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Balance Sheet Information | 9 Months Ended
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Sep. 30, 2014
Balance Sheet Information |
Balance Sheet Information | Note 4—Balance Sheet Information Cash and Cash Equivalents Cash and cash equivalents include cash and certain highly liquid investments. Highly liquid investments with maturities of three months or less when purchased may be classified as cash equivalents. Such items may include liquid money market accounts, U.S. treasuries, government agency securities and corporate debt. The investments that are classified as cash equivalents are carried at cost, which approximates fair value. Short-Term Investments Total available-for-sale securities and gains and losses in Accumulated Other Comprehensive Income (Loss) consist of the following (in thousands):
|  | September 30, 2014 |
|  | Amortized Cost |  | Gains in Accumulated Other Comprehensive Income |  | Losses in Accumulated Other Comprehensive Income |  | Estimated Fair Value |
U.S. treasuries |  | $ | 90,523 |  | $ | 35 |  | $ | (1 | ) | $ | 90,557 |
Corporate debt |  | 69,109 |  | 93 |  | (4 | ) | 69,198 |
Government agency securities |  | 63,191 |  | 8 |  | — |  | 63,199 |
Total available-for-sale securities |  | $ | 222,823 |  | $ | 136 |  | $ | (5 | ) | $ | 222,954 |
During the three and nine months ended September 30, 2014, available-for-sale securities were liquidated for total proceeds of $94.8 million and $216.1 million, respectively. For the three and nine months ended September 30, 2014 there were minimal realized gains on these liquidations. During the three and nine months ended September 30, 2013, available-for-sale securities were liquidated for total proceeds of $150.5 million and $422.9 million, respectively. There were minimal gross realized gains on these sales for the three months ended September 30, 2013 and $0.1 million of gross realized gains on these sales for the nine months ended September 30, 2013. The cost of securities liquidated is based on specific identification.
|  | December 31, 2013 |
|  | Amortized Cost |  | Gains in Accumulated Other Comprehensive Income |  | Losses in Accumulated Other Comprehensive Income |  | Estimated Fair Value |
U.S. treasuries |  | $ | 130,956 |  | $ | 22 |  | $ | (1 | ) | $ | 130,977 |
Corporate debt |  | 77,582 |  | 55 |  | (36 | ) | 77,601 |
Government agency securities |  | 61,004 |  | 9 |  | — |  | 61,013 |
Commercial paper |  | 11,947 |  | — |  | — |  | 11,947 |
Total available-for-sale securities |  | $ | 281,489 |  | $ | 86 |  | $ | (37 | ) | $ | 281,538 |
The table below shows the fair value of short-term investments that have been in an unrealized loss position for less than 12 months (in thousands):
|  | September 30, 2014 |
|  | Less than 12 months |
|  | Estimated Fair Value |  | Gross Unrealized Losses |
U.S. treasuries |  | $ | 15,006 |  | $ | (1 | )
Corporate debt |  | 7,221 |  | (4 | )
Total |  | $ | 22,227 |  | $ | (5 | )
|  | December 31, 2013 |
|  | Less than 12 months |
|  | Estimated Fair Value |  | Gross Unrealized Losses |
Corporate debt |  | $ | 37,654 |  | $ | (36 | )
U. S. treasuries |  | 29,068 |  | (1 | )
Total |  | $ | 66,722 |  | $ | (37 | )
We did not hold any short-term investments that have been in an unrealized loss position for 12 months or longer for the periods noted in the tables above. The Company regularly reviews its investment portfolio to identify and evaluate investments that have indications of possible impairment. Factors considered in determining whether an unrealized loss was considered to be temporary or other-than-temporary and therefore impaired include: the length of time and extent to which fair value has been lower than the cost basis; the financial condition and near-term prospects of the investee; and whether it is more likely than not that the Company will be required to sell the security prior to recovery. The Company believes the gross unrealized losses on the Company’s short-term investments as of September 30, 2014 and December 31, 2013 were temporary in nature and therefore did not recognize any impairment. Contractual maturities of available-for-sale debt securities are as follows (in thousands):
|  | September 30, 2014 |
|  | Estimated Fair Value |
Due in one year or less |  | $ | 135,948 |
Due in 1–2 years |  | 87,006 |
Total available-for-sale securities |  | $ | 222,954 |
Actual maturities may differ from contractual maturities because some borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Restricted Cash As of September 30, 2014 and December 31, 2013, restricted cash was $0.5 million and $2.7 million, respectively, which serves as collateral for bank guarantees that provide financial assurance that the Company will fulfill certain customer obligations. This cash is held in custody by the issuing bank and is restricted as to withdrawal or use while the related bank guarantees are outstanding. Accounts Receivable, Net Accounts receivable are presented net of allowance for doubtful accounts of $0.9 million and $2.4 million as of September 30, 2014 and December 31, 2013, respectively. We evaluate the collectability of accounts receivable based on a combination of factors. In cases where we become aware of circumstances that may impair a customer’s ability to meet its financial obligations subsequent to the original sale, we will record an allowance against amounts due, and thereby reduce the net recognized receivable to the amount the we reasonably believe will be collected. For all other customers, we recognize an allowance for doubtful accounts based on the length of time the receivables are past due and consideration of other factors such as industry conditions, the current business environment and its historical experience. During the nine months ended September 30, 2014, we collected $1.9 million of previously reserved accounts. As a result, we reversed the related allowance and bad debt expense associated with this receivable. Inventories Inventories are stated at the lower of cost (principally first-in, first-out) or market. Inventories consist of (in thousands):
|  | September 30, |  | December 31, |
|  | 2014 |  | 2013 |
Materials |  | $ | 26,305 |  | $ | 34,301 |
Work in process |  | 15,169 |  | 12,900 |
Finished goods |  | 5,120 |  | 12,525 |
|  | $ | 46,594 |  | $ | 59,726 |
Assets Held for Sale and Property, Plant and Equipment, Net During the three and nine months ended September 30, 2014, we transferred $2.7 million of assets from property, plant and equipment, net to assets held for sale. In conjunction with the transfer, these assets were evaluated for impairment in accordance with the accounting guidance. As a result, during the three and nine months ended September 30, 2014, we recognized an asset impairment charge of $2.4 million and a corresponding reduction to property, plant and equipment of $5.1 million. The $2.4 million impairment charge consisted of $1.6 million relating to our research and demonstration labs in Asia and $0.8 million relating to vacant land in our LED and Solar segment. During the three and nine months ended September 30, 2014, we recognized an additional asset impairment charge of $0.4 million relating to assets in our LED and Solar segment that we abandoned during the quarter. As of September 30, 2014, we are holding $2.9 million of tools that were previously used in our laboratories, for sale. These tools are carried in machinery and equipment, as a component of property, plant and equipment, net in our Consolidated Balance Sheets. These tools are the same type of tools we sell to our customers in the ordinary course of our business. During the nine months ended September 30, 2014, we converted and sold $4.6 million of tools that we had previously used in our laboratories as Veeco Certified Equipment at an aggregate selling price of $7.0 million which is included in revenue in our Consolidated Statements of Operations. We did not sell any of these tools during the three months ended September 30, 2014. Intangible Assets, Net During the three months ended September 30, 2014, we completed the $5.1 million of in-process research and development acquired with our ALD business (see Note Business Combinations). No impairment was required, and as such, we will amortize this asset over a useful life of 13 years. During the three months ended September 30, 2014 we recognized amortization expense of approximately $0.1 million relating to this asset. Goodwill Changes in our goodwill are as follows (in thousands):
Beginning balance as of December 31, 2013 |  | $ | 91,348 |
Purchase price adjustment (see Business Combinations) |  | 173 |
Ending balance as of September 30, 2014 |  | $ | 91,521 |
Cost Method Investment We maintain certain investments in support of our strategic business objectives, including a non-marketable cost method investment. Our ownership interest is less than 20% of the investee’s voting stock and we do not exert significant influence, therefore the investment is recorded at cost. The carrying value of the investment was $19.4 million and $16.9 million at September 30, 2014 and December 31, 2013, respectively and is included in “Other assets” on the Consolidated Balance Sheet. The investment is subject to a periodic impairment review; however, there are no open-market valuations, and the impairment analysis requires significant judgment. This analysis includes assessment of the investee’s financial condition, the business outlook for its products and technology, its projected results and cash flow, the likelihood of obtaining subsequent rounds of financing, and the impact of any relevant contractual equity preferences held by us or others. 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. Customer Deposits and Deferred Revenue As of September 30, 2014 and December 31, 2013, we had customer deposits of $35.8 million and $27.5 million, respectively recorded as a component of customer deposits and deferred revenue. Accrued Warranty We estimate the costs that may be incurred under the warranties we provide and record a liability in the amount of such costs at the time the related revenue is recognized. Factors that affect our warranty liability include product failure rates, material usage and labor costs incurred in correcting product failures during the warranty period. This accrual is recorded in accrued expenses and other current liabilities in our Consolidated Balance Sheets. We periodically assess the adequacy of our recognized warranty liability and adjust the amount as necessary. Changes in our warranty liability during the period are as follows (in thousands):
|  | September 30, |
|  | 2014 |  | 2013 |
Balance as of the beginning of period |  | $ | 5,662 |  | $ | 4,942 |
Warranties issued during the period |  | 2,536 |  | 2,778 |
Settlements made during the period |  | (3,160 | ) | (3,315 | )
Changes in estimate during the period |  | 259 |  | — |
Balance as of the end of period |  | $ | 5,297 |  | $ | 4,405 |
Mortgage Payable We have a mortgage payable with approximately $1.9 million and $2.1 million outstanding as of September 30, 2014 and December 31, 2013, respectively. The mortgage accrues interest at an annual rate of 7.91%, and the final payment is due on January 1, 2020. Our estimate of the fair value of the mortgage as of September 30, 2014 and December 31, 2013 was approximately $2.0 million and $2.3 million, respectively. We believe the mortgage is a Level 3 liability in the fair-value hierarchy. Accumulated Other Comprehensive Income The components of accumulated other comprehensive income are (in thousands):
|  | Gross |  | Taxes |  | Net |
As of September 30, 2014 |  |  |  |  |  |  |  |  |  |
Translation adjustments |  | $ | 5,689 |  | $ | (392 | ) | $ | 5,297 |
Minimum pension liability |  | (1,160 | ) | 424 |  | (736 | )
Unrealized gain on available-for-sale securities |  | 131 |  | (18 | ) | 113 |
Accumulated other comprehensive income |  | $ | 4,660 |  | $ | 14 |  | $ | 4,674 |
|  | Gross |  | Taxes |  | Net |
As of December 31, 2013 |  |  |  |  |  |  |
Translation adjustments |  | $ | 5,718 |  | $ | (392 | ) | $ | 5,326 |
Minimum pension liability |  | (1,160 | ) | 424 |  | (736 | )
Unrealized gain on available-for-sale securities |  | 49 |  | (18 | ) | 31 |
Accumulated other comprehensive income |  | $ | 4,607 |  | $ | 14 |  | $ | 4,621 |
Equity Summary share activities impacting our common stock and additional paid-in capital balances are as follows (in thousands):
|  | For the nine months ended September 30, 2014 |
|  | Shares |
Restricted Stock |  |  |
Grants |  | 221 |
Gross Vesting |  | 173 |
Shares Withheld to Cover Taxes & Cancelled |  | (57 | )
Net Shares Vested |  | 116 |
Stock Options |  |  |
Exercised |  | 402 |

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