What changed in this filing

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Item 1A. Risk Factors

2020-11-02 compared with 2020-08-04 · 47 added, 39 removed, 406 unchanged (17% of the section changed)

5 unchanged sentences

The effects of a public health crisis caused by the COVID-19 pandemic and the measures being taken to limit the spread of COVID-19 are uncertain and difficult to predict, but pose the following risks to our business, results of operations and financial condition:

A likely decrease in short-term and/or long-term demand for our products and disruptions to our operations resulting from the immediate consequences of and responses to the pandemic, including the public health problems resulting from COVID-19 and precautionary measures instituted by governments and businesses to mitigate its spread, which have raised the prospect of an extended global recession, which would adversely impact the businesses of our customers, suppliers and partners;

resulting from COVID-19 and pre cautionary measures instituted by governments and businesses to mitigate its spread, which have raised the prospect of an extended global recession, which would adversely impact the businesses of our customers, suppliers and partners;

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;

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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 CO VID-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 COVID-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.

10 unchanged sentences

In light of these factors and the cyclical nature of the semiconductor industry, we expect to continue to experience significant fluctuations in quarterly and annual operating results.

Moreover, many of our expenses are fixed in the short-term which, together with the need for continued investment in research and development, marketing and customer support, limits our ability to reduce expenses quickly.

Moreover, many of our expenses are fixed in the short-term

which, together with the need for continued investment in research and developme nt, marketing and customer support, limits our ability to reduce expenses quickly.

As a result, declines in net sales could harm our business and the price of our common stock could substantially decline.

30 unchanged sentences

We are subject to order and shipment uncertainties.

Our profitability will decline if we fail to accurately forecast customer demand when managing inventory.

Our profitability will d ecline if we fail to accurately forecast customer demand when managing inventory.

We typically plan production and inventory levels based on internal forecasts of customer demand, which can be highly unpredictable and can fluctuate substantially, which could lead to excess inventory write-downs and resulting negative impacts on gross margin and net income.

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Because the governments of these countries have provided extensive financial support to our semiconductor device manufacturing customers in these countries, we believe that our customers could be disproportionately affected by any trade embargoes, excise taxes, tariffs or other restrictions imposed by their governments on trade with United States companies such as ourselves, particularly with respect to the ongoing trade negotiations between the United States and China.

As of January 2020, trade delegations from the United States and China reached partial agreement over tariffs on certain products, but if the United States and China do not continue negotiations and reach agreement on a trade policy, tariffs imposed by China may result in lower sales to customers in China as the costs of our products become more expensive to such customers.

In addition, tariffs imposed by the United States will increase the cost of raw materials that we import from China.

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 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.

Over the last several years and accelerating this year, the U.S.

government has significantly expanded export controls on certain technologies and commodities to certain markets, particularly with respect to semiconductor and other high technology exports to China.

For example, effective June 29, 2020, the U.S.

Department of Commerce imposed new export controls on the transfer of many U.S.

products and technologies, including many commercial-grade electronics, to “military end users” or for “military end use” in China, which may include many Chinese commercial companies that sell products to or do business with the Chinese military.

Likewise, beginning in May 2019, the U.S.

Department of Commerce has imposed significant restrictions on the transfer of any products from the United States, as well as many products produced overseas that incorporate U.S.

content or rely on U.S.

software or technology, to Huawei Technologies Co., Ltd., and a large number of its overseas affiliates, including HiSilicon.

government is also engaged in an ongoing process of assessing which “emerging and foundational technologies” warrant new or additional controls, which could subject additional U.S.-origin products and services to more stringent export restrictions.

It is possible that these modified regulations, and any future regulations could reduce demand for our products.

In particular, these restrictive measures may reduce overall global demand for our customers’ products or for other products produced or manufactured in the United States or based on United States technology, in turn reducing demand for our products, which could have a material adverse effect on our business, financial condition and results of operations.

Political and economic instability.

4 unchanged sentences

An outbreak of hostilities or other political upheaval in China, Taiwan or South Korea, or an economic downturn in Japan or other countries, would likely harm the operations of our customers in these countries.

The effect of these types of events on our revenue and cash flows could be material because we derive substantial revenue from sales to semiconductor device foundries in Taiwan such as Taiwan Semiconductor Manufacturing Company Ltd., from memory chip manufacturers in South Korea such as Samsung Electronics Co., Ltd., and from semiconductor device manufacturers in Japan such as Toshiba Corporation.

The effect of these types of eve nts on our revenue and cash flows could be material because we derive substantial revenue from sales to semiconductor device foundries in Taiwan such as Taiwan Semiconductor Manufacturing Company Ltd., from memory chip manufacturers in South Korea such as Samsung Electronics Co., Ltd., and from semiconductor device manufacturers in Japan such as Toshiba Corporation.

Natural disasters and climate change .

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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 custome rs.

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.

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

1 unchanged sentence

In the event of a successful product liability claim, we could be obligated to pay damages significantly in excess of our product liability insurance limits.

If we are not successful in developing new and enhanced products for the semiconductor device manufacturing industry, we will lose sales and market share to our competitors.

If we are not successful in developin g new and enhanced products for the semiconductor device manufacturing industry, we will lose sales and market share to our competitors.

We operate in an industry that is highly competitive and subject to evolving industry standards, rapid technological changes, rapid changes in consumer demands and the rapid introduction of new, higher performance systems with shorter product life cycles.

54 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 th ird 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 third 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 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.

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 not be able to enter into such

a license or such a license may not be available on commerc ially reasonable terms.

Accordingly, the loss of important intellectual property rights could hinder our ability to sell our systems or to make the sale of these systems more expensive.

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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 equi pment.

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.

We must attract and retain experienced senior executives and other key personnel with knowledge of semiconductor device manufacturing and inspection, metrology or lithography equipment and related software to help support our future growth, and competition for such personnel in our industry is high.

We must attract and retain experienced senior executives and other key personnel with knowledge of semiconductor device manufacturing and inspection, metrology or lithography equip ment and related software to help support our future growth, and competition for such personnel in our industry is high.

Our success depends, to a significant degree, upon the continued contributions of our key executive management, engineering, sales and marketing, customer support, finance and manufacturing personnel.

28 unchanged sentences

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.

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 transit ion 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.

Beyond cost an d 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 a s 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.

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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 ope rating results may be adversely affected.

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

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

We must also enhance quality, speed and flexibility to meet changing demand for our products and product mix and uncertain market conditions.

Our success also depends in part on refining our cost structure and supply chains so that we have flexibility and can maintain and improve profitability.

Our success also depends in part on refining our cost structure and supply chains so that we have flexibility and can maintain and

improve profitability.

Although the current tariff environment has not had a material adverse effect on our costs to date, further deterioration in the tariff environment, or changes in suppliers, may cause our costs to increase, which if we are not able to offset by charging higher sales prices, will cause a decline in our margins.

To improve our margins on a product, we will need to establish high volume supply agreements with our vendors.

We cannot be certain that we will be able to timely negotiate vendor supply agreements on improved terms and conditions, or at all.

We cannot be certain that we will be able to tim ely negotiate vendor supply agreements on improved terms and conditions, or at all.

Failure to achieve the desired level of cost reductions could adversely affect our financial results.

Despite our efforts to control costs and increase efficiency in our facilities, changes in demand could still cause us to realize lower operating margins and profitability.

Despite our efforts to control costs and increase efficiency in our fa cilities, changes in demand could still cause us to realize lower operating margins and profitability.

We may choose to acquire new and complementary businesses, products or technologies instead of developing them ourselves, and we may be unable to complete these acquisitions or may not be able to successfully integrate an acquired business in a cost-effective and non-disruptive manner.

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Specifically, the following issues, among others, must be addressed in integrating the operations of Rudolph and Nanometrics in order to realize the anticipated benefits of the Merger so we perform as expected:

• combining the companies’ operations and corporate functions;

• 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;

• com bining the companies’ operations and corporate functions;

• 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 th e 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 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;

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

• maintaining existing agreements with customers, distributor s, 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 infrastructure;

• conso lidating the companies’ administrative and information technology infrastructure;

• coordinating distribution and marketing efforts;

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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 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.

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.

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.

2 unchanged sentences

Any of the aforementioned disruptions could limit our ability to achieve the anticipated benefits of the Merger.

We may be exposed to increased litigation due to the Merger, which could have an adverse effect on our business and operations.

We may be exposed to increased litigation due to the Me rger, which could have an adverse effect on our business and operations.

We may be exposed to increased litigation from stockholders, customers, suppliers, consumers and other third parties due to the combination of Rudolph’s business and Nanometrics’ business.

66 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