Axcelis Annual Report 2013

← All annual reports

FY2013 Annual Report · Axcelis

Loading PDF…

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

(Mark One)
(cid:2)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2013

(cid:3)

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from

to
Commission file number 000-30941
AXCELIS TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction
of incorporation or organization)

34-1818596
(IRS Employer Identification No.)

108 Cherry Hill Drive
Beverly, Massachusetts 01915
(Address of principal executive offices) (zip code)

(978) 787-4000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Name of each exchange on which registered

Common Stock, $.001 par value

The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities

Act. Yes (cid:3) No (cid:2)

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the

Act. Yes (cid:3) No (cid:2)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of

the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (cid:2) No (cid:3)

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Web site, if

any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files). Yes (cid:2) No (cid:3)

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained

herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (cid:2)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer’’ and ‘‘smaller
reporting company’’ in Rule 12b-2 of the Exchange Act.
Large accelerated filer (cid:3) Accelerated filer (cid:2) Non-accelerated filer (cid:3) Smaller reporting company (cid:3)

(Do not check if a smaller
reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:3) No (cid:2)

Aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, 2013: $194,738,957

Number of shares outstanding of the registrant’s Common Stock, $0.001 par value, as of February 24, 2014:

110,711,182.

Portions of the definitive Proxy Statement for Axcelis Technologies, Inc.’s Annual Meeting of Stockholders to be

held on May 13, 2014 are incorporated by reference into Part III of this Form 10-K.

Documents incorporated by reference:

Item 1. Business.

Overview of Our Business

PART I

Axcelis Technologies, Inc. (‘‘Axcelis,’’ the ‘‘Company,’’ ‘‘we,’’ ‘‘us,’’ or ‘‘our’’) designs, manufactures
and services ion implantation and other processing equipment used in the fabrication of semiconductor
chips. We believe that our Purion family of products are the most innovative implanters available on
the market today. We sell to leading semiconductor chip manufacturers worldwide. The ion
implantation business comprised approximately 83.8% of our revenue in 2013 with the remaining 16.2%
of revenue derived from our dry strip and other legacy processing systems. In addition to equipment,
we provide extensive aftermarket lifecycle products and services, including used tools, spare parts,
equipment upgrades, maintenance services and customer training.

Axcelis’ business commenced in 1978 and its current corporate entity was incorporated in

Delaware in 1995, headquartered in Beverly, Massachusetts. We maintain an internet site at
www.axcelis.com. On or through our website, investors may access, free of charge, our annual reports
on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to
those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as
reasonably practicable after we electronically file such material with, or furnish it to, the Securities and
Exchange Commission. Our website and the information contained therein or connected thereto shall
not be deemed to be incorporated into this Form 10-K.

Industry Overview

Semiconductor chips, also known as integrated circuits, are used in personal computers,

telecommunication equipment, digital consumer electronics, wireless communication products and other
applications. Types of semiconductor chips include memory chips (which store and retrieve
information), microprocessors (logic devices which process information) and ‘‘system on chip’’ devices
(which have both logic and memory features). Most semiconductor chips are built on a wafer of silicon
of either 200mm (8 inches) or 300mm (12 inches) in diameter. Each semiconductor chip is made up of
millions of tiny transistors or ‘‘switches’’ to control the functions of the device. Transistors are created
in the silicon wafer by introducing various precisely placed impurities into the silicon in specific
patterns. The process steps in the formation of transistors are traditionally referred to as
‘‘front-end-of-line.’’ The ‘‘back-end-of-line’’ process steps connect the transistors and other components
together through several overlapping layers of metal wires, known as interconnect, creating a complete
circuit. Each layer of metal interconnect must be separated by a non-conductive or insulating material
called inter-level dielectric. Each layer that is added is selectively patterned to all previous layers
through a process called photolithography.

Semiconductor chip manufacturers utilize many different types of equipment in the making of
integrated circuits. Over 300 process steps utilizing over 50 different types of process tools are required
to make a single device like a microprocessor. Semiconductor chip manufacturers seek device
performance benefits through new products and technology enhancements and productivity
improvements through increased throughput, equipment utilization and higher manufacturing yields.

Capacity is added by increasing the amount of manufacturing equipment in existing fabrication

facilities and by constructing new fabrication facilities. Periodically the semiconductor device industry
adopts a larger silicon wafer size to achieve lower manufacturing costs. Semiconductor manufacturers
can produce more chips on a larger wafer, thus reducing the overall manufacturing cost per chip. For
example, the use of 200mm wafers in production began at the end of the 1980s. The migration from
200mm to 300mm began at the end of the 1990s. The majority of wafer fabrication facilities today are
using wafers with a diameter of 300mm. In 2013, Axcelis derived 76.9% of total systems revenue (a

component of product revenue) from sales of 300mm equipment. In 2011, industry participants began
planning for the next wafer size transition, to 450mm diameter wafers. The schedule for this future
transition will vary by customer.

The customer base is also changing. Given the magnitude of the investment needed to build a new
wafer fabrication facility (often referred to as a ‘‘fab’’), which can be over $4.0 billion for a new 300mm
fab, many customers are entering into partnerships to offset the cost of technology development and
manufacturing. In addition, many chip developers outsource all or part of their chip manufacturing
requirements to contract manufacturers, known as foundries. Foundries are significant purchasers of
semiconductor manufacturing equipment.

The semiconductor capital equipment industry is highly cyclical, as global chip production
capacities successively exceed, then lag behind, global chip demand. When chip demand is high, and
inventories low, chip manufacturers add capacity through capital equipment purchases. Given the
difficulties of forecasting and calibrating chip demand and production capacity, the industry periodically
experiences excess chip inventories and softening chip prices. Device manufacturers react with muted
capital spending, lowering the demand for capital equipment. Changes in consumer and business
demand for products in which chips are used also affect the industry. A successful semiconductor
equipment manufacturer must not only provide some of the most technically complex products
manufactured in the world but also must design its business to thrive during the inevitable low points in
the cycle. The most recent cycle began with weak industry conditions in mid-2011 which continued
through the first quarter of 2013. Beginning in the second quarter of 2013 the industry entered a
period of gradual market improvement which continued during the third and fourth quarters.

Our financial results in 2013 reflect our investment of a significant portion of our resources in
research and development programs related to our new leading edge Purion ion implantation platform
and the market introduction and initial sales of Purion systems. These results also reflect our efforts to
lower our breakeven revenue levels by maintaining tight control of discretionary spending. We expect
customer demands for our products to continue to improve through 2014. Throughout 2014 we expect
to continue to grow Purion system sales and maintain tight control of our cost structure in order to
sustain profitability throughout the full industry cycle.

Axcelis’ Strategy

Axcelis’ 2014 strategic focus is to:

(cid:129) Penetrate additional customer fabs with Purion platform products (200mm and 300mm)

(cid:129) Protect and grow Global Service Solutions base business

(cid:129) Exceed our last peak cycle quarterly revenues

(cid:129) Sustain profitability on a quarterly basis

In December 2012, we sold to Lam Research Corporation (‘‘Lam’’) the intellectual property rights

and other assets relating to our dry strip systems product line. The sold intellectual property rights
included, among other things, worldwide patent rights, patent applications, copyrights, industrial
designs, know-how and related rights used by us in our dry strip business. As a result of this
transaction, we ceased the sale of 300mm dry strip wafer processing equipment in September 2013. We
will continue to sell dry strip systems for smaller wafers until December 2015 and support our installed
base of dry strip systems indefinitely.

The transaction with Lam in December 2012 represents an important step in the execution of our
strategy, allowing us to focus on ion implant. The collaboration with Lam will also allow us to identify
value for our customers as we explore the interrelationships between implant, etch, deposition, dry strip

and clean applications. We expect that this partnership will enhance our ability to compete and gain
implant market share.

We have continued to invest in research and development through the industry cycles to assure our

products meet the needs of our customers. We take pride in our scientists and engineers who continue
to add to our portfolio of patents and unpatented proprietary technology to ensure that our investment
in technology leadership is translated into unique product advantages. We strive for operational
excellence by focusing on ways to lower our manufacturing and design costs and to improve our
delivery times to our customers. Finally, we will use our Global Customer Teams and a focused account
management structure to maintain and strengthen our customer relationships and increase customer
satisfaction.

Ion Implantation Systems

Ion implantation is a principal step in the transistor formation cycle of the semiconductor
manufacturing process. An ion implanter is a large, technically advanced system that injects dopants
such as arsenic, boron or phosphorus into a silicon wafer. These dopants are ionized and therefore
have electric charges. With an electric charge they can be manipulated, moved and accelerated with
electric and magnetic fields. Ion implanters use these fields to create a beam of ions with a precisely
defined amount of energy (ranging between several hundred and three million electron-volts) and with
a precisely defined amount of beam current (ranging from microamps to milliamps). Certain areas of
the silicon wafer are blocked off by a polymer material known as photoresist, which acts as a ‘‘stencil’’
to pattern devices so that the dopants will only enter the wafer where needed. The dopants change the
electrical properties of the silicon wafer to create the active components of a chip, called the
transistors. Typical process flows require twenty implant steps, with the most advanced processes
requiring thirty or more. Each implant step is characterized by four key parameters: dopant type, dose
(amount of dopant), energy (depth into the silicon) and tilt (angle of wafer relative to the ion beam).

In order to cover the wide range of implant steps, three different types of implanters have been

developed, each designed to cover a specific range of applications, primarily defined by dose and
energy. The three traditional implanter types are referred to as medium current, high current and high
energy:

(cid:129) Medium current (mid dose) implanters are the original model of ion implanter, with mid to

low-range energy and dose capability.

(cid:129) High current (high dose) implanters were the second type of implanter to emerge, having low

energy capability and high dose range.

(cid:129) High energy implanters emerged to address the need for deeper implants with a high energy

range and low dose.

The Purion Platform and Family of Ion Implanters

Axcelis offers a complete line of high energy, high current and medium current implanters for all

application requirements. Our newest systems are all based on a common Purion platform which offers
purity, precision and productivity by combining a high-speed, state-of-the-art single wafer end station,
enabling unmatched throughput (500 wafer per hour), and an advanced spot beam that ensures that all
points across the wafer see the same beam at the same beam angle, resulting in exceptional process
control and maximum yield.

(cid:129) High Energy Implant. Purion XE, our high energy system, combines Axcelis’ production-proven

RF Linac high energy, spot beam technology with the Purion platform. Axcelis is a market
leader in high energy ion implanters, and we expect to maintain our leadership in the high
energy segment through sales of both our multi wafer high energy systems and the Purion XE.

(cid:129) Medium Current Implant. Our Purion M medium current system offers higher productivity and
lower cost of ownership than competitive offerings, in addition to other advantages. In 2012 and
2013, three evaluation placements of the Purion M were shipped to customers. In 2013, the first
evaluation system was purchased. In 2014, Axcelis expects to close the other two evaluation
placements, receive follow-on orders from these evaluation customers and obtain new customer
Purion M design-wins.

(cid:129) High Current Implant. In December 2013, we announced our new high current ion implanter,
the Purion H. The Purion H fulfills all traditional high current requirements while extending
beyond traditional high current energy and dose ranges. In order to maximize utilization and
flexibility, the Purion H can process some traditional mid current implants. In addition, the
Purion H is extendable into ultra-low energy applications to satisfy future process requirements
including leakage current performance. In 2014, we expect to place Purion H evaluation systems
in multiple customer fabs, and our goal over the next several years, is to regain leadership in the
high current segment through sales of the Purion H.

We believe our ion implant products will continue to meet customer demand for advantages in

productivity, process performance and technical extendibility.

Dry Strip

In the process steps prior to ion implantation, a light sensitive, polymer-based liquid called

photoresist is spread in a uniformly thin film on the wafer. Through a process known as
photolithography, the photoresist is developed into a pattern like a stencil. Once the subsequent
implant processes and etch steps (in which the top layer of the surface of the wafer not covered by
photoresist is removed) are completed, the photoresist is no longer necessary and must be removed.
The primary means of removing photoresist and residue is a process called dry strip or ashing. Our dry
strip machines, also called ashers, use microwave and radio frequency energy to turn process gases into
plasma, which then acts to clean the surface of the wafer by removing the photoresist and unwanted
residue.

Axcelis has offered a full line of dry strip tools that cover the entire range of customer

applications. In December 2012, Lam purchased the intellectual property rights relating to our dry strip
systems business. As a result of this transaction, we ceased the sale of 300mm dry strip wafer
processing equipment in September 2013. We will continue to sell dry strip systems for smaller wafers
until December 2015 and support our installed base of dry strip systems indefinitely.

Aftermarket Support and Services

Through our Global Service Solutions business, we offer our customers extensive aftermarket
service and support throughout the lifecycle of the equipment we manufacture as well as equipment we
previously manufactured. We believe that approximately 3,000 of our products are in use in
33 countries worldwide. The service and support that we provide include used tools, spare parts,
equipment upgrades, and maintenance services. We provide varying levels of sales, service and
applications support out of our field offices to customers located in 33 countries. Revenue generated
through our service and support business represented about 61.6%, 61.0%, and 46.2% of revenue in
2013, 2012, and 2011, respectively.

To support our aftermarket business we have several hundred staff members, including sales and

marketing personnel, field service engineers, and spare parts and applications engineers, as well as
employees located at our manufacturing facilities who work with our customers to provide customer
training and documentation, product, process and applications support. In 2012, Ulvac Techno, a
Japanese company, began providing aftermarket services and support services for our products in
Japan.

Most of our customers maintain spare parts inventories for our machines. In addition to our

web-based spare parts management and replenishment tracking program, we offer a number of
Business-to-Business options to support our customers’ parts management requirements. Our Axcelis
Managed Inventory service offering, a parts consignment arrangement, provides the customer with full
spares support, with Axcelis retaining responsibility for the complete supply chain. The expansion of
these services provides ease of use alternatives that help us reduce order fulfillment costs and improve
cycle time, resulting in an expanded customer base for this service offering.

Sales and Marketing

We primarily sell our equipment and services through our direct sales force. We conduct sales and

marketing activities from our sales offices located in the United States, Taiwan, South Korea, China,
Germany, Singapore and Italy.

Since March 2009, SEN Corporation, or ‘‘SEN’’ (our former Japanese joint venture, which was

divested in 2009), has held a non-exclusive license to use certain patented and unpatented technology
associated with legacy products owned by the Company. Axcelis holds a reciprocal license of implant
technology from SEN. These royalty-free, perpetual cross licenses do not restrict our ability to sell any
of our products in Japan or elsewhere in the world.

Concurrently with the sale of assets to Lam in December 2012, the Company and Lam entered

into a Transition Agreement pursuant to which Lam granted us a worldwide, non-exclusive,
non-transferable, royalty-free license to use the dry strip intellectual property rights sold by the
Company. The license allows us to make and sell dry strip wafer processing equipment for
semiconductor applications for a limited transition period after the closing and to support our installed
base of dry strip equipment on a perpetual basis.

International revenue, including export sales from our U.S. manufacturing facilities to foreign

customers, sales by foreign subsidiaries and branches, accounted for 76.4% of total revenue in 2013,
70.2% of total revenue in 2012, and 72.3% in 2011. Substantially all of our sales are denominated in
U.S. dollars. See Note 17 to our Consolidated Financial Statements contained in Item 15 of this
Form 10-K for a breakdown of our revenue and long-lived assets in the United States, Europe and
Asia.

Customers

In 2013, the top 20 semiconductor manufacturers accounted for approximately 85.3% of total
semiconductor industry capital spending, down from 85.6% in 2012. These manufacturers are from the
largest semiconductor manufacturing regions in the world: the United States, Asia Pacific (Taiwan,
South Korea, Singapore, and China), Japan and Europe. The Company serves all leading
semiconductor manufacturers.

Revenue from our ten largest customers accounted for 69.1%, 70.6%, and 68.6%, of revenue in
2013, 2012, and 2011, respectively. We expect that sales of our products to relatively few customers will
continue to account for a high percentage of revenue for the foreseeable future. In 2013, one customer
accounted for 15.5% of revenue. In 2012, one customer accounted for 18.2% of revenue. In 2011, one
customer accounted for 21.2% of revenue.

Our Beverly, Massachusetts Advanced Technology Center houses a process development laboratory
with 12,500 sq. ft. of class 10/100/1000 clean room for product demonstrations and process development
and a 34,000 sq. ft. customer training center. The Advanced Technology Center provides infrastructure
and process capabilities that allow customers to test their unique process steps on our systems under
conditions that substantially replicate the customers’ production environment. This facility also provides
significant capability for our research and development efforts.

Research and Development

Our industry continues to experience rapid technological change, requiring us to frequently
introduce new products and enhancements. Our ability to remain competitive in this market will
depend in part upon our ability to develop new and enhanced systems and to introduce these systems
at competitive prices on a timely and cost effective basis.

We devote a significant portion of our personnel and financial resources to research and
development programs and seek to maintain close relationships with our customers to remain
responsive to their product needs. We have also sought to reduce the development cycle for new
products through a collaborative process whereby our engineering, manufacturing and marketing
personnel work closely together with one another and with our customers at an earlier stage in the
process. We also use 3D, computer-aided design, finite element analysis and other computer-based
modeling methods to test new designs.

Our expenses for research and development were $34.8 million, $40.4 million, and $47.2 million in
2013, 2012, and 2011, respectively, or 17.8%, 19.9%, and 14.8% of revenue, respectively. We expect that
research and development expenditures will continue to represent a similar level of investment in
future years.

Manufacturing

We manufacture products at our 417,000 sq. ft. ISO 9001:2008, ISO 14001:2004 certified plant in

Beverly, Massachusetts. Our facility employs best in class manufacturing techniques including lean
manufacturing, six sigma controls and advanced inventory management, purchasing and quality systems.

Our clean manufacturing process uses class 1000/10,000 space to facilitate most of our

manufacturing requirements.

The Company’s core manufacturing competency is built around system assembly and test which
remains an in house capability due to the high degree of expertise and intellectual property associated
with the process and design. Non-core work is sourced to one of several global partners and includes
items such as power distribution, vacuum systems, wafer handling and commodity level components. We
continuously pursue outsourcing opportunities where the economics are justified, with a goal of
enabling quality and margin improvement. Our supply chain team is globally focused and is located in
Beverly and Singapore. Customized and commercially available software solutions drive our planning,
purchasing and inventory tracking process.

Our products are designed to be assembled and tested in a modular fashion, which facilitates our

industry-recognized ‘‘ship-from-cell’’ process. Specially developed test stands, software and tooling
provide the framework for this accelerated delivery process. Customers that choose ship-from-cell
substantially improve their delivery times while receiving the same high level of quality provided by
more traditional longer cycle integration techniques. Product margins and inventory turns also improve
as a result of shorter factory cycle times and increased labor productivity.

Installation of our equipment is provided by factory and field teams. The process includes
assembling the equipment at its installation site and after it has been connected, recalibrating it to
specifications that had previously been met during factory testing.

Competition

The semiconductor wafer fabrication equipment industry is highly competitive and is characterized
by a small number of participants ranging in size. Significant competitive factors in the semiconductor
equipment market include price, cost of ownership, equipment performance, customer support,
capabilities and breadth of product line.

We have competed in two principal product markets of the semiconductor wafer fabrication
process: ion implantation and dry strip. In December 2012, we divested our dry strip intellectual
property and ceased selling 300mm dry strip systems in September 2013.

In ion implantation, we mainly compete against Applied Materials, Inc. The Company and Applied
Materials are the only ion implant manufacturers with a full range of implant products, and service and
support infrastructures able to service our customers globally. Three other niche players we compete
with from time to time include Nissin Ion Implantation Co., Ltd., Advanced Ion Beam Technology, Inc.
and SEN.

Intellectual Property

We rely on patent, copyright, trademark and trade secret protection, in the United States and in
other countries, as well as contractual restrictions, to protect our proprietary rights in our products and
our business. As of January 1, 2014, we had 295 active patents issued in the United States and 387
active patents granted in other countries, as well as 282 patent applications (32 in the United States
and 250 in other countries) on file with various patent agencies worldwide. Patents are generally in
effect for up to 20 years from the filing of the application.

We intend to file additional patent applications and grow our intellectual property portfolio as

appropriate. Although patents are important to our business, we do not believe that we are
substantially dependent on any single patent or any group of patents.

We have trademarks, both registered and unregistered, that are maintained to provide customer

recognition for our products in the marketplace. Trademark registrations generally remain in effect as
long as the trademarks are in use. From time to time, we enter into license agreements with third
parties under which we obtain or grant rights to patented or proprietary technology. Except for our
license agreement with SEN and our license from Lam (described above under ‘‘Sales and Marketing’’),
we do not believe that any of our licenses are currently material to us. We can give no assurance that
we, our licensors, licensees, customers or suppliers will not be subject to claims of patent infringement
or claims to invalidate our patents, or that any such claims will not be successful, requiring us to pay
substantial damages or remove certain features from our products or both.

Backlog

Systems backlog including deferred systems revenue was $9.3 million and $18.5 million as of
December 31, 2013 and 2012, respectively. We believe it is meaningful to investors to include deferred
systems revenue as part of our backlog. Deferred systems revenue represents revenue that will be
recognized in future periods based on prior shipments. Our policy is to include in backlog only those
system orders for which we have accepted purchase orders and typically are due to ship within six
months. All orders are subject to cancellations or rescheduling by customers with limited or no
penalties.

Backlog does not include orders received and fulfilled within a quarter. Our backlog at the
beginning of a quarter typically does not include all orders required to achieve our sales objectives for
that quarter. Because orders for services or parts received during the quarter are performed or shipped
within the same quarter, backlog is not necessarily an indicator of future business trends.

Bookings in the quarter ended December 31, 2013 were $16.8 million compared to $17.3 million in

the quarter ended December 31, 2012.

Employees

As of December 31, 2013, we had 826 employees and 37 temporary staff worldwide, of which 646

work in North America, 164 in Asia and 53 in Europe. We consider our relationship with our

employees to be good. Our employees are not represented by a labor union and are not subject to a
collective bargaining agreement. One of our European locations has formed a work council, which has
certain information and discussion rights under applicable law.

Environmental

We are subject to environmental laws and regulations in the countries in which we operate that

regulate, among other things: air emissions; water discharges; and the generation, use, storage,
transportation, handling and disposal of solid and hazardous wastes produced by our manufacturing,
research and development and sales activities. As with other companies engaged in like businesses, the
nature of our operations exposes us to the risk of environmental liabilities, claims, penalties and orders.

We are proud of our commitment to improving our environment. We believe that our operations

are in substantial compliance with applicable environmental laws and regulations and that there are no
pending environmental matters that would have a material impact on our business. We are ISO-14001
certified at our Beverly, MA facility.

Executive Officers of the Registrant

Mary G. Puma, 56, has been our President and Chief Executive Officer since January 2002 and

Chairman since 2005. From May 2000 until January 2002, Ms. Puma was our President and Chief
Operating Officer. In 1998, she became General Manager and Vice President of the Implant Systems
Division of Eaton Corporation, a global diversified industrial manufacturer. In May 1996, she joined
Eaton as General Manager of the Commercial Controls Division. Prior to joining Eaton, Ms. Puma
spent 15 years in various marketing and general management positions for General Electric Company.
Ms. Puma is a director of Nordson Corporation, North Shore Medical Center and Semiconductor
Equipment and Materials International (SEMI).

Kevin J. Brewer, 55, became our interim Chief Financial Officer in June 2013 and our Executive

Vice President and Chief Financial Officer in September 2013. Mr. Brewer also manages our
Information Technology and Global Operations. Mr. Brewer had been our Executive Vice President,
Global Operations since 2008 and our Senior Vice President, Manufacturing Operations since May
2005, prior to which he had been Vice President of Manufacturing Operations since October 2002 and
Director of Operations from 1999 to 2002. Prior to joining Axcelis in 1999, Mr. Brewer was Director of
Operations, Business Jets at Raytheon Aircraft Company, a leading manufacturer of business and
special mission aircraft owned by Raytheon Company, a manufacturer of defense, government and
commercial electronics, as well as aircraft. Prior to that, Mr. Brewer held various management positions
in operations and strategic planning in Raytheon Company’s Electronic Systems and Missile Systems
groups.

Lynnette C. Fallon, 54, is our Executive Vice President, Human Resources/Legal and General
Counsel, a position she has held since May 2005. Prior to that, Ms. Fallon was Senior Vice President
HR/Legal and General Counsel since 2002, and Senior Vice President and General Counsel since 2001.
Ms. Fallon has also been our corporate Secretary since 2001. Before joining Axcelis, Ms. Fallon was a
partner in the Boston law firm of Palmer & Dodge LLP since 1992, where she was head of the
Business Law Department from 1997 to 2001.

William Bintz, 57, has been our Executive Vice President, Product Development, Engineering and

Marketing since 2011. Prior to that, he was our Senior Vice President, Marketing since September
2007, after joining Axcelis in early 2006 as Director of Marketing for curing and cleaning products and
shortly thereafter becoming Vice President of Product Marketing. Prior to joining Axcelis, from 2002
Mr. Bintz was Product Director for Medium Current and High Energy Ion Implant System at Varian
Semiconductor Equipment Associates, Inc. Before that, he was General Manager of the Materials

Delivery Products Group at MKS Instruments, beginning in 1999, and General Manager of the
Thermal Processing Systems Division at Eaton Corporation (now Axcelis) beginning in 1995.

John E. Aldeborgh, 57, has been our Executive Vice President, Customer Operations since February

2013, having joined Axcelis in January 2013 as our Senior Vice President, Customer Operations. Prior
to joining Axcelis, Mr. Aldeborgh served as the Chief Executive Officer and President, and as a
Director, of innoPad, Inc., a privately held manufacturer of Chemical Mechanical Planarization pads,
since 2006. Mr. Aldeborgh served in various marketing and sales position at Varian Semiconductor
Equipment Associates Inc. from 2002 to 2005, including Vice President of Sales and Marketing. Prior
to Varian, Mr. Aldeborgh served as President and Chief Operating Officer of Ebara Technologies, Inc.,
from 1998 to 2002. Mr. Aldeborgh also held various positions, at Genus, Inc. from 1989 to 1998,
including Executive Vice President and Chief Operating Officer.

Douglas A. Lawson, 53, has been our Executive Vice President, Corporate Marketing and Strategy

since November 2013, having joined Axcelis as Vice President Business Development in 2010, and
holding the position of Senior Vice President of Strategic Initiatives beginning in 2011. Prior to joining
the company in 2010, he held the position of General Manager of Luminus Devices from 2009 to 2010.
He has over 30 years of experience in the technology industry, and has held numerous executive and
technical positions at BTU International, PRI Automation, Digital Equipment and Intel.

Item 1A. Risk Factors.

Risks Related to Our Business and Industry

Set forth below and elsewhere in this Form 10-K and in other documents we file with the SEC are
risks and uncertainties that could cause actual results to differ materially from the results contemplated
by the forward-looking statements contained in this Form 10-K. We note that factors set forth below,
individually or in the aggregate, may cause our actual results to differ materially from expected and
historical results. We note these factors for investors as permitted by the Private Securities Litigation
Reform Act of 1995. You should understand that it is not possible to predict or identify all such factors.
Consequently, you should not consider the following to be a complete discussion of all potential risks
or uncertainties.

If semiconductor manufacturers do not make sufficient capital expenditures, our sales and profitability will be
harmed.

New systems orders will depend upon demand from semiconductor manufacturers who build or

expand fabrication facilities. When the rate of construction or expansion of fabrication facilities
declines, demand for our systems will decline, reducing our revenue. Revenue decline also hurts our
profitability because our established cost structure and our continued investments in engineering,
research and development and marketing necessary to develop new products and to maintain extensive
customer service and support capabilities limit our ability to reduce expenses in proportion to declining
sales.

If we fail to develop and introduce reliable new or enhanced products and services that meet the needs of
semiconductor manufacturers, our results will suffer.

Rapid technological changes in semiconductor manufacturing processes require us to respond
quickly to changing customer requirements. Our future success will depend in part upon our ability to
develop, manufacture and successfully introduce new systems and product lines with improved
capabilities and to continue to enhance existing products. This will depend upon a variety of factors,
including new product selection, timely and efficient completion of product design and development

and of manufacturing and assembly processes, product performance in the field and effective sales and
marketing. In particular:

(cid:129) We must continue to develop competitive technical specifications of new systems, or

enhancements to our existing systems, and manufacture and ship these systems or enhancements
in volume in a timely manner.

(cid:129) We will need to accurately predict the schedule on which our customers will be ready to

transition to new products, in order to accurately forecast demand for new products while
managing the transition from older products.

(cid:129) We will need to effectively manage product reliability or quality problems that often exist with

new systems, in order to avoid reduced orders, higher manufacturing costs, delays in acceptance
and payment and additional service and warranty expenses.

(cid:129) Our new products must be accepted in the marketplace.

(cid:129) Our failure to meet any of these requirements will have a material adverse effect on our

operating results and profitability.

Our financial results may fluctuate significantly.

We derive our new systems revenue from the sale of a relatively small number of expensive
products to a small number of customers. We also sell used equipment in our aftermarket business.
The list prices on these systems range from $0.4 million to $5.0 million. At our current sales level, each
sale, or failure to make a sale, has a material effect on us in a particular quarter. In a given quarter, a
number of factors can adversely affect our revenue and results, including changes in our product mix,
increased fixed expenses per unit due to reductions in the number of products manufactured, and
higher fixed costs due to increased levels of research and development and expansion of our worldwide
sales and marketing organization. Our financial results also fluctuate based on gross profit realized on
sales. A variety of factors may cause gross profit as a percentage of revenue to vary, including the mix
and average selling prices of products sold, costs to manufacture and customize systems and warranty
costs. New product introductions may also affect our gross margins. Fluctuations in our financial results
may have an adverse effect on the price of our common stock.

Our financial results may fall short of anticipated levels; forecasting revenue and profitability is complex and
may be inaccurate.

Management may from time to time provide financial forecasts. These forecasts are based on
assumptions, believed to be reasonable when made, of fab utilization, shipment timing and system
acceptance timing. Any of these assumptions can prove erroneous and the level of revenue recognizable
in a particular quarter may vary from the forecast. Our lengthy sales cycle, coupled with customers’
competing capital budget considerations, make the timing of customer orders uneven and difficult to
predict. In addition, our backlog at the beginning of a quarter typically does not include all orders
required to achieve our sales objectives for that quarter and is not a reliable indicator of our future
sales. As a result, our revenue and operating results for a quarter depend on our shipping orders as
scheduled during that quarter, receiving customer acceptance of previously shipped products, and
obtaining new orders for products to be shipped in that same quarter. Any delay in, or cancellation of,
scheduled shipments and customer acceptances or in shipments from new orders could materially and
adversely affect our financial results.

Accounting rules addressing revenue recognition have added additional complexity in forecasting
quarterly revenue and profitability. Orders for our products usually contain multiple delivery elements
that result in revenue deferral under generally accepted accounting principles. Due to the foregoing
factors, investors should understand that our actual financial results for a quarter may vary significantly

from our forecasts of financial performance for that quarter. Failure to meet forecasted financial
performance may have an adverse effect on the price of our common stock.

We may be unable to obtain needed additional capital to finance our operations.

Our capital requirements may vary widely from quarter to quarter, depending on, among other

things, capital expenditures, fluctuations in our operating results, financing activities, acquisitions and
investments and inventory and receivables management. We believe that our existing cash and cash
equivalents will be sufficient to satisfy our anticipated cash requirements through the end of 2014 and
beyond, but this, of course, depends on the accuracy of our assumptions about levels of sales and
expenses. A number of factors, including those described in these ‘‘Risk Factors,’’ could prove our
assumptions wrong and cause us to require additional capital from external sources. Depending on
market conditions, future debt or equity financings may not be possible on attractive terms or at all. In
addition, future debt or equity financings could be dilutive to the existing holders of our common stock.

The semiconductor industry is highly cyclical and we expect that demand for our products will regularly
increase and decrease, making it difficult to manage the business and potentially causing harm to our sales
and profitability.

The semiconductor business is highly cyclical, experiencing upturns when the demand for our
products is high and downturns when our customers are not investing in new or expanded fabrication
facilities. From time to time, inventory buildups in the semiconductor industry, resulting in part from
periodic downturns, produce an oversupply of semiconductors. This will cause semiconductor
manufacturers to revise capital spending plans, resulting in reduced demand for capital equipment such
as our products. If an oversupply is not reduced by increasing demand from the various industries that
use semiconductors, which we cannot accurately predict, our sales and profitability will be harmed. Our
revenue can vary significantly from one point in the cycle to another, making it difficult to manage the
business, both when revenue is increasing and when it is decreasing. In addition, a substantial portion
of our operating expenses do not fluctuate with changes in volume. Significant decreases in revenue can
therefore have a disproportionate effect on profitability.

If we fail to compete successfully in the highly competitive semiconductor equipment industry, our sales and
profitability will decline.

The market for semiconductor manufacturing equipment is highly competitive and includes some

companies with substantially greater financial, engineering, manufacturing, marketing and customer
service and support resources than we have that may be better positioned to compete successfully in
the industry. In addition, there are smaller, emerging semiconductor equipment companies that could
provide innovative systems with technology that may have performance advantages over our systems.
We expect our competitors to continue to improve the design and performance of their existing
products and processes and to introduce new products and processes with improved price and
performance characteristics. If we are unable to improve or introduce competing products when
demanded by the markets, our business will be harmed. Finally, if we must lower prices to remain
competitive without commensurate cost of goods savings, our gross margins and profitability will be
adversely affected.

We have been dependent on sales to a limited number of large customers; the loss of any of these customers or
any reduction in orders from them could materially affect our sales.

Historically, we have sold a significant portion of our products and services to a limited number of

fabricators of semiconductor products. For example, in 2013, our top ten customers accounted for
69.1% of our net sales. None of our customers has entered into a long-term agreement requiring it to
purchase our products. Although the composition of the group comprising our largest customers has

varied from year to year, the loss of a significant customer or any reduction or delays in orders from
any significant customer could adversely affect us. The ongoing consolidation of semiconductor
manufacturers may also increase the harmful effect of losing one or more significant customers.

Axcelis is subject to the risks of operating internationally and we derive a substantial portion of our revenue
from outside the United States, especially from Asia.

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

United States. International sales, including export sales from our U.S. manufacturing facilities to
non-U.S. customers and sales by our non-U.S. subsidiaries and branches, accounted for 76.4% of total
revenue in 2013 in comparison to 70.2% in 2012 and 72.3% in 2011. System shipments to Asian
customers represented 77.8% of total shipment dollars in 2013 in comparison to 71.3% in 2012 and
60% in 2011. We anticipate that international sales will continue to account for a significant portion of
our revenue. Because of our dependence upon international sales, our results and prospects may be
adversely affected by a number of factors, including:

(cid:129) unexpected changes in laws or regulations resulting in more burdensome governmental controls,

tariffs, restrictions, embargoes or export license requirements;

(cid:129) difficulties in obtaining required export licenses;

(cid:129) volatility in currency exchange rates;

(cid:129) political and economic instability;

(cid:129) difficulties in accounts receivable collections;

(cid:129) extended payment terms beyond those customarily offered in the United States;

(cid:129) difficulties in managing suppliers, service providers or representatives outside the United States;

(cid:129) difficulties in staffing and managing foreign subsidiary and branch operations; and

(cid:129) potentially adverse tax consequences.

We may not be able to maintain and expand our business if we are not able to hire, retain and integrate
qualified personnel.

Our business depends on our ability to attract and retain qualified, experienced employees. There

is substantial competition for experienced engineering, technical, financial, sales and marketing
personnel in our industry. In particular, we must attract and retain highly skilled design and process
engineers. Competition for such personnel is intense, particularly in the Boston metropolitan area, as
well as in other locations around the world. If we are unable to retain our existing key personnel, or
attract and retain additional qualified personnel, we may from time to time experience levels of staffing
inadequate to develop, manufacture and market our products and perform services for our customers.
As a result, our growth could be limited or we could fail to meet our delivery commitments or
experience deterioration in service levels or decreased customer satisfaction, all of which could
adversely affect our financial results.

Our dependence upon a limited number of suppliers for many components and sub-assemblies could result in
increased costs or delays in the manufacture and sale of our products.

We rely to a substantial extent on outside vendors to manufacture many of the components and
sub-assemblies of our products. We obtain many of these components and sub-assemblies from either a
sole source or a limited group of suppliers. Accordingly, we may be unable to obtain an adequate
supply of required components on a timely basis, on price and other terms acceptable to us, or at all.
In addition, we often quote prices to our customers and accept customer orders for our products

before purchasing components and sub-assemblies from our suppliers. If our suppliers increase the cost
of components or sub-assemblies, we may not have alternative sources of supply and may not be able
to raise the price of our products to cover all or part of the increased cost of components, negatively
impacting our gross margins.

The manufacture of some of these components and sub-assemblies is an extremely complex

process and requires long lead times. As a result, we have in the past, and may in the future,
experience delays or shortages. If we are unable to obtain adequate and timely deliveries of our
required components or sub-assemblies, we may have to seek alternative sources of supply or
manufacture these components internally. This could delay our ability to manufacture or to ship our
systems on a timely basis, causing us to lose sales, incur additional costs, delay new product
introductions and suffer harm to our reputation.

Our international operations involve currency risk.

Substantially all of our sales are billed in U.S. dollars, thereby reducing the impact of fluctuations

in foreign exchange rates on our results. Operating margins of our foreign operations can fluctuate with
changes in foreign exchange rates to the extent revenues are billed in U.S. dollars and operating
expenses are incurred in the local functional currency. During the year ended December 31, 2013,
approximately 32.9% of our revenue was derived from foreign operations with this inherent risk. In
addition, at December 31, 2013, our operations outside of the United States accounted for
approximately 39.6% of our total assets, the majority of which was denominated in currencies other
than the U.S. dollar.

We are subject to cyber security risks, which could adversely affect our business.

We and certain of our third-party vendors receive and store personal information in connection
with our human resources operations and other aspects of our business. Despite our implementation of
security measures, our IT systems are vulnerable to damages from computer viruses, natural disasters,
unauthorized access, cyber-attack and other similar disruptions. Any system failure, accident or security
breach could result in disruptions to our operations. A material network breach in the security of our
IT systems could include the theft of our intellectual property or trade secrets. To the extent that any
disruptions or security breach results in a loss or damage to our data, or in inappropriate disclosure of
confidential information, it could cause significant damage to our reputation, affect our relationships
with our customers, lead to claims against us and ultimately harm our business. In addition, we may be
required to incur significant costs to protect against damage caused by these disruptions or security
breaches in the future.

Our stock price has been volatile and you could lose the value of your investment.

The trading price of our stock is likely to continue to be highly volatile and subject to wide

fluctuations. Your investment in our stock could lose value. Some of the factors that could significantly
affect the market price of our stock include:

(cid:129) actual or anticipated variations in results;

(cid:129) analyst reports or recommendations;

(cid:129) changes in interest rates; and

(cid:129) other events and factors, many of which are beyond our control.

The stock market in general has experienced extreme price fluctuations.

Our proprietary technology may be vulnerable to efforts by competitors to challenge or design around,
potentially reducing our market share.

We rely on a combination of patents, copyrights, trademark and trade secret laws, non-disclosure
agreements and other intellectual property protection methods to protect our proprietary technology.
Despite our efforts to protect our intellectual property, our competitors may be able to legitimately
ascertain the non-patented proprietary technology embedded in our systems. If this occurs, we may not
be able to prevent their use of this technology. Our means of protecting our proprietary rights may not
be adequate and our patents may not be sufficiently broad to prevent others from using technology that
is similar to or the same as our technology. In addition, patents issued to us have been, or might be
challenged, and might be invalidated or circumvented and any rights granted under our patents may
not provide adequate protection to us. Our competitors may independently develop similar technology,
duplicate features of our products or design around patents that may be issued to us. As a result of
these threats to our proprietary technology, we may have to resort to costly litigation to enforce or
defend our intellectual property rights. Finally, all patents expire after a period of time (in the U.S.,
patents expire 20 years from the date of filing of the patent application). Our market share could be
negatively impacted by the expiration of a patent which had created a barrier for our competitors.

Axcelis also has agreements with third parties for licensing of patented or proprietary technology
with Axcelis as the licensor or the licensee. Termination of license agreements could have an adverse
impact on our financial performance or ability to ship products with existing configurations.

We (or customers that we indemnify) might face intellectual property infringement claims or patent disputes
that may be costly to resolve and, if resolved against us, could be very costly to us and prevent us from
making and selling our systems.

From time to time, claims and proceedings have been or may be asserted against us relative to
patent validity or infringement matters. We typically agree to indemnify our customers from liability to
third parties for intellectual property infringement arising from the use of our products in their
intended manner. Therefore, we occasionally receive notification from customers who believe that we
owe them indemnification or other obligations related to infringement claims made against the
customers by third parties. Our involvement in any patent dispute or other intellectual property dispute
or action to protect trade secrets, even if the claims are without merit, could be very expensive to
defend and could divert the attention of our management. Adverse determinations in any litigation
could subject us to significant liabilities to third parties, require us to seek costly licenses from third
parties and prevent us from manufacturing and selling our systems. In addition, infringement
indemnification clauses in system sale agreements may require us to take other actions or require us to
provide certain remedies to customers who are exposed to indemnified liabilities. Any of these
situations could have a material adverse effect on our business results.

If operations were disrupted at Axcelis’ primary manufacturing facility it would have a negative impact on our
business.

We have one primary manufacturing facility, located in Massachusetts. Its operations could be

subject to disruption for a variety of reasons, including, but not limited to natural disasters, work
stoppages, operational facility constraints and terrorism. Such disruption could cause delays in
shipments of products to our customers and could result in cancellation of orders or loss of customers,
which could seriously harm our business.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

We own one property and lease 40 properties, of which 13 are located in the United States and
the remainder are located in Asia and Europe, including offices in Taiwan, Singapore, South Korea,
China, Malaysia, Italy, and Germany.

We own our principal facility in Beverly, Massachusetts, which comprises 417,000 square feet. The

facility is principally used for manufacturing, research and development, sales/marketing, customer
support, advanced process development, product demonstration, customer-training center and corporate
headquarters.

We believe that our manufacturing facilities and equipment generally are well maintained, in good

operating condition, suitable for our purposes, and adequate for our present operations. Our Beverly,
Massachusetts facility is ISO 9001:2008 and ISO 14001:2004 and our European office is ISO 9001:2008
certified.

Item 3. Legal Proceedings.

The Company is not presently a party to any litigation that it believes might have a material
adverse effect on its business operations. The Company is, from time to time, a party to litigation that
arises in the normal course of its business operations.

Item 4. Mine Safety Disclosures.

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases

of Equity Securities.

Our common stock trades on the Nasdaq Global Select Market under the symbol ACLS. The
following table sets forth the high and low closing sale prices as reported on the Nasdaq Global Select
Market during each of the quarters for the two most recent years. As of February 24, 2014, we had
approximately 4,500 stockholders of record. We have never paid any cash dividends to our shareholders
and do not anticipate paying cash dividends in the future and in any event, we would be restricted from
doing so by the terms of our bank credit agreement.

Common Stock Price

High

Low

2012
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1.88
$1.76
$1.20
$1.40

$1.41
$1.82
$2.27
$2.49

$1.36
$1.00
$0.78
$0.84

$1.09
$1.13
$1.79
$2.06

Item 6. Selected Financial Data.

The following selected consolidated statements of operations data for each of the three years
ended December 31, 2013, 2012, and 2011 and the consolidated balance sheet data as of December 31,
2013 and 2012 have been derived from the audited consolidated financial statements contained in
Item 15 of Part IV of this Form 10-K. The selected consolidated balance sheet data as of December 31,
2011 and 2010, and the statement of operations data for the years ended December 31, 2010 and 2009,
have been derived from the audited financial statements contained in our Form 10-K filed on
February 29, 2012. The consolidated balance sheet data as of December 31, 2009 has been derived
from the audited financial statements contained in our Form 10-K filed on March 14, 2011.

The historical financial information set forth below may not be indicative of our future

performance and should be read together with ‘‘Management’s Discussion and Analysis of Financial
Condition and Results of Operations’’ and our historical consolidated financial statements and notes to
those statements included in Item 7 of Part II and Item 15 of Part IV, respectively, of this Form 10-K.

Consolidated statements of operations data:
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity loss of SEN . . . . . . . . . . . . . . . . . . . . .
Income (loss) from operations . . . . . . . . . . . .
Income (loss) before income taxes . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) per share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares used in computing basic and diluted per

share amounts:

Years ended December 31,

2013

2012

2011

2010

2009

(In thousands, except per share amounts)

$195,632
67,935
—
(14,618)
(16,104)
(17,144)

$203,385
58,171
—
(30,938)
(32,388)
(34,034)

$319,416
114,737
—
7,132
7,471
5,077

$275,212
85,838
—
(13,367)
(17,261)
(17,573)

$133,022
28,064
(3,238)
(69,434)
(76,603)
(77,468)

$
$

(0.16) $
(0.16) $

(0.32) $
(0.32) $

0.05
0.05

$
$

(0.17) $
(0.17) $

(0.75)
(0.75)

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

108,869
108,869

107,619
107,619

106,234
109,098

104,522
104,522

103,586
103,586

Consolidated balance sheet data:
Cash and cash equivalents . . . . . . . . . . . . . . .
Working capital . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term liabilities . . . . . . . . . . . . . . . . . . . .
Stockholders’ equity . . . . . . . . . . . . . . . . . . . .

$ 46,290
149,448
233,549
22,087
176,002

$ 44,986
145,443
222,158
6,300
186,076

$ 46,877
164,561
269,245
7,218
214,555

$ 45,743
160,501
280,872
7,176
205,567

$ 45,020
163,849
250,603
4,447
216,399

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Certain statements in ‘‘Management’s Discussion and Analysis of Financial Condition and Results of
Operations’’ are forward-looking statements that involve risks and uncertainties. Words such as may, will,
should, would, anticipates, expects, intends, plans, believes, seeks, estimates and similar expressions identify
such forward-looking statements. The forward-looking statements contained herein are based on current
expectations and entail various risks and uncertainties that could cause actual results to differ materially
from those expressed in such forward-looking statements. Factors that might cause such a difference include,
among other things, those set forth under ‘‘Liquidity and Capital Resources’’ and ‘‘Risk Factors’’ and others
discussed elsewhere in this Form 10-K. Readers are cautioned not to place undue reliance on these forward-
looking statements, which reflect management’s analysis only as of the date hereof. We assume no obligation
to update these forward-looking statements to reflect actual results or changes in factors or assumptions
affecting forward-looking statements, except as may be required by law.

Overview

The semiconductor capital equipment industry is subject to significant cyclical swings in capital

spending by semiconductor manufacturers. Capital spending is influenced by demand for
semiconductors and the products using them, the utilization rate and capacity of existing semiconductor
manufacturing facilities and changes in semiconductor technology, all of which are outside of our
control. As a result, our revenue and gross margins fluctuate from year to year and period to period.
Our established cost structure does not vary significantly with changes in volume. We may experience
fluctuations in operating results and cash flows depending on our revenue as driven by the level of
capital expenditures by semiconductor manufacturers.

In December 2012, we sold to Lam Research Corporation the intellectual property rights and
other assets relating to our dry strip systems product line. The sold intellectual property rights included,
among other things, worldwide patent rights, patent applications, copyrights, industrial designs,
know-how and related rights used by us in our dry strip products. As a result of this transaction, we
ceased the sale of 300mm dry strip wafer processing equipment in September 2013. We can sell dry
strip systems for smaller wafers until December 2015 and support our installed base of dry strip systems
indefinitely. As a result of this continuing interest in the dry strip business, the sale of the intellectual
property rights and other assets to Lam have been reported in continuing operations.

Consolidation and partnering within the semiconductor manufacturing industry has resulted in a

smaller number of customers representing a substantial portion of our business. Our net revenue from
our ten largest customers accounted for 69.1% of total revenue for the year ended December 31, 2013
compared to 70.6% and 68.6% of revenue for the years ended December 31, 2012 and 2011,
respectively.

A successful semiconductor equipment manufacturer must not only provide some of the most
technically complex products manufactured in the world but also must design its business to thrive
during the inevitable low points in the cycle. The most recent cycle began with weak industry conditions
in mid-2011 which continued through the first quarter of 2013. Beginning in the second quarter of
2013, we entered a period of gradual market improvement which continued during the third and fourth
quarters. Our financial results in 2013 reflect our investment of a significant portion of our resources in
research and development programs related to our new leading edge Purion ion implantation platform
and the market introduction and initial sales of Purion systems. These results also reflect our efforts to
lower our breakeven revenue levels by maintaining tight control of discretionary spending. We expect
the market for our products to continue to improve through 2014. Throughout 2014 we expect to
continue to grow Purion system sales and maintain tight control of our cost structure in order to
sustain profitability throughout the full industry cycle. In the event that industry conditions cause the
demand for our products to decline in future periods, we believe that we can align manufacturing and

operating expense levels to changing business conditions and provide sufficient liquidity to support
operations.

Operating results for the years presented are not necessarily indicative of the results that may be

expected for future interim periods or years as a whole.

Critical Accounting Estimates

Management’s discussion and analysis of our financial condition and results of operations are
based upon Axcelis’ consolidated financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States. The preparation of these financial
statements requires management to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an
on-going basis, we evaluate our estimates and assumptions. Management’s estimates are based on
historical experience and on various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.

We believe the following accounting policies are critical in the portrayal of our financial condition

and results of operations and require management’s most significant judgments and estimates in the
preparation of our consolidated financial statements. For additional accounting policies see Notes to
Consolidated Financial Statements Note 2. Summary of Significant Accounting Policies.

Revenue Recognition

Our revenue recognition policy involves significant judgment by management. As described below,

we consider a broad array of facts and circumstances in determining when to recognize revenue,
including contractual future service obligations to the customer, the complexity of the customer’s
post-delivery acceptance provisions, payment history, customer creditworthiness and the installation
process. In the future, if the post-delivery acceptance provisions and installation process become more
complex or result in a materially lower rate of acceptance, we may have to revise our revenue
recognition policy, which could delay the timing of revenue recognition.

Our system sales transactions are made up of multiple elements, including the system itself and

elements that are not delivered simultaneously with the system. These undelivered elements might
include a combination of installation services, extended warranty and support and spare parts, all of
which are generally covered by a single sales price.

Our system revenue arrangements with multiple elements are divided into separate units of
accounting if specified criteria are met, including whether the delivered element has stand-alone value
to the customer. If the criteria are met, then the consideration received is allocated among the separate
units based on their relative selling price, and the revenue is recognized separately for each of the
separate units.

We determine selling price for each unit of accounting (element) using vendor specific objective

evidence (‘‘VSOE’’) or third-party evidence (‘‘TPE’’), if they exist, otherwise, we use best estimated
selling price (‘‘BESP’’). We generally expect that we will not be able to establish TPE due to the nature
of our products, and, as such, we typically will determine selling price using VSOE or BESP.

Where required, we determine BESP for an individual element based on consideration of both
market and Company-specific factors, including the selling price and profit margin for similar products,
the cost to produce the deliverable and the anticipated margin on that deliverable and the
characteristics of the varying markets in which the deliverable is sold.

Systems are not sold separately and VSOE or TPE is not available for the systems element.

Therefore the selling price associated with systems is based on BESP. The allocated value for
installation in the arrangement includes the greater of (i) the relative selling price of the installation or
(ii) the portion of the sales price that will not be received until the installation is completed (the
‘‘retention’’). The selling price of installation is based upon the fair value of the service performed,
including labor, which is based upon the estimated time to complete the installation at hourly rates,
and material components, both of which are sold separately. The selling price of all other elements
(extended warranty for support, spare parts, and labor) is based upon the price charged when these
elements are sold separately, or VSOE.

Product revenue for products which have demonstrated market acceptance, is generally recognized

upon shipment provided title and risk of loss has passed to the customer, evidence of an arrangement
exists, prices are contractually fixed or determinable, collection is reasonably assured through historical
collection results and regular credit evaluations, and there are no uncertainties regarding customer
acceptance. Revenue from installation services is recognized at the time acceptance has occurred, as
defined in the sales documentation, or, for certain customers, when both the acceptance has occurred
and retention payment has been received. Revenue for other elements is recognized at the time
products are shipped or the related services are performed.

We generally recognize product revenue for systems which have demonstrated market acceptance

at the time of shipment because the customer’s post-delivery acceptance provisions and installation
process have been established to be routine, commercially inconsequential and perfunctory. We believe
the risk of failure to complete a system installation is remote.

For initial shipments of systems with new technologies or in the small number of instances where

we are unsure of meeting the customer’s specifications or obtaining customer acceptance upon
shipment of the system, we will defer the recognition of systems revenue and related costs until written
customer acceptance of the system is obtained. This deferral period is generally within twelve months
of shipment.

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. 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.

Future actual performance could be materially different from our current forecasts, which could
impact future estimates of undiscounted cash flows and may result in the impairment of the carrying
amount of the long-lived assets in the future. This could be caused by strategic decisions made in
response to economic and competitive conditions, the impact of the economic environment on our
customer base, or a material adverse change in our relationships with significant customers.

We did not record an impairment charge for the years ended December 31, 2013, 2012 or 2011.

Accounts Receivable—Allowance for Doubtful Accounts

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
allowances may be necessary.

Inventory—Allowance for Excess and Obsolescence

We record an allowance for estimated excess and obsolete inventory. The allowance is determined

using management’s assumptions of materials usage, based on estimates of forecasted and historical
demand and market conditions. If actual market conditions become less favorable than those projected
by management, additional inventory write-downs may be required.

Although we make every effort to ensure the accuracy of our forecasts or product demand and

pricing assumptions, any significant unanticipated changes in demand, pricing, or technical
developments would significantly impact the value of our inventory and our reported operating results.
In the future, if we find that estimates are too optimistic and determine that inventory needs to be
written down, the Company will recognize such costs in our cost of revenue at the time of such
determination. Conversely, if we find our estimates are too pessimistic and we subsequently sell product
that has previously been written down, our gross margin in that period will be favorably impacted.

In 2013, we recorded an $8.5 million net decrease to our inventory reserves, primarily related to an

$8.7 million disposal of previously, fully reserved inventory in the fourth quarter of 2013.

Product Warranty

We generally offer a one year warranty for all of our systems, the terms and conditions of which

vary depending upon the product sold. For all systems sold, we accrue a liability for the estimated cost
of standard warranty at the time of system shipment and defer the portion of systems revenue
attributable to the fair value of non-standard warranty. Costs for non-standard warranty are expensed
as incurred. Factors that affect our warranty liability include the number of installed units, historical
and anticipated product failure rates, material usage and service labor costs. We periodically assess the
adequacy of our recorded liability and adjust the amount as necessary.

Share-Based Compensation

Stock-based compensation expense with time based conditions is estimated as of the grant date
based on the fair value of the award and is recognized as expense over the requisite service period,
which generally equals the vesting period, based on the number of awards that are expected to vest.
Estimating the fair value for stock options requires judgment, including the expected term of our stock
options, volatility of our stock, expected dividends, risk-free interest rates over the expected term of the
options and the expected forfeiture rate.

We are responsible for estimating volatility and have considered a number of factors when

estimating volatility. Our method of estimating expected volatility for all stock options granted relies on
a combination of historical and implied volatility. We believe that this blended volatility results in a
more accurate estimate of the grant-date fair value of employee stock options because it more
appropriately reflects the market’s current expectations of future volatility.

In limited circumstances, we also issue stock option grants with vesting based on performance

conditions, such as the price of our common stock, or, a combination of time or performance
conditions. The fair values and derived service periods for all grants that have vesting based on these
performance conditions are estimated using the Monte Carlo valuation method. For each stock option
grant with vesting based on a combination of time or performance conditions where vesting will occur
if either condition is met, the related compensation costs are recognized over the shorter of the explicit
service period or the derived service period.

We use the straight-line attribution method to recognize expense for stock-based awards such that

the expense associated with awards is evenly recognized throughout the period.

The amount of stock-based compensation recognized is based on the value of the portion of the

awards that are ultimately expected to vest. 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 benefits of tax deductions in excess of recognized compensation cost is reported as a financing

cash flow, rather than as an operating cash flow. Because the Company does not recognize the benefit
of tax deductions in excess of recognized compensation cost due to its cumulative net operating loss
position, this had no impact on the Company’s consolidated statement of cash flows as of and for the
years ended December 31, 2013, 2012 and 2011.

Income Taxes

We record income taxes using the asset and liability method. Deferred income tax assets and

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

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

We establish a valuation allowance when it is more likely than not that some portion or all of the

deferred tax assets will not be realized. Significant management judgment is required in determining
our provision for income taxes, the deferred tax assets and liabilities and any valuation allowance
recorded against those net deferred tax assets.

We evaluate the weight of all available evidence such as historical losses, projected future taxable

income and the expected timing of the reversals of existing temporary differences to determine whether
it is more likely than not that some portion or all of the net deferred income tax assets will not be
realized.

Based on our level of deferred tax assets as of December 31, 2013 and our level of historical U.S.

losses, we have determined that the current uncertainty regarding the realization of these assets is
sufficient to warrant the need for a full valuation allowance against our U.S. net deferred tax assets.
We have also determined that a valuation allowance is required on a portion of our foreign deferred
tax assets.

Our income tax expense includes the largest amount of tax benefit for an uncertain tax position

that is more likely than not to be sustained upon audit based on the technical merits of the tax
position. Settlements with tax authorities, the expiration of statutes of limitations for particular tax
positions, or obtaining new information on particular tax positions may cause a change to the effective
tax rate. The Company recognizes accrued interest related to unrecognized tax benefits as interest
expense and penalties as operating expense.

Change in Accounting Estimate

Effective October 1, 2013, we changed our estimate of the useful life of our assets manufactured

for internal use (which are amortized on a straight-line basis) from five years to ten years. This change
in estimate resulted from the evaluation of the life cycle of our assets manufactured for internal use
and the conclusion, that based on recent experience these products consistently have a longer life than
previously estimated. We believe that this change in estimate more accurately reflects the productive
life of these assets. The change in useful life has been accounted for as a change in accounting

estimate, and will be effective on new assets manufactured for internal use, on a prospective basis
beginning October 1, 2013.

As a result of the change in the estimated life of assets manufactured for internal use, profit
before tax and net profit were approximately $0.1 million higher, for both the fourth quarter and the
full year ended December 31, 2013. The change in estimated useful life of assets did not have an
impact on the earnings per share disclosed in the consolidated statements of operations.

Results of Operations

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

Years Ended December 31,

2013

2012

2011

Revenue:

Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

86.7%
13.3

85.7%
14.3

90.0%
10.0

Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

100.0

Cost of revenue:

Total cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses:

Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of dry strip systems assets and intellectual property . . . . . .
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income (loss) from operations: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense):

Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net

Total other income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income (loss) before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

54.5
10.8

65.3

34.7

17.8
10.8
13.0
(0.6)
1.2

42.2

(7.5)

—
(0.3)
(0.5)

(0.8)

(8.3)
0.5

60.8
10.6

71.4

28.6

19.9
12.7
13.1
(3.9)
2.0

43.8

(15.2)

—
—
(0.7)

(0.7)

(15.9)
0.8

56.8
7.3

64.1

35.9

14.8
9.1
9.8
—
—

33.7

2.2

—
—
0.1

0.1

2.3
0.7

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8.8)% (16.7)%

1.6%

Revenue

The following table sets forth our revenues.

Years ended
December 31,

Period-to-Period
Change

Years ended
December 31,

Period-to-Period
Change

2013

2012

2011

(dollars in thousands)

Revenues:
Product

. . . . . . . . .

$169,587

$174,309

$(4,722)

(2.7)% $174,309

$287,324

$(113,015)

(39.3)%

Percentage of

revenues . . . . . .
Services . . . . . . . . .

Percentage of

86.7%

85.7%

90.0%

26,045

29,076

(3,031)

(10.4)% 29,076

32,092

(3,016)

(9.4)%

revenues . . . . . .

13.3%

14.3%

10.0%

Total revenues . . .

$195,632

$203,385

$(7,753)

(3.8)% $203,385

$319,416

$(116,031)

(36.3)%

2013 Compared with 2012

Product

Product revenue which includes new system sales, sales of spare parts, product upgrades and used
system sales was $169.6 million or 86.7% of revenue in 2013, compared with $174.3 million, or 85.7%
or revenue in 2012. The decrease in product revenue in 2013 is attributable to the weak semiconductor
market and a related decrease in capital spending by semiconductor manufacturers early in 2013. Weak
sales of our ion implant systems combined with our customers’ suspended spending for consumables,
spare parts and upgrades resulted in this decline in product revenue in 2013 compared with 2012.

Approximately 23.1% of systems revenue in 2013 was from sales of 200mm products and 76.9%

was from sales of 300mm products, compared with 23.4% and 76.6% for sales of 200mm products and
300mm products in 2012, respectively.

A portion of our revenue from system sales is deferred until installation and other services related
to future deliverables are performed. The total amount of deferred revenue at December 31, 2013 and
2012 was $4.7 million and $6.9 million, respectively. The decrease was mainly due to the decrease in
systems sales in 2013 and the timing of acceptance of deferred system sales.

Services

Service revenue, which includes the labor component of maintenance and service contracts and
fees for service hours provided by on-site service personnel, was $26.0 million, or 13.3% of revenue for
2013, compared with $29.1 million, or 14.3% of revenue for 2012. Although service revenue should
increase with the expansion of the installed base of systems, it can fluctuate from period to period
based on capacity utilization at customers’ manufacturing facilities, which affects the need for
equipment service. The decrease during 2013 was primarily due to a decrease in fabrication utilization
in the semiconductor industry during 2013.

2012 Compared with 2011

Product

Product revenue was $174.3 million or 85.7% of revenue in 2012, compared with $287.3 million, or

90.0% or revenue in 2011. The decrease in product revenue in 2012 is attributable to the continued
weak semiconductor market and a related decrease in capital spending by semiconductor manufacturers
during 2012. Ongoing weak sales of our ion implant and dry strip systems combined with our

customers’ suspended spending for consumables, spare parts and upgrades resulted in this decline in
product revenue in 2012 compared with 2011.

Approximately 23.4% of systems revenue in 2012 was from sales of 200mm products and 76.6%

was from sales of 300mm products, compared with 24.9% and 75.1% for sales of 200mm products and
300mm products in 2011, respectively.

The total amount of deferred revenue at December 31, 2012 and 2011 was $6.9 million and
$12.3 million, respectively. The decrease was mainly due to the decrease in systems sales in 2012 and
the timing of acceptance of deferred system sales.

Services

Service revenue was $29.1 million, or 14.3% of revenue for 2012, compared with $32.1 million, or

10.0% of revenue for 2011. The decrease during 2012 was primarily due to a decrease in fabrication
utilization in the semiconductor industry during 2012.

Revenue Categories used by Management

In addition to the line item revenue categories discussed above, management also uses revenue
categorizations which look at revenue by product line (the most significant of which is ion implant) and
by aftermarket, as described below.

2013 Compared with 2012

Ion Implant

Included in total revenue of $195.6 million in 2013 is revenue from sales of ion implantation

products and related service of $164.0 million, or 83.8% of total revenue, compared with $156.1 million,
or 76.7%, of total revenue in 2012. The increase in ion implant’s share of total revenue for 2013
reflects a reduction in dry strip revenue following the sale of assets relating to the dry strip product line
in December 2012 as discussed in the Overview. Total revenue in ion implant increased slightly as the
market improved in 2013.

Aftermarket

We refer to the business of selling spare parts, product upgrades, and used systems combined with

the sale of maintenance labor and service contracts and service hours, as the ‘‘aftermarket’’ business.
Included in total revenue of $195.6 million in 2013 is revenue from our aftermarket business of
$120.6 million, compared to $124.1 million for 2012. Aftermarket revenue generally increases with the
expansion of the installed base of systems but can fluctuate from period to period based on capacity
utilization at customers’ manufacturing facilities which affects the sale of spare parts and demand for
equipment service. The decrease in aftermarket revenue in 2013 compared to 2012 was due to a
decrease in fabrication utilization in the semiconductor industry during 2013.

2012 Compared with 2011

Ion Implant

Included in total revenue of $203.4 million in 2012 is revenue from sales of ion implantation

products and related service of $156.1 million, or 76.7% of total revenue, compared with $237.9 million,
or 74.5%, of total revenue in 2011. The dollar decrease was due to the factors discussed above for
product revenue. Annual revenue from the sale of ion implantation products and service typically
averages from 70.0% to 80.0% of total revenue.

Aftermarket

Included in total revenue of $203.4 million in 2012 is revenue from our aftermarket business of

$124.1 million, compared to $147.6 million for 2011. The decrease in aftermarket revenue in 2012
compared to 2011 was due to a decrease in fabrication utilization in the semiconductor industry during
2012.

Gross Profit / Gross Margin

The following table sets forth our gross profit.

Years ended
December 31,

Period-to-Period
Change

Years ended
December 31,

Period-to-Period
Change

2013

2012

2011

(dollars in thousands)

Gross Profit:

Product . . . . . . . . . . . .
Product gross margin . .
Services . . . . . . . . . . . .
Services gross margin . .

$62,909

$50,716

$12,193

24.0% $50,716

$106,083

$(55,367)

(52.2)%

37.1%
5,026
19.3%

29.1%

36.9%

7,455

(2,429)

(32.6)% 7,455

8,654

(1,199)

(13.9)%

25.6%

27.0%

Total gross profit . . .

$67,935

$58,171

$ 9,764

16.8% $58,171

$114,737

$(56,566)

(49.3)%

Gross margin . . . . .

34.7%

28.6%

35.9%

2013 Compared with 2012

Product

Gross margin from product revenue was 37.1% for the twelve months ended December 31, 2013,

compared to 29.1% for the twelve months ended December 31, 2012, an increase of 8.0 percentage
points. Gross profit increased by 7.0 percentage points due to a lower excess inventory charge. A
favorable mix of systems sales and lower warranty costs increased gross profit by 1.9 percentage points.
These increases were partially offset by a 0.9 percentage point decrease in gross profit resulting from
lower margins on parts and upgrade revenue.

Services

Gross margin from service revenue was 19.3% for the twelve months ended December 31, 2013,
compared to 25.6% for the twelve months ended December 31, 2012. The decrease in gross profit is
attributable to changes in the mix of service contracts and the unfavorable absorption of fixed service
costs.

2012 Compared with 2011

Product

Gross margin from product revenue was 29.1% for the twelve months ended December 31, 2012,

compared to 36.9% for the twelve months ended December 31, 2011, a decrease of 7.8 percentage
points. Gross profit decreased by 7.7 percentage points due to a higher excess inventory charge of
$13.4 million recorded during the fourth quarter of 2012, as a result of our comprehensive review of
our worldwide inventory levels. Lower systems sales volumes and the related unfavorable absorption of
fixed overhead costs also contributed to the reduction in gross profit by 9.0 percentage points. These
decreases were partially offset by an 8.9 percentage point increase in gross profit resulting from a
higher margin mix of parts and upgrade revenue.

Services

Gross margin from service revenue was 25.6% for the twelve months ended December 31, 2012,
compared to 27.0% for the twelve months ended December 31, 2011. The decrease in gross profit is
attributable to changes in the mix of service contracts and the unfavorable absorption of fixed service
costs.

Operating Expenses

The following table sets forth our operating expenses:

Percentage of revenues

Research and development
Percentage of revenues

. .
. . . .
Sales and marketing . . . . . . .
. . . .
General and administrative . .
. . . .

Percentage of revenues
Gain on sale of dry strip
assets and intellectual
property . . . . . . . . . . . . . .
. . . .
Percentage of revenues
Restructuring charges . . . . . .
. . . .

Percentage of revenues

Years ended
December 31,

Period-to-Period
Change

Years ended
December 31,

Period-to-Period
Change

2013

2012

2011

$34,756

$40,401

17.8%

19.9%

(dollars in thousands)
$(5,645) (14.0)% $40,401

19.9%

21,159

25,889

(4,730) (18.3)% 25,889

10.8%

12.7%

25,471

26,554

(1,083)

(4.1)% 26,554

13.0%

13.1%

$ 47,176

$ (6,775) (14.4)%

14.8%

29,255

9.1%

31,174

9.8%

(3,366) (11.5)%

(4,620) (14.8)%

(1,167)

(7,904)

6,737

85.2% (7,904)

(0.6)%

(3.9)%

2,334

1.2%

4,169

(1,835) (44.0)% 4,169

2.0%

—
0.0%
—
0.0%

(7,904) —%

4,169 —%

Total operating expenses . . . .

$82,553

$89,109

$(6,556)

(7.4)% $89,109

$107,605

$(18,496) (17.2)%

Percentage of revenues . . .

42.2%

43.8%

33.7%

Our operating expenses consist primarily of personnel costs, including salaries, commissions,
bonuses, share-based compensation and related benefits and taxes; project material costs related to the
design and development of new products and enhancement of existing products; and professional fees,
travel and depreciation expenses. Personnel costs are our largest expense, representing $47.3 million, or
58.1% of our total operating expenses, excluding the gain on sale of the dry strip assets and intellectual
property of $1.2 million and restructuring charges of $2.3 million, for the year ended December 31,
2013; $52.5 million, or 56.5%, of our total operating expenses, excluding the gain on sale of the dry
strip assets and intellectual property of $7.9 million and restructuring charges of $4.2 million for the
year ended December 31, 2012; and $62.5 million, or 58.1%, of our total operating expenses for the
year ended December 31, 2011. In general, operating expenses declined from 2011 to 2013 as a result
of our efforts to maintain tight control of discretionary spending.

Research and Development

Years ended
December 31,

Period-to-
Period
Change

Years ended
December 31,

Period-to-
Period
Change

2013

2012

2011

Research and development . . .
Percentage of revenues . . . . . .

$34,756

$40,401

17.8% 19.9%

(dollars in thousands)
$(5,645) (14.0)%$40,401

$47,176

$(6,775) (14.4)%

19.9% 14.8%

Our ability to remain competitive depends largely on continuously developing innovative

technology, with new and enhanced features and systems and introducing them at competitive prices on

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

2013 Compared with 2012

Research and development expense was $34.8 million in 2013, a decrease of approximately
$5.6 million, or 14.0%, compared with $40.4 million in 2012. The decrease was primarily due to the
reduction in payroll costs of $3.2 million as a result of lowering our headcount through reductions in
force. As we focused our R&D spend on critical programs, consulting, project material and related
costs decreased by $0.5 million and depreciation expense for internal use assets used as demonstration
and/or test systems decreased by $1.5 million.

2012 Compared with 2011

Research and development expense was $40.4 million in 2012, a decrease of approximately
$6.8 million, or 14.4%, compared with $47.2 million in 2011. The decrease was primarily due to the
reduction in payroll costs of $2.4 million as a result of lowering our headcount through reductions in
force and the cost savings realized by three weeks of unpaid furloughs taken by our employees. As we
focused our R&D spend on critical programs, consulting and project material costs decreased by
$2.6 million and depreciation expense for internal use assets used as demonstration and/or test systems
decreased by $1.4 million.

Sales and Marketing

Years ended
December 31,

Period-to-
Period
Change

Years ended
December 31,

Period-to-
Period
Change

2013

2012

2011

Sales and marketing . . . . .
Percentage of revenues . . .

$21,159

$25,889

10.8% 12.7%

$(4,730)

(dollars in thousands)
(18.3)% $25,889

$29,255

$(3,366)

(11.5)%

12.7%

9.1%

Our sales and marketing expenses result primarily from the sale of our equipment and services

through our direct sales force.

2013 Compared with 2012

Sales and marketing expense was $21.2 million in 2013, a decrease of $4.7 million, or 18.3%,
compared with $25.9 million in 2012. The decrease was primarily due to the reduction in payroll costs
of $1.6 million as a result of lowering our headcount through reductions in force. In addition,
consulting and project material costs decreased by $0.3 million and travel costs decreased by
$0.3 million due to reduced travel. In addition, there was a one-time marketing expense of $2.1 million
associated with our evaluation programs in 2012.

2012 Compared with 2011

Sales and marketing expense was $25.9 million in 2012, a decrease of $3.4 million, or 11.5%,
compared with $29.3 million in 2011. The decrease was primarily due to the reduction in payroll costs
of $5.0 million as a result of lowering our headcount through reductions in force and the cost savings
realized by three weeks of unpaid furloughs taken by our employees. In addition, freight expenses
decreased by $0.5 million due to lower shipments and travel costs decreased by $0.8 million due to
reduced travel. The decreases in expenses were partially offset by a one-time marketing expense of
$2.1 million associated with our evaluation programs and an increase in consulting expenses of
$0.4 million.

General and Administrative

Years ended
December 31,

Period-to-
Period
Change

Years ended
December 31,

Period-to-
Period
Change

2013

2012

2011

General and administrative .
Percentage of revenues . . .

$25,471

$26,554

13.0% 13.1%

(dollars in thousands)
(4.1)% $26,554

$(1,083)

$31,174

$(4,620) (14.8)%

13.1%

9.8%

2013 Compared with 2012

General and administrative expense was $25.5 million in 2013, a decrease of $1.1 million, or 4.1%

compared with $26.6 million in 2012. The decrease was due to the reduction in payroll costs of
$0.4 million as a result of lower headcount, lower legal fees of $0.5 million associated with patents
related to our dry strip product line which was sold in 2012, and lower facility related costs.

2012 Compared with 2011

General and administrative expense was $26.6 million in 2012, a decrease of $4.6 million, or 14.8%

compared with $31.2 million in 2011. The decrease was due to the reduction in payroll costs of
$2.6 million as a result of lowering our headcount through reductions in force and the cost savings
realized by three weeks of unpaid furloughs taken by our employees, lower facility related costs of
$1.1 million, which were partially due to the three weeks of plant shutdowns, lower professional fees of
$0.3 million and lower consulting costs of $0.6 million.

Gain on Sale of Dry Strip Assets and Intellectual Property

On December 3, 2012, we sold our dry strip system assets and intellectual property to Lam

Research.

2013 Compared with 2012

The $1.2 million gain on sale of dry strip assets and intellectual property in 2013 was related to the

achievement of reaching certain milestones with Lam in 2013.

2012 Compared with 2011

The $7.9 million gain on sale of dry strip assets and intellectual property in 2012 was comprised of

$8.7 million in proceeds received for the sale, offset by approximately $0.8 million of product and
material costs related to the lab system and other components purchased by Lam.

Restructuring

During 2012 and 2013, we implemented multiple reductions in force to improve the focus of our

operations, control costs to achieve future profitability and conserve cash.

2013 Compared with 2012

In 2013, we recorded $2.3 million in restructuring expense for severance and related costs as a
result of this reduction in force as compared to $4.2 million in restructuring expense for severance and
related costs during the twelve months ended December 31, 2012.

2012 Compared with 2011

In 2012, we recorded a restructuring expense for severance and related costs of $4.2 million, which

included a $0.1 million non-cash charge related to the modification of a share-based award during
twelve months ended December 31, 2012. Approximately $0.5 million of the restructuring costs were
associated with the sale of the dry strip assets and intellectual property.

Other Income (Expense)

2013 Compared with 2012

Other expense was $1.5 million for the twelve months ended December 31, 2013 compared to
other expense of $1.5 million for the twelve months ended December 31, 2012. Other income (expense)
consists primarily of foreign exchange gains and losses attributable to fluctuations of the U.S. dollar
against the local currencies of certain of the countries in which we operate, interest earned on our
invested cash balances, bank fees associated with our financing arrangements and interest expense
related to our term loan.

2012 Compared with 2011

Other expense was $1.5 million for the twelve months ended December 31, 2012 compared to
other income of $0.3 million for the twelve months ended December 31, 2011. Other income (expense)
consists primarily of foreign exchange gains and losses attributable to fluctuations of the U.S. dollar
against the local currencies of certain of the countries in which we operate, interest earned on our
invested cash balances and bank fees associated with maintaining our credit facility.

During the years ended December 31, 2013, 2012 and 2011, we had no significant off-balance-sheet

risk such as foreign exchange contracts, option contracts or other foreign hedging arrangements

Income Taxes

Income tax expense was $1.0 million, $1.6 million and $2.4 million for the twelve months ended
December 31, 2013, 2012 and 2011, respectively. Our income tax expense is due primarily to operating
results of foreign entities in jurisdictions in Europe and Asia, where we earn taxable income. We have
significant net operating loss carryforwards in the United States and certain European jurisdictions,
and, as a result, we do not currently pay significant income taxes in those jurisdictions. Additionally, we
do not recognize the tax benefit for such losses in the United States and certain European taxing
jurisdictions.

During 2013, the statute of limitations expired for an uncertain tax position for $0.4 million in a

foreign jurisdiction that was reserved for in 2008. This resulted in a benefit to tax expense of
$0.3 million and a reduction to interest expense of $0.1 million. The expiration of the statute of
limitations did not have a significant impact on our results of operations or cash flows for the twelve
months ended December 31, 2013.

During the year ended December 31, 2013, we incurred charges related to the write-off of deferred

tax assets in certain foreign jurisdictions that were no longer realizable, which resulted in a non-cash
tax expense of $0.4 million. The charge did not have a significant impact on our results of operations
or cash flows for the twelve months ended December 31, 2013.

Liquidity and Capital Resources

Our liquidity is affected by many factors. Some of these relate specifically to the operations of our

business, for example, the rate of sale of our product lines, and others relate to the uncertainties of
global economies, including the availability of credit and the condition of the overall semiconductor

equipment industry. Our established cost structure does not vary significantly with changes in volume.
We have reduced operating expense to achieve profitability towards the lower end of our quarterly
revenue swings. We experience fluctuations in operating results and cash flows depending on our
revenue as driven by the level of capital expenditures by semiconductor manufacturers.

For the full year 2013, $15.0 million of cash was used to support operating activities. This

compares to cash used to support operations of $10.6 million in 2012. The $4.4 million increase in cash
used by operations in 2013 was predominately driven by the decrease in the Company’s loss from
operations excluding non-cash charges for depreciation and amortization and stock based compensation
expense. We received $1.2 million in cash in 2013 for the achievement of milestones associated with the
Lam transaction, which was partially offset by $0.8 million in capital expenditures. Cash also had a net
increase from financing activities of $15.7 million, driven by the $15.0 million proceeds from the
issuance of our term loan and $1.7 million of proceeds from the exercise of stock options partially
off-set by $0.8 million of long-term restricted cash related to our term loan. Cash and cash equivalents
at December 31, 2013 are $46.3 million, compared to $45.0 million at December 31, 2012. Working
capital at December 31, 2013 was $149.4 million. Approximately $23.0 million of cash was located in
foreign jurisdictions as of December 31, 2013.

Capital expenditures were $0.8 million and $0.6 million for the years ended December 31, 2013
and 2012, respectively. Total capital expenditures for 2014 are projected to be slightly higher than in
2013. Future capital expenditures beyond 2014 will depend on a number of factors, including the timing
and rate of expansion of our business and our ability to generate cash to fund them.

We have an interest reserve account, outstanding standby letters of credit and surety bonds in the
amount of $4.7 million to support our term loan as well as specified operating and insurance programs
and certain value added tax claims in Europe.

The following represents our commercial commitments as of December 31, 2013 (in thousands):

Amount of
Commitment
Expiration by Period

Other Commercial Commitments

Total

2014

2015-2018

Surety bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Standby letters of credit . . . . . . . . . . . . . . . . . . . . . . . .
Interest reserve escrow . . . . . . . . . . . . . . . . . . . . . . . . .

$1,432
2,473
825

$ 172
2,473
—

$1,260
—
825

$4,730

$2,645

$2,085

The following represents our contractual obligations as of December 31, 2013 (in thousands):

Contractual Obligations

Total

2014

2015-2018

2018-2021

Payments Due by Period

Debt Obligations . . . . . . . . . . . . . . . . . . . .
Interest Payments . . . . . . . . . . . . . . . . . . .
Purchase order commitments . . . . . . . . . . .
Operating leases . . . . . . . . . . . . . . . . . . . .

$15,000
2,045
24,468
4,574

471
808
24,238
2,762

14,529
1,237
230
1,812

$46,087

$28,279

17,808

—
—
—
—

—

We have no off-balance sheet arrangements at December 31, 2013, exclusive of operating leases.

We have net operating loss and tax credit carryforwards, the tax effect of which aggregate

$131.4 million at December 31, 2013. These carryforwards, which expire principally between 2014 and

2032, are available to reduce future income tax liabilities in the United States and certain foreign
jurisdictions.

It is Company policy to provide taxes for the total anticipated tax impact of the undistributed
earnings of our wholly-owned foreign subsidiaries,’ as such earnings are not expected to be reinvested
indefinitely. The Company anticipates that U.S. tax resulting from remitting such earnings will be
off-set by net operating loss or credit carryforwards to the extent available. In addition, the Company
does not anticipate incurring a foreign withholding tax on remitting such earnings since it does not
intend to remit the earnings as dividends.

On July 5, 2013, we entered into a Business Loan Agreement with Northern Bank & Trust

Company (the ‘‘Bank’’), which provides for a three year term loan of $15.0 million, secured by our real
estate in Beverly, Massachusetts (the ‘‘Term Loan’’). The Term Loan bears interest at the rate of 5.5%
per annum, with payments of principal beginning August 5, 2014 on a 10 year amortization schedule of
the principal on a straight-line basis. Interest is payable monthly beginning on August 5, 2013. All
outstanding principal and unpaid interest is due and payable on July 5, 2016. In addition, under the
Term Loan, the Company must comply with financial covenants relating to debt service ratio, net worth
and liquidity. As of December 31, 2013, we were in compliance with all covenant requirements of the
Term Loan.

In connection with closing the term loan with Northern Bank & Trust Company, we terminated

our revolving credit facility with Silicon Valley Bank, which had provided for borrowings of up to
$30.0 million. We paid a $0.3 million early termination fee to Silicon Valley Bank. In the fourth
quarter, we reinstated a revolving credit facility with Silicon Valley Bank pursuant to a Loan and
Security Agreement dated October 31, 2013. The facility provides for borrowings up to $10.0 million,
based primarily on accounts receivable, and is subject to certain financial covenants requiring us to
maintain minimum levels of operating results and liquidity. The agreement will terminate on
October 31, 2015. The Company uses the facility to support letters of credit and for short term
borrowing as needed. At December 31, 2013, our available borrowing capacity under this revolving
credit facility was $7.5 million and we were compliant with all covenants of the credit facility. There
were no borrowings against this facility during the year-ended December 31, 2013.

We believe that based on our current market, revenue, expense and cash flow forecasts, our
existing cash, cash equivalents and borrowing capacity will be sufficient to satisfy our anticipated cash
requirements for the short and long-term. In the event that demand for our products declines in future
periods, we believe we can align manufacturing and operating spending levels to the changing business
conditions and provide sufficient liquidity to support operations.

Related-Party Transactions

There are no significant related-party transactions that require disclosure in the consolidated
financial statements for the year ended December 31, 2013, or in this Annual Report on Form 10-K.

Recent Accounting Pronouncements

A discussion of recent accounting pronouncements is included in Note 2 to the consolidated

financial statements for the year ended December 31, 2013 included in this Annual Report on
Form 10-K.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

Interest Rate Sensitivity

Our exposure to market risk for changes in interest rates relates primarily to our investment
portfolio, which consists entirely of cash-equivalents at December 31, 2013. The primary objective of

our investment activities is to preserve principal while maximizing yields without significantly increasing
risk. This is accomplished by investing in marketable high investment grade securities. We do not use
derivative financial instruments in managing our investment portfolio. Due to the nature of our
investments, we do not expect our operating results or cash flows to be affected to any significant
degree by any change in market interest rates. We incur interest expense on borrowings outstanding
under our term loan which bears interest at the fixed rate.

Foreign Currency Exchange Risk

Substantially all of our sales are billed in U.S. dollars, thereby reducing the impact of fluctuations
in foreign exchange rates on our results. Operating margins of certain foreign operations can fluctuate
with changes in foreign exchange rates to the extent revenues are billed in U.S. dollars and operating
expenses are incurred in the local functional currency. During the years ended December 31, 2013 and
2012, approximately 32.9% and 29% of our revenue were derived from foreign operations with this
inherent risk. In addition, at both December 31, 2013 and 2012, our operations outside of the United
States accounted for approximately 39.6% and 42% of our total assets, respectively, the majority of
which was denominated in currencies other than the U.S. dollar. We do not use derivative financial
instruments in managing our foreign currency exchange risk.

Item 8. Financial Statements and Supplementary Data.

Response to this Item is submitted as a separate section of this report immediately following

Item 15.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures.

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. Because of its
inherent limitations, internal control over financial reporting may not prevent or detect all
misstatements. A control system, no matter how well designed and operated, can provide only
reasonable assurance with respect to financial statement preparation and presentation. Projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.

Management assessed the effectiveness of our internal control over financial reporting as of

December 31, 2013. In making this assessment, management used the criteria set forth in the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) Internal Control—
Integrated Framework.

Based on this assessment, management has concluded that, as of December 31, 2013, our internal

control over financial reporting is effective based on those criteria.

The independent registered public accounting firm of Ernst & Young LLP, as auditors of our
consolidated financial statements, has issued an attestation report on its assessment of our internal
control over financial reporting.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of Axcelis Technologies, Inc.

We have audited Axcelis Technologies, Inc.’s internal control over financial reporting as of

December 31, 2013, based on criteria established in Internal Control—Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) (the
COSO criteria). Axcelis Technologies, Inc.’s management is responsible for maintaining effective
internal control over financial reporting, and for its assessment of the effectiveness of internal control
over financial reporting included in the accompanying 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 conducted our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was maintained
in all material respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design
and operating effectiveness of internal control based on the assessed risk, and performing such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.

A 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. Also, projections of any evaluation of effectiveness to future periods are subject
to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.

In our opinion, Axcelis Technologies, Inc. maintained, in all material respects, effective internal

control over financial reporting as of December 31, 2013, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of Axcelis Technologies, Inc. as of
December 31, 2013 and 2012, and the related consolidated statements of operations, comprehensive
income (loss), stockholders’ equity, and cash flows for each of the three years in the period ended
December 31, 2013 of Axcelis Technologies, Inc. and our report dated March 3, 2014 expressed an
unqualified opinion thereon.

Boston, Massachusetts
March 3, 2014

/s/ Ernst & Young LLP

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.

Item 9B. Other Information.

None

Item 10. Directors, Executive Officers and Corporate Governance.

PART III

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 13, 2014 (the ‘‘Proxy Statement’’) captioned:

(cid:129) ‘‘Proposal 1: Election of Directors,’’

(cid:129) ‘‘Corporate Governance,’’ and

(cid:129) ‘‘Other Matters—Section 16(a) Beneficial Ownership Reporting Compliance.’’

The remainder of such information is set forth under the heading ‘‘Executive Officers of the

Registrant’’ at the end of Item 1 in Part I of this report.

Item 11. 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:

(cid:129) ‘‘Executive Compensation,’’ and

(cid:129) ‘‘Other Matters—Compensation Committee Interlocks and Insider Participation.’’

Item 12. 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:

(cid:129) ‘‘Share Ownership of 5% Stockholders,’’

(cid:129) ‘‘Share Ownership of Directors and Executive Officers,’’ and

(cid:129) ‘‘Proposal 3: Approval of Amendment to the 2012 Equity Incentive Plan—Current Equity

Compensation Plan Information.’’

Item 13. 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:

(cid:129) ‘‘Executive Compensation,’’

(cid:129) ‘‘Corporate Governance—Board of Directors Independence and Meetings,’’ and

(cid:129) ‘‘Corporate Governance—Certain Relationships and Related Transactions.’’

Item 14. 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 2: Ratification of the
Appointment of our Independent Registered Public Accounting Firm’’ in the Proxy Statement.

PART IV

Item 15. Exhibits, Financial Statement Schedules.

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

1) Financial Statements:

Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . F-1
Consolidated Statements of Operations—For the years ended December 31,

2013, 2012 and 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2

Consolidated Statements of Comprehensive Income (Loss)—For the years

ended December 31, 2013, 2012 and 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Consolidated Balance Sheets—December 31, 2013 and 2012 . . . . . . . . . . . . . . F-4
Consolidated Statements of Stockholders’ Equity—For the years ended

December 31, 2013, 2012 and 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5

Consolidated Statements of Cash Flows—For the years ended December 31,

2013, 2012 and 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . F-7

2) Financial Statement Schedules:

Schedule II—Valuation and Qualifying Accounts for the years ended December 31, 2013, 2012
and 2011.

All other schedules for which provision is made in the applicable regulation of the Securities
and Exchange Commission are not required under the related instructions or are inapplicable,
and therefore have been omitted.

3) Exhibits

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

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of Axcelis Technologies, Inc.

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

December 31, 2013 and 2012, and the related consolidated statements of operations, comprehensive
income (loss), changes in stockholders’ equity and cash flows for each of the three years in the period
ended December 31, 2013. Our audits also include the financial statement schedule listed in the Index
at Item 15(a). These financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Axcelis Technologies, Inc. at December 31, 2013 and 2012, and
the consolidated results of their operations and their cash flows for each of the three years in the
period ended December 31, 2013, in conformity with U.S. generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects to the information set
forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting

Oversight Board (United States), Axcelis Technologies, Inc.’s internal control over financial reporting as
of December 31, 2013, based on criteria established in Internal Control-Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) and our
report dated March 3, 2014 expressed an unqualified opinion thereon.

Boston, Massachusetts
March 3, 2014

/s/ Ernst & Young LLP

F-1

Axcelis Technologies, Inc.
Consolidated Statements of Operations
(In thousands, except per share amounts)

Twelve months ended
December 31,

2013

2012

2011

Revenue

Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$169,587
26,045

$174,309
29,076

$287,324
32,092

Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

195,632

203,385

319,416

Cost of revenue

Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

106,678
21,019

123,593
21,621

181,241
23,438

Total cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

127,697

145,214

204,679

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

67,935

58,171

114,737

Operating expenses

Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of dry strip assets and intellectual property . . . . . . . .
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

34,756
21,159
25,471
(1,167)
2,334

40,401
25,889
26,554
(7,904)
4,169

47,176
29,255
31,174
—
—

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

82,553

89,109

107,605

Income (loss) from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(14,618)

(30,938)

7,132

Other income (expense)

Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total other income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . .

44
(457)
(1,073)

(1,486)

45
—
(1,495)

(1,450)

Income (loss) before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . .

(16,104)

(32,388)

Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,040

1,646

42
—
297

339

7,471

2,394

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (17,144) $ (34,034) $ 5,077

Net income (loss) per share

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(0.16) $

(0.32) $

(0.16) $

(0.32) $

0.05

Shares used in computing net income (loss) per share

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

108,869

107,619

106,234

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

108,869

107,619

109,098

See accompanying Notes to these Consolidated Financial Statements

F-2

Axcelis Technologies, Inc.
Consolidated Statements of Comprehensive Income (Loss)
(In thousands)

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income:

Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . .
Actuarial net (loss) gain from pension plan, net of benefit (taxes) of

($15), $178 and ($4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Twelve months ended December 31,

2013

2012

2011

$(17,144) $(34,034) $ 5,077

695

642

(1,465)

(399)

Comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(16,425) $(33,791) $ 3,622

See accompanying Notes to these Consolidated Financial Statements

F-3

Axcelis Technologies, Inc.
Consolidated Balance Sheets
(In thousands, except per share amounts)

December 31,
2013

December 31,
2012

Current assets

ASSETS

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . .

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 46,290
36,587
95,789
—
6,242

184,908
32,006
825
15,810

$ 44,986
24,843
100,234
106
5,056

175,225
34,413
—
12,520

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 233,549

$ 222,158

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 19,451
4,845
1,316
417
4,387
471
4,573

35,460
14,529
322
7,236

57,547

$ 10,166
7,283
1,700
278
6,423
—
3,932

29,782
—
456
5,844

36,082

Commitments and contingencies (Note 16)
Stockholders’ equity

Preferred stock, $0.001 par value, 30,000 shares authorized; none issued or
outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Common stock, $0.001 par value, 300,000 shares authorized; 110,225

shares issued and 110,105 shares outstanding at December 31, 2013;
108,293 shares issued and 108,173 shares outstanding at December 31,
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock, at cost, 120 shares at December 31, 2013 and 2012 . . . . . .
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . .

—

110
510,992
(1,218)
(339,621)
5,739

108
504,643
(1,218)
(322,477)
5,020

Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

176,002

186,076

Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . .

$ 233,549

$ 222,158

See accompanying Notes to these Consolidated Financial Statements

F-4

Axcelis Technologies, Inc.
Consolidated Statements of Stockholders’ Equity
(In thousands)

Common Stock

Amount

Additional
Paid-in
Capital

Accumulated
Other

Total

Treasury Accumulated Comprehensive Stockholders’

Stock

Deficit

Income (Loss)

Equity

Balance at December 31, 2010 . . . . . . . . . 105,906

$106

$493,967 $(1,218) $(293,520)

$ 6,232

$205,567

Net income . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments . .
Change in pension . . . . . . . . . . . . . . . . .
Exercise of stock options . . . . . . . . . . . . .
Issuance of shares under Employee Stock

Purchase Plan . . . . . . . . . . . . . . . . . .
Issuance of restricted common shares . . . .
Stock-based compensation expense . . . . . .

—
—
—
372

398
133
—

Balance at December 31, 2011 . . . . . . . . . 106,809
—
Net loss . . . . . . . . . . . . . . . . . . . . . . . .
—
Foreign currency translation adjustments . .
—
Change in pension . . . . . . . . . . . . . . . . .
Exercise of stock options . . . . . . . . . . . . .
1,148
Issuance of shares under Employee Stock

Purchase Plan . . . . . . . . . . . . . . . . . .
Issuance of restricted common shares . . . .
Stock-based compensation expense . . . . . .

306
30
—

—
—
—
—

1
—
—

107
—
—
—
1

—
—
—

—
—
—
288

502
(112)
4,687

—
—
—
—

—
—
—

5,077
—
—
—

—
—
—

499,332
—
—
—
967

(1,218)

(288,443)
— (34,034)
—
—
—
—
—
—

390
(22)
3,976

—
—
—

—
(1,465)
10
—

—
—
—

4,777
—
642
(399)
—

—
—
—

5,077
(1,465)
10
288

503
(112)
4,687

214,555
(34,034)
642
(399)
968

390
(22)
3,976

Balance at December 31, 2012 . . . . . . . . . 108,293

108

504,643

(1,218)

(322,477)

5,020

186,076

Net loss . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments . .
Change in pension . . . . . . . . . . . . . . . . .
Exercise of stock options . . . . . . . . . . . . .
Issuance of shares under Employee Stock

Purchase Plan . . . . . . . . . . . . . . . . . .
Issuance of restricted common shares . . . .
Stock-based compensation expense . . . . . .

—
—
—
1,511

206
215
—

—
—
—
2

—
—
—

—
—
—
1,667

436
(26)
4,272

— (17,144)
—
—
—
—
—
—

—
—
—

—
695
24
—

—
—
—

(17,144)
695
24
1,669

436
(26)
4,272

Balance at December 31, 2013 . . . . . . . . . 110,225

$110

$510,992 $(1,218) $(339,621)

$ 5,739

$176,002

See accompanying Notes to these Consolidated Financial Statements

F-5

Axcelis Technologies, Inc.
Consolidated Statements of Cash Flows
(In thousands)

Twelve months ended
December 31,

2013

2012

2011

Cash flows from operating activities

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income (loss) to net cash (used for)

$(17,144) $(34,034) $ 5,077

provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of dry strip assets and intellectual property . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . .
Provision for excess inventory . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating assets & liabilities

Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . .
Accounts payable and other current liabilities . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . .

5,075
(1,167)
(1,465)
—
4,337
2,562

(11,528)
2,209
125
7,308
(2,181)
133
(3,306)

6,877
(7,904)
826
186
3,976
14,492

10,478
5,903
4,386
(13,490)
(5,396)
(225)
3,328

8,497
—
585
28
4,687
1,015

22,692
(11,870)
3,049
(17,940)
(4,006)
507
(8,788)

Net cash (used for) provided by operating activities . . . . . . .

(15,042)

(10,597)

3,533

Cash flows from investing activities

Proceeds from sale of dry strip assets and intellectual property . . .
Expenditures for property, plant, and equipment . . . . . . . . . . . . .
Decrease (increase) in restricted cash . . . . . . . . . . . . . . . . . . . . .

Net cash provided by (used for) investing activities . . . . . . . .

Cash flows from financing activities

Increase in restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing fees and other expenses . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from exercise of stock options . . . . . . . . . . . . . . . . . . .
Proceeds from Employee Stock Purchase Plan . . . . . . . . . . . . . . .
Proceeds from issuance of Term Loan . . . . . . . . . . . . . . . . . . . . .

Net cash provided by financing activities . . . . . . . . . . . . . . . .
Effect of exchange rate changes on cash . . . . . . . . . . . . . . . . . . . . . .

Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . .
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . .

1,200
(821)
106

485

(825)
(560)
1,669
436
15,000

15,720
141

1,304
44,986

8,716
(591)
(2)

8,123

—
(2,124)
3

(2,121)

—
—
968
331
—

1,299
(716)

(1,891)
46,877

—
(200)
288
503
—

591
(869)

1,134
45,743

Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . .

$ 46,290

$ 44,986

$ 46,877

Cash paid for:

Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$
$

737
409

848
—

515
—

See accompanying Notes to these Consolidated Financial Statements

F-6

Axcelis Technologies, Inc.
Notes to Consolidated Financial Statements

Note 1. Nature of Business

Axcelis Technologies, Inc. (‘‘Axcelis’’ or the ‘‘Company’’) was incorporated in Delaware in 1995,
and is a worldwide producer of ion implantation, dry strip and other processing equipment used in the
fabrication of semiconductor chips in the United States, Europe and Asia. In addition, the Company
provides extensive aftermarket service and support, including spare parts, equipment upgrades, used
equipment and maintenance services to the semiconductor industry.

In December 2012, the Company sold its intellectual property rights and certain assets relating to

the Company’s dry strip product line for cash proceeds of $8.7 million. These amounts were partially
offset by additional costs associated with the lab system purchased by Lam. As a result of this
transaction, the Company ceased the sale of 300mm dry strip wafer processing equipment in September
2013. The Company will be able to continue to sell dry strip systems for smaller wafers until December
2015 and to support its installed base of all dry strip systems indefinitely. A portion of the purchase
consideration (up to $2.0 million) was contingent upon the Company achieving certain milestones by
June 30, 2013. The Company recorded $1.2 million for the proceeds received based on its achievement
of milestones during 2013. See Note 3 for additional information relating to the accounting for the sale
of the dry strip assets and intellectual property.

Note 2. Summary of Significant Accounting Policies

The accompanying consolidated financial statements reflect the application of certain significant

accounting policies as described in this note and elsewhere in the footnotes.

(a) Basis of Presentation

The accompanying consolidated financial statements include the accounts of the Company and its

wholly-owned, controlled subsidiaries. All intercompany balances and transactions have been eliminated
in consolidation.

Events occurring subsequent to December 31, 2013 have been evaluated for potential recognition

or disclosure in the consolidated financial statements.

(b) Use of Estimates

The preparation of these consolidated financial statements in conformity with accounting principles

generally accepted in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the dates of the financial statements and the reported amounts of revenue and
expenses during the reporting periods. On an ongoing basis, the Company evaluates its estimates and
judgments, including those related to revenue recognition, the realizable value of inventories, valuing
share-based compensation instruments and valuation allowances for deferred tax assets. Actual amounts
could differ from these estimates. Changes in estimates are recorded in the period in which they
become known.

The Company has determined the functional currency for substantially all operations outside the
United States is the local currency. 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

F-7

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, 2013 the Company realized $0.3 million of foreign exchange
losses. For the year ended December 31, 2012 the Company realized $0.9 million of foreign exchange
losses. For the year ended December 31, 2011 the Company realized $1.2 million of foreign exchange
gains.

(d) Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand and highly liquid investments with original
maturities of ninety days or less. Cash equivalents consist primarily of money market securities and
certificates of deposit. Cash equivalents are carried on the balance sheet at fair market value.

(e)

Inventories

Inventories are carried at lower of cost, determined using the first-in, first-out (‘‘FIFO’’) method,

or market. The Company periodically reviews its inventories and makes provisions as necessary for
estimated obsolescence or damaged goods to ensure values approximate lower of cost or market. The
amount of such markdowns is equal to the difference between cost of inventory and the estimated
market value based upon assumptions about future demands, selling prices, and market conditions.

The Company records an allowance for estimated excess inventory. The allowance is determined

using management’s assumptions of materials usage, based on estimates of demand and market
conditions. If actual market conditions become less favorable than those projected by management,
additional inventory write-downs may be required.

(f) Property, Plant and Equipment

Property and equipment are stated at cost, less accumulated depreciation and amortization.

Depreciation and amortization are recorded using the straight-line method over the estimated

useful lives of the related assets as follows:

Asset Classification

Estimated Useful Life

Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

40 years
3 to 10 years

Repairs and maintenance costs are expensed as incurred. Expenditures for renewals and

betterments are capitalized.

(g)

Impairment of Long-Lived Assets

The Company records 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. 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.

The Company completed a test for recoverability due to indicators of impairment present during
interim periods in 2013. There were no indicators present at December 31, 2013 and therefore no test
for recoverability was performed as of December 31, 2013. Results of tests for recoverability performed
in 2013 indicated that the carrying value of the asset group was recoverable.

The Company completed a test for recoverability due to indicators present at December 31, 2012;

specifically the carrying value of its net assets exceeded its current market capitalization. As of

F-8

December 31, 2012, the undiscounted cash flows used in the analysis significantly exceeded the carrying
value of the Company’s assets. As a result no impairment was recorded. The undiscounted cash flows
used in the analysis were derived from the Company’s long-term strategic plan.

The Company did not record an impairment charge for the years ended December 31, 2013, 2012,

or 2011.

(h) Concentration of Risk and Off-Balance Sheet Risk

Financial instruments that potentially subject the Company to concentrations of credit risk are

principally cash equivalents and accounts receivable. The Company’s cash equivalents are principally
maintained in an investment grade money-market fund.

The Company has no significant off-balance-sheet risk such as foreign exchange contracts, option

contracts or other foreign hedging arrangements.

The Company exposure to market risk for changes in interest rates relates primarily to cash
equivalents. The primary objective of the Company’s investment activities is to preserve principal while
maximizing yields without significantly increasing risk. This is accomplished by investing in marketable
high investment grade securities. The Company does not use derivative financial instruments to manage
its investment portfolio and does not expect operating results or cash flows to be affected to any
significant degree by any change in market interest rates.

The Company performs ongoing credit evaluations of its customers’ financial condition and

generally requires no collateral to secure accounts receivable. For selected overseas sales, the Company
requires customers to obtain letters of credit before product is shipped. The Company maintains an
allowance for doubtful accounts based on its assessment of the collectability of accounts receivable. The
Company reviews the allowance for doubtful accounts monthly. The Company does not have any
off-balance sheet credit exposure related to its customers.

The Company’s customers consist of semiconductor manufacturers located throughout the world
and net sales to its ten largest customers accounted for 69.1%, 70.6% and 68.6% of revenue in 2013,
2012 and 2011, respectively.

For the years ended December 31, 2013, 2012 and 2011, the Company had one customer represent

15.5%, 18.2% and 21.2% of total revenues, respectively, for each of the periods presented.

For the year ended December 31, 2013, the Company had three customers account for 23.2%,
14.2% and 13.6% of consolidated accounts receivable, respectively. For the year ended December 31,
2012, the Company had two customers account for 11.9% and 11.5% of consolidated accounts
receivable, respectively.

Some of the components and sub-assemblies included in the Company’s products are obtained
either from a sole source or a limited group of suppliers. Disruption to the Company’s supply source,
resulting either from depressed economic conditions or other factors, could affect its ability to deliver
products to its customers.

F-9

(i) Revenue Recognition

The Company’s revenue recognition policy involves significant judgment by management. As
described below, the Company considers a broad array of facts and circumstances in determining when
to recognize revenue, including contractual obligations to the customer, the complexity of the
customer’s post-delivery acceptance provisions, payment history, customer creditworthiness and the
installation process. In the future, if the post-delivery acceptance provisions and installation process
become more complex or result in a materially lower rate of acceptance, the Company may have to
revise its revenue recognition policy, which could delay the timing of revenue recognition.

The Company’s system sales transactions are made up of multiple elements, including the system
itself and elements that are not delivered simultaneously with the system. These undelivered elements
might include a combination of installation services, extended warranty and support and spare parts, all
of which are covered generally by a single sales price.

The Company’s system revenue arrangements with multiple elements are divided into separate
units of accounting if specified criteria are met, including whether the delivered element has stand-
alone value to the customer. If the criteria are met, then the consideration received is allocated among
the separate units based on their relative selling price, and the revenue is recognized separately for
each of the separate units.

The Company determines selling price for each unit of accounting (element) using vendor specific

objective evidence (VSOE) or third-party evidence (TPE), if they exist, otherwise, the Company uses
best estimated selling price (BESP). The Company generally expects that it will not be able to establish
TPE due to the nature of its products, and, as such, the Company typically will determine selling price
using VSOE or BESP.

Where required, the Company determines BESP for an individual element based on consideration

of both market and Company-specific factors, including the selling price and profit margin for similar
products, the cost to produce the deliverable and the anticipated margin on that deliverable and the
characteristics of the varying markets in which the deliverable is sold.

Systems are not sold separately and VSOE or TPE is not available for the systems element.

Product revenue for products which have demonstrated market acceptance, is generally recognized

upon shipment provided title and risk of loss has passed to the customer, evidence of an arrangement
exists, prices are contractually fixed or determinable, collectability is reasonably assured through
historical collection results and regular credit evaluations, and there are no uncertainties regarding
customer acceptance. Revenue from installation services is recognized at the time acceptance has
occurred, as defined in the sales documentation or, for certain customers, when both acceptance has
occurred and retention payment has been received. Revenue for other elements is recognized at the
time products are shipped or the related services are performed.

The Company generally recognizes revenue for products which have demonstrated market
acceptance at the time of shipment because the customer’s post-delivery acceptance provisions and
installation process have been established to be routine, commercially inconsequential and perfunctory.
The Company believes the risk of failure to complete a system installation is remote.

F-10

For initial shipments of systems with new technologies or in the small number of instances where

the Company is unsure of meeting the customer’s specifications or obtaining customer acceptance upon
shipment of the system, it will defer the recognition of systems revenue and related costs until written
customer acceptance of the system is obtained. This deferral period is generally within twelve months
of shipment.

Revenue related to maintenance and service contracts is recognized ratably over the duration of

the contracts, or based on parts usage, where appropriate. Revenue related to service hours is
recognized when the services are performed.

Product revenue includes revenue from system sales, sales of spare parts, the spare parts

component of maintenance and service contracts and product upgrades. Service revenue includes the
labor component of maintenance and service contract amounts charged for on-site service personnel.

(j) Shipping and Handling Costs

Shipping and handling costs are included in cost of revenue.

(k) Stock-Based Compensation

The Company generally recognizes compensation expense for all share-based payments to

employees and directors, including grants of employee stock options, based on the grant-date fair value
of those share-based payments using the Black-Scholes option pricing model, adjusted for expected
forfeitures. Other valuation models may be utilized in the limited circumstances where awards with
performance-based vesting considerations such as the price of the Company’s common stock are
granted. Stock-based compensation expense is recognized ratably over the requisite service period.

See Note 13 for additional information relating to stock-based compensation.

(l)

Income Taxes

The Company records income taxes using the asset and liability method. Deferred income tax
assets and liabilities are recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and their respective income tax
bases, and operating loss and tax credit carryforwards.

The Company’s 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. The Company establishes a valuation allowance if the likelihood of realization of
the deferred tax assets is reduced based on an evaluation of objective verifiable evidence. Significant
management judgment is required in determining the Company’s provision for income taxes, the
Company’s deferred tax assets and liabilities and any valuation allowance recorded against those net
deferred tax assets. The Company evaluates the weight of all available evidence to determine whether it
is more likely than not that some portion or all of the net deferred income tax assets will not be
realized.

Income taxes include the largest amount of tax benefit for an uncertain tax position that is more
likely than not to be sustained upon audit based on the technical merits of the tax position. Settlements
with tax authorities, the expiration of statutes of limitations for particular tax positions, or obtaining
new information on particular tax positions may cause a change to the effective tax rate. The Company
recognizes accrued interest related to unrecognized tax benefits as interest expense and penalties as
operating expense in the consolidated statements of operations.

F-11

(m) Computation of Net Income (Loss) per Share

Basic earnings per share is computed by dividing income available to common stockholders (the

numerator) by the weighted-average number of common shares outstanding (the denominator) for the
period. The computation of diluted earnings per share is similar to basic earnings per share, except that
the denominator is increased to include the number of additional common shares that would have been
outstanding if the potentially dilutive common shares had been issued, calculated using the treasury
stock method.

The Company incurred net losses for the years ended December 31, 2013 and December 31, 2012,
and has excluded 3,547,578 and 1,563,417 incremental shares attributable to outstanding stock options,
restricted stock and restricted stock units from the calculation of net loss per share because the effect
would have been anti-dilutive.

The components of net income (loss) per share are as follows:

Income (loss) available to common stockholders . . . . . . . . . . . . . . . .

Weighted average common shares outstanding used in computing

Years Ended December 31,

2013

2012

2011

(in thousands, except per share data)
5,077
$ (17,144) $ (34,034) $

basic net income (loss) per share . . . . . . . . . . . . . . . . . . . . . . . . .
Incremental shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

108,869
—

107,619
—

106,234
2,864

Weighted average common shares outstanding used in computing

diluted net income (loss) per share . . . . . . . . . . . . . . . . . . . . . . . .

108,869

107,619

109,098

Net income (loss) per share

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$
$

(0.16) $
(0.16) $

(0.32) $
(0.32) $

0.05
0.05

(n) Accumulated Other Comprehensive Income

The following table presents the changes in accumulated other comprehensive income, net of tax,

by component for the year ended December 31, 2013:

Balance at December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss before reclassifications . . . . . . . . . . . . . .
Amounts reclassified from accumulated other comprehensive

income(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net current-period other comprehensive income . . . . . . . . . . . . . . .

Foreign
currency

Defined benefit
pension plan

Total

$5,375
695

—

695

(in thousands)
$(355)
—

$5,020
695

719

Balance at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$6,070

$(331)

$5,739

(1) Amount presented before taxes as the tax effect is not material to the consolidated financial

statements.

F-12

(o) Recent Accounting Guidance

Accounting Standards or Updates Recently Adopted

On February 5, 2013, the Financial Accounting Standards Board (‘‘FASB’’) issued Accounting

Standards Update No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other
Comprehensive Income. The update requires that companies present either in a single note or
parenthetically on the face of the financial statements, the effect of significant amounts reclassified
from each component of accumulated other comprehensive income based on its source and the income
statement line items affected by the reclassification. If a component is not required to be reclassified to
net income in its entirety, companies would instead cross reference to the related footnote for
additional information. This update is effective prospectively for annual and interim reporting periods
beginning after December 15, 2012. As this update only requires enhanced disclosure, the adoption of
this update will not impact our financial position or results of operations.

Accounting Standards or Updates Not Yet Effective

In July 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards
Update (ASU) No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss
Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exist. ASU 2013-11 amends the
presentation requirements of ASC 740, Income Taxes, and requires an unrecognized tax benefit to be
presented in the financial statements as a reduction to a deferred tax asset for a net operating loss
carryforward, similar tax loss, or a tax credit carryforward. To the extent the tax benefit is not available
at the reporting date under the governing tax law or if the entity does not intend to use the deferred
tax asset for such purpose, the unrecognized tax benefit should be presented as a liability and not
combined with deferred tax assets. The ASU is effective for annual periods, and interim periods within
those years, beginning after December 15, 2013, which is fiscal 2014 for the Company. The
amendments are to be applied to all unrecognized tax benefits that exist as of the effective date and
may be applied retrospectively to each prior reporting period presented. The Company is currently
evaluating the impact of the adoption of ASU 2013-11 on its consolidated financial statements. We do
not expect the adoption of this standard to have a significant impact on our consolidated financial
statements.

Note 3. Gain on Sale of Dry Strip Assets and Intellectual Property

On December 3, 2012, the Company entered into a purchase agreement with Lam Research
Corporation (‘‘Lam’’). As part of the agreement, the Company sold its dry strip system assets and
intellectual property to Lam. The purchase price was $10.7 million, of which $2.0 million was
contingent upon reaching certain milestones.

Lam granted the Company a worldwide, non-exclusive, non-transferable, royalty free license to use

the intellectual property rights sold by the Company under the Asset Purchase Agreement. The
perpetual license allowed the Company to make and sell 300mm dry strip wafer processing equipment
for semiconductor applications through September 2013, make and sell 200mm products through
December 2015 and to support the Company’s installed base of all dry strip equipment on a perpetual
basis. As a result of this continuing involvement, the transaction has been recorded in continuing
operations.

The $1.2 million gain on sale of dry strip assets and intellectual property for the year ended
December 31, 2013 relates to the achievement of certain milestones met during 2013. No further
milestones are expected to be met.

During 2012, the $7.9 million gain on sale of dry strip assets and intellectual property was
comprised of the $8.7 million proceeds received for the sale, offset by approximately $0.8 million of

F-13

product and material costs related to the lab system and other components purchased by Lam during
2012.

Note 4. Restricted Cash

The components of restricted cash are as follows:

Statutory liability deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest reserve escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31,

2013

2012

(in thousands)
$ — $106
—

825

The $0.8 million interest reserve at December 31, 2013 was established in connection with the

Company’s outstanding Term Loan. The $0.1 million statutory liability deposit at December 31, 2012
expired during the year and was subsequently released from restricted cash.

The Company has surety bonds related to value added tax claims and refunds in Europe of

approximately $1.4 million at December 31, 2013 ($1.8 million at December 31, 2012) and two standby
letters of credit issued under the Silicon Valley Bank credit facility of $2.5 million ($3.6 million at
December 31, 2012).

Note 5. Accounts Receivable, net

The components of accounts receivable are as follows:

Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . .

$36,991
(404)

$25,148
(305)

December 31,

2013

2012

(in thousands)

Note 6. Inventories, net

The components of inventories are as follows:

$36,587

$24,843

December 31,

2013

2012

(in thousands)

Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finished goods (completed systems) . . . . . . . . . . . . . . . . . . . . .

$56,942
27,462
11,385

$ 72,013
12,253
15,968

$95,789

$100,234

When recorded, inventory reserves are intended to reduce the carrying value of inventories to their

net realizable value. The Company establishes inventory reserves when conditions exist that indicate
inventory may be in excess of anticipated demand or is obsolete based upon assumptions about future
demand for the Company’s products or market conditions. The Company regularly evaluates the 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. Purchasing and usage alternatives are also explored to mitigate inventory

F-14

exposure. As of December 31, 2013 and 2012, inventories are stated net of inventory reserves of
$25.1 million and $33.6 million respectively.

In 2013, the Company recorded a $2.6 million increase to its excess inventory reserves. During the

three months ended March 31, 2013, the Company recorded a charge to cost of sales of $2.1 million
for 300mm dry strip components. Under the terms of the agreement with Lam, the Company was
permitted to manufacture and sell dry strip products through September 2013. Due to changes in the
forecasted sales of the Company’s dry strip products that become known in the current period, a
portion of the dry strip inventory components were determined to be non-recoverable. During the three
months ended December 31, 2013, after reviewing all excess inventory levels, the Company disposed of
$8.7 million of previously reserved for inventory.

During 2013, the Company recorded a charge to cost of sales of $0.6 million due to production

levels below normal capacity. During 2012, the Company recorded a similar charge to cost of sales of
$2.6 million due to production levels below normal capacity.

Note 7. Property, Plant and Equipment, net

The components of property, plant and equipment are as follows:

December 31,

2013

2012

(in thousands)

Land and buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 79,076
7,774
356

$ 78,954
7,118
455

Total cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . .

87,206
(55,200)

86,527
(52,114)

Property, plant and equipment, net . . . . . . . . . . . . . . . . . . .

$ 32,006

$ 34,413

Depreciation expense was $3.2 million, $3.3 million, and $3.5 million, for the years ended

December 31, 2013, 2012, and 2011, respectively.

Note 8. Assets Manufactured for Internal Use

The components of assets manufactured for internal use, included in amounts reported as other

assets, are as follows:

December 31,

2013

2012

(in thousands)

Internal use assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 23,409
5,263

$ 21,904
1,823

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total cost
Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . .

28,672
(15,774)

23,727
(13,948)

Assets manufactured for internal use . . . . . . . . . . . . . . . . . .

$ 12,898

$ 9,779

These products are used in-house for research and development, training, and customer

demonstration purposes.

Effective October 1, 2013, the Company changed its estimate of the useful life of its assets
manufactured for internal use (which are amortized on a straight-line basis) from five years to ten
years. This change in estimate resulted from the evaluation of the life cycle of our assets manufactured

F-15

for internal use and the conclusion, that based on recent experience these products consistently have a
longer life than previously estimated. The change in useful life has been accounted for as a change in
accounting estimate, and will be effective on new assets manufactured for internal use, on a prospective
basis beginning October 1, 2013.

Depreciation expense was $1.8 million, $3.4 million, and $4.9 million, for the years ended

December 31, 2013, 2012, and 2011, respectively.

Note 9. Restructuring Charges

The Company initiated reductions in force early in 2013 to control costs and improve the focus of

its operations in order to sustain future profitability and conserve cash. As a result, the Company
recorded a total restructuring charge of approximately $2.3 million, for severance and related costs all
of which was paid in 2013. The Company also incurred restructuring charges of $4.2 million in 2012,
most of which was paid in 2012. The Company did not incur restructuring charges for the year ended
December 31, 2011.

The Company’s restructuring liability for the years ended December 31, 2013, 2012 and 2011 are

as follows:

Severance

(In thousands)

Balance at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

171
—

Balance at December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Severance and related costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance at December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Severance and related costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

171
4,169
(3,551)
(130)

659
2,334
(2,950)

Balance at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 10. Product Warranty

The Company generally offers a one year warranty for all of its systems, the terms and conditions

of which vary depending upon the product sold. For all systems sold, the Company accrues a liability
for the estimated cost of standard warranty at the time of system shipment and defers the portion of
systems revenue attributable to the fair value of non-standard warranty. Costs for non-standard
warranty are expensed as incurred. Factors that affect the Company’s warranty liability include the
number of installed units, historical and anticipated product failure rates, material usage and service
labor costs. The Company periodically assesses the adequacy of its recorded liability and adjusts the
amount as necessary.

F-16

The changes in the Company’s product warranty liability are as follows:

Balance at January 1 (beginning of year) . . . . . . . . . . . . . . . . . . . . . . . .
Warranties issued during the period . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements made during the period . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in estimate of liability for pre-existing warranties during the

Years Ended December 31,

2013

2012

2011

$ 1,801
2,240
(1,515)

(in thousands)
$ 3,697
3,042
(3,010)

$ 2,713
4,772
(5,275)

period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1,098)

(1,928)

1,487

Balance at December 31 (end of year) . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,428

$ 1,801

$ 3,697

Amount classified as current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount classified as long-term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,316
112

$ 1,700
101

$ 3,556
141

Total Warranty Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,428

$ 1,801

$ 3,697

Note 11. Financing Arrangements

Term Loan

During the third quarter of 2013, the Company entered into a Business Loan Agreement with
Northern Bank & Trust Company which provides for a three year term loan of $15.0 million secured by
the Company’s real estate in Beverly, Massachusetts. $0.8 million of the loan proceeds are held in a
restricted interest reserve escrow account as shown under cash flows from financing activities in our
Consolidated Statements of Cash Flows. The Bank will also maintain a reserve on the Company’s loan
account with the Bank for quarterly real estate taxes on the mortgaged property. The loan bears
interest at 5.5% per annum, with payments of principal beginning August 5, 2014. Interest is payable
monthly. All outstanding principal and interest is due and payable on July 5, 2016.

The Company’s term loan contains certain customary covenants which limit the Company’s ability,
with certain exceptions, to dispose of assets, engage in a new line of business, make material changes to
our executive management team, effect a change of control, acquire another business, incur additional
indebtedness, incur liens, pay dividends and make other distributions, and make investments.

Furthermore, under the term loan, the Company is required to comply with certain financial
covenants, including a Debt Service Ratio, Net Worth, and Liquidity. The Company was in compliance
with all covenants associated with the term loan for the year-ended December 31, 2013.

The Company is subject to a 3% early termination fee on amounts prepaid prior to July 5, 2014, a

2% fee on amounts prepaid between July 5, 2014 and July 5, 2015 and a 1% fee on amounts prepaid
between July 5, 2015 and July 5, 2016.

In the event of a default, the Company’s interest rate will automatically increase 5% above the

otherwise applicable rate.

Credit Facility

During the third quarter of 2013, the Company terminated its revolving credit facility with Silicon
Valley Bank, which had provided for borrowings of up to $30.0 million due to the closing of the Term
Loan with Northern Bank & Trust Company. With the termination of this facility, the Company cash
collateralized two letters of credit issued by Silicon Valley Bank in the aggregate amount of
$1.5 million. The Company paid a $0.3 million early termination fee to Silicon Valley Bank.

During the fourth quarter of 2013, the Company reinstated a new revolving credit facility with
Silicon Valley Bank. Under this new revolving credit facility, the Company has the ability to borrow up
to $10.0 million on a revolving basis during its two year term. The Company’s ability to borrow under

F-17

this line of credit is limited to 80% of the then current amount of qualified accounts receivable. The
agreement will terminate on October 31, 2015. At December 31, 2013, our available borrowing capacity
under the revolving credit facility was $7.5 million.

The Company has not drawn down on the line of credit, although a portion of the availability is

being used to support outstanding letters of credit in the amount of $2.5 million in lieu of cash
collateralization. The obligations under the credit facility are guaranteed by a domestic subsidiary of
Axcelis and are secured by substantially all of the personal property of the Company and the
guarantying subsidiary, as well as by all or a portion of the capital stock of its domestic and foreign
subsidiaries. The principal amount outstanding under this credit facility will bear interest at a rate equal
to the prime plus 1.00%. The Company will also incur a monthly fee equal to 0.375% per annum on
any unused portion of the credit facility.

The credit facility contains customary negative covenants which limit the Company’s ability, with

certain exceptions, to dispose of assets, engage in a new line of business, make material changes to our
executive management team, effect a change of control, acquire another business, incur additional
indebtedness, incur liens, pay dividends and make other distributions, make investments, make
payments on subordinated debt and engage in transactions with affiliates other than transactions in the
ordinary course of business on terms no less favorable than would be obtained in an arms-length
transaction.

Additionally, the credit facility has certain financial covenants requiring the Company to maintain
minimum levels of operating results and liquidity. The Company was in compliance with all covenants
associated with the credit facility for the year ended December 31, 2013.

The Company is subject to a $0.1 million early termination fee if it decides to terminate the credit
facility prior to the maturity date or if Silicon Valley Bank terminates the credit facility in the event of
a default.

In the event of a default, the interest rate will automatically increase 3.5% above the otherwise

applicable rate.

Note 12. Employee Benefit Plans

(a) Defined Contribution Plan

The Company maintains the Axcelis Long-Term Investment Plan, a defined contribution plan. All

regular employees are eligible to participate and 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. The Company does not match contributions; therefore, no expense was recorded for this
plan in 2013, 2012 or 2011.

(b) Other Compensation Plans

The Company operates in foreign jurisdictions that require lump sum benefits, payable based on

statutory regulations, for voluntary or involuntary termination. Where required, an annual actuarial
valuation of the benefit plans is obtained.

F-18

The Company has recorded an unfunded liability of $4.1 million and $4.5 million at December 31,
2013 and 2012, respectively, for costs associated with these compensation plans in foreign jurisdictions.
The following table presents the classification of these liabilities in the Consolidated Balance Sheets:

Year Ended
December 31,

2013

2012

(in thousands)

Current:

Accrued compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 638

$1,475

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 638

$1,475

Long-term:

Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,416

$3,042

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$4,054

$4,517

The expense recorded in connection with these plans was $0.6 million, $0.6 million and

$0.7 million during the years ended December 31, 2013, 2012 and 2011, respectively.

Note 13. Stock Award Plans and Stock Based Compensation

(a) Equity Incentive Plans

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

The 2012 Equity Plan reserves 7.1 million shares of common stock, $0.001 par value for grant and
permits the issuance of options, stock appreciation rights, restricted stock, restricted stock units, stock
equivalents, and awards of shares of common stock that are not subject to restrictions or forfeiture to
selected employees, directors and consultants of the Company. Shares that are not issued under an
award (because such award expires, is terminated unexercised or is forfeited) that were outstanding
under the 2000 Stock Plan as of the May 2, 2012 increase the reserve of shares available for grant
under the 2012 Equity Plan.

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

a lesser term is otherwise specified by the Company’s Compensation Committee of the 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
6 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 performance-based vesting
conditions, such as, the Company’s common stock price. 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. In
general, retiring employees will have one year after termination of employment to exercise vested
options. The Company settles stock option exercises with newly issued common shares.

F-19

Restricted stock units granted to employees during 2013, 2012 and 2011 had both time-based
vesting provisions and performance-based vesting provisions. Generally, unvested restricted stock unit
awards expire upon termination of service to the Company. The Company settles restricted stock units
upon vesting with newly issued common shares. No restricted stock was granted under either stock plan
during the three year period.

As of December 31, 2013, there were 3.6 million shares available for grant under the 2012 Equity

Plan. No shares are available for grant under the 2000 Stock Plan.

As of December 31, 2013, there were 22.3 million options outstanding under the 2012 Equity Plan

and the 2000 Stock Plan, collectively, and less than 0.1 million unvested restricted stock units
outstanding under the 2000 Stock Plan.

(b) Employee Stock Purchase Plan

The Employee Stock Purchase Plan (the ‘‘Purchase Plan’’) provides effectively all of the

Company’s 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 its
common stock at 85% of the market value of the Company’s common stock 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 was $0.1 million for each of the years ended
December 31, 2013, 2012, and 2011.

As of December 31, 2013, there were a total of 1.8 million shares reserved for issuance and
available for purchase under the Purchase Plan. There were 0.2 million, 0.3 million and 0.4 million
shares purchased under the Purchase Plan for the years ended December 31, 2013, 2012, and 2011,
respectively.

For the purpose of valuing stock options with service conditions, the Company uses the Black-
Scholes option pricing model to calculate the grant-date fair value of an award. The fair values of
options granted were calculated using the following estimated weighted-average assumptions:

Years ended December 31,

2013

2012

2011

Weighted-average expected volatility . . .
Weighted-average expected term . . . . . .
Risk-free interest rate . . . . . . . . . . . . . .
Expected dividend yield . . . . . . . . . . . .

98.1% 97.8%-113.55%

97.8%

4.7 years
0.7%-1.4%
0%

3.8-6.1 years

6.1 years

0.45%-1.37% 1.1%-2.4%
0%

Expected volatility—The Company is responsible for estimating volatility and has considered a
number of factors when estimating volatility. The Company’s method of estimating expected volatility
for all stock options granted relies on a combination of historical and implied volatility. The Company
believes that this blended volatility results in a more accurate estimate of the grant-date fair value of
employee stock options because it more appropriately reflects the market’s current expectations of
future volatility.

Expected term—The Company calculated the weighted average expected term for stock options

granted prior to July 1, 2012, using a forward looking lattice model of the Company’s stock price
incorporating a suboptimal exercise factor and a projected post-vest forfeiture rate. For stock options
granted after July 1, 2012 to employees and to non-employee members of the Company’s Board of

F-20

Directors, the Company used the simplified method for estimating the expected life of ‘‘plain vanilla’’
options because it did not have sufficient exercise history. The Company expects that it will use a
lattice model once sufficient exercise history has been established.. The change in the expected life
from 10 years to 7 years reflects the fact that options granted after May 1, 2012 were granted under the
2012 Equity Incentive Plan, which limits option terms to seven years.

Risk-free interest rate—The yield on zero-coupon U.S. Treasury securities for a period that is

commensurate with the expected term assumption is used as the risk-free interest rate.

Expected dividend yield—Expected dividend yield was not considered in the option pricing formula

since the Company does not pay dividends and has no current plans to do so in the future.

In limited circumstances, the Company also issues stock option grants with vesting based on

performance conditions, such as the Company’s common stock price, or, a combination of time or
performance conditions. The fair values and derived service periods for all grants that have vesting
based on these performance conditions are estimated using the Monte Carlo valuation method. For
each stock option grant with vesting based on a combination of time or performance conditions where
vesting will occur if either condition is met, the related compensation costs are recognized over the
shorter of the explicit service period or the derived service period.

(d) Summary of Share-Based Compensation Expense

The Company estimates the fair value of stock options with time-based conditions using the
Black-Scholes valuation model and estimates the fair value of stock options with performance-based
vesting conditions such as the price of the Company’s common stock, using the Monte Carlo valuation
model. The fair value of the Company’s restricted stock and restricted stock units is calculated based
upon the fair market value of the Company’s stock at the date of grant.

The Company uses the straight-line attribution method to recognize expense for stock-based
awards such that the expense associated with awards is evenly recognized throughout the period.

The amount of stock-based compensation recognized is based on the value of the portion of the
awards that are ultimately expected to vest. The Company estimates forfeitures at the time of grant and
revises 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. Based on a historical analysis, a forfeiture rate of 5%
per year, including executive officer awards, was applied to stock-based awards for the years ended
December 31, 2013, 2012 and 2011.

The Company recognized stock-based compensation expense of $4.3 million, $3.9 million and
$4.7 million for the years ended December 31, 2013, 2012 and 2011, respectively. For 2013, 2012 and
2011, the Company primarily used stock options in its annual equity compensation program.

The benefits of tax deductions in excess of recognized compensation cost is reported as a financing

F-21

(e) Stock Option Awards

The following table summarizes the stock option activity for the year ended December 31, 2013:

Outstanding at December 31, 2012 . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Outstanding at December 31, 2013 . . . . . . . . . . . . .

Exercisable at December 31, 2013 . . . . . . . . . . . . . .

Options Vested or Expected to Vest at

Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Contractual
Term

Aggregate
Intrinsic
Value

(years)

(in thousands)

$2.24
1.95
1.10
1.39
7.26

$1.89

$2.10

5.95

5.53

$21,017

$12,705

Options

(in thousands)
21,260
5,409
(1,511)
(1,138)
(1,721)

22,299

12,075

December 31, 2013(1) . . . . . . . . . . . . . . . . . . . . .

21,515

$1.89

6.02

$12,609

(1) In addition to the vested options, the Company expects 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.

Of the options outstanding at December 31, 2013, 12.1 million were vested and exercisable with a

weighted average exercise price of $2.10. 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, 2013, 2012 and 2011 was $1.4 million,
$0.9 million and $0.7 million, respectively.

The total fair value of stock options vested during the years ended December 31, 2013, 2012 and
2011 were $3.8 million, $4.1 million and $3.3 million respectively. As of December 31, 2013, there was
$9.4 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 2.9 years.

(f) Restricted Stock and Restricted Stock Units

Restricted stock units (‘‘RSUs’’) 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 RSU Award Agreement
and either the 2012 Equity Incentive Plan or the 2000 Stock Plan. 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. RSU awards
granted in 2013, 2012 and 2011 included both time vested awards and performance vested awards for
employees and executive officers. No restricted stock awards were granted, or vested, during the period.
The fair value of a restricted stock unit and restricted stock awards is charged to expense ratably over
the applicable service period.

F-22

Changes in the Company’s non-vested restricted stock units for the year ended December 31, 2013

is as follows:

Outstanding at December 31, 2012 . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Shares/units

(in thousands)
961
195
(231)
(902)

Outstanding at December 31, 2013 . . . . . . . . . . . . . .

Weighted-Average
Grant Date Fair
Value per Share

$1.73
1.27
1.56
1.68

$1.39

Some restricted stock units provide for a net share settlement program to offset the personal

income tax obligations of the employee’s restricted stock unit vesting. Vesting activity above reflects
shares vested before net share settlement. The total forfeiture adjusted unrecognized compensation cost
related to performance based restricted stock units that had not vested as of December 31, 2013 was
not significant.

Note 14. Stockholders’ Equity

Preferred Stock

The Company may issue up to 30 million shares of preferred stock in one or more series. The

Board of Directors is authorized to fix the rights and terms for any series of preferred stock without
additional shareholder approval. As of December 31, 2013 and 2012, there were no outstanding shares
of preferred stock.

Note 15. Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a

liability (an exit price) in the principal or most advantageous market for the asset or liability in an
orderly transaction between market participants on the measurement date.

(a) Fair Value Hierarchy

The accounting guidance for fair value measurement requires an entity to maximize the use of

observable inputs and minimize the use of unobservable inputs when measuring fair value. 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); 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.

F-23

(b) Assets Measured at Fair Value

The Company’s money market funds are included in cash and cash equivalents in the Consolidated

Balance Sheets, and are considered a level 1 investment as they are valued at quoted market prices in
active markets. The Company’s Term Loan is carried at amortized cost which approximates fair value
based on current market pricing of similar debt instruments and is categorized as level 2 within the fair
value hierarchy.

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

the fair value hierarchy.

December 31, 2013
Fair Value Measurements

Level 1

Level 2

Level 3

Total

(in thousands)

Assets
Cash equivalents:

Money market funds . . . . . . . . . . . . . . . . .

$10,504

$ — $— $10,504

Liabilites

Term loan . . . . . . . . . . . . . . . . . . . . . . . . .

$ — $15,000

$— $15,000

December 31, 2012
Fair Value Measurements

Level 1

Level 2

Level 3

Total

(in thousands)

Assets
Cash equivalents:

Money market funds

. . . . . . . . . . . . . . . . . .

$29,179

$—

$— $29,179

The carrying amounts reflected in the consolidated balance sheets for cash and cash equivalents

(which are comprised primarily of deposit and overnight sweep accounts), accounts receivable, prepaid
expenses and other current and non-current assets, restricted cash, accounts payable and accrued
expenses approximate fair value due to their short-term maturities.

Note 16. Commitments and Contingencies

(a) Lease Commitments

The Company leases manufacturing and office facilities and certain equipment under operating

leases that expire through 2016. Rental expense was $4.0 million, $4.3 million, and $4.6 million under
operating leases for the years ended December 31, 2013, 2012, and 2011, respectively.

Future minimum lease commitments on non-cancelable operating leases for the year ended

December 31, 2013 are as follows:

2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Operating
Leases

(in thousands)
$2,762
1,458
312
42

$4,574

F-24

(b) Purchase Commitments

The Company has non-cancelable contracts and purchase orders for inventory of $24.5 million at

December 31, 2013.

(d)

Indemnifications

The Company’s system sales agreements typically include provisions under which the Company
agrees to take certain actions, provide certain remedies and defend its customers against third-party
claims of intellectual property infringement under specified conditions and to indemnify customers
against any damage and costs awarded in connection with such claims. The Company has not incurred
any material costs as a result of such indemnifications and has not accrued any liabilities related to
such obligations in the accompanying consolidated financial statements.

Note 17. Business Segment and Geographic Region Information

The Company operates in one business segment, which is the manufacture of capital equipment

for the semiconductor manufacturing industry. The principal market for semiconductor manufacturing
equipment is semiconductor manufacturers. Substantially all sales are made directly by the Company to
its customers located in the United States, Europe and Asia Pacific.

The Company’s ion implantation systems product line includes high current, medium current and

high energy implanters. Other products include dry strip equipment, curing systems, and thermal
processing systems. In addition to new equipment, the Company provides post-sales equipment service
and support, including spare parts, equipment upgrades, used equipment, maintenance services and
customer training.

Revenue by product lines is as follows:

Ion implantation systems, services, and royalties . . .
Other systems and services . . . . . . . . . . . . . . . . . .

$164,030
31,602

(in thousands)
$156,090
47,295

$237,857
81,559

$195,632

$203,385

$319,416

Years ended December 31,

2013

2012

2011

F-25

Revenue and long-lived assets by geographic region, based on the physical location of the

operation recording the sale or the asset, are as follows:

2013
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2012
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2011
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Revenue

Long-Lived
Assets

(in thousands)

$116,969
27,933
50,730

$44,424
—
480

195,632

$44,904

$132,159
27,636
43,590

$43,440
—
752

$203,385

$44,192

$234,123
31,505
53,779

$54,472
—
996

$319,416

$55,468

Long-lived assets consist of property, plant and equipment, net and assets manufactured for

internal use. Operations in Europe and Asia Pacific consist of sales and service organizations.

International revenue, including export sales from U.S. manufacturing facilities to foreign
customers, sales by foreign subsidiaries and branches was $149.4 million (76.4% of total revenue) in
2013, $142.8 million (70.2% of total revenue) in 2012, and $231.0 million (72.3% of total revenue) in
2011.

Note 18. Income Taxes

Income (loss) before income taxes are as follows:

Years ended December 31,

2013

2012

2011

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(in thousands)
$(18,998) $(37,682) $2,622
4,849

5,294

2,894

Income (loss) before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . .

$(16,104) $(32,388) $7,471

F-26

Income taxes (Benefits) are as follows:

Current:

United States
Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Years ended December 31,

2013

2012

2011

(in thousands)

$ — $ — $ —
163
1,646

84
641

82
738

Total current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

725

820

1,809

Deferred:

Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

315

826

585

Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,040

$1,646

$2,394

Reconciliations of income taxes at the United States Federal statutory rate to the effective income

tax rate are as follows:

Years ended December 31,

2013

2012

2011

Income tax (benefits) at the United States statutory rate . . . . . . . . . . . .
State income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrecognized tax benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of change in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign income tax rate differentials . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restoration of foreign deferred tax assets . . . . . . . . . . . . . . . . . . . . . . .
Foreign dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deemed distribution from foreign subsidiaries . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(in thousands)
$(5,636) $(11,336) $ 2,615
31
899
(3,160)
(365)
—
—
—
1,533
841

53
(832)
12,662
(788)
—
383
1,298
149
57

55
(293)
5,975
(1,244)
961
—
450
316
456

Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,040

$ 1,646

$ 2,394

F-27

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

Federal net operating loss carryforwards . . . . . . . . . . . . .
State net operating loss carryforwards . . . . . . . . . . . . . .
Foreign net operating loss carryforwards . . . . . . . . . . . . .
Federal tax credit carryforwards . . . . . . . . . . . . . . . . . . .
State tax credit carryforwards . . . . . . . . . . . . . . . . . . . . .
Unremitted earnings of foreign subsidiaries . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . . . . .
Accrued compensation . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock compensation . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

As of December 31,

2013

2012

Current

Long Term

Current

Long Term

(in thousands)

— $ 104,370
2,250
—
1,421
—
17,814
—
5,543
—
(9,661)
—
532
—
4,796
—
43
16,540
—
591
2,671

4,896
(56)
(2,406)

— $ 88,088
1,181
—
1,853
—
17,814
—
9,051
—
(8,580)
—
661
—
5,925
—
368
352
(215)
22,582
4,378
—
36
612
917
1,820

Deferred taxes, gross . . . . . . . . . . . . . . . . . . . . . . . . . . .

19,845

129,499

25,366

121,477

Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . .

(18,059)

(129,409)

(25,062)

(119,605)

Deferred taxes, net . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,786

304

1,872

At December 31, 2013, the Company had $149.3 million of deferred tax assets relating to net
operating loss carryforwards, tax credit carryforwards and other temporary differences, which are
available to reduce income taxes in future years. A valuation allowance must be established when it is
‘‘more likely than not’’ that all or a portion of deferred tax assets will not be realized. A review of all
available positive and negative evidence needs to be considered, including a company’s performance,
the market environment in which the company operates, length of carryback and carryforward periods,
existing sales backlog, and projections of future operating results. Where there are cumulative losses in
recent years there is a strong presumption that a valuation allowance is needed. This presumption can
be overcome in very limited circumstances.

The Company is in a three year cumulative loss position in the United States. As a result, the
Company maintains a 100% valuation allowance for entities in those tax jurisdictions to reduce the
carrying value of deferred tax assets to zero. The Company will continue to maintain a full valuation
allowance for those tax assets until sustainable future levels of profitability are evident. Changes in the
valuation allowance in 2013 and 2012 were attributable to changes in the composition of temporary
differences and changes in net operating loss carryforwards.

At December 31, 2013, the Company has federal and state net operating loss carryforwards of
approximately $345.3 million and foreign net operating loss carryforwards of approximately $5.1 million
expiring principally between 2014 and 2032.

The Company has research and development and other tax credit carryforwards of approximately

$25.8 million at December 31, 2013 that can be used to reduce future federal and state income tax
liabilities. These tax credit carryforwards expire principally between 2014 and 2028. In addition, the
Company has foreign tax credit carryforwards of approximately $5 million at December 31, 2013 that
are available to reduce future U.S. income tax liabilities subject to certain limitations. These foreign tax
credit carryforwards expire between 2014 and 2016.

F-28

It is Company policy to provide taxes for the total anticipated tax impact of the undistributed
earnings of our wholly-owned foreign subsidiaries’, as such earnings are not expected to be reinvested
indefinitely. The Company anticipates that U.S. tax resulting from remitting such earnings will be
off-set by net operating loss or credit carryforwards to the extent available. In addition, the Company
does not anticipate incurring a foreign withholding tax on remitting such earnings since it does not
intend to remit the earnings as dividends.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and
various states and foreign jurisdictions. The Company and most foreign subsidiaries are subject to
income tax examinations by tax authorities for all years dating back to 2003. The Company’s policy is to
recognize interest related to unrecognized tax benefits as interest expense and penalties as operating
expenses. The Company believes that it has appropriate support for the income tax positions taken and
to be taken on its tax returns and that its 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, 2013, the Company had unrecognized tax benefits of approximately $7.6 million,

of which approximately $5.3 million reduced the Company’s deferred tax assets and the offsetting
valuation allowance and $2.3 million was recorded in other long-term liabilities. The Company does not
expect any significant changes in unrecognized tax benefits in 2014.

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

Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increases in unrecognized tax benefits as a result of tax positions taken during a prior
period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decreases in unrecognized tax benefits related to settlements with tax authorities . . .
Increases in unrecognized tax benefits as a result of tax positions taken during the

2013

2012

(in thousands)

$7,719

$8,089

324
—

646
(880)

current period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

663

Reductions to unrecognized tax benefits as a result of a lapse of the applicable

statute of limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(398)

(799)

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$7,645

$7,719

Recorded as other long-term liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recorded as a decrease in deferred tax assets and offsetting valuation allowance . . . .

$2,343
5,302

$2,646
5,073

$7,645

$7,719

Note 19. Quarterly Results of Operations (unaudited)

Dec. 31,
2013(1)

Sept. 30,
2013(2)

June 30, March 31, Dec. 31,
2012(5)
2013(4)
2013(3)

Sept. 30,
2012(6)

June 30, March 31,
2012(7)

2012(8)

(in thousands, except per share data)

Revenue . . . . . . . . . . . . . . . . $58,574 $48,831 $47,501 $40,726 $ 44,624 $44,640 $59,114 $ 55,007
Gross profit . . . . . . . . . . . . . .
20,536
Net income (loss) . . . . . . . . . .
(471) (10,027)
Net income (loss) per share

480
(14,818)

16,976
(4,750)

16,737
(4,019)

12,943
(8,988)

14,367
(8,718)

21,280
614

22,788

basic and diluted . . . . . . . . . $

0.01 $ (0.04) $ (0.04) $ (0.08) $

(0.14) $ (0.08) $ (0.00) $

(0.09)

(1) Net income includes $0.4 million of income related to the expiration of an uncertain tax position

in a foreign jurisdiction.

F-29

(2) Net loss includes $0.4 million related to the write off of certain deferred tax assets in foreign

jurisdictions.

(3) Net loss includes $0.4 million in restructuring charges, and $0.8 million from the gain on sale of

dry strip assets and intellectual property.

(4) Gross profit and net loss includes a $2.1 million charge to excess and obsolete inventory. Net loss
includes, $1.8 million in restructuring charges, and $0.4 million from the gain on sale of dry strip
assets and intellectual property.

(5) Gross profit and net loss includes a $13.4 million provision for excess inventory related to the

Company’s comprehensive review of its worldwide inventory levels. Net loss includes a $7.9 million
gain on sale of the Company’s dry strip assets and intellectual property to Lam Research;
restructuring charges of $0.6 million; and a $2.1 million one-time marketing expense associated
with the Company’s evaluation programs.

(6) Net loss includes restructuring charges of $0.6 million.

(7) Net loss includes restructuring charges of $0.1 million and a tax expense of $0.8 million related to

an uncertain tax position in a certain foreign jurisdiction.

(8) Net loss includes restructuring charges of $2.9 million

F-30

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the

Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

Signatures

AXCELIS TECHNOLOGIES, INC.

By: /s/ MARY G. PUMA

Dated: March 3, 2014

Mary G. Puma, Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed

below by the following persons on behalf of the Registrant and in the capacities and on the date
indicated.

Signature

Title

Date

/s/ MARY G. PUMA

Mary G. Puma

/s/ KEVIN J. BREWER

Kevin J. Brewer

/s/ R. JOHN FLETCHER

R. John Fletcher

/s/ STEPHEN R. HARDIS

Stephen R. Hardis

/s/ WILLIAM C. JENNINGS

William C. Jennings

/s/ JOSEPH P. KEITHLEY

Joseph P. Keithley

/s/ PATRICK H. NETTLES

Patrick H. Nettles

/s/ H. BRIAN THOMPSON

H. Brian Thompson

Director and Principal Executive Officer

March 3, 2014

Principal Accounting and Financial Officer March 3, 2014

Director

March 3, 2014

Exhibit No.

Exhibit Index

Description

2.1

3.1

3.2

4.1

10.1*

10.2*

10.3*

10.4*

10.5*

10.6*

10.7*

10.8*

10.9*

Asset Purchase Agreement dated December 3, 2012 between Axcelis Technologies, Inc. and
Lam Research Corporation. Incorporated by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K filed with the Commission on December 4, 2012.

Amended and Restated Certificate of Incorporation of the registrant, as adopted May 6,
2009. Incorporated by reference to Exhibit 3.1 of the Company’s Form 8-K filed with the
Commission on May 11, 2009.

Bylaws of the Company, as amended as of August 8, 2007. Incorporated by reference to
Exhibit 3.2 of the Company’s Form 10-Q for the quarter ended June 30, 2007, filed with
the Commission on August 9, 2007

Specimen Stock Certificate. Incorporated by reference to Exhibit 4.1 of the Company’s
Registration Statement on Form S-1 (Registration No. 333-36330).

Axcelis Technologies, Inc. 2000 Stock Plan, as amended through June 23, 2005.
Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
filed with the Commission on June 28, 2005.

Axcelis Technologies, Inc. 2012 Equity Incentive Plan, as amended through May 14, 2013.
Incorporated by reference to Exhibit 10.1 to the Company’s registration statement on
Form S-8 filed with the Commission on May 31, 2013 (File No. 333-188967).

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.

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, together with a schedule
of each current indemnitee. 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 Board of
Directors on April 27, 2012 between the Company and each of its executive officers.
Incorporated by reference to Exhibit 10.5 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 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.

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.

Form of Restricted Stock Unit Award Agreement for use under the 2000 Stock Plan.
Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K
filed with the Commission on June 28, 2005.

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.

Exhibit No.

10.10*

Description

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.

10.11*

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.

10.12*

Named Executive Officer Base Compensation at March 1, 2014. Filed herewith.

10.13*

Non-Employee Director Cash Compensation at March 1, 2014. Filed herewith.

10.14*

10.15

10.16

10.17*

10.18

10.19

10.20

14.1

21.1

23.1

31.1

31.2

Amended and Restated Employment Agreement between the Company and Mary G. 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.

Business Loan Agreement dated as of July 5, 2013 between the Company and Northern
Bank &Trust Company. Incorporated by reference to Exhibit 10.1 to the Company’s report
on Form 10-Q filed with the Commission on August 2, 2013.

Mortgage and Fixture Filing dated as of July 5, 2013 by the Company in favor of Northern
Bank &Trust Company. Incorporated by reference to Exhibit 10.2 to the Company’s report
on Form 10-Q filed with the Commission on August 2, 2013.

Executive Separation Agreement between the Company and Jay Zager dated as of July 17,
2013. Incorporated by reference to Exhibit 10.1 to the Company’s report on Form 8-K filed
with the Commission on August 2, 2013.

Loan and Security Agreement dated as of October 31, 2013 between the Company and
Silicon Valley Bank. Incorporated by reference to Exhibit 10.4 to the Company’s report on
Form 10-Q filed with the Commission on November 8, 2013.

License Agreement dated as of March 30, 2009 between the Company and SEN
Corporation. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report
on Form 8-K filed with the Commission on April 3, 2009.

Transition Agreement dated December 3, 2012 between Axcelis Technologies, Inc. and Lam
Research Corporation. Incorporated by reference to Exhibit 10.2 to the Company’s Current
Report on Form 8-K filed with the Commission on December 4, 2012.

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.

Subsidiaries of the Company. Filed herewith.

Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm. 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 3, 2014.
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 3, 2014.
Filed herewith.

Exhibit No.

32.1

32.2

101

Description

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 3,
2014. 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 3,
2014. Filed herewith.

The following materials from the Company’s Form 10-K for the year ended December 31,
2013, 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.

Indicates a management contract or compensatory plan.

You may obtain a copy of any of these exhibits free of charge either on our website at
http://www.axcelis.com or by contacting Investor Relations at Axcelis Technologies, Inc., 108 Cherry Hill
Drive, Beverly, MA 01915-1053.

Schedule II—Valuation and Qualifying Accounts
Axcelis Technologies, Inc.
(In thousands)

Balance at
Beginning of
Period

Charged to
Costs and
Expenses

Deductions Other(*)

Balance at
End of
Period

Year Ended December 31, 2013
Allowance for doubtful accounts and returns . .
Reserve for excess and obsolete inventory(**) .
Year Ended December 31, 2012
Allowance for doubtful accounts and returns . .
Reserve for excess and obsolete inventory . . . .
Year Ended December 31, 2011
Allowance for doubtful accounts and returns . .
Reserve for excess and obsolete inventory . . . .

305
33,601

411
22,778

$ 1,357
27,517

96
2,562

— $

(10,913)

3
(159)

404
25,091

$ — $

14,492

(112)
(4,819)

$
6
1,150

$
305
33,601

$ (535)
1,015

(449)
(5,583)

38
(171)

$
411
22,778

(*) Represents foreign currency translation adjustments.

(**) Deductions include the disposal of fully reserved inventory

STOCK PERFORMANCE GRAPH
This graph compares the five-year cumulative total stockholder returns for our common stock to that of the Philadelphia
Semiconductor Index and the Nasdaq Composite Index at each of the last five fiscal year ends. The cumulative returns are
based on a $100 investment on December 31, 2008, with all dividends, if any, being reinvested. The stock performance shown
on the graph below is not necessarily indicative of future price performance.

$800.00

$700.00

$600.00

$500.00

$400.00

$300.00

$200.00

$100.00

$0.00

12/31/2008

12/31/2009

12/31/2010

12/30/2011

12/31/2012

12/31/2013

Company/Index Name

December 31 December 31 December 31 December 30 December 31 December 31

Axcelis Technologies Inc.
NASDAQ Composite Index
Philadelphia Semiconductor Index

2008
$100.00
$100.00
$100.00

2009
$276.47
$146.33
$170.36

2010
$678.43
$171.08
$194.94

2011
$260.78
$168.00
$172.51

2012
$272.55
$194.72
$181.79

2013
$478.43
$269.34
$253.26

BOARD OF DIRECTORS

EXECUTIVE OFFICERS

R. John Fletcher
Chief Executive Officer,
Fletcher Spaght, Inc.

Stephen R. Hardis
Lead Director, Axcelis Technologies, Inc.,
Retired Chairman and Chief Executive Officer,
Eaton Corporation

Mary G. Puma
Chairman, Chief Executive Officer and President

Kevin J. Brewer
Executive Vice President and Chief Financial Officer

John E. Aldeborgh
Executive Vice President, Customer Operations

William C. Jennings
Retired Partner, PricewaterhouseCoopers LLP

William Bintz
Executive Vice President, Engineering and Marketing

Joseph P. Keithley
Chairman, Nordson Corporation
Former Chairman and CEO of Keithley Instruments

Douglas A. Lawson
Executive Vice President, Corporate Marketing and
Strategy

Patrick H. Nettles
Executive Chairman of the Board of Directors,
CIENA Corporation

Lynnette C. Fallon
Executive Vice President, Human Resources and Legal,
General Counsel and Secretary

Mary G. Puma
Chairman and Chief Executive Officer,
Axcelis Technologies, Inc.

H. Brian Thompson
Executive Chairman,
GTT

AUDIT COMMITTEE
William C. Jennings, Chairman
R. John Fletcher
Joseph P. Keithley

COMPENSATION COMMITTEE
H. Brian Thompson, Chairman
R. John Fletcher
Stephen R. Hardis

NOMINATING AND GOVERNANCE
COMMITTEE
Patrick H. Nettles, Chairman
Stephen R. Hardis
H. Brian Thompson

ANNUAL MEETING DATE & LOCATION
The annual meeting of stockholders will be held at 10:30 a.m.
on Tuesday, May 13, 2014 at the offices of Edwards Wildman
Palmer LLP, 111 Huntington Ave., Boston, MA 02199

CORPORATE HEADQUARTERS
108 Cherry Hill Drive
Beverly, MA 01915-1053
978-787-4000

INDEPENDENT AUDITORS
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072

INVESTOR INFORMATION/SEC FORM 10-K
Information on the Company, as well as the Company’s 2013
Annual Report on SEC Form 10-K and other SEC filings, can be
obtained free of charge either on our website at
http://www.axcelis.com or by contacting Investor Relations
at Axcelis Technologies, Inc., 108 Cherry Hill Drive, Beverly, MA
01915-1053. You can also e-mail investor relations at
investor.relations@axcelis.com.

LEGAL COUNSEL
Edwards Wildman Palmer LLP
111 Huntington Avenue
Boston, MA 02199-7613

STOCK LISTING
The Company's common stock is traded on the NASDAQ Global
Select market under the symbol ACLS.

TRANSFER AGENT & REGISTRAR
For questions regarding misplaced stock certificates, changes
of address, or the consolidation of accounts, please contact the
Company's transfer agent:

Telephone: 1-781-575-2725
Hearing Impaired TDD#: 1-800-952-9245

Website:
http://www.computershare.com/investor

Mailing Address:
Computershare Trust Company, N.A.
P.O. Box 30170
College Station, TX 77842-3170

Overnight Correspondence:
Computershare Trust Company, N.A.
211 Quality Circle, Suite 210
College Station, TX 77854

WEBSITE
http://www.axcelis.com

SAFE HARBOR STATEMENT
This document contains forward-looking statements under the SEC safe harbor provisions. These statements are based on management’s current expectations and should be
viewed with caution. They are subject to various risks and uncertainties, many of which are outside the control of the company, including our ability to implement
successfully our profit plans, the continuing demand for semiconductor equipment, relative market growth, continuity of business relationships with and purchases by
major customers, competitive pressure on sales and pricing, increases in material and other production costs that cannot be recouped in product pricing and global
economic and financial conditions. These risks and uncertainties are discussed in more detail in our Form 10-K and other SEC Filings, which may be obtained as described
above under “Investor Information/SEC Form 10-K”.

(This page has been left blank intentionally.)