What changed in this filing

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Item 1A. Risk Factors

2020-08-04 compared with 2020-05-05 · 44 added, 39 removed, 401 unchanged (17% of the section changed)

7 unchanged sentences

Changes in our operations in response to COVID-19 and employee illnesses resulting from the pandemic, which have impacted the way that we operate and conduct business, and may result in additional inefficiencies or delays, including in sales and product development efforts and additional costs related to business continuity initiatives, which cannot be avoided or alleviated through succession planning, employees working remotely or teleconferencing technologies;

Negative impacts to our operations, including reductions in production levels, research and development activities, and qualification activities with our customers, inefficiencies and dela ys, and increased costs resulting from our efforts to mitigate the impact and spread of COVID-19 through changes in our operations we have enacted at certain of our locations around the world in an effort to protect our employees’ health and well-being (in cluding the implementation of work-from-home policies, social-distancing measures, modified work schedules and shifts, the suspension of employee travel, and limits on the number of employees attending in-person meetings and the number of people permitted to be present at our facilities at any one time);

Negative impacts to our operations, including reductions in production levels, research and development activities, and qualification activities with our customers, inefficiencies and delays, and increased costs resulting from our efforts to mitigate the impact and spread of COVID-19 through changes in our operations we have enacted at certain of our locations around the world in an effort to protect our employees’ health and well-being (including the implementation of work-from-home policies, social-distancing measures, modified work schedules and shifts, the suspension of employee travel, and limits on the number of employees attending in-person meetings and the number of people permitted to be present at our facilities at any one time);

Management focus on mitigating the impact of the coronavirus pandemic, which has required and will continue to require a substantial investment of time and resources across our enterprise, which has resulted and can be expected to continue to result in a diversion of management attention and resources;

2 unchanged sentences

Difficulty accessing capital, if needed in the future, through a sale of securities, or in obtaining favorable terms of such securities, due to market conditions generally or a decline or volatility in the market for our securities.

The resumption of normal business operations after such interruptions may be delayed or constrained by lingering effects of COVID-19 on our suppliers, third-party service providers, and/or customers.

The resumption of normal business operations after such interruptions may be delayed or constrained by lingering effects of CO VID-19 on our suppliers, third-party service providers, and/or customers.

These effects, alone or taken together, could have a material adverse effect on our business, results of operations, legal exposure, or financial condition.

15 unchanged sentences

We operate in the highly concentrated, capital-intensive semiconductor device manufacturing industry.

Historically, a substantial portion of our revenue in each quarter and year has been derived from sales to

relatively few customers, and this trend is expected to continue.

Historically, a substantial portion of our revenue in each quarter and year has been derived from sales to relatively few customers, and this trend is expected to continue.

If any of our key customers were to purchase significantly fewer of our systems in the future, or if they delay or cancel a large order, our revenue and cash flows could meaningfully decline.

44 unchanged sentences

Any restrictions of these types could result in a reduction in our sales to customers in these countries.

In addition, given the relatively fluid regulatory environment in China, there could be additional tax or other regulatory changes in the future.

Such actions in the future, as well as other changes in Chinese laws and regulations, including actions in furtherance of China’s stated policy of reducing its dependence on foreign semiconductor manufacturers, could increase the cost of doing business in China, foster the emergence of Chinese-based competitors, decrease the demand for our customers’ products in China, or reduce the supply of critical materials for our customers’ products, which could have a material adverse effect on our business and results of operations.

In addition, given the relatively fluid regulatory environment

in China, there could be additional tax or other regulatory changes in the future.

Such actions in the future, as well as other changes in Chinese laws and regulations, including actions in furtherance of China’s stated pol icy of reducing its dependence on foreign semiconductor manufacturers, could increase the cost of doing business in China, foster the emergence of Chinese-based competitors, decrease the demand for our customers’ products in China, or reduce the supply of critical materials for our customers’ products, which could have a material adverse effect on our business and results of operations.

Political and economic instability.

7 unchanged sentences

N atural disasters, changes in climate and geo-political events could materially adversely affect our worldwide operations (or those of our business partners).

The occurrence of one or mo re natural disasters such as hurricanes, tropical storms, fires, cyclones, earthquakes, tsunamis, flooding, typhoons, volcanic eruptions and weather conditions such as major or extended winter storms, droughts and tornadoes, whether as a result of climate change or otherwise, may disrupt manufacturing or other operations.

The occurrence of one or more natural disasters such as hurricanes, tropical storms, fires, cyclones, earthquakes, tsunamis, flooding, typhoons, volcanic eruptions and weather conditions such as major or extended winter storms, droughts and tornadoes, whether as a result of climate change or otherwise, may disrupt manufacturing or other operations.

For example, our Milpitas operations are located near major earthquake fault lines in California.

26 unchanged sentences

When this occurs, our credibility and the market acceptance and sales of our systems could be harmed.

Further, if our systems contain errors, defects or bugs, computer viruses or malicious code as a result of cyber-attacks to our computer networks, we may be required to expend significant capital and resources to alleviate these problems.

Defects could also lead to product liability as a result of product liability lawsuits against us or against our customers.

Further, if our systems contain

errors, defects or bugs, computer viruses or malicious code as a result of cyber-attacks to our computer networks, we may be required to expend significant capital and resources to alleviate these problems.

Defects could also lead to product liability as a result of product liability lawsuits against us or against our custome rs.

We have agreed to indemnify our customers under certain circumstances against liability arising from defects in our systems.

6 unchanged sentences

We expect to continue to make significant investments in our research and development activities.

We may experience difficulties or delays in our development efforts with respect to new systems, and we may not ultimately be successful in our product enhancement efforts to

improve and advance products or in responding effectively to technological change, as not all research and development activities result in viable commercial products.

We may experience difficulties or delays in our development efforts with respect to new systems, and we may not ultimately be successful in our product enhancement efforts to improve and advance products or in responding effectively to technological change, as not all research and development activities result in viable commercial products.

In addition, we cannot provide assurance that we will be able to develop new products for the most opportunistic new markets and applications.

Any s ignificant delay in releasing new systems could cause our products to become obsolete, adversely affect our reputation, give a competitor a first-to-market advantage or cause a competitor to achieve greater market share.

Any significant delay in releasing new systems could cause our products to become obsolete, adversely affect our reputation, give a competitor a first-to-market advantage or cause a competitor to achieve greater market share.

Some of our competitors have greater financial, engineering, manufacturing, research and development, marketing and customer support resources than we do.

25 unchanged sentences

If these suppliers, such as Applied Materials, Inc., Ebara Corporation, Lam Research Corporation and Tokyo Electron, are unable to sell such products, if they choose to focus their attention on products that do not integrate our systems, or if they choose to develop competing systems, our business could suffer.

If our relationships with our large customers deteriorate, our product development activities cou ld be adversely affected.

If our relationships with our large customers deteriorate, our product development activities could be adversely affected.

The success of our product development efforts depends on our ability to anticipate market trends and the price, performance and functionality requirements of semiconductor device manufacturers.

19 unchanged sentences

In addition, our commercial success depends in part on our ability to avoid infringing or misappropriating patents or other proprietary rights owned by third parties.

From time to time, we receive communications from third parties asserting that our products or systems infringe, or may infringe, on the proprietary rights of these third parties.

From time to time, we receive communications from th ird parties asserting that our products or systems infringe, or may infringe, on the proprietary rights of these third parties.

These claims of infringement may lead to protracted and costly litigation, which could require us to pay substantial damages or have the sale of our products or systems stopped by an injunction.

Infringement claims could also cause product or system delays or require us to redesign our products or systems, and these delays could result in the loss of substantial revenue.

We may also be required to obtain a license from the third party or cease activities utilizing the third party’s proprietary rights.

We may als o be required to obtain a license from the third party or cease activities utilizing the third party’s proprietary rights.

We may not be able to enter into such a license or such a license may not be available on commercially reasonable terms.

5 unchanged sentences

The publication of a patent in Taiwan prior to the filing of a patent in Taiwan would invalidate the ability of a company to obtain a patent in Taiwan.

Similarly, in contrast to the United States where the contents of patents remain confidential during the patent

application process, in Taiwan, the contents of a patent are published up on filing, which provides competitors an advance view of the contents of a patent application prior to the establishment of patent rights.

Similarly, China’s protection of intellectual property rights historically has been less stringent and robust compare d to other countries such as the United States, and consequently intellectual property rights and confidentiality protections in China may not be as effective as in the United States or other countries.

Similarly, in contrast to the United States where the contents of patents remain confidential during the patent application process, in Taiwan, the contents of a patent are published upon filing, which provides competitors an advance view of the contents of a patent application prior to the establishment of patent rights.

Similarly, China’s protection of intellectual property rights historically has been less stringent and robust compared to other countries such as the United States, and consequently intellectual property rights and confidentiality protections in China may not be as effective as in the United States or other countries.

Monitoring and preventing unauthorized use are also difficult and the measures we take to protect our intellectual property rights may not be adequate.

20 unchanged sentences

Because of the high cost of switching equipment vendors in our markets, it is sometimes difficult for us to win new customers from our competitors even if our systems are superior to theirs.

We believe that once a semiconductor device manufacturer has selected one vendor’s capital equipment for a production-line application, the manufacturer generally relies upon that capital equipment and, to the extent possible, subsequent generations of the same vendor’s equipment for the life of the application.

Once a vendor’s equipment has been installed in a production line application, a semiconductor device manufacturer must often make substantial technical modifications and may experience production-line downtime in order to switch to another vendor’s equipment.

generations of the same vendor’s equipment for the life of the application .

Accordingly, unless our systems offer performance or cost advantages that outweigh a customer’s expense of switching to our systems, it will be difficult for us to achieve significant sales to that manufacturer once it has selected another vendor’s capital equipment for an application.

7 unchanged sentences

In order to attract and retain executives and other key employees, the Company must provide a competitive compensation package, including cash and stock-based compensation.

If the anticipated value of the Company’s stock-based incentive awards does not materialize so that they cease to be viewed as valuable, if the Company’s profits decrease, or if the Company’s total compensation package is not viewed as compe titive, the Company’s ability to attract, retain and motivate executives and key employees could be weakened.

If the anticipated value of the Company’s stock-based incentive awards does not materialize so that they cease to be viewed as valuable, if the Company’s profits decrease, or if the Company’s total compensation package is not viewed as competitive, the Company’s ability to attract, retain and motivate executives and key employees could be weakened.

We obtain some of the components and subassemblies included in our systems from a limited group of suppliers, and the partial or complete loss of one of these suppliers could cause production delays and a substantial loss of revenue.

18 unchanged sentences

If we do not effectively manage our outsourcing strategy or if third party service providers do not perform as anticipated, we may experience operational difficulties, increased costs, manufacturing interruptions or inefficiencies in the operation of our supply chain, any or all of which could delay our delivery of products to our customers, and materially and adversely affect our business, financial condition, and results of operations.

We are in the process of implementing a world-wide new enterprise resource planning (“ERP”) system, and problems with the design or implementation of this ERP system could interfere with our business and operations.

We are currently engaged in a multi-year process of conforming all our operations to one global enterprise resource planning (“ERP”) system.

The ERP system is designed to accurately maintain the Company’s books and records and enhance the speed and quality of information provided to our management team for use in the operation and management of our business.

The Company’s ERP transition has required, and will continue to require, the investment of significant human and financial resources.

We may not be able to successfully implement the ERP transition without experiencing delays, increased costs and other difficulties.

Beyond cost and scheduling, potential flaws in the implementation of an ERP system may pose risks to the Company’s ability to operate successfully and efficiently, including timely and accurate SEC filings.

If we are unable to successfully implement the new ERP system as planned, our financial position, results of operations and cash flows could be negatively impacted.

If our network security measures are breached and unauthorized access is obtained to a customer’s data, to our data, or to our information technology systems, we may incur significant legal and financial exposure and liabilities.

5 unchanged sentences

In addition, third parties may attempt to fraudulently induce employees or users to disclose information to gain access to our data or our customers’ data.

If any of these events occur, our or our customers’ and vendors’ information

could be acces sed or disclosed improperly.

If any of these events occur, our or our customers’ and vendors’ information could be accessed or disclosed improperly.

Any or all of these issues could negatively affect our ability to attract new customers, cause existing customers to choose to purchase from our competitors, result in reputational damage or subject us to third-party lawsuits, regulatory fines or other action or liability, which could adversely affect our operating results.

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Additionally, if we are consistently unable to fulfill our backlog, this may be a disincentive to customers to award large contracts to us in the future until they are comfortable that we can effectively manage our backlog.

If we do not manage our supply chain effectively, our operating results may be adversely affected.

If we do not manage our supply chain effectively, our ope rating results may be adversely affected.

We need to continually evaluate our global supply chains and assess opportunities to reduce costs.

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Adverse economic conditions, such as sustained periods of economic uncertainty or a crisis in the financial markets may have a material adverse effect on our liquidity and financial condition if our ability to obtain credit from the capital financial markets, or from trade creditors was impaired.

In addition, a

worsening e conomy or an economic crisis could also adversely impact our customers’ ability to finance the purchase of systems from us or our suppliers’ ability to provide us with product, either of which may negatively impact our business and results of operations.

I n addition, we enter into factoring arrangements with certain financial institutions to sell a certain portion of our trade receivables.

If we were to stop entering into these factoring arrangements, our operating results, financial condition and cash flow s could be adversely impacted by delays or failure to collect the trade receivables.

In addition, a worsening economy or an economic crisis could also adversely impact our customers’ ability to finance the purchase of systems from us or our suppliers’ ability to provide us with product, either of which may negatively impact our business and results of operations.

In addition, we enter into factoring arrangements with certain financial institutions to sell a certain portion of our trade receivables.

If we were to stop entering into these factoring arrangements, our operating results, financial condition and cash flows could be adversely impacted by delays or failure to collect the trade receivables.

However, by entering into these arrangements, we are exposed to additional risks.

If any of these financial institutions experiences financial difficulties or is otherwis e unable to honor the terms of our factoring arrangements, we may experience material financial losses due to the failure of such arrangements, which could have an adverse impact upon our operating results, financial condition and cash flows.

If any of these financial institutions experiences financial difficulties or is otherwise unable to honor the terms of our factoring arrangements, we may experience material financial losses due to the failure of such arrangements, which could have an adverse impact upon our operating results, financial condition and cash flows.

We are subject to various environmental laws and regulations that could impose substantial costs upon us and may harm our business, operating results and financial condition.

19 unchanged sentences

• combining the companies’ operations and corporate functions;

• combining t he businesses of Rudolph and Nanometrics and meeting our capital requirements, in a manner that permits us to achieve any cost savings or revenue synergies anticipated to result from the Merger, the failure of which would result in the anticipated benefits of the Merger not being realized in the time frame currently anticipated or at all;

• combining the businesses of Rudolph and Nanometrics and meeting our capital requirements, in a manner that permits us to achieve any cost savings or revenue synergies anticipated to result from the Merger, the failure of which would result in the anticipated benefits of the Merger not being realized in the time frame currently anticipated or at all;

• integrating personnel from the two companies;

• integrating and unifying the offerings and services available to customers;

• harmonizing the companies’ operating practi ces, employee development and compensation programs, internal controls and other policies, procedures and processes;

• maintaining existing agreements with customers, distributors, providers and vendors and avoiding delays in entering into new agreements w ith prospective customers, distributors, providers and vendors;

• harmonizing the companies’ operating practices, employee development and compensatio n programs, internal controls and other policies, procedures and processes;

• maintaining existing agreements with customers, distributors, providers and vendors and avoiding delays in entering into new agreements with prospective customers, distributors, providers and vendors;

• addressing possible differences in business backgrounds, corporate cultures and management philosophies;

• consolidating the companies’ administrative and information technology infrastructu re;

• consolidating the companies’ administrative and information technology infrastructure;

• coordinating distribution and marketing efforts;

4 unchanged sentences

As a result of the Merger, we may experience impacts on relationships with customers and suppliers that may harm our business and results of operations.

Certain customers, licensors, business partners or suppliers may seek to terminate or modify contractual obligations whether or not contractual rights were triggered as a result of the Merger.

There can be no guarantee that customers and suppliers of Rudolph or Nanometrics will remain with or continue to have a relationship with us or do so on the same or similar contractual terms to those they had with Rudolph or Nanometrics prior to the Merger.

Certain customers, licensors, business partners or suppliers may seek to terminate or modify

contractual obligations whether or not contractual rights were triggered as a result of the Merger.

There ca n be no guarantee that customers and suppliers of Rudolph or Nanometrics will remain with or continue to have a relationship with us or do so on the same or similar contractual terms to those they had with Rudolph or Nanometrics prior to the Merger.

If any customers or suppliers seek to terminate or modify contractual obligations or discontinue the relationship with us, then our business and results of operations may be harmed.

17 unchanged sentences

This cyclical nature of the industry in which we operate affects our ability to accurately predict future revenue and, thus, future expense levels.

When cyclical fluctuations result in lower than expected revenue levels, operating results may be adversely

affected, and cost red uction measures may be necessary in order for us to remain competitive and financially sound.

When cyclical fluctuations result in lower than expected revenue levels, operating results may be adversely affected, and cost reduction measures may be necessary in order for us to remain competitive and financially sound.

During a down cycle, we must be in a position to adjust our cost and expense structure to prevailing market conditions and to continue to motivate and retain our key employees.

In addition, during periods of rapid growth, we must be able to increase manufacturing capacity and personnel to meet customer demand.

We can provide no assurance that these objectives can be met in a timely manner in response to industry cy cles.

We can provide no assurance that these objectives can be met in a timely manner in response to industry cycles.

If we fail to respond to industry cycles, our business could be seriously harmed.

32 unchanged sentences

changes in earnings estimates by analysts or our failure to meet analysts’ expectations;

changes in the market price per share of ou r public company customers;

changes in the market price per share of our public company customers;

market conditions in the semiconductor and other industries into which we sell products;

13 unchanged sentences

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-Q

Item 1A. Risk Factors