10. Commitments and Contingencies and Other Matters

Restructuring and Other Charges

During 2011 through 2013, in response to challenging business conditions, we initiated activities to reduce and contain spending, including reducing our workforce, consultants and discretionary expenses.

In conjunction with these activities, we recognized restructuring charges of approximately $1.5 million, $3.8 million and $1.3 million during the years ended December 31, 2013, 2012 and 2011, respectively. During the years ended December 31, 2012 and 2011, we also recorded inventory write-offs of $1.0 million related to a discontinued product line in our Data Storage segment and $0.8 million related to a discontinued product line in our LED & Solar segment, respectively. These inventory write-offs are included in cost of sales in the accompanying Consolidated Statements of Operations.

Restructuring expense for the years ended December 31, 2013, 2012 and 2011 are as follows (in thousands):

	Year ended December 31,
	2013		2012		2011
Personnel severance and related costs	$	1,485	$	3,040	$	1,288
Equity compensation and related costs	—		414		—
Lease-related and other	—		359		—
	$	1,485	$	3,813	$	1,288

Personnel Severance and Related Costs

During 2013, we recorded $1.5 million in personnel severance and related costs resulting from the restructuring of one of our international sales offices and the consolidation of certain sales, business and administrative functions. During 2012, we recorded $3.0 million in personnel severance and related costs resulting from a headcount reduction of 52 employees. During 2011, we recorded $1.3 million in personnel severance and related costs related to a companywide reorganization resulting in a headcount reduction of 65 employees. These reductions in workforce included executives, management, administration, sales and service personnel and manufacturing employees’ companywide.

Lease-Related and Other

During 2012, we recorded $0.4 million in other associated costs resulting from a headcount reduction of 52 employees. These charges primarily consist of job placement services, consulting and relocation expenses, as well as duplicate wages incurred during the transition period.

The following is a reconciliation of the liability for the 2013, 2012 and 2011 restructuring charges through December 31, 2013 (in thousands):

	LED & Solar			Data Storage			Unallocated			Total
Short-term liability
Balance as of January 1, 2011	$	—		$	178		$	536		$	714

Personnel severance and related costs 2011	672			51			311			1,034
Personnel severance and related costs 2012	874			1,684			135			2,693
Personnel severance and related costs 2013	1,017			410			58			1,485
Short-term/long-term reclassification 2011	—			58			—			58
Cash payments 2011	(138		)	(159		)	(553		)	(850		)
Cash payments 2012	(960		)	(504		)	(310		)	(1,774		)
Cash payments 2013	(1,282		)	(1,368		)	(177		)	(2,827		)
Balance as of December 31, 2013	$	183		$	350		$	—		$	533

Long-term liability
Balance as of January 1, 2011	$	—		$	58		$	—		$	58
Short-term/long-term reclassification 2011	—			(58		)	—			(58		)
Balance as of December 31, 2011	$	—		$	—		$	—		$	—

Minimum Lease Commitments

Minimum lease commitments as of December 31, 2013 for property and equipment under operating lease agreements (exclusive of renewal options) are payable as follows (in thousands):

2014	$	3,076
2015	2,091
2016	1,327
2017	1,052
2018	536
	$	8,082

Rent amounted to $2.9 million, $3.5 million and $2.7 million in 2013, 2012 and 2011, respectively. In addition, we are obligated under such leases for certain other expenses, including real estate taxes and insurance.

Environmental Remediation

We are aware that petroleum hydrocarbon contamination has been detected in the soil at the site of a facility formerly leased by us in Santa Barbara, California. We have been indemnified for any liabilities we may incur which arise from environmental contamination at the site. Even without consideration of such indemnification, we do not believe that any material loss or expense is probable in connection with any such liabilities. The former owner of the land and building in Santa Barbara, California in which our former Metrology operations were located, which business (sold to Bruker on October 7, 2010), has disclosed that there are hazardous substances present in the ground under the building. Management believes that the comprehensive indemnification clause that was part of the purchase contract relating to the purchase of such land provides adequate protection against any environmental issues that may arise. We have provided Bruker indemnification as part of the sale.

Litigation

Veeco and certain other parties were named as defendants in a lawsuit filed on April 25, 2013 in the Superior Court of California, County of Sonoma. The plaintiff in the lawsuit, Patrick Colbus, seeks unspecified damages and asserts claims that he suffered burns and other injuries while he was cleaning a molecular beam epitaxy system alleged to have been manufactured by Veeco. The lawsuit alleges, among other things, that the molecular beam epitaxy system was defective and that Veeco failed to adequately warn of the potential risks of the system. Veeco believes this lawsuit is without merit and intends to defend vigorously against the claims. Veeco is unable to predict the outcome of this action or to reasonably estimate the possible loss or range of loss, if any, arising from the claims asserted therein. The Company believes that, in the event of any recovery by the plaintiff from Veeco, such recovery would be fully covered by Veeco’s insurance.

We are involved in various other legal proceedings arising in the normal course of our business. We do not believe that the ultimate resolution of these matters will have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Concentrations of Credit Risk

Our business depends in large part upon the capital expenditures of our top ten customers, which accounted for 69% and 77% of total accounts receivable as of December 31, 2013 and 2012, respectively. Of such, LED & Solar and Data Storage customers accounted for approximately 30% and 39%, and 56% and 21%, respectively, of total accounts receivable as of December 31, 2013 and 2012.

Customers who accounted for more than 10% of our aggregate accounts receivable or net sales are as follows:

Accounts Receivable

Net Sales for the year ended

December 31,

Customer

Segment

2013

2012

2013

2012

2011

Customer A

Data Storage

Customer B

Data Storage

Customer C

LED & Solar

Customer D

LED & Solar

Customer E

LED & Solar

* Less than 10% of aggregate accounts receivable or net sales.

We manufacture and sell our products to companies in different geographic locations. In certain instances, we require deposits for a portion of the sales price in advance of shipment. We perform periodic credit evaluations of our customers’ financial condition and, where appropriate, require that letters of credit be provided on certain foreign sales arrangements. Receivables generally are due within 30-90 days, other than receivables generated from customers in Japan where payment terms generally range from 60-150 days. Our net accounts receivable balance is concentrated in the following geographic locations (in thousands):

	December 31,
	2013		2012
China	$	4,845	$	28,132
Singapore	3,192		7,266
Taiwan	553		6,390
Other	6,162		3,853
Asia Pacific	14,752		45,641
Americas	7,526		13,917
Europe, Middle East and Africa	1,545		3,611
	$	23,823	$	63,169

Suppliers

We currently outsource certain functions to third parties, including the manufacture of all or substantially all of our new MOCVD systems, Data Storage systems and ion sources. We primarily rely on several suppliers for the manufacturing of these systems. We plan to maintain some level of internal manufacturing capability for these systems. The failure of our present suppliers to meet their contractual obligations under our supply arrangements and our inability to make alternative arrangements or resume the manufacture of these systems ourselves could have a material adverse effect on our revenues, profitability, cash flows and relationships with our customers.

In addition, certain of the components and sub-assemblies included in our products are obtained from a single source or a limited group of suppliers. Our inability to develop alternative sources, if necessary, could result in a prolonged interruption in supply or a significant increase in the price of one or more components, which could adversely affect our operating results.

Purchase Commitments

As of December 31, 2013, we had purchase commitments totaling $60.3 million all of which come due within one year. We have $9.4 million of offsetting supplier deposits against these purchase commitments as of December 31, 2013.

Lines of Credit and Guarantees

As of December 31, 2013, we had letter of credit and bank guarantees issued by a bank on our behalf as needed. We had letters of credit outstanding of $0.6 million and bank guarantees outstanding of $5.9 million, of which, $2.7 million is collateralized against cash that is restricted from use. As of December 31, 2013, we had $40.4 million of unused lines of credit available. The line of credit is available to draw upon to cover performance bonds as required by our customers.