

Boston, Massachusetts

March 2, 2020

February 26, 2021

Axcelis Technologies, Inc.

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Income before income taxes

Income tax provision (benefit)

Income tax provision

Net income per share:

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Twelve months ended

Other comprehensive (loss) income:

Other comprehensive income (loss):

Foreign currency translation adjustments

Amortization of actuarial loss and other adjustments from pension plan

Total other comprehensive (loss) income

Amortization of actuarial loss and other adjustments from pension plan, net of tax

Total other comprehensive income (loss)

Comprehensive income

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Deferred income taxes

LIABILITIES AND STOCKHOLDERS’

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

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Total current liabilities

Finance lease obligation

Long-term finance lease obligation

Long-term deferred revenue

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Commitments and contingencies (Note 16)

Stockholders’

Stockholders’ equity:

Common stock, $ 0.001 par value, 75,000 shares authorized;

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Accumulated deficit

Accumulated other comprehensive (loss) income

Total stockholders’

Total liabilities and stockholders’

Accumulated other comprehensive income (loss)

Total stockholders’ equity

Total liabilities and stockholders’ equity

See accompanying Notes to these Consolidated Financial Statements

Axcelis Technologies, Inc.

Consolidated Statements of Stockholders’

Consolidated Statements of Stockholders’ Equity

(In thousands)

Comprehensive

Stockholders’

Income (Loss)

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Foreign currency translation adjustments

Change in pension obligation

Change in pension obligation, net of tax

Exercise of stock options

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Issuance of restricted common shares

Adjustment to Retained Earnings upon ASC 606 Adoption

Stock-based compensation expense

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Foreign currency translation adjustments

Change in pension obligation

Change in pension obligation, net of tax

Exercise of stock options

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Issuance of restricted common shares

Adjustment to Retained Earnings upon ASC 606 Adoption

Stock-based compensation expense

Repurchase of common stock

Balance at December 31, 2019

Foreign currency translation adjustments

Change in pension obligation

Change in pension obligation, net of tax

Exercise of stock options

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Cash flows from operating activities

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

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

Depreciation and amortization

Gain on sale of equipment

Deferred income taxes

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Other assets and liabilities

Net cash (used in) provided by operating activities

Net cash provided by (used in) operating activities

Cash flows from investing activities

Proceeds from sale of equipment

Expenditures for property, plant and equipment and capitalized software

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Proceeds from Employee Stock Purchase Plan

Principal payments on finance lease obligation

Proceeds from exercise of stock options

Net cash (used in) provided by financing activities

Net cash used in financing activities

Effect of exchange rate changes on cash and cash equivalents

Net (decrease) increase in cash, cash equivalents and restricted cash

Net increase (decrease) in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

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Axcelis Technologies, Inc.

(“Axcelis”

or the “Company”) was incorporated in Delaware in 1995, and is a worldwide producer of ion implantation and other processing equipment used in the fabrication of semiconductor chips in the United States, Europe and Asia.

(“Axcelis” or the “Company”) was incorporated in Delaware in 1995, and is a worldwide producer of ion implantation and other processing equipment used in the fabrication of semiconductor chips in the United States, Europe and Asia.

In addition, we provide extensive aftermarket service and support, including spare parts, equipment upgrades, used equipment and maintenance services to the semiconductor industry.

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Financial statements for these operations are translated into United States dollars at year-end rates as to assets and liabilities and average exchange rates during the year as to revenue and expenses.

The resulting translation adjustments are recorded in stockholders’

equity as an element of accumulated other comprehensive income (loss).

The resulting translation adjustments are recorded in stockholders’ equity as an element of accumulated other comprehensive income (loss).

Foreign currency transaction gains and losses are included in other income (expense) in the Consolidated Statements of Operations.

For the year ended December 31, 2020 we had $ 1.4 million in foreign exchange gain.

For the year ended December 31, 2019 we had $ 0.6 million in foreign exchange loss.

For the year ended December 31, 2018 we had $ 1.3 million in foreign exchange loss.

For the year ended December 31, 2017 we had $1.1 million in foreign exchange gains.

(d) Cash and Cash Equivalents

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(e) Inventories

Inventories are carried at the lower of cost or net realizable value, determined using the first‑in, first‑out (“FIFO”) method, or market.

Inventories are carried at the lower of cost or net realizable value, determined using the first-in, first-out (“FIFO”) method.

We periodically review our inventories and make provisions as necessary for estimated obsolescence or damaged goods to ensure values approximate lower of cost or net realizable value.

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We record a provision for estimated excess inventory.

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

The provision is determined using management’s assumptions of materials usage, based on estimates of demand, market conditions, and the size and utilization of our installed base.

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

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We retained the historical costs of the property and the related accumulated depreciation on our financial books within property, plant and equipment and will continue to depreciate the property for financial reporting purposes over the lesser of its remaining useful life or its initial lease term of 22 years .

On January 1, 2019, we adopted Accounting Standard Update (“ASU”) No.

2016-02 “Leases.”

This update requires operating lease assets and finance lease assets be classified separately from owned assets on the balance sheet.

On January 1, 2019, we adopted Accounting Standard Update (“ASU”) No.

2016-02 “Leases.” This update requires operating lease assets and finance lease assets be classified separately from owned assets on the balance sheet.

See Note 9 for further discussion.

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Repairs and maintenance costs are expensed as incurred.

Expenditures for renewals and betterments are capitalized.

Expenditures greater than $ 2.5 thousand for renewals and betterments are capitalized and depreciated over their useful lives.

(g) Impairment of Long-Lived Assets

We record impairment losses on long-lived assets when events and circumstances indicate that these assets might not be recoverable.

Recoverability is measured by a comparison of the assets’

carrying amount to their expected future undiscounted net cash flows.

Recoverability is assessed by a comparison of the assets’ carrying amount to their expected future undiscounted net cash flows.

If such assets are considered to be impaired, the impairment is measured based on the amount by which the carrying value exceeds its fair value.

We did not have any indicators of impairment during the period ending December 31, 2020.

We did not record an impairment charge in the years ended December 31, 2019, 2018, or 2017.

We did no t record an impairment charge in the years ended December 31, 2020, 2019, or 2018.

Actual performance could be materially different from our current forecasts, which could impact estimates of undiscounted cash flows and may result in the impairment of the carrying amount of the long-lived assets in the future.

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We do not use derivative financial instruments to manage our investment portfolio and do not expect operating results or cash flows to be affected to any significant degree by any change in market interest rates.

We perform ongoing credit evaluations of our customers’

financial condition and generally require no collateral to secure accounts receivable.

We perform ongoing credit evaluations of our customers’ financial condition and generally require no collateral to secure accounts receivable.

For selected overseas sales, we require customers to obtain letters of credit before product is shipped.

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Our customers consist of semiconductor chip manufacturers located throughout the world and net sales to our ten largest customers accounted for 74.0 %, 74.1 % and 76.9 % of revenue in 2020, 2019 and 2018, respectively.

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

For the year ended December 31, 2020, we had two customers representing 17.9 % and 16.4 % of total revenue, respectively.

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

For the year ended December 31, 2018 we had two customers representing 20.1 % and 12.1 % of total revenue, respectively.

As of December 31, 2019, we had three customers account for 24.9%, 15.3% and 11.1% of consolidated accounts receivable, respectively.

As of December 31, 2020, we had two customers account for 23.8 % and 11.9 % of consolidated accounts receivable, respectively.

As of December 31, 2019, we had three customers account for 24.9 %, 15.3 % and 11.1 % of consolidated accounts receivable, respectively.

Some of the components and sub-assemblies included in our products are obtained either from a sole source or a limited group of suppliers.

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(i) Revenue Recognition

Effective January 1, 2018, we adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers or (“ASC 606”).

In accordance with ASC 606, we changed certain characteristics of our revenue recognition accounting policy as described below.

On adoption, ASC 606 was applied only to open contracts using the modified retrospective method, where the cumulative effect of the initial application is recognized as an adjustment to opening retained earnings at January 1, 2018.

Therefore, the year ended December 31, 2017 has not been adjusted and continues to be reported under FASB ASC Topic 605, Revenue Recognition , or ASC 605.

Under ASC 606, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration we expect to receive in exchange for those goods or services.

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The transaction price of a contract is allocated to each distinct performance obligation based upon the relative standalone selling price for each performance obligation and recognized as revenue when, or as, the customer receives the benefit of the performance obligation.

To account for and measure revenue, we

apply the following five steps:

To account for and measure revenue, we apply the following five steps:

1) Identify the contract with the customer

A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the related payment terms, (ii) the contract has commercial substance, and (iii) we determine that collection of substantially all consideration for goods and services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration.

2) Identify the performance obligations in the contract

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In applying this guidance, Companies must also consider whether any significant financing components exist.

The transaction price for all transactions is based on the price reflected in the individual customer’s purchase order.

Variable consideration has not been identified as a significant component of the transaction price for any of our transactions.

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We satisfy performance obligations either over time or at a point in time.

Revenue is recognized over time if either 1) the customer simultaneously receives and consumes the benefits provided by the entity’s performance, 2) the entity’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced, or 3) the entity’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date.

If the entity does not satisfy a performance obligation over time, the related performance obligation is satisfied at a point in time by transferring the control of a promised good or service to a customer.

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surveys of performance completed to date, appraisals of results achieved, milestones reached, time elapsed, and units produced or units delivered);

Input methods - recognize revenue on the basis of the entity’s efforts or inputs to the satisfaction of a performance obligation (e.g., resources consumed, labor hours expended, costs incurred, or time elapsed) relative to the total expected inputs to the satisfaction of that performance obligation.

We have the right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entity’s performance completed to date (i.e., certain aftermarket contracts), as such we have elected a practical expedient to recognize revenue in the amount to which the entity has a right to invoice for such services.

Product related revenues (whether for systems or aftermarket business) are recognized at a point in time, when they are shipped or delivered, depending on shipping terms.

For installation services, revenue is recognized at a point in time, once the installation of the tool is complete.

The nature of the installation services is such that the customer does not simultaneously receive and consume the benefits provided by the entity’s performance, nor does performance of installation services create or enhance an asset that the customer controls.

Installation services do not create an asset with an alternative use to the entity, and the entity does not have an enforceable right to payment for performance completed to date.

Contract liabilities are reflected as deferred revenue on the consolidated balance sheet.

Contract liabilities relate

to payments invoiced or received in advance of completion of performance obligations under a contract.

Contract liabilities relate to payments invoiced or received in advance of completion of performance obligations under a contract.

Contract liabilities are recognized as revenue upon the fulfillment of performance obligations.

Service-type warranties for any product are recognized over time, as these represent a stand ready obligation to service the product during the warranty period.

Progress in the satisfaction of these performance obligations will be measured using an input method of time elapsed.

Progress in the satisfaction of these performance obligations is measured using an input method of time elapsed.

Maintenance and service contracts are recognized over time.

Progress in the satisfaction of these performance obligations will be measured using an input method of either time elapsed in the case of fixed period contracts, or labor hours expended, in the case of project-based contracts.

Progress in the satisfaction of these performance obligations is measured using an input method of either time elapsed in the case of fixed period contracts, or labor hours expended, in the case of project-based contracts.

(j) Recognizing Assets related to Recoverable Customer Contract Costs

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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 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 tax accounting.

We establish a valuation allowance if the likelihood of realization of the deferred tax assets is reduced based on an evaluation of objective verifiable evidence.

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Net income per share

Diluted weighted average common shares outstanding does not include restricted stock units

outstanding to purchase 0.2 million common equivalent shares for the period ended December 31, 2019, as their effect would have been anti-dilutive.

Diluted weighted average common shares outstanding does not include restricted stock units outstanding to purchase 1,951 common equivalent shares and 232,844 common equivalent shares for the periods ended December 31, 2020 and 2019, respectively, as their effect would have been anti-dilutive.

(o) Accumulated Other Comprehensive Income (Loss)

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Balance at December 31, 2019

Other comprehensive loss and pension reclassification

Other comprehensive income and pension reclassification

Balance at December 31, 2020

(p) Recent Accounting Guidance

Accounting Standard Update 2016-02 on Leases Adopted January 1, 2019

We adopted Accounting Standards Update (“ASU”) No.

2016-02, “

Leases”

2018-11 “

Leases (Topic 842)”

, (collectively “Topic 842”) as of January 1, 2019, using the modified retrospective approach, applying the new lease standard at the adoption date.

We elected the package of practical expedients permitted under the transition guidance within the new standard, carrying forward the historical lease classification for both operating and finance leases.

We made an accounting policy election to keep leases with an initial term of 12 months or less off of the balance sheet.

We recognize the lease expense relating to operating leases on a straight-line basis over the respective lease term and report the associated expense within the operating activities section of our statement of cash flows.

We recognize the interest expense on our finance lease within the operating activities section of our statement of cash flows and recognize the payment of principal of our finance lease obligation within the financing activities section of our statement of cash flows.

The adoption of Topic 842 resulted in the initial recording of additional net operating lease assets and related lease liabilities of $6.1 million as of January 1, 2019.

We also reclassified $22.1 million net, of previously capitalized property, plant and equipment associated with the sale of our corporate headquarters, as well as $0.8 million of prepaid transaction costs, as finance lease assets, within our balance sheet.

The related finance lease liability associated with the sale-leaseback increased $0.8 million as a result of the reclassification of the prepaid transaction costs.

The standard had no impact on our consolidated net earnings and cash flows.

See Note 9 for further discussion.

Accounting Standards Update 2018-13 on Fair Value Measurements Adopted January 1, 2019

We adopted ASU No.

2018-13 “Fair Value Measurement (Topic 820)”

as of January 1, 2019, The amendments in ASU No.

2018-13 modify the disclosure requirements on fair value measurements in Topic 820, removing disclosure requirements for transfers between Level 1 and Level 2 within the fair value hierarchy, as well as modifying the disclosure requirement relating to the timing of liquidation for investments calculated on net asset value.

The ASU also requires the disclosure of unrealized gains and losses for the period included in other comprehensive income for Level 3 instruments.

The amendments on changes for unrealized gains and losses should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption.

The adoption of ASU 2018-13 did not have any impact on our consolidated financial statements and disclosures.

Accounting Standards Update 2019-04 on Financial Instruments;

Topic 326, Topic 815 and Topic 825 to be Effective January 1, 2020

In April 2019, the Financial Accounting Standards Board issued ASU No.

2019-04 “Codification Improvements to Topic 326, Financial Instruments –

Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.”

Topic 326, Topic 815 and Topic 825 Effective January 1, 2020

We adopted Financial Accounting Standards Board ASU No.

2019-04 “Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments” as of January 1, 2020, using the modified-retrospective approach resulting in no cumulative adjustment to retained earnings.

The amendments in this Update clarify the guidance within Topic 326 relating to credit losses.

The guidance is effective for annual reporting periods beginning after December 15, 2019, and interim periods within those years.

Early adoption is permitted in any interim period after issuance of this Update as long as the entity has adopted the

amendments in Update 2016-13.

The amendments in these Updates should be applied on a modified retrospective basis by means of a cumulative-effect adjustment to the opening retained earnings balance in the statement of financial position as of the date of adoption of Update 2016-13.

We will adopt these Updates as of January 1, 2020.

The adoption is not expected to have a material impact on our results of operations or cash flows.

Topic 326 replaces the current incurred loss impairment methodology for financial assets measured at amortized cost with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information, including forecasted information, to develop credit loss estimates.

Due to the requirements of Topic 326, management reviews the average annual write-off rate along with an assessment of current micro and macro-economic factors to determine any expected losses.

The adoption of this Update did not have a material impact on our results of operations or cash flows.

See Note 5 for further discussion.

We design, manufacture and service ion implantation and other processing equipment used in the fabrication of semiconductor chips and sell our products to leading semiconductor chip manufacturers worldwide.

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Our revenue recognition policies are set forth in Section (i) of Note 2, Summary of Significant Accounting Policies.

Alternative Operational Revenue Categories used by Management

(a) Alternative Operational Revenue Categories used by Management

To reflect the organization of our business operations, management reviews revenue in two categories:

revenue from sales of new systems and revenue arising from the sale of used systems, parts and labor to customers who own systems, which we refer to as “aftermarket.”

revenue from sales of new systems and revenue arising from the sale of used systems, parts and labor to customers who own systems, which we refer to as “CS&I” or “aftermarket.”

Below are the revenues by categories used by management for the periods covered in this report:

(in thousands)

Economic Factors Affecting our Revenue:

CS&I/Aftermarket

Total Revenue

(b) Economic Factors Affecting our Revenue:

Geographic Breakdown of Revenue

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We are substantially dependent on sales of our products and services to customers outside the United States.

Adverse economic conditions, political instability, potential adverse tax consequences and volatility in exchange rates pose a risk that our clients may reduce, postpone or cancel spending for our products and services, which would impact our revenue.

Adverse economic conditions, political instability, potential adverse tax consequences, regulatory changes and volatility in exchange rates pose a risk that our clients may reduce, postpone or cancel spending for our products and services, which would impact our revenue.

Revenue by geographic markets is determined based upon the location to which our products are shipped and where our services are performed.

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North America

Recognition of Deferred Revenue from Contract Liabilities

Contract assets and contract liabilities are as follows:

Total Revenue

Contract liabilities are as follows:

(in thousands)

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Recognition of deferred revenue

Balance, ending of the period

Balance, end of the period

Contract liabilities are reflected as deferred revenue on the consolidated balance sheet.

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This represents the portion of the transaction price for contracts with customers allocated to the performance obligations that remain unsatisfied or partially unsatisfied.

Short-term deferred revenue of $24.6 million as of December 31, 2019 represents performance obligations that will be satisfied within the next 12 months.

Short-term deferred revenue of $ 21.2 million as of December 31, 2020 represents performance obligations that are expected to be satisfied within the next 12 months.

This amount relates primarily to prepayments made prior to system delivery as well as to installation and non-standard warranty performance obligations for system sales.

Long-term deferred revenue of $4.7 million as of December 31, 2019 relates primarily to extended warranty performance obligations that we expect to be completed within the next 24 months.

Long-term deferred revenue of $ 1.8 million as of December 31, 2020 relates primarily to extended warranty performance obligations that we expect to be completed in excess of the next 12 months but within the next 24 months .

The majority of our system transactions have payment terms that are 90 % due upon shipment of the tool and 10 % due upon installation.

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Total cash, cash equivalents and restricted cash

As of 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 sale leaseback transaction, a $0.7 million letter of credit relating to workers’

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

Accounts Receivable, net

As of December 31, 2020, we had $ 0.8 million in restricted cash which relates to a $ 0.7 million letter of credit relating to workers’ compensation insurance and a $ 0.1 million deposit relating to customs activity.

Accounts Receivable and Allowance for Credit Losses

All trade receivables are reported on the Consolidated Balance Sheets at their amortized cost adjusted for any write-offs and net of allowances for credit losses.

Axcelis maintains an allowance for credit losses, which represents an estimate of expected losses over the remaining contractual life of its receivables considering current market conditions and estimates for supportable forecasts when appropriate.

The estimate is a result of the Company’s ongoing assessments and evaluations of collectability, historical loss experience, and future expectations in estimating credit losses in its receivable portfolio.

Axcelis uses historical loss experience rates and applies them to a related aging analysis while also considering customer and/or economic risk where appropriate.

Determination of the proper amount of allowances requires management to exercise judgment about the timing, frequency and severity of credit losses that could materially affect the provision for credit losses and, as a result, net earnings.

The allowance takes into consideration numerous quantitative and qualitative factors that include receivable type, historical loss experience, delinquency trends, collection experience, current economic conditions, estimates for supportable forecasts, when appropriate, and credit risk characteristics.

Axcelis evaluates the credit risk of the customer when extending credit based on a combination of various financial and qualitative factors that may affect its customers’ ability to pay.

These factors may include the customer’s financial condition, past payment experience, and credit ratings from credit bureaus, as well as the value of the underlying collateral.

Management performs detailed reviews of its receivables on a quarterly basis to assess the adequacy of the allowances and to determine if any impairment has occurred.

Amounts determined to be uncollectable are charged directly against the allowance, while amounts recovered on previously written-off accounts increase the allowance.

Changes to the allowance for credit losses are maintained through adjustments to the provision for credit losses, which are charged to current period earnings.

The following table shows changes of the allowances for credit losses related to trade receivables for the twelve months ended December 31, 2020 and 2019, respectively:

(in thousands)

Balance, beginning of period

Provision for credit losses

Balance, end of period

The components of accounts receivable are as follows:

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Trade receivables, net

We record an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments.

Our allowance for doubtful accounts is established based on a specific assessment of collectability of our customer accounts.

If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowance may be necessary.

Inventories, net

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We regularly evaluate our ability to realize the value of inventories based on a combination of factors including the following:

forecasted sales or usage, estimated product end of life dates, estimated current and future market value and new product introductions.

forecasted sales and the size and utilization of our installed base, estimated product end of life dates, estimated current and future market value and new product introductions.

Purchasing and usage alternatives are also explored to mitigate inventory exposure.

In 2019, we recorded a net decrease of $5.7 million in inventory reserves.

In 2020, we recorded a net slight increase of $ 0.1 million in inventory reserves.

As of December 31, 2020 and 2019, inventories are stated net of inventory reserves of $ 8.3 million and $ 8.2 million, respectively.

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Property, plant and equipment, net

Upon the adoption of Topic 842 on January 1, 2019, $70.1 million of land and buildings and their related accumulated depreciation of $48.0 million was reclassified to finance lease assets, net on the consolidated balance sheet.

See Note 9 for further discussion.

Depreciation expense was $ 3.4 million, $ 2.6 million and $ 3.2 million for the years ended December 31, 2020, 2019 and 2018, respectively.

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We recognize a corresponding right-of-use asset, which is initially determined based upon the net present value of the associated liability and is adjusted for deferred costs and possible impairment, if any.

For those lease agreements that do not indicate the applicable discount rate, we use

our incremental borrowing rate.

For those lease agreements that do not indicate the applicable discount rate, we use our incremental borrowing rate.

The value of the right-of-use asset is initially determined based on the net present value of the associated liability, and is adjusted for deferred costs and possible impairments, if any.

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Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The amounts of operating and finance lease right-of-use assets and related lease obligations recorded within our consolidated balance sheet are as follows:

The amounts of operating and finance lease right-of-use assets and related lease obligations recorded within our consolidated balance sheets are as follows:

Classification

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* Finance lease assets are recorded net of accumulated depreciation of $ 48.4 million and include $ 0.7 million of prepaid financing costs as of December 31, 2020.

Finance lease assets are recorded net of accumulated depreciation of $ 47.4 million and include $ 0.7 million of prepaid financing costs as of December 31, 2019.

All of our office locations support selling and servicing functions.

Lease expense, depreciation expense relating to finance leased assets and interest expense relating to our finance lease obligation recognized within our consolidated statement of operations for the twelve months ended December 31, 2019 are as follows:

Classification

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Total lease cost

* Sales and marketing, general and administrative expense includes short-term lease and variable lease costs of approximately $0.9 million for the twelve months ended December 31, 2019.

* Sales and marketing, general and administrative expense also includes short-term lease and variable lease costs of approximately $ 1.2 million and $ 0.9 million for the twelve months ended December 31, 2020 and 2019, respectively.

Our corporate headquarters, shown below under finance leases, has an original lease term of 22 years .

All other locations are treated as operating leases, with lease terms ranging from 1 to 10 years .

The tables below reflect the minimum cash outflow regarding our current lease obligations as well as the weighted-average remaining lease term and

weighted-average discount rates used on our calculation of our lease obligations and right-of-use assets:

The tables below reflect the minimum cash outflow regarding our current lease obligations as well as the weighted-average remaining lease term and weighted-average discount rates used in our calculation of our lease obligations and right-of-use assets:

Maturity of Lease Liabilities

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These cash flows are included within the operating section of our statement of cash flows.

Our cash flows from our finance lease currently include an interest only component and starting in April 2020, both an interest and payment of principal component.

Our cash flows from our finance lease include an interest and payment of principal component.

The table below shows our cash outflows, by lease type and related section of our statement of cash flows, as well as the non-cash amount capitalized on our balance sheet in relation to our operating lease right-of-use assets:

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Financing cash outflows from finance leases

Operating lease assets obtained in exchange for new operating lease liabilities

Operating lease assets obtained in exchange for operating lease liabilities

Finance lease assets obtained in exchange for new finance lease liabilities

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Financing Arrangements

Sale Leaseback Obligation

On January 30, 2015, we sold our corporate headquarters facility for the sale price of $ 48.9 million.

As part of the sale, we also entered into a 22-year lease agreement with the buyer.

The sale leaseback is accounted for as a financing arrangement for financial reporting and, as such, we recorded a financing obligation of $48.5 million as of December 31, 2019, $0.4 million of which is classified within current liabilities.

The sale leaseback is accounted for as a financing arrangement for financial reporting purposes and, as such, we recorded a financing obligation of $ 48.1 million as of December 31, 2020, $ 0.8 million of which is classified within current liabilities.

The associated lease payments include both an interest component and payment of principal, with the underlying liability being extinguished at the end of the original lease term.

We posted a collateralized security deposit of $ 5.9 million in the form of an irrevocable letter of credit at the time of the closing.

In October 2015, this letter of credit was cash collateralized.

This letter of credit is currently issued under the credit facility described in the next paragraph.

On July 31, 2020, we entered into a Senior Secured Credit Facilities Credit Agreement (the “Credit Agreement”) with Silicon Valley Bank, in its capacity as administrative agent and collateral agent for itself and as a lender, and such other banks and financial institutions or entities that from time to time join as lenders under the Credit Agreement.

The Credit Agreement provides for a revolving credit facility in an aggregate principal amount not to exceed $ 40.0 million.

Our obligations under the Credit Agreement are secured by a security interest, senior to any current and future debts and to any security interest, in all of our rights, title, and interest in, to and under substantially all of our assets, subject to limited exceptions, including permitted liens.

The revolving credit facility terminates on July 31, 2023.

As of December 31, 2020, we were in compliance with all covenant requirements of the Credit Agreement.

As of such date, no borrowings had been made under the Credit Agreement, although a letter of credit for $ 5.9 million, previously issued by Silicon Valley Bank, had been rolled under the Credit Agreement, reducing the funds available for borrowing under the credit line.

Employee Benefit Plans

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We maintain the Axcelis Long-Term Investment Plan, a defined contribution plan.

Eligible employees may contribute up to 35% of their compensation on a before-tax basis subject to Internal Revenue Service (“IRS”) limitations.

Eligible employees may contribute up to 35 % of their compensation on a before-tax basis subject to Internal Revenue Service (“IRS”) limitations.

Highly compensated employees may contribute up to 16 % of their compensation on a before-tax basis subject to IRS limitations.

In 2019, 2018 and 2017 we provided an employer match of 50% of employees’

pre-tax contributions on the first 6% of eligible compensation.

In 2020, 2019 and 2018 we provided an employer match of 50 % of employees’ pre-tax contributions on the first 6 % of eligible compensation.

Total related matching contribution expense was $ 2.0 million, $ 1.9 million and $ 1.6 million, for 2020, 2019 and 2018, respectively.

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We maintain the Axcelis Technologies, Inc.

2012 Equity Incentive Plan (the “2012 Equity Plan”), which became effective on May 2, 2012.

Our 2000 Stock Plan (the “2000 Stock Plan”) expired on May 1, 2012 and no new grants may be made under that plan after that date.

2012 Equity Incentive Plan (the “2012 Equity Plan”), which became effective on May 2, 2012.

Our 2000 Stock Plan (the “2000 Stock Plan”) expired on May 1, 2012 and no new grants may be made under that plan after that date.

However, awards granted under the 2000 Stock Plan prior to the expiration remain outstanding and subject to the terms of the 2000 Stock Plan.

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The term of stock options granted under these plans is specified in the award agreements.

Unless a lesser term is otherwise specified by the Compensation Committee of the Company’s Board of Directors, awards under the 2012 Equity Plan will expire seven years from the date of grant.

In general, all awards issued under the 2000 Stock Plan expire ten years from the date of grant.

Under the terms of these stock plans, the exercise price of a stock option may not be less than the fair market value of a share of the Company’s common stock on the date of grant.

Under the 2012 Equity Plan, fair market value is defined as the last reported sale price of a share of the common stock on a national securities exchange as of any applicable date, as long as the Company’s shares are traded on such exchange.

Stock options granted to employees generally vest over a period of four years, while stock options granted to non‑employee members of the Company’s Board of Directors generally vest over a period of six months and, once vested, are not affected by the director’s termination of service to the Company.

In limited circumstances, the Company may grant stock option awards with market-based vesting conditions, such as the Company’s common stock price, or other performance conditions.

Under the terms of these stock plans, the exercise price of a stock option may not be less than the fair market value of a share of the Company’s common stock on the date of grant.

Under the 2012 Equity Plan, fair market value is defined as the last reported sale price of a share of the Company’s common stock on a national securities exchange as of any applicable date, as long as the Company’s shares are traded on such exchange.

Stock options granted to employees generally vest over a period of four years , while stock options granted to non-employee members of the Company’s Board of Directors generally vest over a period of six months and, once vested, are not affected by the director’s termination of service to the Company.

In limited circumstances, the Company may grant stock option awards with market-based vesting conditions, such as the Company’s common stock price, or other performance conditions.

Termination of service by an employee will cause options to cease vesting as of the date of termination, and in most cases, employees will have 90 days after termination to exercise options that were vested as of the termination of employment.

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Restricted stock units granted to employees during 2020 had both service-based vesting provisions and performance-based vesting provisions.

Restricted stock units granted to employees generally vest over a service period of four years, while restricted stock units granted to non‑employee members of the Company’s Board of Directors generally

vest over a service period of six months.

Restricted stock units granted to employees generally vest over a service period of

four years , while restricted stock units granted to non-employee members of the Company’s Board of Directors generally vest over a service period of six months .

We have granted restricted stock units to executive officers and other senior employees with performance vesting conditions, which may be subject to further service-based vesting terms.

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(b) Employee Stock Purchase Plan

The Employee Stock Purchase Plan (the “Purchase Plan”) provides effectively all of our employees the opportunity to purchase common stock of the Company at less than market prices.

Purchases are made through payroll deductions of up to 10% of the employee’s salary as elected by the participant, subject to certain caps set forth in the Purchase Plan.

Employees may purchase the Company’s common stock at 85% of its market price on the day the stock is purchased.

The Purchase Plan is considered compensatory and as such, compensation expense has been recognized based on the benefit of the discounted stock price, amortized to compensation expense over each offering period of six months.

Compensation expense relating to the Purchase Plan was approximately $0.2 million for the years ended December 31, 2019 and December 31, 2018 and approximately $0.1 million for the year ended December 31, 2017.

As of December 31, 2019, there were a total of 0.2 million shares reserved for issuance and available for purchase under the Purchase Plan.

Less than 0.1 million shares were purchased under the Purchase Plan in each of the years ended December 31, 2019, 2018 and 2017.

The Purchase Plan will expire in June 2020, unless re-approved by the Board of Directors, with approval of stockholders within twelve months thereafter.

The 2020 Employee Stock Purchase Plan (the “2020 ESPP”) provides effectively all of our employees the opportunity to purchase common stock of the Company at less than market prices.

Purchases are made through payroll deductions of up to 10 % of the employee’s salary as elected by the participant, subject to certain caps set forth in the 2020 ESPP.

Employees may purchase the Company’s common stock at 85 % of its market price on the day the stock is purchased.

The 2020 ESPP is considered compensatory and as such, compensation expense has been recognized based on the benefit of the discounted stock price, amortized to compensation expense over each offering period of six months .

Compensation expense relating to the 2020 ESPP and our prior employee stock purchase plan (“Purchase Plan”) was approximately $ 0.2 million for the years ended December 31, 2020.

Compensation expense under the Purchase Plan was approximately $ 0.2 million for the years ended December 31, 2019 and 2018.

As of December 31, 2020, there were approximately 1.0 million shares reserved for issuance and available for purchase under the 2020 ESPP, with 20,216 shares purchased on that date to be issued pending settlement.

The Company’s Employee Stock Purchase plan effective in June 2000 (the “2000 ESPP”) expired in June 2020.

Less than 0.1 million shares were purchased under the 2000 ESPP in each of the years ended December 31, 2020, 2019 and 2018.

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There were no stock option awards granted in 2020, 2019 and 2018.

The fair value of the Company’s restricted stock units is calculated based upon the fair market value of the Company’s stock at the date of grant.

(d) Summary of Stock-based Compensation Expense

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We estimate forfeitures at the time of grant and revise them, if necessary, in subsequent periods, if actual forfeitures differ from those estimates.

The term “forfeitures”

is distinct from “cancellations”

or “expirations”

and represents only the unvested portion of the surrendered stock‑based award.

The term “forfeitures” is distinct from “cancellations” or “expirations” and represents only the unvested portion of the surrendered stock-based award.

Based on a historical analysis, a forfeiture rate of 5 % per year was applied to stock-based awards, including executive officer awards, for the years ended December 31, 2020, 2019 and 2018.

For the years ended December 31, 2020, 2019 and 2018, we recognized stock-based compensation expense of $ 10.5 million, $ 8.2 million and $ 7.8 million, respectively.

We present the expenses related to stock-based compensation in the same expense line items as cash compensation paid to our employees.

We present the expenses related to stock-based compensation

in the same expense line items as cash compensation paid to our employees.

For the years ended December 31, 2020, 2019 and 2018, we used restricted stock units in our annual equity compensation program.

The benefit of tax deductions in excess of recognized compensation cost is reported as an operating cash flow.

The benefit of tax deductions in excess of recognized compensation cost is reported in the consolidated statements of cash flows as part of cash flows from operating activities.

Axcelis had tax deductions in excess of recognized compensation cost of $ 14.6 million for the year ended December 31, 2020 which resulted in a tax benefit of $ 3.1 million.

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Exercisable at December 31, 2020

Options Vested or Expected to Vest at December 31, 2019(1)

(1) In addition to the vested options, we expect a portion of the unvested options to vest at some point in the future.

Options expected to vest is calculated by applying an estimated forfeiture rate to the unvested options.

Options Vested at December 31, 2020

The total intrinsic value, which is defined as the difference between the market price at exercise and the price paid by the employee to exercise the options, for options exercised during the years ended December 31, 2020, 2019 and 2018 was $ 18.4 million, $ 10.9 million and $ 4.1 million, respectively.

The total fair value of stock options vested during the years ended December 31, 2020, 2019 and 2018 was $ 0.1 million, $ 0.9 million and $ 1.9 million respectively.

As of December 31, 2019, there was $0.1 million of total forfeiture‑adjusted unrecognized compensation cost related to non‑vested stock options granted under the 2012 Equity Incentive Plan and the 2000 Stock Plan.

That cost is expected to be recognized over a weighted‑average period of 0.9 years.

As of December 31, 2020, there was no unrecognized compensation cost related to non-vested stock options granted under the 2012 Equity Incentive Plan and the 2000 Stock Plan.

(f) Restricted Stock Units and Restricted Stock

Restricted stock units represent the Company’s unfunded and unsecured promise to issue shares of the common stock at a future date, subject to the terms of the Award Agreement issued under the 2012 Equity Incentive Plan.

Restricted stock unit awards granted in 2020 included time vested share awards and awards with performance vesting conditions.

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The purpose of these awards is to assist in attracting and retaining highly competent employees and directors and to act as an incentive in motivating selected employees and directors to achieve long-term corporate objectives.

Changes in the Company’s non‑vested restricted stock units for the year ended December 31, 2019 is as follows:

Changes in the Company’s non-vested restricted stock units for the year ended December 31, 2020 is as follows:

Weighted-Average

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The weighted average grant-date fair value of restricted stock units granted for the years ended December 31, 2020, 2019 and 2018 was $ 23.60 , $ 17.08 and $ 22.41 , respectively.

Most restricted stock units provide for net share settlement to cover the employee’s personal income tax withholding obligations on vesting of the employee’s restricted stock units.

Vesting activity above reflects shares vested before net share settlement.

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That cost is expected to be recognized over a weighted-average period of 2.4 years.

Stockholders’

Stockholders’ Equity

We may issue up to 75 million shares of common stock without additional shareholder approval.

As of December 31, 2019 and 2018, there were 32.6 million outstanding shares of common stock.

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.

As of December 31, 2020 and 2019, there were 33.6 million and 32.6 million outstanding shares of common stock, respectively.

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.

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

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.

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.

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

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

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The standard establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value.

A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The fair value hierarchy is as follows:

Level 1 —applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2 —applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability, such as quoted prices for similar assets or liabilities in active markets;

quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets);

Level 1 —applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions

(less active markets);

or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3 —applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

(b) Assets and Liabilities Measured at Fair Value

Our money market funds and short-term investments are included in cash and cash equivalents in the consolidated balance sheets.

The following table sets forth Company’s assets which are measured at fair value by level within the fair value hierarchy.

December 31, 2020

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Total deferred

Income tax provision (benefit)

Income tax provision

Reconciliation of income taxes at the United States Federal statutory rate to the effective income tax rate is as follows:

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Foreign income tax rate differentials

Unremitted earnings of foreign subsidiaries

Stock options

Stock based compensation

Credit expirations

Repatriation of foreign earnings

Recognition of equity NOL's

Credit generation

Discrete items, net

Income tax provision (benefit)

Previously unrecognized tax benefit

GILTI inclusion

Income tax provision

Significant components of long-term deferred income taxes are as follows:

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Deferred revenue

Capitalized research and development costs

Gross deferred tax assets

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Our deferred tax assets and liabilities are measured at the enacted tax rate expected to apply when these temporary differences are expected to be realized or settled.

On December 22, 2017, the Tax Cuts and Jobs Act (“2017 Tax Act”) was signed into law and has resulted in significant changes to the U.S.

corporate income tax system.

The 2017 Tax Act eliminates the deferral of U.S.

income tax on the historical un-repatriated earnings by imposing the Transition Toll Tax, which is a one-time mandatory deemed repatriation tax on undistributed foreign earnings.

The Transition Toll Tax is assessed on the U.S.

shareholder's share of the foreign corporation's accumulated foreign earnings that have not previously been taxed.

Earnings in the form of cash and cash equivalents will be taxed at a rate of 15.5% and all other earnings will be taxed at a rate of 8.0%.

During 2018, the provisional amount for the Toll tax was updated from $4.6 million in 2017 to $3.6 million in 2018 due to refinement of earnings and profits during 2018.

We consider our accounting regarding the Transition Toll Tax to be complete.

We accrued income tax liabilities of $0.3 million after utilization of foreign tax and research and development credits.

The 2017 Tax Act included a federal statutory rate reduction from 35% to 21%, the elimination or reduction of certain domestic deductions and credits and limitations on the deductibility of interest expense and executive compensation.

The 2017 Tax Act also transitioned international taxation from a worldwide system to a modified territorial system and includes base erosion prevention measures on non-U.S.

earnings, which has the effect of subjecting certain earnings of our foreign subsidiaries to U.S.

taxation as global intangible low-taxed income (“GILTI”).

related to GILTI was $0.6 million and $0.4 million for the years ended December 31, 2019 and 2018, respectively.

We are treating GILTI as a period cost.

At December 31, 2020, we had $ 57.9 million of 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.

At December 31, 2019, we maintain an $8.3 million valuation allowance in the U.S.

At December 31, 2020, we maintain a $ 9.1 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.

This represents an increase of $ 0.8 million from the prior year.

At December 31, 2019, we have federal and state net operating loss carryforwards of $209.5 million and foreign net operating loss carryforwards of $2.1 million expiring principally between 2020 and 2034.

We have research and development and other tax credit carryforwards of $24.9 million at December 31, 2019 that can be used to reduce future federal and state income tax liabilities.

These tax credit carryforwards expire principally between 2020 and 2039.

At December 31, 2020, we have federal and state net operating loss carryforwards of $ 114.1 million and $ 17.8 million, respectively.

Federal and state net operating losses will expire between 2021 and 2034.

The federal net operating loss carryforwards are subject to an uncertain tax position reserve of $ 3.7 million.

At December 31, 2020, we have foreign net operating loss carryforwards of $ 2.1 million.

The majority of our foreign net operating losses have an unlimited carryforward period.

At December 31, 2020, we have research and development and other tax credit carryforwards of $ 37.5 million.

These carry forwards are subject to an uncertain tax position reserve of $ 8.8 million.

These credits can be used to reduce future federal and state income tax liabilities and expire principally between 2021 and 2040.

We consider the undistributed earnings of our foreign subsidiaries as of December 31, 2020, 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.

As of December 31, 2020, the amount of

cash associated with indefinitely reinvested foreign earnings was approximately $ 14.0 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.

4 unchanged sentences

We believe that we have appropriate support for the income tax positions taken and to be taken on our tax returns and that our accruals for tax liabilities are adequate for all open years based on an assessment of many factors including past experience and interpretations of tax law applied to the facts of each matter.

At December 31, 2019, we had unrecognized tax benefits related to uncertain tax positions of approximately $9.8 million, of which approximately $9.4 million reduced the Company’s deferred tax assets and the offsetting valuation allowance and $0.4 million was recorded in other long-term liabilities.

During the first quarter of 2019, the statute of limitations associated with a tax position previously taken by the Company expired.

The related tax reserve of $0.2 million and accrued interest of $0.1 million that had been recorded were reversed during the twelve months ended December 31, 2019.

At December 31, 2020, we had unrecognized tax benefits related to uncertain tax positions of approximately $ 10.0 million, of which approximately $ 9.6 million reduced the Company’s deferred tax assets and the offsetting valuation allowance and $ 0.5 million was recorded in other long-term liabilities.

A reconciliation of the beginning and ending balance of unrecognized tax benefits are as follows:

7 unchanged sentences

Recorded as other long-term liability

Recorded as a decrease in deferred tax assets and offsetting valuation allowance

Recorded as a decrease in deferred tax assets

Balance at end of year

As of December 31, 2020 we had $ 10.0 million of unrecognized tax benefits which, if recognized would reduce the effective tax rate.

Quarterly Results of Operations (unaudited)

(in thousands, except per share data)

Net income per basic share

Net income per diluted share

Schedule II—Valuation and Qualifying Accounts

Axcelis Technologies, Inc.

11 unchanged sentences

Restated Certificate of Incorporation of the Company, filed November 2, 2017.

Incorporated by reference to Exhibit 3.1 of the Company’s Form 10-Q filed with the Commission on November 3, 2017.

Bylaws of the Company, as amended and restated as of May 13, 2014.

Incorporated by reference to Exhibit 3.2 of the Company’s Form 8‑K filed with the Commission on May 19, 2014.

Incorporated by reference to Exhibit 3.2 of the Company’s Form 8-K filed with the Commission on May 19, 2014.

Description of Securities Registered under Section 12 of the Securities Exchange Act of 1934.

Filed herewith.

Incorporated by reference to Exhibit 4.4 of the Company’s Form 10-K for the year ended December 31, 2019 filed with the Commission on March 2, 2020.

Axcelis Technologies, Inc.

2000 Stock Plan, as amended through November 13, 2014.

Incorporated by reference to Exhibit 10.1 of the Company’s Form 10‑K for the year ended December 31, 2014 filed with the Commission on March 11, 2015.

Incorporated by reference to Exhibit 10.1 of the Company’s Form 10-K for the year ended December 31, 2014 filed with the Commission on March 11, 2015.

Axcelis Technologies, Inc.

2012 Equity Incentive Plan, as approved by stockholders on May 14, 2019.

Incorporated by reference to Exhibit 10.1 of the Company’s Form S-8 registration statement filed with the Commission on May 21, 2019.

Axcelis Management Incentive Plan, as amended and restated by the Compensation Committee of the Board of Directors on February 11, 2010.

Incorporated by reference to Exhibit 10.2 of the Company’s report on Form 10‑K for the year ended December 31, 2009 filed with the Commission on March 15, 2010.

Incorporated by reference to Exhibit 10.2 of the Company’s report on Form 10-K for the year ended December 31, 2009 filed with the Commission on March 15, 2010.

Form of Indemnification Agreement approved by the Board of Directors of the Company on February 9, 2012 for use with each of its directors and officers.

Incorporated by reference to Exhibit 10.4 of the Company’s report on Form 10‑K for the year ended December 31, 2011 filed with the Commission on February 29, 2012.

Incorporated by reference to Exhibit 10.4 of the Company’s report on Form 10-K for the year ended December 31, 2011 filed with the Commission on February 29, 2012.

Form of Change in Control Agreement, as amended, as approved by the Compensation Committee of the Board of Directors on November 11, 2016, between the Company and each of its executive officers.

Incorporated by reference to Exhibit 10.6 of the Company’s Form 10-K for the year ended December 31, 2016 filed with the Commission on March 14, 2017.

Form of Employee non-qualified stock option grant under the 2000 Stock Plan, updated as of April 5, 2002.

Incorporated by reference to Exhibit 10.1 of the Company’s report on Form 10‑Q filed with the Commission on November 9, 2004.

Incorporated by reference to Exhibit 10.1 of the Company’s report on Form 10-Q filed with the Commission on November 9, 2004.

Form of Non-Employee Director stock non-qualified stock option grant under the 2000 Stock Plan, updated as of July 12, 2004.

Incorporated by reference to Exhibit 10.2 of the Company’s report on Form 10‑Q filed with the Commission on November 9, 2004.

Incorporated by reference to Exhibit 10.2 of the Company’s report on Form 10-Q filed with the Commission on November 9, 2004.

Form of Employee Non-Qualified Stock Option Certificate under the 2012 Equity Incentive Plan, adopted June 18, 2012.

Incorporated by reference to Exhibit 10.2 of the Company’s report on Form 10‑Q for the quarter ended June 30, 2012 filed with the Commission on August 7, 2012.

Incorporated by reference to Exhibit 10.2 of the Company’s report on Form 10-Q for the quarter ended June 30, 2012 filed with the Commission on August 7, 2012.

Form of Non-Employee Director Non-Qualified Stock Option Certificate under the 2012 Equity Incentive Plan, adopted June 18, 2012.

Incorporated by reference to Exhibit 10.3 of the Company’s report on Form 10‑Q for the quarter ended June 30, 2012 filed with the Commission on August 7, 2012.

Incorporated by reference to Exhibit 10.3 of the Company’s report on Form 10-Q for the quarter ended June 30, 2012 filed with the Commission on August 7, 2012.

Form of Restricted Stock Unit Award Agreement under the 2012 Equity Incentive Plan, adopted June 18, 2012.

Incorporated by reference to Exhibit 10.4 of the Company’s report on Form 10‑Q for the quarter ended June 30, 2012 filed with the Commission on August 7, 2012.

Named Executive Officer Base Compensation at March 02, 2020.

Incorporated by reference to Exhibit 10.4 of the Company’s report on Form 10-Q for the quarter ended June 30, 2012 filed with the Commission on August 7, 2012.

Named Executive Officer Base Compensation at February 26, 2021.

Filed herewith.

Non‑Employee Director Cash Compensation at March 02, 2020.

Non-Employee Director Cash Compensation at February 26, 2021.

Filed herewith.

1 unchanged sentence

Puma dated November 6, 2007.

Incorporated by reference to Exhibit 10.3 of the Company’s report on Form 10‑Q for the quarter ended September 30, 2007 filed with the Commission on November 8, 2007.

Incorporated by reference to Exhibit 10.3 of the Company’s report on Form 10-Q for the quarter ended September 30, 2007 filed with the Commission on November 8, 2007.

Form of Amended and Restated Executive Separation Pay Agreement between the Company and Kevin J.

2 unchanged sentences

Fallon and Douglas Lawson dated May 15, 2019.

Incorporated by reference to Exhibit 10.2 of the Company’s Form 10‑Q for the quarter ended June 30, 2019 filed with the Commission on August 7, 2019.

Incorporated by reference to Exhibit 10.2 of the Company’s Form 10-Q for the quarter ended June 30, 2019 filed with the Commission on August 7, 2019.

Lease Agreement between the Company and Beverly Property Owner LLC, effective January 30, 2015.

Incorporated by reference to Exhibit 10.24 of the Company’s Form 10‑K for the year ended December 31, 2014 filed with the Commission on March 11, 2015.

Incorporated by reference to Exhibit 10.24 of the Company’s Form 10-K for the year ended December 31, 2014 filed with the Commission on March 11, 2015.

Senior Secured Credit Facilities Credit Agreement dated as of July 31, 2020, among the Company, as the Borrower, the several lenders from time to time party thereto, and Silicon Valley Bank, as Administrative Agent, Issuing Lender and Swingline Lender, and as Lead Arranger.

Incorporated by reference to Exhibit 10.1 of the Company’s Form 10-Q for the quarter ended September 30, 2020 filed with the Commission on November 6, 2020 .

Guarantee and Collateral Agreement dated as of July 31, 2020 made by the Company and the other grantors referred to therein in favor of Silicon Valley Bank, as Administrative Agent.

Incorporated by reference to Exhibit 10.2 of the Company’s Form 10-Q for the quarter ended September 30, 2020 filed with the Commission on November 6, 2020.

Ethical Business Conduct at Axcelis, revised through January 2003.

Incorporated by reference to Exhibit 14.1 of the Company’s report on Form 10‑K filed with the Commission on March 28, 2003.

Incorporated by reference to Exhibit 14.1 of the Company’s report on Form 10-K filed with the Commission on March 28, 2003.

Subsidiaries of the Company.

2 unchanged sentences

Filed herewith.

Certification of the Principal Executive Officer under Exchange Act Rule 13a‑14(a)/15d‑14(a) (Section 302 of the Sarbanes‑Oxley Act), dated March 02, 2020.

Certification of the Principal Executive Officer under Exchange Act Rule 13a-14(a)/15d-14(a) (Section 302 of the Sarbanes-Oxley Act), dated February 26, 2021.

Filed herewith.

Certification of the Principal Financial Officer under Exchange Act Rule 13a‑14(a)/15d‑14(a) (Section 302 of the Sarbanes‑Oxley Act), dated March 02, 2020.

Certification of the Principal Financial Officer under Exchange Act Rule 13a-14(a)/15d-14(a) (Section 302 of the Sarbanes-Oxley Act), dated February 26, 2021.

Filed herewith.

Certification of the Principal Executive Officer pursuant to Section 1350 of Chapter 63 of title 18 of the United States Code (Section 906 of the Sarbanes‑Oxley Act), dated March 02, 2020.

Certification of the Principal Executive Officer pursuant to Section 1350 of Chapter 63 of title 18 of the United States Code (Section 906 of the Sarbanes-Oxley Act), dated February 26, 2021.

Filed herewith.

Certification of the Principal Financial Officer pursuant to Section 1350 of Chapter 63 of title 18 of the United States Code (Section 906 of the Sarbanes‑Oxley Act), dated March 02, 2020.

Certification of the Principal Financial Officer pursuant to Section 1350 of Chapter 63 of title 18 of the United States Code (Section 906 of the Sarbanes-Oxley Act), dated February 26, 2021.

Filed herewith.

The following materials from the Company’s Form 10‑K for the year ended December 31, 2019, formatted in eXtensible Business Reporting Language (XBRL):

The following materials from the Company’s Form 10-K for the year ended December 31, 2020, formatted in eXtensible Business Reporting Language (XBRL):

(i) Consolidated Statements of Operations, (ii) Consolidated Statement of Comprehensive Income (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements.

Cover Page Interactive Data File (formatted as iXBRL and contained in Exhibit 101).

Indicates a management contract or compensatory plan.

2 unchanged sentences

President and Chief Executive Officer

March 02, 2020

February 26, 2021

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 date indicated.

Director and Principal Executive Officer

March 02, 2020

February 26, 2021

Principal Accounting and Financial Officer

March 02, 2020

/s/ Tzu-Yin Chiu

March 02, 2020

February 26, 2021

/s/ T zu-Yin Chiu

February 26, 2021

/s/ Richard J.

March 02, 2020

February 26, 2021

John Fletcher

March 02, 2020

February 26, 2021

John Fletcher

/s/ Arthur L.

March 02, 2020

February 26, 2021

/s/ Joseph P.

March 02, 2020

February 26, 2021

/s/ Thomas St.

March 02, 2020

/s/ Jorge Titinger

March 02, 2020

February 26, 2021

/s/ J orge T itinger

February 26, 2021

Jorge Titinger

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 9A. Controls and Procedures