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|
|||
Note 1 - Basis of Presentation
The accompanying unaudited Consolidated Financial Statements of Veeco have been prepared in accordance with U.S. GAAP as defined in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification 270 for interim financial information and with the instructions to Rule 10-01 of Securities and Exchange Commission Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements as the interim information is an update of the information that was presented in Veeco’s most recent annual financial statements. For further information, refer to Veeco’s Consolidated Financial Statements and Notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2016 (“2016 Form 10-K”). In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal, recurring nature. Certain amounts previously reported have been reclassified in the financial statements to conform to the current presentation.
Veeco reports interim quarters on a 13-week basis ending on the last Sunday of each quarter. The fourth quarter always ends on the last day of the calendar year, December 31. The 2017 interim quarters end on April 2, July 2, and October 1, and the 2016 interim quarters ended on April 3, July 3, and October 2. These interim quarters are reported as March 31, June 30, and September 30 in Veeco’s interim consolidated financial statements.
Revenue recognition
Veeco recognizes revenue when all of the following criteria have been met: persuasive evidence of an arrangement exists with a customer; delivery of the specified products has occurred or services have been rendered; prices are contractually fixed or determinable; and collectability is reasonably assured. Revenue is recorded including shipping and handling costs and excluding applicable taxes related to sales.
Contracts with customers frequently contain multiple deliverables, such as systems, upgrades, components, spare parts, maintenance, and service plans. Judgment is required to properly identify the accounting units of the multiple-element arrangements and to determine how the revenue should be allocated among the accounting units. Veeco also evaluates whether multiple transactions with the same customer or related parties should be considered part of a single, multiple-element arrangement based on an assessment of whether the contracts or agreements are negotiated or executed within a short time frame of each other or if there are indicators that the contracts are negotiated in contemplation of one another. Moreover, judgment is used in interpreting the commercial terms and determining when all criteria have been met in order to recognize revenue in the appropriate accounting period.
When there are separate units of accounting, Veeco allocates revenue to each element based on the following selling price hierarchy: vendor-specific objective evidence (“VSOE”) if available; third party evidence (“TPE”) if VSOE is not available; or the best estimate of selling price (“BESP”) if neither VSOE nor TPE is available. Veeco uses BESP for the elements in its arrangements. The maximum revenue recognized on a delivered element is limited to the amount that is not contingent upon the delivery of additional items.
Veeco considers many facts when evaluating each of its sales arrangements to determine the timing of revenue recognition including its contractual obligations, the customer’s creditworthiness, and the nature of the customer’s post-delivery acceptance provisions. Veeco’s system sales arrangements, including certain upgrades, generally include field acceptance provisions that may include functional or mechanical test procedures. For the majority of the arrangements, a customer source inspection of the system is performed in Veeco’s facility or test data is sent to the customer documenting that the system is functioning to the agreed upon specifications prior to delivery. Historically, such source inspection or test data replicates the field acceptance provisions that are performed at the customer’s site prior to final acceptance of the system. When Veeco objectively demonstrates that the criteria specified in the contractual acceptance provisions are achieved prior to delivery, revenue is recognized upon system delivery since there is no substantive contingency remaining related to the acceptance provisions at that date, subject to the retention amount constraint described below for certain contracts. For new products, new applications of existing products, or for products with substantive customer acceptance provisions where Veeco cannot objectively demonstrate that the criteria specified in the contractual acceptance provisions have been achieved prior to delivery, revenue and the associated costs are deferred and fully recognized upon the receipt of final customer acceptance, assuming all other revenue recognition criteria have been met.
The Company’s system sales arrangements, including certain upgrades, generally do not contain provisions for the right of return, forfeiture, refund, or other purchase price concession. In the rare instances where such provisions are included, all revenue is deferred until such rights expire. The sales arrangements generally include installation. The installation process is not deemed essential to the functionality of the equipment since it is not complex; it does not require significant changes to the features or capabilities of the equipment or involve constructing elaborate interfaces or connections subsequent to factory acceptance. Veeco has a demonstrated history of consistently completing installations in a timely manner and can reliably estimate the costs of such activities. Most customers engage Veeco to perform the installation services, although there are other third-party providers with sufficient knowledge who could complete these services. Based on these factors, installation is deemed to be inconsequential or perfunctory relative to the system sale as a whole, and as a result, installation service is not considered a separate element of the arrangement. As such, Veeco records the cost of the installation at the earlier of the time of revenue recognition for the system or when installation services are performed.
In certain cases Veeco’s products are sold with a billing retention, typically 10% of the sales price, which is billed by Veeco and payable by the customer when field acceptance provisions are completed. The amount of revenue recognized upon delivery of a system or upgrade, if any, is limited to the lower of i) the amount billed that is not contingent upon acceptance provisions or ii) the value of the arrangement consideration allocated to the delivered elements, if such sale is part of a multiple-element arrangement.
The Company recognizes revenue related to maintenance and service contracts ratably over the applicable contract term. Veeco recognizes revenue from the sales of components, spare parts, and specified service engagements at the time of delivery in accordance with the terms of the applicable sales arrangement.
Incremental direct costs incurred related to the acquisition of a customer contract, such as sales commissions, are expensed as incurred, even if the related revenue is deferred in accordance with the above policy.
Recent accounting pronouncements
The FASB issued ASU 2014-09, as amended: Revenue from Contracts with Customers, which has been codified as Accounting Standards Codification 606 (“ASC 606”). ASC 606 requires the Company’s revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. ASC 606 outlines a five-step model to make the revenue recognition determination and requires new financial statement disclosures. Publicly-traded companies are required to adopt ASC 606 for reporting periods beginning after December 15, 2017, but can adopt early for annual periods beginning after December 15, 2016. The Company is still completing its evaluation of the impact of adopting this standard; however, the Company currently expects the most significant financial statement impacts of adopting ASC 606 will be the elimination of the constraint on revenue associated with the billing retention related to the receipt of customer final acceptance as well as the identification of installation services as a performance obligation. The elimination of the constraint on revenue related to customer final acceptance, which is usually about 10 percent of a system sale, will generally be recognized at the time the Company transfers control of the system to the customer, which is earlier than under the Company’s current revenue recognition model for certain contracts that are subject to the billing retention constraint described above. The new performance obligation related to installation services under the new standard will generally be recognized as the installation services are performed, which is later than under the Company’s current revenue recognition model. Taken together, the Company currently believes there will be a net acceleration of a small percentage of its revenue under ASC 606 as compared to its current revenue recognition model. ASC 606 provides for different transition alternatives, and the Company is evaluating which method of adoption to select.
In January 2016, the FASB issued ASU 2016-01: Financial Instruments — Overall, which requires certain equity investments to be measured at fair value, with changes in fair value recognized in net income. Publicly-traded companies are required to adopt the update for reporting periods beginning after December 15, 2017; early adoption is permitted. The Company does not expect this ASU will have a material impact on the consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02: Leases, which generally requires operating lessee rights and obligations to be recognized as assets and liabilities on the balance sheet. In addition, interest on lease liabilities is to be recognized separately from the amortization of right-of-use assets in the Statement of Operations. Further, payments of the principal portion of lease liabilities are to be classified as financing activities while payments of interest on lease liabilities and variable lease payments are to be classified as operating activities in the Statement of Cash Flows. When the standard is adopted, the Company will be required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, with early application permitted. The Company is evaluating the anticipated impact of adopting the ASU on the consolidated financial statements.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments, which provides guidance on eight specific cash flow issues, including debt prepayments or debt extinguishment costs. Publicly-traded companies are required to adopt the update for reporting periods beginning after December 15, 2017. This ASU will not have a material impact on the consolidated financial statements.
In October 2016, the FASB issued ASU 2016-16, Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory, which requires that entities recognize the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. Publicly-traded companies are required to adopt the update for reporting periods beginning after December 15, 2017. The Company is evaluating the anticipated effect the ASU will have on the consolidated financial statements.
The Company is also evaluating other pronouncements recently issued but not yet adopted. The adoption of these pronouncements is not expected to have a material impact on our consolidated financial statements.
|
|||
Note 3 — Business Combinations
Ultratech
On May 26, 2017, the Company completed its acquisition of Ultratech, Inc. (“Ultratech”). Ultratech designs, manufactures, and markets lithography, laser annealing, and inspection equipment for manufacturers of semiconductor devices, including advanced packaging, MEMS, and atomic layer deposition (“ALD”) applications. Ultratech’s customers are primarily located throughout the United States, EMEA, China, Japan, Taiwan, and Korea. With the addition of Ultratech, the Company establishes itself as a leading equipment supplier in the advanced packaging market, forming a strong technology portfolio to address critical advanced packaging applications. The results of Ultratech’s operations have been included in the consolidated financial statements since the date of acquisition.
Ultratech shareholders received (i) $21.75 per share in cash and (ii) 0.2675 of a share of Veeco common stock for each Ultratech common share outstanding on the acquisition date. The Company plans to finalize the purchase accounting within the measurement period, which may include adjustments to the fair values of assets acquired and liabilities assumed. The preliminary acquisition date fair value of the consideration totaled $633.4 million, net of cash acquired, which consisted of the following:
|
|
|
Acquisition Date |
|
|
|
|
|
(May 26, 2017) |
|
|
|
|
|
(in thousands) |
|
|
|
Amount paid, net of cash acquired |
|
$ |
399,478 |
|
|
Fair value of equity issuances (7.4 million shares issued) |
|
233,655 |
|
|
|
Replacement equity awards attributable to pre-acquisition service |
|
228 |
|
|
|
|
|
|
|
|
|
Acquisition date fair value |
|
$ |
633,361 |
|
|
|
|
|
|
|
The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the acquisition date:
|
|
|
Acquisition Date |
|
|
|
|
|
(May 26, 2017) |
|
|
|
|
|
(in thousands) |
|
|
|
Short-term investments |
|
$ |
47,161 |
|
|
Accounts receivable |
|
45,465 |
|
|
|
Inventory and deferred cost of sales |
|
61,680 |
|
|
|
Prepaid expense and other current assets |
|
7,217 |
|
|
|
Property, plant, and equipment |
|
19,555 |
|
|
|
Intangible assets |
|
346,940 |
|
|
|
Other assets |
|
6,442 |
|
|
|
|
|
|
|
|
|
Total identifiable assets acquired |
|
534,460 |
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
40,087 |
|
|
|
Customer deposits and deferred revenue |
|
4,834 |
|
|
|
Deferred income taxes |
|
32,478 |
|
|
|
Other liabilities |
|
11,952 |
|
|
|
|
|
|
|
|
|
Total liabilities assumed |
|
89,351 |
|
|
|
|
|
|
|
|
|
Net identifiable assets acquired |
|
445,109 |
|
|
|
Goodwill |
|
188,252 |
|
|
|
|
|
|
|
|
|
Net assets acquired |
|
$ |
633,361 |
|
|
|
|
|
|
|
The gross contractual value of the acquired accounts receivable was approximately $46.0 million. The fair value of the accounts receivables is the amount expected to be collected by the Company. Goodwill generated from the acquisition is primarily attributable to expected synergies from future growth and strategic advantages provided through the expansion of product offerings as well as assembled workforce and is not expected to be deductible for income tax purposes. The Company has not yet completed its analysis of the allocation of the above acquired goodwill to the reporting units.
The preliminary classes of intangible assets acquired and the estimated useful life of each class is presented in the table below:
|
|
|
Acquisition Date |
|
|||
|
|
|
(May 26, 2017) |
|
|||
|
|
|
Amount |
|
Useful life |
|
|
|
|
|
(in thousands) |
|
|
|
|
|
Technology |
|
$ |
158,390 |
|
9 years |
|
|
Customer relationships |
|
116,710 |
|
12 years |
|
|
|
Backlog |
|
3,080 |
|
6 months |
|
|
|
In-process research and development |
|
43,340 |
|
* |
|
|
|
Trademark and tradenames |
|
25,420 |
|
7 years |
|
|
|
|
|
|
|
|
|
|
|
Intangible assets acquired |
|
$ |
346,940 |
|
|
|
|
|
|
|
|
|
|
|
*In-process research and development will be amortized (or impaired) upon completion (or abandonment) of the development project
The Company determined the estimated fair value of the identifiable intangible assets based on various factors including: cost, discounted cash flow, income method, loss-of-revenue/income method, and relief-from-royalty method in determining the purchase price allocation.
In-process research and development (IPR&D) represents the estimated fair values of incomplete Ultratech research and development projects that had not reached the commercialization stage and meet the criteria for recognition as IPR&D as of the date of the acquisition. In the future, the fair value of each project at the acquisition date will be either amortized or impaired depending on whether the projects are completed or abandoned. The fair value of IPR&D was determined using an income approach, and costs to complete the project and expected commercialization timelines are considered key assumptions. This valuation approach reflects the present value of the projected cash flows that are expected to be generated by the IPR&D less charges representing the contribution of other assets to those cash flows. The value of the IPR&D was determined to be $43.3 million, approximately half of which is related to the Company’s lithography technologies and one-third of which is related to the Company’s laser annealing technologies.
For the three and six months ended June 30, 2017, acquisition related costs were approximately $14.1 million and $15.5 million, respectively, including non-cash charges of $4.2 million for the three months ended June 30, 2017 related to accelerated share-based compensation for employee terminations.
The amounts of revenue and income (loss) from continuing operations before income taxes of Ultratech included in the Company’s consolidated statement of operations from the acquisition date to the period ending June 30, 2017 are as follows:
|
|
|
Total |
|
|
|
|
|
(in thousands) |
|
|
|
Revenue |
|
$ |
24,050 |
|
|
Loss from operations before income taxes |
|
$ |
(21,445 |
) |
Loss from operations before income taxes of Ultratech for the period ending June 30, 2017 of $21.4 million includes acquisition costs of $14.1 million, release of inventory fair value step-up related to purchase accounting of $7.4 million, amortization expense on intangible assets of $3.5 million, and restructuring charges of $1.2 million.
The following table presents unaudited pro forma financial information as if the acquisition of Ultratech had occurred on January 1, 2016:
|
|
|
Three months ended June 30, |
|
Six months ended June 30, |
|
||||||||
|
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
||||
|
|
|
(in thousands, except per share amounts) |
|
||||||||||
|
Revenue |
|
$ |
128,399 |
|
$ |
124,272 |
|
$ |
280,194 |
|
$ |
247,493 |
|
|
Loss from operations |
|
(28,898 |
) |
(54,380 |
) |
(32,852 |
) |
(128,860 |
) |
||||
|
Diluted earnings per share |
|
$ |
(0.61 |
) |
$ |
(1.17 |
) |
$ |
(0.70 |
) |
$ |
(2.78 |
) |
The pro-forma results were calculated by combining the results of the Company with the stand-alone results of Ultratech for the pre-acquisition period, and adjusting for the following:
|
(i) |
Additional amortization expense related to identified intangibles valued as part of the purchase price allocation that would have been incurred starting on January 1, 2016. |
|
(ii) |
Additional depreciation expense for the property, plant, and equipment fair value adjustments that would have been incurred starting on January 1, 2016. |
|
(iii) |
All acquisition related costs incurred by the Company as well as by Ultratech pre-acquisition have been removed from their respective periods and included in the three months ended March 31, 2016, as such expenses would have been incurred in the first quarter following the acquisition. |
|
(iv) |
All amortization of inventory step-up has been removed from their respective periods and recorded in the first two quarters of 2016, as such costs would have been incurred as the corresponding inventory was sold. |
|
(v) |
Additional interest expense related to the Convertible Senior Notes (see Note 5, “Liabilities”) as if they had been issued on January 1, 2016. |
|
(vi) |
Income tax expense (benefit) was adjusted for the impact of the above adjustments for each period. |
|
|||
Note 4 - Assets
Investments
Short-term investments are generally classified as available-for-sale and reported at fair value, with unrealized gains and losses, net of tax, presented as a separate component of stockholders’ equity under the caption “Accumulated other comprehensive income” in the Consolidated Balance Sheets. These securities may include U.S. treasuries, government agency securities, corporate debt, and commercial paper, all with maturities of greater than three months when acquired. All realized gains and losses and unrealized losses resulting from declines in fair value that are other than temporary are included in “Other, net” in the Consolidated Statements of Operations.
Fair value is the price that would be received for an asset or the amount paid to transfer a liability in an orderly transaction between market participants. Veeco classifies certain assets based on the following fair value hierarchy:
Level 1:Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2:Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly; and
Level 3:Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Veeco has evaluated the estimated fair value of financial instruments using available market information and valuations as provided by third-party sources. The use of different market assumptions and/or estimation methodologies could have a significant effect on the estimated fair value amounts.
The following table presents the portion of Veeco’s assets that were measured at fair value on a recurring basis at June 30, 2017 and December 31, 2016:
|
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
||||
|
|
|
(in thousands) |
|
||||||||||
|
June 30, 2017 |
|
|
|
|
|
|
|
|
|
||||
|
Short-term investments |
|
|
|
|
|
|
|
|
|
||||
|
U.S. treasuries |
|
$ |
34,951 |
|
$ |
— |
|
$ |
— |
|
$ |
34,951 |
|
|
Government agency securities |
|
— |
|
62,135 |
|
— |
|
62,135 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total |
|
$ |
34,951 |
|
$ |
62,135 |
|
$ |
— |
|
$ |
97,086 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
December 31, 2016 |
|
|
|
|
|
|
|
|
|
||||
|
Cash equivalents |
|
|
|
|
|
|
|
|
|
||||
|
Corporate debt |
|
$ |
— |
|
$ |
1,501 |
|
$ |
— |
|
$ |
1,501 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
— |
|
$ |
1,501 |
|
$ |
— |
|
$ |
1,501 |
|
|
Short-term investments |
|
|
|
|
|
|
|
|
|
||||
|
U.S. treasuries |
|
$ |
40,008 |
|
$ |
— |
|
$ |
— |
|
$ |
40,008 |
|
|
Government agency securities |
|
— |
|
10,012 |
|
— |
|
10,012 |
|
||||
|
Corporate debt |
|
— |
|
13,773 |
|
— |
|
13,773 |
|
||||
|
Commercial paper |
|
— |
|
2,994 |
|
— |
|
2,994 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total |
|
$ |
40,008 |
|
$ |
26,779 |
|
$ |
— |
|
$ |
66,787 |
|
There were no transfers between fair value measurement levels during the three and six months ended June 30, 2017.
At June 30, 2017 and December 31, 2016, the amortized cost and fair value of available-for-sale securities consist of:
|
|
|
|
|
Gross |
|
Gross |
|
|
|
||||
|
|
|
Amortized |
|
Unrealized |
|
Unrealized |
|
Estimated |
|
||||
|
|
|
Cost |
|
Gains |
|
Losses |
|
Fair Value |
|
||||
|
|
|
(in thousands) |
|
||||||||||
|
June 30, 2017 |
|
|
|
|
|
|
|
|
|
||||
|
U.S. treasuries |
|
$ |
34,986 |
|
$ |
— |
|
$ |
(35 |
) |
$ |
34,951 |
|
|
Government agency securities |
|
62,181 |
|
— |
|
(46 |
) |
62,135 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total |
|
$ |
97,167 |
|
$ |
— |
|
$ |
(81 |
) |
$ |
97,086 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
December 31, 2016 |
|
|
|
|
|
|
|
|
|
||||
|
U.S. treasuries |
|
$ |
40,013 |
|
$ |
— |
|
$ |
(5 |
) |
$ |
40,008 |
|
|
Government agency securities |
|
10,020 |
|
— |
|
(8 |
) |
10,012 |
|
||||
|
Corporate debt |
|
13,780 |
|
— |
|
(7 |
) |
13,773 |
|
||||
|
Commercial paper |
|
2,994 |
|
— |
|
— |
|
2,994 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total |
|
$ |
66,807 |
|
$ |
— |
|
$ |
(20 |
) |
$ |
66,787 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities in a loss position at June 30, 2017 and December 31, 2016 consist of:
|
|
|
June 30, 2017 |
|
December 31, 2016 |
|
||||||||
|
|
|
|
|
Gross |
|
|
|
Gross |
|
||||
|
|
|
Estimated |
|
Unrealized |
|
Estimated |
|
Unrealized |
|
||||
|
|
|
Fair Value |
|
Losses |
|
Fair Value |
|
Losses |
|
||||
|
|
|
(in thousands) |
|
||||||||||
|
U.S. treasuries |
|
$ |
34,951 |
|
$ |
(35 |
) |
$ |
20,002 |
|
$ |
(5 |
) |
|
Government agency securities |
|
62,135 |
|
(46 |
) |
10,012 |
|
(8 |
) |
||||
|
Corporate debt |
|
— |
|
— |
|
13,774 |
|
(7 |
) |
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total |
|
$ |
97,086 |
|
$ |
(81 |
) |
$ |
43,788 |
|
$ |
(20 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2017 and December 31, 2016, there were no short-term investments that had been in a continuous loss position for more than 12 months.
The contractual maturities of securities classified as available-for-sale at June 30, 2017 were as follows:
|
|
|
June 30, 2017 |
|
||||
|
|
|
Amortized |
|
Estimated |
|
||
|
|
|
cost |
|
fair value |
|
||
|
|
|
(in thousands) |
|
||||
|
Due in one year or less |
|
$ |
72,278 |
|
$ |
72,220 |
|
|
Due after one year through two years |
|
24,889 |
|
24,866 |
|
||
|
|
|
|
|
|
|
||
|
Total |
|
$ |
97,167 |
|
$ |
97,086 |
|
|
|
|
|
|
|
|
|
|
Actual maturities may differ from contractual maturities. Veeco may sell these securities prior to maturity based on the needs of the business. In addition, borrowers may have the right to call or prepay obligations prior to scheduled maturities.
There were minimal realized gains for the three and six months ended June 30, 2017 and no realized gains for the three and six months ended June 30, 2016. The cost of securities liquidated is based on specific identification.
Accounts receivable
Accounts receivable is presented net of an allowance for doubtful accounts of $0.3 million at both June 30, 2017 and December 31, 2016.
Inventories
Inventories are stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis. Inventories at June 30, 2017 and December 31, 2016 consist of the following:
|
|
|
June 30, |
|
December 31, |
|
||
|
|
|
2017 |
|
2016 |
|
||
|
|
|
(in thousands) |
|
||||
|
Materials |
|
$ |
58,372 |
|
$ |
46,457 |
|
|
Work-in-process |
|
46,498 |
|
25,250 |
|
||
|
Finished goods |
|
15,065 |
|
5,356 |
|
||
|
|
|
|
|
|
|
||
|
Total |
|
$ |
119,935 |
|
$ |
77,063 |
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets
Prepaid expenses and other current assets primarily consist of supplier deposits, prepaid value-added tax, lease deposits, prepaid insurance, and prepaid licenses. Veeco had deposits with its suppliers of $7.9 million and $7.8 million at June 30, 2017 and December 31, 2016, respectively. Also included within prepaid expenses and other current assets at June 30, 2017 were assets held for sale with a carrying value of $2.3 million related to one of the Company’s properties in St. Paul, Minnesota. The Company determined that the carrying value of this property exceeded the fair value, less cost to sell, and recorded an impairment charge of approximately $0.7 million for the three and six months ended June 30, 2017.
Property, plant, and equipment
Property, plant, and equipment at June 30, 2017 and December 31, 2016 consist of the following:
|
|
|
June 30, |
|
December 31, |
|
||
|
|
|
2017 |
|
2016 |
|
||
|
|
|
(in thousands) |
|
||||
|
Land |
|
$ |
5,669 |
|
$ |
5,669 |
|
|
Building and improvements |
|
49,832 |
|
50,814 |
|
||
|
Machinery and equipment(1) |
|
122,131 |
|
99,370 |
|
||
|
Leasehold improvements |
|
9,486 |
|
3,652 |
|
||
|
|
|
|
|
|
|
||
|
Gross property, plant and equipment |
|
187,118 |
|
159,505 |
|
||
|
Less: accumulated depreciation and amortization |
|
104,572 |
|
98,859 |
|
||
|
|
|
|
|
|
|
||
|
Net property, plant, and equipment |
|
$ |
82,546 |
|
$ |
60,646 |
|
|
|
|
|
|
|
|
|
|
(1) Machinery and equipment also includes software, furniture and fixtures
For the three and six months ended June 30, 2017, depreciation expense was $3.5 million and $6.4 million, respectively, and $3.4 million and $6.8 million for the comparable 2016 periods.
Goodwill
Goodwill represents the future economic benefits arising from assets acquired in a business combination that are not individually identified and separately recognized. The following table presents the changes in goodwill balances for the six months ended June 30, 2017:
|
|
|
Gross carrying |
|
Accumulated |
|
|
|
|||
|
|
|
amount |
|
impairment |
|
Net amount |
|
|||
|
|
|
(in thousands) |
|
|||||||
|
Balance at December 31, 2016 |
|
$ |
238,108 |
|
$ |
123,200 |
|
$ |
114,908 |
|
|
Acquisition |
|
188,252 |
|
— |
|
188,252 |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Balance at June 30, 2017 |
|
$ |
426,360 |
|
$ |
123,200 |
|
$ |
303,160 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets
Intangible assets consist of purchased technology, customer-related intangible assets, in-process research and development, trademarks (both long-lived and indefinite-lived), patents, backlog, and licenses and are initially recorded at fair value. Long-lived intangibles are amortized over their estimated useful lives in a method reflecting the pattern in which the economic benefits are consumed or amortized on a straight-line basis if such pattern cannot be reliably determined.
The components of purchased intangible assets were as follows:
|
|
|
June 30, 2017 |
|
December 31, 2016 |
|
||||||||||||||
|
|
|
|
|
Accumulated |
|
|
|
|
|
Accumulated |
|
|
|
||||||
|
|
|
Gross |
|
Amortization |
|
|
|
Gross |
|
Amortization |
|
|
|
||||||
|
|
|
Carrying |
|
and |
|
Net |
|
Carrying |
|
and |
|
Net |
|
||||||
|
|
|
Amount |
|
Impairment |
|
Amount |
|
Amount |
|
Impairment |
|
Amount |
|
||||||
|
|
|
(in thousands) |
|
||||||||||||||||
|
Technology |
|
$ |
307,588 |
|
$ |
118,863 |
|
$ |
188,725 |
|
$ |
149,198 |
|
$ |
113,904 |
|
$ |
35,294 |
|
|
Customer relationships |
|
164,595 |
|
31,971 |
|
132,624 |
|
47,885 |
|
28,659 |
|
19,226 |
|
||||||
|
In-process R&D |
|
43,340 |
|
— |
|
43,340 |
|
— |
|
— |
|
— |
|
||||||
|
Trademarks and tradenames |
|
28,010 |
|
2,326 |
|
25,684 |
|
2,590 |
|
1,948 |
|
642 |
|
||||||
|
Indefinite-lived trademark |
|
2,900 |
|
— |
|
2,900 |
|
2,900 |
|
— |
|
2,900 |
|
||||||
|
Other |
|
3,828 |
|
1,004 |
|
2,824 |
|
2,026 |
|
1,710 |
|
316 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Total |
|
$ |
550,261 |
|
$ |
154,164 |
|
$ |
396,097 |
|
$ |
204,599 |
|
$ |
146,221 |
|
$ |
58,378 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other intangible assets primarily consist of patents, backlog, and licenses.
Other assets
Veeco has an ownership interest of less than 20% in a non-marketable investment, Kateeva, Inc. (“Kateeva”). Veeco does not exert significant influence over Kateeva and therefore the investment is carried at cost. There was no change to the $21.0 million carrying value of the investment during the six months ended June 30, 2017. The investment is included in “Other assets” on the Consolidated Balance Sheet. The investment is subject to a periodic impairment review; as there are no open-market valuations, the impairment analysis requires judgment. The analysis includes assessments of Kateeva’s financial condition, the business outlook for its products and technology, its projected results and cash flow, business valuation indications from recent rounds of financing, the likelihood of obtaining subsequent rounds of financing, and the impact of equity preferences held by Veeco relative to other investors. Fair value of the investment is not estimated unless there are identified events or changes in circumstances that could have a significant adverse effect on the fair value of the investment. No such events or circumstances are present.
Also included within Other assets at June 30, 2017 are deferred compensation plan assets of approximately $3.1 million representing the cash surrender value of life insurance policies held by the Company related to an executive non-qualified deferred compensation plan that was assumed from Ultratech that allows qualifying executives to defer cash compensation. The related plan liability of approximately $4.4 million is included in “Other liabilities” on the Consolidated Balance Sheet.
|
|||
Note 5 - Liabilities
Accrued expenses and other current liabilities
The components of accrued expenses and other current liabilities at June 30, 2017 and December 31, 2016 consist of:
|
|
|
June 30, |
|
December 31, |
|
||
|
|
|
2017 |
|
2016 |
|
||
|
|
|
(in thousands) |
|
||||
|
Payroll and related benefits |
|
$ |
23,016 |
|
$ |
18,780 |
|
|
Warranty |
|
6,741 |
|
4,217 |
|
||
|
Professional fees |
|
2,943 |
|
1,827 |
|
||
|
Installation |
|
1,386 |
|
1,382 |
|
||
|
Sales, use, and other taxes |
|
1,806 |
|
1,282 |
|
||
|
Restructuring liability |
|
1,373 |
|
1,796 |
|
||
|
Interest |
|
4,244 |
|
— |
|
||
|
Other |
|
2,796 |
|
3,917 |
|
||
|
|
|
|
|
|
|
||
|
Total |
|
$ |
44,305 |
|
$ |
33,201 |
|
|
|
|
|
|
|
|
|
|
Warranty
Warranties are typically valid for one year from the date of system final acceptance, and Veeco estimates the costs that may be incurred under the warranty. Estimated warranty costs are determined by analyzing specific product and historical configuration statistics and regional warranty support costs and are affected by product failure rates, material usage, and labor costs incurred in correcting product failures during the warranty period. Unforeseen component failures or exceptional component performance can also result in changes to warranty costs. Changes in product warranty reserves for the six months ended June 30, 2017 include:
|
|
|
(in thousands) |
|
|
|
Balance - December 31, 2016 |
|
$ |
4,217 |
|
|
Warranties issued |
|
2,809 |
|
|
|
Addition from Ultratech acquisition |
|
1,889 |
|
|
|
Consumption of reserves |
|
(2,673 |
) |
|
|
Changes in estimate |
|
499 |
|
|
|
|
|
|
|
|
|
Balance - June 30, 2017 |
|
$ |
6,741 |
|
|
|
|
|
|
|
Restructuring accruals
During the six months ended June 30, 2017, additional accruals were recognized and payments made related to previous years’ restructuring initiatives. During the second and third quarters of 2016, the Company undertook restructuring activities as part of its initiative to streamline operations, enhance efficiency, and reduce costs. As a result of these actions, the Company notified approximately 50 employees of their termination from the Company. In addition, during the third quarter of 2016, the Company decided to significantly reduce future investments in its ALD technology development, which impacted approximately 25 additional employees. Over the next few quarters, the Company expects to incur additional restructuring costs of $1 million to $3 million as it finalizes all of these activities.
|
|
|
Personnel |
|
|
|
|
|
|||
|
|
|
Severance and |
|
Facility |
|
|
|
|||
|
|
|
Related Costs |
|
Closing Costs |
|
Total |
|
|||
|
|
|
(in thousands) |
|
|||||||
|
Balance - December 31, 2016 |
|
$ |
1,796 |
|
$ |
— |
|
$ |
1,796 |
|
|
Provision |
|
1,405 |
|
2,349 |
|
3,754 |
|
|||
|
Payments |
|
(2,079 |
) |
(2,098 |
) |
(4,177 |
) |
|||
|
|
|
|
|
|
|
|
|
|||
|
Balance - June 30, 2017 |
|
$ |
1,122 |
|
$ |
251 |
|
$ |
1,373 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Included within restructuring expense in the Consolidated Statements of Operations for the six months ended June 30, 2017 is approximately $0.8 million of non-cash charges related to accelerated share-based compensation for employee terminations.
Customer deposits
Customer deposits totaled $25.0 million and $22.2 million at June 30, 2017 and December 31, 2016, respectively.
Mortgage Payable
The Company has a mortgage note payable associated with its property in St. Paul, Minnesota, which, during the second quarter of 2017 was designated an asset held for sale. The carrying value of the property exceeds the carrying value of the mortgage note, which was $1.0 million and $1.2 million at June 30, 2017 and December 31, 2016, respectively. The annual interest rate on the note is 7.91%, and the final payment is due on January 1, 2020. The Company determined the mortgage is a Level 3 liability in the fair-value hierarchy and, using a discounted cash flow model, estimated its fair value as $1.0 million and $1.2 million at June 30, 2017 and December 31, 2016, respectively. At June 30, 2017, the remaining principle balance on the mortgage note is included in “Current portion of long-term debt” on the Consolidated Balance Sheet as the associated asset is expected to be sold within the next twelve months.
Convertible Senior Notes
On January 10, 2017, the Company issued $345.0 million of 2.70% convertible senior unsecured notes due (the “Convertible Senior Notes”). The Company received net proceeds, after deducting underwriting discounts and fees and expenses payable by the Company, of approximately $335.8 million. The Convertible Senior Notes bear interest at a rate of 2.70% per year, payable semiannually in arrears on January 15 and July 15 of each year, commencing on July 15, 2017. The Convertible Senior Notes mature on January 15, 2023, unless earlier purchased by the Company, redeemed, or converted.
The Convertible Senior Notes are unsecured obligations of Veeco and rank senior in right of payment to any of Veeco’s subordinated indebtedness; equal in right of payment to all of Veeco’s unsecured indebtedness that is not subordinated; effectively subordinated in right of payment to any of Veeco’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally subordinated to all indebtedness and other liabilities (including trade payables) of Veeco’s subsidiaries.
The Convertible Senior Notes are convertible into cash, shares of the Company’s common stock, or a combination thereof, at the Company’s election, upon the satisfaction of specified conditions and during certain periods as described below. The initial conversion rate is 24.9800 shares of the Company’s common stock per $1,000 principal amount of Convertible Senior Notes, representing an initial effective conversion price of $40.03 per share of common stock. The conversion rate may be subject to adjustment upon the occurrence of certain specified events as provided in the indenture governing the Convertible Senior Notes, dated January 18, 2017 between the Company and U.S. Bank National Association, as trustee (the “Indenture”), but will not be adjusted for accrued but unpaid interest.
Holders may convert all or any portion of their notes, in multiples of one thousand dollar principal amount, at their option at any time prior to the close of business on the business day immediately preceding October 15, 2022 only under the following circumstances:
|
(i) |
During any calendar quarter (and only during such calendar quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; |
|
(ii) |
During the five consecutive business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per one thousand dollar principal amount of Convertible Senior Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of Veeco’s common stock and the conversion rate on each such trading day; |
|
(iii) |
If the Company calls any or all of the Convertible Senior Notes for redemption at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or |
|
(iv) |
Upon the occurrence of specified corporate events. |
On or after October 15, 2022, until the close of business on the business day immediately preceding the Maturity Date, holders may convert their notes at any time, regardless of the foregoing circumstances.
Upon conversion by the holders, the Company may elect to settle such conversion in shares of its common stock, cash, or a combination thereof. As a result of its cash conversion option, the Company segregated the liability component of the instrument from the equity component. The liability component was measured by estimating the fair value of a non-convertible debt instrument that is similar in its terms to the Convertible Senior Notes. The calculation of the fair value of the debt component required the use of Level 3 inputs, including utilization of convertible investors’ credit assumptions and high yield bond indices. Fair value was estimated through discounting future interest and principal payments, an income approach, due under the Convertible Senior Notes at a discount rate of 7.00%, an interest rate equal to the estimated borrowing rate for similar non-convertible debt. The excess of the aggregate face value of the Convertible Senior Notes over the estimated fair value of the liability component of $72.5 million was recognized as a debt discount and recorded as an increase to additional paid-in capital, and will be amortized over the expected life of the Convertible Senior Notes using the effective interest rate method. Amortization of the debt discount is recognized as non-cash interest expense.
The transaction costs of $9.2 million incurred in connection with the issuance of the Convertible Senior Notes were allocated to the liability and equity components based on their relative values. Transaction costs allocated to the liability component are being amortized using the effective interest rate method and recognized as non-cash interest expense over the expected term of the Convertible Senior Notes. Transaction costs allocated to the equity component of $1.9 million reduced the value of the equity component recognized in stockholders’ equity.
The carrying value of the Convertible Senior Notes is as follows:
|
|
|
June 30, |
|
|
|
|
|
2017 |
|
|
|
|
|
(in thousands) |
|
|
|
Principal amount |
|
$ |
345,000 |
|
|
Unamortized debt discount |
|
(68,072 |
) |
|
|
Unamortized transaction costs |
|
(6,857 |
) |
|
|
|
|
|
|
|
|
Net carrying value |
|
$ |
270,071 |
|
|
|
|
|
|
|
Total interest expense related to the Convertible Senior Notes is as follows:
|
|
|
Three months |
|
Six months ended |
|
||
|
|
|
2017 |
|
2017 |
|
||
|
|
|
(in thousands) |
|
||||
|
Cash Interest Expense |
|
|
|
|
|
||
|
Coupon interest expense |
|
$ |
2,329 |
|
$ |
4,244 |
|
|
Non-Cash Interest Expense |
|
|
|
|
|
||
|
Amortization of debt discount |
|
2,455 |
|
4,440 |
|
||
|
Amortization of transaction costs |
|
247 |
|
447 |
|
||
|
|
|
|
|
|
|
||
|
Total Interest Expense |
|
$ |
5,031 |
|
$ |
9,131 |
|
|
|
|
|
|
|
|
|
|
The Company determined the Convertible Senior Notes is a Level 2 liability in the fair value hierarchy and estimated its fair value as $354.0 million at June 30, 2017.
Other Liabilities
Other liabilities at June 30, 2017 included deferred compensation of $4.4 million, asset retirement obligations of $3.3 million, medical and dental benefits of $2.5 million, and acquisition related accruals of $1.0 million. At December 31, 2016, other liabilities primarily consisted of a non-current income tax payable of $4.9 million.
|
|||
Note 6 - Commitments and Contingencies
Minimum lease commitments
At June 30, 2017, Veeco’s total future minimum lease payments under non-cancelable operating leases (exclusive of renewal options) are payable as follows:
|
|
|
Operating |
|
|
|
|
|
(in thousands) |
|
|
|
Payments due by period: |
|
|
|
|
|
2017 |
|
$ |
3,528 |
|
|
2018 |
|
5,433 |
|
|
|
2019 |
|
4,994 |
|
|
|
2020 |
|
4,756 |
|
|
|
2021 |
|
1,799 |
|
|
|
Thereafter |
|
4,493 |
|
|
|
|
|
|
|
|
|
Total |
|
$ |
25,003 |
|
|
|
|
|
|
|
Purchase commitments
Veeco has purchase commitments of $144.5 million at June 30, 2017, substantially all of which become due within one year.
Bank guarantees
Veeco has bank guarantees and letters of credit issued by a financial institution on its behalf as needed. At June 30, 2017, outstanding bank guarantees and letters of credit totaled $4.1 million, and unused bank guarantees and letters of credit of $67.2 million were available to be drawn upon.
Legal proceedings
On March 17, 2017, an Ultratech shareholder filed a purported class action complaint in the U.S. District Court for the Northern District of California (the “District Court”), captioned The Vladimir Gusinsky Rev. Trust v. Ultratech, Inc., et al., Case No. 4:17-cv-01468-PJH, on behalf of itself and all other Ultratech shareholders against Ultratech, its directors at the time the acquisition was announced, Veeco, and Merger Sub. The complaint alleges, among other things, that in connection with Veeco’s proposed acquisition of Ultratech, the defendants purportedly agreed to a supposedly inadequate price for the Ultratech shares, agreed to unreasonable deal-protection measures, and potentially engaged in supposed self-dealing.
On March 22, 2017, two other Ultratech shareholders filed a purported class action complaint in the District Court, captioned De Letter et al. v. Ultratech, Inc., et al., Case No. 3:17-cv-01542-WHA, on behalf of themselves and all other Ultratech shareholders against Ultratech and its directors at the time the acquisition was announced. The complaint alleges, among other things, that in connection with Veeco’s proposed acquisition of Ultratech, the defendants purportedly agreed to a supposedly inadequate price for the Ultratech shares and potentially engaged in supposed self-dealing.
On May 28, 2017, the District Court dismissed both cases.
Veeco is involved in various other legal proceedings arising in the normal course of business. Veeco does not believe that the ultimate resolution of these matters will have a material adverse effect on its consolidated financial position, results of operations, or cash flows.
|
|||
Note 7 - Equity
Accumulated Other Comprehensive Income (“AOCI”)
The following table presents the changes in the balances of each component of AOCI, net of tax:
|
|
|
|
|
Unrealized |
|
|
|
|||
|
|
|
Foreign Currency |
|
Gains (Losses) on |
|
|
|
|||
|
|
|
Translation |
|
Securities |
|
Total |
|
|||
|
|
|
(in thousands) |
|
|||||||
|
Balance - December 31, 2016 |
|
$ |
1,797 |
|
$ |
(20 |
) |
$ |
1,777 |
|
|
Other comprehensive income (loss) |
|
24 |
|
(61 |
) |
(37 |
) |
|||
|
|
|
|
|
|
|
|
|
|||
|
Balance - June 30, 2017 |
|
$ |
1,821 |
|
$ |
(81 |
) |
$ |
1,740 |
|
|
|
|
|
|
|
|
|
|
|
|
|
There were minimal reclassifications from AOCI into net income for the six months ended June 30, 2017.
For the six months ended June 30, 2017, Additional Paid-in Capital increased approximately $233.8 million related to 7.4 million shares issued for the Ultratech merger consideration, $49.3 million related to the issuance of the Convertible Senior Notes including deferred tax impact, and $6.7 million related to on-going share-based compensation activities.
|
|||
Note 9 - Income Taxes
Income taxes are estimated for each of the jurisdictions in which the Company operates. Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as the tax effect of carryforwards. Realization of net deferred tax assets is dependent on future taxable income. At June 30, 2017, the Company’s U.S. deferred tax assets are fully offset by a valuation allowance since the Company cannot conclude that that it is more likely than not that these future benefits will be realized before they expire.
At the end of each interim reporting period, the effective tax rate is aligned to expectations for the full year. This estimate is used to determine the income tax provision on a year-to-date basis and may change in subsequent interim periods. The year-to-date tax benefit for interim period losses is limited to the amount that could be recognizable at the end of the fiscal year. Income (loss) before income taxes and income tax expense (benefit) for the three and six months ended June 30, 2017 and 2016 were as follows:
|
|
|
Three months ended June 30, |
|
Six months ended June 30, |
|
||||||||
|
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
||||
|
|
|
(in thousands) |
|
||||||||||
|
Loss before income taxes |
|
$ |
(31,285 |
) |
$ |
(31,068 |
) |
$ |
(40,472 |
) |
$ |
(46,073 |
) |
|
Income tax expense (benefit) |
|
$ |
(12,897 |
) |
$ |
1,014 |
|
$ |
(23,179 |
) |
$ |
1,542 |
|
The net income tax benefit for the three months ended June 30, 2017 was comprised of a net benefit of $15.4 million related to the Company’s U.S. operations, and a net tax expense of $2.5 million related to the Company’s non-U.S. operations. The net income tax benefit for the six months ended June 30, 2017 was comprised of a net benefit of $19.5 million and $3.7 million related to the Company’s U.S. and non-U.S. operations, respectively.
The net income tax benefit from the Company’s U.S. operations was primarily attributable to a tax benefit of $16.4 million and $21.3 million for losses incurred during the three and six months ended June 30, 2017, respectively. Under the intraperiod tax allocation rules, the deferred tax liability created upon the issuance of the Convertible Senior Notes and recorded through Additional Paid-in Capital is treated as a source of income, which enables the Company to recognize a benefit for the U.S. loss before income taxes through continuing operations during fiscal 2017. The tax benefit related to the issuance of the Convertible Senior Notes will not recur in future years. When calculating the income tax benefit for the six months ended June 30, 2017, the Company was subject to a loss limitation rule as the year-to-date ordinary loss exceeded the full-year expected ordinary loss. The tax benefit for the year-to-date ordinary loss was limited to the amount that we expect to be able to recognize for the full year. This benefit was partially offset by a deferred provision of approximately $1.0 million and $1.9 million related to tax amortization on indefinite-lived intangible assets for the three and six months ended June 30, 2017, respectively.
The net income tax benefit of $3.7 million for the six months ended June 30, 2017, from the Company’s non-U.S. operations was primarily attributable to the Company’s determination in the first quarter of 2017 that it was more likely than not that it will meet the requirements of an existing foreign tax incentive agreement. As a result, the Company remeasured this uncertain tax position and recognized a $6.3 million benefit during the first quarter, which is comprised of a reversal of a $4.9 million tax liability established in previous periods and the recognition of a deferred tax benefit of $1.4 million related to certain foreign net operating losses generated in prior years that are now determined to be realizable. This benefit was partially offset by a current year tax expense of approximately $2.7 million attributed to the profitable non-U.S. operations, of which approximately $2.5 million was recorded during the three months ended June 30, 2017.
For the three and six months ended June 30, 2016, the Company did not provide a current tax benefit on U.S. pre-tax losses since the Company could not conclude that it is more likely than not that the benefits would be realized. The tax expense is primarily related to indefinite-lived intangible assets that are amortized for tax purposes but not for financial reporting purposes, as well as taxes attributed to the profitable non-U.S. operations. The deferred tax liability created by the tax deductible expense cannot be used to offset existing deferred tax assets.
|
|||
Note 10 - Segment Reporting and Geographic Information
Veeco operates and measures its results in one operating segment and continues to do so with the integration of Ultratech’s business activities. As a result, the Company has one reportable segment: the design, development, manufacture, and support of semiconductor process equipment primarily sold to make electronic devices.
Veeco categorizes its revenue by the key markets into which it sells. As a result of the acquisition of Ultratech, the Company’s four key markets are now: Lighting, Display & Power Electronics; Advanced Packaging, MEMS & RF; Scientific & Industrial, which now includes Data Storage, which was formerly a separate category; and Front-End Semiconductor, which was formerly included in the Scientific & Industrial market category.
Lighting, Display & Power Electronics
Lighting refers to Light Emitting Diode (“LED”) and semiconductor illumination sources used in various applications including, but not limited to, displays such as backlights, general lighting, automotive running lights, and head lamps.
Display refers to LEDs used for displays and Organic Light Emitting Diode (“OLED”) displays found in outdoor display/signage applications, smartphones, wearable devices, and tablets. Power Electronics refers to semiconductor devices such as rectifiers, inverters, and converters for the control and conversion of electric power.
Advanced Packaging, MEMS & RF (Mobility)
Advanced Packaging includes a portfolio of wafer-level assembly technologies that enable the miniaturization and performance improvement of electronic products, such as smartphones, smartwatches, tablets, and laptops. Micro-Electro Mechanical Systems (“MEMS”) includes tiny mechanical devices such as sensors, switches, mirrors, and actuators embedded in semiconductor chips used in vehicles, smartphones, tablets, and games. Radio Frequency (“RF”) includes semiconductor devices that make use of radio waves (RF fields) for wireless broadcasting and/or communications.
Scientific & Industrial
Scientific refers to advanced materials research at university research institutions, industry research institutions, industry consortiums, and government research agencies. Industrial refers to large-scale product manufacturing applications including high powered lasers, data storage, and optical coatings: thin layers of material deposited on a lens or mirror that alters how light reflects and transmits.
Front-End Semiconductor
Front-End Semiconductor refers to the early steps in the process of integrated circuit fabrication where the microchips are created but still remain on the silicon wafer. This includes the photomask market, which is an opaque plate that allows light to shine through in a defined pattern for use in lithography.
Sales by end-market and geographic region for the three and six months ended June 30, 2017 and 2016 were as follows:
|
|
|
Three months ended June 30, |
|
Six months ended June 30, |
|
||||||||
|
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
||||
|
|
|
(in thousands) |
|
||||||||||
|
Sales by end-market |
|
|
|
|
|
|
|
|
|
||||
|
Lighting, Display & Power Electronics |
|
$ |
56,199 |
|
$ |
24,762 |
|
$ |
110,393 |
|
$ |
47,705 |
|
|
Advanced Packaging, MEMS & RF |
|
21,426 |
|
17,045 |
|
32,983 |
|
40,308 |
|
||||
|
Scientific & Industrial |
|
27,033 |
|
31,779 |
|
54,209 |
|
62,582 |
|
||||
|
Front-End Semiconductor |
|
10,408 |
|
1,762 |
|
11,867 |
|
2,764 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total |
|
$ |
115,066 |
|
$ |
75,348 |
|
$ |
209,452 |
|
$ |
153,359 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales by geographic region |
|
|
|
|
|
|
|
|
|
||||
|
United States |
|
$ |
21,245 |
|
$ |
20,734 |
|
$ |
38,533 |
|
$ |
47,446 |
|
|
China |
|
26,287 |
|
24,582 |
|
66,613 |
|
33,383 |
|
||||
|
EMEA(1) |
|
18,002 |
|
14,834 |
|
40,069 |
|
42,296 |
|
||||
|
Rest of World |
|
49,532 |
|
15,198 |
|
64,237 |
|
30,234 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total |
|
$ |
115,066 |
|
$ |
75,348 |
|
$ |
209,452 |
|
$ |
153,359 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) EMEA consists of Europe, the Middle East, and Africa
For geographic reporting, sales are attributed to the location in which the customer facility is located.
|
|||
Revenue recognition
Veeco recognizes revenue when all of the following criteria have been met: persuasive evidence of an arrangement exists with a customer; delivery of the specified products has occurred or services have been rendered; prices are contractually fixed or determinable; and collectability is reasonably assured. Revenue is recorded including shipping and handling costs and excluding applicable taxes related to sales.
Contracts with customers frequently contain multiple deliverables, such as systems, upgrades, components, spare parts, maintenance, and service plans. Judgment is required to properly identify the accounting units of the multiple-element arrangements and to determine how the revenue should be allocated among the accounting units. Veeco also evaluates whether multiple transactions with the same customer or related parties should be considered part of a single, multiple-element arrangement based on an assessment of whether the contracts or agreements are negotiated or executed within a short time frame of each other or if there are indicators that the contracts are negotiated in contemplation of one another. Moreover, judgment is used in interpreting the commercial terms and determining when all criteria have been met in order to recognize revenue in the appropriate accounting period.
When there are separate units of accounting, Veeco allocates revenue to each element based on the following selling price hierarchy: vendor-specific objective evidence (“VSOE”) if available; third party evidence (“TPE”) if VSOE is not available; or the best estimate of selling price (“BESP”) if neither VSOE nor TPE is available. Veeco uses BESP for the elements in its arrangements. The maximum revenue recognized on a delivered element is limited to the amount that is not contingent upon the delivery of additional items.
Veeco considers many facts when evaluating each of its sales arrangements to determine the timing of revenue recognition including its contractual obligations, the customer’s creditworthiness, and the nature of the customer’s post-delivery acceptance provisions. Veeco’s system sales arrangements, including certain upgrades, generally include field acceptance provisions that may include functional or mechanical test procedures. For the majority of the arrangements, a customer source inspection of the system is performed in Veeco’s facility or test data is sent to the customer documenting that the system is functioning to the agreed upon specifications prior to delivery. Historically, such source inspection or test data replicates the field acceptance provisions that are performed at the customer’s site prior to final acceptance of the system. When Veeco objectively demonstrates that the criteria specified in the contractual acceptance provisions are achieved prior to delivery, revenue is recognized upon system delivery since there is no substantive contingency remaining related to the acceptance provisions at that date, subject to the retention amount constraint described below for certain contracts. For new products, new applications of existing products, or for products with substantive customer acceptance provisions where Veeco cannot objectively demonstrate that the criteria specified in the contractual acceptance provisions have been achieved prior to delivery, revenue and the associated costs are deferred and fully recognized upon the receipt of final customer acceptance, assuming all other revenue recognition criteria have been met.
The Company’s system sales arrangements, including certain upgrades, generally do not contain provisions for the right of return, forfeiture, refund, or other purchase price concession. In the rare instances where such provisions are included, all revenue is deferred until such rights expire. The sales arrangements generally include installation. The installation process is not deemed essential to the functionality of the equipment since it is not complex; it does not require significant changes to the features or capabilities of the equipment or involve constructing elaborate interfaces or connections subsequent to factory acceptance. Veeco has a demonstrated history of consistently completing installations in a timely manner and can reliably estimate the costs of such activities. Most customers engage Veeco to perform the installation services, although there are other third-party providers with sufficient knowledge who could complete these services. Based on these factors, installation is deemed to be inconsequential or perfunctory relative to the system sale as a whole, and as a result, installation service is not considered a separate element of the arrangement. As such, Veeco records the cost of the installation at the earlier of the time of revenue recognition for the system or when installation services are performed.
In certain cases Veeco’s products are sold with a billing retention, typically 10% of the sales price, which is billed by Veeco and payable by the customer when field acceptance provisions are completed. The amount of revenue recognized upon delivery of a system or upgrade, if any, is limited to the lower of i) the amount billed that is not contingent upon acceptance provisions or ii) the value of the arrangement consideration allocated to the delivered elements, if such sale is part of a multiple-element arrangement.
The Company recognizes revenue related to maintenance and service contracts ratably over the applicable contract term. Veeco recognizes revenue from the sales of components, spare parts, and specified service engagements at the time of delivery in accordance with the terms of the applicable sales arrangement.
Incremental direct costs incurred related to the acquisition of a customer contract, such as sales commissions, are expensed as incurred, even if the related revenue is deferred in accordance with the above policy.
Recent accounting pronouncements
The FASB issued ASU 2014-09, as amended: Revenue from Contracts with Customers, which has been codified as Accounting Standards Codification 606 (“ASC 606”). ASC 606 requires the Company’s revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. ASC 606 outlines a five-step model to make the revenue recognition determination and requires new financial statement disclosures. Publicly-traded companies are required to adopt ASC 606 for reporting periods beginning after December 15, 2017, but can adopt early for annual periods beginning after December 15, 2016. The Company is still completing its evaluation of the impact of adopting this standard; however, the Company currently expects the most significant financial statement impacts of adopting ASC 606 will be the elimination of the constraint on revenue associated with the billing retention related to the receipt of customer final acceptance as well as the identification of installation services as a performance obligation. The elimination of the constraint on revenue related to customer final acceptance, which is usually about 10 percent of a system sale, will generally be recognized at the time the Company transfers control of the system to the customer, which is earlier than under the Company’s current revenue recognition model for certain contracts that are subject to the billing retention constraint described above. The new performance obligation related to installation services under the new standard will generally be recognized as the installation services are performed, which is later than under the Company’s current revenue recognition model. Taken together, the Company currently believes there will be a net acceleration of a small percentage of its revenue under ASC 606 as compared to its current revenue recognition model. ASC 606 provides for different transition alternatives, and the Company is evaluating which method of adoption to select.
In January 2016, the FASB issued ASU 2016-01: Financial Instruments — Overall, which requires certain equity investments to be measured at fair value, with changes in fair value recognized in net income. Publicly-traded companies are required to adopt the update for reporting periods beginning after December 15, 2017; early adoption is permitted. The Company does not expect this ASU will have a material impact on the consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02: Leases, which generally requires operating lessee rights and obligations to be recognized as assets and liabilities on the balance sheet. In addition, interest on lease liabilities is to be recognized separately from the amortization of right-of-use assets in the Statement of Operations. Further, payments of the principal portion of lease liabilities are to be classified as financing activities while payments of interest on lease liabilities and variable lease payments are to be classified as operating activities in the Statement of Cash Flows. When the standard is adopted, the Company will be required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, with early application permitted. The Company is evaluating the anticipated impact of adopting the ASU on the consolidated financial statements.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments, which provides guidance on eight specific cash flow issues, including debt prepayments or debt extinguishment costs. Publicly-traded companies are required to adopt the update for reporting periods beginning after December 15, 2017. This ASU will not have a material impact on the consolidated financial statements.
In October 2016, the FASB issued ASU 2016-16, Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory, which requires that entities recognize the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. Publicly-traded companies are required to adopt the update for reporting periods beginning after December 15, 2017. The Company is evaluating the anticipated effect the ASU will have on the consolidated financial statements.
The Company is also evaluating other pronouncements recently issued but not yet adopted. The adoption of these pronouncements is not expected to have a material impact on our consolidated financial statements.
|
|||
|
|
|
Acquisition Date |
|
|
|
|
|
(May 26, 2017) |
|
|
|
|
|
(in thousands) |
|
|
|
Amount paid, net of cash acquired |
|
$ |
399,478 |
|
|
Fair value of equity issuances (7.4 million shares issued) |
|
233,655 |
|
|
|
Replacement equity awards attributable to pre-acquisition service |
|
228 |
|
|
|
|
|
|
|
|
|
Acquisition date fair value |
|
$ |
633,361 |
|
|
|
|
|
|
|
|
|
|
Acquisition Date |
|
|
|
|
|
(May 26, 2017) |
|
|
|
|
|
(in thousands) |
|
|
|
Short-term investments |
|
$ |
47,161 |
|
|
Accounts receivable |
|
45,465 |
|
|
|
Inventory and deferred cost of sales |
|
61,680 |
|
|
|
Prepaid expense and other current assets |
|
7,217 |
|
|
|
Property, plant, and equipment |
|
19,555 |
|
|
|
Intangible assets |
|
346,940 |
|
|
|
Other assets |
|
6,442 |
|
|
|
|
|
|
|
|
|
Total identifiable assets acquired |
|
534,460 |
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
40,087 |
|
|
|
Customer deposits and deferred revenue |
|
4,834 |
|
|
|
Deferred income taxes |
|
32,478 |
|
|
|
Other liabilities |
|
11,952 |
|
|
|
|
|
|
|
|
|
Total liabilities assumed |
|
89,351 |
|
|
|
|
|
|
|
|
|
Net identifiable assets acquired |
|
445,109 |
|
|
|
Goodwill |
|
188,252 |
|
|
|
|
|
|
|
|
|
Net assets acquired |
|
$ |
633,361 |
|
|
|
|
|
|
|
|
|
|
Acquisition Date |
|
|||
|
|
|
(May 26, 2017) |
|
|||
|
|
|
Amount |
|
Useful life |
|
|
|
|
|
(in thousands) |
|
|
|
|
|
Technology |
|
$ |
158,390 |
|
9 years |
|
|
Customer relationships |
|
116,710 |
|
12 years |
|
|
|
Backlog |
|
3,080 |
|
6 months |
|
|
|
In-process research and development |
|
43,340 |
|
* |
|
|
|
Trademark and tradenames |
|
25,420 |
|
7 years |
|
|
|
|
|
|
|
|
|
|
|
Intangible assets acquired |
|
$ |
346,940 |
|
|
|
|
|
|
|
|
|
|
|
*In-process research and development will be amortized (or impaired) upon completion (or abandonment) of the development project
The amounts of revenue and income (loss) from continuing operations before income taxes of Ultratech included in the Company’s consolidated statement of operations from the acquisition date to the period ending June 30, 2017 are as follows:
|
|
|
Total |
|
|
|
|
|
(in thousands) |
|
|
|
Revenue |
|
$ |
24,050 |
|
|
Loss from operations before income taxes |
|
$ |
(21,445 |
) |
|
|
|
Three months ended June 30, |
|
Six months ended June 30, |
|
||||||||
|
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
||||
|
|
|
(in thousands, except per share amounts) |
|
||||||||||
|
Revenue |
|
$ |
128,399 |
|
$ |
124,272 |
|
$ |
280,194 |
|
$ |
247,493 |
|
|
Loss from operations |
|
(28,898 |
) |
(54,380 |
) |
(32,852 |
) |
(128,860 |
) |
||||
|
Diluted earnings per share |
|
$ |
(0.61 |
) |
$ |
(1.17 |
) |
$ |
(0.70 |
) |
$ |
(2.78 |
) |
|
|||
|
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
||||
|
|
|
(in thousands) |
|
||||||||||
|
June 30, 2017 |
|
|
|
|
|
|
|
|
|
||||
|
Short-term investments |
|
|
|
|
|
|
|
|
|
||||
|
U.S. treasuries |
|
$ |
34,951 |
|
$ |
— |
|
$ |
— |
|
$ |
34,951 |
|
|
Government agency securities |
|
— |
|
62,135 |
|
— |
|
62,135 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total |
|
$ |
34,951 |
|
$ |
62,135 |
|
$ |
— |
|
$ |
97,086 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
December 31, 2016 |
|
|
|
|
|
|
|
|
|
||||
|
Cash equivalents |
|
|
|
|
|
|
|
|
|
||||
|
Corporate debt |
|
$ |
— |
|
$ |
1,501 |
|
$ |
— |
|
$ |
1,501 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
— |
|
$ |
1,501 |
|
$ |
— |
|
$ |
1,501 |
|
|
Short-term investments |
|
|
|
|
|
|
|
|
|
||||
|
U.S. treasuries |
|
$ |
40,008 |
|
$ |
— |
|
$ |
— |
|
$ |
40,008 |
|
|
Government agency securities |
|
— |
|
10,012 |
|
— |
|
10,012 |
|
||||
|
Corporate debt |
|
— |
|
13,773 |
|
— |
|
13,773 |
|
||||
|
Commercial paper |
|
— |
|
2,994 |
|
— |
|
2,994 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total |
|
$ |
40,008 |
|
$ |
26,779 |
|
$ |
— |
|
$ |
66,787 |
|
|
|
|
|
|
Gross |
|
Gross |
|
|
|
||||
|
|
|
Amortized |
|
Unrealized |
|
Unrealized |
|
Estimated |
|
||||
|
|
|
Cost |
|
Gains |
|
Losses |
|
Fair Value |
|
||||
|
|
|
(in thousands) |
|
||||||||||
|
June 30, 2017 |
|
|
|
|
|
|
|
|
|
||||
|
U.S. treasuries |
|
$ |
34,986 |
|
$ |
— |
|
$ |
(35 |
) |
$ |
34,951 |
|
|
Government agency securities |
|
62,181 |
|
— |
|
(46 |
) |
62,135 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total |
|
$ |
97,167 |
|
$ |
— |
|
$ |
(81 |
) |
$ |
97,086 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
December 31, 2016 |
|
|
|
|
|
|
|
|
|
||||
|
U.S. treasuries |
|
$ |
40,013 |
|
$ |
— |
|
$ |
(5 |
) |
$ |
40,008 |
|
|
Government agency securities |
|
10,020 |
|
— |
|
(8 |
) |
10,012 |
|
||||
|
Corporate debt |
|
13,780 |
|
— |
|
(7 |
) |
13,773 |
|
||||
|
Commercial paper |
|
2,994 |
|
— |
|
— |
|
2,994 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total |
|
$ |
66,807 |
|
$ |
— |
|
$ |
(20 |
) |
$ |
66,787 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017 |
|
December 31, 2016 |
|
||||||||
|
|
|
|
|
Gross |
|
|
|
Gross |
|
||||
|
|
|
Estimated |
|
Unrealized |
|
Estimated |
|
Unrealized |
|
||||
|
|
|
Fair Value |
|
Losses |
|
Fair Value |
|
Losses |
|
||||
|
|
|
(in thousands) |
|
||||||||||
|
U.S. treasuries |
|
$ |
34,951 |
|
$ |
(35 |
) |
$ |
20,002 |
|
$ |
(5 |
) |
|
Government agency securities |
|
62,135 |
|
(46 |
) |
10,012 |
|
(8 |
) |
||||
|
Corporate debt |
|
— |
|
— |
|
13,774 |
|
(7 |
) |
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total |
|
$ |
97,086 |
|
$ |
(81 |
) |
$ |
43,788 |
|
$ |
(20 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017 |
|
||||
|
|
|
Amortized |
|
Estimated |
|
||
|
|
|
cost |
|
fair value |
|
||
|
|
|
(in thousands) |
|
||||
|
Due in one year or less |
|
$ |
72,278 |
|
$ |
72,220 |
|
|
Due after one year through two years |
|
24,889 |
|
24,866 |
|
||
|
|
|
|
|
|
|
||
|
Total |
|
$ |
97,167 |
|
$ |
97,086 |
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
||
|
|
|
2017 |
|
2016 |
|
||
|
|
|
(in thousands) |
|
||||
|
Materials |
|
$ |
58,372 |
|
$ |
46,457 |
|
|
Work-in-process |
|
46,498 |
|
25,250 |
|
||
|
Finished goods |
|
15,065 |
|
5,356 |
|
||
|
|
|
|
|
|
|
||
|
Total |
|
$ |
119,935 |
|
$ |
77,063 |
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
||
|
|
|
2017 |
|
2016 |
|
||
|
|
|
(in thousands) |
|
||||
|
Land |
|
$ |
5,669 |
|
$ |
5,669 |
|
|
Building and improvements |
|
49,832 |
|
50,814 |
|
||
|
Machinery and equipment(1) |
|
122,131 |
|
99,370 |
|
||
|
Leasehold improvements |
|
9,486 |
|
3,652 |
|
||
|
|
|
|
|
|
|
||
|
Gross property, plant and equipment |
|
187,118 |
|
159,505 |
|
||
|
Less: accumulated depreciation and amortization |
|
104,572 |
|
98,859 |
|
||
|
|
|
|
|
|
|
||
|
Net property, plant, and equipment |
|
$ |
82,546 |
|
$ |
60,646 |
|
|
|
|
|
|
|
|
|
|
(1) Machinery and equipment also includes software, furniture and fixtures
|
|
|
Gross carrying |
|
Accumulated |
|
|
|
|||
|
|
|
amount |
|
impairment |
|
Net amount |
|
|||
|
|
|
(in thousands) |
|
|||||||
|
Balance at December 31, 2016 |
|
$ |
238,108 |
|
$ |
123,200 |
|
$ |
114,908 |
|
|
Acquisition |
|
188,252 |
|
— |
|
188,252 |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Balance at June 30, 2017 |
|
$ |
426,360 |
|
$ |
123,200 |
|
$ |
303,160 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017 |
|
December 31, 2016 |
|
||||||||||||||
|
|
|
|
|
Accumulated |
|
|
|
|
|
Accumulated |
|
|
|
||||||
|
|
|
Gross |
|
Amortization |
|
|
|
Gross |
|
Amortization |
|
|
|
||||||
|
|
|
Carrying |
|
and |
|
Net |
|
Carrying |
|
and |
|
Net |
|
||||||
|
|
|
Amount |
|
Impairment |
|
Amount |
|
Amount |
|
Impairment |
|
Amount |
|
||||||
|
|
|
(in thousands) |
|
||||||||||||||||
|
Technology |
|
$ |
307,588 |
|
$ |
118,863 |
|
$ |
188,725 |
|
$ |
149,198 |
|
$ |
113,904 |
|
$ |
35,294 |
|
|
Customer relationships |
|
164,595 |
|
31,971 |
|
132,624 |
|
47,885 |
|
28,659 |
|
19,226 |
|
||||||
|
In-process R&D |
|
43,340 |
|
— |
|
43,340 |
|
— |
|
— |
|
— |
|
||||||
|
Trademarks and tradenames |
|
28,010 |
|
2,326 |
|
25,684 |
|
2,590 |
|
1,948 |
|
642 |
|
||||||
|
Indefinite-lived trademark |
|
2,900 |
|
— |
|
2,900 |
|
2,900 |
|
— |
|
2,900 |
|
||||||
|
Other |
|
3,828 |
|
1,004 |
|
2,824 |
|
2,026 |
|
1,710 |
|
316 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Total |
|
$ |
550,261 |
|
$ |
154,164 |
|
$ |
396,097 |
|
$ |
204,599 |
|
$ |
146,221 |
|
$ |
58,378 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
June 30, |
|
December 31, |
|
||
|
|
|
2017 |
|
2016 |
|
||
|
|
|
(in thousands) |
|
||||
|
Payroll and related benefits |
|
$ |
23,016 |
|
$ |
18,780 |
|
|
Warranty |
|
6,741 |
|
4,217 |
|
||
|
Professional fees |
|
2,943 |
|
1,827 |
|
||
|
Installation |
|
1,386 |
|
1,382 |
|
||
|
Sales, use, and other taxes |
|
1,806 |
|
1,282 |
|
||
|
Restructuring liability |
|
1,373 |
|
1,796 |
|
||
|
Interest |
|
4,244 |
|
— |
|
||
|
Other |
|
2,796 |
|
3,917 |
|
||
|
|
|
|
|
|
|
||
|
Total |
|
$ |
44,305 |
|
$ |
33,201 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
|
|
Balance - December 31, 2016 |
|
$ |
4,217 |
|
|
Warranties issued |
|
2,809 |
|
|
|
Addition from Ultratech acquisition |
|
1,889 |
|
|
|
Consumption of reserves |
|
(2,673 |
) |
|
|
Changes in estimate |
|
499 |
|
|
|
|
|
|
|
|
|
Balance - June 30, 2017 |
|
$ |
6,741 |
|
|
|
|
|
|
|
|
|
|
Personnel |
|
|
|
|
|
|||
|
|
|
Severance and |
|
Facility |
|
|
|
|||
|
|
|
Related Costs |
|
Closing Costs |
|
Total |
|
|||
|
|
|
(in thousands) |
|
|||||||
|
Balance - December 31, 2016 |
|
$ |
1,796 |
|
$ |
— |
|
$ |
1,796 |
|
|
Provision |
|
1,405 |
|
2,349 |
|
3,754 |
|
|||
|
Payments |
|
(2,079 |
) |
(2,098 |
) |
(4,177 |
) |
|||
|
|
|
|
|
|
|
|
|
|||
|
Balance - June 30, 2017 |
|
$ |
1,122 |
|
$ |
251 |
|
$ |
1,373 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
|
|
|
2017 |
|
|
|
|
|
(in thousands) |
|
|
|
Principal amount |
|
$ |
345,000 |
|
|
Unamortized debt discount |
|
(68,072 |
) |
|
|
Unamortized transaction costs |
|
(6,857 |
) |
|
|
|
|
|
|
|
|
Net carrying value |
|
$ |
270,071 |
|
|
|
|
|
|
|
|
|
|
Three months |
|
Six months ended |
|
||
|
|
|
2017 |
|
2017 |
|
||
|
|
|
(in thousands) |
|
||||
|
Cash Interest Expense |
|
|
|
|
|
||
|
Coupon interest expense |
|
$ |
2,329 |
|
$ |
4,244 |
|
|
Non-Cash Interest Expense |
|
|
|
|
|
||
|
Amortization of debt discount |
|
2,455 |
|
4,440 |
|
||
|
Amortization of transaction costs |
|
247 |
|
447 |
|
||
|
|
|
|
|
|
|
||
|
Total Interest Expense |
|
$ |
5,031 |
|
$ |
9,131 |
|
|
|
|
|
|
|
|
|
|
|
|||
At June 30, 2017, Veeco’s total future minimum lease payments under non-cancelable operating leases (exclusive of renewal options) are payable as follows:
|
|
|
Operating |
|
|
|
|
|
(in thousands) |
|
|
|
Payments due by period: |
|
|
|
|
|
2017 |
|
$ |
3,528 |
|
|
2018 |
|
5,433 |
|
|
|
2019 |
|
4,994 |
|
|
|
2020 |
|
4,756 |
|
|
|
2021 |
|
1,799 |
|
|
|
Thereafter |
|
4,493 |
|
|
|
|
|
|
|
|
|
Total |
|
$ |
25,003 |
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
Unrealized |
|
|
|
|||
|
|
|
Foreign Currency |
|
Gains (Losses) on |
|
|
|
|||
|
|
|
Translation |
|
Securities |
|
Total |
|
|||
|
|
|
(in thousands) |
|
|||||||
|
Balance - December 31, 2016 |
|
$ |
1,797 |
|
$ |
(20 |
) |
$ |
1,777 |
|
|
Other comprehensive income (loss) |
|
24 |
|
(61 |
) |
(37 |
) |
|||
|
|
|
|
|
|
|
|
|
|||
|
Balance - June 30, 2017 |
|
$ |
1,821 |
|
$ |
(81 |
) |
$ |
1,740 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
Three months ended June 30, |
|
Six months ended June 30, |
|
||||||||
|
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
||||
|
|
|
(in thousands) |
|
||||||||||
|
Loss before income taxes |
|
$ |
(31,285 |
) |
$ |
(31,068 |
) |
$ |
(40,472 |
) |
$ |
(46,073 |
) |
|
Income tax expense (benefit) |
|
$ |
(12,897 |
) |
$ |
1,014 |
|
$ |
(23,179 |
) |
$ |
1,542 |
|
|
|||
|
|
|
Three months ended June 30, |
|
Six months ended June 30, |
|
||||||||
|
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
||||
|
|
|
(in thousands) |
|
||||||||||
|
Sales by end-market |
|
|
|
|
|
|
|
|
|
||||
|
Lighting, Display & Power Electronics |
|
$ |
56,199 |
|
$ |
24,762 |
|
$ |
110,393 |
|
$ |
47,705 |
|
|
Advanced Packaging, MEMS & RF |
|
21,426 |
|
17,045 |
|
32,983 |
|
40,308 |
|
||||
|
Scientific & Industrial |
|
27,033 |
|
31,779 |
|
54,209 |
|
62,582 |
|
||||
|
Front-End Semiconductor |
|
10,408 |
|
1,762 |
|
11,867 |
|
2,764 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total |
|
$ |
115,066 |
|
$ |
75,348 |
|
$ |
209,452 |
|
$ |
153,359 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, |
|
Six months ended June 30, |
|
||||||||
|
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
||||
|
|
|
(in thousands) |
|
||||||||||
|
Sales by geographic region |
|
|
|
|
|
|
|
|
|
||||
|
United States |
|
$ |
21,245 |
|
$ |
20,734 |
|
$ |
38,533 |
|
$ |
47,446 |
|
|
China |
|
26,287 |
|
24,582 |
|
66,613 |
|
33,383 |
|
||||
|
EMEA(1) |
|
18,002 |
|
14,834 |
|
40,069 |
|
42,296 |
|
||||
|
Rest of World |
|
49,532 |
|
15,198 |
|
64,237 |
|
30,234 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total |
|
$ |
115,066 |
|
$ |
75,348 |
|
$ |
209,452 |
|
$ |
153,359 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) EMEA consists of Europe, the Middle East, and Africa
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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|
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|
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|
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|
|
|
|
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|
|||||||||||||
|
|||||||||||||||||||||||||
|
|
|
|
|
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|
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