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Assets | 6 Months Ended
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Jun. 30, 2017
Assets |
Assets | 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.

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