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Business Combinations | 12 Months Ended
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Dec. 31, 2015
Business Combinations |
Business Combinations | Note 5 — Business Combinations PSP On December 4, 2014 the Company acquired 100% of Solid State Equipment, LLC (“SSEC”) and rebranded the business Veeco Precision Surface Processing (“PSP”). The results of PSP operations have been included in the consolidated financial statements since the date of acquisition. PSP designs and develops wafer wet processing capabilities. Target market applications include semiconductor advanced packaging (including 2.5D and 3D ICs), micro-electromechanical systems (“MEMS”), compound semiconductor (RF, power electronics, LED and others), data storage, photomask, and flat panel displays. PSP further extends the Company’s penetration in the compound semiconductor and MEMS markets and represents the Company’s entry into the advanced packaging market. The acquisition date fair value of the consideration totaled $145.5 million, net of cash acquired, which consisted of the following:
|  | Acquisition Date |
|  | (December 4, 2014) |
|  | (in thousands) |
Amount paid, net of cash acquired |  | $ | 145,382 |
Working capital adjustment |  | 88 |
Acquisition date fair value |  | $ | 145,470 |
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date. The Company utilized third-party valuations to estimate the fair value of certain of the acquired tangible and intangible assets:
|  | Acquisition Date (December 4, 2014) |
|  | (in thousands) |
Accounts receivable |  | $ | 9,383 |
Inventory |  | 13,812 |
Other current assets |  | 463 |
Property, plant, and equipment |  | 6,912 |
Intangible assets |  | 79,810 |
Total identifiable assets acquired |  | 110,380 |
Accounts payable and accrued expenses |  | 6,473 |
Customer deposits |  | 6,039 |
Deferred tax liability, net |  | 2,705 |
Other |  | 1,089 |
Total liabilities assumed |  | 16,306 |
Net identifiable assets acquired |  | 94,074 |
Goodwill |  | 51,396 |
Net assets acquired |  | $ | 145,470 |
The gross contractual value of the acquired accounts receivable was approximately $10.5 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. Approximately 80% of the value of the goodwill is expected to be deductible for income tax purposes. During 2015, the Company finalized the purchase accounting, including taxes and the working capital adjustment under the purchase agreement. Based on the final adjustments, net working capital increased $0.7 million, goodwill decreased $0.1 million, deferred tax liabilities decreased $0.2 million, and a lease-related asset retirement obligation of $0.8 million was recognized. The classes of intangible assets acquired and the estimated useful life of each class is presented in the table below:
|  | Acquisition Date |
|  | (December 4, 2014) |
|  | Amount |  | Useful life |
|  | (in thousands) |  |  |
Technology |  | $ | 39,950 |  | 10 years |
Customer relationships |  | 34,310 |  | 14 years |
Backlog |  | 3,340 |  | 6 months |
Non-compete agreements |  | 1,130 |  | 2 years |
Trademark and tradenames |  | 1,080 |  | 1 year |
Intangible assets acquired |  | $ | 79,810 |  |  |
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. During 2014, the Company recognized $3.2 million of acquisition related costs that are included in “Selling, general, and administrative” in the Consolidated Statements of Operations. The amounts of revenue and income (loss) from continuing operations before income taxes of PSP included in the Company’s consolidated statement of operations from the acquisition date (December 4, 2014) to the period ending December 31, 2014 are as follows:
|  | Total |
|  | (in thousands) |
Revenue |  | $ | 7,906 |
Loss from operations before income taxes |  | $ | (3,011 | )
The following represents the unaudited pro forma Consolidated Statements of Operations as if PSP had been included in the Company’s consolidated results for the periods indicated. These amounts have been calculated after applying the Company’s accounting policies to material amounts and also adjusting the results of PSP to reflect the additional amortization and depreciation that would have been expensed assuming the fair value adjustments to the acquired assets had been applied on January 1, 2013:
|  | December 31, |
|  | 2014 |  | 2013 |
|  | (in thousands) |
Revenue |  | $ | 447,089 |  | $ | 379,272 |
Loss from operations before income taxes |  | $ | (68,715 | ) | $ | (77,252 | )
ALD On October 1, 2013 the Company acquired 100% of the outstanding common shares and voting interest of Synos Technology, Inc. and rebranded the business Veeco ALD (“ALD”). The results of ALD operations have been included in the consolidated financial statements since the date of acquisition, and ALD has been integrated into the Company’s single operating segment. The ALD business includes early stage manufacturing of fast array scanning atomic layer deposition (“FAST-ALD”) tools for the flexible organic light-emitting diode (“OLED”) and semiconductor markets. The acquisition date fair value of the consideration totaled $102.3 million, net of cash acquired, which consisted of the following:
|  | Acquisition Date |
|  | (October 1, 2013) |
|  | (in thousands) |
Cash (net of cash acquired) |  | $ | 71,488 |
Contingent consideration |  | 33,539 |
Working capital adjustment |  | (2,695 | )
Acquisition date fair value |  | $ | 102,332 |
The acquisition agreement included performance milestones that could trigger contingent payments to the original selling shareholders. During the year ended December 31, 2013, the first milestone was achieved, and the Company paid the former shareholders $5.0 million and increased the estimated fair value of the remaining contingent payments by $0.8 million. During 2014, the Company determined that all of the remaining performance milestones were not met, reversed the fair value of the liability, and recorded a non-cash gain of $29.4 million, which is included in “Changes in contingent consideration” in the Consolidated Statements of Operations. During 2014, the Company finalized the working capital adjustment under the purchase agreement. Based on the final adjustment, the working capital adjustment was reduced to $1.3 million. As a result, a $1.4 million adjustment was made that increased goodwill by $0.2 million and reduced accrued expenses by $1.2 million for the relief of a potential liability that the former shareholders have retained. During 2014, the Company received payment of the $1.3 million working capital adjustment from the former shareholders, which is included in “Acquisitions of business, net of cash acquired” within the Cash Provided by Investing Activities in the Consolidated Statements of Cash Flows. The following table summarizes the estimated fair value of the assets acquired and liabilities assumed at the acquisition date. The Company utilized third-party valuations to estimate the fair value of the acquired tangible and intangible assets as well as the contingent consideration:
|  | Acquisition Date |
|  | (October 1, 2013) |
|  | (in thousands) |
Accounts receivable |  | $ | 1,523 |
Inventory |  | 386 |
Other current assets |  | 512 |
Property, plant, and equipment |  | 1,917 |
Intangible assets |  | 99,270 |
Total identifiable assets acquired |  | 103,608 |
Current liabilities |  | 4,370 |
Estimated deferred tax liability, net |  | 32,426 |
Total liabilities assumed |  | 36,796 |
Net identifiable assets acquired |  | 66,812 |
Goodwill |  | 35,520 |
Net assets acquired |  | $ | 102,332 |
The goodwill is not deductible for income tax purposes. The classes of intangible assets acquired and the original estimated useful life of each class is presented in the table below:
|  | Acquisition Date |
|  | (October 1, 2013) |
|  | Amount |  | Uuseful life |
|  | (in thousands) |  |  |
Technology |  | $ | 73,160 |  | 14 years |
Customer relationships |  | 20,630 |  | 8 years |
In-process research and development |  | 5,070 |  | To be determined |
Trademarks and trade names |  | 140 |  | 1 year |
Non-compete agreement |  | 270 |  | 3 years |
Intangible assets acquired |  | $ | 99,270 |  |  |
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. During the fourth quarter of 2014, the Company determined that, while its ALD technology was successfully demonstrated at its key OLED display customer, it was unlikely to be adopted in the near-term for flexible OLED applications. The significant reduction in near-term forecasted bookings and cash flows required the Company in December 2014 to assess its ALD business for impairment, which in 2014 was its own reporting unit. As a result, the Company recorded a non-cash impairment charge of $53.9 million related to goodwill and other long-lived assets for ALD. See Note 6, “Goodwill and Intangible Assets,” for additional information. During 2013, the Company recognized $1.0 million of acquisition related costs that are included in “Selling, general, and administrative” in the Consolidated Statements of Operations. The following represents the unaudited pro forma Consolidated Statements of Operations as if ALD had been included in the Company’s consolidated results for the periods indicated. These amounts have been calculated after applying the Company’s accounting policies to material amounts and also adjusting the result of ALD to reflect the additional amortization that would have been expensed assuming the fair value adjustments to the acquired assets had been applied on January 1, 2012.
|  | December 31, |
|  | 2013 |
|  | (in thousands) |
Revenue |  | $ | 346,319 |
Loss from operations before income taxes |  | $ | (60,983 | )

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