Inventories, net

12 Months Ended

Dec. 31, 2013

Note 6. Inventories, net

The components of inventories are as follows:

	December 31,

	2013		2012
	(in thousands)
Raw materials	$	56,942	$	72,013
Work in process		27,462		12,253
Finished goods (completed systems)		11,385		15,968


	$	95,789	$	100,234

When recorded, inventory reserves are intended to reduce the carrying value of inventories to their net realizable value. The Company establishes inventory reserves when conditions exist that indicate inventory may be in excess of anticipated demand or is obsolete based upon assumptions about future demand for the Company's products or market conditions. The Company regularly evaluates the ability to realize the value of inventories based on a combination of factors including the following: forecasted sales or usage, estimated product end of life dates, estimated current and future market value and new product introductions. Purchasing and usage alternatives are also explored to mitigate inventory exposure. As of December 31, 2013 and 2012, inventories are stated net of inventory reserves of $25.1 million and $33.6 million respectively.

In 2013, the Company recorded a $2.6 million increase to its excess inventory reserves. During the three months ended March 31, 2013, the Company recorded a charge to cost of sales of $2.1 million for 300mm dry strip components. Under the terms of the agreement with Lam, the Company was permitted to manufacture and sell dry strip products through September 2013. Due to changes in the forecasted sales of the Company's dry strip products that become known in the current period, a portion of the dry strip inventory components were determined to be non-recoverable. During the three months ended December 31, 2013, after reviewing all excess inventory levels, the Company disposed of $8.7 million of previously reserved for inventory.

During 2013, the Company recorded a charge to cost of sales of $0.6 million due to production levels below normal capacity. During 2012, the Company recorded a similar charge to cost of sales of $2.6 million due to production levels below normal capacity.

- Definition

The entire disclosure for inventory. This may include, but is not limited to, the basis of stating inventory, the method of determining inventory cost, the major classes of inventory, and the nature of the cost elements included in inventory. If inventory is stated above cost, accrued net losses on firm purchase commitments for inventory and losses resulting from valuing inventory at the lower-of-cost-or-market may also be included. For LIFO inventory, may disclose the amount and basis for determining the excess of replacement or current cost over stated LIFO value and the effects of a LIFO quantities liquidation that impacts net income.

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