On May 26, 2017, the Company completed its acquisition of Ultratech, Inc. (“Ultratech”). Ultratech develops, manufactures, sells, and supports lithography, laser annealing, and inspection equipment for manufacturers of semiconductor devices, including front-end semiconductor manufacturing and advanced packaging. Ultratech also develops, manufactures, sells, and supports ALD equipment for scientific and industrial applications. Ultratech’s customers are primarily located throughout the United States, Europe, China, Japan, Taiwan, Singapore, and Korea. The results of Ultratech’s operations have been included in the consolidated financial statements since the date of acquisition.

Ultratech shareholders received (i) $21.75 per share in cash and (ii) 0.2675 of a share of Veeco common stock for each Ultratech common share outstanding on the acquisition date. The acquisition date fair value of the consideration totaled $633.4 million, net of cash acquired, which consisted of the following:

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date:

The gross contractual value of the acquired accounts receivable was approximately $46.0 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 and is not expected to be deductible for income tax purposes.

The classes of intangible assets acquired and the estimated useful life of each class is presented in the table below:

*	In-process research and development will be amortized (or impaired) upon completion (or abandonment) of the development project.

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.

In-process research and development (“IPR&D”) represents the estimated fair values of incomplete Ultratech research and development projects that had not reached the commercialization stage and met the criteria for recognition as IPR&D as of the date of the acquisition. The fair value of IPR&D was determined using an income approach and costs to complete the project and expected commercialization timelines are considered key assumptions. This valuation approach reflected the present value of the projected cash flows that were expected to be generated by the IPR&D less charges representing the contribution of other assets to those cash flows. The value of the IPR&D was determined to be $43.3 million, approximately half of which was related to Ultratech’s lithography technologies and one-third of which was related to Ultratech’s laser annealing technologies.

During the second quarter of 2018, the Company lowered its projected results for the Ultratech asset group and determined that the revised projections were significantly lower than projected results at the time of the acquisition and that these revised projections required the Company to assess the Ultratech asset group for impairment. See Note 6, “Goodwill and Intangible Assets,” for additional information.

For the year ended December 31, 2018 and 2017, acquisition related costs were approximately $3.0 million and $17.8 million, respectively, including non-cash charges of $4.2 million related to accelerated share-based compensation for employee terminations for the year ended December 31, 2017.

The amounts of net sales and income (loss) from operations before income taxes of Ultratech included in the Company’s Consolidated Statement of Operations for the year ended December 31, 2017 are as follows:


	Year ended
	December 31, 2017
	(in thousands)
Net sales	$	65,280
Loss before income taxes	$	(62,284)

Loss before income taxes of Ultratech for the year ended December 31, 2017 of $62.3 million includes acquisition costs of $17.8 million, release of inventory fair value step-up related to purchase accounting of $9.6 million, amortization expense on intangible assets of $23.9 million, and restructuring charges of $3.3 million.

The following table presents unaudited pro forma financial information for the year ended December 31, 2017, as if the acquisition of Ultratech had occurred on January 1, 2016:


	Year ended December 31, 2017
	(in thousands, except per share amounts)
Net sales	$	546,428
Loss before income taxes		(90,000)
Diluted earnings per share	$	(1.38)

The pro-forma results were calculated by combining the audited results of the Company with the stand-alone unaudited results of Ultratech for the pre-acquisition period, and adjusting for the following:

(i)

Additional amortization expense related to identified intangible assets valued as part of the purchase price allocation that would have been incurred starting on January 1, 2016.

(ii)

Additional depreciation expense for the property, plant, and equipment fair value adjustments that would have been incurred starting on January 1, 2016.

(iii)

All acquisition related costs incurred by the Company as well as by Ultratech pre-acquisition have been removed from the year ended December 31, 2017 and included in the year ended December 31, 2016, as such expenses would have been incurred in the first quarter following the acquisition.

(iv)

All amortization of inventory step-up has been removed from the year ended December 31, 2017 and recorded in the year ended December 31, 2016, as such costs would have been incurred as the corresponding inventory was sold.

(v)

Additional interest expense related to the Convertible Senior Notes (see Note 12, “Debt”) as if they had been issued on January 1, 2016.

(vi)

Income tax expense (benefit) was adjusted for the impact of the above adjustments for each period.

(vii)

All shares issued in connection with the acquisition were considered outstanding as of January 1, 2016 for purposes of calculating diluted earnings per share.

Dispositions

As of December 31, 2019, the Company determined that one of its non-core product lines (the “disposal group”) met the held for sale criteria, and as such, the related assets are presented as “Assets held for sale” on the Consolidated Balance Sheets. Long-lived assets and definite-lived intangible assets are not depreciated or amortized while classified as held for sale. The potential sale of this disposal group does not represent a strategic shift that will have a material effect on the Company’s operations and financial results, nor is it considered a component of the Company, and as such it did not meet the criteria to be reported as discontinued operations.

For the year ended December 31, 2019, the Company recorded a non-cash impairment charge on these assets held for sale of $4.0 million, included in “Asset impairment” in the Consolidated Statements of Operations, in order to measure the disposal group at the lower of its carrying value or fair value less costs to sell as of December 31, 2019, which resulted in a corresponding held for sale valuation allowance on its assets held for sale in the Consolidated Balance Sheet. The major classes of assets that were classified as held for sale as of December 31, 2019 are as follows:


	December 31, 2019
	(in thousands)
Assets held for sale:
Inventories	$	5,985
Property, plant, and equipment, net		310
Intangible assets, net		6,546
Goodwill		2,359
Impairment		(4,020)
Total Assets held for sale	$	11,180