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Assets | 6 Months Ended
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Jun. 30, 2018
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 purchased. 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 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, 2018 and December 31, 2017:
|  | Level 1 |  | Level 2 |  | Level 3 |  | Total |
|  | (in thousands) |
June 30, 2018 |  |  |  |  |  |  |  |  |
Short-term investments |  |  |  |  |  |  |  |  |
U.S. treasuries |  | $ | 44,488 |  | $ | — |  | $ | — |  | $ | 44,488 |
Corporate debt |  | — |  | 8,604 |  | — |  | 8,604 |
Commercial paper |  | — |  | 11,931 |  | — |  | 11,931 |
Total |  | $ | 44,488 |  | $ | 20,535 |  | $ | — |  | $ | 65,023 |
December 31, 2017 |  |  |  |  |  |  |  |  |
Cash equivalents |  |  |  |  |  |  |  |  |
U.S. treasuries |  | $ | 12,490 |  | $ | — |  | $ | — |  | $ | 12,490 |
Total |  | $ | 12,490 |  | $ | — |  | $ | — |  | $ | 12,490 |
Short-term investments |  |  |  |  |  |  |  |  |
U.S. treasuries |  | $ | 33,895 |  | $ | — |  | $ | — |  | $ | 33,895 |
Corporate debt |  | — |  | 10,886 |  | — |  | 10,886 |
Commercial paper |  | — |  | 2,999 |  | — |  | 2,999 |
Total |  | $ | 33,895 |  | $ | 13,885 |  | $ | — |  | $ | 47,780 |
There were no transfers between fair value measurement levels during the three and six months ended June 30, 2018. At June 30, 2018 and December 31, 2017, 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, 2018 |  |  |  |  |  |  |  |  |
U.S. treasuries |  | $ | 44,501 |  | $ | 1 |  | $ | (14 | ) | $ | 44,488 |
Corporate debt |  | 8,619 |  | — |  | (15 | ) | 8,604 |
Commercial paper |  | 11,930 |  | 1 |  | — |  | 11,931 |
Total |  | $ | 65,050 |  | $ | 2 |  | $ | (29 | ) | $ | 65,023 |
December 31, 2017 |  |  |  |  |  |  |  |  |
U.S. treasuries |  | $ | 33,914 |  | $ | — |  | $ | (19 | ) | $ | 33,895 |
Corporate debt |  | 10,894 |  | — |  | (8 | ) | 10,886 |
Commercial paper |  | 2,999 |  | — |  | — |  | 2,999 |
Total |  | $ | 47,807 |  | $ | — |  | $ | (27 | ) | $ | 47,780 |
Available-for-sale securities in a loss position at June 30, 2018 and December 31, 2017 consist of:
|  | June 30, 2018 |  | December 31, 2017 |
|  |  |  | Gross |  |  |  | Gross |
|  | Estimated |  | Unrealized |  | Estimated |  | Unrealized |
|  | Fair Value |  | Losses |  | Fair Value |  | Losses |
|  | (in thousands) |
U.S. treasuries |  | $ | 25,387 |  | $ | (14 | ) | $ | 33,895 |  | $ | (19 | )
Corporate debt |  | 8,604 |  | (15 | ) | 10,886 |  | (8 | )
Total |  | $ | 33,991 |  | $ | (29 | ) | $ | 44,781 |  | $ | (27 | )
At June 30, 2018 and December 31, 2017, there were no short-term investments that had been in a continuous loss position for more than 12 months. The maturities of securities classified as available-for-sale at June 30, 2018 were all due in one year or less. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. There were no realized gains or losses for the three and six months ended June 30, 2018 and minimal realized gains for the three and six months ending June 30, 2017. Accounts Receivable Accounts receivable is presented net of an allowance for doubtful accounts of $0.3 million at both June 30, 2018 and December 31, 2017. 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, 2018 and December 31, 2017 consist of the following:
|  | June 30, |  | December 31, |
|  | 2018 |  | 2017 |
|  | (in thousands) |
Materials |  | $ | 74,571 |  | $ | 59,919 |
Work-in-process |  | 44,301 |  | 37,222 |
Finished goods |  | 27,067 |  | 23,125 |
Total |  | $ | 145,939 |  | $ | 120,266 |
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 $11.6 million and $7.6 million at June 30, 2018 and December 31, 2017, respectively. Property, Plant, and Equipment Property, plant, and equipment at June 30, 2018 and December 31, 2017 consist of the following:
|  | June 30, |  | December 31, |
|  | 2018 |  | 2017 |
|  | (in thousands) |
Land |  | $ | 5,669 |  | $ | 5,669 |
Building and improvements |  | 59,301 |  | 54,449 |
Machinery and equipment(1) |  | 120,467 |  | 126,829 |
Leasehold improvements |  | 8,750 |  | 10,073 |
Gross property, plant, and equipment |  | 194,187 |  | 197,020 |
Less: accumulated depreciation and amortization |  | 114,919 |  | 111,962 |
Net property, plant, and equipment |  | $ | 79,268 |  | $ | 85,058 |
(1) Machinery and equipment also includes software, furniture and fixtures For the three and six months ended June 30, 2018, depreciation expense was $4.2 million and $8.4 million, respectively, and $3.5 million and $6.4 million for the comparable 2017 periods. Goodwill Goodwill represents the future economic benefits arising from assets acquired in a business combination that are not individually identified and separately recognized. There were no changes to goodwill during the six months ended June 30, 2018. Intangible Assets Intangible assets consist of purchased technology, customer relationships, patents, trademarks and tradenames, and backlog, and are initially recorded at fair value. Long-lived intangible assets 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. During the second quarter of 2018, the Company lowered its projected results for the Ultratech asset group. The revised projections were significantly lower than the projected results at the time of the acquisition. The lower than expected unit volume of certain smartphones, which incorporate advanced packaging methods such as Fan-Out Wafer Level Packaging (“FOWLP”), and the delay in the adoption of FOWLP advanced packaging by other electronics manufacturers has slowed orders and reduced revenue projections for the Company’s advanced packaging lithography systems. In addition, there has been a delay in the build out of 28nm facilities by companies in China who were expected to purchase the Company’s Laser Spike Anneal (“LSA”) systems. Taken together, the reduced projections required the Company to assess the Ultratech asset group for impairment. As a result of the analysis, which included projected cash flows that required the use of unobservable inputs, the Company recorded non-cash impairment charges of $216.4 million and $35.9 million related to definite-lived intangible assets and in-process research and development assets, respectively, during the second quarter of 2018. The components of purchased intangible assets were as follows:
|  | June 30, 2018 |  | December 31, 2017 |
|  |  |  | Accumulated |  |  |  |  |  | Accumulated |  |  |
|  | Gross |  | Amortization |  |  |  | Gross |  | Amortization |  |  |
|  | Carrying |  | and |  | Net |  | Carrying |  | and |  | Net |
|  | Amount |  | Impairment |  | Amount |  | Amount |  | Impairment |  | Amount |
|  | (in thousands) |
Technology |  | $ | 307,588 |  | $ | 260,471 |  | $ | 47,117 |  | $ | 307,588 |  | $ | 133,121 |  | $ | 174,467 |
Customer relationships |  | 164,595 |  | 133,393 |  | 31,202 |  | 164,595 |  | 39,336 |  | 125,259 |
In-process R&D |  | 43,340 |  | 35,900 |  | 7,440 |  | 43,340 |  | — |  | 43,340 |
Trademarks and tradenames |  | 30,910 |  | 23,221 |  | 7,689 |  | 30,910 |  | 4,321 |  | 26,589 |
Other |  | 3,686 |  | 3,552 |  | 134 |  | 3,686 |  | 3,498 |  | 188 |
Total |  | $ | 550,119 |  | $ | 456,537 |  | $ | 93,582 |  | $ | 550,119 |  | $ | 180,276 |  | $ | 369,843 |
Other intangible assets primarily consist of patents, licenses, and backlog. Based on the revised intangible asset values resulting from the impairment recorded during the period ended June 30, 2018, the remaining estimated annual amortization expense, excluding in-process R&D, is expected to be as follows:
|  | Amortization |
|  | (in thousands) |
2018 |  | $ | 8,196 |
2019 |  | 16,211 |
2020 |  | 15,285 |
2021 |  | 12,164 |
2022 |  | 9,829 |
Thereafter |  | 24,457 |
Total |  | $ | 86,142 |
Other Assets Veeco has an ownership interest of less than 20% in a non-marketable investment, Kateeva, Inc. (“Kateeva”), over which Veeco does not exert significant influence. The carrying value of the investment was $21.0 million at June 30, 2018 and December 31, 2017. Additionally, during the six months ended June 30, 2018, the Company made a separate non-marketable investment of $3.5 million. The Company does not exert significant influence over this investment, and its ownership interest is less than 20%. Neither equity investment has a readily observable market price, and therefore the Company has elected to measure these investments at cost, adjusted for changes in observable market prices minus impairment. The investments are included in “Other assets” on the Consolidated Balance Sheets. There were no changes in observable market prices for either investment for the six months ended June 30, 2018. These investments are subject to periodic impairment reviews; as there are no open-market valuations, the impairment analyses require judgment. The analyses include assessments of the companies’ financial condition, the business outlooks for their products and technologies, their 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.

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