they have enabled us to maintain lower cost levels until such time that the positive trends in end market demand for our products that we saw in the third quarter of 2009 become sustainable.
Our analysis presented below is organized to provide the information we believe will be instructive for understanding our historical performance and relevant trends going forward. However, this discussion should be read in conjunction with our consolidated financial statements in Part I Item 1 of this report, including the notes thereto.
Results of Operations
SALES
The following tables summarize net sales, and percentages of net sales, by market type for each of the three and nine months ended September 30, 2009 and 2008:

                                    Three Months Ended September 30,             Increase/                                 Nine Months Ended September 30,              Increase/
                                      2009                    2008              (Decrease)          % Change                2009                     2008              (Decrease)          % Change
                                                         (In thousands)                                                                         (In thousands)
Product:
Semiconductor capital
equipment                        $        20,808         $        28,211        $    (7,403 )           (26.2 )%      $         42,577         $        110,282        $   (67,705 )           (61.4 )%
Non-semiconductor capital
equipment                                 20,281                  40,702            (20,421 )           (50.2 )                 50,183                  104,172            (53,989 )           (51.9 )

Total Product                             41,089                  68,913            (27,824 )           (40.4 )                 92,760                  214,454           (121,694 )           (56.8 )
Global Support                            10,673                  15,597             (4,924 )           (31.6 )                 27,196                   46,939            (19,743 )           (42.1 )

Total Sales                      $        51,762         $        84,510        $   (32,748 )           (38.8 )%      $        119,956         $        261,393        $  (141,437 )           (54.1 )%


                                    Three Months Ended September 30,                                                       Nine Months Ended September 30,
                                      2009                    2008                                                          2009                     2008
Product:
Semiconductor capital
equipment                                   40.2 %                  33.4 %                                                        35.4 %                   42.2 %
Non-semiconductor capital
equipment                                   39.2 %                  48.2 %                                                        41.8 %                   39.8 %

Total Product                               79.4 %                  81.6 %                                                        77.2 %                   82.0 %
Global Support                              20.6 %                  18.4 %                                                        22.8 %                   18.0 %

Total Sales                                100.0 %                 100.0 %                                                       100.0 %                  100.0 %

Overall sales for the three months ended September 30, 2009 were $51.8 million, representing a 38.8% decrease from the three months ended September 30, 2008. Overall sales for the nine months ended September 30, 2009 were $120.0 million, representing a 54.1% decrease from the nine months ended September 30, 2008.
Product sales for the three months ended September 30, 2009 were $41.1 million, representing a 40.4% decrease from the three months ended September 30, 2008. Product sales for the nine months ended September 30, 2009 were $92.8 million, representing a 56.8% decrease from the nine months ended September 30, 2008. The decrease in product sales was due to a significant reduction in worldwide demand from our end markets which significantly reduced the need for capacity expansion in such markets.
Sales to the semiconductor capital equipment market were $20.8 million, or 40.2% of total sales, for the three months ended September 30, 2009, as compared to $28.2 million, or 33.4% of total sales, for the three months ended September 30, 2008 and $42.6 million, or 35.4% of total sales for the nine months ended September 30, 2009, as compared to $110.3 million, or 42.2% of total sales, for the nine months ended September 30, 2008. Demand in the semiconductor capital equipment market fell significantly as end market demand for products that include semiconductors fell in the wake of the global economic crisis. The drop in demand reduced factory utilization and significantly reduced the need for semiconductor fab expansion. The semiconductor capital equipment market was severely affected by these developments and, consequently, demand for our products in these markets decreased from year ago levels.
As described above, there were positive trends in semiconductor demand in the third quarter of 2009 and we anticipate similar, if not higher, levels of sales to the semiconductor capital equipment market in the fourth quarter of 2009.
Product sales to our non-semiconductor equipment markets declined year over year, accounting for $20.3 million, or 39.2%, of total sales, for the three months ended September 30, 2009, as compared to $40.7 million, or 48.2% of total sales, for the three months ended September 30, 2008. Additionally, sales to our non-semiconductor equipment markets were $50.2 million, or 41.8% of total sales, for the nine months ended September 30, 2009, as compared to $104.2 million, or 39.8% of total sales, for the nine months ended September 30, 2008. Our non-semiconductor equipment markets were also adversely affected by a number of the pervasive factors previously mentioned, such as the credit constraints in the financial markets and the negative trends in consumer spending. The drop in end market demand reduced factory utilization and significantly reduced the need for capacity expansion in our non-

semiconductor markets. The markets that comprise our non-semiconductor equipment markets include solar, flat panel display, data storage, architectural glass, and other industrial thin-film manufacturing equipment. Our customers in these markets, other than the solar market, are predominantly large original equipment manufacturers (OEM's) for new equipment. Our customers in the solar market are predominantly large system integrators, independent power producers and public utilities.
Over the past three years, the solar market has been growing the fastest of our non-semiconductor equipment markets; however, product sales to this market were adversely affected by the weakened global economy and the financial credit crisis which began in the second half of 2008 and has continued through most of 2009. Solar panel manufacturers installed substantial panel manufacturing capacity over the past three years, and as a result of declining panel sales caused in part by the global recession, built significant inventory. The majority of panel manufacturers must work through their current inventory levels before their factory utilization will be at a point where they will need to expand capacity. Sales to customers in the solar market decreased to $6.5 million, or 12.5% of total sales, for the three months ended September 30, 2009 as compared to $19.3 million, or 22.8% of total sales, for the three months ended September 30, 2008. Similarly, sales to customers in the solar market decreased to $18.9 million, or 15.8% of total sales, for the nine months ended September 30, 2009, as compared to $40.2 million, or 15.4% of total sales, for nine months ended September 30, 2008. Our products are used in the thin-film deposition process for solar cell production, such as amorphous silicon, polysilicon, amorphous-microcrystalline silicon, cadmium telluride (CdTe), copper indium gallium selenide (CIGS), copper indium selenide (CIS) and cadmium telluride. Sales of our Solaron® solar inverter, which converts DC power generated by the solar panel to AC power, are included in sales to the solar market.
Although we have experienced continued success in our non-semiconductor equipment business, just as in our semiconductor business, demand for our products is driven by requirements for capacity expansion in each of the non-semiconductor markets we serve. We have experienced near term weakness throughout 2009 due to the softness in the global economy and have limited visibility as to whether this weakness will continue in 2010. As discussed above, however, we have seen signs of positive trends in our non-semiconductor business as well and anticipate a continued shift in our business towards our non-semiconductor equipment markets as we continue to invest in new technology and products for the solar market.
Sales from our global support business were $10.7 million, or 20.6% of total sales, for the three months ended September 30, 2009 and $27.2 million, or 22.8% of total sales, for the nine months ended September 30, 2009. This was a decrease from $15.6 million, or 18.4% of total sales, for the three months ended September 30, 2008 and $46.9 million, or 18.0% of total sales, for the nine months ended September 30, 2008. The decrease in absolute dollars resulted in large part from a continuing practice by our customers of utilizing spare parts inventory and idle equipment for spare parts in efforts to conserve cash as opposed to repairing malfunctioning or worn parts. However, we did experience a 21.6% increase in global support sales in the third quarter of 2009 as compared to the second quarter of 2009. This is an early indication that factory utilization is beginning to improve and that customers no longer have enough inventory to maintain their production lines. As a result, we anticipate our global support business to experience similar, if not higher, levels of sales in the fourth quarter of 2009.
GROSS PROFIT
Our gross profit was $15.6 million, or 30.1% of sales, for the three months ended September 30, 2009, as compared to $35.3 million, or 41.7% of sales for the three months ended September 30, 2008. Similarly, gross profit decreased to $29.9 million, or 24.9% of sales, for the nine months ended September 30, 2009, from $106.4 million, or 40.7% of sales, for the nine months ended September 30, 2008. The large decrease in both periods was due to an overall decrease in production volume related to the weakening economy which resulted in a lack of absorption of our factory costs therefore reducing our gross margin. In response to the decrease in production volume we reduced our overall manufacturing costs by reducing fixed production and overhead costs including personnel costs and discretionary spending through the cost-cutting activities described above.
The decrease in gross profit of $19.7 million in the three months ended September 30, 2009 as compared to the same period in 2008 was driven primarily by lower sales volume. Production and overhead personnel cost reductions decreased by $2.2 million, travel decreased $0.3 million and professional fees decreased $0.2 million. The decrease in gross profit of $76.5 million in the nine months ended September 30, 2009 as compared to the same period in 2008 was almost exclusively driven by lower sales volume. Production and overhead personnel costs decreased $6.5 million, travel decreased $0.7 million and professional fees decreased $0.5 million.
Maintaining lower cost levels has allowed us to improve our gross margin percentage in the current quarter as compared to the first and second quarters of 2009 on higher demand. Although we currently have excess manufacturing capacity related to buildings, machinery and unabsorbed overhead expenses, we do anticipate continued improvement in our gross profit and gross margin percentage in the fourth quarter of 2009.

RESEARCH AND DEVELOPMENT EXPENSES
The markets we serve constantly present us with opportunities to develop our products for new or emerging applications and require technological changes driving for higher performance, lower cost, and other attributes that will advance our customers' products. We believe that continued and timely development of new and differentiated products, as well as enhancements to existing products to support customer requirements, is critical for us to compete in the markets we serve. Accordingly, we devote significant personnel and financial resources to the development of new products and the enhancement of existing products, and we expect these investments to continue. Since inception, all of our research and development costs have been expensed as incurred.
Research and development expenses for the three months ended September 30, 2009 were $10.2 million, or 19.7% of sales, as compared to $14.7 million, or 17.4% of sales, for the three months ended September 30, 2008. Similarly, research and development expenses decreased to $32.0 million, or 26.7% of sales, for the nine months ended September 30, 2009, from $41.5 million, or 15.9% of sales, for the nine months ended September 30, 2008.
The decrease in research and development expenses of $4.5 million in the three months ended September 30, 2009 as compared to the same period in 2008 was driven primarily by decreases of $3.2 million in personnel costs, $1,0 million in engineering material and $0.2 million in travel costs. The decrease in research and development expenses of $9.5 million in the nine months ended September 30, 2009 as compared to the same period in 2008 was driven primarily by decreases of $7.2 million in personnel costs, $1.7 million in engineering material, and $0.3 million in travel costs, The decrease in engineering material in the nine months ended September 30, 2009 was offset by an approximate $0.8 million charge for excess and obsolete engineering inventory, for which management does not believe there will be utilizable demand. Overall, the decreases in material costs were due to more effective spending controls related to engineering projects.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling expenses are comprised of all global sales and marketing activities which include personnel, trade shows, advertising, third-party sales representative commissions and other selling and marketing activities. General and administrative expenses are comprised of our worldwide corporate, legal, patent, tax, financial, governance, administrative, information systems and human resource functions in addition to our general management.
Selling, general and administrative ("SG&A") expenses for the three months ended September 30, 2009 were $10.8 million, or 20.8% of sales, as compared to $14.3 million, or 17.0% of sales, in the three months ended September 30, 2008. Similarly, SG&A expenses decreased to $30.3 million, or 25.3% of sales, for the nine months ended September 30, 2009, from $42.8 million, or 16.4% of sales, for the nine months ended September 30, 2008.
The decrease in SG&A expenses of $3.5 million in the three months ended September 30, 2009 as compared to the same period in 2008 was primarily driven by decreases of $2.1 million in personnel costs, $1.1 million in professional fees and $0.5 million in travel costs, offset by an increase to bad debt expense of $0.3 million. The decrease in SG&A expenses of $12.5 million in the nine months ended September 30, 2009 as compared to the same period in 2008 was primarily driven by decreases of $9.7 million in personnel costs, $4.0 million in professional fees and $1.8 million in travel costs, offset by a $1.9 million increase in bad debt expense. The increases in bad debt expense in both periods are a result of certain customers' deteriorating financial condition. While we believe that our allowance for doubtful accounts at September 30, 2009 is adequate, we will continue to closely monitor customer liquidity and other economic conditions. .
GOODWILL IMPAIRMENT CHARGE
We recorded a non-cash goodwill impairment charge in the amount of $63.3 million during the nine months ended September 30, 2009 based upon the results of our impairment test performed during the first quarter of 2009. For further discussion of the goodwill impairment charge recorded, see Note 8 - "Goodwill, Purchased Technology and Other Intangible Assets" to the Condensed Consolidated Financial Statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates - Goodwill Impairment."
RESTRUCTURING CHARGES
As previously discussed, we implemented cost reduction efforts in response to deteriorating economic conditions and weakening demand from our end markets. As a result, we incurred restructuring costs of $0.2 million and $0.5 million for the three months ended

September 30, 2009 and 2008, respectively and $4.4 million and $1.6 million for the nine months ended September 30, 2009 and 2008, respectively. The costs incurred were primarily severance and benefits related to reductions in personnel. We continue to look for ways to make our global workforce more efficient and effective, which may lead to additional cost reduction activities in the future.
OTHER INCOME, NET
Other income, net consists primarily of investment income and expense and foreign exchange gains and losses. Other income, net was $0.5 million for the three months ended September 30, 2009, as compared to $0.4 million for the three months ended September 30, 2008. This increase was due to a foreign exchange loss that occurred in the three months ended September 30, 2008 caused by the strengthening of the Japanese Yen and Euro against the United States Dollar. The impact of foreign exchange on our results of operation was immaterial in the three months ended September 30, 2009. Other income, net was $1.4 million for the nine months ended September 30, 2009, as compared to $2.3 million for the nine months ended September 30, 2008. This decrease was due to a significant reduction in interest rates earned on our cash and investments due to market conditions.
PROVISION (BENEFIT) FOR INCOME TAXES
During 2008, based on our 2008 operating results and projection of future operating results within the United States, our management evaluated the recoverability of our deferred tax assets in the United States and concluded a portion of our United States deferred tax assets were not recoverable. As such, an increase to the valuation allowance of $18.0 million was recorded during the quarter ended December 31, 2008.
For the three and nine months ended September 30, 2009, we sustained further losses in the United States and, as a result, management determined that an increase to the valuation allowance of $17.0 million was necessary since management has determined that we are not likely to utilize the benefits of the associated deferred tax assets. The ultimate realization of our overall deferred tax assets is dependent upon the generation of approximately $111.6 million of future taxable income in the United States, the timing and amount of which is uncertain. We assess the recoverability of our net deferred tax assets on a quarterly basis. If our expectation of future realization of our deferred tax assets changes, we will adjust the valuation allowance with a corresponding change in income tax expense in such period.
We recorded an income tax provision for the three months ended September 30, 2009 of $3.2 million, which related to taxable income in our foreign jurisdictions as well as additional domestic tax expense of $1.3 million that resulted from an adjustment necessary to reconcile our 2008 year-end tax provision with our 2008 Federal tax return that was filed on September 15, 2009. The domestic tax adjustment related to a decision not to utilize certain research and development credits in an effort to preserve their deductibility against future taxable income.
The tax expense for the three months ended September 30, 2009 represented an effective tax rate of 60.5% as compared to an effective tax rate of 26.6% for the three months ended September 30, 2008. The increase in the current three month effective tax rate as compared to the rate for the three months ended September 30, 2008, resulted primarily from lower taxable income in our foreign jurisdictions, offset by the recording of the additional valuation allowance discussed above on continued losses in the United States. Additionally, we incurred a charge for the impairment of goodwill during the current year, which is non-deductible for United States tax purposes.
Our future effective income tax rate depends on various factors, such as tax legislation and the geographic composition of our pre-tax income. We carefully monitor these factors and timely adjust our effective income tax rate accordingly.
Liquidity and Capital Resources
Our primary sources of liquidity are our available cash levels and available liquidity from our Credit Line Agreement. We utilize these capital resources to make capital expenditures primarily for our operational needs, investment in technology applications and tools to further develop our products and for other general corporate purposes, including the funding of possible acquisitions. In future periods, we intend similar uses of these funds.
During the nine months ended September 30, 2009, we generated $25.0 million in cash from net changes in marketable securities and $0.3 million of proceeds from stock option exercises and used $2.8 million for capital expenditures and $0.3 million for operating

activities, resulting in a $23.2 million increase in available cash (including $1.0 million of favorable effects of international currency exchange rates on cash). . . .