10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

S Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended                                                            December 31, 2013                                                                         

or

£ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                                                                                       to                                                                             

Commission File Number                                                                        0-12944                                                                                         

Zygo Corporation

(Exact name of registrant as specified in its charter)

Delaware	06-0864500
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
Laurel Brook Road, Middlefield, Connecticut	06455
(Address of principal executive offices)	(Zip Code)

(860) 347-8506

Registrant’s telephone number, including area code

N/A

(Former name, former address, and former fiscal year, if changed from last report)

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.  S YES £ 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  S YES £ 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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer £	Accelerated filer S
Non-accelerated filer £ (Do not check if a smaller reporting company)	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 S NO

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

18,893,149 shares of Common Stock, $.10 Par Value, at January 31, 2014

1

FORWARD LOOKING STATEMENTS

All statements other than statements of historical fact included in this Form 10-Q Quarterly Report regarding financial performance, financial condition and operations and the business strategy, plans, anticipated revenue, bookings, market acceptance, growth rates, market opportunities and objectives of management of the Company for future operations are forward-looking statements. Forward-looking statements provide management’s current expectations or plans for the future operating and financial performance of the Company based upon information currently available and assumptions currently believed to be valid. Forward-looking statements can be identified by the use of words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan(s),” “strategy,” “project,” “should” and other words of similar meaning in connection with a discussion of current or future operating or financial performance. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors. Among the important factors that could cause actual events to differ materially from those in the forward-looking statements are fluctuations in capital spending of our customers; fluctuations in revenues to our major customers; manufacturing and supply chain risks; risks of order cancellations, push-outs and de-bookings; dependence on timing and market acceptance of new product development and introductions; rapid technological and market change; risks in international operations; risks related to the integration of manufacturing facilities; risks related to any reorganization of our business; risks related to changes in management personnel, including risks related to the Company’s recent and announced changes in Senior Management and the Board of Directors; dependence on proprietary technology and key personnel; length of the revenue cycle; environmental conditions and regulations; investment portfolio returns; fluctuations in our stock price; the risk that anticipated growth opportunities may be smaller than anticipated or may not be realized; and risks related to business acquisitions.

Any forward-looking statements included in this Quarterly Report speak only as of the date of this document. We undertake no obligation to publicly update or revise forward-looking statements to reflect events or circumstances after the date of this Form 10-Q except as required by law. Further information on potential factors that could affect our business is described in this Form 10-Q and in our reports on file with the Securities and Exchange Commission, including our Form 10-K for the fiscal year ended June 30, 2013, filed with the Securities and Exchange Commission on September 13, 2013.

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PART I - Financial Information

Item 1. Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED) (Amounts in thousands, except per share amounts)

	Three Months Ended December 31,						Six Months Ended December 31,
	2013			2012			2013			2012
Net revenue	$	48,161		$	34,635		$	88,279		$	74,841
Cost of goods sold		23,365			19,352			45,146			42,065
Gross profit		24,796			15,283			43,133			32,776
Selling, general and administrative expenses		13,070			8,568			23,023			17,089
Research, development and engineering expenses		5,209			4,502			10,174			9,083
Operating profit		6,517			2,213			9,936			6,604
Other income (expense)
Miscellaneous income (expense), net		(185	)		(208	)		105			(172	)
Total other income (expense)		(185	)		(208	)		105			(172	)
Income before income taxes, including noncontrolling interest		6,332			2,005			10,041			6,432
Income tax expense		(2,135	)		(1,064	)		(3,540	)		(3,106	)
Net income including noncontrolling interest		4,197			941			6,501			3,326
Less: Net income attributable to noncontrolling interest		143			103			292			709
Net income attributable to Zygo Corporation	$	4,054		$	838		$	6,209		$	2,617
Earnings per share attributable to Zygo Corporation
Basic earnings per share	$	0.22		$	0.05		$	0.33		$	0.14
Diluted earnings per share	$	0.21		$	0.04		$	0.32		$	0.14
Weighted average shares outstanding
Basic shares		18,802			18,455			18,708			18,398
Diluted shares		19,333			19,070			19,292			19,060

See accompanying notes to condensed consolidated financial statements.

3

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED) (Amounts in thousands)

	Three Months Ended December 31,						Six Months Ended December 31,
	2013			2012			2013			2012
Net income attributable to Zygo Corporation	$	4,054		$	838		$	6,209		$	2,617
Other comprehensive income (loss), net of tax
Foreign currency translation adjustment		(61	)		(43	)		564			365
Changes in unrealized cashflow hedge
Unrealized cash flow hedging gain (loss) arising during the period		701			—			482			—
Less: Gain reclassified into revenue		305			—			239			—
Unrealized cash flow hedging gain (loss) at the end of the period		396			—			243			—
Tax benefit (expense)		(147	)		—			(84	)		—
Changes in unrealized cash flow hedge		249			—			159			—
											—
Other comprehensive income, net of tax benefit		188			(43	)		723			365
Comprehensive income		4,242			795			6,932			2,982
Less: comprehensive income (loss) attributable to noncontrolling interest		(9	)		38			13			104
Comprehensive income attributable to Zygo Corporation	$	4,251		$	757		$	6,919		$	2,878

See accompanying notes to condensed consolidated financial statements.

4

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(Amounts in thousands, except share and per share amounts)

	December 31, 2013			June 30, 2013
Assets
Current assets:
Cash and cash equivalents	$	90,441		$	83,056
Receivables, net of allowance for doubtful accounts of $300 and $272, respectively		31,483			32,360
Inventories		31,272			30,185
Prepaid expenses, prepaid taxes and other current assets		5,429			5,429
Revenue recognized in excess of billings on uncompleted contracts		5,123			5,342
Deferred income taxes		10,384			8,631
Total current assets		174,132			165,003
Marketable securities		644			662
Property, plant and equipment, net		37,191			34,343
Deferred income taxes		9,026			10,490
Intangible assets, net		4,339			4,615
Total assets	$	225,332		$	215,113
Liabilities and Equity
Current liabilities:
Accounts payable	$	7,951		$	7,170
Progress payments and deferred revenue		5,412			4,538
Billings in excess of costs and estimated earnings on uncompleted contracts		2,855			6,481
Accrued salaries and wages		6,834			3,746
Other accrued expenses		3,478			4,558
Deferred income taxes		122			123
Income taxes payable		150			19
Total current liabilities		26,802			26,635
Deferred income taxes		1,568			704
Other long-term liabilities		4,807			3,769
Total liabilities		33,177			31,108
Commitments and contingencies
Equity:
Common stock, $0.10 par value per share: 40,000,000 shares authorized; 21,306,223 shares issued (20,858,158 at June 30, 2013); 18,870,502 shares outstanding (18,532,623 at June 30, 2013)		2,131			2,086
Additional paid-in capital		184,782			181,694
Retained earnings		33,064			26,855
Accumulated other comprehensive income (loss):
Currency translation effects		(90	)		(641	)
Unrealized gain (loss) on hedge		143			(16	)
Treasury stock, at cost, 2,435,721 shares (2,325,535 at June 30, 2013)		(29,765	)		(28,016	)
Total shareholders’ equity - Zygo Corporation		190,265			181,962
Noncontrolling interest		1,890			2,043
Total equity		192,155			184,005
Total liabilities and equity	$	225,332		$	215,113

See accompanying notes to condensed consolidated financial statements.

5

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(Amounts in thousands)

	Six Months Ended December 31,
	2013			2012
Cash provided by operating activities:
Net income including noncontrolling interests	$	6,501		$	3,326
Adjustments to reconcile net income to cash provided by operating activities from continuing operations:
Depreciation and amortization		2,928			2,783
Deferred income taxes		1,586			(939	)
Provision for doubtful accounts		32			(110	)
Compensation cost related to share-based payment arrangements		2,821			2,756
Other		(36	)		132
Changes in operating accounts:
Receivables		525			2,890
Inventories		(1,047	)		(1,906	)
Prepaid expenses, prepaid taxes and other current assets		589			(3,012	)
Net billings in excess of revenue recognized on uncompleted contracts		(3,405	)		(2,994	)
Accounts payable, accrued expenses and taxes payable		3,733			(1,391	)
Net cash provided by operating activities from continuing operations		14,227			1,535
Cash used for investing activities:
Additions to property, plant and equipment		(5,430	)		(3,510	)
Additions to intangibles		(123	)		(76	)
Investments and acquisitions		—			(3,155	)
Proceeds from the sale and maturity of marketable securities		108			88
Net cash used for investing activities		(5,445	)		(6,653	)
Cash used for financing activities:
Dividend payments to noncontrolling interest		(458	)		(1,742	)
Employee stock purchase		56			15
Repurchase of restricted stock		(1,748	)		(1,078	)
Exercise of employee stock options		255			868
Net cash used for financing activities		(1,895	)		(1,937	)
Effect of exchange rate changes on cash and cash equivalents		498			349
Net increase (decrease) in cash and cash equivalents		7,385			(6,706	)
Cash and cash equivalents, beginning of period		83,056			84,053
Cash and cash equivalents, end of period	$	90,441		$	77,347

Supplemental Cash Flow Information

Net cash paid for income taxes was $978 and $4,140 for the six months ended December 31, 2013 and 2012, respectively. Purchases of property, plant and equipment included in accounts payable was $85 and $132 for the six months ended December 31, 2013 and 2012, respectively.

See accompanying notes to condensed consolidated financial statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Amounts in thousands, except share and per share amounts)

Note 1: Accounting Policies

Basis of Presentation and Principles of Consolidation
Zygo Corporation is a worldwide supplier of optical metrology instruments, precision optics, and electro-optical design and manufacturing services, serving customers in the semiconductor capital equipment, research, defense, life sciences and industrial markets. The accompanying condensed consolidated financial statements include the accounts of Zygo Corporation and its subsidiaries (“Zygo,” “we,” “us,” “our” or “the Company”). The Company follows accounting principles generally accepted in the United States of America (“US GAAP”). Zygo’s reporting currency is the U.S. dollar. The functional currencies of our foreign subsidiaries are their local currencies; and amounts included in the condensed consolidated statements of operations are translated at the weighted-average exchange rates for the period. Assets and liabilities are translated at period-end exchange rates, and resulting foreign exchange translation adjustments are recorded in the condensed consolidated balance sheets as a component of accumulated other comprehensive income. All transactions and accounts with the subsidiaries are eliminated from the condensed consolidated financial statements. The results of operations for the three and six month periods ended December 31, 2013 are not necessarily indicative of the results to be expected for the full fiscal year.

In management’s opinion, the accompanying condensed consolidated balance sheets and condensed consolidated interim statements of income, comprehensive income, and cash flows include all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of the results of the interim periods. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended June 30, 2013, including items incorporated therein by reference.

Adoption of new Accounting Pronouncements
In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-10, Derivatives and Hedging: Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes (a consensus of the FASB Emerging Issues Task Force). FASB Accounting Standards Codification (“ASC”) 815 provides guidance on the risks that are permitted to be hedged in a fair value or cash flow hedge. Among those risks for financial assets and financial liabilities is the risk of changes in a hedged item’s fair value or a hedged transaction’s cash flows attributable to changes in the designated benchmark interest rate (referred to as interest rate risk). In the United States, currently only the interest rates on direct Treasury obligations of the U.S. government (“UST”) and, for practical reasons, the London Interbank Offered Rate (“LIBOR”) swap rate are considered benchmark interest rates. The ASU permits the Overnight Index Swap Rate (“OIS”) to be used as a U.S. benchmark interest rate for hedge accounting purposes under FASB ASC 815, in addition to UST and LIBOR. The amendments also remove the restriction on using different benchmark rates for similar hedges. The amendments are effective prospectively for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013. The adoption of this guidance in the first quarter of fiscal 2014 did not have a material impact on our condensed consolidated financial statements and is not expected to have a material impact on future financial statements.

Recent Accounting Guidance Not Yet Adopted
In July 2013, FASB issued ASU No. 2013-11, Income Taxes: Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force). FASB ASC 740, Income Taxes, does not include explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. There is diversity in practice in the presentation of unrecognized tax benefits in those instances. Some entities present unrecognized tax benefits as a liability unless the unrecognized tax benefit is directly associated with a tax position taken in a tax year that results in, or that resulted in, the recognition of a net operating loss or tax credit carryforward for that year, and the net operating loss or tax credit carryforward has not been utilized. Other entities present unrecognized tax benefits as a reduction of a deferred tax asset for a net operating loss or tax credit carryforward in certain circumstances. The objective of ASU 2013-11 is to eliminate that diversity in practice.

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Under ASU 2013-11, an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position, or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption is permitted. The effective date for Zygo is the first quarter of fiscal year 2015, unless earlier adopted. We are currently evaluating this guidance but do not expect its adoption to have a material effect on our condensed consolidated financial statements.

Reclassifications
Certain amounts included in the condensed consolidated balance sheets for the prior year have been reclassified to conform with the current year presentation of “Deferred income taxes” long term liability. In fiscal 2013, “Deferred income taxes” current liability of $123 was reported as a component of other accrued expenses in the condensed consolidated balance sheet. In fiscal 2014, deferred income taxes is presented separately for December 31, 2013 and June 30, 2013.

Note 2: Weighted Average Shares Outstanding

For the three and six months ended December 31, 2013, outstanding stock options and restricted stock awards for 391,894 shares and 382,325 shares, respectively, (for the three and six months ended December 31, 2012, outstanding stock options and restricted stock awards for 332,023 shares and 214,383 shares, respectively) of the Company’s common stock were excluded from the calculation of diluted earnings per share because they were antidilutive.

The following table sets forth the reconciliation of basic weighted average shares outstanding and diluted weighted average shares outstanding for the periods presented:

	Three Months Ended December 31,				Six Months Ended December 31,
	2013		2012		2013		2012
Basic weighted average shares outstanding		18,801,670		18,455,136		18,708,159		18,398,228
Dilutive effect of stock options and restricted shares		530,833		614,540		583,420		661,594
Diluted weighted average shares outstanding		19,332,503		19,069,676		19,291,579		19,059,822

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Note 3: Shareholders’ Equity

The following table sets forth shareholders’ equity and noncontrolling interest for the six months ended December 31, 2013 and 2012:

	Six Months Ended December 31,
	2013									2012
	Shareholders’ Equity Zygo Corp.			Non- Controlling Interest			Total Equity			Shareholders’ Equity Zygo Corp.			Non- Controlling Interest			Total Equity
Equity, beginning of period	$	181,962		$	2,043		$	184,005		$	173,482		$	2,355		$	175,837
Net income		6,209			292			6,501			2,617			709			3,326
Unrealized gain on hedge		159			—			159			—			—			—
Foreign currency translation effect		551			13			564			261			104			365
Total		6,919			305			7,224			2,878			813			3,691
Share-based compensation		2,821			—			2,821			3,988			—			3,988
Repurchase of restricted stock		(1,748	)		—			(1,748	)		(1,078	)		—			(1,078	)
Employee stock purchase		56			—			56			15			—			15
Exercise of employee stock options and related tax effect		255			—			255			868			—			868
Dividends attributable to noncontrolling interest		—			(458	)		(458	)		—			(1,101	)		(1,101	)
Purchase of subsidiary shares from noncontrolling interest		—			—			—			(2,777	)		(378	)		(3,155	)
Equity, end of period	$	190,265		$	1,890		$	192,155		$	177,376		$	1,689		$	179,065

Note 4: Marketable Securities

Marketable securities as of December 31, 2013 consisted of a mutual fund investment comprised primarily of corporate securities classified as a trading security corresponding to elections made in our deferred compensation program. Dividend and interest income are recognized when earned. Straight-line amortization related to discounts and premiums on the purchase of marketable securities is recorded in interest income. Realized gains and losses are included in net income and are derived using the specific identification method for determining the cost of securities sold.

We make quarterly distributions in accordance with the deferred compensation program agreement. The following table sets forth the beginning balance at July 1, 2013 and 2012, of gross unrealized gains and losses, contributions, redemptions and fair value of trading securities at December 31, 2013 and 2012:

	Balance Beginning of Fiscal Year		Gross Unrealized Gains		Gross Unrealized Losses		Contributions		Redemptions			Ending Balance
December 31, 2013 Mutual Fund	$	662	$	90	$	—	$	—	$	(108	)	$	644
December 31, 2012 Mutual Fund	$	729	$	42	$	—	$	—	$	(88	)	$	683

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Note 5. Fair Value Measurements

Fair value measurement disclosures utilize a valuation hierarchy for determining the grouping of the inputs used. 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 financial instrument. Level 3 inputs are unobservable inputs based on management’s assumptions used to measure assets and liabilities at fair value. A financial asset or liability classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The Company uses quoted market prices to determine the fair value of its assets and liabilities included in Level 1. When quoted market prices are unobservable, the Company uses quotes from independent pricing vendors based on recent trading activity and other relevant information for similar products. The carrying value of other financial instruments, including cash, accounts receivable, accounts payable and accrued liabilities, approximates fair value due to their short maturities.

The following tables provide the assets and liabilities carried at fair value measured on a recurring basis as of December 31, 2013 and June 30, 2013:

			Fair value measurements at December 31, 2013
	Total carrying value at December 31,		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
	2013		(Level 1)		(Level 2)		(Level 3)
Money market funds	$	23,739	$	23,739	$	—	$	—
Trading securities		644		644		—		—
Foreign currency hedge	$	678		—		678		—
Total	$	25,061	$	24,383	$	678	$	—

				Fair value measurements at June 30, 2013
	Total carrying value at			Quoted prices in active markets		Significant other observable inputs			Significant unobservable inputs
	June 30, 2013			(Level 1)		(Level 2)			(Level 3)
Money market funds	$	23,736		$	23,736	$	—		$	—
Trading securities		662			662		—			—
Foreign currency hedge		(7	)		—		(7	)		—
Total	$	24,391		$	24,398	$	(7	)	$	—

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Note 6: Share-Based Payments

We recorded share-based compensation expense for the three months ended December 31, 2013 and 2012 of $1,565 and $1,526, respectively, with related tax benefits of $569 and $549, respectively. For the six months ended December 31, 2013 and 2012, we recorded share-based compensation expense of $2,821 and $2,756, respectively, with related tax benefits of $1,025 and $992, respectively.

Stock Options

We use the Black-Scholes option-pricing model to calculate the fair value of stock option awards. The key assumptions for this valuation method include the expected term of the option, stock price volatility, risk-free interest rate, dividend yield and exercise price. Many of these assumptions are judgmental and highly sensitive in the determination of compensation expense.

There were no stock option grants for the three months ended December 31, 2013 and 2012. Under the assumptions indicated below, the weighted-average fair value of stock option grants for the six months ended December 31, 2013 and 2012 was $8.53 and $11.49, respectively. During the six months ended December 31, 2013 and 2012, we granted stock options aggregating 166,938 and 122,934 shares of common stock, respectively.

The table below indicates the key assumptions used in the option valuation calculations for options granted in the periods presented:

	Six Months Ended December 31,
	2013			2012
Term		8.5 Years			7.3 Years
Volatility		57.0	%		59.2	%
Dividend yield		—			—
Risk-free interest rate		2.4	%		1.2	%

Restricted Stock

Our share-based compensation expense also includes the effects of the issuance of restricted stock units. The compensation expense related to restricted stock awards is determined based on the market price of our stock at the date of grant applied to the total number of shares anticipated to fully vest, which is then amortized over the expected term. During the three months ended December 31, 2013 and 2012, an aggregate of 30,000 restricted stock units in each period were issued at a weighted average stock price at date of grant of $14.90 and $14.52, respectively. During the six months ended December 31, 2013 and 2012, an aggregate of 213,195 and 162,901 shares, respectively, of restricted stock units were issued at a weighted average stock price at date of grant of $14.43 and $18.49, respectively. Generally, the restrictions on the restricted stock units granted to employees prior to January 1, 2011 lapse at a rate of 50% on the three-year anniversary and the remaining 50% on the fourth year anniversary. Restrictions on restricted stock units granted to employees after January 1, 2011 lapse at a rate of 25% each year.

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Note 7: Receivables

The following table sets forth the components of accounts receivable at December 31, 2013 and June 30, 2013:

	December 31, 2013			June 30, 2013
Trade and other	$	31,783		$	32,632
Allowance for doubtful accounts		(300	)		(272	)
	$	31,483		$	32,360

Note 8: Inventories

Inventories are stated at the lower of cost (determined on a first-in, first-out basis) or market. The following table sets forth the components of inventories at December 31, 2013 and June 30, 2013:

	December 31, 2013		June 30, 2013
Raw materials and manufactured parts	$	16,032	$	14,411
Work in process		11,813		11,300
Finished goods		3,427		4,474
	$	31,272	$	30,185

Note 9: Property, Plant and Equipment

Property, plant and equipment are stated at cost less depreciation and impairments. Maintenance and repairs are charged to expense as incurred. Management evaluates, on an ongoing basis, the carrying value of property, plant and equipment and makes adjustments when impairments are identified. Depreciation is based on the estimated useful lives of the various classes of assets and is computed using the straight-line method. The following table sets forth the components of property, plant and equipment at December 31, 2013 and June 30, 2013:

	December 31, 2013			June 30, 2013			Estimated Useful Life (Years)
Land and improvements	$	4,030		$	4,030			—
Building and improvements		26,913			24,665			15-40
Machinery, equipment and office furniture		62,587			60,905			3-8
Leasehold improvements		721			1,009			1-5
Construction in progress		2,234			1,525			—
		96,485			92,134
Accumulated depreciation		(59,294	)		(57,791	)
	$	37,191		$	34,343

Depreciation expense was $1,295 and $1,169 for the three months ended December 31, 2013 and 2012, respectively and $2,530 and $2,344 for the six months ended December 31, 2013 and 2012.

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Note 10: Warranty

A limited warranty is provided on our products for periods ranging from 3 to 12 months, and allowances for estimated warranty costs are recorded during the period of sale. The determination of such allowances requires management to make estimates of product return rates and expected costs to repair or replace products under warranty. If actual return rates or repair and replacement costs, or both, differ significantly from management estimates, adjustments to the expense will be required.

The following table is a reconciliation of the beginning and ending balances of the accrued warranty liability, which is included in “Other accrued expenses” in the condensed consolidated balance sheets:

	Six Months Ended December 31,
	2013			2012
Beginning balance	$	647		$	1,188
Reductions for payments made		(258	)		(467	)
Changes in accruals related to pre-existing warranties		(263	)		53
Changes in accruals related to warranties made in the current period		677			287
Ending balance	$	803		$	1,061

Note 11: Intangible Assets

Intangible assets includes patents, customer relationships and technology. The cost of patents and customer relationships and technology is amortized on a straight-line basis over estimated useful lives ranging from 3-17 years.

The following table sets forth the components of intangible assets, as of December 31, 2013 and June 30, 2013:

	December 31, 2013			June 30, 2013
Patents	$	7,310		$	7,198
Customer relationships and technology		2,051			2,051
		9,361			9,249
Accumulated amortization		(5,022	)		(4,634	)
Total	$	4,339		$	4,615

Amortization expense related to intangibles was $199 and $214 for the three months ended December 31, 2013 and 2012, respectively, and $398 and $439 for the six months ended December 31, 2013 and 2012, respectively. This amortization expense related to intangible assets is included in “Cost of goods sold” and “Selling, general and administrative expenses” in the condensed consolidated statements of operations.

Based on the carrying amount of the intangible assets as of December 31, 2013, the estimated future amortization expense is as follows:

	Estimated Future Amortization Expense
Six months ending June 30, 2014	$	440
Fiscal year ending June 30, 2015		827
Fiscal year ending June 30, 2016		651
Fiscal year ending June 30, 2017		512
Fiscal year ending June 30, 2018		390
Fiscal year ending June 30, 2019		377
Thereafter		1,142
Total	$	4,339

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Note 12: Segment and Major Customer Information

Our business is organized into two operating divisions and reporting segments – Metrology Solutions and Optical Systems. The Metrology Solutions segment includes 3-Dimensional surface metrology products, precision positioning systems and custom-engineered solutions used in the semiconductor capital equipment, research, defense and industrial markets. The Optical Systems segment designs, develops and manufactures high precision optical components and electro-optical systems used in the semiconductor capital equipment, defense, life sciences and research markets. The chief operating decision-maker uses this information to allocate resources.

The following table sets forth segment net revenue, gross profit and gross margin for the three and six months ended December 31, 2013 and 2012:

	Three Months Ended December 31,						Six Months Ended December 31,
	2013			2012			2013			2012
Metrology Solutions
Net revenue	$	33,875		$	21,416		$	60,319		$	47,294
Gross profit	$	20,552		$	11,595		$	35,169		$	25,928
Gross margin		61	%		54	%		58	%		55	%
Optical Systems
Net revenue	$	14,286		$	13,219		$	27,960		$	27,547
Gross profit	$	4,244		$	3,688		$	7,964		$	6,848
Gross margin		30	%		28	%		28	%		25	%
Total
Net revenue	$	48,161		$	34,635		$	88,279		$	74,841
Gross profit	$	24,796		$	15,283		$	43,133		$	32,776
Gross margin		51	%		44	%		49	%		44	%

Separate financial information by segment for total assets, capital expenditures and depreciation and amortization is not evaluated by our chief operating decision-maker. Substantially all of our operating expenses, assets and depreciation and amortization are U.S.-based.

The following table sets forth revenue by geographic area:

	Three Months Ended December 31,				Six Months Ended December 31,
	2013		2012		2013		2012
Americas	$	20,850	$	19,755	$	39,944	$	38,618
Japan		16,710		5,336		25,511		11,667
China		4,104		3,498		7,852		11,036
Europe		3,790		4,397		9,061		9,219
Pacific Rim		2,707		1,649		5,911		4,301
Total	$	48,161	$	34,635	$	88,279	$	74,841

Revenue from one customer in the Metrology Solutions Segment accounted for 24% and 19% of net revenue for the three and six months ended December 31, 2013, respectively. These revenues related primarily to the shipments of the precision positioning systems. The fulfillment of these large orders is expected to be completed by our fiscal year end. No customer accounted for over 10% of our revenue for the three months ended December 31, 2012. Revenue from one customer in the Metrology Solutions Segment accounted for 10% of net revenue for the six months ended December 31, 2012.

14

Note 13: Transactions with Shareholder

Revenue from Canon Inc., a shareholder, and Canon Sales Co. Inc., a distributor of certain of our products in Japan and a subsidiary of Canon Inc. (collectively referred to as “Canon”), amounted to $4,750 and $2,855 (9.9% and 8% of net revenue, respectively) for the three months ended December 31, 2013 and 2012, respectively. For the six months ended December 31, 2013 and 2012, revenues from Canon amounted to $8,008 and $5,668 (9% and 8% of net revenue, respectively). Selling prices of products sold to Canon are based, generally, on the terms customarily given to distributors. At December 31, 2013 and June 30, 2013, there were, in the aggregate, $1,569 and $1,771, respectively, of trade accounts receivable from Canon.

Note 14: Derivatives and Hedging Activities

We enter into foreign currency forward contracts to reduce the impact of adverse fluctuations on earnings associated with foreign currency exchange rate changes. We do not enter into any derivative transactions for speculative purposes.

Most derivative contracts are used as hedges but do not qualify and are not designated as hedging instruments under authoritative guidance on accounting for derivative instruments and hedging activities. These non-qualifying derivative contracts are entered into for periods consistent with the currency transaction exposures from the point of shipment to the point of collection, generally three to six months, and are marked-to-market with changes in fair value recorded in the condensed consolidated statements of operations in Miscellaneous income (expense), net. Any gains and losses on the fair value of these derivative contracts would largely offset corresponding foreign currency losses and gains on the underlying transactions.

In the case of derivative contracts used as hedges for significant orders with shipping dates that may extend more than six months in the future, we may designate those derivative contracts as cash flow hedges that qualify as hedging instruments under authoritative guidance on accounting for derivative instruments and hedging activities. These qualifying derivative contracts are entered into for periods consistent with the currency transaction exposures from the order date through shipment and collection. For these cash flow hedges, any gains or losses on the fair value of these contracts would be charged to the account accumulated other comprehensive income (“AOCI”) and subsequently relieved to net revenue upon shipment to the customer. In addition, at the point of shipment to the customer, the cash flow hedge will be de-designated, with any future gains or losses from that point forward charged to Miscellaneous income (expense), net. Those gains and losses would be expected to largely offset corresponding losses and gains on the underlying receivable transactions. In the case where a designated cash flow hedge is accounted for under the spot method, a portion of the adjustment that would otherwise be accounted for in AOCI would be charged to Miscellaneous income (expense), net and would not be offset by any corresponding gains or losses on an underlying transaction up to the point of shipment or revenue recognition.

Derivatives not designated as hedging instruments

As of December 31, 2013, we had seven foreign currency forward contracts outstanding involving our German operations with notional amounts aggregating $1,870. These foreign currency hedges are not designated as hedging instruments. Net unrealized gains (losses) recognized from foreign currency forward contracts for the three months ended December 31, 2013 and 2012 were ($22) and $244, respectively. For the six months ended December 31, 2013 and 2012, net unrealized gains (losses) recognized from foreign currency forward contracts were ($134) and $201, respectively. These gains and losses are substantially offset by foreign exchange losses and gains on intercompany balances recorded by our subsidiaries and were included in Miscellaneous income (expense), net in the condensed consolidated statements of operations.

The following table summarizes the fair value of derivative instruments as of December 31, 2013 and June 30, 2013.

Derivatives not designated as hedging instruments			Balance sheet location
December 31, 2013	Number of foreign exchange contracts:	7	Other accrued expenses	$58
June 30, 2013	Number of foreign exchange contracts:	11	Prepaid expenses, prepaid taxes and other current assets	$147

15

Derivative designated as a hedging instrument.

As of December 31, 2013, we had one foreign currency forward contract outstanding involving our Japanese operations with a notional amount of $13,586 to protect against foreign currency fluctuations for current transactions and longer term orders denominated in Japanese Yen.

This foreign currency hedge is designated as a hedging instrument qualifying as a cash flow hedge utilizing a window forward approach used in situations where multiple shipments occur over a period of time. The cash flow hedge is in effect for the period of April 2013 through June 2014. The cash flow hedge is evaluated quarterly to ensure that hedge accounting treatment still applies.

The window forward approach provides for the use of the spot method to determine the amount to be included in AOCI. This method requires current period expensing of the impact in changes to the forward rates while allowing the changes in the spot rate to be recorded in AOCI. At the time the various shipments occur, AOCI is relieved for a pro-rata amount of the basis which is reclassified to net revenue in the condensed consolidated statements of operations. Concurrently, that portion of the hedge related to current shipments is de-designated as a cash flow hedge for accounting purposes and any future changes in fair value related to that portion of the hedge is included in Miscellaneous income (expense), net in the condensed consolidated statements of operations. These gains and losses from the de-designated portion of the hedge are substantially offset by foreign exchange losses and gains on balances recorded by our subsidiary.

Net unrealized gains (losses) recognized from the ineffective portion of the cash flow hedge for the three and six months ended December 31, 2013 was $16 and $63, respectively, and the de-designated portions of the hedge for the same periods were $562 and $530, respectively, included in Miscellaneous income (expense), net in the condensed consolidated statements of operations. Amounts reclassified from AOCI to revenue based on shipments to customers resulted in increases in net revenue of $305 and $239 for the three and six months ended December 31, 2013, respectively. The remaining amounts in AOCI are forecasted to be reclassified into net revenue over the next six months.

The following table summarizes the foreign exchange cash flow hedge value as of December 31, 2013 and June 30, 2013:

Foreign currency derivative designated as hedging instruments			Balance sheet location
December 31, 2013	Number of foreign exchange contracts:	1	Derivative asset	$736
			Accumulated other comprehensive income	$227
June 30, 2013	Number of foreign exchange contracts:	1	Other accrued expenses	$154
			Accumulated other comprehensive loss	($25	)

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Note 15: Income Taxes

	Three Months Ended December 31,										Six Months Ended December 31,
	2013					2012					2013					2012
	Amount		Tax Rate %			Amount		Tax Rate %			Amount		Tax Rate %			Amount		Tax Rate %
Income tax expense	$	2,135		34	%	$	1,064		53	%	$	3,540		35	%	$	3,106		48	%

Income tax expense for the six months ended December 31, 2013 resulted from an annual effective tax rate of 39%, reduced by recording foreign tax credits upon completion of a full foreign tax credit study. Income tax expense for the six months ended December 31, 2012 did not include federal research and development credits due to expiration of the credit, which was not renewed until the third quarter.

The Company is subject to U.S. federal income tax, as well as income tax in multiple state and foreign jurisdictions. The Company is no longer subject to U.S. federal income tax audit or tax adjustments for years prior to June 30, 2007, except to the extent there are NOLs and credits arising from any of those years. Those years are subject to audit at the time the NOLs or credits available from those years are utilized. The Company is no longer subject to state and foreign income tax audit or tax adjustments for years prior to June 30, 2006.

In the normal course of business, we analyze for uncertain tax positions and adjust unrecognized tax benefits or liabilities accordingly. For the three and six months ended December 31, 2013, we recognized additional liabilities for uncertain tax positions of $148 and $192, respectively. We are not aware of any tax positions that would create a material adjustment to unrecognized tax benefits during the next twelve months.

As previously reported, the Company has been performing a review of its tax accounts, assisted by outside consultants as appropriate. As a result of that review, the Company reported in its earnings press release for the second quarter of fiscal 2014 that, subsequent to the issuance of the financial information for the period ended December 31, 2012, the Company’s management identified certain errors in the Company’s accounting for income taxes. Upon completion of this review, the Company identified two errors in addition to the errors reported in its earnings press release, all of which the Company determined to be immaterial to the financial information:

(1) An overstatement in recorded tax expense related to certain transactions with foreign subsidiaries, partially offset by an understatement in tax expense recorded in a reduction of reserves against uncertain tax positions related to transfer pricing. The Company’s deferred tax assets were understated for tax benefits that had not historically been captured from transactions between Zygo and their foreign subsidiaries, primarily related to its German subsidiary ZygoLot. For the six month period ended December 31, 2012, the correction of the two errors aggregated to a decrease in income tax expense of $0.7 million with a corresponding decrease in deferred tax liabilities. The three month period ended December 31, 2012 was not affected by this adjustment as all of the activity related to the first quarter of fiscal 2013.

(2)

An overstatement of recorded state research and development tax credits, which are available for use to offset future state taxes on capital. Zygo had incorrectly recorded these State credits within its tax accounts for States where Zygo pays tax on capital, not on income. As a result, the previously recorded deferred tax assets related to these credits was reversed. For three and six months ended December 31, 2012, the correction of the error resulted in an increase to income tax expense of $0.2 million and $0.4 million, respectively, with a corresponding decrease to deferred tax assets.

(3)

An error in accounting for the tax basis of fixed assets acquired in the Company’s acquisition of the Richmond, California operations in November 2010. The tax basis of the fixed assets acquired that was used in the calculation of the deferred tax accounts since the acquisition date was overstated and as a result understated the associated deferred tax liability. The calculated tax basis did not include a basis adjustment for a future discount liability recorded as part of the original acquisition. For three and six months ended December 31, 2012, the correction of the error resulted in an increase in income tax expense of $0.5 million and $1.7 million, respectively, with a corresponding decrease in deferred tax assets.

(4) An understatement in the recording of the Company’s net operating loss carryforward related to excess tax benefits on shared based compensation. The unrecognized excess tax benefits in certain years were not recorded in accordance with the same methodology in which the Company had elected on the date of adoption of FAS 123R. The correction of the error resulted in an increase to the deferred tax asset related to the net operating loss carryforward and an increase to additional paid-in capital of $1.4 million as of June 30, 2013.

(5) An error in the recognition of uncertain tax positions against a net operating loss carryforward related to an acquisition. The Company’s uncertain tax positions were understated by $1.1 million and therefore were corrected to reflect the uncertainty on the availability of an acquired net operating loss carryforward. As of June 30, 2013, the correction of the error resulted in an increase in other long-term liabilities of $1.1 million with a corresponding decrease in retained earnings.

17

The Company’s management has evaluated these errors on the previously reported financial information on the basis of quantitative and qualitative considerations and does not believe the errors are material to the previously issued financial information. However, because correction of these amounts in the current period would be significant to the current statement of operations, they have been corrected by immaterial restatement of the previously reported amounts. The table below provides a reconciliation of the restated balances to the amounts previously reported:

(Amounts in thousands, except per share amounts)

Fiscal 2013	Six Months Ended December 31, 2012						Three Months Ended December 31, 2012
Condensed Consolidated Statements of Operations	As Previously Reported			As Restated			As Previously Reported			As Restated
Income tax expense	$	(1,756	)	$	(3,106	)	$	(323	)	$	(1,064	)
Net Income attributable to Zygo Corporation		3,967			2,617			1,579			838
Basic Earnings per Share	$	0.22		$	0.14		$	0.09		$	0.05
Diluted Earnings Per Share	$	0.21		$	0.14		$	0.08		$	0.04

Fiscal 2013	At June 30, 2013
Condensed Consolidated Balance Sheet	As Previously Reported		As Restated
Deferred income taxes - Asset - Current	$	7,261	$	8,631
Total current assets	$	163,633	$	165,003
Deferred income taxes - Asset - Long Term	$	14,967	$	10,490
Total assets	$	218,220	$	215,113
Other long term liabilities	$	4,997	$	3,769
Total liabilities	$	32,336	$	31,108
Additional paid-in capital	$	180,324	$	181,694
Retained earnings	$	30,104	$	26,855
Total shareholders’ equity - Zygo Corporation	$	183,841	$	181,962
Total equity	$	185,884	$	184,005
Total liabilities and equity	$	218,220	$	215,113

Fiscal 2013	Six Months Ended December 31, 2012
Condensed Consolidated Statement of Cash Flows	As Previously Reported			As Restated
Cash provided by operating activites - Net income including noncontrolling interest	$	4,676		$	3,326
Adjustments to reconcile net income to cash - Deferred income taxes	$	(2,105	)	$	(939	)
Adjustments to reconcile net income to cash - Accounts payable, accrued expenses and taxes payable	$	(1,575	)	$	(1,391	)

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Note 16: Commitments and Contingencies

On November 12, 2010, we completed a transaction with ASML US, Inc. (“ASML”) to purchase substantially all the assets of their Richmond, California operations. These assets were acquired for $12,475, of which $7,142 was in cash, and the balance was future consideration, with a then-net-present value of $5,333 using a discount factor of 14%, based on the level of shipments to ASML over the subsequent three years beginning January 1, 2011. On the acquisition date, the future consideration was recorded as a liability, with $1,127 recorded as a current liability and $4,206 recorded as a long-term liability. The future consideration represented a supply agreement that was entered into with ASML that provided for a volume discount on future purchases. The volume discount portion of the agreement expired on December 31, 2013.

From time to time we are subject to certain legal proceedings and claims that arise in the ordinary course of business.

We are aware of certain levels of environmental contamination that are below reportable levels on one of our properties. In addition, we are aware of certain contamination on an adjacent property that we formerly owned. The future effect of environmental matters, including potential liabilities, is often difficult to estimate. At this time, we are unable to determine or reasonably estimate the amount of costs, if any, that we might incur or for which we may potentially be responsible. We will record a reserve for the exposure related to the environmental contamination, when and if, it is both probable that a liability has been incurred and the amount of any liability can be reasonably estimated, whether or not a claim has been asserted.

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

EXPLANATORY NOTE

As disclosed in Note 15: Income Taxes to the Condensed Consolidated Financial Statements (unaudited), we have processed an immaterial restatement of previously reported amounts to correct certain income tax accounting misstatements. All amounts reported in this Management Discussion and Analysis reflect the effects of the restatement.

OVERVIEW

Zygo Corporation is a worldwide supplier of optical metrology instruments, precision optics and electro-optical design and manufacturing services, serving customers in the semiconductor capital equipment, research, defense, life sciences and industrial markets. We conduct the majority of our manufacturing in a 153,500 square foot facility in Middlefield, Connecticut, a 55,300 square foot facility in Richmond, California, and a 110,020 square foot facility in Tucson, Arizona.

Bookings for the second quarter of fiscal 2014 of $38.4 million decreased 10% when compared with bookings of $42.8 million in the second quarter of fiscal 2013 and increased slightly compared with bookings of $37.0 million in the first quarter of fiscal 2014. Bookings for the Metrology Solutions segment were 64% of the total; Optical Systems segment bookings were 36%. Backlog was $76.9 million at December 31, 2013, compared with $73.2 million at December 31, 2012, and $86.7 million at September 30, 2013. Effective with this quarter’s report, the Company will report the value of all orders received in bookings and backlog and will separately report the value of orders with delivery dates beyond twelve months. The Company believes this policy more accurately reflects the business activity. The value of orders included in backlog with delivery dates beyond twelve months from December 31, 2013 is $0.9 million. The value of orders excluded from reported backlog at September 30, 2013 and December 31, 2012 with delivery dates beyond 12 months was $1.2 million and $2.0 million, respectively. If those orders had been included in backlog on the respective dates, the reported backlog at September 30, 2013 and December 31, 2012 would have been $87.9 million and $75.2 million, respectively.

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Critical Accounting Policies, Significant Judgments and Estimates

The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, and expenses, and related disclosures at the date of our condensed consolidated financial statements. On an ongoing basis, management evaluates its estimates and judgments, including those related to bad debts, inventories, marketable securities, warranty obligations, income taxes, long-lived assets, share-based payments and accruals for health insurance. Management bases its estimates and judgments on historical experience and current market conditions and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. As discussed in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2013, management considers the Company’s policies on revenue recognition and allowance for doubtful accounts; inventory valuation; other-than-temporary impairment of marketable securities; share-based compensation; warranty costs; accounting for income taxes; valuation of long-lived assets; and accruals for health insurance to be critical accounting policies due to the estimates, assumptions and application of judgment involved in each.

Adoption of new Accounting Pronouncements

In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-10, Derivatives and Hedging: Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes (a consensus of the FASB Emerging Issues Task Force). FASB Accounting Standards Codification (“ASC”) 815 provides guidance on the risks that are permitted to be hedged in a fair value or cash flow hedge. Among those risks for financial assets and financial liabilities is the risk of changes in a hedged item’s fair value or a hedged transaction’s cash flows attributable to changes in the designated benchmark interest rate (referred to as interest rate risk). In the United States, currently only the interest rates on direct Treasury obligations of the U.S. government (“UST”) and, for practical reasons, the London Interbank Offered Rate (“LIBOR”) swap rate are considered benchmark interest rates. The ASU permits the Overnight Index Swap Rate (“OIS”) to be used as a U.S. benchmark interest rate for hedge accounting purposes under FASB ASC 815, in addition to UST and LIBOR. The amendments also remove the restriction on using different benchmark rates for similar hedges. The amendments are effective prospectively for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013. The adoption of this guidance in the first quarter of fiscal 2014 did not have a material impact on our condensed consolidated financial statements and is not expected to have a material impact on future financial statements.

Recent Accounting Guidance Not Yet Adopted

In July 2013, FASB issued ASU No. 2013-11, Income Taxes: Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force). FASB ASC 740, Income Taxes, does not include explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. There is diversity in practice in the presentation of unrecognized tax benefits in those instances. Some entities present unrecognized tax benefits as a liability unless the unrecognized tax benefit is directly associated with a tax position taken in a tax year that results in, or that resulted in, the recognition of a net operating loss or tax credit carryforward for that year, and the net operating loss or tax credit carryforward has not been utilized. Other entities present unrecognized tax benefits as a reduction of a deferred tax asset for a net operating loss or tax credit carryforward in certain circumstances. The objective of ASU 2013-11 is to eliminate that diversity in practice.

Under ASU 2013-11, an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position, or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption is permitted. The effective date for Zygo is the first quarter of fiscal year 2015 unless earlier adopted.

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Results of Operations

Net Revenue by Segment
	Fiscal 2014					Fiscal 2013
(Amounts in millions)	Amount		Percentage of Total			Amount		Percentage of Total
Quarter ended December 31
Metrology Solutions	$	33.9		70	%	$	21.4		62	%
Optical Systems		14.3		30	%		13.2		38	%
Total	$	48.2		100	%	$	34.6		100	%
Six Months ended December 31
Metrology Solutions	$	60.3		68	%	$	47.3		63	%
Optical Systems		28.0		32	%		27.5		37	%
Total	$	88.3		100	%	$	74.8		100	%

Net revenue for the three months ended December 31, 2013 increased $13.6 million compared with the prior year period, reflecting increases in the Metrology Solutions Segment of 58% and the Optical Systems Segment of 8%. The increase in the Metrology Solutions Segment was primarily due to an increase in shipments of a significant portion of the large orders of precision positioning systems. Optical Systems segment revenue increased primarily due to increases in optical components and medical device shipments, partially offset by a decrease in semiconductor-related shipments.

Net revenue for the six months ended December 31, 2013 increased $13.5 million compared with the prior year period, reflecting increases in the Metrology Solutions Segment of 28% and the Optical Systems Segment of 2%. The increase in the Metrology Solutions Segment was primarily due to an increase in shipments of a significant portion of the large orders of precision positioning systems. The increase in Optical Systems Segment revenue was primarily due to optical components and medical device shipments, partially offset by a decrease in semiconductor-related shipments.

Revenue from one customer in the Metrology Solutions Segment accounted for 24% and 19% of net revenue for the three and six months ended December 31, 2013, respectively. These revenues related primarily to the shipments of the precision positioning systems. Fulfillment of the large precision positioning systems orders is expected to be completed within fiscal 2014. No customer accounted for over 10% of our revenue for the three months ended December 31, 2012. Revenue from one customer in the Metrology Solutions Segment accounted for 10% of net revenue for the six months ended December 31, 2012.

The percentage of revenue denominated in U.S. dollars for the three months ended December 31, 2013 and 2012 was 64% and 76%, respectively, and 66% and 78% for the six months ended December 31, 2013 and 2012, respectively. The decrease in the percentage of revenue in U.S. dollars was primarily due to the increase in international sales related to the fulfillment of the large precision positioning systems orders. The balance of revenue was denominated in Euro, Yen and Yuan. Revenue denominated in foreign currency is exposed to foreign exchange fluctuations from the time customers are invoiced in foreign currency until collection occurs. Significant changes in the values of foreign currencies relative to the value of the U.S. dollar, or in the general economic conditions in our export markets, could materially impact the revenue from these markets and our consolidated financial position and results of operations.

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Gross Margin by Segment

	Fiscal 2014					Fiscal 2013
(Amounts in millions)	Gross Profit		Gross Margin			Gross Profit		Gross Margin
Quarter ended December 31
Metrology Solutions	$	20.6		61	%	$	11.6		54	%
Optical Systems		4.2		30	%		3.7		28	%
Total	$	24.8		51	%	$	15.3		44	%
Six months ended December 31
Metrology Solutions	$	35.1		58	%	$	25.9		55	%
Optical Systems		8.0		29	%		6.9		25	%
Total	$	43.1		49	%	$	32.8		44	%

Gross margin for the three months ended December 31, 2013 was 51%, an increase of seven percentage points from the comparable prior year period. Gross margin in the Metrology Solutions segment for the three months ended December 31, 2013 increased seven percentage points, due to the increase in volume and product mix towards higher margin products primarily related to shipments of a significant portion of the large orders of precision positioning systems. The gross margin of the Optical Systems segment for the three months ended December 31, 2013 increased by two percentage points compared with the prior year period due to product mix and stronger margins achieved on certain custom orders.

Selling, General and Administrative Expenses (“SG&A”)

	Fiscal 2014					Fiscal 2013
(Amounts in millions)	Amount		Percentage of Net Revenue			Amount		Percentage of Net Revenue
Quarter ended December 31	$	13.1		27	%	$	8.6		25	%
Six months ended December 31	$	23.0		26	%	$	17.1		23	%

SG&A increased in the three months ended December 31, 2013 by $4.5 million from the comparable prior year period, primarily due to costs of $2.1 million associated with separation of our former CEO and increased employee incentive compensation costs. For the six months ended December 31, 2013, SG&A increased by $5.9 million from the comparable prior year period, primarily due to costs associated with the former CEO separation, increased employee compensation-related costs, costs associated with a terminated acquisition effort and increased group insurance costs.

Research, Development and Engineering Expenses (“RD&E”)

	Fiscal 2014					Fiscal 2013
(Amounts in millions)	Amount		Percentage of Net Revenue			Amount		Percentage of Net Revenue
Quarter ended December 31,	$	5.2		11	%	$	4.5		13	%
Six months ended December 31	$	10.2		12	%	$	9.1		12	%

RD&E for the three and six months ended December 31, 2013 increased by $0.7 million and $1.1 million, respectively, compared with the prior year periods primarily due to increased spending in semiconductor-related projects and development costs associated with the Instruments product line, including the Nexview product introduced during the first quarter of fiscal 2014.

23

Other Income (Expense)

	Fiscal 2014						Fiscal 2013
(Amounts in millions)	Amount			Percentage of Net Revenue			Amount			Percentage of Net Revenue
Quarter ended December 31	$	(0.2	)		0	%	$	(0.2	)		1	%
Six months ended December 31	$	0.1			0	%	$	(0.2	)		0	%

Other income (expense) for the three months ended December 31, 2013 consisted primarily of lower purchase discount liability adjustments related to our supply contract from a previous acquisition, offset by a foreign refund. Other income (expense) for the six months ended December 31, 2013 consisted primarily of an adjustment to reduce the purchase discount liability related to the supply contract from a previous acquisition.

Income Tax Expense

	Fiscal 2014					Fiscal 2013
(Amounts in millions)	Amount		Tax Rate %			Amount		Tax Rate %
Quarter ended December 31	$	2.1		34	%	$	1.1		53	%
Six months ended December 31	$	3.5		35	%	$	3.1		48	%

Income tax expense for the six months ended December 31, 2013 resulted from an annual effective tax rate of 39%, marginally reduced by the recording of foreign tax credits upon the completion of a full foreign tax credit study. Income tax expense for the six months ended December 31, 2012 did not include federal research and development credits due to the expiration of the credit, which was not renewed until the third quarter of fiscal 2013.

24

TRANSACTIONS WITH SHAREHOLDER

Revenue from Canon Inc., a shareholder, and Canon Sales Co., Inc., a distributor of certain of our products in Japan and a subsidiary of Canon Inc. (collectively referred to as “Canon”), amounted to $4.8 million and $2.9 million (9.9% and 8% of net revenue, respectively) for the three months ended December 31, 2013 and 2012, respectively. For the six months ended December 31, 2013 and 2012, revenues from Canon amounted to $8.0 million and $5.7 million (9% and 8% of net revenue, respectively). Selling prices of products sold to Canon are based, generally, on the terms customarily given to distributors. At December 31, 2013 and June 30, 2013, there were $1.6 million and $1.8 million, respectively, of trade accounts receivable from Canon.

LIQUIDITY AND CAPITAL RESOURCES

We assess our liquidity in terms of our ability to generate cash to fund operating, investing and financing activities. Our principal source of liquidity is cash reserves and operating cash flows. In addition to operating cash flows, other significant factors that could affect our overall management of liquidity include: capital expenditures, customer credit requirements, investments in businesses and the availability of bank lines of credit.

At December 31, 2013, cash and cash equivalents were $90.4 million, an increase of $7.3 million from $83.1 million at June 30, 2013. As of December 31, 2013, there are less than $0.1 million in standby letters of credit outstanding. The letters of credit are used primarily overseas to cover certain warranty periods or to cover future product shipments, and will expire by January 30, 2014. Cash in a money market account is invested primarily in U.S. government securities. We do not believe there is any risk to liquidity in the money market account, nor are there currently any limits on redemptions.

Cash provided by operating activities for the six months ended December 31, 2013 of $14.2 million was primarily due to net earnings and non-cash adjustments of $13.8 million (primarily due to net earnings including noncontrolling interests of $6.3 million, depreciation and amortization of $2.9 million, and compensation cost related to share-based payment agreements of $2.8 million) and decreased accounts payable, accrued expenses and taxes payable of $3.7 million, partially offset by a decrease in revenue recognized in excess of billings on uncompleted contracts of $3.4 million. Cash provided by operating activities for the six months ended December 31, 2012 of $1.5 million was primarily due to net earnings and non-cash adjustments of $7.9 million and reductions to receivables of $2.9 million, partially offset by decreases in prepaid expenses and other current assets of $3.0 million, revenue recognized in excess of billings on uncompleted contracts of $3.0 million, accounts payable, accrued expenses and taxes payable of $1.4 million and increases in inventories of $1.9 million.

Cash used for investing activities for the six months ended December 31, 2013 of $5.4 million was used to purchase property, plant and equipment, of which $1.9 million was for building improvements and $1.7 million was for optics machines. Cash used for investing activities for the six months ended December 31, 2012 of $6.7 million was used to purchase the noncontrolling interest of ZygoLOT for €2.5 million, or $3.2 million, and to purchase property, plant and equipment of $3.5 million.

Cash used for financing activities for the six months ended December 31, 2013 was $1.9 million, primarily related to the repurchase of restricted stock of $1.7 million to satisfy employee tax obligations. Cash used for financing activities for the six months ended December 31, 2012 was $1.9 million, primarily related to dividend payments to noncontrolling interests of $1.7 million.

Currently, the Company has no outstanding bank debt and does not pay a dividend. In the future, if the need for debt or credit lines arises, there is no assurance that we would be able to secure such financing. We believe we have sufficient cash flows from operations and cash reserves to maintain adequate amounts of liquidity and to meet our future liquidity requirements for at least the next twelve months.

25

OFF-BALANCE SHEET ARRANGEMENTS

We have not created, and are not party to, any special-purpose or off-balance sheet entities for the purpose of raising capital, incurring debt, or operating parts of our business that are not consolidated into our financial statements. We have not guaranteed any obligations of a third party.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes in our quantitative and qualitative market risk disclosures during the three months ended December 31, 2013. Please refer to Item 7a., “Quantitative and Qualitative Disclosures about Market Risk,” of our Annual Report on Form 10-K for the year ended June 30, 2013, filed with the Securities and Exchange Commission (the “2013 Annual Report”) for a discussion of our exposure to market risk.

Item 4. Controls and Procedures

The effectiveness of our or any system of disclosure controls and procedures is subject to certain limitations, including the exercise of judgment in designing, implementing, and evaluating the controls and procedures, the assumptions used in identifying the likelihood of future events, and the inability to eliminate misconduct completely. In designing, implementing, and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well-designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

We initially identified a material weakness as of June 30, 2012 related to inadequate design of processes, procedures and controls regarding our accounting for income taxes and, subsequently, concluded that our internal control over financial reporting was not effective at each of June 30, 2012 and 2013. During the periods since June 30, 2012, we have implemented, and are continuing to implement, additional controls in our financial reporting process, including adding control processes to aid in preparing the amounts related to income taxes, particularly certain tax assets and liabilities and the current and deferred income tax expense to ensure those amounts are recorded in accordance with accounting principles generally accepted in the United States of America, and have engaged external resources to assist in the review of our accounting for income taxes. While significant actions have been taken during fiscal 2013 and fiscal 2014 to remediate the material weakness, we are continuing the remediation process of designing and implementing effective internal controls around the accounting for income taxes. We anticipate that the Company’s actions described above and resulting improvements in controls will strengthen Zygo’s internal control over financial reporting and, over time, address the related material weakness.

Our management, with the participation of our Chief Executive Officer and Principal Financial Officer, carried out an evaluation, as of the end of the period covered by this report (the quarter ended December 31, 2013), of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), including controls and procedures being implemented to address the material weakness described above. Based upon their evaluation and the lack of a sufficient period of time for the additional controls and processes to operate, the Chief Executive Officer and Principal Financial Officer concluded that, as of the end of such period, a material weakness still existed, and our disclosure controls and procedures were not effective in recording, processing, summarizing and reporting within the time periods specified in the Securities and Exchange Commission’s rules and forms information required to be disclosed by us in the reports that we file or submit under the Exchange Act and were not effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including the Chief Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Except as described above, there were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred in the most recent fiscal quarter (the quarter ended December 31, 2013) that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

26

PART II - Other Information

Item 1A. Risk Factors

Part I, “Item 1A. Risk Factors” in our 2013 Annual Report on Form 10-K includes a listing of risk factors that could materially affect our business, financial condition, or future results, including a risk related to senior management. There have been no material changes in risk factors except as described below; however, the risks described in our 2013 Annual Report and below may not be the only risks facing the Company.

Zygo is subject to changes in senior management that could affect the operation of the Company.

Unforeseen or anticipated changes in senior management could adversely impact the Company due to a lack of historical knowledge and familiarity with all aspects of the Company’s business and operations by new senior management. As reported in October 2013, following the mutual decision of Dr. Chris L. Koliopoulos and Zygo’s Board of Directors, Dr. Koliopoulos resigned as the Chairman of the Board, President and Chief Executive Officer of the Company. The Board has appointed Gary K. Willis as interim Chief Executive Officer and Michael A. Kaufman as Chairman of the Board.

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

The following table provides information about stock repurchases during the quarter ended December 31, 2013 under our authorized purchase plan and restricted stock repurchases in connection with the surrender of shares to cover taxes upon the vesting of restricted stock awards.

Period	Total number of shares purchased		Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs (1)		Approximate dollar value of shares that may yet be purchased under the plans or programs (in millions)
October 1, 2013 - October 31, 2013		—		—		—	$	5.0
November 1, 2013 - November 30, 2013		38,851	$	14.81		—	$	5.0
December 1, 2013 - December 31, 2013		72	$	14.56		—	$	5.0

(1) In August 2007, our Board of Directors authorized the repurchase of up to $25.0 million of our outstanding common stock. During the three months ended December 31, 2013, there were no repurchases of common stock in the open market. The previous share repurchases under this program have been effected pursuant to plans in conformity with Rule 10b5-1 under the Securities Exchange Act of 1934. This rule allows public companies to adopt written, pre-arranged stock trading plans when they do not have material, non-public information in their possession. The adoption of this stock trading plan allows us to repurchase our shares during periods when we otherwise might be prevented from doing so under insider trading laws or because of self-imposed trading blackout periods.

27

Item 6. Exhibits

(a)	Exhibits:
	31.1	Certification Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	31.2	Certification Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	32.1	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	32.2	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase
101.DEF*	XBRL Taxonomy Extension Definition Linkbase
101.LAB*	XBRL Taxonomy Extension Label Linkbase
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase

* Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, or Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

28

SIGNATURE

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.

Zygo Corporation

(Registrant)

/s/ Gary K. Willis

Gary K. Willis

Chief Executive Officer

/s/ John P. Jordan

John P. Jordan

Vice President, Chief Financial Officer and Treasurer

Date: February 25, 2014

29

EXHIBIT INDEX

31.1	Certification Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase
101.DEF*	XBRL Taxonomy Extension Definition Linkbase
101.LAB*	XBRL Taxonomy Extension Label Linkbase
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase

* Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, or Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a) OF THE SECURITIES EXCHANGE ACT OF
1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Gary K. Willis, certify that:

1) I have reviewed this quarterly report on Form 10-Q of Zygo Corporation;

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: February 25, 2014

/s/ Gary K. Willis

Gary K. Willis

Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a) OF THE SECURITIES EXCHANGE ACT OF
1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, John P. Jordan, certify that:

1) I have reviewed this quarterly report on Form 10-Q of Zygo Corporation;

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: February 25, 2014

/s/ John P. Jordan

John P. Jordan

Vice President, Chief Financial Officer and Treasurer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Gary K. Willis, 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 Zygo Corporation on Form 10-Q for the fiscal quarter ended December 31, 2013, as filed with the Securities and Exchange Commission (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Zygo Corporation.

A signed original of this written statement required by Section 906 has been provided to Zygo Corporation and will be retained by Zygo Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

Dated: February 25, 2014

/s/ Gary K. Willis

Gary K. Willis

Chief Executive Officer

of Zygo Corporation

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, John P. Jordan, 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 Zygo Corporation on Form 10-Q for the fiscal quarter ended December 31, 2013, as filed with the Securities and Exchange Commission (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Zygo Corporation.

A signed original of this written statement required by Section 906 has been provided to Zygo Corporation and will be retained by Zygo Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

Dated: February 25, 2014

/s/ John P. Jordan

John P. Jordan

Vice President, Chief Financial Officer and Treasurer

of Zygo Corporation

XML

Weighted Average Shares Outstanding (Details) - Schedule of earnings per share computation	3 Months Ended		6 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012
Schedule of earnings per share computation [Abstract]
Basic weighted average shares outstanding	18,801,670	18,455,136	18,708,159	18,398,228
Dilutive effect of stock options and restricted shares	530,833	614,540	583,420	661,594
Diluted weighted average shares outstanding	19,332,503	19,069,676	19,291,579	19,059,822

XML

Segment and Major Customer Information (Details)	3 Months Ended		6 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012
Segment and Major Customer Information (Details) [Line Items]
Number of Operating Segments			2
Number of Major Customer During Period	1	0	1	1
Customer One [Member] | Metrology Solutions [Member]
Segment and Major Customer Information (Details) [Line Items]
Concentration Risk, Percentage	24.00%		19.00%	10.00%
No Customer [Member] | Sales [Member]
Segment and Major Customer Information (Details) [Line Items]
Concentration Risk, Percentage		10.00%

XML

Property, Plant and Equipment (Details) - Schedule of property plant and equipment (USD $) In Thousands, unless otherwise specified							6 Months Ended				6 Months Ended				6 Months Ended
	Dec. 31, 2013	Jun. 30, 2013	Dec. 31, 2013 Land Improvements [Member]	Jun. 30, 2013 Land Improvements [Member]	Dec. 31, 2013 Building and Building Improvements [Member]	Jun. 30, 2013 Building and Building Improvements [Member]	Dec. 31, 2013 Building and Building Improvements [Member] Minimum [Member]	Dec. 31, 2013 Building and Building Improvements [Member] Maximum [Member]	Dec. 31, 2013 Machinery Equipment And Office Furniture [Member]	Jun. 30, 2013 Machinery Equipment And Office Furniture [Member]	Dec. 31, 2013 Machinery Equipment And Office Furniture [Member] Minimum [Member]	Dec. 31, 2013 Machinery Equipment And Office Furniture [Member] Maximum [Member]	Dec. 31, 2013 Leasehold Improvements [Member]	Jun. 30, 2013 Leasehold Improvements [Member]	Dec. 31, 2013 Leasehold Improvements [Member] Minimum [Member]	Dec. 31, 2013 Leasehold Improvements [Member] Maximum [Member]	Dec. 31, 2013 Construction in Progress [Member]	Jun. 30, 2013 Construction in Progress [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	$ 96,485	$ 92,134	$ 4,030	$ 4,030	$ 26,913	$ 24,665			$ 62,587	$ 60,905			$ 721	$ 1,009			$ 2,234	$ 1,525
Property, Plant and Equipment, Useful Life							15 years	40 years			3 years	8 years			1 year	5 years
Accumulated depreciation	(59,294)	(57,791)
	$ 37,191	$ 34,343

XML

Segment and Major Customer Information (Details) - Schedule of segment reporting information, by segment (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012
Segment Reporting Information [Line Items]
Net revenues	$ 48,161	$ 34,635	$ 88,279	$ 74,841
Gross profit	24,796	15,283	43,133	32,776
Gross margin	51.00%	44.00%	49.00%	44.00%
Metrology Solutions [Member]
Segment Reporting Information [Line Items]
Net revenues	33,875	21,416	60,319	47,294
Gross profit	20,552	11,595	35,169	25,928
Gross margin	61.00%	54.00%	58.00%	55.00%
Optical Systems [Member]
Segment Reporting Information [Line Items]
Net revenues	14,286	13,219	27,960	27,547
Gross profit	$ 4,244	$ 3,688	$ 7,964	$ 6,848
Gross margin	30.00%	28.00%	28.00%	25.00%

XML

Inventories (Details) - Schedule of inventory (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Jun. 30, 2013
Schedule of inventory [Abstract]
Raw materials and manufactured parts	$ 16,032	$ 14,411
Work in process	11,813	11,300
Finished goods	3,427	4,474
	$ 31,272	$ 30,185

XML

Intangible Assets (Tables)

6 Months Ended

Dec. 31, 2013

Disclosure Text Block [Abstract]

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

The following table sets forth the components of intangible assets, as of December 31, 2013 and June 30, 2013:

	December 31, 2013			June 30, 2013
Patents	$	7,310		$	7,198
Customer relationships and technology		2,051			2,051
		9,361			9,249
Accumulated amortization		(5,022	)		(4,634	)
Total	$	4,339		$	4,615

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

Based on the carrying amount of the intangible assets as of December 31, 2013, the estimated future amortization expense is as follows:

	Estimated Future Amortization Expense
Six months ending June 30, 2014	$	440
Fiscal year ending June 30, 2015		827
Fiscal year ending June 30, 2016		651
Fiscal year ending June 30, 2017		512
Fiscal year ending June 30, 2018		390
Fiscal year ending June 30, 2019		377
Thereafter		1,142
Total	$	4,339

XML

Transactions with Shareholder (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Jun. 30, 2013
Transactions with Shareholder (Details) [Line Items]
Revenue, Net	$ 48,161	$ 34,635	$ 88,279	$ 74,841
Accounts Receivable, Net, Current	31,483		31,483		32,360
Trade Accounts Receivable [Member] | Canon Inc [Member]
Transactions with Shareholder (Details) [Line Items]
Accounts Receivable, Net, Current	1,569		1,569		1,771
Canon Inc [Member]
Transactions with Shareholder (Details) [Line Items]
Revenue, Net	$ 4,750	$ 2,855	$ 8,008	$ 5,668
Percentage Of Net Revenues	9.90%	8.00%	9.00%	8.00%

XML

Shareholders' Equity (Tables)

6 Months Ended

Dec. 31, 2013

Stockholders' Equity Note [Abstract]

Schedule of Stockholders Equity [Table Text Block]

The following table sets forth shareholders’ equity and noncontrolling interest for the six months ended December 31, 2013 and 2012:

	Six Months Ended December 31,
	2013									2012
	Shareholders’ Equity Zygo Corp.			Non- Controlling Interest			Total Equity			Shareholders’ Equity Zygo Corp.			Non- Controlling Interest			Total Equity
Equity, beginning of period	$	181,962		$	2,043		$	184,005		$	173,482		$	2,355		$	175,837
Net income		6,209			292			6,501			2,617			709			3,326
Unrealized gain on hedge		159			—			159			—			—			—
Foreign currency translation effect		551			13			564			261			104			365
Total		6,919			305			7,224			2,878			813			3,691
Share-based compensation		2,821			—			2,821			3,988			—			3,988
Repurchase of restricted stock		(1,748	)		—			(1,748	)		(1,078	)		—			(1,078	)
Employee stock purchase		56			—			56			15			—			15
Exercise of employee stock options and related tax effect		255			—			255			868			—			868
Dividends attributable to noncontrolling interest		—			(458	)		(458	)		—			(1,101	)		(1,101	)
Purchase of subsidiary shares from noncontrolling interest		—			—			—			(2,777	)		(378	)		(3,155	)
Equity, end of period	$	190,265		$	1,890		$	192,155		$	177,376		$	1,689		$	179,065

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Warranty (Details) - Schedule of product warranty liability (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Schedule of product warranty liability [Abstract]
Beginning balance	$ 647	$ 1,188
Reductions for payments made	(258)	(467)
Changes in accruals related to pre-existing warranties	(263)	53
Changes in accruals related to warranties made in the current period	677	287
Ending balance	$ 803	$ 1,061

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Fair Value Measurements (Details) - Schedule of fair value assets and liabilities measured on recurring basis (Fair Value, Measurements, Recurring [Member], USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Jun. 30, 2013
Portion at Other than Fair Value Measurement [Member]
Fair Value Measurements (Details) - Schedule of fair value assets and liabilities measured on recurring basis [Line Items]
Money market funds	$ 23,739	$ 23,736
Trading securities	644	662
Foreign currency hedge	678	(7)
Total	25,061	24,391
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value Measurements (Details) - Schedule of fair value assets and liabilities measured on recurring basis [Line Items]
Money market funds	23,739	23,736
Trading securities	644	662
Total	24,383	24,398
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value Measurements (Details) - Schedule of fair value assets and liabilities measured on recurring basis [Line Items]
Foreign currency hedge	678	(7)
Total	$ 678	$ (7)

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Accounting Policies (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Jun. 30, 2013
Accounting Policies [Abstract]
Deferred Tax Liabilities, Net, Current	$ 122	$ 123

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Intangible Assets (Details) - Schedule of finite lived intangible assets (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Jun. 30, 2013
Finite-Lived Intangible Assets [Line Items]
Intangible assets, gross	$ 9,361	$ 9,249
Accumulated amortization	(5,022)	(4,634)
Total	4,339	4,615
Patents And Trademarks [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, gross	7,310	7,198
Customer Relationships And Technology [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, gross	$ 2,051	$ 2,051

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Income Taxes (Details) (USD $)	3 Months Ended		6 Months Ended		1 Months Ended		3 Months Ended	6 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Jun. 30, 2013 Additional Paid-in Capital [Member]	Jun. 30, 2013 Other Noncurrent Liabilities [Member]	Dec. 31, 2012 Richmond, California [Member]	Dec. 31, 2012 Richmond, California [Member]
Income Taxes (Details) [Line Items]
Effective Income Tax Rate Reconciliation, Percent			39.00%
Liabilities Additional for Uncertain Tax Positions During Period	$ 148,000		$ 192,000
Income Tax Expense Tax Benefit Number of Error				2
Increase Decrease in Deferred Tax Liabilities Due to Correction of Errors				700,000
Increase Decrease in Deferred Tax Assets Due to Correction of Errors		200,000		400,000	1,400,000	1,100,000	500,000	1,700,000
Understated Amount of Uncertain Tax Positions	$ 1,100,000		$ 1,100,000

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Property, Plant and Equipment (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012
Property, Plant and Equipment [Abstract]
Depreciation	$ 1,295	$ 1,169	$ 2,530	$ 2,344

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Shareholders' Equity

6 Months Ended

Dec. 31, 2013

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

Note 3: Shareholders’ Equity

The following table sets forth shareholders’ equity and noncontrolling interest for the six months ended December 31, 2013 and 2012:

	Six Months Ended December 31,
	2013									2012
	Shareholders’ Equity Zygo Corp.			Non- Controlling Interest			Total Equity			Shareholders’ Equity Zygo Corp.			Non- Controlling Interest			Total Equity
Equity, beginning of period	$	181,962		$	2,043		$	184,005		$	173,482		$	2,355		$	175,837
Net income		6,209			292			6,501			2,617			709			3,326
Unrealized gain on hedge		159			—			159			—			—			—
Foreign currency translation effect		551			13			564			261			104			365
Total		6,919			305			7,224			2,878			813			3,691
Share-based compensation		2,821			—			2,821			3,988			—			3,988
Repurchase of restricted stock		(1,748	)		—			(1,748	)		(1,078	)		—			(1,078	)
Employee stock purchase		56			—			56			15			—			15
Exercise of employee stock options and related tax effect		255			—			255			868			—			868
Dividends attributable to noncontrolling interest		—			(458	)		(458	)		—			(1,101	)		(1,101	)
Purchase of subsidiary shares from noncontrolling interest		—			—			—			(2,777	)		(378	)		(3,155	)
Equity, end of period	$	190,265		$	1,890		$	192,155		$	177,376		$	1,689		$	179,065

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Income Taxes (Details) - Schedule of components of income tax expense benefit (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012
Schedule of components of income tax expense benefit [Abstract]
Income tax expense (in Dollars)	$ 2,135	$ 1,064	$ 3,540	$ 3,106
Income tax expense	34.00%	53.00%	35.00%	48.00%

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Share-Based Payments (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012
Share-Based Payments (Details) [Line Items]
Share-based Compensation (in Dollars)	$ 1,565	$ 1,526	$ 2,821	$ 2,756
Employee Service Share-based Compensation, Tax Benefit from Compensation Expense (in Dollars)	$ 569	$ 549	$ 1,025	$ 992
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Net of Forfeitures	0	0	166,938	122,934
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value (in Dollars per share)			$ 8.53	$ 11.49
Description Of Restricted Stock Awards Granted Prior			Generally, the restrictions on the restricted stock units granted to employees prior to January 1, 2011 lapse at a rate of 50% on the three-year anniversary and the remaining 50% on the fourth year anniversary. Restrictions on restricted stock units granted to employees after January 1, 2011 lapse at a rate of 25% each year.
Restricted Stock [Member]
Share-Based Payments (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	30,000	30,000	213,195	162,901
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value (in Dollars per share)	$ 14.90	$ 14.52	$ 14.43	$ 18.49
Prior To January 1, 2011 [Member]
Share-Based Payments (Details) [Line Items]
Percentage Of Lapse Rate On Restricted Stock Units Granted To Employees			50.00%
Remaining Percentage Of Lapse Rate On Restricted Stock Units Granted To Employees			50.00%
After January 1, 2011 [Member]
Share-Based Payments (Details) [Line Items]
Percentage Of Lapse Rate On Restricted Stock Units Granted To Employees			25.00%

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Receivables (Tables)

6 Months Ended

Dec. 31, 2013

Receivables [Abstract]

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

The following table sets forth the components of accounts receivable at December 31, 2013 and June 30, 2013:

	December 31, 2013			June 30, 2013
Trade and other	$	31,783		$	32,632
Allowance for doubtful accounts		(300	)		(272	)
	$	31,483		$	32,360

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Share-Based Payments (Tables)

6 Months Ended

Dec. 31, 2013

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

Share based Compensation Arrangement By Share based Payment Award Fair Value Assumptions And Methodology [Table Text Block]

The table below indicates the key assumptions used in the option valuation calculations for options granted in the periods presented:

	Six Months Ended December 31,
	2013			2012
Term		8.5 Years			7.3 Years
Volatility		57.0	%		59.2	%
Dividend yield		—			—
Risk-free interest rate		2.4	%		1.2	%

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Segment and Major Customer Information (Details) - Schedule of revenues by geographic area (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012
Revenues from External Customers and Long-Lived Assets [Line Items]
Sales Revenue Net	$ 48,161	$ 34,635	$ 88,279	$ 74,841
Americas [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Sales Revenue Net	20,850	19,755	39,944	38,618
Japan [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Sales Revenue Net	16,710	5,336	25,511	11,667
China [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Sales Revenue Net	4,104	3,498	7,852	11,036
Europe [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Sales Revenue Net	3,790	4,397	9,061	9,219
Pacific Rim [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Sales Revenue Net	$ 2,707	$ 1,649	$ 5,911	$ 4,301

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Share-Based Payments (Details) - Share-based compensation arrangement by share-based payment award, fair value assumptions and methodology	6 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Share-based compensation arrangement by share-based payment award, fair value assumptions and methodology [Abstract]
Term	8 years 6 months	7 years 109 days
Volatility	57.00%	59.20%
Risk-free interest rate	2.40%	1.20%

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Inventories (Tables)

6 Months Ended

Dec. 31, 2013

Inventory Disclosure [Abstract]

Schedule of Inventory, Current [Table Text Block]

The following table sets forth the components of inventories at December 31, 2013 and June 30, 2013:

	December 31, 2013		June 30, 2013
Raw materials and manufactured parts	$	16,032	$	14,411
Work in process		11,813		11,300
Finished goods		3,427		4,474
	$	31,272	$	30,185

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Property, Plant and Equipment (Tables)

6 Months Ended

Dec. 31, 2013

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment [Table Text Block]

The following table sets forth the components of property, plant and equipment at December 31, 2013 and June 30, 2013:

							Estimated Useful Life (Years)
	December 31, 2013			June 30, 2013			Minimum	Maximum
Land and improvements	$	4,030		$	4,030				—
Building and improvements		26,913			24,665		15	40
Machinery, equipment and office furniture		62,587			60,905		3	8
Leasehold improvements		721			1,009		1	5
Construction in progress		2,234			1,525				—
		96,485			92,134
Accumulated depreciation		(59,294	)		(57,791	)
	$	37,191		$	34,343

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Weighted Average Shares Outstanding

6 Months Ended

Dec. 31, 2013

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

Note 2: Weighted Average Shares Outstanding

For the three and six months ended December 31, 2013, outstanding stock options and restricted stock awards for 391,894 shares and 382,325 shares, respectively, (for the three and six months ended December 31, 2012, outstanding stock options and restricted stock awards for 332,023 shares and 214,383 shares, respectively) of the Company’s common stock were excluded from the calculation of diluted earnings per share because they were antidilutive.

The following table sets forth the reconciliation of basic weighted average shares outstanding and diluted weighted average shares outstanding for the periods presented:

	Three Months Ended December 31,				Six Months Ended December 31,
	2013		2012		2013		2012
Basic weighted average shares outstanding		18,801,670		18,455,136		18,708,159		18,398,228
Dilutive effect of stock options and restricted shares		530,833		614,540		583,420		661,594
Diluted weighted average shares outstanding		19,332,503		19,069,676		19,291,579		19,059,822

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Warranty (Tables)

6 Months Ended

Dec. 31, 2013

Product Warranties Disclosures [Abstract]

Schedule of Product Warranty Liability [Table Text Block]

The following table is a reconciliation of the beginning and ending balances of the accrued warranty liability, which is included in “Other accrued expenses” in the condensed consolidated balance sheets:

	Six Months Ended December 31,
	2013			2012
Beginning balance	$	647		$	1,188
Reductions for payments made		(258	)		(467	)
Changes in accruals related to pre-existing warranties		(263	)		53
Changes in accruals related to warranties made in the current period		677			287
Ending balance	$	803		$	1,061

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Shareholders' Equity (Details) - Shareholders' equity and noncontrolling interest (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012
Shareholders' Equity (Details) - Shareholders' equity and noncontrolling interest [Line Items]
Equity, beginning of period			$ 181,962
Net income	4,054	838	6,209	2,617
Unrealized gain on hedge	249		159
Foreign currency translation effect	(61)	(43)	564	365
Total	4,251	757	6,919	2,878
Share-based compensation	1,565	1,526	2,821	2,756
Exercise of employee stock options and related tax effect			255	868
Equity, end of period	190,265		190,265
Parent [Member]
Shareholders' Equity (Details) - Shareholders' equity and noncontrolling interest [Line Items]
Equity, beginning of period			181,962	173,482
Net income			6,209	2,617
Unrealized gain on hedge			159
Foreign currency translation effect			551	261
Total			6,919	2,878
Share-based compensation			2,821	3,988
Repurchase of restricted stock			(1,748)	(1,078)
Employee stock purchase			56	15
Exercise of employee stock options and related tax effect			255	868
Purchase of subsidiary shares from noncontrolling interest				(2,777)
Equity, end of period	190,265	177,376	190,265	177,376
Noncontrolling Interest [Member]
Shareholders' Equity (Details) - Shareholders' equity and noncontrolling interest [Line Items]
Equity, beginning of period			2,043	2,355
Net income			292	709
Foreign currency translation effect			13	104
Total			305	813
Dividends attributable to noncontrolling interest			(458)	(1,101)
Purchase of subsidiary shares from noncontrolling interest				(378)
Equity, end of period	1,890	1,689	1,890	1,689
Total Equity [Member]
Shareholders' Equity (Details) - Shareholders' equity and noncontrolling interest [Line Items]
Equity, beginning of period			184,005	175,837
Net income			6,501	3,326
Unrealized gain on hedge			159
Foreign currency translation effect			564	365
Total			7,224	3,691
Share-based compensation			2,821	3,988
Repurchase of restricted stock			(1,748)	(1,078)
Employee stock purchase			56	15
Exercise of employee stock options and related tax effect			255	868
Dividends attributable to noncontrolling interest			(458)	(1,101)
Purchase of subsidiary shares from noncontrolling interest				(3,155)
Equity, end of period	$ 192,155	$ 179,065	$ 192,155	$ 179,065

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Intangible Assets (Details) - Estimated future amortization expense of intangible assets (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Jun. 30, 2013
Estimated future amortization expense of intangible assets [Abstract]
Six months ending June 30, 2014	$ 440
Fiscal year ending June 30, 2015	827
Fiscal year ending June 30, 2016	651
Fiscal year ending June 30, 2017	512
Fiscal year ending June 30, 2018	390
Fiscal year ending June 30, 2019	377
Thereafter	1,142
Total	$ 4,339	$ 4,615

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012
Net revenue	$ 48,161	$ 34,635	$ 88,279	$ 74,841
Cost of goods sold	23,365	19,352	45,146	42,065
Gross profit	24,796	15,283	43,133	32,776
Selling, general and administrative expenses	13,070	8,568	23,023	17,089
Research, development and engineering expenses	5,209	4,502	10,174	9,083
Operating profit	6,517	2,213	9,936	6,604
Other income (expense)
Miscellaneous income (expense), net	(185)	(208)	105	(172)
Total other income (expense)	(185)	(208)	105	(172)
Income before income taxes, including noncontrolling interest	6,332	2,005	10,041	6,432
Income tax expense	(2,135)	(1,064)	(3,540)	(3,106)
Net income including noncontrolling interest	4,197	941	6,501	3,326
Less: Net income attributable to noncontrolling interest	143	103	292	709
Net income attributable to Zygo Corporation	$ 4,054	$ 838	$ 6,209	$ 2,617
Earnings per share attributable to Zygo Corporation
Basic earnings per share (in Dollars per share)	$ 0.22	$ 0.05	$ 0.33	$ 0.14
Diluted earnings per share (in Dollars per share)	$ 0.21	$ 0.04	$ 0.32	$ 0.14
Weighted average shares outstanding
Basic shares (in Shares)	18,801,670	18,455,136	18,708,159	18,398,228
Diluted shares (in Shares)	19,332,503	19,069,676	19,291,579	19,059,822

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Receivables (Details) - Schedule of accounts receivable (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Jun. 30, 2013
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for doubtful accounts	$ (300)	$ (272)
	31,483	32,360
Trade and other receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Trade and other	$ 31,783	$ 32,632

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Cash provided by operating activities:
Net income including noncontrolling interests	$ 6,501	$ 3,326
Adjustments to reconcile net income to cash provided by operating activities from continuing operations:
Depreciation and amortization	2,928	2,783
Deferred income taxes	1,586	(939)
Provision for doubtful accounts	32	(110)
Compensation cost related to share-based payment arrangements	2,821	2,756
Other	(36)	132
Changes in operating accounts:
Receivables	525	2,890
Inventories	(1,047)	(1,906)
Prepaid expenses, prepaid taxes and other current assets	589	(3,012)
Net billings in excess of revenue recognized on uncompleted contracts	(3,405)	(2,994)
Accounts payable, accrued expenses and taxes payable	3,733	(1,391)
Net cash provided by operating activities from continuing operations	14,227	1,535
Cash used for investing activities:
Additions to property, plant and equipment	(5,430)	(3,510)
Additions to intangibles	(123)	(76)
Investments and acquisitions		(3,155)
Proceeds from the sale and maturity of marketable securities	108	88
Net cash used for investing activities	(5,445)	(6,653)
Cash used for financing activities:
Dividend payments to noncontrolling interest	(458)	(1,742)
Employee stock purchase	56	15
Repurchase of restricted stock	(1,748)	(1,078)
Exercise of employee stock options	255	868
Net cash used for financing activities	(1,895)	(1,937)
Effect of exchange rate changes on cash and cash equivalents	498	349
Net increase (decrease) in cash and cash equivalents	7,385	(6,706)
Cash and cash equivalents, beginning of period	83,056	84,053
Cash and cash equivalents, end of period	90,441	77,347
Supplemental cash flow information:
Cash paid for income taxes	978	4,140
Purchases of property, plant and equipment included in accounts payable	$ 85	$ 132

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Derivatives and Hedging Activities (Details) - Schedule of Foreign Exchange Contracts, Statement of Financial Position (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Dec. 31, 2013 Other Accrued Liabilities [Member]	Jun. 30, 2013 Prepaid Expense And Other [Member]
Derivatives and Hedging Activities (Details) - Schedule of Foreign Exchange Contracts, Statement of Financial Position [Line Items]
December 31, 2013	7
December 31, 2013	Other accrued expenses
December 31, 2013 (in Dollars)	$ 58
June 30, 2013		11
June 30, 2013		Prepaid expenses, prepaid taxes and other current assets
June 30, 2013 (in Dollars)		$ 147

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Derivatives and Hedging Activities (Tables)

6 Months Ended

Dec. 31, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Foreign Exchange Contracts, Statement of Financial Position [Table Text Block]

The following table summarizes the fair value of derivative instruments as of December 31, 2013 and June 30, 2013.

Derivatives not designated as hedging instruments			Balance sheet location
December 31, 2013	Number of foreign exchange contracts:	7	Other accrued expenses	$58
June 30, 2013	Number of foreign exchange contracts:	11	Prepaid expenses, prepaid taxes and other current assets	$147

Schedule of Cash Flow Hedging Instruments, Statements of Financial Performance and Financial Position, Location [Table Text Block]

The following table summarizes the foreign exchange cash flow hedge value as of December 31, 2013 and June 30, 2013:

Foreign currency derivative designated as hedging instruments			Balance sheet location
December 31, 2013	Number of foreign exchange contracts:	1	Derivative asset	$736
			Accumulated other comprehensive income	$227
June 30, 2013	Number of foreign exchange contracts:	1	Other accrued expenses	$154
			Accumulated other comprehensive loss	($25	)

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Income Taxes (Details) - Schedule of reconciliation of restated cash flow statement to previously reported (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Adjustments to reconcile net income to cash - Deferred income taxes	$ 1,586	$ (939)
Adjustments to reconcile net income to cash - Accounts payable, accrued expenses and taxes payable	3,733	(1,391)
Scenario, Previously Reported [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cash provided by operating activites - Net income including noncontrolling interest		4,676
Adjustments to reconcile net income to cash - Deferred income taxes		(2,105)
Adjustments to reconcile net income to cash - Accounts payable, accrued expenses and taxes payable		(1,575)
Restatement Adjustment [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cash provided by operating activites - Net income including noncontrolling interest		3,326
Adjustments to reconcile net income to cash - Deferred income taxes		(939)
Adjustments to reconcile net income to cash - Accounts payable, accrued expenses and taxes payable		$ (1,391)

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Commitments and Contingencies

6 Months Ended

Dec. 31, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

Note 16: Commitments and Contingencies

On November 12, 2010, we completed a transaction with ASML US, Inc. (“ASML”) to purchase substantially all the assets of their Richmond, California operations. These assets were acquired for $12,475, of which $7,142 was in cash, and the balance was future consideration, with a then-net-present value of $5,333 using a discount factor of 14%, based on the level of shipments to ASML over the subsequent three years beginning January 1, 2011. On the acquisition date, the future consideration was recorded as a liability, with $1,127 recorded as a current liability and $4,206 recorded as a long-term liability. The future consideration represented a supply agreement that was entered into with ASML that provided for a volume discount on future purchases. The volume discount portion of the agreement expired on December 31, 2013.

From time to time we are subject to certain legal proceedings and claims that arise in the ordinary course of business.

We are aware of certain levels of environmental contamination that are below reportable levels on one of our properties. In addition, we are aware of certain contamination on an adjacent property that we formerly owned. The future effect of environmental matters, including potential liabilities, is often difficult to estimate. At this time, we are unable to determine or reasonably estimate the amount of costs, if any, that we might incur or for which we may potentially be responsible. We will record a reserve for the exposure related to the environmental contamination, when and if, it is both probable that a liability has been incurred and the amount of any liability can be reasonably estimated, whether or not a claim has been asserted.

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Income Taxes (Tables)

6 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

Schedule of Components of Income Tax Expense (Benefit) [Table Text Block]

	Three Months Ended December 31,										Six Months Ended December 31,
	2013					2012					2013					2012
	Amount		Tax Rate %			Amount		Tax Rate %			Amount		Tax Rate %			Amount		Tax Rate %
Income tax expense	$	2,135		34	%	$	1,064		53	%	$	3,540		35	%	$	3,106		48	%

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

The table below provides a reconciliation of the restated balances to the amounts previously reported:

Fiscal 2013	Six Months Ended December 31, 2012						Three Months Ended December 31, 2012
Condensed Consolidated Statements of Operations	As Previously Reported			As Restated			As Previously Reported			As Restated
Income tax expense	$	(1,756	)	$	(3,106	)	$	(323	)	$	(1,064	)
Net Income attributable to Zygo Corporation		3,967			2,617			1,579			838
Basic Earnings per Share	$	0.22		$	0.14		$	0.09		$	0.05
Diluted Earnings Per Share	$	0.21		$	0.14		$	0.08		$	0.04

Schedule of Deferred Tax Assets and Liabilities [Table Text Block]

Fiscal 2013	At June 30, 2013
Condensed Consolidated Balance Sheet	As Previously Reported		As Restated
Deferred income taxes - Asset - Current	$	7,261	$	8,631
Total current assets	$	163,633	$	165,003
Deferred income taxes - Asset - Long Term	$	14,967	$	10,490
Total assets	$	218,220	$	215,113
Other long term liabilities	$	4,997	$	3,769
Total liabilities	$	32,336	$	31,108
Additional paid-in capital	$	180,324	$	181,694
Retained earnings	$	30,104	$	26,855
Total shareholders’ equity - Zygo Corporation	$	183,841	$	181,962
Total equity	$	185,884	$	184,005
Total liabilities and equity	$	218,220	$	215,113

Schedule of New Accounting Pronouncements and Changes in Accounting Principles [Table Text Block]

Fiscal 2013	Six Months Ended December 31, 2012
Condensed Consolidated Statement of Cash Flows	As Previously Reported			As Restated
Cash provided by operating activites - Net income including noncontrolling interest	$	4,676		$	3,326
Adjustments to reconcile net income to cash - Deferred income taxes	$	(2,105	)	$	(939	)
Adjustments to reconcile net income to cash - Accounts payable, accrued expenses and taxes payable	$	(1,575	)	$	(1,391	)

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Weighted Average Shares Outstanding (Tables)

6 Months Ended

Dec. 31, 2013

Earnings Per Share [Abstract]

Schedule of Weighted Average Number of Shares [Table Text Block]

The following table sets forth the reconciliation of basic weighted average shares outstanding and diluted weighted average shares outstanding for the periods presented:

	Three Months Ended December 31,				Six Months Ended December 31,
	2013		2012		2013		2012
Basic weighted average shares outstanding		18,801,670		18,455,136		18,708,159		18,398,228
Dilutive effect of stock options and restricted shares		530,833		614,540		583,420		661,594
Diluted weighted average shares outstanding		19,332,503		19,069,676		19,291,579		19,059,822

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Accounting Policies

6 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

Note 1: Accounting Policies

Basis of Presentation and Principles of Consolidation
Zygo Corporation is a worldwide supplier of optical metrology instruments, precision optics, and electro-optical design and manufacturing services, serving customers in the semiconductor capital equipment, research, defense, life sciences and industrial markets. The accompanying condensed consolidated financial statements include the accounts of Zygo Corporation and its subsidiaries (“Zygo,” “we,” “us,” “our” or “the Company”). The Company follows accounting principles generally accepted in the United States of America (“US GAAP”). Zygo’s reporting currency is the U.S. dollar. The functional currencies of our foreign subsidiaries are their local currencies; and amounts included in the condensed consolidated statements of operations are translated at the weighted-average exchange rates for the period. Assets and liabilities are translated at period-end exchange rates, and resulting foreign exchange translation adjustments are recorded in the condensed consolidated balance sheets as a component of accumulated other comprehensive income. All transactions and accounts with the subsidiaries are eliminated from the condensed consolidated financial statements. The results of operations for the three and six month periods ended December 31, 2013 are not necessarily indicative of the results to be expected for the full fiscal year.

In management’s opinion, the accompanying condensed consolidated balance sheets and condensed consolidated interim statements of income, comprehensive income, and cash flows include all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of the results of the interim periods. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended June 30, 2013, including items incorporated therein by reference.

Adoption of new Accounting Pronouncements
In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-10, Derivatives and Hedging: Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes (a consensus of the FASB Emerging Issues Task Force). FASB Accounting Standards Codification (“ASC”) 815 provides guidance on the risks that are permitted to be hedged in a fair value or cash flow hedge. Among those risks for financial assets and financial liabilities is the risk of changes in a hedged item’s fair value or a hedged transaction’s cash flows attributable to changes in the designated benchmark interest rate (referred to as interest rate risk). In the United States, currently only the interest rates on direct Treasury obligations of the U.S. government (“UST”) and, for practical reasons, the London Interbank Offered Rate (“LIBOR”) swap rate are considered benchmark interest rates. The ASU permits the Overnight Index Swap Rate (“OIS”) to be used as a U.S. benchmark interest rate for hedge accounting purposes under FASB ASC 815, in addition to UST and LIBOR. The amendments also remove the restriction on using different benchmark rates for similar hedges. The amendments are effective prospectively for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013. The adoption of this guidance in the first quarter of fiscal 2014 did not have a material impact on our condensed consolidated financial statements and is not expected to have a material impact on future financial statements.

Recent Accounting Guidance Not Yet Adopted
In July 2013, FASB issued ASU No. 2013-11, Income Taxes: Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force). FASB ASC 740, Income Taxes, does not include explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. There is diversity in practice in the presentation of unrecognized tax benefits in those instances. Some entities present unrecognized tax benefits as a liability unless the unrecognized tax benefit is directly associated with a tax position taken in a tax year that results in, or that resulted in, the recognition of a net operating loss or tax credit carryforward for that year, and the net operating loss or tax credit carryforward has not been utilized. Other entities present unrecognized tax benefits as a reduction of a deferred tax asset for a net operating loss or tax credit carryforward in certain circumstances. The objective of ASU 2013-11 is to eliminate that diversity in practice.

Under ASU 2013-11, an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position, or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption is permitted. The effective date for Zygo is the first quarter of fiscal year 2015, unless earlier adopted. We are currently evaluating this guidance but do not expect its adoption to have a material effect on our condensed consolidated financial statements.

Reclassifications
Certain amounts included in the condensed consolidated balance sheets for the prior year have been reclassified to conform with the current year presentation of “Deferred income taxes” long term liability. In fiscal 2013, “Deferred income taxes” current liability of $123 was reported as a component of other accrued expenses in the condensed consolidated balance sheet. In fiscal 2014, deferred income taxes is presented separately for December 31, 2013 and June 30, 2013.

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012
Net income attributable to Zygo Corporation	$ 4,054	$ 838	$ 6,209	$ 2,617
Other comprehensive income (loss), net of tax
Foreign currency translation adjustment	(61)	(43)	564	365
Changes in unrealized cashflow hedge
Unrealized cash flow hedging gain (loss) arising during the period	701		482
Less: Gain reclassified into revenue	305		239
Unrealized cash flow hedging gain (loss) at the end of the period	396		243
Tax benefit (expense)	(147)		(84)
Changes in unrealized cash flow hedge	249		159
Other comprehensive income, net of tax benefit	188	(43)	723	365
Comprehensive income	4,242	795	6,932	2,982
Less: comprehensive income (loss) attributable to noncontrolling interest	(9)	38	13	104
Comprehensive income attributable to Zygo Corporation	$ 4,251	$ 757	$ 6,919	$ 2,878

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Intangible Assets

6 Months Ended

Dec. 31, 2013

Disclosure Text Block [Abstract]

Intangible Assets Disclosure [Text Block]

Note 11: Intangible Assets

Intangible assets includes patents, customer relationships and technology. The cost of patents and customer relationships and technology is amortized on a straight-line basis over estimated useful lives ranging from 3-17 years.

The following table sets forth the components of intangible assets, as of December 31, 2013 and June 30, 2013:

	December 31, 2013			June 30, 2013
Patents	$	7,310		$	7,198
Customer relationships and technology		2,051			2,051
		9,361			9,249
Accumulated amortization		(5,022	)		(4,634	)
Total	$	4,339		$	4,615

Amortization expense related to intangibles was $199 and $214 for the three months ended December 31, 2013 and 2012, respectively, and $398 and $439 for the six months ended December 31, 2013 and 2012, respectively. This amortization expense related to intangible assets is included in “Cost of goods sold” and “Selling, general and administrative expenses” in the condensed consolidated statements of operations.

Based on the carrying amount of the intangible assets as of December 31, 2013, the estimated future amortization expense is as follows:

	Estimated Future Amortization Expense
Six months ending June 30, 2014	$	440
Fiscal year ending June 30, 2015		827
Fiscal year ending June 30, 2016		651
Fiscal year ending June 30, 2017		512
Fiscal year ending June 30, 2018		390
Fiscal year ending June 30, 2019		377
Thereafter		1,142
Total	$	4,339

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Document And Entity Information	6 Months Ended
	Dec. 31, 2013	Jan. 31, 2014
Document and Entity Information [Abstract]
Entity Registrant Name	ZYGO CORP
Document Type	10-Q
Current Fiscal Year End Date	--06-30
Entity Common Stock, Shares Outstanding		18,893,149
Amendment Flag	false
Entity Central Index Key	0000730716
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Accelerated Filer
Entity Well-known Seasoned Issuer	No
Document Period End Date	Dec. 31, 2013
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2

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Segment and Major Customer Information

6 Months Ended

Dec. 31, 2013

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

Note 12: Segment and Major Customer Information

Our business is organized into two operating divisions and reporting segments – Metrology Solutions and Optical Systems. The Metrology Solutions segment includes 3-Dimensional surface metrology products, precision positioning systems and custom-engineered solutions used in the semiconductor capital equipment, research, defense and industrial markets. The Optical Systems segment designs, develops and manufactures high precision optical components and electro-optical systems used in the semiconductor capital equipment, defense, life sciences and research markets. The chief operating decision-maker uses this information to allocate resources.

The following table sets forth segment net revenue, gross profit and gross margin for the three and six months ended December 31, 2013 and 2012:

	Three Months Ended December 31,						Six Months Ended December 31,
	2013			2012			2013			2012
Metrology Solutions
Net revenue	$	33,875		$	21,416		$	60,319		$	47,294
Gross profit	$	20,552		$	11,595		$	35,169		$	25,928
Gross margin		61	%		54	%		58	%		55	%
Optical Systems
Net revenue	$	14,286		$	13,219		$	27,960		$	27,547
Gross profit	$	4,244		$	3,688		$	7,964		$	6,848
Gross margin		30	%		28	%		28	%		25	%
Total
Net revenue	$	48,161		$	34,635		$	88,279		$	74,841
Gross profit	$	24,796		$	15,283		$	43,133		$	32,776
Gross margin		51	%		44	%		49	%		44	%

Separate financial information by segment for total assets, capital expenditures and depreciation and amortization is not evaluated by our chief operating decision-maker. Substantially all of our operating expenses, assets and depreciation and amortization are U.S.-based.

The following table sets forth revenue by geographic area:

	Three Months Ended December 31,				Six Months Ended December 31,
	2013		2012		2013		2012
Americas	$	20,850	$	19,755	$	39,944	$	38,618
Japan		16,710		5,336		25,511		11,667
China		4,104		3,498		7,852		11,036
Europe		3,790		4,397		9,061		9,219
Pacific Rim		2,707		1,649		5,911		4,301
Total	$	48,161	$	34,635	$	88,279	$	74,841

Revenue from one customer in the Metrology Solutions Segment accounted for 24% and 19% of net revenue for the three and six months ended December 31, 2013, respectively. These revenues related primarily to the shipments of the precision positioning systems. The fulfillment of these large orders is expected to be completed by our fiscal year end. 0 customer accounted for over 10% of our revenue for the three months ended December 31, 2012. Revenue from one customer in the Metrology Solutions Segment accounted for 10% of net revenue for the six months ended December 31, 2012.

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Jun. 30, 2013
Current assets:
Cash and cash equivalents	$ 90,441	$ 83,056
Receivables, net of allowance for doubtful accounts of $300 and $272, respectively	31,483	32,360
Inventories	31,272	30,185
Prepaid expenses, prepaid taxes and other current assets	5,429	5,429
Revenue recognized in excess of billings on uncompleted contracts	5,123	5,342
Deferred income taxes	10,384	8,631
Total current assets	174,132	165,003
Marketable securities	644	662
Property, plant and equipment, net	37,191	34,343
Deferred income taxes	9,026	10,490
Intangible assets, net	4,339	4,615
Total assets	225,332	215,113
Current liabilities:
Accounts payable	7,951	7,170
Progress payments and deferred revenue	5,412	4,538
Billings in excess of costs and estimated earnings on uncompleted contracts	2,855	6,481
Accrued salaries and wages	6,834	3,746
Other accrued expenses	3,478	4,558
Deferred income taxes	122	123
Income taxes payable	150	19
Total current liabilities	26,802	26,635
Deferred income taxes	1,568	704
Other long-term liabilities	4,807	3,769
Total liabilities	33,177	31,108
Commitments and contingencies
Equity:
Common stock, $0.10 par value per share: 40,000,000 shares authorized; 21,306,223 shares issued (20,858,158 at June 30, 2013); 18,870,502 shares outstanding (18,532,623 at June 30, 2013)	2,131	2,086
Additional paid-in capital	184,782	181,694
Retained earnings	33,064	26,855
Accumulated other comprehensive income (loss):
Currency translation effects	(90)	(641)
Unrealized gain (loss) on hedge	143	(16)
Treasury stock, at cost, 2,435,721 shares (2,325,535 at June 30, 2013)	(29,765)	(28,016)
Total shareholders’ equity - Zygo Corporation	190,265	181,962
Noncontrolling interest	1,890	2,043
Total equity	192,155	184,005
Total liabilities and equity	$ 225,332	$ 215,113

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Share-Based Payments

6 Months Ended

Dec. 31, 2013

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

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

Note 6: Share-Based Payments

We recorded share-based compensation expense for the three months ended December 31, 2013 and 2012 of $1,565 and $1,526, respectively, with related tax benefits of $569 and $549, respectively. For the six months ended December 31, 2013 and 2012, we recorded share-based compensation expense of $2,821 and $2,756, respectively, with related tax benefits of $1,025 and $992, respectively.

Stock Options

We use the Black-Scholes option-pricing model to calculate the fair value of stock option awards. The key assumptions for this valuation method include the expected term of the option, stock price volatility, risk-free interest rate, dividend yield and exercise price. Many of these assumptions are judgmental and highly sensitive in the determination of compensation expense.

There were 0 stock option grants for the three months ended December 31, 2013 and 2012. Under the assumptions indicated below, the weighted-average fair value of stock option grants for the six months ended December 31, 2013 and 2012 was $8.53 and $11.49, respectively. During the six months ended December 31, 2013 and 2012, we granted stock options aggregating 166,938 and 122,934 shares of common stock, respectively.

The table below indicates the key assumptions used in the option valuation calculations for options granted in the periods presented:

	Six Months Ended December 31,
	2013			2012
Term		8.5 Years			7.3 Years
Volatility		57.0	%		59.2	%
Dividend yield		—			—
Risk-free interest rate		2.4	%		1.2	%

Restricted Stock

Our share-based compensation expense also includes the effects of the issuance of restricted stock units. The compensation expense related to restricted stock awards is determined based on the market price of our stock at the date of grant applied to the total number of shares anticipated to fully vest, which is then amortized over the expected term. During the three months ended December 31, 2013 and 2012, an aggregate of 30,000 restricted stock units in each period were issued at a weighted average stock price at date of grant of $14.90 and $14.52, respectively. During the six months ended December 31, 2013 and 2012, an aggregate of 213,195 and 162,901 shares, respectively, of restricted stock units were issued at a weighted average stock price at date of grant of $14.43 and $18.49, respectively. Generally, the restrictions on the restricted stock units granted to employees prior to January 1, 2011 lapse at a rate of 50% on the three-year anniversary and the remaining 50% on the fourth year anniversary. Restrictions on restricted stock units granted to employees after January 1, 2011 lapse at a rate of 25% each year.

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Fair Value Measurements

6 Months Ended

Dec. 31, 2013

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

Note 5. Fair Value Measurements

Fair value measurement disclosures utilize a valuation hierarchy for determining the grouping of the inputs used. 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 financial instrument. Level 3 inputs are unobservable inputs based on management’s assumptions used to measure assets and liabilities at fair value. A financial asset or liability classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The Company uses quoted market prices to determine the fair value of its assets and liabilities included in Level 1. When quoted market prices are unobservable, the Company uses quotes from independent pricing vendors based on recent trading activity and other relevant information for similar products. The carrying value of other financial instruments, including cash, accounts receivable, accounts payable and accrued liabilities, approximates fair value due to their short maturities.

The following tables provide the assets and liabilities carried at fair value measured on a recurring basis as of December 31, 2013 and June 30, 2013:

			Fair value measurements at December 31, 2013
	Total carrying value at December 31,		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
	2013		(Level 1)		(Level 2)		(Level 3)
Money market funds	$	23,739	$	23,739	$	—	$	—
Trading securities		644		644		—		—
Foreign currency hedge	$	678		—		678		—
Total	$	25,061	$	24,383	$	678	$	—

				Fair value measurements at June 30, 2013
	Total carrying value at			Quoted prices in active markets		Significant other observable inputs			Significant unobservable inputs
	June 30, 2013			(Level 1)		(Level 2)			(Level 3)
Money market funds	$	23,736		$	23,736	$	—		$	—
Trading securities		662			662		—			—
Foreign currency hedge		(7	)		—		(7	)		—
Total	$	24,391		$	24,398	$	(7	)	$	—

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Accounting Policies, by Policy (Policies)

6 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

Basis Of Presentation And Principles Of Consolidation [Policy Text Block]

Basis of Presentation and Principles of Consolidation
Zygo Corporation is a worldwide supplier of optical metrology instruments, precision optics, and electro-optical design and manufacturing services, serving customers in the semiconductor capital equipment, research, defense, life sciences and industrial markets. The accompanying condensed consolidated financial statements include the accounts of Zygo Corporation and its subsidiaries (“Zygo,” “we,” “us,” “our” or “the Company”). The Company follows accounting principles generally accepted in the United States of America (“US GAAP”). Zygo’s reporting currency is the U.S. dollar. The functional currencies of our foreign subsidiaries are their local currencies; and amounts included in the condensed consolidated statements of operations are translated at the weighted-average exchange rates for the period. Assets and liabilities are translated at period-end exchange rates, and resulting foreign exchange translation adjustments are recorded in the condensed consolidated balance sheets as a component of accumulated other comprehensive income. All transactions and accounts with the subsidiaries are eliminated from the condensed consolidated financial statements. The results of operations for the three and six month periods ended December 31, 2013 are not necessarily indicative of the results to be expected for the full fiscal year.

In management’s opinion, the accompanying condensed consolidated balance sheets and condensed consolidated interim statements of income, comprehensive income, and cash flows include all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of the results of the interim periods. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended June 30, 2013, including items incorporated therein by reference.

New Accounting Pronouncements, Policy [Policy Text Block]

Adoption of new Accounting Pronouncements
In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-10, Derivatives and Hedging: Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes (a consensus of the FASB Emerging Issues Task Force). FASB Accounting Standards Codification (“ASC”) 815 provides guidance on the risks that are permitted to be hedged in a fair value or cash flow hedge. Among those risks for financial assets and financial liabilities is the risk of changes in a hedged item’s fair value or a hedged transaction’s cash flows attributable to changes in the designated benchmark interest rate (referred to as interest rate risk). In the United States, currently only the interest rates on direct Treasury obligations of the U.S. government (“UST”) and, for practical reasons, the London Interbank Offered Rate (“LIBOR”) swap rate are considered benchmark interest rates. The ASU permits the Overnight Index Swap Rate (“OIS”) to be used as a U.S. benchmark interest rate for hedge accounting purposes under FASB ASC 815, in addition to UST and LIBOR. The amendments also remove the restriction on using different benchmark rates for similar hedges. The amendments are effective prospectively for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013. The adoption of this guidance in the first quarter of fiscal 2014 did not have a material impact on our condensed consolidated financial statements and is not expected to have a material impact on future financial statements.

New Accounting Pronouncements Not Yet Adopted [Policy Text Block]

Recent Accounting Guidance Not Yet Adopted
In July 2013, FASB issued ASU No. 2013-11, Income Taxes: Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force). FASB ASC 740, Income Taxes, does not include explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. There is diversity in practice in the presentation of unrecognized tax benefits in those instances. Some entities present unrecognized tax benefits as a liability unless the unrecognized tax benefit is directly associated with a tax position taken in a tax year that results in, or that resulted in, the recognition of a net operating loss or tax credit carryforward for that year, and the net operating loss or tax credit carryforward has not been utilized. Other entities present unrecognized tax benefits as a reduction of a deferred tax asset for a net operating loss or tax credit carryforward in certain circumstances. The objective of ASU 2013-11 is to eliminate that diversity in practice.

Under ASU 2013-11, an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position, or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption is permitted. The effective date for Zygo is the first quarter of fiscal year 2015, unless earlier adopted. We are currently evaluating this guidance but do not expect its adoption to have a material effect on our condensed consolidated financial statements.

Reclassification, Policy [Policy Text Block]

Reclassifications
Certain amounts included in the condensed consolidated balance sheets for the prior year have been reclassified to conform with the current year presentation of “Deferred income taxes” long term liability. In fiscal 2013, “Deferred income taxes” current liability of $123 was reported as a component of other accrued expenses in the condensed consolidated balance sheet. In fiscal 2014, deferred income taxes is presented separately for December 31, 2013 and June 30, 2013.

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Transactions with Shareholder

6 Months Ended

Dec. 31, 2013

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

Note 13: Transactions with Shareholder

Revenue from Canon Inc., a shareholder, and Canon Sales Co. Inc., a distributor of certain of our products in Japan and a subsidiary of Canon Inc. (collectively referred to as “Canon”), amounted to $4,750 and $2,855 (9.9% and 8% of net revenue, respectively) for the three months ended December 31, 2013 and 2012, respectively. For the six months ended December 31, 2013 and 2012, revenues from Canon amounted to $8,008 and $5,668 (9% and 8% of net revenue, respectively). Selling prices of products sold to Canon are based, generally, on the terms customarily given to distributors. At December 31, 2013 and June 30, 2013, there were, in the aggregate, $1,569 and $1,771, respectively, of trade accounts receivable from Canon.

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Property, Plant and Equipment

6 Months Ended

Dec. 31, 2013

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment Disclosure [Text Block]

Note 9: Property, Plant and Equipment

Property, plant and equipment are stated at cost less depreciation and impairments. Maintenance and repairs are charged to expense as incurred. Management evaluates, on an ongoing basis, the carrying value of property, plant and equipment and makes adjustments when impairments are identified. Depreciation is based on the estimated useful lives of the various classes of assets and is computed using the straight-line method. The following table sets forth the components of property, plant and equipment at December 31, 2013 and June 30, 2013:

							Estimated Useful Life (Years)
	December 31, 2013			June 30, 2013			Minimum	Maximum
Land and improvements	$	4,030		$	4,030				—
Building and improvements		26,913			24,665		15	40
Machinery, equipment and office furniture		62,587			60,905		3	8
Leasehold improvements		721			1,009		1	5
Construction in progress		2,234			1,525				—
		96,485			92,134
Accumulated depreciation		(59,294	)		(57,791	)
	$	37,191		$	34,343

Depreciation expense was $1,295 and $1,169 for the three months ended December 31, 2013 and 2012, respectively and $2,530 and $2,344 for the six months ended December 31, 2013 and 2012.

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Derivatives and Hedging Activities (Details) - Schedule of Foreign Currency Derivative designated as hedging instruments (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Jun. 30, 2013
Other Accrued Liabilities [Member]
Derivatives and Hedging Activities (Details) - Schedule of Foreign Currency Derivative designated as hedging instruments [Line Items]
Foreign Currency Derivative designated as hedging instruments	1	1
Balance Sheet Location	$ 736	$ 154
Accumulated Other Comprehensive Income Loss [Member]
Derivatives and Hedging Activities (Details) - Schedule of Foreign Currency Derivative designated as hedging instruments [Line Items]
Balance Sheet Location	$ 227	$ (25)

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Receivables

6 Months Ended

Dec. 31, 2013

Receivables [Abstract]

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

Note 7: Receivables

The following table sets forth the components of accounts receivable at December 31, 2013 and June 30, 2013:

	December 31, 2013			June 30, 2013
Trade and other	$	31,783		$	32,632
Allowance for doubtful accounts		(300	)		(272	)
	$	31,483		$	32,360

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Inventories

6 Months Ended

Dec. 31, 2013

Inventory Disclosure [Abstract]

Inventory Disclosure [Text Block]

Note 8: Inventories

Inventories are stated at the lower of cost (determined on a first-in, first-out basis) or market. The following table sets forth the components of inventories at December 31, 2013 and June 30, 2013:

	December 31, 2013		June 30, 2013
Raw materials and manufactured parts	$	16,032	$	14,411
Work in process		11,813		11,300
Finished goods		3,427		4,474
	$	31,272	$	30,185

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Warranty

6 Months Ended

Dec. 31, 2013

Product Warranties Disclosures [Abstract]

Product Warranty Disclosure [Text Block]

Note 10: Warranty

A limited warranty is provided on our products for periods ranging from 3 to 12 months, and allowances for estimated warranty costs are recorded during the period of sale. The determination of such allowances requires management to make estimates of product return rates and expected costs to repair or replace products under warranty. If actual return rates or repair and replacement costs, or both, differ significantly from management estimates, adjustments to the expense will be required.

The following table is a reconciliation of the beginning and ending balances of the accrued warranty liability, which is included in “Other accrued expenses” in the condensed consolidated balance sheets:

	Six Months Ended December 31,
	2013			2012
Beginning balance	$	647		$	1,188
Reductions for payments made		(258	)		(467	)
Changes in accruals related to pre-existing warranties		(263	)		53
Changes in accruals related to warranties made in the current period		677			287
Ending balance	$	803		$	1,061

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Income Taxes (Details) - Schedule of reconciliation of restated balance sheet to previously reported (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Jun. 30, 2013
Income Taxes (Details) - Schedule of reconciliation of restated balance sheet to previously reported [Line Items]
Deferred income taxes - Asset - Current	$ 9,026	$ 10,490
Total current assets	174,132	165,003
Total assets	225,332	215,113
Other long term liabilities	4,807	3,769
Total liabilities	33,177	31,108
Retained earnings	33,064	26,855
Total shareholders’ equity - Zygo Corporation	190,265	181,962
Total equity	192,155	184,005
Total liabilities and equity	225,332	215,113
Scenario, Previously Reported [Member]
Income Taxes (Details) - Schedule of reconciliation of restated balance sheet to previously reported [Line Items]
Deferred income taxes - Asset - Current		7,261
Total current assets		163,633
Deferred income taxes - Asset - Long Term		14,967
Total assets		218,220
Other long term liabilities		4,997
Total liabilities		32,336
Additional paid-in capital		180,324
Retained earnings		30,104
Total shareholders’ equity - Zygo Corporation		183,841
Total equity		185,884
Total liabilities and equity		218,220
Restatement Adjustment [Member]
Income Taxes (Details) - Schedule of reconciliation of restated balance sheet to previously reported [Line Items]
Deferred income taxes - Asset - Current		8,631
Total current assets		165,003
Deferred income taxes - Asset - Long Term		10,490
Total assets		215,113
Other long term liabilities		3,769
Total liabilities		31,108
Additional paid-in capital		181,694
Retained earnings		26,855
Total shareholders’ equity - Zygo Corporation		181,962
Total equity		184,005
Total liabilities and equity		$ 215,113

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Commitments and Contingencies (Details) (USD $) In Thousands, unless otherwise specified	1 Months Ended
	Nov. 30, 2010	Nov. 12, 2010
Commitments and Contingencies Disclosure [Abstract]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Assets		$ 12,475
Payments to Acquire Businesses, Gross	7,142
Business Combination, Consideration Transferred, Liabilities Incurred	5,333
Business Acquisition, Cost Of Acquired Entity, Liabilities Incurred, Discount Factor		14.00%
Business Acquisition, Cost of Acquired Entity, Current Liabilities Incurred		1,127
Business Acquisition, Cost of Acquired Entity, Long Term Liabilities Incurred		$ 4,206

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Income Taxes (Details) - Schedule of reconciliation of restated income statement to previously reported (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012
Income Taxes (Details) - Schedule of reconciliation of restated income statement to previously reported [Line Items]
Income tax expense (in Dollars)	$ (2,135)	$ (1,064)	$ (3,540)	$ (3,106)
Net Income attributable to Zygo Corporation (in Dollars)	4,054	838	6,209	2,617
Basic Earnings per Share	$ 0.22	$ 0.05	$ 0.33	$ 0.14
Diluted Earnings Per Share	$ 0.21	$ 0.04	$ 0.32	$ 0.14
Scenario, Previously Reported [Member]
Income Taxes (Details) - Schedule of reconciliation of restated income statement to previously reported [Line Items]
Income tax expense (in Dollars)		(323)		(1,756)
Net Income attributable to Zygo Corporation (in Dollars)		1,579		3,967
Basic Earnings per Share		$ 0.09		$ 0.22
Diluted Earnings Per Share		$ 0.08		$ 0.21
Restatement Adjustment [Member]
Income Taxes (Details) - Schedule of reconciliation of restated income statement to previously reported [Line Items]
Income tax expense (in Dollars)		(1,064)		(3,106)
Net Income attributable to Zygo Corporation (in Dollars)		$ 838		$ 2,617
Basic Earnings per Share		$ 0.05		$ 0.14
Diluted Earnings Per Share		$ 0.04		$ 0.14

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Segment and Major Customer Information (Tables)

6 Months Ended

Dec. 31, 2013

Segment Reporting [Abstract]

Schedule of Segment Reporting Information, by Segment [Table Text Block]

The following table sets forth segment net revenue, gross profit and gross margin for the three and six months ended December 31, 2013 and 2012:

	Three Months Ended December 31,						Six Months Ended December 31,
	2013			2012			2013			2012
Metrology Solutions
Net revenue	$	33,875		$	21,416		$	60,319		$	47,294
Gross profit	$	20,552		$	11,595		$	35,169		$	25,928
Gross margin		61	%		54	%		58	%		55	%
Optical Systems
Net revenue	$	14,286		$	13,219		$	27,960		$	27,547
Gross profit	$	4,244		$	3,688		$	7,964		$	6,848
Gross margin		30	%		28	%		28	%		25	%
Total
Net revenue	$	48,161		$	34,635		$	88,279		$	74,841
Gross profit	$	24,796		$	15,283		$	43,133		$	32,776
Gross margin		51	%		44	%		49	%		44	%

Schedule of Revenue from External Customers and Long-Lived Assets, by Geographical Areas [Table Text Block]

The following table sets forth revenue by geographic area:

	Three Months Ended December 31,				Six Months Ended December 31,
	2013		2012		2013		2012
Americas	$	20,850	$	19,755	$	39,944	$	38,618
Japan		16,710		5,336		25,511		11,667
China		4,104		3,498		7,852		11,036
Europe		3,790		4,397		9,061		9,219
Pacific Rim		2,707		1,649		5,911		4,301
Total	$	48,161	$	34,635	$	88,279	$	74,841

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Intangible Assets (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012
Intangible Assets (Details) [Line Items]
Amortization of Intangible Assets	$ 199	$ 214	$ 398	$ 439
Minimum [Member]
Intangible Assets (Details) [Line Items]
Finite-Lived Intangible Asset, Useful Life			3 years
Maximum [Member]
Intangible Assets (Details) [Line Items]
Finite-Lived Intangible Asset, Useful Life			17 years

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Income Taxes

6 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 15: Income Taxes

	Three Months Ended December 31,										Six Months Ended December 31,
	2013					2012					2013					2012
	Amount		Tax Rate %			Amount		Tax Rate %			Amount		Tax Rate %			Amount		Tax Rate %
Income tax expense	$	2,135		34	%	$	1,064		53	%	$	3,540		35	%	$	3,106		48	%

Income tax expense for the six months ended December 31, 2013 resulted from an annual effective tax rate of 39%, reduced by recording foreign tax credits upon completion of a full foreign tax credit study. Income tax expense for the six months ended December 31, 2012 did not include federal research and development credits due to expiration of the credit, which was not renewed until the third quarter.

The Company issubject to U.S. federal income tax, as well as income tax in multiple state and foreign jurisdictions. The Company is no longer subject to U.S. federal income tax audit or tax adjustments for years prior to June 30, 2007, except to the extent there are NOLs and credits arising from any of those years. Those years are subject to audit at the time the NOLs or credits available from those years are utilized. The Company is no longer subject to state and foreign income tax audit or tax adjustments for years prior to June 30, 2006.

In the normal course of business, we analyze for uncertain tax positions and adjust unrecognized tax benefits or liabilities accordingly. For the three and six months ended December 31, 2013, we recognized additional liabilities for uncertain tax positions of $148 and $192, respectively. We are not aware of any tax positions that would create a material adjustment to unrecognized tax benefits during the next twelve months.

As previously reported, the Company has been performing a review of its tax accounts, assisted by outside consultants as appropriate. As a result of that review, the Company reported in its earnings press release for the second quarter of fiscal 2014 that, subsequent to the issuance of the financial information for the period ended December 31, 2012, the Company’s management identified certain errors in the Company’s accounting for income taxes. Upon completion of this review, the Company identified two errors in addition to the errors reported in its earnings press release, all of which the Company determined to be immaterial to the financial information:

(1) An overstatement in recorded tax expense related to certain transactions with foreign subsidiaries, partially offset by an understatement in tax expense recorded in a reduction of reserves against uncertain tax positions related to transfer pricing. The Company’s deferred tax assets were understated for tax benefits that had not historically been captured from transactions between Zygo and their foreign subsidiaries, primarily related to its German subsidiary ZygoLot. For the six month period ended December 31, 2012, the correction of the two errors aggregated to a decrease in income tax expense of $0.7 million with a corresponding decrease in deferred tax liabilities. The three month period ended December 31, 2012 was not affected by this adjustment as all of the activity related to the first quarter of fiscal 2013.

(2)

An overstatement of recorded state research and development tax credits, which are available for use to offset future state taxes on capital. Zygo had incorrectly recorded these State credits within its tax accounts for States where Zygo pays tax on capital, not on income. As a result, the previously recorded deferred tax assets related to these credits was reversed. For three and six months ended December 31, 2012, the correction of the error resulted in an increase to income tax expense of $0.2 million and $0.4 million, respectively, with a corresponding decrease to deferred tax assets.

(3)

An error in accounting for the tax basis of fixed assets acquired in the Company’s acquisition of the Richmond, California operations in November 2010. The tax basis of the fixed assets acquired that was used in the calculation of the deferred tax accounts since the acquisition date was overstated and as a result understated the associated deferred tax liability. The calculated tax basis did not include a basis adjustment for a future discount liability recorded as part of the original acquisition. For three and six months ended December 31, 2012, the correction of the error resulted in an increase in income tax expense of $0.5 million and $1.7 million, respectively, with a corresponding decrease in deferred tax assets.

(4) An understatement in the recording of the Company’s net operating loss carryforward related to excess tax benefits on shared based compensation. The unrecognized excess tax benefits in certain years were not recorded in accordance with the same methodology in which the Company had elected on the date of adoption of FAS 123R. The correction of the error resulted in an increase to the deferred tax asset related to the net operating loss carryforward and an increase to additional paid-in capital of $1.4 million as of June 30, 2013.

(5) An error in the recognition of uncertain tax positions against a net operating loss carryforward related to an acquisition. The Company’s uncertain tax positions were understated by $1.1 million and therefore were corrected to reflect the uncertainty on the availability of an acquired net operating loss carryforward. As of June 30, 2013, the correction of the error resulted in an increase in other long-term liabilities of $1.1 million with a corresponding decrease in retained earnings.

The Company’s management has evaluated these errors on the previously reported financial information on the basis of quantitative and qualitative considerations and does not believe the errors are material to the previously issued financial information. However, because correction of these amounts in the current period would be significant to the current statement of operations, they have been corrected by immaterial restatement of the previously reported amounts. The table below provides a reconciliation of the restated balances to the amounts previously reported:

(Amounts in thousands, except per share amounts)

Fiscal 2013	Six Months Ended December 31, 2012						Three Months Ended December 31, 2012
Condensed Consolidated Statements of Operations	As Previously Reported			As Restated			As Previously Reported			As Restated
Income tax expense	$	(1,756	)	$	(3,106	)	$	(323	)	$	(1,064	)
Net Income attributable to Zygo Corporation		3,967			2,617			1,579			838
Basic Earnings per Share	$	0.22		$	0.14		$	0.09		$	0.05
Diluted Earnings Per Share	$	0.21		$	0.14		$	0.08		$	0.04

Fiscal 2013	At June 30, 2013
Condensed Consolidated Balance Sheet	As Previously Reported		As Restated
Deferred income taxes - Asset - Current	$	7,261	$	8,631
Total current assets	$	163,633	$	165,003
Deferred income taxes - Asset - Long Term	$	14,967	$	10,490
Total assets	$	218,220	$	215,113
Other long term liabilities	$	4,997	$	3,769
Total liabilities	$	32,336	$	31,108
Additional paid-in capital	$	180,324	$	181,694
Retained earnings	$	30,104	$	26,855
Total shareholders’ equity - Zygo Corporation	$	183,841	$	181,962
Total equity	$	185,884	$	184,005
Total liabilities and equity	$	218,220	$	215,113

Fiscal 2013	Six Months Ended December 31, 2012
Condensed Consolidated Statement of Cash Flows	As Previously Reported			As Restated
Cash provided by operating activites - Net income including noncontrolling interest	$	4,676		$	3,326
Adjustments to reconcile net income to cash - Deferred income taxes	$	(2,105	)	$	(939	)
Adjustments to reconcile net income to cash - Accounts payable, accrued expenses and taxes payable	$	(1,575	)	$	(1,391	)

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Marketable Securities (Tables)

6 Months Ended

Dec. 31, 2013

Investments, Debt and Equity Securities [Abstract]

Trading Securities [Table Text Block]

The following table sets forth the beginning balance at July 1, 2013 and 2012, of gross unrealized gains and losses, contributions, redemptions and fair value of trading securities at December 31, 2013 and 2012:

	Balance Beginning of Fiscal Year		Gross Unrealized Gains		Gross Unrealized Losses		Contributions		Redemptions			Ending Balance
December 31, 2013 Mutual Fund	$	662	$	90	$	—	$	—	$	(108	)	$	644
December 31, 2012 Mutual Fund	$	729	$	42	$	—	$	—	$	(88	)	$	683

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Warranty (Details)	6 Months Ended
	Dec. 31, 2013
Warranty (Details) [Line Items]
Standard Product Warranty Description	A limited warranty is provided on our products for periods ranging from 3 to 12 months, and allowances for estimated warranty costs are recorded during the period of sale. The determination of such allowances requires management to make estimates of product return rates and expected costs to repair or replace products under warranty. If actual return rates or repair and replacement costs, or both, differ significantly from management estimates, adjustments to the expense will be required.
Minimum [Member]
Warranty (Details) [Line Items]
Product Warranty Period	3 months
Maximum [Member]
Warranty (Details) [Line Items]
Product Warranty Period	12 months

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Marketable Securities (Details) - Schedule of trading securities (Mutual Fund [Member], USD $) In Thousands, unless otherwise specified	6 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Mutual Fund [Member]
Schedule of Trading Securities and Other Trading Assets [Line Items]
Balance Beginning of Fiscal Year	$ 662	$ 729
Gross Unrealized Gains	90	42
Redemptions	(108)	(88)
Ending Balance	$ 644	$ 683

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parentheticals) (USD $) In Thousands, except Share data, unless otherwise specified	Dec. 31, 2013	Jun. 30, 2013
Allowance for doubtful accounts (in Dollars)	$ 300	$ 272
Common stock, par value (in Dollars per share)	$ 0.10	$ 0.10
Common stock, shares authorized	40,000,000	40,000,000
Common stock, shares issued	21,306,223	20,858,158
Common stock, shares outstanding	18,870,502	18,532,623
Treasury stock, shares	2,435,721	2,325,535

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Marketable Securities

6 Months Ended

Dec. 31, 2013

Investments, Debt and Equity Securities [Abstract]

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

Note 4: Marketable Securities

Marketable securities as of December 31, 2013 consisted of a mutual fund investment comprised primarily of corporate securities classified as a trading security corresponding to elections made in our deferred compensation program. Dividend and interest income are recognized when earned. Straight-line amortization related to discounts and premiums on the purchase of marketable securities is recorded in interest income. Realized gains and losses are included in net income and are derived using the specific identification method for determining the cost of securities sold.

We make quarterly distributions in accordance with the deferred compensation program agreement. The following table sets forth the beginning balance at July 1, 2013 and 2012, of gross unrealized gains and losses, contributions, redemptions and fair value of trading securities at December 31, 2013 and 2012:

	Balance Beginning of Fiscal Year		Gross Unrealized Gains		Gross Unrealized Losses		Contributions		Redemptions			Ending Balance
December 31, 2013 Mutual Fund	$	662	$	90	$	—	$	—	$	(108	)	$	644
December 31, 2012 Mutual Fund	$	729	$	42	$	—	$	—	$	(88	)	$	683

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Derivatives and Hedging Activities (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012
Derivatives and Hedging Activities (Details) [Line Items]
Foreign Currency Transaction Gain (Loss), Unrealized	$ (22)	$ 244	$ (134)	$ 201
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI on Derivatives, before Tax	305		239
Not Designated as Hedging Instrument [Member] | Foreign Exchange Forward [Member]
Derivatives and Hedging Activities (Details) [Line Items]
Derivative, Number of Instruments Held	7		7
Derivative, Notional Amount	1,870		1,870
Designated as Hedging Instrument [Member] | Foreign Exchange Forward [Member]
Derivatives and Hedging Activities (Details) [Line Items]
Derivative, Number of Instruments Held	1		1
Derivative, Notional Amount	13,586		13,586
Designated as Hedging Instrument [Member]
Derivatives and Hedging Activities (Details) [Line Items]
Unrealized Gain (Loss) on Cash Flow Hedging Instruments	16		63
Unrealized Loss on Cash Flow designated Portion of Hedge	562		530
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI on Derivatives, before Tax	$ 305		$ 239

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Fair Value Measurements (Tables)

6 Months Ended

Dec. 31, 2013

Fair Value Disclosures [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

The following tables provide the assets and liabilities carried at fair value measured on a recurring basis as of December 31, 2013 and June 30, 2013:

			Fair value measurements at December 31, 2013
	Total carrying value at December 31,		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
	2013		(Level 1)		(Level 2)		(Level 3)
Money market funds	$	23,739	$	23,739	$	—	$	—
Trading securities		644		644		—		—
Foreign currency hedge	$	678		—		678		—
Total	$	25,061	$	24,383	$	678	$	—

				Fair value measurements at June 30, 2013
	Total carrying value at			Quoted prices in active markets		Significant other observable inputs			Significant unobservable inputs
	June 30, 2013			(Level 1)		(Level 2)			(Level 3)
Money market funds	$	23,736		$	23,736	$	—		$	—
Trading securities		662			662		—			—
Foreign currency hedge		(7	)		—		(7	)		—
Total	$	24,391		$	24,398	$	(7	)	$	—

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Weighted Average Shares Outstanding (Details)	3 Months Ended		6 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013	Dec. 31, 2012
Earnings Per Share [Abstract]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	391,894	332,023	382,325	214,383

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Derivatives and Hedging Activities

6 Months Ended

Dec. 31, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Note 14: Derivatives and Hedging Activities

We enter into foreign currency forward contracts to reduce the impact of adverse fluctuations on earnings associated with foreign currency exchange rate changes. We do not enter into any derivative transactions for speculative purposes.

Most derivative contracts are used as hedges but do not qualify and are not designated as hedging instruments under authoritative guidance on accounting for derivative instruments and hedging activities. These non-qualifying derivative contracts are entered into for periods consistent with the currency transaction exposures from the point of shipment to the point of collection, generally three to six months, and are marked-to-market with changes in fair value recorded in the condensed consolidated statements of operations in Miscellaneous income (expense), net. Any gains and losses on the fair value of these derivative contracts would largely offset corresponding foreign currency losses and gains on the underlying transactions.

In the case of derivative contracts used as hedges for significant orders with shipping dates that may extend more than six months in the future, we may designate those derivative contracts as cash flow hedges that qualify as hedging instruments under authoritative guidance on accounting for derivative instruments and hedging activities. These qualifying derivative contracts are entered into for periods consistent with the currency transaction exposures from the order date through shipment and collection. For these cash flow hedges, any gains or losses on the fair value of these contracts would be charged to the account accumulated other comprehensive income (“AOCI”) and subsequently relieved to net revenue upon shipment to the customer. In addition, at the point of shipment to the customer, the cash flow hedge will be de-designated, with any future gains or losses from that point forward charged to Miscellaneous income (expense), net. Those gains and losses would be expected to largely offset corresponding losses and gains on the underlying receivable transactions. In the case where a designated cash flow hedge is accounted for under the spot method, a portion of the adjustment that would otherwise be accounted for in AOCI would be charged to Miscellaneous income (expense), net and would not be offset by any corresponding gains or losses on an underlying transaction up to the point of shipment or revenue recognition.

Derivatives not designated as hedging instruments

As of December 31, 2013, we had seven foreign currency forward contracts outstanding involving our German operations with notional amounts aggregating $1,870. These foreign currency hedges are not designated as hedging instruments. Net unrealized gains (losses) recognized from foreign currency forward contracts for the three months ended December 31, 2013 and 2012 were ($22) and $244, respectively. For the six months ended December 31, 2013 and 2012, net unrealized gains (losses) recognized from foreign currency forward contracts were ($134) and $201, respectively. These gains and losses are substantially offset by foreign exchange losses and gains on intercompany balances recorded by our subsidiaries and were included in Miscellaneous income (expense), net in the condensed consolidated statements of operations.

The following table summarizes the fair value of derivative instruments as of December 31, 2013 and June 30, 2013.

Derivatives not designated as hedging instruments			Balance sheet location
December 31, 2013	Number of foreign exchange contracts:	7	Other accrued expenses	$58
June 30, 2013	Number of foreign exchange contracts:	11	Prepaid expenses, prepaid taxes and other current assets	$147

Derivative designated as a hedging instrument.

As of December 31, 2013, we had one foreign currency forward contract outstanding involving our Japanese operations with a notional amount of $13,586 to protect against foreign currency fluctuations for current transactions and longer term orders denominated in Japanese Yen.

This foreign currency hedge is designated as a hedging instrument qualifying as a cash flow hedge utilizing a window forward approach used in situations where multiple shipments occur over a period of time. The cash flow hedge is in effect for the period of April 2013 through June 2014. The cash flow hedge is evaluated quarterly to ensure that hedge accounting treatment still applies.

The window forward approach provides for the use of the spot method to determine the amount to be included in AOCI. This method requires current period expensing of the impact in changes to the forward rates while allowing the changes in the spot rate to be recorded in AOCI. At the time the various shipments occur, AOCI is relieved for a pro-rata amount of the basis which is reclassified to net revenue in the condensed consolidated statements of operations. Concurrently, that portion of the hedge related to current shipments is de-designated as a cash flow hedge for accounting purposes and any future changes in fair value related to that portion of the hedge is included in Miscellaneous income (expense), net in the condensed consolidated statements of operations. These gains and losses from the de-designated portion of the hedge are substantially offset by foreign exchange losses and gains on balances recorded by our subsidiary.

Net unrealized gains (losses) recognized from the ineffective portion of the cash flow hedge for the three and six months ended December 31, 2013 was $16 and $63, respectively, and the de-designated portions of the hedge for the same periods were $562 and $530, respectively, included in Miscellaneous income (expense), net in the condensed consolidated statements of operations. Amounts reclassified from AOCI to revenue based on shipments to customers resulted in increases in net revenue of $305 and $239 for the three and six months ended December 31, 2013, respectively. The remaining amounts in AOCI are forecasted to be reclassified into net revenue over the next six months.

The following table summarizes the foreign exchange cash flow hedge value as of December 31, 2013 and June 30, 2013:

Foreign currency derivative designated as hedging instruments			Balance sheet location
December 31, 2013	Number of foreign exchange contracts:	1	Derivative asset	$736
			Accumulated other comprehensive income	$227
June 30, 2013	Number of foreign exchange contracts:	1	Other accrued expenses	$154
			Accumulated other comprehensive loss	($25	)