10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

___________________________

FORM 10-Q

__________________________

(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2014

OR

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

For the transition period from          to          

Commission File No. 000-27965

___________________________

RUDOLPH TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

___________________________

Delaware	22-3531208
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

One Rudolph Road, PO Box 1000, Flanders, New Jersey 07836

(Address of principal executive offices, including zip code)

Registrant's telephone number, including area code: (973) 691-1300

___________________________

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 [X]   No [_]

Indicate by check mark 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 (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X]   No [_]

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 definition of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Securities Exchange Act.    

Large accelerated filer [  ]	Accelerated filer [ X ]	Non-accelerated filer [  ]	Smaller reporting company [  ]
		(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 Exchange Act).     Yes [_] No [X]

The number of outstanding shares of the Registrant’s Common Stock on April 21, 2014 was 33,230,086.

TABLE OF CONTENTS

Item No.  Page

PART I    FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	1
	Condensed Consolidated Balance Sheets at March 31, 2014 and December 31, 2013	1
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2014 and 2013	2
	Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2014 and 2013	3
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2014 and 2013	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	21
Item 4.	Controls and Procedures	21

PART II    OTHER INFORMATION

Item 1.	Legal Proceedings	22
Item 1A.	Risk Factors	22
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22
Item 3.	Defaults Upon Senior Securities	22
Item 4.	Mine Safety Disclosures	22
Item 5.	Other Information	22
Item 6.	Exhibits	23

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

RUDOLPH TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

	March 31, 2014			December 31, 2013
	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	55,606		$	80,790
Marketable securities	127,913			86,582
Accounts receivable, less allowance of $1,596 as of March 31, 2014 and $1,152 as of December 31, 2013	42,547			53,437
Inventories	62,321			61,351
Prepaid expenses and other current assets	16,392			14,804
Total current assets	304,779			296,964
Property, plant and equipment, net	12,552			13,058
Goodwill	22,495			22,553
Identifiable intangible assets, net	10,794			11,464
Other assets	28,763			27,323
Total assets	$	379,383		$	371,362
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	14,211		$	12,772
Other current liabilities	23,538			18,918
Total current liabilities	37,749			31,690
Convertible senior notes	52,486			51,751
Other non-current liabilities	9,410			8,918
Total liabilities	99,645			92,359
Commitments and contingencies
Stockholders’ equity:
Common stock	33			33
Additional paid-in capital	417,327			415,739
Accumulated other comprehensive loss	(1,924		)	(1,795		)
Accumulated deficit	(135,698		)	(134,974		)
Total stockholders’ equity	279,738			279,003
Total liabilities and stockholders’ equity	$	379,383		$	371,362

The accompanying notes are an integral part of these financial statements.

1

RUDOLPH TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

	Three Months Ended
	March 31,
	2014			2013
Revenues	$	41,649		$	41,650
Cost of revenues	20,080			19,776
Gross profit	21,569			21,874
Operating expenses:
Research and development	10,006			9,703
Selling, general and administrative	10,780			10,252
Amortization	670			616
Total operating expenses	21,456			20,571
Operating income	113			1,303
Interest expense, net	1,281			1,209
Other expense (income)	(127		)	349
Loss before income taxes	(1,041		)	(255		)
Benefit for income taxes	(317		)	(648		)
Net income (loss)	$	(724	)	$	393
Earnings (loss) per share:
Basic	$	(0.02	)	$	0.01
Diluted	$	(0.02	)	$	0.01
Weighted average shares outstanding:
Basic	33,092			32,523
Diluted	33,092			33,239

The accompanying notes are an integral part of these financial statements. 

2

RUDOLPH TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)

	Three Months Ended
	March 31,
	2014			2013
Net income (loss)	$	(724	)	$	393
Other comprehensive loss:
Change in net unrealized gains on investments, net of tax	3			14
Change in currency translation adjustments	(132		)	(449		)
Total comprehensive loss	$	(853	)	$	(42	)

The accompanying notes are an integral part of these financial statements. 

3

RUDOLPH TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Three Months Ended March 31,
	2014			2013
Cash flows from operating activities:
Net income (loss)	$	(724	)	$	393
Adjustments to reconcile net income to net cash and cash equivalents provided by (used in) operating activities:
Amortization of intangibles and other	672			707
Amortization of convertible note discount and issuance costs	822			739
Depreciation	1,038			1,064
Foreign currency exchange (gain) loss	(127		)	331
Contingent consideration adjustments	75			—
Share-based compensation	1,445			957
Provision for doubtful accounts and inventory valuation	353			778
Deferred income taxes	65			—
Changes in operating assets and liabilities, net of acquisitions	11,987			(5,276		)
Net cash and cash equivalents provided by (used in) operating activities	15,606			(307		)
Cash flows from investing activities:
Purchases of marketable securities	(69,634		)	(34,877		)
Proceeds from sales of marketable securities	29,018			18,473
Purchases of property, plant and equipment	(390		)	(2,528		)
Net cash and cash equivalents used in investing activities	(41,006		)	(18,932		)
Cash flows from financing activities:
Proceeds from sales of shares through share-based compensation plans	93			101
Tax benefit for sale of shares through share-based compensation plans	49			500
Net cash and cash equivalents provided by financing activities	142			601
Effect of exchange rate changes on cash and cash equivalents	74			(562		)
Net decrease in cash and cash equivalents	(25,184		)	(19,200		)
Cash and cash equivalents at beginning of period	80,790			104,253
Cash and cash equivalents at end of period	$	55,606		$	85,053
Supplemental disclosure of cash flow information:
Income taxes paid	$	567		$	1,954
Interest paid	$	1,125		$	1,125

The accompanying notes are an integral part of these financial statements. 

4

RUDOLPH TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share data)

(Unaudited)

NOTE 1.    Basis of Presentation

The accompanying interim unaudited condensed consolidated financial statements have been prepared by Rudolph Technologies, Inc. (the “Company” or “Rudolph”) and in the opinion of management reflect all adjustments, consisting of normal recurring accruals, necessary for their fair presentation in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).  Preparing financial statements requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes.  Actual amounts could differ materially from those amounts.  The interim results for the three month period ended March 31, 2014 are not necessarily indicative of results to be expected for the entire year or any future periods.  This interim financial information should be read in conjunction with the financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 (“2013 10-K”) filed with the Securities and Exchange Commission (“SEC”). The accompanying condensed consolidated balance sheet at December 31, 2013 has been derived from the audited consolidated financial statements included in the 2013 10-K.

Reclassifications

Certain prior period amounts have been reclassified to conform to current financial statement presentation. These amounts include the reclassification of a portion of deferred tax assets from Other assets to Prepaid expenses and other current assets in the Condensed Consolidated Balance Sheets.

NOTE 2.   Business Combinations

Tamar Technology

In April 2013, the Company announced that it had acquired specific assets of Tamar Technology, located in Newbury Park, California. The acquired business has been integrated into the Company’s inspection technology group.  The impact of the acquisition was not material to the Company’s consolidated financial position or results of operations.

NOTE 3.  Fair Value Measurements

The Company applies a three-level valuation hierarchy for fair value measurements. This hierarchy prioritizes the inputs into three broad levels.  Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the asset or liability. Level 3 inputs are unobservable inputs based on management’s assumptions used to measure assets and liabilities at fair value. A financial asset’s or liability’s fair value measurement classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The following tables provide the assets and liabilities carried at fair value measured on a recurring basis at March 31, 2014 and December 31, 2013:

5

			Fair Value Measurements Using
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
March 31, 2014
Assets:
Available-for-sale debt securities:
Municipal notes and bonds	$	127,618	$	—	$	127,618	$	—
Auction rate securities	295		—		—		295
Total Assets	$	127,913	$	—	$	127,618	$	295
Liabilities:
Contingent consideration - acquisitions	$	5,283	$	—	$	—	$	5,283
Foreign currency forward contracts	21		—		21		—
Total Liabilities	$	5,304	$	—	$	21	$	5,283
December 31, 2013
Assets:
Available-for-sale debt securities:
Municipal notes and bonds	$	86,305	$	—	$	86,305	$	—
Auction rate securities	277		—		—		277
Foreign currency forward contracts	6		—		6		—
Total Assets	$	86,588	$	—	$	86,311	$	277
Liabilities:
Contingent consideration - acquisitions	$	5,208	$	—	$	—	$	5,208
Total Liabilities	$	5,208	$	—	$	—	$	5,208

Level 1 investments are based on quoted prices that are available in active markets.

The Company’s investments classified as Level 2 are valued using observable inputs to quoted market prices, benchmark yields, reported trades, broker/dealer quotes or alternative pricing sources with reasonable levels of price transparency. The foreign currency forward contracts are primarily measured based on the foreign currency spot and forward rates quoted by the banks or foreign currency dealers. Available-for-sale debt securities prices are obtained from third party pricing providers, which models prices utilizing the above observable inputs, for each asset class.

Level 3 investments consist of an auction rate security and contingent consideration related to an acquisition for which the Company uses a discounted cash flow model to value these investments. The Level 3 assumptions used in the discounted cash flow model for the auction rate security included estimates of interest rates of 3.3%, timing and amount of cash flows and expected holding periods of the auction rate security, based on data available on March 31, 2014. Changes in the unobservable input values would be unlikely to cause material changes in the fair value of the auction rate security. The Level 3 assumptions used in the discounted cash flow model for the contingent consideration included projected revenues, estimates of discount rates of 5.7% and timing of cash flows. A significant decrease in the projected revenues or increase in discount rate could result in a significantly lower fair value measurement for the contingent consideration.

This table presents a reconciliation for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months endedMarch 31, 2014:

6

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Assets:
Balance at December 31, 2013	$	277
Unrealized gain in accumulated other comprehensive loss	18
Purchases	—
Sales, issuances, and settlements	—
Transfers into (out of) Level 3	—
Balance at March 31, 2014	$	295
Liabilities:
Balance at December 31, 2013	$	5,208
Additions	—
Total gain (loss) included in earnings	(75		)
Payments	—
Transfers into (out of) Level 3	—
Balance at March 31, 2014	$	5,283

See Note 4 for additional discussion regarding the fair value of the Company’s marketable securities.

Fair Value of Other Financial Instruments

The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximates fair value because of the short maturity of these instruments. The estimated fair value of these obligations is based, primarily, on a market approach, comparing the Company’s interest rates to those rates the Company believes it would reasonably receive upon re-entry into the market. Judgment is required to estimate the fair value, using available market information and appropriate valuation methods.

The Company’s convertible senior notes are not publicly traded. The estimated fair value of the Company’s convertible senior notes was valued using a discounted cash flow model. The Level 3 assumptions, based on data available at the valuation date used in preparing the discounted cash flow model included estimates of interest rates, timing and amount of cash flows and expected holding periods of the convertible senior notes. The fair value of the contingent interest associated with the convertible senior notes is valued quarterly using the present value of expected cash flow model incorporating the probabilities of the contingent events occurring.

The following table reflects information pertaining to the Company’s convertible senior notes:

	March 31, 2014			December 31, 2013
Net carrying value of convertible senior notes	$	52,486		$	51,751
Estimated fair value of convertible senior notes	$	60,390		$	59,340
Estimated interest rate used in discounted cash flow model	3.5		%	4.2		%
Fair value of contingent interest	$	—		$	—

NOTE 4.   Marketable Securities

The Company has evaluated its investment policies and determined that all of its investment securities are to be classified as available-for-sale.  Available-for-sale securities are carried at fair value, with the unrealized gains and losses reported in Stockholders’ Equity under the caption “Accumulated other comprehensive loss.”  Realized gains and losses on available-for-sale securities are included in “Other expense (income)” in the Condensed Consolidated Statements of Operations.  The Company records other-than-temporary impairment charges for its available-for-sale investments when it intends to sell the securities, it is more-likely-than not that it will be required to sell the securities before a recovery, or when it does not expect to recover the entire amortized cost basis of the securities.  The cost of securities sold is based on the specific identification method.

7

As of March 31, 2014, the Company held one auction rate security with a fair value of $295. The underlying asset of the Company’s auction rate security consisted of a municipal bond with an auction reset feature. Due to auction failures in the marketplace, the Company will not have access to these funds unless (a) future auctions occur and are successful, (b) the security is called by the issuer, (c) the Company sells the security in an available secondary market, or (d) the underlying note matures. Currently, there are no active secondary markets. As of March 31, 2014, the Company had recorded a cumulative temporary unrealized impairment loss of $180 within “Accumulated other comprehensive loss” based upon its assessment of the fair value of this security. The Company believes that this impairment is temporary as it does not intend to sell this security, the Company will not be required to sell this security before recovery, and the Company expects to recover the amortized cost basis of this security.

The Company has determined that the gross unrealized losses on its marketable securities at March 31, 2014 and December 31, 2013 are temporary in nature. The Company reviews its investment portfolio to identify and evaluate investments that have indications of possible impairment. Factors considered in determining whether a loss is other-than-temporary include the length of time and extent to which fair value has been less than the cost basis, credit quality and the Company’s ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

At March 31, 2014 and December 31, 2013, marketable securities are categorized as follows:

	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Fair Value
March 31, 2014
Municipal notes and bonds	$	127,585	$	44	$	11	$	127,618
Auction rate securities	475		—		180		295
Total marketable securities	$	128,060	$	44	$	191	$	127,913
December 31, 2013
Municipal notes and bonds	$	86,257	$	50	$	2	$	86,305
Auction rate securities	475		—		198		277
Total marketable securities	$	86,732	$	50	$	200	$	86,582

 The amortized cost and estimated fair value of marketable securities classified by the maturity date listed on the security, regardless of the Condensed Consolidated Balance Sheet classification, is as follows at March 31, 2014 and December 31, 2013:

	March 31, 2014				December 31, 2013
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due within one year	$	101,686	$	101,707	$	78,909	$	78,948
Due after one through five years	15,150		15,164		5,811		5,821
Due after five through ten years	5,010		5,009		—		—
Due after ten years	6,214		6,033		2,011		1,813
Total marketable securities	$	128,060	$	127,913	$	86,731	$	86,582

The following table summarizes the estimated fair value and gross unrealized holding losses of marketable securities, aggregated by investment instrument and period of time in an unrealized loss position at March 31, 2014 and December 31, 2013:  

8

	In Unrealized Loss Position For Less Than 12 Months				In Unrealized Loss Position For Greater Than 12 Months
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
March 31, 2014
Municipal notes and bonds	$	57,313	$	5	$	—	$	—
Auction rate securities	—		—		475		180
Total	$	57,313	$	5	$	475	$	180
December 31, 2013
Municipal notes and bonds	$	16,448	$	2	$	—	$	—
Auction rate securities	—		—		475		198
Total	$	16,448	$	2	$	475	$	198

See Note 3 for additional discussion regarding the fair value of the Company’s marketable securities.

NOTE 5.    Derivative Instruments and Hedging Activities

The Company, when it considers it to be appropriate, enters into forward contracts to hedge the economic exposures arising from foreign currency denominated transactions. At March 31, 2014 and December 31, 2013, these contracts included the future sale of Japanese Yen to purchase U.S. dollars. Derivative instruments are recognized as either “Prepaid expenses and other current assets” or “Other current liabilities” in the Condensed Consolidated Balance Sheets and are measured at fair value. The foreign currency forward contracts were entered into by the Company’s Japanese subsidiary to economically hedge a portion of certain intercompany obligations. The forward contracts are not designated as hedges for accounting purposes and therefore, decreases in the fair value of $27 and $68 for the three month period ended March 31, 2014 and 2013, respectively. These decreases are recorded within the caption “Other expense (income)” in the Condensed Consolidated Statements of Operations.

The dollar equivalent of the U.S. dollar forward contracts and related fair values as of March 31, 2014 and December 31, 2013 were as follows:

	March 31, 2014			December 31, 2013
Notional amount	$	1,442		$	1,029
Fair value of asset (liability)	$	(21	)	$	6

NOTE 6.    Goodwill and Purchased Intangible Assets

Goodwill

The changes in the carrying amount of goodwill are as follows:

Balance at December 31, 2012	$	15,361
Goodwill acquired during period	6,989
Other, primarily currency translation	203
Balance at December 31, 2013	$	22,553
Goodwill acquired during period	—
Other	(58		)
Balance at March 31, 2014	$	22,495

Purchased Intangible Assets

Purchased intangible assets as of  March 31, 2014 and December 31, 2013 are as follows:

9

	Gross Carrying Amount		Accumulated Amortization		Net
March 31, 2014
Finite-lived intangibles:
Developed technology	$	59,831	$	52,032	$	7,799
Customer and distributor relationships	9,560		7,544		2,016
Trade names	4,361		3,382		979
Total identifiable intangible assets	$	73,752	$	62,958	$	10,794
December 31, 2013
Finite-lived intangibles:
Developed technology	$	59,831	$	51,496	$	8,335
Customer and distributor relationships	9,560		7,449		2,111
Trade names	4,361		3,343		1,018
Total identifiable intangible assets	$	73,752	$	62,288	$	11,464

Intangible asset amortization expense for the three months endedMarch 31, 2014 and 2013 was $670 and $616. Assuming no change in the gross carrying value of identifiable intangible assets and estimated lives, estimated amortization expense for the remainder of 2014 will be $1,752, and for each of the next five years estimated amortization expense amounts to $2,050 for 2015, $1,941 for 2016, $1,553 for 2017, $1,117 for 2018, and $1,117 for 2019.

NOTE 7.    Balance Sheet Details

Inventories

Inventories are comprised of the following:

	March 31, 2014		December 31, 2013
Materials	$	31,086	$	31,194
Work-in-process	18,969		19,867
Finished goods	12,266		10,290
Total inventories	$	62,321	$	61,351

The Company has established reserves of $6,606 and $6,101 as of March 31, 2014 and December 31, 2013, respectively, for slow moving and obsolete inventory, which are included in the amounts above.

Property, Plant and Equipment

Property, plant and equipment, net is comprised of the following:

	March 31, 2014		December 31, 2013
Land and building	$	5,024	$	5,024
Machinery and equipment	21,280		20,827
Furniture and fixtures	3,970		4,043
Computer equipment	5,658		5,568
Leasehold improvements	7,742		7,744
	43,674		43,206
Less: Accumulated depreciation	31,122		30,148
Total property, plant and equipment, net	$	12,552	$	13,058

10

Other assets

Other assets is comprised of the following:

	March 31, 2014		December 31, 2013
Deferred income taxes	$	27,087	$	25,547
Other	1,676		1,776
Total other assets	$	28,763	$	27,323

Other current liabilities

Other current liabilities is comprised of the following:

	March 31, 2014		December 31, 2013
Litigation accrual	$	4,211	$	4,293
Deferred revenue	12,850		8,786
Contingent consideration - acquisitions	1,130		868
Other	5,347		4,971
Total other current liabilities	$	23,538	$	18,918

Other non-current liabilities

Other non-current liabilities is comprised of the following:

	March 31, 2014		December 31, 2013
Unrecognized tax benefits (including interest)	$	3,498	$	2,806
Contingent consideration - acquisitions	4,153		4,340
Other	1,759		1,772
Total other non-current liabilities	$	9,410	$	8,918

NOTE 8.   Debt Obligations

On July 25, 2011, the Company issued $60,000 aggregate principal amount of 3.75% Convertible Senior Notes due 2016 (the “Notes”) at par. The Notes were issued pursuant to an indenture, dated as of July 25, 2011, between the Company and Bank of New York Mellon Trust Company, N.A., as Trustee, which includes a form of Note. The Notes provide for the payment of interest semi-annually in arrears on January 15 and July 15 of each year, beginning January 15, 2012, at an annual rate of 3.75% and will mature on July 15, 2016, unless earlier converted or repurchased. The Notes may be converted, under certain circumstances, based on an initial conversion rate of 77.241 shares of Company common stock per $1 principal amount of Notes, which represents an initial conversion price of approximately $12.95 per share. Concurrently with the issuance of the Notes, the Company purchased a convertible note hedge and sold a warrant. Each of the convertible note hedge and warrant transactions were entered into with an affiliate of the initial purchaser of the Notes. The convertible note hedge is intended to reduce the potential future dilution to the Company’s common stock associated with the conversion of the Notes. However, the warrant transaction will have a dilutive effect on the Company’s earnings per share to the extent that the price of the Company’s common stock exceeds the strike price of the warrant. The strike price of the warrant will initially be $17.00 per share. The net proceeds to the Company from the sale of the Notes, including the convertible note hedge and warrant were $50,249.

The following table reflects the net carrying value of the Notes:

	March 31, 2014		December 31, 2013
Convertible senior notes	$	60,000	$	60,000
Less: Unamortized interest discount	7,514		8,249
Net carrying value of convertible senior notes	$	52,486	$	51,751

11

The following table presents the amount of interest cost recognized relating to the Notes during the three months endedMarch 31, 2014 and March 31, 2013.

	Three Months Ended March 31,
	2014		2013
Contractual interest coupon	$	562	$	562
Amortization of interest discount	735		667
Amortization of debt issuance costs	87		72
Total interest cost recognized	$	1,384	$	1,301

The remaining bond discount of the Notes of $7,514, as of March 31, 2014, will be amortized over the remaining life of the Notes.

NOTE 9.   Commitments and Contingencies

Warranty Reserves

The Company generally provides a warranty on its products for a period of twelve to fifteen months against defects in material and workmanship. The Company estimates the costs that may be incurred during the warranty period and records a liability in the amount of such costs at the time revenue is recognized. The Company’s estimate is based primarily on historical experience. The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary. Settlements of warranty reserves are generally associated with sales that occurred during the 12 to 15 months prior to the year-end and warranty accruals are related to sales during the year.

Changes in the Company’s warranty reserves are as follows:

	Three Months Ended March 31,
	2014		2013
Balance, beginning of the period	$	1,551	$	2,024
Accruals	481		446
Less: Usage	523		705
Balance, end of the period	$	1,509	$	1,765

Warranty reserves are reported in the Condensed Consolidated Balance Sheets within the caption “Accounts payable and accrued liabilities.”

Letter of Credit

As of March 31, 2014, the Company had a $40,000 irrevocable standby letter of credit with Credit Suisse AG available to secure the damages assessment in connection with the ITC litigation discussed in Legal Matters below, which the Company is in the process of appealing. The letter of credit contains a provision for automatic renewal each year. Upon draw down of funds, the letter of credit would be collateralized by securities held in the Company’s investment portfolios and reported in the Condensed Consolidated Balance Sheets within the caption “Cash and cash equivalents” and “Marketable securities.” No amounts were outstanding on the letter of credit as of, or during the three months ended, March 31, 2014.

Legal Matters

From time to time, the Company is subject to legal proceedings and claims in the ordinary course of business. As previously disclosed, in December 2007, the Company completed the acquisition of specific assets and liabilities of the semiconductor division of Applied Precision LLC (“Applied”). As a result of the acquisition, the Company assumed certain liabilities of Applied including a lawsuit filed in the United States District Court, District of Arizona, by Integrated Technology Corporation (“ITC”) which alleged Applied’s PrecisionPoint™, PrecisionWoRx® and ProbeWoRx® products infringed an ITC patent (Integrated Technology Corporation v. Rudolph Technologies, Inc., No.  CV-06-2182-PHX-ROS).  Prior to trial, the District Court ruled that such products sold prior to August of 2007 (the “pre-August 2007 tools”) infringed the ITC patent.  At trial in December of 2011, a trial verdict was rendered in which the jury found that while the Company’s products manufactured after August of 2007 (the “post-August 2007 tools”) did not literally infringe ITC’s patent, the products were found to infringe under a rule known as the doctrine of equivalents, a legal principle which expands the language of patent claims to encompass products or processes which may otherwise be found not to literally infringe the patent. The jury awarded $15,475 to ITC in damages for sales made during the years 2000-2011,

12

of which award approximately one-half related to sales for pre-August 2007 tools.  The jury found that for the sales of the post-August 2007 tools, the infringement was willful.  On July 23, 2012, the District Court issued an Order which affirmed the jury’s award, applied treble damages to the portion of the jury award related to post-August 2007 tool sales and granted ITC’s motion for attorney’s fees and prejudgment interest on the verdict and attorney’s fees.  At that time, the District Court also enjoined the Company from future infringement of the ITC patent and from selling or supplying the applicable products with the applicable features from or into the United States. The Company appealed the injunction, the District Court Order and the damages assessment. In October 2012, the injunction was stayed by the U.S. Federal Court of Appeals and thereafter in June of 2013, the patent expired.  On November 4, 2013, the U.S. Federal Court of Appeals issued a ruling which reversed the judgment of infringement against all post-August 2007 tools, reversed the finding of willfulness, vacated the treble damages award, vacated the award of attorney’s fees and costs, remanded the issue back to the District Court for further review, and affirmed the award of damages and interest for the pre-August 2007 tools.  As a result, the matter is resolved with regard to the alleged infringement of the post-August 2007 tools in the Company’s favor.  With regard to the damages assessment against the pre-August 2007 tools, the Company believes that it has meritorious defenses and the Company intends to continue to vigorously prosecute our appeal regarding this issue.  On March 4, 2014, the Company filed a Petition for a Writ of Certiorari with the U.S. Supreme Court to appeal the basis of the Federal Court of Appeals’ decision affirming the damages award for the pre-August 2007 tools. A decision by the Supreme Court on whether the Petition will be granted is expected to be issued on or about June 26, 2014. It remains probable that the Company could realize a loss in this matter  regarding the pre-August 2007 tools for which the Company has estimated and recorded a liability of approximately $4,211 in “Other current liabilities” in the Condensed Consolidated Balance Sheets.  The Company expects that the maximum liability reasonably possible for the pre-August 2007 products, including damages and interest, is an additional $6,367 plus attorney’s fees beyond the accrual.

In the Company’s patent infringement suit against Camtek, Ltd., of Migdal Hamek, Israel, concerning the Company’s proprietary continuous scan wafer inspection technology, the U.S. Federal Court of Appeals issued a ruling on August 22, 2011.  In its opinion, the Appellate Court affirmed multiple rulings from trial at the District Court level including (i) finding the Company’s U.S. Patent No. 6,826,298 valid, (ii) the part of the infringement ruling based on the finding that Camtek’s Falcon product strobes “based on velocity,” and (iii) the dismissal of Camtek’s claim against the Company for inequitable conduct against the U.S. Patent and Trademark Office.  The court did, however, revise one claim construction ruling made by the District Court in the original case.  As a result, the Appellate Court set aside the verdict delivered by the jury for damages and the District Court’s decision to enter an injunction against Camtek’s selling Falcon tools in the U.S. and remanded the case back to the trial court for a limited trial on this single infringement issue.  On March 31, 2014, the District Court ruled in the Company’s favor, finding that Camtek’s Falcon tools continue to infringe the Company’s patent even under the revised claim construction of the patent, obviating the need for the limited trial.  The Company intends to petition the court to reinstate a permanent injunction against the sale by Camtek of its infringing semiconductor inspection systems. The Company also anticipates that the damages originally awarded by the jury in 2009 will be reinstated, as well as related interest and all subsequently awarded damages.   This lawsuit was initially brought in 2005 by August Technology prior to its merger with the Company. A subsequent lawsuit has been filed by Rudolph against Camtek alleging infringement of Rudolph’s U.S. Patent No. 7,729,528, also related to the Company’s proprietary continuous scan wafer inspection technology.  This lawsuit is currently stayed pending resolution of a re-examination petition filed by Camtek with the U.S. Patent and Trademark Office.

NOTE 10.   Share-Based Compensation

Restricted Stock Unit Activity

A summary of the Company’s nonvested restricted stock unit activity with respect to the three months ended March 31, 2014 is as follows:

	Number of Shares	Weighted Average Grant Date Fair Value
Nonvested at December 31, 2013	1,116	$	9.73
Granted	503	$	10.97
Less: Vested	290	$	8.37
Less: Forfeited	12	$	10.31
Nonvested at March 31, 2014	1,317	$	10.50

As of March 31, 2014 and December 31, 2013, there was $9,884 and $5,755 of total unrecognized compensation cost related to restricted stock units granted under the Company’s stock plans, respectively.  That cost is expected to be recognized over a weighted average period of 2.4 years and 2.0 years for the respective periods.

13

NOTE 11.   Other Expense (Income)

	Three Months Ended
	March 31,
	2014			2013
Foreign currency exchange losses (gains), net	$	(127	)	$	331
Other	—			18
Total other expense (income)	$	(127	)	$	349

NOTE 12.   Income Taxes

The following table provides details of income taxes:

	Three Months Ended
	March 31,
	2014			2013
Loss before income taxes	$	(1,041	)	$	(255	)
Benefit for income taxes	$	(317	)	$	(648	)
Effective tax rate	30.5		%	254.1		%

The income tax provision for the three months endedMarch 31, 2014 was computed based on the Company’s annual forecast of profit by jurisdiction and forecasted effective tax rate for the year. The changes in the Company’s effective tax rate for the three months endedMarch 31, 2014 compared to the same period for the prior year are primarily due to the generation of federal R&D credits for both 2012 and 2013 recognized in 2013, which are not available in the 2014 period as a result of legislation.

The Company currently has a partial valuation allowance recorded against certain deferred tax assets. Each quarter, the Company assesses the likelihood that it will be able to recover its deferred tax assets. The Company considers available evidence, both positive and negative, including prudent and feasible tax planning strategies in assessing the need for a valuation allowance. As a result of the Company’s analysis, it concluded that it is more likely than not that a portion of its deferred tax assets will not be realized. Therefore, the Company continues to provide a valuation allowance against certain deferred tax assets. The Company continues to closely monitor available evidence and may reverse some or all of the remaining valuation allowance in future periods, if appropriate. The Company has a valuation allowance of $1,646 as of March 31, 2014 and December 31, 2013.

NOTE 13.   Earnings (Loss) Per Share

Basic earnings (loss) per share is calculated using the weighted average number of shares of common stock outstanding during the period.  Diluted earnings per share is computed in the same manner and also gives effect to all dilutive common equivalent shares outstanding during the period.  Potential common shares that would have the effect of increasing diluted earnings per share are considered to be antidilutive. In accordance with U.S. GAAP, these shares were not included in calculating diluted earnings per share. For the three months endedMarch 31, 2014, all outstanding stock options and restricted stock units totaling 739 and 1,377, respectively, were excluded from the computation of diluted loss per share because the effect in the period would be antidilutive. For the three months endedMarch 31, 2013, the weighted average number of stock options and restricted stock units excluded from the computation of diluted earnings per share totaled 810 and 0, respectively, because their effect was antidilutive. Diluted earnings per share-weighted average shares outstanding do not include any effect resulting from assumed conversion of the Notes and warrants as their impact would be anti-dilutive.

14

The Company’s basic and diluted earnings (loss) per share amounts are as follows:

	Three Months Ended March 31,
	2014			2013
Numerator:
Net income (loss)	$	(724	)	$	393
Denominator:
Basic earnings (loss) per share - weighted average shares outstanding	33,092			32,523
Effect of potential dilutive securities:
Employee stock options and restricted stock units - dilutive shares	—			716
Diluted earnings (loss) per share - weighted average shares outstanding	33,092			33,239
Earnings (loss) per share:
Basic	$	(0.02	)	$	0.01
Diluted	$	(0.02	)	$	0.01

NOTE 14.   Accumulated Other Comprehensive Loss

Comprehensive income includes net income (loss), foreign currency translation adjustments, and net unrealized gains and losses on available-for-sale investments. See the unaudited Condensed Consolidated Statements of Comprehensive Loss for the effect of the components of comprehensive loss to our net income.

The components of accumulated other comprehensive loss, net of tax, are as follows:

	Foreign currency translation adjustments		Net unrealized losses on available-for-sale investments			Accumulated other comprehensive loss
Beginning Balance, December 31, 2012	$	985	$	100		$	1,085
Net current period other comprehensive loss	660		50			710
Reclassifications	—		—			—
Beginning Balance, December 31, 2013	$	1,645	$	150		$	1,795
Net current period other comprehensive loss (gain)	132		(3		)	129
Reclassifications	—		—			—
Ending balance, March 31, 2014	$	1,777	$	147		$	1,924

NOTE 15.   Segment Reporting and Geographic Information

The Company is engaged in the design, development, manufacture and support of high-performance control metrology, defect inspection, advanced packaging lithography and data analysis systems used by microelectronics device manufacturers. The Company and its subsidiaries currently operate in a single operating segment: the design, development, manufacture and support of high-performance process control defect inspection, metrology, and process control software systems used by microelectronics device manufacturers, and therefore have one reportable segment. The Company’s chief operating decision maker is the Chief Executive Officer. The chief operating decision maker allocates resources and assesses performance of the business and other activities at the reporting segment level.

15

The following table lists the different sources of revenue:

	Three Months Ended
	March 31,
	2014				2013
Systems and Software:
Inspection	$	18,002	43	%	$	24,879	60	%
Metrology	5,749		14	%	288		1	%
Lithography	3,657		9	%	3,700		9	%
Data Analysis and Review	5,974		14	%	4,157		10	%
Parts	5,040		12	%	5,546		13	%
Services	3,227		8	%	3,080		7	%
Total revenue	$	41,649	100	%	$	41,650	100	%

For geographical revenue reporting, revenues are attributed to the geographic location in which the product is shipped.  Revenue by geographic region is as follows:

	Three Months Ended
	March 31,
	2014		2013
United States	$	9,934	$	9,402
Taiwan	7,930		13,131
Japan	1,284		2,388
China	4,830		2,748
South Korea	7,552		3,423
Other Asia	6,591		5,408
Germany	1,344		2,525
Other Europe	2,184		2,625
Total revenue	$	41,649	$	41,650

The following customers each accounted for more than 10% of total revenues for the indicated periods.

	Three Months Ended
	March 31,
	2014		2013
Customer A	17.0	%	2.1	%
Customer B	14.0	%	9.0	%
Customer C	4.4	%	18.5	%

NOTE 16.   Share Repurchase Program

In July 2008, the Board of Directors authorized a share repurchase program of up to 3,000 shares of the Company’s common stock with no established end date.  As of the time of filing this Quarterly Report on Form 10-Q, the Company has not purchased any shares under this program.

Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

Certain statements in this Quarterly Report on Form 10-Q are forward-looking statements, including those concerning our business momentum and future growth, the benefit to customers and market acceptance of our products and customer service,

16

our ability to deliver both products and services consistent with our customers’ demands and expectations and strengthen our market position, our expectations of the semiconductor market outlook, future revenues, gross profits, research and development and engineering expenses, selling, general and administrative expenses, product introductions, technology development, manufacturing practices, cash requirements and anticipated trends and developments in and management plans for, our business and the markets in which we operate, our anticipated revenue as a result of recent acquisitions, and our ability to be successful in managing our cost structure and cash expenditures and results of litigation, including ongoing litigation with ITC. The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the words such as, but not limited to, “anticipate,” “believe,” “expect,” “intend,” “plan,” “should,” “may,” “could,” “will” and words or phrases of similar meaning, as they relate to our management or us.

The forward-looking statements contained herein reflect our current expectations with respect to future events and are subject to certain risks, uncertainties and assumptions. The forward-looking statements reflect our position as of the date of this report and we undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Actual results may differ materially from those projected in such forward-looking statements for a number of reasons including, but not limited to, the following: variations in the level of orders which can be affected by general economic conditions and growth rates in the semiconductor manufacturing industry and in the markets served by our customers, the global economic and political climates, difficulties or delays in product functionality or performance, the delivery performance of sole source vendors, the timing of future product releases, failure to respond adequately to either changes in technology or customer preferences, changes in pricing by us or our competitors, our ability to manage growth, risk of nonpayment of accounts receivable, changes in budgeted costs, our ability to leverage our resources to improve our position in our core markets, our ability to weather difficult economic environments, our ability to open new market opportunities and target high-margin markets, the strength/weakness of the back-end and /or front-end semiconductor market segments, our ability to successfully integrate recently acquired businesses into our business and fully realize, or realize within the expected time frame, the expected combination benefits from the acquisitions, and the “Risk Factors” set forth in Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2013 (“2013 10-K”). The forward-looking statements reflect our position as of the date of this report and we undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Critical Accounting Policies

The preparation of condensed consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make judgments, assumptions and estimates that affect the amounts reported. Certain of these significant accounting policies are considered to be critical accounting policies, as defined below.

A critical accounting policy is defined as one that is both material to the presentation of our condensed consolidated financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on our financial condition or results of operations. Specifically, these policies have the following attributes: (1) we are required to make judgments and assumptions about matters that are highly uncertain at the time of the estimate; and (2) different estimates we could reasonably have used, or changes in the estimate that are reasonably likely to occur, could have a material effect on our financial position and results of operations.

Estimates and assumptions about future events and their effects cannot be determined with certainty. We base our estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, as additional information is obtained and as our operating environment changes. These changes have been included in the condensed consolidated financial statements as soon as they became known. In addition, management is periodically faced with uncertainties, the outcomes of which are not within its control and will not be known for prolonged periods of time. Certain of these uncertainties are discussed in our 2013 10-K in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Based on a critical assessment of our accounting policies and the underlying judgments and uncertainties affecting the application of those policies, management believes that our condensed consolidated financial statements are fairly stated in accordance with accounting principles generally accepted in the United States of America, and provide a fair presentation of our financial position and results of operations.

For more information, please see our critical accounting policies as previously disclosed in our 2013 10-K.

See Note 1 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q regarding the impact of recent accounting pronouncements on our financial position and results of operations.

Results of Operations for the Three Month Periods EndedMarch 31, 2014 and 2013

17

We are a worldwide leader in the design, development, manufacture and support of defect inspection, advanced packaging lithography, process control metrology, and data analysis systems and software used by microelectronic device manufacturers. We provide process and yield management solutions used in both wafer processing and final manufacturing through a family of standalone systems for macro-defect inspection, lithography, probe card test and analysis, and transparent and opaque thin film measurements. All Rudolph systems feature sophisticated software and production-worthy automation. Rudolph systems are backed by worldwide customer support.

Rudolph’s business is affected by the annual spending patterns of our customers on semiconductor capital equipment. The amount that our customers devote to capital equipment spending depends on a number of factors, including general worldwide economic conditions as well as other economic drivers such as personal computer, tablet, cell phone, other personal electronic devices and automotive sales. Current forecasts by industry analysts for the semiconductor device manufacturing industry project a year-over-year increase in capital spending of approximately 5% to 10% for 2014. We monitor capital equipment spending through announced capital spending plans by our customers and monthly-published industry data such as the book-to-bill ratio. The book-to-bill ratio is a 3-month running statistic that compares bookings or orders placed with capital equipment suppliers to billings or shipments. A book-to-bill above 1.0 shows that semiconductor device equipment manufacturers are ordering equipment at a pace that exceeds the equipment suppliers’ shipments for the period. The 3-month rolling average North American semiconductor equipment book-to-bill ratio was 1.1 at March 31, 2014, an increase from the book-to-bill ratio of 1.0 at December 31, 2013.

Historically, a significant portion of our revenues in each quarter and year has been derived from sales to relatively few customers, and we expect this trend to continue. For the three month period ended March 31, 2014 and for the years ended December 31, 2013, 2012 and 2011, sales to customers that individually represented at least five percent of our revenues accounted for 40.7%, 41.6%, 50.9%, and 43.6% of our revenues, respectively.

We do not have purchase contracts with any of our customers that obligate them to continue to purchase our products, and they could cease purchasing products from us at any time. A delay in purchase or cancellation by any of our large customers could cause quarterly revenues to vary significantly. In addition, during a given quarter, a significant portion of our revenues may be derived from the sale of a relatively small number of systems.

System	Average Selling Price Per System
Macro-defect inspection and probe card and test analysis	$250,000 to $1.7 million
Transparent film measurement	$800,000 to $1.2 million
Opaque film measurements	$1.0 million to $1.8 million
Lithography steppers	$3.0 million to $4.0 million

A significant portion of our revenues has been derived from customers outside of the United States.  We expect that revenues generated from customers outside of the United States will continue to account for a significant percentage of our revenues. 

The following table lists, for the periods indicated, the revenue derived from customers outside of the United States (in percentages of total revenues): 

	Three Months Ended
	March 31,		Years Ended December 31,
	2014		2013		2012		2011
Asia	67.7	%	62.4	%	67.3	%	51.3	%
Europe	8.5	%	14.4	%	13.4	%	20.4	%
Total international revenue	76.2	%	76.8	%	80.7	%	71.7	%

The sales cycle for our systems typically ranges from six to 15 months, and can be longer when our customers are evaluating new technology. Due to the length of these cycles, we invest significantly in research and development and sales and marketing in advance of generating revenues related to these investments.

Revenues. Our revenues are primarily derived from the sale of our systems, services, spare parts and software licensing.  Our revenue was $41.6 million for the three month period ended March 31, 2014, compared to $41.7 million for the three month period ended March 31, 2013, representing a change that was relatively flat period over period. 

The following table lists, for the periods indicated, the different sources of our revenues in dollars (thousands) and as percentages of our total revenues:

18

	Three Months Ended
	March 31,
	2014				2013
Systems and Software:
Inspection	$	18,002	43	%	$	24,879	60	%
Metrology	5,749		14	%	288		1	%
Lithography	3,657		9	%	3,700		9	%
Data Analysis and Review	5,974		14	%	4,157		10	%
Parts	5,040		12	%	5,546		13	%
Services	3,227		8	%	3,080		7	%
Total revenue	$	41,649	100	%	$	41,650	100	%

Total systems and software revenue change was relatively flat for the three months ended March 31, 2014 compared to the three month period ended March 31, 2013. Year-over-year there was decreased customer demand for our inspection systems which contributed to a lower number of inspection systems sold during the three months ended March 31, 2014 as compared to the same period in the prior year. As a result, inspection systems revenue decreased $6.9 million for the 2014 period compared to the 2013 period. The number of metrology systems sold during the three months ended March 31, 2014 was significantly higher compared to the same period in the prior year, resulting in an increase in metrology systems revenue of $5.5 million for the 2014 period. Lithography system revenue was relatively flat for the three months ended March 31, 2014 as we sold the same number of lithography systems in both periods. The year-over-year increase in data analysis and review software revenue for the three months ended March 31, 2014 of $1.8 million is primarily due to increased sales in licensing revenue.  As a result, total revenue for the 2014 period was consistent with the 2013 period. Volume or pricing changes had little impact as the average selling price of similarly configured systems has been consistent across the year-over-year periods. Systems revenue generated by our latest product releases and major enhancements in each of our product families amounted to 59% of total revenues for the three month period ended March 31 2014, compared to 67% of total revenues for the three month period ended March 31, 2013.  The year-over-year decrease in total parts and services revenue for the three month period ended March 31 2014 is primarily due to decreased spending by our customers on system upgrades and repairs of existing systems. Parts and services revenues are generated from part sales, maintenance service contracts, system upgrades, as well as time and material billable service calls. 

Deferred revenues of $12.9 million are recorded in the Condensed Consolidated Balance Sheets within the caption “Other current liabilities” at March 31, 2014 and primarily consist of $6.8 million for systems awaiting acceptance and outstanding deliverables and $6.1 million for deferred maintenance agreements.

Gross Profit. Our gross profit has been and will continue to be affected by a variety of factors, including manufacturing efficiencies, excess and obsolete inventory write-offs, pricing by competitors or suppliers, new product introductions, production volume, customization and reconfiguration of systems, international and domestic sales mix, and parts and service margins. Our gross profit was $21.6 million for the three month period ended March 31, 2014, compared to $21.9 million for the three month period ended March 31, 2013.  Our gross profit represented 51.8% of our revenues for the three month period ended March 31, 2014 and 52.5% of our revenues for the same period in the prior year.  The decrease in gross profit as a percentage of revenue for the three month period ended March 31, 2014 compared to the same period in the prior year is primarily due to product mix.

Operating Expenses. Major components of operating expenses include research and development as well as selling, general and administrative expenses. 

Research and Development.  Our research and development expense was $10.0 million for the three month period ended March 31, 2014, compared to $9.7 million for the same period in the prior year.  Research and development expense represented 24.0% of our revenues for the three month period ended March 31, 2014, compared to 23.3% of revenues for the prior year period.  The year-over-year dollar increase for the three month period ended March 31 2014 in research and development expenses primarily reflects the inclusion of research and development expenses generated from our acquisition in the 2013 second quarter of Tamar Technology and higher compensation costs.

Selling, General and Administrative.     Our selling, general and administrative expense was $10.8 million for the three month period ended March 31, 2014, compared to $10.3 million for the same period in the prior year.  Selling, general and administrative expense represented 25.9% of our revenues for the three month period ended March 31, 2014, compared to 24.6% of our revenues for the same period in the prior year.  The year-over-year dollar increase for the three month period ended March 31 2014 in selling, general and administrative expense was primarily due to higher compensation costs.

19

Income Taxes.  For the three month periods ended March 31, 2014 and 2013, we recorded income tax benefits of $0.3 million and $0.6 million, respectively. Our effective tax rate of 30.5% differs from the statutory rate of 35% for the three months endedMarch 31, 2014 primarily due to discrete tax items recorded in the period. Our effective tax rate differs from the statutory tax rate of 35% for the three month period ended March 31, 2013 due to the American Taxpayer Relief Act of 2012 which was passed by Congress and signed into law in January 2013. The provisions under this law were made retroactive to January 1, 2012. However, as a result of the law being signed in January 2013, the financial impact of any retroactive provision was recorded as a discrete item in the tax provision in the first quarter of 2013.

We currently have a partial valuation allowance recorded against our deferred tax assets. Each quarter we assess the likelihood that we will be able to recover our deferred tax assets primarily relating to state R&D credits. We consider available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance. As a result of our analysis, we concluded that it is more likely than not that a portion of our net deferred tax assets will not be realized. Therefore, we continue to provide a valuation allowance against certain net deferred tax assets. We continue to closely monitor available evidence and may reverse some or all of the valuation allowance in future periods, if appropriate.

Litigation. As discussed in Part II, Item 1 of this Quarterly Report on Form 10-Q (“Legal Proceedings”), we are subject to legal proceedings and claims, which includes, among other things, our on-going litigation with ITC in a patent infringement action related to the predictive scrub feature of our PrecisionPoint^™, PrecisionWoRx^® and ProbeWoRx^® products in which we were the defendants (the “ITC Litigation”). See Legal Proceedings for a discussion of this action and the District Court’s adverse order affirming the jury award and ordering other relief in this matter and the ruling obtained from the U.S. Federal Court of Appeals. In the event that the ultimate decision in the ITC Litigation results in a judgment of damages against us at the high end of the identified ranges, such result will have a material impact on our results of operations and may also have a material impact on our liquidity and financial condition.

Liquidity and Capital Resources

At March 31, 2014, we had $183.5 million of cash, cash equivalents and marketable securities and $267.0 million in working capital.  At December 31, 2013, we had $167.4 million of cash, cash equivalents and marketable securities and $265.3 million in working capital. 

Operating activities provided $15.6 million in net cash and cash equivalents for the three month period ended March 31, 2014.  The net cash and cash equivalents provided by operating activities during the three month period ended March 31, 2014 was primarily a result of net loss, adjusted to exclude the effect of non-cash operating charges of $3.6 million and changes in operating assets and liabilities of $12.0 million. Operating activities used $0.3 million in net cash and cash equivalents for the three month period ended March 31, 2013. The net cash and cash equivalents used in operating activities during the three month period ended March 31, 2013 was primarily a result of changes in operating assets and liabilities of $5.3 million, partially offset by net income adjusted to exclude the effect of non-cash operating charges of $5.0 million.

Net cash and cash equivalents used in investing activities during the three month period ended March 31, 2014 of $41.0 million was due to the purchase of marketable securities of $69.6 million, and capital expenditures of $0.4 million, partially offset by the proceeds from sales of marketable securities of $29.0 million.  Net cash and cash equivalents used in investing activities during the three month period ended March 31, 2013 of $18.9 million was due to the purchase of marketable securities of $34.9 million, and capital expenditures of $2.5 million, partially offset by the proceeds from sales of marketable securities of $18.5 million.

In July 2008, our Board of Directors approved a stock repurchase program of up to 3 million shares of Company common stock with no established end date.  As of the time of filing this Quarterly Report on Form 10-Q, we have not purchased any shares under this program.

From time to time, we evaluate whether to acquire new or complementary businesses, products and/or technologies. We may fund all or a portion of the purchase price of these acquisitions in cash, stock, or a combination of cash and stock.

As of March 31, 2014, we had a $40 million irrevocable standby letter of credit available with Credit Suisse AG which is required to secure the damages assessment in connection with the ITC Litigation discussed in Legal Proceedings. The letter of credit contains provisions for automatic renewal each year. Upon draw down of funds, the letter of credit would be collateralized by securities held in our investment portfolios and reported in the Condensed Consolidated Balance Sheets within the caption “Cash and cash equivalents” and “Marketable securities.” No amounts were outstanding on the letter of credit as of, or during the three months ended March 31, 2014.

Our future capital requirements will depend on many factors, including the timing and amount of our revenues and our investment decisions, which will affect our ability to generate additional cash. We believe that our existing cash, cash equivalents

20

and marketable securities will be sufficient to meet our anticipated cash requirements for working capital and capital expenditures for the next twelve months. Thereafter, if cash generated from operations and financing activities is insufficient to satisfy our working capital requirements, we may seek additional funding through bank borrowings, sales of securities or other means. There can be no assurance that we will be able to raise any such capital on terms acceptable to us or at all.

Item 3.    Quantitative and Qualitative Disclosures about Market Risk

Interest Rate and Credit Market Risk

We are exposed to changes in interest rates and market liquidity including our investments in certain available-for-sale securities. Our available-for-sale securities consist of fixed and variable rate income investments (municipal notes, municipal and corporate bonds and an auction rate security). We continually monitor our exposure to changes in interest rates, market liquidity and credit ratings of issuers from our available-for-sale securities. It is possible that we are at risk if interest rates, market liquidity or credit ratings of issuers change in an unfavorable direction. The magnitude of any gain or loss will be a function of the difference between the fixed or variable rate of the financial instrument and the market rate and our financial condition and results of operations could be materially affected. Based on a sensitivity analysis performed on our financial investments held as of March 31, 2014, an immediate adverse change of 10% in interest rates (e.g. 3.00% to 3.30%) would result in an immaterial decrease in the fair value of our available-for-sale securities and would not have a material impact on our consolidated financial position, results of operations or cash flows.

Foreign Currency Risk

We have branch operations in Taiwan, Singapore and South Korea and wholly-owned subsidiaries in Europe, China and Japan.  Our international subsidiaries and branches operate primarily using local functional currencies.  The intercompany transactions denominated in U.S. dollars appearing on the financial statements of the subsidiaries and branches are remeasured at each quarter-end resulting in gains and losses which are reflected in net income.  A hypothetical 10% appreciation or depreciation in the U.S. dollar relative to the reporting currencies of our foreign subsidiaries at March 31, 2014 would have affected the foreign-currency-denominated non-operating expenses of our foreign subsidiaries by approximately $2.2 million. We cannot accurately predict future exchange rates or the overall impact of future exchange rate fluctuations on our business, results of operations and financial condition.

A substantial portion of our international sales are denominated in U.S. dollars with the exception of Japan and, as a result, we have relatively little exposure to foreign currency exchange risk with respect to these sales. Substantially all our sales in Japan are denominated in Japanese yen. From time to time, we may enter into forward exchange contracts to economically hedge a portion of, but not all, existing and anticipated foreign currency denominated transactions expected to occur within 12 months. The change in fair value of the forward contracts is recognized in “Other expense (income)” in the Condensed Consolidated Statements of Operations for each reporting period. As of March 31, 2014, we had nine forward contracts outstanding with a total notional contract value of $1.4 million. We do not use derivative financial instruments for trading or speculative purposes.

Item 4.  Controls and Procedures

We maintain a set of disclosure controls and procedures, as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act, designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow for timely decisions regarding required disclosure. The disclosure controls and procedures are designed to provide reasonable assurance of achieving the desired control objectives. 

Scope of the Controls Evaluation

The evaluation of our disclosure controls and procedures included a review of the controls’ objectives and design, our implementation of the controls and the effect of the controls on the information generated for use in this Quarterly Report on Form 10-Q. In the course of the evaluation, we sought to identify data errors, control problems or acts of fraud and confirm that appropriate corrective actions, if any, including process improvements, were being undertaken. This type of evaluation is performed on a quarterly basis so that the conclusions of management, including the CEO and CFO, concerning the effectiveness of the controls can be reported in our Quarterly Reports on Form 10-Q and in our Annual Reports on Form 10-K. Many of the components of our disclosure controls and procedures are also evaluated on an ongoing basis by other personnel in our accounting, finance and legal functions. The overall goals of these various evaluation activities are to monitor our disclosure controls and procedures and to modify them on an ongoing basis as necessary. A control system can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Over time, controls may

21

become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of inherent limitations in a cost effective control system, misstatements due to error or fraud may occur and not be detected.

Conclusions

As of March 31, 2014, an evaluation of our disclosure controls and procedures was carried out under the supervision and with the participation of our management, including the CEO and CFO. Based on this evaluation, the CEO and CFO have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of the end of the period covered by this Quarterly Report on Form 10-Q.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II    OTHER INFORMATION

Item 1.   Legal Proceedings

For a description of our previously reported legal proceedings refer to “Part I, Item 3 - Legal Proceedings” in our 2013 10-K, as updated in Note 9 to the accompanying unaudited condensed consolidated financial statements.

We are party to other ordinary and routine litigation incidental to our business. We do not expect the outcome of any pending litigation to have a material adverse effect on our consolidated financial position or results of operations.

Item 1A.    Risk Factors

There were no material changes to our risk factors as discussed in Part I, Item 1A - Risk Factors in our 2013 10-K.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

In July 2008, our Board of Directors authorized a share repurchase program of up to 3 million shares of the Company’s common stock with no established end date. As of the time of filing this Quarterly Report on Form 10-Q, we have not purchased any shares under this program.

Item 3.    Defaults Upon Senior Securities

None.

Item 4.    Mine Safety Disclosures

None.

Item 5.    Other Information

None.

22

Item 6.   Exhibits

Exhibit No.	Description
10.1	Employment Agreement, dated as of June 29, 2005, by and between August Technology Corporation and Michael Plisinski as amended July 28, 2006 by and between Rudolph Technologies, Inc. and Michael Plisinski, filed herewith.
10.2	Employment Agreement, dated as of March 5, 2002, by and between August Technology Corporation and D. Mayson Brooks (incorporated by reference to Exhibit 10.28 to the August Technology Corporation Annual Report on Form 10-K (SEC File No. 000-30637) filed March 15, 2002.
10.3	Amendment dated as of June 25, 2005 to Employment Agreement, dated as of March 5, 2002, by and between August Technology Corporation and D. Mayson Brooks, filed herewith.
31.1	Certification of Paul F. McLaughlin, Chief Executive Officer, pursuant to Securities Exchange Act Rule 13a-14(a).
31.2	Certification of  Steven R. Roth, Chief Financial Officer, pursuant to Securities Exchange Act Rule 13a-14(a).
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by Paul F. McLaughlin, Chief Executive Officer of Rudolph Technologies, Inc.
32.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by Steven R. Roth, Chief Financial Officer of Rudolph Technologies, Inc.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

23

SIGNATURES

Pursuant to the requirements 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.

		Rudolph Technologies, Inc.
Date:	May 1, 2014	By:	/s/  Paul F. McLaughlin
		Paul F. McLaughlin
		Chairman and Chief Executive Officer
Date:	May 1, 2014	By:	/s/  Steven R. Roth
		Steven R. Roth
		Senior Vice President, Chief Financial Officer and Principal Accounting Officer

24

EXHIBIT INDEX

Exhibit No.	Description
10.1	Employment Agreement, dated as of June 29, 2005, by and between August Technology Corporation and Michael Plisinski as amended July 28, 2006 by and between Rudolph Technologies, Inc. and Michael Plisinski, filed herewith.
10.2	Employment Agreement, dated as of March 5, 2002, by and between August Technology Corporation and D. Mayson Brooks (incorporated by reference to Exhibit 10.28 to the August Technology Corporation Annual Report on Form 10-K (SEC File No. 000-30637) filed March 15, 2002.
10.3	Amendment dated as of June 25, 2005 to Employment Agreement, dated as of March 5, 2002, by and between August Technology Corporation and D. Mayson Brooks, filed herewith.
31.1	Certification of Paul F. McLaughlin, Chief Executive Officer, pursuant to Securities Exchange Act Rule 13a-14(a).
31.2	Certification of  Steven R. Roth, Chief Financial Officer, pursuant to Securities Exchange Act Rule 13a-14(a).
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by Paul F. McLaughlin, Chief Executive Officer of Rudolph Technologies, Inc.
32.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by Steven R. Roth, Chief Financial Officer of Rudolph Technologies, Inc.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

25

EX-10.1

Exhibit 10.1

EX-10.3

Exhibit 10.3

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Paul F. McLaughlin, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Rudolph Technologies, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 1, 2014

By:	/s/ PAUL F. MCLAUGHLIN
	Paul F. McLaughlin Chairman and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Steven R. Roth, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Rudolph Technologies, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 1, 2014

By:	/s/ STEVEN R. ROTH
	Steven R. Roth Senior Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Paul F. McLaughlin, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Rudolph Technologies, Inc. on Form 10-Q for the quarter ended March 31, 2014 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Rudolph Technologies, Inc.

Date: May 1, 2014

By:	/s/  PAUL F. MCLAUGHLIN
	Paul F. McLaughlin Chairman and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Steven R. Roth, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Rudolph Technologies, Inc. on Form 10-Q for the quarter ended March 31, 2014 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Rudolph Technologies, Inc.

Date: May 1, 2014

By:	/s/  STEVEN R. ROTH
	Steven R. Roth Senior Vice President and Chief Financial Officer

XML

Identifiable Intangible Assets - (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		12 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013	Dec. 31, 2012
Finite-Lived Intangible Assets and Goodwill [Line Items]
Goodwill	$ 22,495		$ 22,553	$ 15,361
Goodwill, Acquired During Period	0		6,989
Goodwill, Translation and Purchase Accounting Adjustments			203
Business Acquisition Purchase Price Allocation Goodwill Amount 2		(58)
Finite-Lived Intangible Assets, Gross	73,752		73,752
Finite-Lived Intangible Assets, Accumulated Amortization	62,958		62,288
Intangible Assets, Net (Excluding Goodwill)	10,794		11,464
Amortization of Intangible Assets	670	616
Future Amortization Expense, Remainder of Fiscal Year	1,752
Future Amortization Expense, Year One	2,050
Future Amortization Expense, Year Two	1,941
Future Amortization Expense, Year Three	1,553
Future Amortization Expense, Year Four	1,117
Future Amortization Expense, Year Five	1,117
Developed Technology Rights [Member]
Finite-Lived Intangible Assets and Goodwill [Line Items]
Finite-Lived Intangible Assets, Gross	59,831		59,831
Finite-Lived Intangible Assets, Accumulated Amortization	52,032		51,496
Intangible Assets, Net (Excluding Goodwill)	7,799		8,335
Customer Relationships [Member]
Finite-Lived Intangible Assets and Goodwill [Line Items]
Finite-Lived Intangible Assets, Gross	9,560		9,560
Finite-Lived Intangible Assets, Accumulated Amortization	7,544		7,449
Intangible Assets, Net (Excluding Goodwill)	2,016		2,111
Trade Names [Member]
Finite-Lived Intangible Assets and Goodwill [Line Items]
Finite-Lived Intangible Assets, Gross	4,361		4,361
Finite-Lived Intangible Assets, Accumulated Amortization	3,382		3,343
Intangible Assets, Net (Excluding Goodwill)	$ 979		$ 1,018

XML

Segment Reporting (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014 Rate	Mar. 31, 2013 Rate
Segment Reporting Information [Line Items]
Revenues	$ 41,649	$ 41,650
Concentration Risk, Percentage	17.00%	2.10%
Inspection Revenue [Member]
Segment Reporting Information [Line Items]
Revenues	18,002	24,879
Metrology Revenue [Member]
Segment Reporting Information [Line Items]
Revenues	5,749	288
Lithography Revenue [Domain]
Segment Reporting Information [Line Items]
Revenues	3,657	3,700
Data Analysis & Review [Member]
Segment Reporting Information [Line Items]
Revenues	5,974	4,157
Sales Revenue, Goods, Net [Member]
Segment Reporting Information [Line Items]
Revenues	5,040	5,546
Sales Revenue, Services, Net [Member]
Segment Reporting Information [Line Items]
Revenues	3,227	3,080
Sales Revenue, Segment [Member]
Segment Reporting Information [Line Items]
Revenues	41,649
Percentage of Total Revenue [Member]
Segment Reporting Information [Line Items]
Revenues		$ 41,650
Sales [Member] | Percentage of Inspection Revenues [Member]
Segment Reporting Information [Line Items]
Concentration Risk, Percentage	43.00%	60.00%
Sales [Member] | Percentage of Metrology Revenue [Member]
Segment Reporting Information [Line Items]
Concentration Risk, Percentage	14.00%	1.00%
Sales [Member] | Percentage of Lithography Revenue [Member] [Domain]
Segment Reporting Information [Line Items]
Concentration Risk, Percentage	9.00%	9.00%
Sales [Member] | Percentage of Data Analysis & Review [Member]
Segment Reporting Information [Line Items]
Concentration Risk, Percentage	14.00%	10.00%
Sales [Member] | Percentage of Parts [Member]
Segment Reporting Information [Line Items]
Concentration Risk, Percentage	12.00%	13.00%
Sales [Member] | Percentage of Service [Member]
Segment Reporting Information [Line Items]
Concentration Risk, Percentage	8.00%	7.00%
Sales [Member] | Percentage of Total Revenue [Member]
Segment Reporting Information [Line Items]
Concentration Risk, Percentage	100.00%	100.00%

XML

Legal Matters (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014
Commitments and Contingencies [Abstract]
Loss Contingency, Damages Awarded, Value	$ 15,475
Estimated Litigation Liability	4,211
Estimated litigation liabilty unaccrued	$ 6,367

XML

Segment Reporting and Geographic Information Geographic Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Segment Reporting Information [Line Items]
Revenues	$ 41,649	$ 41,650
Asia [Member]
Segment Reporting Information [Line Items]
Revenues	6,591	5,408
UNITED STATES
Segment Reporting Information [Line Items]
Revenues	9,934	9,402
TAIWAN, PROVINCE OF CHINA
Segment Reporting Information [Line Items]
Revenues	7,930	13,131
JAPAN
Segment Reporting Information [Line Items]
Revenues	1,284	2,388
CHINA
Segment Reporting Information [Line Items]
Revenues	4,830	2,748
South Korea [Domain]
Segment Reporting Information [Line Items]
Revenues	7,552	3,423
GERMANY
Segment Reporting Information [Line Items]
Revenues	1,344	2,525
Other Europe [Domain]
Segment Reporting Information [Line Items]
Revenues	2,184	2,625
Sales [Member]
Segment Reporting Information [Line Items]
Revenues	$ 41,649	$ 41,650

XML

Commitments and Contingencies - (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013	Dec. 31, 2012
Commitments and Contingencies [Abstract]
Standard Product Warranty Accrual	$ 1,509	$ 1,765	$ 1,551	$ 2,024
Product Warranty Accrual, Warranties Issued	481	446
Product Warranty Accrual, Payments	$ 523	$ 705

XML

Earnings Per Share - (Tables)

3 Months Ended

Mar. 31, 2014

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

The Company’s basic and diluted earnings (loss) per share amounts are as follows:

	Three Months Ended March 31,
	2014			2013
Numerator:
Net income (loss)	$	(724	)	$	393
Denominator:
Basic earnings (loss) per share - weighted average shares outstanding	33,092			32,523
Effect of potential dilutive securities:
Employee stock options and restricted stock units - dilutive shares	—			716
Diluted earnings (loss) per share - weighted average shares outstanding	33,092			33,239
Earnings (loss) per share:
Basic	$	(0.02	)	$	0.01
Diluted	$	(0.02	)	$	0.01

XML

Share Repurchase Program - (Details) In Thousands, unless otherwise specified	Jul. 30, 2008
Share Repurchase Program [Abstract]
Share repurchase program, authorized amount of shares	3,000

XML

Derivative Instruments and Hedging Activities Derivative Instruments and Hedging Activities - (Tables)

3 Months Ended

Mar. 31, 2014

Derivative Instruments and Hedging Activities [Abstract]

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value [Table Text Block]

The dollar equivalent of the U.S. dollar forward contracts and related fair values as of March 31, 2014 and December 31, 2013 were as follows:

	March 31, 2014			December 31, 2013
Notional amount	$	1,442		$	1,029
Fair value of asset (liability)	$	(21	)	$	6

XML

Other Income - (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Other Income (Expense) [Abstract]
Foreign currency exchange losses (gains), net	$ (127)	$ 331
Other Expenses	0	18
Total other expenses (income)	$ (127)	$ 349

XML

Balance Sheet Details - Other Assets (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Other Assets [Abstract]
Deferred Tax Assets, Net of Valuation Allowance, Noncurrent	$ 27,087	$ 25,547
Other	1,676	1,776
Total Other Assets	$ 28,763	$ 27,323

XML

Marketable Securities - (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities, Failed Auction, Value	$ 295	$ 277
Unrealized Gain (Loss) on Investments	180
Available-for-sale Securities, Amortized Cost Basis	128,060	86,731
Available-for-sale Securities, Fair Value Disclosure	127,913	86,582
Available-for-sale Securities, Debt Maturities, Fair Value [Abstract]
Available-for-sale Securities, Debt Maturities, within One Year, Amortized Cost Basis	101,686	78,909
Available-for-sale Securities, Debt Maturities, within One Year, Fair Value	101,707	78,948
Available-for-sale Securities, Debt Maturities, Rolling Year Two Through Five, Amortized Cost Basis	15,150	5,811
Available-for-sale Securities, Debt Maturities, Rolling Year Two Through Five, Fair Value	15,164	5,821
Available-for-sale Securities, Debt Maturities, after Five Through Ten Years, Amortized Cost Basis	5,010	0
Available-for-sale Securities, Debt Maturities, after Five Through Ten Years, Fair Value	5,009	0
Available-for-sale Securities, Debt Maturities, after Ten Years, Amortized Cost Basis	6,214	2,011
Held-to-maturity Securities, Debt Maturities, after Ten Years, Fair Value	6,033	1,813
US Government and Government Agencies and Authorities [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities, Amortized Cost Basis	127,585	86,257
Available-for-sale Securities, Gross Unrealized Gains	44	50
Available-for-sale Securities, Gross Unrealized Losses	11	2
Available-for-sale Securities, Fair Value Disclosure	127,618	86,305
Available-for-sale Securities, Debt Maturities, Fair Value [Abstract]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	57,313	16,448
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Losses	5	2
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	0	0
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Losses	0	0
Auction Rate Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities, Amortized Cost Basis	475	475
Available-for-sale Securities, Gross Unrealized Gains	0	0
Available-for-sale Securities, Gross Unrealized Losses	180	198
Available-for-sale Securities, Fair Value Disclosure	295	277
Available-for-sale Securities, Debt Maturities, Fair Value [Abstract]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	0	0
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Losses	0	0
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	475	475
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Losses	180	198
Available-for-sale Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities, Amortized Cost Basis	128,060	86,732
Available-for-sale Securities, Gross Unrealized Gains	44	50
Available-for-sale Securities, Gross Unrealized Losses	191	200
Available-for-sale Securities, Fair Value Disclosure	127,913	86,582
Available-for-sale Securities, Debt Maturities, Fair Value [Abstract]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	57,313	16,448
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Losses	5	2
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	475	475
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Losses	$ 180	$ 198

XML

Earnings Per Share - (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Earnings Per Share [Abstract]
Stock Options Excluded from Computation of diluted loss per share	739	810
Restricted stock units excluded from Computation of diluted loss per share	1,377	0
Net Income (Loss) Attributable to Parent	$ (724)	$ 393
Weighted Average Number of Shares Outstanding, Basic	33,092	32,523
Weighted Average Number Diluted Shares Outstanding Adjustment	0	716
Weighted Average Number of Shares Outstanding, Diluted	33,092	33,239
Earnings (Loss) Per Share, Basic	$ (0.02)	$ 0.01
Earnings (Loss) Per Share, Diluted	$ (0.02)	$ 0.01

XML

Commitments and Contingencies Letter of Credit (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014
Loss Contingencies [Line Items]
MaximumCapacityToGuaranteeUnderExistingLettersOfCredit	$ 40,000

XML

Fair Value Measurements

3 Months Ended

Mar. 31, 2014

Fair Value Measurements [Abstract]

Fair Value Disclosures [Text Block]

Fair Value Measurements

The Company applies a three-level valuation hierarchy for fair value measurements. This hierarchy prioritizes the inputs into three broad levels.  Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the asset or liability. Level 3 inputs are unobservable inputs based on management’s assumptions used to measure assets and liabilities at fair value. A financial asset’s or liability’s fair value measurement classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The following tables provide the assets and liabilities carried at fair value measured on a recurring basis at March 31, 2014 and December 31, 2013:

			Fair Value Measurements Using
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
March 31, 2014
Assets:
Available-for-sale debt securities:
Municipal notes and bonds	$	127,618	$	—	$	127,618	$	—
Auction rate securities	295		—		—		295
Total Assets	$	127,913	$	—	$	127,618	$	295
Liabilities:
Contingent consideration - acquisitions	$	5,283	$	—	$	—	$	5,283
Foreign currency forward contracts	21		—		21		—
Total Liabilities	$	5,304	$	—	$	21	$	5,283
December 31, 2013
Assets:
Available-for-sale debt securities:
Municipal notes and bonds	$	86,305	$	—	$	86,305	$	—
Auction rate securities	277		—		—		277
Foreign currency forward contracts	6		—		6		—
Total Assets	$	86,588	$	—	$	86,311	$	277
Liabilities:
Contingent consideration - acquisitions	$	5,208	$	—	$	—	$	5,208
Total Liabilities	$	5,208	$	—	$	—	$	5,208

Level 1 investments are based on quoted prices that are available in active markets.

The Company’s investments classified as Level 2 are valued using observable inputs to quoted market prices, benchmark yields, reported trades, broker/dealer quotes or alternative pricing sources with reasonable levels of price transparency. The foreign currency forward contracts are primarily measured based on the foreign currency spot and forward rates quoted by the banks or foreign currency dealers. Available-for-sale debt securities prices are obtained from third party pricing providers, which models prices utilizing the above observable inputs, for each asset class.

Level 3 investments consist of an auction rate security and contingent consideration related to an acquisition for which the Company uses a discounted cash flow model to value these investments. The Level 3 assumptions used in the discounted cash flow model for the auction rate security included estimates of interest rates of 3.3%, timing and amount of cash flows and expected holding periods of the auction rate security, based on data available on March 31, 2014. Changes in the unobservable input values would be unlikely to cause material changes in the fair value of the auction rate security. The Level 3 assumptions used in the discounted cash flow model for the contingent consideration included projected revenues, estimates of discount rates of 5.7% and timing of cash flows. A significant decrease in the projected revenues or increase in discount rate could result in a significantly lower fair value measurement for the contingent consideration.

This table presents a reconciliation for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months endedMarch 31, 2014:

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Assets:
Balance at December 31, 2013	$	277
Unrealized gain in accumulated other comprehensive loss	18
Purchases	—
Sales, issuances, and settlements	—
Transfers into (out of) Level 3	—
Balance at March 31, 2014	$	295
Liabilities:
Balance at December 31, 2013	$	5,208
Additions	—
Total gain (loss) included in earnings	(75		)
Payments	—
Transfers into (out of) Level 3	—
Balance at March 31, 2014	$	5,283

See Note 4 for additional discussion regarding the fair value of the Company’s marketable securities.

Fair Value of Other Financial Instruments

The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximates fair value because of the short maturity of these instruments. The estimated fair value of these obligations is based, primarily, on a market approach, comparing the Company’s interest rates to those rates the Company believes it would reasonably receive upon re-entry into the market. Judgment is required to estimate the fair value, using available market information and appropriate valuation methods.

The Company’s convertible senior notes are not publicly traded. The estimated fair value of the Company’s convertible senior notes was valued using a discounted cash flow model. The Level 3 assumptions, based on data available at the valuation date used in preparing the discounted cash flow model included estimates of interest rates, timing and amount of cash flows and expected holding periods of the convertible senior notes. The fair value of the contingent interest associated with the convertible senior notes is valued quarterly using the present value of expected cash flow model incorporating the probabilities of the contingent events occurring.

The following table reflects information pertaining to the Company’s convertible senior notes:

	March 31, 2014			December 31, 2013
Net carrying value of convertible senior notes	$	52,486		$	51,751
Estimated fair value of convertible senior notes	$	60,390		$	59,340
Estimated interest rate used in discounted cash flow model	3.5		%	4.2		%
Fair value of contingent interest	$	—		$	—

XML

Balance Sheet Details - Other Current Liabilities (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Other Current Liabilities [Abstract]
Estimated Litigation Liability, Current	$ 4,211	$ 4,293
Deferred Revenue	12,850	8,786
Contingent Consideration Current Liability	1,130	868
Other Current Liabilities Subtotal	5,347	4,971
Other Liabilities, Current	$ 23,538	$ 18,918

XML

Commitments and Contingencies - (Tables)

3 Months Ended

Mar. 31, 2014

Commitments and Contingencies [Abstract]

Schedule of changes product warranty liability [Table Text Block]

Changes in the Company’s warranty reserves are as follows:

	Three Months Ended March 31,
	2014		2013
Balance, beginning of the period	$	1,551	$	2,024
Accruals	481		446
Less: Usage	523		705
Balance, end of the period	$	1,509	$	1,765

XML

Debt Obligations - (Tables)

3 Months Ended

Mar. 31, 2014

Debt Obligations [Abstract]

Schedule of carrying value of convertible senior notes [Table Text Block]

The following table reflects the net carrying value of the Notes:

	March 31, 2014		December 31, 2013
Convertible senior notes	$	60,000	$	60,000
Less: Unamortized interest discount	7,514		8,249
Net carrying value of convertible senior notes	$	52,486	$	51,751

Schedule of interest cost recognized on convertible senior notes [Table Text Block]

The following table presents the amount of interest cost recognized relating to the Notes during the three months endedMarch 31, 2014 and March 31, 2013.

	Three Months Ended March 31,
	2014		2013
Contractual interest coupon	$	562	$	562
Amortization of interest discount	735		667
Amortization of debt issuance costs	87		72
Total interest cost recognized	$	1,384	$	1,301

XML

Segment Reporting and Geographic Information Customer Reporting (Details)	3 Months Ended
	Mar. 31, 2014 Rate	Mar. 31, 2013 Rate
Segment Reporting Information [Line Items]
Entity-Wide Revenue, Major Customer, Percentage	17.00%	2.10%
Major Customers Two [Domain]
Segment Reporting Information [Line Items]
Entity-Wide Revenue, Major Customer, Percentage	14.00%	9.00%
Major Customer Three [Domain]
Segment Reporting Information [Line Items]
Entity-Wide Revenue, Major Customer, Percentage	4.40%	18.50%

XML

Balance Sheet Details - Other Non-Current Liabilities (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Other Non-current Liabilities [Abstract]
Unrecognized Tax Benefits	$ 3,498	$ 2,806
Contingent consideration - Acquisition non-current liability	4,153	4,340
Other Liabilities	1,759	1,772
Other Liabilities, Noncurrent	$ 9,410	$ 8,918

XML

Share-Based Compensation - (Tables)

3 Months Ended

Mar. 31, 2014

Share-based Compensation [Abstract]

Summary of restricted stock unit activity [Table Text Block]

A summary of the Company’s nonvested restricted stock unit activity with respect to the three months ended March 31, 2014 is as follows:

	Number of Shares	Weighted Average Grant Date Fair Value
Nonvested at December 31, 2013	1,116	$	9.73
Granted	503	$	10.97
Less: Vested	290	$	8.37
Less: Forfeited	12	$	10.31
Nonvested at March 31, 2014	1,317	$	10.50

XML

Other Income - (Tables)

3 Months Ended

Mar. 31, 2014

Other Income (Expense) [Abstract]

Schedule of Other Nonoperating Income (Expense) [Table Text Block]

	Three Months Ended
	March 31,
	2014			2013
Foreign currency exchange losses (gains), net	$	(127	)	$	331
Other	—			18
Total other expense (income)	$	(127	)	$	349

XML

Business Combination

3 Months Ended

Mar. 31, 2014

Business Combination [Abstract]

Business Combination Disclosure [Text Block]

Business Combinations

Tamar Technology

In April 2013, the Company announced that it had acquired specific assets of Tamar Technology, located in Newbury Park, California. The acquired business has been integrated into the Company’s inspection technology group.  The impact of the acquisition was not material to the Company’s consolidated financial position or results of operations.

XML

Income Taxes - (Tables)

3 Months Ended

Mar. 31, 2014

Income Taxes [Abstract]

Schedule of effective tax rate [Table Text Block]

The following table provides details of income taxes:

	Three Months Ended
	March 31,
	2014			2013
Loss before income taxes	$	(1,041	)	$	(255	)
Benefit for income taxes	$	(317	)	$	(648	)
Effective tax rate	30.5		%	254.1		%

XML

Balance Sheet Details - Inventory (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Inventory Details [Abstract]
Inventory, Raw Materials, Net of Reserves	$ 31,086	$ 31,194
Inventory, Work in Process, Net of Reserves	18,969	19,867
Inventory, Finished Goods, Net of Reserves	12,266	10,290
Inventory, Net	62,321	61,351
Inventory Valuation Reserves	$ 6,606	$ 6,101

XML

Accumulated Other Comprehensive Loss Accumulated Other Comprehensive Loss (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Stockholders' Equity Attributable to Parent	$ 279,738	$ 279,003
Accumulated Translation Adjustment [Member]
Stockholders' Equity Attributable to Parent	1,777	1,645	985
Net current period other comprehensive gain (loss)	132	660
Reclassification of accumulated other comprehensive income (loss)	0	0
Accumulated Net Unrealized Investment Gain (Loss) [Member]
Stockholders' Equity Attributable to Parent	147	150	100
Net current period other comprehensive gain (loss)	(3)	50
Reclassification of accumulated other comprehensive income (loss)	0	0
Accumulated Other Comprehensive Income (Loss) [Member]
Stockholders' Equity Attributable to Parent	1,924	1,795	1,085
Net current period other comprehensive gain (loss)	129	710
Reclassification of accumulated other comprehensive income (loss)	$ 0	$ 0

XML

Statements of Financial Position Consolidated Balance Sheet (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Cash and Cash Equivalents, at Carrying Value	$ 55,606	$ 80,790
Marketable Securities, Current	127,913	86,582
Accounts Receivable, Net, Current	42,547	53,437
Inventory, Net	62,321	61,351
Prepaid Expense and Other Assets	16,392	14,804
Assets, Current	304,779	296,964
Property, Plant and Equipment, Net	12,552	13,058
Goodwill	22,495	22,553
Intangible Assets, Net (Excluding Goodwill)	10,794	11,464
Other Assets, Noncurrent	28,763	27,323
Assets	379,383	371,362
Accounts Payable and Accrued Liabilities	14,211	12,772
Other Liabilities, Current	23,538	18,918
Liabilities, Current	37,749	31,690
Convertible senior notes	52,486	51,751
Other Liabilities, Noncurrent	9,410	8,918
Liabilities	99,645	92,359
Commitments and Contingencies
Common Stock, Value, Issued	33	33
Additional Paid in Capital, Common Stock	417,327	415,739
Accumulated Other Comprehensive Income (Loss), Net of Tax	(1,924)	(1,795)
Retained Earnings (Accumulated Deficit)	(135,698)	(134,974)
Stockholders' Equity Attributable to Parent	279,738	279,003
Liabilities and Equity	$ 379,383	$ 371,362

XML

Debt Obligations - (Details) (USD $) In Thousands, except Share data, unless otherwise specified	1 Months Ended	3 Months Ended
	Jul. 31, 2011	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013	Jul. 25, 2011
Debt Obligations [Abstract]
Convertible Debt		$ 60,000		$ 60,000	$ 60,000
Debt Instrument, Interest Rate, Stated Percentage					3.75%
Convertible Preferred Stock, Shares Issued upon Conversion					77.241
Note increment for which conversion amount of Common Stock based					1
Debt Instrument, Convertible, Conversion Price					$ 12.95
Class of Warrant or Right, Exercise Price of Warrants or Rights					$ 17.00
Proceeds from Convertible Debt	50,249
Debt Instrument, Unamortized Discount		7,514		8,249
Convertible senior notes		52,486		51,751
Contractual Interest Coupon		562	562
Amortization of Debt Discount (Premium)		735	667
Amortization of Financing Costs		87	72
Interest Expense, Debt		$ 1,384	$ 1,301

XML

Statements of Cash Flows Statement (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Net Income (Loss) Attributable to Parent	$ (724)	$ 393
Amortization	672	707
Amortization of Financing Costs and Discounts	822	739
Depreciation	1,038	1,064
Foreign Currency Transaction Gain (Loss), before Tax	(127)	331
Business Combination, Contingent Consideration Arrangements, Change in Amount of Contingent Consideration, Asset	75	0
Share-based Compensation	1,445	957
Provision for doubtful accounts and inventory valuation	353	778
Increase (Decrease) in Deferred Income Taxes	65	0
Increase (Decrease) in Other Operating Assets and Liabilities, Net	11,987	(5,276)
Net Cash Provided by (Used in) Operating Activities	15,606	(307)
Payments to Acquire Marketable Securities	(69,634)	(34,877)
Proceeds from Sale and Maturity of Marketable Securities	29,018	18,473
Payments to Acquire Property, Plant, and Equipment	(390)	(2,528)
Net Cash Provided by (Used in) Investing Activities	(41,006)	(18,932)
Proceeds from Issuance of Shares under Incentive and Share-based Compensation Plans, Including Stock Options	93	101
Excess Tax Benefit (Tax Deficiency) from Share-based Compensation, Financing Activities	49	500
Net Cash Provided by (Used in) Financing Activities	142	601
Effect of Exchange Rate on Cash and Cash Equivalents	74	(562)
Cash and Cash Equivalents, Period Increase (Decrease)	(25,184)	(19,200)
Cash and Cash Equivalents, at Carrying Value	55,606	85,053
Income Taxes Paid	567	1,954
Interest Paid	$ 1,125	$ 1,125

XML

Segment Reporting and Geographic Information - (Tables)

3 Months Ended

Mar. 31, 2014

Segment Reporting and Geographic Information [Abstract]

Schedule of revenue from external customers by Products and Services [Table Text Block]

The following table lists the different sources of revenue:

	Three Months Ended
	March 31,
	2014				2013
Systems and Software:
Inspection	$	18,002	43	%	$	24,879	60	%
Metrology	5,749		14	%	288		1	%
Lithography	3,657		9	%	3,700		9	%
Data Analysis and Review	5,974		14	%	4,157		10	%
Parts	5,040		12	%	5,546		13	%
Services	3,227		8	%	3,080		7	%
Total revenue	$	41,649	100	%	$	41,650	100	%

Schedule of Revenue from External Customers Attributed to Foreign Countries by Geographic Area [Table Text Block]

For geographical revenue reporting, revenues are attributed to the geographic location in which the product is shipped.  Revenue by geographic region is as follows:

	Three Months Ended
	March 31,
	2014		2013
United States	$	9,934	$	9,402
Taiwan	7,930		13,131
Japan	1,284		2,388
China	4,830		2,748
South Korea	7,552		3,423
Other Asia	6,591		5,408
Germany	1,344		2,525
Other Europe	2,184		2,625
Total revenue	$	41,649	$	41,650

Schedule of Revenue by Major Customers by Reporting Segments [Table Text Block]

The following customers each accounted for more than 10% of total revenues for the indicated periods.

	Three Months Ended
	March 31,
	2014		2013
Customer A	17.0	%	2.1	%
Customer B	14.0	%	9.0	%
Customer C	4.4	%	18.5	%

XML

Share Repurchase Program

3 Months Ended

Mar. 31, 2014

Share Repurchase Program [Abstract]

Share Repurchase [Text Block]

Share Repurchase Program

In July 2008, the Board of Directors authorized a share repurchase program of up to 3,000 shares of the Company’s common stock with no established end date.  As of the time of filing this Quarterly Report on Form 10-Q, the Company has not purchased any shares under this program.

XML

Fair Value Measurements - (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2014 Rate	Dec. 31, 2013 Rate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Instruments, Owned, State and Municipal Government Obligations, at Fair Value	$ 127,618	$ 86,305
Available-for-sale Securities, Failed Auction, Value	295	277
Foreign Currency Contracts, Liability, Fair Value Disclosure	21
Foreign Currency Contract, Asset, Fair Value Disclosure		6
Assets, Fair Value Disclosure	127,913	86,588
Business Combination, Contingent Consideration, Liability	(5,283)	5,208
Liabilities, Fair Value Disclosure	5,304
Fair Value Input Discount Rate	3.30%
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Value	295	277
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Gain (Loss) Included in Other Comprehensive Income (Loss)	18
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases, Sales, Issues, Settlements	0
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Sales, Issues, Settlements	0
Fair Value, Level 3 Transfers out, Description	0
Fair Value, Measurement with Unobservable Inputs Reconciliations, Recurring Basis, Liability Value	5,283	5,208
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Gain (Loss) Included in Other Comprehensive Income (Loss)	0
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Purchases	(75)
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Settlements	0
Convertible Debt	52,486	51,751
Long-term Debt, Fair Value	60,390	59,340
Fair Value Inputs Discount Rate 2	3.50%	4.20%
Long-term Debt, Contingent Payment of Principal or Interest	0	0
Fair Value Inputs Discount Rate 3	5.70%
Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Instruments, Owned, State and Municipal Government Obligations, at Fair Value	0	0
Available-for-sale Securities, Failed Auction, Value	0	0
Foreign Currency Contracts, Liability, Fair Value Disclosure	0
Foreign Currency Contract, Asset, Fair Value Disclosure		0
Assets, Fair Value Disclosure	0	0
Business Combination, Contingent Consideration, Liability	0	0
Liabilities, Fair Value Disclosure	0
Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Instruments, Owned, State and Municipal Government Obligations, at Fair Value	127,618	86,305
Available-for-sale Securities, Failed Auction, Value	0	0
Foreign Currency Contracts, Liability, Fair Value Disclosure	21
Foreign Currency Contract, Asset, Fair Value Disclosure		6
Assets, Fair Value Disclosure	127,618	86,311
Business Combination, Contingent Consideration, Liability	0	0
Liabilities, Fair Value Disclosure	(21)
Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Financial Instruments, Owned, State and Municipal Government Obligations, at Fair Value	0	0
Available-for-sale Securities, Failed Auction, Value	295	277
Foreign Currency Contracts, Liability, Fair Value Disclosure	0
Foreign Currency Contract, Asset, Fair Value Disclosure		0
Assets, Fair Value Disclosure	295	277
Business Combination, Contingent Consideration, Liability	(5,283)	5,208
Liabilities, Fair Value Disclosure	$ 5,283

XML

Marketable Securities - (Tables)

3 Months Ended

Mar. 31, 2014

Schedule of Available-for-sale Securities [Line Items]

Schedule of marketable securities by category [Table Text Block]

At March 31, 2014 and December 31, 2013, marketable securities are categorized as follows:

	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Fair Value
March 31, 2014
Municipal notes and bonds	$	127,585	$	44	$	11	$	127,618
Auction rate securities	475		—		180		295
Total marketable securities	$	128,060	$	44	$	191	$	127,913
December 31, 2013
Municipal notes and bonds	$	86,257	$	50	$	2	$	86,305
Auction rate securities	475		—		198		277
Total marketable securities	$	86,732	$	50	$	200	$	86,582

Schedule of marketable securities classified by contractual maturity date [Table Text Block]

The amortized cost and estimated fair value of marketable securities classified by the maturity date listed on the security, regardless of the Condensed Consolidated Balance Sheet classification, is as follows at March 31, 2014 and December 31, 2013:

	March 31, 2014				December 31, 2013
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due within one year	$	101,686	$	101,707	$	78,909	$	78,948
Due after one through five years	15,150		15,164		5,811		5,821
Due after five through ten years	5,010		5,009		—		—
Due after ten years	6,214		6,033		2,011		1,813
Total marketable securities	$	128,060	$	127,913	$	86,731	$	86,582

Schedule of marketable securities in unrealized loss positions [Table Text Block]

The following table summarizes the estimated fair value and gross unrealized holding losses of marketable securities, aggregated by investment instrument and period of time in an unrealized loss position at March 31, 2014 and December 31, 2013:  

	In Unrealized Loss Position For Less Than 12 Months				In Unrealized Loss Position For Greater Than 12 Months
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
March 31, 2014
Municipal notes and bonds	$	57,313	$	5	$	—	$	—
Auction rate securities	—		—		475		180
Total	$	57,313	$	5	$	475	$	180
December 31, 2013
Municipal notes and bonds	$	16,448	$	2	$	—	$	—
Auction rate securities	—		—		475		198
Total	$	16,448	$	2	$	475	$	198

XML

Basis of Presentation (Notes)

3 Months Ended

Mar. 31, 2014

Organization and Nature of Operations: [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

Basis of Presentation

The accompanying interim unaudited condensed consolidated financial statements have been prepared by Rudolph Technologies, Inc. (the “Company” or “Rudolph”) and in the opinion of management reflect all adjustments, consisting of normal recurring accruals, necessary for their fair presentation in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).  Preparing financial statements requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes.  Actual amounts could differ materially from those amounts.  The interim results for the three month period ended March 31, 2014 are not necessarily indicative of results to be expected for the entire year or any future periods.  This interim financial information should be read in conjunction with the financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 (“2013 10-K”) filed with the Securities and Exchange Commission (“SEC”). The accompanying condensed consolidated balance sheet at December 31, 2013 has been derived from the audited consolidated financial statements included in the 2013 10-K.

Reclassifications

Certain prior period amounts have been reclassified to conform to current financial statement presentation. These amounts include the reclassification of a portion of deferred tax assets from Other assets to Prepaid expenses and other current assets in the Condensed Consolidated Balance Sheets.

XML

Statements of Financial Position B/S Parenthetical (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Allowance for Doubtful Accounts Receivable, Current	$ 1,596	$ 1,152

XML

Other Expense (Income)

3 Months Ended

Mar. 31, 2014

Other Income (Expense) [Abstract]

Other Income and Other Expense Disclosure [Text Block]

Other Expense (Income)

	Three Months Ended
	March 31,
	2014			2013
Foreign currency exchange losses (gains), net	$	(127	)	$	331
Other	—			18
Total other expense (income)	$	(127	)	$	349

XML

Document and Entity Information Document	3 Months Ended
	Mar. 31, 2014	Apr. 21, 2014
Entity Information [Line Items]
Entity Registrant Name	RUDOLPH TECHNOLOGIES INC
Entity Central Index Key	0001094392
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Document Type	10-Q
Document Period End Date	Mar. 31, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q1
Amendment Flag	false
Entity Common Stock, Shares Outstanding		33,230,086

XML

Income Taxes

3 Months Ended

Mar. 31, 2014

Income Taxes [Abstract]

Income Tax Disclosure [Text Block]

Income Taxes

The following table provides details of income taxes:

	Three Months Ended
	March 31,
	2014			2013
Loss before income taxes	$	(1,041	)	$	(255	)
Benefit for income taxes	$	(317	)	$	(648	)
Effective tax rate	30.5		%	254.1		%

The income tax provision for the three months endedMarch 31, 2014 was computed based on the Company’s annual forecast of profit by jurisdiction and forecasted effective tax rate for the year. The changes in the Company’s effective tax rate for the three months endedMarch 31, 2014 compared to the same period for the prior year are primarily due to the generation of federal R&D credits for both 2012 and 2013 recognized in 2013, which are not available in the 2014 period as a result of legislation.

The Company currently has a partial valuation allowance recorded against certain deferred tax assets. Each quarter, the Company assesses the likelihood that it will be able to recover its deferred tax assets. The Company considers available evidence, both positive and negative, including prudent and feasible tax planning strategies in assessing the need for a valuation allowance. As a result of the Company’s analysis, it concluded that it is more likely than not that a portion of its deferred tax assets will not be realized. Therefore, the Company continues to provide a valuation allowance against certain deferred tax assets. The Company continues to closely monitor available evidence and may reverse some or all of the remaining valuation allowance in future periods, if appropriate. The Company has a valuation allowance of $1,646 as of March 31, 2014 and December 31, 2013.

XML

Statements of Income Statement (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Revenues	$ 41,649	$ 41,650
Cost of Revenue	20,080	19,776
Gross Profit	21,569	21,874
Research and Development Expense	10,006	9,703
Selling, General and Administrative Expense	10,780	10,252
Amortization of Intangible Assets	670	616
Operating Expenses	21,456	20,571
Operating Income (Loss)	113	1,303
Interest Expense, net	1,281	1,209
Total other expenses (income)	(127)	349
Income (Loss) from Continuing Operations before Equity Method Investments, Income Taxes, Extraordinary Items, Noncontrolling Interest	(1,041)	(255)
Income Tax Expense (Benefit)	(317)	(648)
Net Income (Loss) Attributable to Parent	$ (724)	$ 393
Earnings (Loss) Per Share, Basic	$ (0.02)	$ 0.01
Earnings (Loss) Per Share, Diluted	$ (0.02)	$ 0.01
Weighted Average Number of Shares Outstanding, Basic	33,092	32,523
Weighted Average Number of Shares Outstanding, Diluted	33,092	33,239

XML

Identifiable Intangible Assets and Goodwill

3 Months Ended

Mar. 31, 2014

Finite-Lived Intangible Assets [Line Items]

Goodwill and Intangible Assets Disclosure [Text Block]

Goodwill and Purchased Intangible Assets

Goodwill

The changes in the carrying amount of goodwill are as follows:

Balance at December 31, 2012	$	15,361
Goodwill acquired during period	6,989
Other, primarily currency translation	203
Balance at December 31, 2013	$	22,553
Goodwill acquired during period	—
Other	(58		)
Balance at March 31, 2014	$	22,495

Purchased Intangible Assets

Purchased intangible assets as of  March 31, 2014 and December 31, 2013 are as follows:

	Gross Carrying Amount		Accumulated Amortization		Net
March 31, 2014
Finite-lived intangibles:
Developed technology	$	59,831	$	52,032	$	7,799
Customer and distributor relationships	9,560		7,544		2,016
Trade names	4,361		3,382		979
Total identifiable intangible assets	$	73,752	$	62,958	$	10,794
December 31, 2013
Finite-lived intangibles:
Developed technology	$	59,831	$	51,496	$	8,335
Customer and distributor relationships	9,560		7,449		2,111
Trade names	4,361		3,343		1,018
Total identifiable intangible assets	$	73,752	$	62,288	$	11,464

Intangible asset amortization expense for the three months endedMarch 31, 2014 and 2013 was $670 and $616. Assuming no change in the gross carrying value of identifiable intangible assets and estimated lives, estimated amortization expense for the remainder of 2014 will be $1,752, and for each of the next five years estimated amortization expense amounts to $2,050 for 2015, $1,941 for 2016, $1,553 for 2017, $1,117 for 2018, and $1,117 for 2019.

XML

Derivative Instruments and Hedging Activities

3 Months Ended

Mar. 31, 2014

Derivative Instruments and Hedging Activities [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Derivative Instruments and Hedging Activities

The Company, when it considers it to be appropriate, enters into forward contracts to hedge the economic exposures arising from foreign currency denominated transactions. At March 31, 2014 and December 31, 2013, these contracts included the future sale of Japanese Yen to purchase U.S. dollars. Derivative instruments are recognized as either “Prepaid expenses and other current assets” or “Other current liabilities” in the Condensed Consolidated Balance Sheets and are measured at fair value. The foreign currency forward contracts were entered into by the Company’s Japanese subsidiary to economically hedge a portion of certain intercompany obligations. The forward contracts are not designated as hedges for accounting purposes and therefore, decreases in the fair value of $27 and $68 for the three month period ended March 31, 2014 and 2013, respectively. These decreases are recorded within the caption “Other expense (income)” in the Condensed Consolidated Statements of Operations.

The dollar equivalent of the U.S. dollar forward contracts and related fair values as of March 31, 2014 and December 31, 2013 were as follows:

	March 31, 2014			December 31, 2013
Notional amount	$	1,442		$	1,029
Fair value of asset (liability)	$	(21	)	$	6

XML

Fair Value Measurements - (Tables)

3 Months Ended

Mar. 31, 2014

Fair Value Measurements [Abstract]

Fair Value, Measurement Inputs, Disclosure [Table Text Block]

The following tables provide the assets and liabilities carried at fair value measured on a recurring basis at March 31, 2014 and December 31, 2013:

			Fair Value Measurements Using
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
March 31, 2014
Assets:
Available-for-sale debt securities:
Municipal notes and bonds	$	127,618	$	—	$	127,618	$	—
Auction rate securities	295		—		—		295
Total Assets	$	127,913	$	—	$	127,618	$	295
Liabilities:
Contingent consideration - acquisitions	$	5,283	$	—	$	—	$	5,283
Foreign currency forward contracts	21		—		21		—
Total Liabilities	$	5,304	$	—	$	21	$	5,283
December 31, 2013
Assets:
Available-for-sale debt securities:
Municipal notes and bonds	$	86,305	$	—	$	86,305	$	—
Auction rate securities	277		—		—		277
Foreign currency forward contracts	6		—		6		—
Total Assets	$	86,588	$	—	$	86,311	$	277
Liabilities:
Contingent consideration - acquisitions	$	5,208	$	—	$	—	$	5,208
Total Liabilities	$	5,208	$	—	$	—	$	5,208

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]

This table presents a reconciliation for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months endedMarch 31, 2014:

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Assets:
Balance at December 31, 2013	$	277
Unrealized gain in accumulated other comprehensive loss	18
Purchases	—
Sales, issuances, and settlements	—
Transfers into (out of) Level 3	—
Balance at March 31, 2014	$	295
Liabilities:
Balance at December 31, 2013	$	5,208
Additions	—
Total gain (loss) included in earnings	(75		)
Payments	—
Transfers into (out of) Level 3	—
Balance at March 31, 2014	$	5,283

Fair value convertible senior notes [Table Text Block]

The following table reflects information pertaining to the Company’s convertible senior notes:

	March 31, 2014			December 31, 2013
Net carrying value of convertible senior notes	$	52,486		$	51,751
Estimated fair value of convertible senior notes	$	60,390		$	59,340
Estimated interest rate used in discounted cash flow model	3.5		%	4.2		%
Fair value of contingent interest	$	—		$	—

XML

Earnings Per Share

3 Months Ended

Mar. 31, 2014

Earnings (Loss) Per Share [Abstract]

Earnings Per Share [Text Block]

Earnings (Loss) Per Share

Basic earnings (loss) per share is calculated using the weighted average number of shares of common stock outstanding during the period.  Diluted earnings per share is computed in the same manner and also gives effect to all dilutive common equivalent shares outstanding during the period.  Potential common shares that would have the effect of increasing diluted earnings per share are considered to be antidilutive. In accordance with U.S. GAAP, these shares were not included in calculating diluted earnings per share. For the three months endedMarch 31, 2014, all outstanding stock options and restricted stock units totaling 739 and 1,377, respectively, were excluded from the computation of diluted loss per share because the effect in the period would be antidilutive. For the three months endedMarch 31, 2013, the weighted average number of stock options and restricted stock units excluded from the computation of diluted earnings per share totaled 810 and 0, respectively, because their effect was antidilutive. Diluted earnings per share-weighted average shares outstanding do not include any effect resulting from assumed conversion of the Notes and warrants as their impact would be anti-dilutive.

The Company’s basic and diluted earnings (loss) per share amounts are as follows:

	Three Months Ended March 31,
	2014			2013
Numerator:
Net income (loss)	$	(724	)	$	393
Denominator:
Basic earnings (loss) per share - weighted average shares outstanding	33,092			32,523
Effect of potential dilutive securities:
Employee stock options and restricted stock units - dilutive shares	—			716
Diluted earnings (loss) per share - weighted average shares outstanding	33,092			33,239
Earnings (loss) per share:
Basic	$	(0.02	)	$	0.01
Diluted	$	(0.02	)	$	0.01

XML

Commitments and Contingencies

3 Months Ended

Mar. 31, 2014

Commitments and Contingencies [Abstract]

Commitments and Contingencies Disclosure [Text Block]

Commitments and Contingencies

Warranty Reserves

The Company generally provides a warranty on its products for a period of twelve to fifteen months against defects in material and workmanship. The Company estimates the costs that may be incurred during the warranty period and records a liability in the amount of such costs at the time revenue is recognized. The Company’s estimate is based primarily on historical experience. The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary. Settlements of warranty reserves are generally associated with sales that occurred during the 12 to 15 months prior to the year-end and warranty accruals are related to sales during the year.

Changes in the Company’s warranty reserves are as follows:

	Three Months Ended March 31,
	2014		2013
Balance, beginning of the period	$	1,551	$	2,024
Accruals	481		446
Less: Usage	523		705
Balance, end of the period	$	1,509	$	1,765

Warranty reserves are reported in the Condensed Consolidated Balance Sheets within the caption “Accounts payable and accrued liabilities.”

Letter of Credit

As of March 31, 2014, the Company had a $40,000 irrevocable standby letter of credit with Credit Suisse AG available to secure the damages assessment in connection with the ITC litigation discussed in Legal Matters below, which the Company is in the process of appealing. The letter of credit contains a provision for automatic renewal each year. Upon draw down of funds, the letter of credit would be collateralized by securities held in the Company’s investment portfolios and reported in the Condensed Consolidated Balance Sheets within the caption “Cash and cash equivalents” and “Marketable securities.” No amounts were outstanding on the letter of credit as of, or during the three months ended, March 31, 2014.

Legal Matters

From time to time, the Company is subject to legal proceedings and claims in the ordinary course of business. As previously disclosed, in December 2007, the Company completed the acquisition of specific assets and liabilities of the semiconductor division of Applied Precision LLC (“Applied”). As a result of the acquisition, the Company assumed certain liabilities of Applied including a lawsuit filed in the United States District Court, District of Arizona, by Integrated Technology Corporation (“ITC”) which alleged Applied’s PrecisionPoint™, PrecisionWoRx® and ProbeWoRx® products infringed an ITC patent (Integrated Technology Corporation v. Rudolph Technologies, Inc., No.  CV-06-2182-PHX-ROS).  Prior to trial, the District Court ruled that such products sold prior to August of 2007 (the “pre-August 2007 tools”) infringed the ITC patent.  At trial in December of 2011, a trial verdict was rendered in which the jury found that while the Company’s products manufactured after August of 2007 (the “post-August 2007 tools”) did not literally infringe ITC’s patent, the products were found to infringe under a rule known as the doctrine of equivalents, a legal principle which expands the language of patent claims to encompass products or processes which may otherwise be found not to literally infringe the patent. The jury awarded $15,475 to ITC in damages for sales made during the years 2000-2011, of which award approximately one-half related to sales for pre-August 2007 tools.  The jury found that for the sales of the post-August 2007 tools, the infringement was willful.  On July 23, 2012, the District Court issued an Order which affirmed the jury’s award, applied treble damages to the portion of the jury award related to post-August 2007 tool sales and granted ITC’s motion for attorney’s fees and prejudgment interest on the verdict and attorney’s fees.  At that time, the District Court also enjoined the Company from future infringement of the ITC patent and from selling or supplying the applicable products with the applicable features from or into the United States. The Company appealed the injunction, the District Court Order and the damages assessment. In October 2012, the injunction was stayed by the U.S. Federal Court of Appeals and thereafter in June of 2013, the patent expired.  On November 4, 2013, the U.S. Federal Court of Appeals issued a ruling which reversed the judgment of infringement against all post-August 2007 tools, reversed the finding of willfulness, vacated the treble damages award, vacated the award of attorney’s fees and costs, remanded the issue back to the District Court for further review, and affirmed the award of damages and interest for the pre-August 2007 tools.  As a result, the matter is resolved with regard to the alleged infringement of the post-August 2007 tools in the Company’s favor.  With regard to the damages assessment against the pre-August 2007 tools, the Company believes that it has meritorious defenses and the Company intends to continue to vigorously prosecute our appeal regarding this issue.  On March 4, 2014, the Company filed a Petition for a Writ of Certiorari with the U.S. Supreme Court to appeal the basis of the Federal Court of Appeals’ decision affirming the damages award for the pre-August 2007 tools. A decision by the Supreme Court on whether the Petition will be granted is expected to be issued on or about June 26, 2014. It remains probable that the Company could realize a loss in this matter  regarding the pre-August 2007 tools for which the Company has estimated and recorded a liability of approximately $4,211 in “Other current liabilities” in the Condensed Consolidated Balance Sheets.  The Company expects that the maximum liability reasonably possible for the pre-August 2007 products, including damages and interest, is an additional $6,367 plus attorney’s fees beyond the accrual.

In the Company’s patent infringement suit against Camtek, Ltd., of Migdal Hamek, Israel, concerning the Company’s proprietary continuous scan wafer inspection technology, the U.S. Federal Court of Appeals issued a ruling on August 22, 2011.  In its opinion, the Appellate Court affirmed multiple rulings from trial at the District Court level including (i) finding the Company’s U.S. Patent No. 6,826,298 valid, (ii) the part of the infringement ruling based on the finding that Camtek’s Falcon product strobes “based on velocity,” and (iii) the dismissal of Camtek’s claim against the Company for inequitable conduct against the U.S. Patent and Trademark Office.  The court did, however, revise one claim construction ruling made by the District Court in the original case.  As a result, the Appellate Court set aside the verdict delivered by the jury for damages and the District Court’s decision to enter an injunction against Camtek’s selling Falcon tools in the U.S. and remanded the case back to the trial court for a limited trial on this single infringement issue.  On March 31, 2014, the District Court ruled in the Company’s favor, finding that Camtek’s Falcon tools continue to infringe the Company’s patent even under the revised claim construction of the patent, obviating the need for the limited trial.  The Company intends to petition the court to reinstate a permanent injunction against the sale by Camtek of its infringing semiconductor inspection systems. The Company also anticipates that the damages originally awarded by the jury in 2009 will be reinstated, as well as related interest and all subsequently awarded damages.   This lawsuit was initially brought in 2005 by August Technology prior to its merger with the Company. A subsequent lawsuit has been filed by Rudolph against Camtek alleging infringement of Rudolph’s U.S. Patent No. 7,729,528, also related to the Company’s proprietary continuous scan wafer inspection technology.  This lawsuit is currently stayed pending resolution of a re-examination petition filed by Camtek with the U.S. Patent and Trademark Office.

XML

Balance Sheet Details

3 Months Ended

Mar. 31, 2014

Balance Sheet Detail [Abstract]

Balance Sheet Details [Text Block]

Balance Sheet Details

Inventories

Inventories are comprised of the following:

	March 31, 2014		December 31, 2013
Materials	$	31,086	$	31,194
Work-in-process	18,969		19,867
Finished goods	12,266		10,290
Total inventories	$	62,321	$	61,351

The Company has established reserves of $6,606 and $6,101 as of March 31, 2014 and December 31, 2013, respectively, for slow moving and obsolete inventory, which are included in the amounts above.

Property, Plant and Equipment

Property, plant and equipment, net is comprised of the following:

	March 31, 2014		December 31, 2013
Land and building	$	5,024	$	5,024
Machinery and equipment	21,280		20,827
Furniture and fixtures	3,970		4,043
Computer equipment	5,658		5,568
Leasehold improvements	7,742		7,744
	43,674		43,206
Less: Accumulated depreciation	31,122		30,148
Total property, plant and equipment, net	$	12,552	$	13,058

Other assets

Other assets is comprised of the following:

	March 31, 2014		December 31, 2013
Deferred income taxes	$	27,087	$	25,547
Other	1,676		1,776
Total other assets	$	28,763	$	27,323

Other current liabilities

Other current liabilities is comprised of the following:

	March 31, 2014		December 31, 2013
Litigation accrual	$	4,211	$	4,293
Deferred revenue	12,850		8,786
Contingent consideration - acquisitions	1,130		868
Other	5,347		4,971
Total other current liabilities	$	23,538	$	18,918

Other non-current liabilities

Other non-current liabilities is comprised of the following:

	March 31, 2014		December 31, 2013
Unrecognized tax benefits (including interest)	$	3,498	$	2,806
Contingent consideration - acquisitions	4,153		4,340
Other	1,759		1,772
Total other non-current liabilities	$	9,410	$	8,918

XML

Debt Obligations

3 Months Ended

Mar. 31, 2014

Debt Obligations [Abstract]

Debt Disclosure [Text Block]

Debt Obligations

On July 25, 2011, the Company issued $60,000 aggregate principal amount of 3.75% Convertible Senior Notes due 2016 (the “Notes”) at par. The Notes were issued pursuant to an indenture, dated as of July 25, 2011, between the Company and Bank of New York Mellon Trust Company, N.A., as Trustee, which includes a form of Note. The Notes provide for the payment of interest semi-annually in arrears on January 15 and July 15 of each year, beginning January 15, 2012, at an annual rate of 3.75% and will mature on July 15, 2016, unless earlier converted or repurchased. The Notes may be converted, under certain circumstances, based on an initial conversion rate of 77.241 shares of Company common stock per $1 principal amount of Notes, which represents an initial conversion price of approximately $12.95 per share. Concurrently with the issuance of the Notes, the Company purchased a convertible note hedge and sold a warrant. Each of the convertible note hedge and warrant transactions were entered into with an affiliate of the initial purchaser of the Notes. The convertible note hedge is intended to reduce the potential future dilution to the Company’s common stock associated with the conversion of the Notes. However, the warrant transaction will have a dilutive effect on the Company’s earnings per share to the extent that the price of the Company’s common stock exceeds the strike price of the warrant. The strike price of the warrant will initially be $17.00 per share. The net proceeds to the Company from the sale of the Notes, including the convertible note hedge and warrant were $50,249.

The following table reflects the net carrying value of the Notes:

	March 31, 2014		December 31, 2013
Convertible senior notes	$	60,000	$	60,000
Less: Unamortized interest discount	7,514		8,249
Net carrying value of convertible senior notes	$	52,486	$	51,751

The following table presents the amount of interest cost recognized relating to the Notes during the three months endedMarch 31, 2014 and March 31, 2013.

	Three Months Ended March 31,
	2014		2013
Contractual interest coupon	$	562	$	562
Amortization of interest discount	735		667
Amortization of debt issuance costs	87		72
Total interest cost recognized	$	1,384	$	1,301

The remaining bond discount of the Notes of $7,514, as of March 31, 2014, will be amortized over the remaining life of the Notes.

XML

Share-Based Compensation

3 Months Ended

Mar. 31, 2014

Share-based Compensation [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

Share-Based Compensation

Restricted Stock Unit Activity

A summary of the Company’s nonvested restricted stock unit activity with respect to the three months ended March 31, 2014 is as follows:

	Number of Shares	Weighted Average Grant Date Fair Value
Nonvested at December 31, 2013	1,116	$	9.73
Granted	503	$	10.97
Less: Vested	290	$	8.37
Less: Forfeited	12	$	10.31
Nonvested at March 31, 2014	1,317	$	10.50

As of March 31, 2014 and December 31, 2013, there was $9,884 and $5,755 of total unrecognized compensation cost related to restricted stock units granted under the Company’s stock plans, respectively.  That cost is expected to be recognized over a weighted average period of 2.4 years and 2.0 years for the respective periods.

XML

Accumulated Other Comprehensive Loss (Tables)

3 Months Ended

Mar. 31, 2014

Accumulated Other Comprehensive Loss [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

The components of accumulated other comprehensive loss, net of tax, are as follows:

	Foreign currency translation adjustments		Net unrealized losses on available-for-sale investments			Accumulated other comprehensive loss
Beginning Balance, December 31, 2012	$	985	$	100		$	1,085
Net current period other comprehensive loss	660		50			710
Reclassifications	—		—			—
Beginning Balance, December 31, 2013	$	1,645	$	150		$	1,795
Net current period other comprehensive loss (gain)	132		(3		)	129
Reclassifications	—		—			—
Ending balance, March 31, 2014	$	1,777	$	147		$	1,924

XML

Income Taxes - (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013
Income Taxes [Abstract]
Income (Loss) from Continuing Operations before Equity Method Investments, Income Taxes, Extraordinary Items, Noncontrolling Interest	$ (1,041)	$ (255)
Income Tax Expense (Benefit)	(317)	(648)
Effective Income Tax Rate	30.50%	254.10%
Valuation Allowance, Amount			$ 1,646

XML

Segment Reporting and Geographic Information

3 Months Ended

Mar. 31, 2014

Segment Reporting and Geographic Information [Abstract]

Segment Reporting Disclosure [Text Block]

Segment Reporting and Geographic Information

The Company is engaged in the design, development, manufacture and support of high-performance control metrology, defect inspection, advanced packaging lithography and data analysis systems used by microelectronics device manufacturers. The Company and its subsidiaries currently operate in a single operating segment: the design, development, manufacture and support of high-performance process control defect inspection, metrology, and process control software systems used by microelectronics device manufacturers, and therefore have one reportable segment. The Company’s chief operating decision maker is the Chief Executive Officer. The chief operating decision maker allocates resources and assesses performance of the business and other activities at the reporting segment level.

The following table lists the different sources of revenue:

	Three Months Ended
	March 31,
	2014				2013
Systems and Software:
Inspection	$	18,002	43	%	$	24,879	60	%
Metrology	5,749		14	%	288		1	%
Lithography	3,657		9	%	3,700		9	%
Data Analysis and Review	5,974		14	%	4,157		10	%
Parts	5,040		12	%	5,546		13	%
Services	3,227		8	%	3,080		7	%
Total revenue	$	41,649	100	%	$	41,650	100	%

For geographical revenue reporting, revenues are attributed to the geographic location in which the product is shipped.  Revenue by geographic region is as follows:

	Three Months Ended
	March 31,
	2014		2013
United States	$	9,934	$	9,402
Taiwan	7,930		13,131
Japan	1,284		2,388
China	4,830		2,748
South Korea	7,552		3,423
Other Asia	6,591		5,408
Germany	1,344		2,525
Other Europe	2,184		2,625
Total revenue	$	41,649	$	41,650

The following customers each accounted for more than 10% of total revenues for the indicated periods.

	Three Months Ended
	March 31,
	2014		2013
Customer A	17.0	%	2.1	%
Customer B	14.0	%	9.0	%
Customer C	4.4	%	18.5	%

XML

Identifiable Intangible Assets and Goodwill - (Tables)

3 Months Ended

Mar. 31, 2014

Identifiable Intangible Assets and Goodwill [Abstract]

Schedule of Goodwill [Table Text Block]

The changes in the carrying amount of goodwill are as follows:

Balance at December 31, 2012	$	15,361
Goodwill acquired during period	6,989
Other, primarily currency translation	203
Balance at December 31, 2013	$	22,553
Goodwill acquired during period	—
Other	(58		)
Balance at March 31, 2014	$	22,495

Schedule of Finite-Lived Intangible Assets by Major Class [Table Text Block]

Purchased intangible assets as of  March 31, 2014 and December 31, 2013 are as follows:

	Gross Carrying Amount		Accumulated Amortization		Net
March 31, 2014
Finite-lived intangibles:
Developed technology	$	59,831	$	52,032	$	7,799
Customer and distributor relationships	9,560		7,544		2,016
Trade names	4,361		3,382		979
Total identifiable intangible assets	$	73,752	$	62,958	$	10,794
December 31, 2013
Finite-lived intangibles:
Developed technology	$	59,831	$	51,496	$	8,335
Customer and distributor relationships	9,560		7,449		2,111
Trade names	4,361		3,343		1,018
Total identifiable intangible assets	$	73,752	$	62,288	$	11,464

XML

Share-Based Compensation Restricted Stock Units (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
Restricted Stock Units Activity [Abstract]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number	1,317	1,116
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value	$ 10.50	$ 9.73
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	503
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value	$ 10.97
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period	290
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period, Weighted Average Grant Date Fair Value	$ 8.37
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeited in Period	12
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeitures, Weighted Average Grant Date Fair Value	$ 10.31
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized	$ 9,884	$ 5,755
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized, Period for Recognition	2 years 5 months 1 day	2 years 0 months 1 day

XML

Balance Sheet Details - Property Plant & Equipment (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Property Plant & Equipment [Abstract]
Buildings and Land Gross	$ 5,024	$ 5,024
Machinery and Equipment, Gross	21,280	20,827
Furniture and Fixtures, Gross	3,970	4,043
Computer Equipments And Software Gross	5,658	5,568
Leasehold Improvements, Gross	7,742	7,744
Property, Plant and Equipment, Gross	43,674	43,206
Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment	31,122	30,148
Property, Plant and Equipment, Net	$ 12,552	$ 13,058

XML

Statements of Comprehensive Income (Loss) Statement (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Net Income (Loss) Attributable to Parent	$ (724)	$ 393
Available-for-sale Securities, Change in Net Unrealized Holding Gain (Loss), Net of Tax	3	14
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, Net of Tax	(132)	(449)
Comprehensive Income (Loss), Net of Tax, Attributable to Parent	$ (853)	$ (42)

XML

Marketable Securities

3 Months Ended

Mar. 31, 2014

Marketable Securities [Abstract]

Marketable Securities [Text Block]

Marketable Securities

The Company has evaluated its investment policies and determined that all of its investment securities are to be classified as available-for-sale.  Available-for-sale securities are carried at fair value, with the unrealized gains and losses reported in Stockholders’ Equity under the caption “Accumulated other comprehensive loss.”  Realized gains and losses on available-for-sale securities are included in “Other expense (income)” in the Condensed Consolidated Statements of Operations.  The Company records other-than-temporary impairment charges for its available-for-sale investments when it intends to sell the securities, it is more-likely-than not that it will be required to sell the securities before a recovery, or when it does not expect to recover the entire amortized cost basis of the securities.  The cost of securities sold is based on the specific identification method.

As of March 31, 2014, the Company held one auction rate security with a fair value of $295. The underlying asset of the Company’s auction rate security consisted of a municipal bond with an auction reset feature. Due to auction failures in the marketplace, the Company will not have access to these funds unless (a) future auctions occur and are successful, (b) the security is called by the issuer, (c) the Company sells the security in an available secondary market, or (d) the underlying note matures. Currently, there are no active secondary markets. As of March 31, 2014, the Company had recorded a cumulative temporary unrealized impairment loss of $180 within “Accumulated other comprehensive loss” based upon its assessment of the fair value of this security. The Company believes that this impairment is temporary as it does not intend to sell this security, the Company will not be required to sell this security before recovery, and the Company expects to recover the amortized cost basis of this security.

The Company has determined that the gross unrealized losses on its marketable securities at March 31, 2014 and December 31, 2013 are temporary in nature. The Company reviews its investment portfolio to identify and evaluate investments that have indications of possible impairment. Factors considered in determining whether a loss is other-than-temporary include the length of time and extent to which fair value has been less than the cost basis, credit quality and the Company’s ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

At March 31, 2014 and December 31, 2013, marketable securities are categorized as follows:

	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Fair Value
March 31, 2014
Municipal notes and bonds	$	127,585	$	44	$	11	$	127,618
Auction rate securities	475		—		180		295
Total marketable securities	$	128,060	$	44	$	191	$	127,913
December 31, 2013
Municipal notes and bonds	$	86,257	$	50	$	2	$	86,305
Auction rate securities	475		—		198		277
Total marketable securities	$	86,732	$	50	$	200	$	86,582

 The amortized cost and estimated fair value of marketable securities classified by the maturity date listed on the security, regardless of the Condensed Consolidated Balance Sheet classification, is as follows at March 31, 2014 and December 31, 2013:

	March 31, 2014				December 31, 2013
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due within one year	$	101,686	$	101,707	$	78,909	$	78,948
Due after one through five years	15,150		15,164		5,811		5,821
Due after five through ten years	5,010		5,009		—		—
Due after ten years	6,214		6,033		2,011		1,813
Total marketable securities	$	128,060	$	127,913	$	86,731	$	86,582

The following table summarizes the estimated fair value and gross unrealized holding losses of marketable securities, aggregated by investment instrument and period of time in an unrealized loss position at March 31, 2014 and December 31, 2013:  

	In Unrealized Loss Position For Less Than 12 Months				In Unrealized Loss Position For Greater Than 12 Months
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
March 31, 2014
Municipal notes and bonds	$	57,313	$	5	$	—	$	—
Auction rate securities	—		—		475		180
Total	$	57,313	$	5	$	475	$	180
December 31, 2013
Municipal notes and bonds	$	16,448	$	2	$	—	$	—
Auction rate securities	—		—		475		198
Total	$	16,448	$	2	$	475	$	198

See Note 3 for additional discussion regarding the fair value of the Company’s marketable securities.

XML

Balance Sheet Details - (Tables)

3 Months Ended

Mar. 31, 2014

Balance Sheet Detail [Abstract]

Schedule of Inventory, Current [Table Text Block]

Inventories

Inventories are comprised of the following:

	March 31, 2014		December 31, 2013
Materials	$	31,086	$	31,194
Work-in-process	18,969		19,867
Finished goods	12,266		10,290
Total inventories	$	62,321	$	61,351

Property, Plant and Equipment [Table Text Block]

Property, Plant and Equipment

Property, plant and equipment, net is comprised of the following:

	March 31, 2014		December 31, 2013
Land and building	$	5,024	$	5,024
Machinery and equipment	21,280		20,827
Furniture and fixtures	3,970		4,043
Computer equipment	5,658		5,568
Leasehold improvements	7,742		7,744
	43,674		43,206
Less: Accumulated depreciation	31,122		30,148
Total property, plant and equipment, net	$	12,552	$	13,058

Schedule of Other Assets [Table Text Block]

Other assets

Other assets is comprised of the following:

	March 31, 2014		December 31, 2013
Deferred income taxes	$	27,087	$	25,547
Other	1,676		1,776
Total other assets	$	28,763	$	27,323

Other Current liabilities [Table Text Block]

Other current liabilities

Other current liabilities is comprised of the following:

	March 31, 2014		December 31, 2013
Litigation accrual	$	4,211	$	4,293
Deferred revenue	12,850		8,786
Contingent consideration - acquisitions	1,130		868
Other	5,347		4,971
Total other current liabilities	$	23,538	$	18,918

Other Non-current liabilities [Table Text Block]

Other non-current liabilities

Other non-current liabilities is comprised of the following:

	March 31, 2014		December 31, 2013
Unrecognized tax benefits (including interest)	$	3,498	$	2,806
Contingent consideration - acquisitions	4,153		4,340
Other	1,759		1,772
Total other non-current liabilities	$	9,410	$	8,918

XML

Derivative Instruments and Hedging Activities - (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013
Derivative [Line Items]
Gain (Loss) on Foreign Currency Derivative Instruments Not Designated as Hedging Instruments	$ (27)	$ (68)
Derivative, Notional Amount	1,442		1,029
Derivative Asset, Fair Value, Gross Asset	$ (21)		$ 6

XML

Accumulated Other Comprehensive Loss (Notes)

3 Months Ended

Mar. 31, 2014

Accumulated Other Comprehensive Loss [Abstract]

Comprehensive Income (Loss) Note [Text Block]

Accumulated Other Comprehensive Loss

Comprehensive income includes net income (loss), foreign currency translation adjustments, and net unrealized gains and losses on available-for-sale investments. See the unaudited Condensed Consolidated Statements of Comprehensive Loss for the effect of the components of comprehensive loss to our net income.

The components of accumulated other comprehensive loss, net of tax, are as follows:

	Foreign currency translation adjustments		Net unrealized losses on available-for-sale investments			Accumulated other comprehensive loss
Beginning Balance, December 31, 2012	$	985	$	100		$	1,085
Net current period other comprehensive loss	660		50			710
Reclassifications	—		—			—
Beginning Balance, December 31, 2013	$	1,645	$	150		$	1,795
Net current period other comprehensive loss (gain)	132		(3		)	129
Reclassifications	—		—			—
Ending balance, March 31, 2014	$	1,777	$	147		$	1,924