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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
OR
☐☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-16244
VEECO INSTRUMENTS INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation or Organization)
11-2989601
(I.R.S. Employer Identification No.)
Terminal Drive
Plainview, New York
(Address of Principal Executive Offices)
11803
(Zip Code)
Securities registered pursuant to Section 12(b) of the Act:
Registrant’s telephone number, including area code:
(516) 677-0200
Title of each class
Common Stock, par value $0.01 per share
Trading Symbol(s)
VECO
Name of each exchange on which registered
The NASDAQ Global Select Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-
T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the
Exchange Act.
Large accelerated filer ☒
Non-accelerated filer ☐
Accelerated filer ☐
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit
report. ☒
The aggregate market value of the common stock held by non-affiliates of the registrant at June 26, 2020 (the last business day of the registrant’s most recently
completed second quarter) was $614,033,790 based on the closing price of $12.57 on the NASDAQ Global Select Market on that date.
As of February 11, 2021, there were 49,724,102 shares of the registrant’s common stock, par value $0.01 per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the definitive Proxy Statement to be used in connection with the Registrant’s 2021 Annual Meeting of Stockholders are incorporated by reference into
Part III of this Form 10-K.
VEECO INSTRUMENTS INC.
INDEX
Table of Contents
PART I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Stock Performance Graph
Item 6. Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
PART IV
Item 15. Exhibits, Financial Statement Schedules
SIGNATURES
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This Annual Report on Form 10-K (“Form 10-K”) contains certain forward-looking statements within the meaning of the safe
harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, as amended, relating to Veeco Instruments Inc.
(together with its consolidated subsidiaries, “Veeco,” the “Company,” “Registrant,” “we,” “our,” or “us,” unless the context
indicates otherwise) that are based on management’s expectations, estimates, projections, and assumptions. When used in this
Form 10-K, words such as “expects,” “anticipates,” “plans,” “believes,” “scheduled,” “estimates,” and variations of these words
and similar expressions are intended to identify forward-looking statements. Discussions containing such forward-looking
statements may be found in Part I, Items 1 and 3, Part II, Items 7 and 7A hereof, as well as within this Form 10-K generally.
Forward-looking statements in this discussion include, but are not limited to, those regarding anticipated growth and trends in our
businesses and markets, industry outlooks and demand drivers, our investment and growth strategies, our development of new
products and technologies, our business outlook for the current and future periods, the impact of the COVID-19 pandemic, our
ongoing transformation initiative and the effects thereof on our operations and financial results, and other statements that are not
historical facts. These statements and their underlying assumptions are subject to risks and uncertainties and are not guarantees of
future performance. Factors that could cause actual results to differ materially from those expressed or implied by such
statements include, without limitation:
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the level of demand for our products;
global economic and industry conditions;
the effects of regional or global health epidemics, including the effects of the COVID-19 pandemic on the Company’s
operations and on those of our customers and suppliers;
global trade issues, including the ongoing trade disputes between the U.S. and China, and changes in trade and export
license policies;
our dependency on third-party suppliers and outsourcing partners;
the timing of customer orders;
our ability to develop, deliver and support new products and technologies;
our ability to expand our current markets, increase market share and develop new markets;
the concentrated nature of our customer base;
our ability to obtain and protect intellectual property rights in key technologies;
our ability to achieve the objectives of operational and strategic initiatives and attract, motivate and retain key
employees;
the variability of results among products and end-markets, and our ability to accurately forecast future results, market
conditions, and customer requirements;
the impact of our indebtedness, including our convertible senior notes and our capped call transactions; and
other risks and uncertainties described in our SEC filings on Forms 10-K, 10-Q, and 8-K, including those included in
Item 1A, "Risk Factors" of this Form 10-K, and from time-to-time in our other SEC reports.
All forward-looking statements speak only to management’s expectations, estimates, projections and assumptions as of the date
of this filing or, in the case of any document referenced herein or incorporated by reference, the date of that document. The
Company does not undertake any obligation to update or publicly revise any forward-looking statements to reflect events,
circumstances or changes in expectations after the date of this filing.
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Item 1. Business
Business Description and Overview
PART I
Headquartered in Plainview, New York, we were organized as a Delaware corporation in 1989. We are a manufacturer of
advanced semiconductor process equipment that solves an array of challenging materials engineering problems for our
customers. Our comprehensive collection of ion beam, laser annealing, metal organic chemical vapor deposition (“MOCVD”),
advanced packaging lithography, single wafer wet processing, molecular beam epitaxy (“MBE”), and atomic layer deposition
(“ALD”) technologies play an integral role in the fabrication of key devices that are enabling the 4th industrial revolution of all
things connected. Such devices include leading node application processors for mobile devices, thin film magnetic heads for hard
disk drives in data storage, photonics devices for 3D sensing, advanced displays and high-speed data communications, radio
frequency (“RF”) filters and power amplifiers for fifth generation (“5G”) networks and mobile electronics. In close partnership
with our customers, we combine decades of applications and materials know-how with leading-edge systems engineering to
deliver high-volume manufacturing solutions with competitive cost of ownership. Serving a global and highly interconnected
customer base, we have comprehensive sales and service operations across the Asia-Pacific, Europe, and North America regions
to ensure real-time close collaboration and responsiveness.
Our priorities are:
● Maintain the resilience of our business – Veeco’s management team took decisive action in early 2020 to keep our
employees safe and healthy. We implemented innovative work-arounds, such as virtual customer demos and factory
acceptances, where customers can review data and the performance of their system, in our factory, via live video. This
and other steps have helped Veeco operate safely and successfully throughout the COVID-19 pandemic, resulting in the
overall resiliency of our business. We have been able to serve our customers without pause and expect to continue to do
so while executing on our strategic transformation, which includes a return to profitability and a focus on growth
initiatives. We enter 2021 on strong footing. Operationally, we have secured a healthy backlog and scaled costs in
relation to revenue in order to generate increased earnings. From a financial perspective, we have strengthened our
balance sheet and solidified our capital structure. We believe that the proactive steps we have taken to manage the
business through the pandemic have helped us maintain our financial strength and flexibility while enabling us to
remain on track with our transformation;
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Focus on profitability and products – We seek to maintain the strength of our foundational businesses, including data
storage, service offerings and sales to universities and research institutions to enable further investment in our growth
initiatives; we are focused on delivering strong operating results; and in order to provide the greatest value, we continue
to rationalize our product portfolio for opportunities to optimize and strengthen our competitive edge;
Execute near-term to grow in 2021 - We are excited about our near-term growth opportunities, driven by our laser
annealing, 5G RF, and data storage products. We believe that the foundry and logic markets will remain strong, which
bodes well for our laser annealing product line. The adoption of 5G is off to a great start resulting in traction with our
wet processing product line for the production of RF filters used in the most advanced smartphones. Furthermore, we
continue to see strength in demand for hard disk drive (“HDD”) magnetic head capacity in the Data Storage market
giving us good visibility through 2021; and
Prepare for longer term growth in 2022 and beyond - We view the Semiconductor and Compound Semiconductor
markets as long-term growth opportunities. By selectively investing in new research and development (“R&D”) and
developing additional applications for our technology, we believe that Veeco will be well positioned to capitalize on
emerging global megatrends in these areas. We’re investing now in targeted R&D, inventory for evaluation tools, and
improving our service support capability for longer term growth in Semiconductor and Compound Semiconductor
markets. We have begun placing evaluation tools with customers and plan to continue with additional placements in the
coming quarters in exciting applications such
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as laser annealing in the memory market, laser annealing at advanced logic nodes, and early stage micro-LED. We are
also exploring the application of other core Veeco technologies in semiconductor manufacturing. With these actions, we
expect to generate growth opportunities in both the Semiconductor and Compound Semiconductor markets.
Markets
Our products are purchased by customers in the following four end-markets: 1) Semiconductor; 2) Compound Semiconductor; 3)
Data Storage; and 4) Scientific & Other.
Our array of process equipment systems are used in the production of a broad range of microelectronic components, including
logic, dynamic random-access memory (“DRAM”), photonics devices (including laser diodes and micro-LEDs), power
electronics, RF filters and amplifiers, thin film magnetic heads, and other semiconductor devices. Many of our systems are used
to directly deposit advanced materials critical to the operation of the device and some of our systems are used in cleaning and
surface preparation as well as the precise removal of critical materials. We are also a leader in systems used in the advanced
packaging process flow of microelectronic components such as flip chip, fan-out wafer level packaging (“FOWLP”), and other
wafer level packaging approaches used in the modern integration of diverse semiconductor products, especially in consumer
electronics. In general, our customers purchase our systems to both produce current-generation devices in volume and to develop
next-generation products which deliver more efficient, cost-effective, and advanced technological solutions. We operate in
several highly cyclical business environments, and our customers’ buying patterns are dependent upon industry trends and buying
patterns for consumer electronics. As our products are sold into multiple markets, the following table describes these markets and
the applicable Veeco technologies.
Markets
Description
Semiconductor
The Semiconductor market refers to early process steps in logic and
memory applications where silicon wafers are processed. There are
many different process steps in forming patterned wafers, such as
deposition, etching, masking, and doping, where the microchips are
created but remain on the silicon wafer. As device architectures
continue to shrink with advanced nodes, more precise process control
is paramount to achieving high yields and competitive cost. This
market includes mask blank production for extreme ultraviolet
(“EUV”) lithography.
This market also includes Advanced Packaging which refers to a
portfolio of wafer-level assembly technologies that enable improved
performance of electronic products, such as smartphones, high-end
servers, and graphical processors. Demand for higher performance,
smaller form factors, and lower power consumption in applications
such as artificial intelligence, mobile devices, consumer electronics,
and high-performance computing is driving the adoption of advanced
packaging technologies.
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Applicable Veeco
Technologies
Laser Annealing
Ion Beam Deposition
(“IBD”)
Ion Beam Etch
(“IBE”)
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● Wet Processing
● Advanced Packaging
Lithography
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Compound
Semiconductor
Data Storage
The Compound Semiconductor market includes Photonics, Power
Electronics, RF Filters and Amplifiers, and Solar applications.
Photonics refers to light source technologies and laser-based solutions
for 3D sensing, datacom and telecom applications. This includes
micro-LED, laser diodes, edge emitting lasers and vertical cavity
surface emitting lasers (“VCSELs”).
Micro-LEDs may be used for next generation advanced displays. A
micro-LED display is a new approach which uses an array of red, blue,
and green micro-LEDs to directly display an image without motion
blur or image retention, and with improved brightness, darker blacks,
and wider viewing angles.
Power Electronics refers to semiconductor devices such as rectifiers,
inverters and converters for the control and conversion of electric
power in growing applications such as fast or wireless charging of
consumer electronics and automotive applications.
RF power amplifiers and filters (including surface acoustic wave
(“SAW”) and bulk acoustic wave (“BAW”) filters) are used in 5G
communications infrastructure, smartphones, tablets, and mobile
devices. They make use of radio waves for wireless broadcasting
and/or communications.
Solar refers to power obtained by harnessing the energy of the sun
through the use of compound semiconductor devices such as
photovoltaics.
Data Storage refers to the HDD market which provides significant
value for mass storage and is an important part of large capacity
storage applications. Our systems enable customers to manufacture
thin film magnetic heads for hard disk drives.
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● Gallium Nitride
(“GaN”) MOCVD
● Arsenides/
Phosphides (“As/P”)
MOCVD
● Wet Processing
● MBE
● ALD
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IBE
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IBD
IBE
Physical Vapor
Deposition
● Mechanical (Lapping
and Dicing)
● Diamond Like
Carbon Deposition
● Wet processing
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Scientific & Other refers to advanced materials research and a range of
manufacturing applications including optical coatings (laser mirrors,
optical filters, and anti-reflective coatings).
Scientific &
Other
System Products
Laser Annealing Systems
●
Ion Beam Sputtering
for optical coatings
● MBE for specialized
laser and sensor
devices
● Wet Processing for
sensors
● ALD for a variety of
applications
Our laser annealing systems meet the industry demand for ultra-short time-scale annealing, heating the wafer up to temperatures
just below the silicon melting point over a range of timeframes (microseconds to nanoseconds), enabling thermal annealing
solutions at the most advanced processing nodes. This unique annealing technology provides the solution to the difficult
challenge of fabricating ultra-shallow junctions and highly activated source/drain contacts at these advanced logic nodes. In
addition, our proprietary hardware design enables outstanding temperature uniformity across the wafer and die, by minimizing
the pattern-density effect, thus reducing absorption variations.
We have also developed a next generation melt anneal technology targeted for memory devices and annealing advanced logic
devices at advanced nodes. As devices scale, achieving performance targets has become a challenge. To continue the roadmap,
the industry is looking at new materials and the use of thermal processes that require nanosecond time-scale thermal annealing
with temperatures exceeding the melting point. It is believed that nanosecond annealing will be required to meet the device
targets at future nodes.
Ion Beam Deposition and Etch Systems
Our NEXUS® Ion Beam systems are used to deposit and etch thin film layers for multiple end applications in the Semiconductor,
Data Storage, RF and other various emerging markets. These systems utilize Veeco’s proven gridded ion source technology
which delivers a charged ion beam directed at a substrate for the etch application and at a sputter target for the deposition
application. Our NEXUS® IBD system has a leading position in multiple markets including EUV mask blank manufacturing in
which it enables our customers to deposit multilayers with high precision and ultra-low defects which is essential for EUV
lithography. Our ion sources and grid technology are incorporated into etch systems used to pattern magnetic materials for the
300mm Semiconductor STT-MRAM market. The IBD systems are also critical in the manufacture of thin film magnetic heads
where they are used to deposit various magnetic and oxide layers and deliver best-in-class film properties. Our NEXUS® IBE
systems are used to precisely etch complex features on materials which are challenging to pattern by traditional reactive ion
etching techniques. These systems are widely used in the data storage industry for patterning of magnetic and oxide materials and
are essential for forming the precise shape of the thin film magnetic head. The NEXUS® systems may be included on our cluster
system platform to allow either parallel or sequential deposition/etch processes.
Our Lancer IBE system is used for etching of SAW and BAW devices in the RF filter market and various waveguide patterning
steps for AR/VR markets where their best-in-class film uniformity is a key advantage.
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Our SPECTOR® Ion Beam Sputtering system was developed for high precision optical coatings and offers manufacturers state of
the art optical thickness monitoring, improved productivity, and target material utilization, for cutting-edge optical interference
coating applications. We also provide a broad array of ion beam sources.
Advanced Packaging Lithography
We have a leading position in the Advanced Packaging lithography equipment market for applications such as FOWLP, Flip
Chip (including Copper Pillar), Fan In Wafer Lever Packaging, 3D stacking, interposers and embedded die. The Advanced
Packaging market is driven by the need for improved performance, reduced power consumption, and the ability to image smaller
geometries for mobile and automotive applications. These applications continue to demand increasingly complex packaging
techniques and heterogeneous device integration from integrated device manufacturers (“IDMs,”), Foundries, and outsourced
semiconductor assembly and test (“OSAT”) companies. Our Advanced Packaging tools are designed to optimize productivity for
leading-edge 200mm and 300mm Advanced Packaging applications by delivering proven reliability and low cost of ownership in
high-volume manufacturing environments. Our products are known for best-in-class yield coupled with outstanding resolution
and depth of focus.
Single Wafer Wet Processing
We offer single wafer wet processing, and surface preparation systems which target growth opportunities in RF filters and
amplifiers in the Compound Semiconductor market, as well as advanced packaging applications in the Semiconductor market.
The WaferStorm® platform is based on our unique ImmJET™ technology, which provides improved performance at a lower cost
of ownership than conventional wet bench-only or spray-only approaches. This highly flexible platform targets solvent-based
cleaning applications that require a significant level of process control and flexibility. The WaferEtch® platform provides highly
uniform, selective etching with onboard end-point detection for improved process control and yield in bumping applications. In
addition, we have developed a state-of-the-art solution with the WaferEtch® platform to address the requirements of wafer
thinning.
Metal Organic Chemical Vapor Deposition Systems
MOCVD production systems are used to make GaN and As/P-based devices for applications including power electronics, RF
devices, specialty LED, display, and many other applications. Our proven TurboDisc® technology is at the heart of our MOCVD
systems and is the key to enabling best-in-class deposition uniformity, yield performance and cost per wafer savings for our
customers with a combined advantage of high operating uptime and low maintenance costs. Our Lumina™ platform is used for
As/P deposition, and features long campaigns and low defectivity for exceptional yield and flexibility. Our Propel™ series
(“Propel”) enables the development of highly-efficient GaN-based power electronic, RF devices and advanced GaN-on-silicon
micro-LEDs. The Propel system offers 200mm and fully-automated 300mm technology and incorporates single-wafer reactor
technology for outstanding film uniformity, yield, and device performance.
Molecular Beam Epitaxy Systems
MBE is the process of precisely depositing epitaxially-aligned atomically-thin crystalline layers, or epilayers, of elemental
materials onto a substrate in an ultra-high vacuum environment. We are a leading supplier of MBE systems worldwide.
Our MBE systems, sources, and components are used to develop and manufacture compound semiconductor devices in a wide
variety of applications such as high-power fiber lasers, infrared detectors, mobile phones, radar systems, high efficiency solar
cells, and basic materials science research. The GENxplor® MBE system creates high quality epitaxial layers and is ideal for
cutting-edge research on a wide variety of materials including GaAs, antimonides, nitrides, and oxides on 3” diameter substrates.
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Atomic Layer Deposition and Other Deposition Systems
ALD is a thin-film deposition method in which a film is deposited on a substrate uniformly with precise control down to the
atomic scale. Veeco offers a full suite of ALD systems for non-semiconductor front-end production applications across a wide
range of markets and applications such as energy, optical, electronics, micro-electro mechanical systems (“MEMS”),
nanostructures, and biomedical. We have recently developed a fully automated tool, Firebird™, capable of managing fragile
wafers in a continuous operational sequence.
Other deposition systems include Physical Vapor Deposition, Diamond-Like Carbon Deposition, and Chemical Vapor Deposition
Systems.
Sales and Service
We sell our products and services worldwide through various strategically located facilities in the United States, Europe, and the
Asia-Pacific region. We believe that our customer service organization is a significant factor in our success. We provide service
and support on a warranty, service contract, and an individual service-call basis. We believe that offering timely support creates
stronger relationships with customers. Revenue from the sales of parts, upgrades, service, and support represented approximately
30%, 26%, and 28% of our net sales for the years ended December 31, 2020, 2019, and 2018, respectively. Parts and upgrade
sales represented approximately 23%, 19%, and 23% of our net sales for those years, respectively, and service and support sales
were 7%, 7%, and 5% respectively.
Customers
We sell our products to many of the world’s semiconductor IDMs and Foundries, OSAT, HDD, and photonics manufacturers, as
well as research centers and universities. We rely on certain principal customers for a significant portion of our sales. Sales to
Seagate Technology accounted for more than 10% of our total net sales in 2020 and 2019; and sales to Focus Lighting Tech Co.
accounted for more than 10% of our total net sales in 2018. If any principal customer discontinues its relationship with us or
suffers economic difficulties, our business prospects, financial condition, and operating results could be materially and adversely
affected.
Research and Development
Our research and development functions are focused on the timely creation of new products and enhancements to existing
products, both of which are necessary to maintain our competitive position. We collaborate with our customers to align our
technology and product roadmaps to customer requirements. Our research and development activities take place at our facilities
in San Jose, California; Plainview, New York; Horsham, Pennsylvania; Somerset, New Jersey; St. Paul, Minnesota; and
Waltham, Massachusetts.
Suppliers
We outsource certain functions to third parties, including the manufacture of several of our systems. While we rely on our
outsourcing partners to perform their contracted functions, we maintain some level of internal manufacturing capability for these
systems. Refer to Item 1A, “Risk Factors,” for a description of risks associated with our reliance on suppliers and outsourcing
partners.
Backlog
Our backlog consists of orders for which we received a firm purchase order, a customer-confirmed shipment date generally
within twelve months, and a deposit, when required. Our backlog increased to $366.0 million at December 31, 2020 from $267.6
million at December 31, 2019.
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Competition
In each of the markets that we serve, we face competition from established competitors, some of which have greater financial,
engineering, and marketing resources than we do, as well as from smaller competitors. In addition, many of our products face
competition from alternative technologies, some of which are more established than those used in our products. Significant
factors for customer selection of our tools include system performance, accuracy, repeatability, ease of use, reliability, cost of
ownership, and technical service and support. None of our competitors compete with us across all of our product lines.
Our principal competitors include: Aixtron; Applied Materials; Canon; Grand Plastics Technology Corporation; Screen
Semiconductor Solutions; and Shanghai Micro Electronics Equipment.
Intellectual Property
Our success depends, in part, on our proprietary technology, and we have over 500 patents in the United States and other
countries.
We have patents and exclusive and non-exclusive licenses to patents owned by others covering certain of our products, which we
believe provide us with a competitive advantage. We have a policy of seeking patents on inventions concerning new products and
improvements as part of our ongoing research, development, and manufacturing activities. We believe that there is no single
patent or exclusive or non-exclusive license to patents owned by others that is critical to our operations, as the success of our
business depends primarily on the technical expertise, innovation, customer satisfaction, and experience of our employees. Refer
to Item 1A, “Risk Factors,” for a description of risks associated with intellectual property.
Human Capital
Veeco’s global workforce spans 12 countries around the world. At the end of 2020, we had 993 employees with 221 located in
the Asia-Pacific region, 37 in the EMEA region, and 735 in the United States. Approximately 23% of our employees are involved
in research and development; 53% are involved in operations, manufacturing, service and quality assurance; and 24% are
involved in sales, order administration, marketing, finance, information technology, general management and other
administrative functions. Our success depends on our ability to attract, retain and motivate employees. We compete for talent
with other companies and organizations. We consider our relations with our employees to be good. We are subject to various
federal, state and local regulations, and regularly monitor all key employment activities, such as hiring, termination, pay and
working practices to ensure compliance with such regulations. In addition, we supplement our employee base with contractors
and other temporary workers.
Our recruitment programs are regionally focused, and hiring is done at a local level to ensure compliance with applicable
regulations. To ensure diversity within our workforce we advertise job openings and source candidates broadly to attract a diverse
candidate pool. As a leader in our industry, we are able to attract a strong candidate pool and have been successful in filling
vacancies. In fiscal 2020, we hired 138 employees, 113 of whom were within the United States, 24 of whom were in the Asia-
Pacific region and 1 of whom was within the EMEA region.
During fiscal 2019, we conducted a global employee survey designed to assess employee engagement, leadership, work
environment and culture. We had a response rate of 91% of our total worldwide employee base, which is one indicator of a high-
level of employee engagement. Participants provided over 2,000 responses to open-ended questions. The findings from this
survey established an agenda for various initiatives designed to strengthen our Company. A follow-up survey is planned for fiscal
2021.
We track and report internally on key talent metrics including workforce demographics, talent pipeline and diversity. We believe
in investing in professional development programs to ensure we provide opportunities for individuals to advance their careers
either in a technical track or move to a leadership position. We offer many of our training and development programs on-line for
the benefit of employees located around the world. Additional focus is placed on the development of our future leaders and we
leverage a talent review process where high-potential and high-performing employees are
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assessed for future leadership roles as part of our succession management process for critical leadership positions. Since turnover
is an important indicator of employee satisfaction, we closely monitor turnover globally and benchmark locally. Our 12-month
rolling average for voluntary turnover at December 31, 2020 was approximately 6.8%, substantially less than benchmark data.
Our employee average tenure is more than 9 years.
COVID-19 Update
As a result of the outbreak and continuing spread of COVID-19, governmental authorities have implemented and are continuing
to implement numerous and constantly evolving measures to try to contain the virus, such as travel bans and restrictions, limits
on gatherings, quarantines, shelter-in-place orders, and business shutdowns. We have important manufacturing operations in the
United States and sales and support operations in China, Germany, Japan, Malaysia, Philippines, Singapore, South Korea,
Thailand, Taiwan and the United Kingdom, all of which have been affected by the COVID-19 pandemic.
Measures providing for business shutdowns generally exclude certain essential services, and those essential services include
critical infrastructure and the businesses that support that critical infrastructure. Our operations are considered part of the critical
and essential infrastructure defined by applicable government authorities, and, although governmental measures to contain the
pandemic may be modified or extended, our manufacturing facilities currently remain open. We believe our diverse product
offerings and the critical nature of certain of our products for infrastructure insulate us, to some extent, from the adverse effects
of the pandemic; however, a prolonged economic downturn will adversely affect our customers, which could have a material
adverse effect on our revenues, particularly if customers from whom we derive a significant amount of revenue reduce or delay
purchases to mitigate the impacts of the pandemic or fail to make payments to us on time or at all.
We serve a global and highly interconnected customer base across the Asia-Pacific region, Europe, and North America. Our net
sales to customers located outside of the United States represented approximately 68%, 70%, and 77% of our total net sales in
2020, 2019, and 2018, respectively, and we expect that net sales to customers outside the United States will continue to represent
a significant percentage of our total net sales. As a result, our business will be adversely impacted by further deterioration in
global economic conditions, particularly in markets in Asia and Europe.
To date, we have not yet experienced any significant interruptions to our supply chain as a result of the COVID-19 pandemic. We
continue to monitor our global supply chain and may experience disruptions in future periods, primarily as a result of financial
challenges confronting companies in our supply chain and restrictions or disruptions of transportation, such as reduced
availability of air transport, port closures and increased border controls or closures, any of which could cause a disruption in our
ability to obtain raw materials or components required to manufacture our products.
Like many in our industry, we are managing through the effects of the COVID-19 pandemic. Although the full extent of the
COVID-19 pandemic’s impact on our business, results of operations, supply chains and growth can not be predicted or
quantified, we proactively identified potential challenges to our business and have been executing business continuity activities to
manage disruptions in our business and continue to provide critical infrastructure to our customers. In response to the pandemic,
we have taken, or intend to take, the following steps, among others, to keep our employees safe and minimize the spread of the
virus, while continuing to serve our customers:
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implemented rigorous health and safety protocols at our manufacturing facilities, including extensively and frequently
disinfecting our facilities, limiting access to our facilities, checking temperatures of individuals entering our facilities,
staggering shifts to minimize employee overlap in gowning areas, and providing protective equipment;
● mandated remote working arrangements for employees that do not need to be physically present on the manufacturing
floor or at customer facilities;
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implemented virtual meetings, customer demos, and factory acceptances to enable customers to review data and
performance of their system in our factory remotely via live video;
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performing service and support activities remotely to resolve customer issues and enable our customers to maintain their
operations;
proactively identified gaps in our supply chain and re-sourced a number of components in order to maintain our
customer shipment commitments and mitigate single points of failure;
● monitoring our IT systems and implementing contingency and disaster recovery plans to support our IT infrastructure to
ensure that our systems remain continuously operative; and
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continuing to monitor and, if necessary, reduce our operating expenses and capital expenditures to maintain financial
flexibility and profit margins.
While these steps have been effective so far, there could be additional challenges ahead that may impact either our operations or
those of our customers, which could have a negative effect on our financial performance, including productivity and capacity
impacts as a result of the ongoing pandemic. We expect to continue to implement these measures until we determine that the
COVID-19 pandemic is adequately contained for purposes of our business, and we may take further actions as government
authorities require or recommend or as we determine to be in the best interests of our employees, customers and suppliers. As a
result, we may incur additional expenses in future periods in response to the pandemic, which could adversely affect our financial
position, results of operations, or cash flows. In addition, we may revise our approach to these initiatives or take additional
actions to meet the needs of our employees and customers, and mitigate the impact of the pandemic on our business.
Available Information
Our corporate website address is www.veeco.com. All filings we make with the Securities and Exchange Commission (“SEC”),
including our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K, our proxy
statements and any amendments thereto filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended, are available for free in the Investor Relations section of our website as soon as reasonably practicable after
they are filed with or furnished to the SEC. The reference to our website address does not constitute inclusion or incorporation by
reference of the information contained on our website in this Form 10-K or other filings with the SEC, and the information
contained on our website is not part of this document.
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Item 1A. Risk Factors
Key Risk Factors That May Impact Future Results
Stockholders should carefully consider the risk factors described below. Any of these factors, many of which are beyond our
control, could materially and adversely affect our business, financial condition, operating results, cash flow, and stock price.
Risks Related to Our Business, Finance and Operations
The effects of the COVID-19 pandemic have strained and have threatened to negatively impact our businesses and operations,
and the duration and extent to which COVID-19 may impact our future results of operations and overall financial
performance remains uncertain.
The outbreak and continuing spread of COVID-19 has resulted in a substantial curtailment of business activities worldwide and
has caused and is likely to continue to cause weakened economic conditions, both in the United States and many countries
abroad, including in markets in Asia and Europe from which we derive the majority of our revenue. Government restrictions
(such as stay-at-home orders), quarantines and worker absenteeism as a result of COVID-19 have led to a significant number of
business closures and other slowdowns. These slowdowns have adversely impacted and will likely continue to adversely impact
Veeco directly, as well as our customers, suppliers and other partners.
We have determined that our operations are considered part of the critical and essential infrastructure defined by applicable
government agencies. Consequently, as of the date of filing this report, we are currently permitted and are endeavoring to
maintain manufacturing and supply chain operations. However, the conditions caused by COVID-19 could adversely affect our
customers’ ability or willingness to purchase our products or services, delay prospective customers’ purchasing decisions,
adversely impact our ability to source and deliver products and provide on-site services to our customers, delay the provisioning
of our offerings, or lengthen payment terms, all of which could adversely affect our future sales, operating results and overall
financial performance. In addition, adverse impacts on the creditworthiness of our customers and other counterparties and their
ability to pay amounts owed to us and our ability to collect such amounts may be adversely affected, which could materially and
adversely affect our results of operations, financial condition and cash flows.
The COVID-19 pandemic has resulted in significant disruption of global financial markets and could materially impact the value
of our common stock, our access to capital, and our business and results of operations in the near and long-term.
Unfavorable market conditions have adversely affected, and may continue to adversely affect, our operating results.
Conditions of the markets in which we operate are volatile and have experienced, and may in the future continue to experience,
significant deterioration. Changing market conditions require that we continuously monitor and reassess our strategic resource
allocation decisions. If we fail to properly adapt to changing business environments, we may lack the infrastructure and resources
necessary to scale up our businesses to successfully compete during periods of growth, or we may incur excess fixed costs during
periods of decreasing demand. Adverse market conditions relative to our products have resulted in, and may continue to result in:
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reduced demand for our products;
rescheduling and cancellations of orders for our products, which may result in negative backlog adjustments;
asset impairments, including the impairment of goodwill and other intangible assets;
unfavorable changes in customer mix and product mix;
increased price competition leading to a lower profit margin for our products;
increased competition from sellers of used equipment or lower-priced alternatives to our products;
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increased inventory obsolescence;
disruptions in our supply chain;
higher operating costs as a percentage of revenues; and
an increase in uncollectable amounts due from our customers resulting in increased reserves for doubtful accounts and
write-offs of accounts receivable.
If the markets in which we participate continue to experience deteriorations or downturns, this could negatively impact our sales
and revenue generation, margins, operating expenses, and profitability.
The timing of our orders, shipments, and revenue recognition may cause our quarterly operating results to fluctuate
significantly.
We derive a substantial portion of our net sales in any fiscal period from the sale of a relatively small number of high-priced
systems. As a result, the timing for the recognition of revenue for a single transaction could have a material effect on our sales
and operating results for a particular fiscal period. As is typical in our industry, orders and shipments often occur during the last
few weeks of a quarter. As a result, a delay of only a week or two can impact which period revenue is reported and can cause
volatility in our revenue for a given reporting period. Our quarterly results have fluctuated significantly in the past and we expect
this trend to continue.
Our sales cycle is long and unpredictable.
Historically, we have experienced long and unpredictable sales cycles (the period between our initial contact with a potential
customer and the time that we recognize revenue from resulting sales to that customer). It is not uncommon for our sales cycle to
exceed twelve months. The timing of an order often depends on our customer’s capital expenditure budget, over which we have
no control. In addition, the time it takes us to procure and build a product to customer specifications typically ranges from three
to twelve months. When coupled with the fluctuating amount of time required for shipment, installation, and final acceptance, our
sales cycles often vary widely, and these variations can cause fluctuations in our operating results. As a result of our lengthy sales
cycles, we may incur significant research, development, selling, general, and administrative expenses before we generate revenue
for these products. We may never generate the anticipated revenue if a customer cancels or otherwise changes its purchase plans,
which could have an adverse effect on our business.
We are now confronting many of these risks as we gain traction in the Semiconductor market, which is often characterized by
long customer qualification times, typically twelve to eighteen months. Once qualified, the ramp to volume production can take
an additional extended period of time, often twelve to twenty-four months. During these periods, little to no revenue will be
recognized by us, while we will continue to incur research and development costs. Despite our efforts, our products may never be
qualified and may never achieve design-tool-of-record (“DTOR”) or production-tool-of-record (“PTOR”) status, and our
business, financial condition, and results of operations may be materially and adversely affected.
Our backlog is subject to customer cancellation or modification which could result in decreased sales, increased inventory
obsolescence, and liabilities to our suppliers for products no longer needed.
Customer purchase orders may be cancelled or rescheduled by the customer, sometimes with limited or no penalties, which may
result in increased or unrecoverable costs for the Company. We adjust our backlog for such cancellations, contract modifications,
and delivery delays that result in a delivery period in excess of one year, among other items. A downturn in one or more of our
businesses could result in an increase in order cancellations and postponements.
We write-off excess and obsolete inventory based on historical trends, future usage forecasts, and other factors including the
amount of backlog we have on hand. If our backlog is canceled or modified, our estimates of future product demand may prove
to be inaccurate, in which case we may have understated the write-off required for excess and obsolete inventory. In the future, if
we determine that our inventory is overvalued, we will be required to recognize associated costs in our financial statements at the
time of such determination. In addition, we place orders with our suppliers based
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on our customers’ orders. If our customers cancel their orders with us, we may not be able to cancel our orders with our suppliers.
Any resulting charges could be materially adverse to our results of operations and financial condition.
We may be required to take impairment charges on assets.
We are required to assess goodwill and indefinite-lived intangible assets annually for impairment, or on an interim basis
whenever certain events occur or circumstances change, such as an adverse change in business climate or a decline in the overall
industry, that would more likely than not reduce the fair value below its carrying amount.
As part of our long term strategy, we may pursue future acquisitions of, or investments in, other companies or assets which could
potentially increase our assets. We are required to test certain of our assets, including acquired intangible assets, property, plant,
and equipment, and equity investments without readily observable market prices, for recoverability and impairment whenever
there are indicators of impairment such as an adverse change in business climate. Adverse changes in business conditions or
worse-than-expected performance by these acquired companies could negatively impact our estimates of future operations and
result in impairment charges to these assets. For example, in the fourth quarter of 2019 we recorded non-cash impairment charges
of $25.0 million, primarily related to our equity investments without readily observable market prices. If our assets are further
impaired, our financial condition and results of operations could be materially and adversely affected.
We are exposed to risks associated with business combinations, acquisitions, strategic investments and divestitures.
We have completed several significant acquisitions and investments in the past and we will consider new opportunities in the
future. Acquisitions and investments involve numerous risks, many of which are unpredictable and beyond our control, including
the following:
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difficulties and increased costs in integrating the personnel, operations, technologies, and products of acquired
companies;
diversion of management’s attention and disruption of ongoing businesses;
the inability to complete proposed transactions as anticipated, resulting in obligations to pay professional and other
expenses, including any applicable termination fees;
potential loss of key employees of acquired companies, especially if a relocation or change in responsibilities is
involved;
difficulties in managing geographically dispersed operations in a cost-effective manner;
the failure to realize expected synergies;
unknown, underestimated, and undisclosed commitments or liabilities;
increased amortization expenses relating to intangible assets; and
other adverse effects on our business, including the potential impairment and write-down of amounts capitalized as
intangible assets and goodwill as part of the acquisition, as a result of such matters as technological advancements or
worse-than-expected performance by the acquired company.
If we issue equity securities to pay for an acquisition or investment, the ownership percentage of our then-current shareholders
would be reduced and the value of the shares held by these shareholders could be diluted, which could adversely affect the price
of our stock. If we use cash to pay for an acquisition or investment, the payment could significantly reduce the cash that would be
available to fund our operations, pay our indebtedness, or be used for other purposes, which could have a negative effect on our
business.
In addition, we continually assess the strategic fit of our businesses and may from time to time seek to divest portions of our
Company that no longer fit our strategic plan. Divestitures involve significant risks and uncertainties, including the ability to sell
such businesses at satisfactory prices, on acceptable terms, and in a timely manner. Divestitures may also disrupt other parts of
our businesses, distract the attention of our management, result in a loss of key employees or
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customers, and require that we allocate internal resources that would otherwise be devoted to operating our existing businesses.
Divestitures may expose us to unanticipated liabilities (including those arising from representations and warranties made to a
buyer regarding the businesses) and to ongoing obligations to support the businesses following such divestitures, any and all of
which could adversely affect our business, financial condition, and results of operations.
We have adopted certain measures that may have anti-takeover effects which may make an acquisition of our Company by
another company more difficult.
We have adopted, and may in the future adopt, certain measures that may have the effect of delaying, deferring, or preventing a
takeover or other change in control of our Company, which a holder of our common stock might not consider to be in the
holder’s best interest. These measures include:
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“blank check” preferred stock;
a classified board of directors; and
certain other provisions appearing in our certificate of incorporation and bylaws.
Our board of directors has the authority to issue up to 500,000 shares of preferred stock and to fix the rights (including voting
rights), preferences and privileges of these shares (“blank check” preferred). Such preferred stock may have rights, including
economic rights, senior to our common stock. As a result, the issuance of the preferred stock could have a material adverse effect
on the price of our common stock and could make it more difficult for a third party to acquire a majority of our outstanding
common stock.
Our board of directors is divided into three classes with each class serving a staggered three-year term. The existence of a
classified board makes it more difficult for our shareholders to change the composition of our board of directors, and therefore
the Company’s policies, in a relatively short period of time.
We have adopted certain certificate of incorporation and bylaws provisions which have anti-takeover effects. These include: (a)
requiring certain actions to be taken at a meeting of shareholders rather than by written consent, (b) requiring a super-majority of
shareholders to approve certain amendments to our bylaws, (c) limiting the maximum number of directors, and (d) providing that
directors may be removed only for cause. These measures and those described above may have the effect of delaying, deferring,
or preventing a takeover or other change in control of our Company that a holder of our common stock may not consider to be in
the holder’s best interest.
In addition, we are subject to the provisions of Section 203 of the General Corporation Law of the State of Delaware, which
prohibits a Delaware corporation from engaging in any business combination, including mergers and asset sales, with an
interested stockholder (generally, a 15% or greater stockholder) for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. The
operation of Section 203 may have anti-takeover effects, which could delay, defer, or prevent a takeover attempt that a holder of
our common stock may not consider to be in the holder’s best interest.
Despite the above measures, an activist shareholder could undertake action to implement governance, strategic, or other changes
to the Company which a holder of our common stock may not consider to be in the holder’s best interest. Such activities could
interfere with our ability to execute our strategic plans, be costly and time consuming, disrupt our operations, and divert the
attention of management and our employees.
We may not have the ability to raise the funds necessary to settle for cash conversions of our 2.70% Convertible Senior Notes
due 2023 (the “2023 Notes”), our 3.50% Convertible Senior Notes due 2025 (the “2025 Notes”), or our 3.75% Convertible
Senior Notes due 2027 (the “2027 Notes”) (the 2023 Notes, 2025 Notes, and 2027 Notes, together, the “Notes”) or to
repurchase the Notes for cash upon a fundamental change, and any future debt may contain limitations on our ability to pay
cash upon conversion or repurchase of the Notes.
As of December 31, 2020, we had $131.7 million in principal amounts outstanding in 2023 Notes, $132.5 million in principal
amounts outstanding in 2025 Notes, and $125.0 million in principal amounts outstanding in 2027 Notes.
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Holders of the Notes will have the right to require us to repurchase all or any portion of their Notes upon the occurrence of a
fundamental change before the maturity date at a fundamental change repurchase price equal to 100% of the principal amount of
the Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date,
as described in the applicable Notes and indenture. In addition, upon conversion of the Notes, unless we elect to deliver solely
shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will
be required to make cash payments in respect of the notes being converted. However, we may not have enough available cash or
be able to obtain financing at the time we are required to make repurchases of the Notes surrendered therefor or pay cash with
respect to the Notes being converted.
In addition, our ability to repurchase or to pay cash upon conversion of the Notes may be limited by law, by regulatory authority
or by agreements governing our indebtedness that exist at the time of repurchase or conversion. Our failure to repurchase the
Notes at a time when the repurchase is required by the respective indenture or to pay any cash upon conversion of the Notes as
required by the respective indenture would constitute a default under the indenture for that series of convertible notes and could
also lead to a default under the indenture for the other series of convertible notes. A default under either indenture or the
fundamental change itself could lead to a default under any of our future indebtedness. If the payment of the related indebtedness
were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness
and repurchase the Notes or to pay cash upon conversion of the Notes.
The conditional conversion features of the 2023 Notes, 2025 Notes, and 2027 Notes, if triggered, may materially and
adversely affect our financial condition and operating results.
In the event the conditional conversion features of the 2023 Notes, 2025 Notes, and 2027 Notes are triggered, holders of notes
will be entitled to convert the notes at any time during specified periods at their option. If one or more holders elect to convert the
notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying
cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation
through the payment of cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert the
notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the
notes as a current rather than long-term liability, which could result in a material reduction of our net working capital.
The accounting method for convertible debt securities that may be settled in cash, such as the Notes, could have a material
effect on our reported financial results.
Under Accounting Standards Codification 470-20, Debt with Conversion and Other Options, which we refer to as ASC 470-20,
an entity must separately account for the liability and equity components of certain convertible debt instruments (such as the
Notes) that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer’s economic interest
cost. The effect of ASC 470-20 on the accounting for the Notes is that the equity component is required to be included in the
additional paid-in capital section of stockholders’ equity on our consolidated balance sheet at the issuance date, and the value of
the equity component is treated as debt discount for purposes of accounting for the debt component of the Notes. As a result, we
are required to record a greater amount of non-cash interest expense as a result of the amortization of the discounted carrying
value of the Notes to their face amount over the respective terms of the Notes. We report lower net income (or higher net loss) in
our financial results because ASC 470-20 requires interest to include both the amortization of the debt discount and the
instrument’s coupon interest rate, which could adversely affect our financial results, the trading price of our common stock, and
the trading price of the Notes.
In addition, under certain circumstances, including our ability and intent to settle the convertible debt instruments in cash,
convertible debt instruments (such as the Notes) that may be settled entirely or partly in cash are currently accounted for utilizing
the treasury stock method, the effect of which is that the shares issuable upon conversion of the Notes are not included in the
calculation of diluted income per share except to the extent that the conversion value of the Notes exceeds their principal amount.
Under the treasury stock method, for diluted income per share purposes, the transaction is accounted for as if the number of
shares of common stock that would be necessary to settle such excess, if we elected to settle such excess in shares, are issued. We
cannot be sure that we will meet the criteria to utilize the treasury stock method in the future. If we are unable to utilize the
treasury stock method, we would be required to apply
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the if-converted method. Under this method, diluted income per share would generally be calculated assuming that all the Notes
were converted into shares of our common stock at the beginning of the reporting period, unless the result would be anti-dilutive.
If we are unable or otherwise elect not to use the treasury stock method in accounting for the shares issuable upon conversion of
the Notes, then our diluted income per share could be adversely affected.
In August 2020, the FASB issued ASU 2020-06: Debt – Debt with Conversion and Other Options (Subtopic 470-20) and
Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and
Contracts in an Entity’s Own Equity. Under the standard, which will be effective for our fiscal year 2022, if not earlier adopted,
an entity is no longer required to separately account for the liability and equity components of convertible debt instruments, such
as those described above. As a result, entities will account for a convertible debt instrument wholly as debt, unless certain other
conditions are met. The elimination of these seperation models will reduce non-cash interest expense, and thereby increasing net
income (or reducing net loss) for entities that have issued a convertible instrument that was within the scope of those models
before the adoption of ASU 2020-06. Additionally, ASU 2020-06 requires the application of the if-converted method for
calculating diluted earnings per share, and precludes the use of the treasury stock method for certain debt instruments, which
could adversely affect our diluted net income (loss) per share. We cannot be sure whether other changes may be made to the
current accounting standards related to the Notes, or otherwise, that could have an adverse impact on our financial statements.
Issuance of our common stock, if any, upon conversion of the Notes, as well as the capped call transactions and the
hedging activities of the option counterparties, may impair or reduce our ability to utilize our net operating loss
carryforwards or our research and development credits carryforwards in the future.
Pursuant to U.S. federal and state tax rules, a corporation is generally permitted to deduct from taxable income in any year net
operating losses (“NOLs”) carried forward from prior years and to reduce from tax liabilities in any year R&D credits carried
forward from prior years.
As of December 31, 2020, we had U.S. federal NOL carryforwards of approximately $219.3 million, of which $6.9 million has
an indefinite carryforward period, with the remaining expiring in varying amounts between 2034 and 2037, if not utilized. We
also had U.S. federal R&D credits carryforwards of approximately $28.8 million expiring in varying amounts between 2021 and
2040. If we were to experience a “change in ownership” under Section 382 of the Internal Revenue Code (“Section 382”), the
NOL carry forward limitations under Section 382 would impose an annual limit on the amount of the future taxable income that
may be offset by our NOLs generated prior to the change in ownership. The R&D credits carry forward limitation under Section
383 of the Internal Revenue Code would impose an annual limit on the amount of tax liabilities that may be offset by R&D
credits generated prior to the change in ownership. If an ownership change were to occur, we may be unable to use a significant
portion of our NOLs to offset future taxable income and/or a significant portion of R&D credits to offset future tax liabilities.
The shares of common stock, if any, issued upon conversion of the Notes will, upon such issuance, be taken into account when
determining the cumulative change in our ownership for Section 382 purposes. As a result, any conversion of the Notes that we
elect to settle in shares may materially increase the risk that we could experience an ownership change in the future.
The capped call transactions may affect the value of the 2027 Notes and our common stock.
With respect to the 2027 Notes, we have entered into capped call transactions with certain option counterparties. The capped call
transactions were expected generally to reduce the potential dilution upon conversion of the 2027 Notes and/or offset any cash
payments we are required to make in excess of the principal amount of converted 2027 Notes, as the case may be, with such
reduction and/or offset subject to a cap.
The option counterparties or their affiliates may enter into or modify hedge positions by entering into or unwinding various
derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in
secondary market transactions prior to the maturity of the 2027 Notes (and are likely to do so during any observation period
related to a conversion of the 2027 Notes). This activity could also cause or avoid an increase or a
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decrease in the market price of our common stock and the 2027 Notes, which could affect the ability of the noteholders to
convert the 2027 Notes and, to the extent the activity occurs during any observation period related to a conversion of the 2027
Notes, it could affect the number of shares and value of the consideration that noteholders will receive upon conversion of the
2027 Notes.
Risks Associated with Operating a Global Business
We are exposed to risks of operating businesses outside the United States.
Most of our sales are to customers located outside of the United States, and we expect sales from non-U.S. markets to continue to
represent a significant portion of our sales in the future. Our non-U.S. sales and operations are subject to risks inherent in
conducting business outside the United States, many of which are beyond our control including:
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political and social attitudes, laws, rules, regulations, and policies within countries that favor local companies over U.S.
companies, including government-supported efforts to promote the development and growth of local competitors;
global trade issues and uncertainties with respect to trade policies, including tariffs, trade sanctions, and international
trade disputes, and the ability to obtain required import and export licenses;
differing legal systems and standards of trade which may not honor our intellectual property rights and which may place
us at a competitive disadvantage;
pressures from foreign customers and foreign governments for us to increase our operations and sourcing in the foreign
country, which may necessitate the sharing of sensitive information and intellectual property rights;
● multiple conflicting and changing governmental laws and regulations, including varying labor laws and tax regulations;
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reliance on various information systems and information technology to conduct our business, making us vulnerable to
additional cyberattacks by third parties or breaches due to employee error, misuse, or other causes, that could result in
further business disruptions, loss of or damage to our intellectual property and confidential information (and that of our
customers and other business partners), reputational harm, transaction errors, processing inefficiencies, or other adverse
consequences;
regional economic downturns, varying foreign government support, unstable political environments, and other changes
in foreign economic conditions (such as the United Kingdom’s departure from the European Union, commonly referred
to as Brexit);
the impact of public health epidemics, such as the COVID-19 pandemic, on employees, suppliers, customers and the
global economy;
difficulties in managing a global enterprise, including staffing, managing distributors and representatives, and
repatriating cash;
longer sales cycles and difficulties in collecting accounts receivable; and
different customs and ways of doing business.
These challenges, many of which are associated with sales into the Asia-Pacific region, have had and may continue to have a
material adverse effect on our business.
Changes in U.S. trade policy and export controls and ongoing trade disputes between the U.S. and China have adversely
affected, and may continue to adversely affect, our business, results of operations, and financial condition.
The U.S. government has recently enacted several changes in trade policy which have adversely affected the Company’s ability
to sell and service its products to and for customers located in China and in certain other countries. These changes have included,
without limitation, the elimination of license exception CIV, the addition of several companies to the U.S. Commerce
Department’s Entity List, and the implementation of new regulations governing the sale of equipment to
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defined “Military End Users” and for defined “Military End Uses”. The effect of these changes, among others, is that U.S.
companies are now required to obtain export licenses before providing commodities, software, and technology (that are subject to
the regulations) to customers for whom licensing requirements did not previously apply. The administrative processing, attendant
delays and risk of ultimately not obtaining required export approvals pose a particular disadvantage to the Company relative to
our non-U.S. competitors who are not required to comply with U.S. export controls. This difficulty and uncertainty has adversely
affected our ability to compete for and win business from customers in China. Foreign customers affected by these and future
U.S. government sanctions or threats of sanctions may respond by developing their own solutions to replace our products or by
utilizing our foreign competitors’ products. This “trade war” with China, together with the prospect of additional governmental
action related to international sanctions and tariffs, has adversely affected, and is likely to continue to adversely affect, demand
for our products and the results of our operations and financial condition.
The changes in U.S. trade policy and export controls, as well as sanctions imposed by the U.S. against certain Chinese
companies, have triggered retaliatory action by China and could trigger further retaliation. For example, China has instituted
trade sanctions on certain U.S. goods, as well as other sanctions designed to deny U.S. companies access to critical raw materials.
In addition, China has provided, and is expected to continue to provide, significant assistance, financial and otherwise, to its
domestic industries, including some of our competitors. We face increasing competition as a result of significant investment in
the semiconductor industry by the Chinese government and various state-owned or affiliated entities that is intended to advance
China's stated national policy objectives. In addition, the Chinese government may restrict us from participating in the China
market or may prevent us from competing effectively with Chinese companies.
Further, we hold inventory of products that may be affected by the recent U.S. government actions, including potential order
cancellations. While we continue to take steps to mitigate our exposure to this developing situation, if the sale of these products is
delayed or we are unable to return or dispose of our inventory on favorable economic terms, we may incur additional carrying
costs for the inventory or otherwise record charges associated with this inventory.
We may be unable to obtain required export licenses for the sale of our products.
Whether with respect to sales to customers located in China or otherwise, products which (i) are manufactured in the United
States, (ii) incorporate controlled U.S. origin parts, technology, or software, or (iii) are based on U.S. technology, are subject to
the U.S. Export Administration Regulations (“EAR”) when exported to and re-exported from international jurisdictions, in
addition to the local jurisdiction’s export regulations applicable to individual shipments. Currently, our MOCVD, MBE, laser
annealing and certain other systems and products are controlled for export under the EAR. Licenses or proper license exceptions
may be required for the shipment of our products to certain customers or countries. Obtaining an export license or determining
whether an export license exception exists often requires considerable effort by us and cooperation from the customer, which can
add time to the order fulfillment process. We may be unable to obtain required export licenses or qualify for export license
exceptions and, as a result, we may be unable to export products to our customers and/or meet their servicing needs. Non-
compliance with the EAR or other applicable export regulations could result in a wide range of penalties including the denial of
export privileges, fines, criminal penalties, and the seizure of commodities. In the event that an export regulatory body
determines that any of our shipments violate applicable export regulations, we could be fined significant sums and our export
capabilities could be restricted, which could have a material adverse impact on our business.
We are exposed to various risks associated with global regulatory requirements.
As a public company with global operations, we are subject to the laws of the United States and multiple foreign jurisdictions,
and the rules and regulations of various governing bodies, which may differ among jurisdictions. We are required to comply with
legal and regulatory requirements pertaining to such matters as data privacy (including, for example, the European Union General
Data Protection Regulation and similar laws), labor laws, immigration, customs, trade, taxes, corporate governance, conflict
minerals and other social responsibility legislation, and antitrust regulations, among others. These laws and regulations, which are
ever-evolving and at times complex and inconsistent, impose costs on our business and divert management time and attention
from revenue-generating activities. Changes to or ambiguities in these laws and regulations may create uncertainty regarding our
compliance requirements. While we intend to invest
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the required resources to comply with these regulatory requirements, if we are found by a court or regulatory agency to have
failed in these efforts, our business, financial condition, and results of operations could be adversely affected.
We may be exposed to liabilities under the Foreign Corrupt Practices Act and other similar laws.
We are subject to the Foreign Corrupt Practices Act of 1977 (“FCPA”) and other laws that prohibit improper payments or offers
of payments to foreign government officials, as defined by the statute, for the purpose of obtaining or retaining business.
Violations of the FCPA or similar laws or similar customer policies may result in severe criminal or civil sanctions or the loss of
supplier privileges to a customer and we may be subject to other liabilities, which could negatively affect our business, financial
condition, and results of operations.
Our operating results may be adversely affected by tightening credit markets.
As a global company with worldwide operations, we are subject to volatility and adverse consequences associated with economic
downturns in different parts of the world. In the event of a downturn, many of our customers may delay or reduce their purchases
of our products and services. If negative conditions in the credit markets prevent our customers from obtaining credit or
necessary financing, product orders in these channels may decrease, which could result in lower revenue. In addition, we may
experience cancellations of orders in backlog, rescheduling of customer deliveries, and attendant pricing pressures. If our
suppliers face challenges in obtaining credit, in selling their products, or otherwise in operating their businesses, their ability to
continue to supply materials to us may be negatively affected.
In addition, we finance some of our sales through trade credit. In addition to ongoing credit evaluations of our customers’
financial condition, we seek to mitigate our credit risk by obtaining deposits and letters of credit on certain of our sales
arrangements. We could suffer significant losses if a customer whose accounts receivable we have not secured fails or is
otherwise unable to pay us, or if financial institutions providing letters of credit become insolvent. A loss in collections on our
accounts receivable would have a negative impact on our financial condition and results of operations.
We are subject to foreign currency exchange risks.
We are exposed to foreign currency exchange rate risks that are inherent in our anticipated sales, purchase commitments, and
assets and liabilities that are denominated in currencies other than the U.S. dollar. Although we attempt to mitigate our exposure
to fluctuations in currency exchange rates, hedging activities may not always be available or adequate to mitigate the impact of
our exchange rate exposure. Failure to sufficiently hedge or otherwise manage foreign currency risks properly could materially
and adversely affect our financial condition, results of operations, and liquidity.
Risks Related to Intellectual Property and Cybersecurity
Disruptions in our information technology systems or data security incidents could result in significant financial, legal,
regulatory, business, and reputational harm to us.
We are increasingly dependent on information technology systems and infrastructure, including mobile technologies, to operate
our business. In the ordinary course of our business, we collect, store, process and transmit significant amounts of sensitive
information, including intellectual property, proprietary business information, personally-identifiable information of individuals,
and other confidential information, including that of our customers and other business partners. It is critical that we do so in a
secure manner to maintain the confidentiality, integrity, and availability of this sensitive information. We have also outsourced
elements of our operations (including elements of our information technology infrastructure) to third parties, and as a result, we
manage a number of third-party vendors who have access to our computer networks and our confidential information.
All information systems are subject to disruption, breach, or failure. Potential vulnerabilities can be exploited from inadvertent or
intentional actions of our employees, third-party vendors, business partners, or by malicious third parties. Attacks of this nature
are increasing in their frequency, levels of persistence, sophistication, and intensity, and are being conducted by sophisticated and
organized groups and individuals with a wide range of expertise and motives (including industrial espionage), including
organized criminal groups, nation states, and others. In addition to the extraction of
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sensitive information, attacks could include the deployment of harmful malware, ransomware, or other means which could affect
service reliability and threaten the confidentiality, integrity, and availability of information. Significant disruptions in our, or our
third-party vendors’, information technology systems or other data security incidents could adversely affect our business
operations and result in the loss or misappropriation of, and unauthorized access to, sensitive information, which could result in
financial, legal, regulatory, business, and reputational harm to us.
On November 1, 2018, we announced the discovery of an attack on our computer system by a highly-sophisticated actor. We
notified law enforcement of the attack and retained forensic experts to assist with the investigation. We were not able to
definitively determine the extent of the breach or the potential impact on our operations. We also were not able to definitively
identify who was responsible for the attack. While we have engaged in remediation and implemented, and are continuing to
implement, security measures intended to protect our information technology systems and infrastructure, there can be no
assurance that such remediation and security measures will successfully prevent further security incidents. Additional
information technology system disruptions, whether from attacks on our technology environment or from computer viruses,
natural disasters, terrorism, war or other causes, could result in a material disruption in our business operations, force us to incur
significant costs and engage in litigation, harm our reputation, and subject us to liability under laws, regulations, and contractual
obligations.
We may be unable to effectively enforce and protect our intellectual property rights.
Our success as a company depends in part upon the protection of our intellectual property rights. We rely primarily on patent,
copyright, trademark, and trade secret laws, as well as nondisclosure and confidentiality agreements and other methods, to protect
our proprietary information, technologies, processes, and brand identity. We own various U.S. and international patents and have
additional pending patent applications relating to certain of our products and technologies. The process of seeking patent
protection is lengthy and expensive, and we cannot be certain that pending or future applications will result in issued patents or
that issued patents will be of sufficient scope or strength to provide meaningful protection or commercial advantage. In addition,
our intellectual property rights may be circumvented, invalidated, or rendered obsolete by the rapid pace of technological change,
or through efforts by others to reverse engineer our products or design around patents that we own. Policing unauthorized use of
our products and technologies is difficult and time consuming and the laws of other countries may not protect our proprietary
rights as fully or as readily as U.S. laws. Given these limitations, our success will depend in part upon our ability to innovate
ahead of our competitors.
In addition, our outsourcing efforts require that we share certain portions of our technology with our outsourcing partners, which
poses additional risks of infringement and trade secret misappropriation. Infringement of our rights by a third party, possibly for
purposes of developing and selling competing products, could result in uncompensated lost market and revenue opportunities.
Similar exposure could result in the event that former employees seek to compete with us through their unauthorized use of our
intellectual property and proprietary information. We cannot be certain that the protective steps and measures we have taken will
prevent the misappropriation or unauthorized use of our proprietary information and technologies, nor can we be certain that
applicable intellectual property laws, regulations, and policies will not be changed in a manner detrimental to the sale or use of
our products.
Litigation has been required in the past, is currently ongoing, and may be required in the future, to enforce our intellectual
property rights, protect our trade secrets, and to determine the validity and scope of proprietary rights of others. As a result of any
such litigation, we could lose our ability to enforce one or more patents, incur substantial costs, and jeopardize relationships with
current or prospective customers or suppliers. Any action we take to enforce or defend our intellectual property rights could
absorb significant management time and attention, and could otherwise negatively impact our operating results.
We may be subject to claims of intellectual property infringement by others.
We receive communications from time to time from other parties asserting the existence of patent or other rights which they
believe cover certain of our products. We also periodically receive notices from customers who believe that we are required to
indemnify them for damages they may incur related to infringement claims made against these customers by third parties. Our
customary practice is to evaluate such assertions and to consider the available alternatives, including
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whether to seek a license, if appropriate. However, we cannot ensure that licenses can be obtained or, if obtained, will be on
acceptable terms or that costly litigation or other administrative proceedings will not occur. If we are not able to resolve a claim,
negotiate a settlement of the matter, obtain necessary licenses on commercially reasonable terms, or successfully prosecute and
defend our position, our business, financial condition, and results of operations could be materially and adversely affected.
Risks Associated with Our Industry
We face significant competition.
We face significant competition throughout the world, which may increase as certain markets in which we operate continue to
evolve. Some of our competitors have greater financial, engineering, manufacturing, and marketing resources than us. Other
competitors are located in regions with lower labor costs and other reduced costs of operation. In addition, our ability to compete
in foreign countries against local manufacturers may be hampered by nationalism, social attitudes, laws, regulations, and policies
within such countries that favor local companies over U.S. companies or that are otherwise designed to promote the development
and growth of local competitors. Furthermore, we face competition from smaller emerging equipment companies whose strategy
is to provide a portion of the products and services we offer, with a focused approach on innovative technology for specialized
markets. New product introductions or enhancements by us or our competitors could cause a decline in sales or loss of market
acceptance of our existing or prior generation products. Increased competitive pressure could also lead to intensified price
competition resulting in lower profit margins.
We operate in industries characterized by rapid technological change.
Each of the industries in which we operate is subject to rapid technological change. Our ability to remain competitive depends on
our ability to enhance existing products and develop and manufacture new products in a timely and cost effective manner and to
accurately predict technology transitions. Our performance may be adversely affected if we are unable to accurately predict
evolving market trends and related customer needs and to effectively allocate our resources among new and existing products and
technologies.
We are also exposed to potential risks associated with unexpected product performance issues. Our product designs and
manufacturing processes are complex and could contain unexpected product defects, especially when products are first
introduced. Unexpected product performance issues could result in significant costs and damages, including increased service and
warranty expenses, the need to provide product replacements or modifications, reimbursement for damages caused by our
products, product recalls, related litigation, product write-offs, and disposal costs. Product defects could also result in personal
injury or property damage, claims for which may exceed our existing insurance coverages. These and other costs could be
substantial and our reputation could be harmed, resulting in a reduced demand for our products and a negative effect on our
business, financial condition, and results of operations.
Certain of our sales are dependent on the demand for consumer electronics, which can experience significant volatility due to
seasonal and other factors.
The demand for semiconductors, LEDs, HDDs and other devices is highly dependent on sales of consumer electronics, such as
televisions, computers, tablets, digital video recorders, smartphones, cell phones, and other mobile devices. Factors that could
influence the levels of spending on consumer electronic products include consumer confidence, access to credit, volatility in fuel
and other energy costs, conditions in the residential real estate and mortgage markets, labor and healthcare costs, and other
macroeconomic factors affecting consumer spending behavior. The emergence of new or competing technologies may also affect
demand for consumer electronic products. These and other factors have had and could continue to have an adverse effect on the
demand for our customers’ products and, in turn, on our customers’ demand for our products and services. Furthermore, in the
past, some of our customers have overestimated their potential for market share growth. If this growth is overestimated, we may
experience cancellations of orders in backlog, rescheduling of customer deliveries, obsolete inventory, and liabilities to our
suppliers for products no longer needed.
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We have a concentrated customer base, located primarily in a limited number of regions, which operates in highly
concentrated industries.
Our customer base continues to be highly concentrated. Orders from a relatively limited number of customers have accounted for,
and likely will continue to account for, a substantial portion of our net sales, which may allow customers to demand pricing and
other terms less favorable to us (including extended warranties, indemnification commitments, and the obligation to continue
production of older products). Customer consolidation activity involving some of our largest customers could result in an even
greater concentration of our sales in the future. Management changes at key customer accounts could result in a loss of future
sales due to vendor preferences or other reasons and may introduce new challenges in managing customer relationships.
If a principal customer discontinues its relationship with us or suffers economic setbacks, our business, financial condition, and
operating results could be materially and adversely affected. Our ability to increase sales in the future will depend in part upon
our ability to obtain orders from new customers and we cannot be certain that we will be successful in these efforts. In addition,
because a relatively small number of large manufacturers, many of whom are our customers, dominate the industries in which
they operate, it may be especially difficult for us to replace these customers if we lose their business. A significant portion of
orders in our backlog are orders from our principal customers.
In addition, a substantial investment is required by customers to install and integrate capital equipment into a production line. As
a result, once a manufacturer has selected a particular vendor to supply capital equipment, the manufacturer will often attempt to
consolidate its other capital equipment requirements with the same vendor. Accordingly, if a customer selects a competitor’s
product over ours, we could experience difficulty selling to that customer for a significant period of time.
Furthermore, we do not have long-term contracts with our customers. As a result, our agreements with our customers do not
provide assurance of future sales, and we are exposed to competitive price pressures on new orders we attempt to obtain.
Our customer base is also highly concentrated in terms of geography, and the majority of our sales are to customers located in a
limited number of countries. Dependence upon sales emanating from a limited number of regions increases our risk of exposure
to local difficulties and challenges, such as those associated with regional economic downturns, political instability, trade wars
and other trade disruptions, fluctuating currency exchange rates, natural disasters, social unrest, pandemics, terrorism, and acts of
war. Our reliance upon customer demand arising primarily from a limited number of countries could materially and adversely
impact our future results of operations.
The cyclicality of the industries we serve directly affects our business.
Our business depends in large part upon the capital expenditures of manufacturers in our four end-markets: Semiconductor;
Compound Semiconductor; Data Storage; and Scientific & Other. We are subject to the business cycles of these industries, the
timing, length, and volatility of which are difficult to predict. These industries have historically been highly cyclical and have
experienced significant economic downturns in the last decade. As a capital equipment provider, our revenue depends in large
part on the spending patterns of these customers, who often delay expenditures or cancel or reschedule orders in reaction to
variations in their businesses or general economic conditions. In downturns, we must be able to quickly and effectively align our
costs with prevailing market conditions, as well as motivate and retain key employees. However, because a portion of our costs
are fixed, our ability to reduce expenses quickly in response to revenue shortfalls may be limited. Downturns in one or more of
these industries have had, and will likely have, a material adverse effect on our business, financial condition, and operating
results. Alternatively, during periods of rapid growth, we must be able to acquire and develop sufficient manufacturing capacity
to meet customer demand and attract, hire, assimilate, and retain a sufficient number of qualified people. Our net sales and
operating results may be negatively affected if our customers experience economic downturns or slowdowns in their businesses.
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Our failure to estimate customer demand accurately could result in inventory obsolescence, liabilities to our suppliers for
products no longer needed, and manufacturing interruptions or delays which could affect our ability to meet customer
demand.
The success of our business depends in part on our ability to accurately forecast and supply equipment and services that meet the
rapidly changing technical and volume requirements of our customers. To meet these demands, we depend on the timely delivery
of parts, components, and subassemblies from our suppliers. Uncertain worldwide economic conditions and market instabilities
make it difficult for us (and our customers) to accurately forecast future product demand. If actual demand for our products is
different than expected, we may purchase more or fewer parts than necessary or incur costs for canceling, postponing, or
expediting delivery of parts. If we overestimate the demand for our products, excess inventory could result which could be
subject to heavy price discounting, which could become obsolete, and which could subject us to liabilities to our suppliers for
products no longer needed. Similarly, we may be harmed in the event that our competitors overestimate the demand for their
products and engage in heavy price discounting practices as a result. In addition, the volatility of demand for capital equipment
poses risks for companies in our supply chain, including challenges associated with inventory management and fluctuating
working capital requirements.
Furthermore, certain key parts may be subject to long lead-times or may be obtainable only from a single supplier or limited
group of suppliers, and some sourcing and assembly is provided by suppliers located in countries other than the United States.
We may experience significant interruptions in our manufacturing operations, delays in our ability to timely deliver products or
services, increased costs, or customer order cancellations as a result of:
●
●
●
●
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●
the failure or inability of our suppliers to timely deliver quality parts;
volatility in the availability and cost of materials;
difficulties or delays in obtaining required import or export approvals;
information technology or infrastructure failures;
natural disasters such as earthquakes, tsunamis, fires, floods, or storms; or
other causes such as regional economic downturns, international trade disruptions, pandemics, political instability,
terrorism, or acts of war, which could result in delayed deliveries, manufacturing inefficiencies, increased costs, or order
cancellations.
In addition, in the event of an unanticipated increase in demand for our products, our need to rapidly increase our business and
manufacturing capacity may be limited by our working capital constraints and those of our suppliers, which may cause or
exacerbate interruptions in our manufacturing and supply chain operations. Any or all of these factors could materially and
adversely affect our business, financial condition, and results of operations.
Our failure to successfully manage our outsourcing activities or failure of our outsourcing partners to perform as anticipated
could adversely affect our results of operations.
To better align our costs with market conditions, increase the percentage of variable costs relative to total costs, and to increase
productivity and operational efficiency, we have outsourced certain functions to third parties, including the manufacture of
several of our systems. While we maintain some level of internal manufacturing capability for these systems, we rely on our
outsourcing partners to perform their contracted functions to allow us flexibility to adapt to changing market conditions,
including periods of significantly diminished order volumes. If our outsourcing partners do not perform as required, or if our
outsourcing efforts do not allow us to realize the intended cost savings and flexibility, our results of operations (and those of our
third-party providers) may be adversely affected. Disputes and possibly litigation involving third party providers could result and
we could suffer damage to our reputation. Dependence on contract manufacturing and outsourcing may also adversely affect our
ability to bring new products to market. Although we attempt to select reputable providers, one or more of these providers could
fail to perform as we expect. If we do not effectively manage our outsourcing efforts or if third party providers do not perform as
anticipated, we may not realize the benefits of productivity improvements and we may experience operational difficulties,
increased costs, manufacturing and installation interruptions or delays, inefficiencies in the structure and operation of our supply
chain,
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loss of intellectual property rights, quality issues, increased product time-to-market, and an inefficient allocation of our human
resources, any or all of which could materially and adversely affect our business, financial condition, and results of operations.
We rely on a limited number of suppliers, some of whom are our sole source for particular components.
Certain of the parts, components, and sub-assemblies included in our products are obtained from a single source or a limited
group of suppliers. Our inability to develop alternative sources, as necessary, could result in a prolonged interruption in our
ability to supply related products, a failure on our part to meet the demands our customers, and a significant increase in the price
of related products, which could adversely affect our business, financial condition, and results of operations.
General Risk Factors
The price of our common shares is volatile and could decrease.
The stock market in general and the market for technology stocks in particular has experienced significant volatility. The trading
price of our common shares has fluctuated significantly and could decline independent of the overall market, and shareholders
could lose all or a substantial part of their investment. The market price of our common shares could continue to fluctuate in
response to several factors, including those mentioned elsewhere in this section and, among others:
●
●
●
●
●
●
●
●
●
●
difficult macroeconomic conditions, international trade disputes, unfavorable geopolitical events, and general stock
market uncertainties, such as those occasioned by a global liquidity crisis and a failure of large financial institutions;
actual or anticipated variations in our results of operations;
issues associated with the performance of our products, or the performance of our internal systems such as our customer
relationship management (“CRM”) system or our enterprise resource planning (“ERP”) system;
announcements of financial developments or technological innovations;
our failure to meet the performance estimates of investment research analysts;
changes in recommendations and financial estimates by investment research analysts, and decisions by investment
research analysts to cease coverage of our company;
our failure to successfully and timely implement cost reduction initiatives and restructuring activities, if and when
required;
delays or difficulties in satisfying internal control evaluations and attestation requirements of Section 404 of the
Sarbanes Oxley Act of 2002;
the commencement of, and rulings on, litigation and legal proceedings; and
the occurrence of major catastrophic events.
Securities class action litigation is often brought against a company following periods of volatility in the market price of its
securities. We have defended security class actions lawsuits in the past, and are currently defending such a lawsuit now. These
lawsuits, if and when brought, can result in substantial costs and a diversion of management’s attention and resources, which can
adversely affect our financial condition, results of operations, and liquidity.
We are subject to risks of non-compliance with environmental, health, and safety regulations.
From a corporate governance perspective, there is an increasing focus on reducing energy usage and improving the
environmental impact and sustainability associated with manufacturing operations. In addition, we are subject to environmental,
health, and safety regulations in connection with our business operations, including but not limited to
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regulations related to the development, manufacture and use of our products, recycling and disposal of related materials, and the
operation and use of our facilities and real property. Failure or inability to comply with existing or future environmental, safety
and sustainability standards and regulations could result in significant remediation liabilities, the imposition of fines, the
suspension or termination of research, development, or use of certain of our products, and other harm to the Company, which
could have a material adverse effect on our business, financial condition, and results of operations. Aside from these potential
adverse effects on our business operations, we are committed to ensuring safe
working conditions, treating our employees with dignity and respect, and sourcing, manufacturing, and distributing our
products in a responsible and environmentally friendly manner, and any failure on our part to do so may cause
reputational harm for the Company. Furthermore, some of our operations involve the storage, handling, and use of hazardous
materials that may pose a risk of fire, explosion, or environmental release. Such events could result from acts of terrorism, natural
disasters, or operational failures and may result in injury or loss of life to our employees and others, local environmental
contamination, and property damage. These events may cause a temporary shutdown of an affected facility, or portion thereof,
and we could be subject to penalties or claims as a result. Each of these events could have a material adverse effect on our
business, financial condition, and results of operations.
Our inability to attract, retain, and motivate employees could have a material adverse effect on our business.
Our success depends in part upon our ability to attract, retain, and motivate employees, including those in executive, managerial,
engineering and marketing positions, as well as highly skilled and qualified technical personnel. Attracting, retaining, and
motivating such qualified personnel may be difficult due to challenging industry conditions, competition for such personnel by
other technology companies, consolidations and relocations of operations, and workforce reductions, and there can be no
assurance that we will be successful in recruiting or retaining key personnel. We have entered into employment agreements with
certain key personnel but our inability to attract, retain, and motivate key personnel could have a material adverse effect on our
business, financial condition, and results of operations.
Changes in accounting pronouncements or taxation rules or practices may adversely affect our financial results.
Changes in accounting pronouncements or taxation rules or practices can have a significant effect on our reported results. New
accounting pronouncements and taxation rules can have a material impact on revenue recognition practices, effective tax rates,
results of operations, and our financial condition. In addition, varying interpretations of accounting pronouncements or taxation
practices, and the questioning of our current or past practices (such as those associated with our transfer pricing), may adversely
affect our reported financial results.
Our income taxes may change.
We are subject to income tax on a jurisdictional or legal entity basis and significant judgment is required in certain instances to
allocate our taxable income to a jurisdiction and to determine the related income tax expense and benefits. Losses in one
jurisdiction generally may not be used to offset profits in other jurisdictions. As a result, changes in the mix of our earnings (or
losses) between jurisdictions, among other factors, could alter our overall effective income tax rate, possibly resulting in
significant tax rate increases.
We are regularly audited by various tax authorities. Income tax audit assessments or changes in tax laws, regulations, or other
interpretations may result in increased tax provisions which could materially affect our operating results in the period or periods
in which such determinations are made or changes occur.
In addition, our effective tax rate could increase if we determine that it is no longer more likely than not that we are able to
realize our remaining net deferred tax assets, if we are unable to generate sufficient future taxable income in certain jurisdictions,
or if we are otherwise required to increase our valuation allowances against our deferred tax assets.
Item 1B. Unresolved Staff Comments
None.
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Item 2. Properties
Our corporate headquarters and principal research and development, manufacturing, and sales and service facilities as of
December 31, 2020 are as follows:
Owned Facilities Location
Plainview, NY
Somerset, NJ
St. Paul, MN
Somerset, NJ
Leased Facilities Location
San Jose, CA
Somerset, NJ
Horsham, PA
Waltham, MA
Approximate
Size (sq. ft.)
Use
80,000 Corporate Headquarters; R&D; Sales & Service; Administration
80,000 R&D; Manufacturing; Sales & Service; Administration
43,000 R&D; Manufacturing; Sales & Service; Administration
38,000 R&D; Sales & Service; Administration
Approximate
Size (sq. ft.)
Use
100,000 R&D; Manufacturing; Sales & Service; Administration
57,000 Warehouse
49,000 R&D; Manufacturing; Sales & Service; Administration
19,000 R&D; Sales & Service; Administration
Lease
Expiration
2023
2022
2024
2023
In addition to the above, we lease a small office in Malta, New York for sales and service and our foreign sales and service
subsidiaries lease office space in China, Germany, Japan, Malaysia, Philippines, Singapore, South Korea, Thailand, Taiwan and
the United Kingdom. Finally, as discussed in Note 20 to the Consolidated Financial Statements, on February 18, 2021, we
entered into a new lease agreement in San Jose, California, to expand our manufacturing capabilities for our laser annealing and
lithography technologies. This new facility has approximately the same square footage as our existing San Jose, California
facility, but expanded manufacturing capabilities, and we will transition to the new facility over the next two years. We believe
our facilities are adequate to meet our current needs.
Item 3. Legal Proceedings
The discussion under the heading Legal Proceedings within Note 10, “Commitments and Contingencies” to the Consolidated
Financial Statements is incorporated herein by reference.
Item 4. Mine Safety Disclosures
Not Applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock is quoted on The NASDAQ Global Select Market under the symbol “VECO.” As of February 11, 2021, there
were approximately 132 stockholders of record of our common stock. Because many of our shares of common stock are held by
brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented
by these record holders. We have not paid dividends on our common stock. The Board of Directors will determine future
dividend policy based on our consolidated results of operations, financial condition, capital requirements, and other
circumstances.
Issuer Purchases of Equity Securities
On December 11, 2017, our Board of Directors authorized a program to repurchase up to $100 million of the Company’s
outstanding common stock to be completed through December 11, 2019, after completion of the previous program on
October 28, 2017. During fiscal year 2018, we repurchased 1.0 million shares of our common stock for $11.3 million through our
share repurchase programs. We did not purchase any shares during the fiscal years 2020 and 2019. At the end of the program,
$14.3 million of the $100 million had been utilized.
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Stock Performance Graph
ASSUMES $100 INVESTED ON DEC. 31, 2015
ASSUMES DIVIDENDS REINVESTED
FISCAL YEAR ENDING DEC. 31
Veeco Instruments Inc.
S&P Smallcap 600
RDG MidCap Technology
2015
100.00
100.00
100.00
2016
141.78
126.56
104.93
2017
72.23
143.30
110.75
2018
36.04
131.15
96.33
2019
71.43
161.03
115.29
2020
84.44
179.20
158.24
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Item 6. Selected Financial Data
The information set forth below should be read in conjunction with the “Results of Operations” section included in Item 7,
“Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
2020
2019
Year ended December 31,
2018
(in thousands, except per share data)
2017 (1)(2)
2016 (1)
Statement of Operations Data:
Net sales
Operating income (loss)
Net income (loss)
Basic income (loss) per common share
Diluted income (loss) per common share
$ 454,163
22,565
(8,391)
(0.17)
(0.17)
$ 419,349
(39,578)
(78,733)
(1.66)
(1.66)
$ 542,082
(415,502)
(407,088)
(8.63)
(8.63)
$ 475,686
(71,868)
(51,396)
(1.16)
(1.16)
$ 331,702
(120,162)
(122,027)
(3.10)
(3.10)
(1) Effective January 1, 2018, the Company adopted the new revenue accounting standard (“ASC 606”). The results of operations for 2017 and 2016
have been recast for the new standard.
(2) During the second quarter of 2017, the Company acquired Ultratech. The results of operations of Ultratech have been included in the consolidated
financial statements since that date.
Balance Sheet Data:
Cash and cash equivalents
Short-term investments
Working capital
Total assets
Long-term debt (less current installments)
Total equity
2020
2019 (1)
December 31,
2018
(in thousands)
2017 (2)
2016 (2)
$ 129,625
189,771
440,250
898,064
321,115
408,374
$ 129,294
115,252
357,654
818,088
300,068
374,512
$ 212,273
48,189
360,027
900,816
287,392
437,775
$
279,736
47,780
372,822
1,387,475
275,630
840,093
$ 277,444
66,787
365,374
763,988
826
601,704
(1) Effective January 1, 2019, the Company adopted the new lease accounting standard (“ASC 842”). The balance sheet and results of operations for
prior periods have not been recast for the new standard. Refer to Note 1, “Significant Accounting Policies” for additional information.
(2) Effective January 1, 2018, the Company adopted the new revenue accounting standard (“ASC 606”). The balance sheet data for 2017 and 2016
have been recast for the new standard.
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Executive Summary
We are an innovative manufacturer of semiconductor process equipment. Our proven ion beam, laser annealing, lithography,
MOCVD and single wafer wet processing technologies play an integral role in the fabrication and packaging of advanced
semiconductor devices. With equipment designed to optimize performance, yield and cost of ownership, Veeco holds leading
technology positions in the markets we serve. To learn more about Veeco’s systems and service offerings, visit www.veeco.com.
We categorize our revenue by the end-markets into which we sell. Our four end-markets are: Semiconductor; Compound
Semiconductor; Data Storage; and Scientific & Other.
Sales in the Semiconductor market were driven by our laser annealing systems, lithography systems for Advanced Packaging, as
well as Low Defect Density IBD systems for EUV Mask Blank Production. We continue to build momentum for our laser
annealing solutions with advanced node logic customers. We recently announced that Veeco won an additional application with a
leading manufacturer. We have evaluation systems at a DRAM manufacturer and are working with new and existing customers
on their next manufacturing nodes. Our lithography systems for Advanced Packaging are aligned with longer-term growth of
FOWLP and other Advanced Packaging applications. Additionally, the ongoing adoption of EUV Lithography for advanced
node, semiconductor manufacturing continues to drive requirements for our mask blank systems. Overall, our technology and
market strategy is well aligned with trends such as artificial intelligence, mobile connectivity and high performance computing
that drive the Semiconductor market.
We address the Compound Semiconductor market with a broad portfolio of technologies including Wet Processing, MOCVD,
MBE, and Ion Beam, which have been developed to support emerging applications such as 5G driven RF device manufacturing,
photonics applications including 3D sensing laser diodes and micro-LEDs, and GaN-based power electronics. Sales in the
Compound Semiconductor market improved in 2020, and were driven by equipment shipments for RF Filters, RF Devices, and
power electronics, as well as sales to the Photonics market. The Photonics market was driven by the monetization of slow moving
MOCVD inventory, as well as shipments of MOCVD, Ion Beam, and MBE equipment for specialty LED and display
applications.
Sales in the Data Storage market have been growing for several years, primarily driven by shipments of Ion Beam systems for
data storage applications. Demand for our Ion Beam products for data storage is being driven by big data and cloud-based storage
growth. In order to be successful, hard disk drive manufacturers are required to improve areal density of magnetic heads for hard
disk drives and are manufacturing drives with an increasing number of thin film magnetic heads. These two factors taken
together, along with new innovations by HDD manufacturers such as heat assisted magnetic recording and microwave assisted
magnetic recording, are driving additional capacity requirements and equipment upgrades. Additionally, recent trends in the work
from home environment and the importance of cloud computing are also providing tailwinds to this market. We have good
visibility in this market, which we believe will remain healthy through 2021.
Sales in the Scientific & Other market are largely driven by sales to governments, universities, and research institutions. While
sales were lower in 2020 compared to 2019, which we attribute to COVID-19 impacts to purchasing decisions, revenues did
increase in the second half of 2020 which may be indicative of a recovery.
Overall, our laser annealing, 5G RF, and data storage products are all performing well for us today, and we expect them to
provide growth in the near term, through 2021. Long term growth for 2022 and beyond is expected to come from the
Semiconductor and Compound Semiconductor markets. As such, we have been making strategic investments in R&D and
inventory, including evaluation systems, in these markets, as well as improving our service capabilities to support these
anticipated growth opportunities.
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Results of Operations
Years Ended December 31, 2020 and 2019
The following table presents revenue and expense line items reported in our Consolidated Statements of Operations for 2020 and
2019 and the period-over-period dollar and percentage changes for those line items. Our results of operations are reported as one
business segment, represented by our single operating segment.
For the year ended December 31,
Change
2020
2019
(dollars in thousands)
Period to Period
Net sales
Cost of sales
Gross profit
Operating expenses, net:
Research and development
Selling, general, and administrative
Amortization of intangible assets
Restructuring
Asset impairment
Other operating expense (income), net
Total operating expenses, net
Operating income (loss)
Interest income (expense), net
Other income (expense), net
Income (loss) before income taxes
Income tax expense (benefit)
Net income (loss)
* Not meaningful
Net Sales
$ 454,163 100 % $ 419,349 100 % $ 34,814
259,863 57 %
194,300 43 %
261,155 62 %
158,194 38 %
8 %
(1,292) — %
36,106 23 %
(11,563) (13)%
(3,498) (4)%
(1,752) (10)%
(5,306) (83)%
(3,739)
(179)
78,994 17 %
76,251 17 %
3 %
15,333
1,097 —
281 —
—
(221)
(26,037) (13)%
171,735 38 %
62,143
5 %
22,565
(5,783) 33 %
(5)%
(23,188)
13,132 (63)%
(2)%
(7,841)
69,492
(2)%
(8,464)
—
(73)
(850)
(2)% $ (78,733) (19)% $ 70,342
$ (8,391)
90,557 22 %
79,749 19 %
4 %
17,085
2 %
6,403
1 %
4,020
—
(42)
197,772 47 %
(9)%
(39,578)
(4)%
(17,405)
(20,973)
(5)%
(77,956) (19)%
777 —
*
*
*
*
*
*
The following is an analysis of sales by end-market and by region:
Year ended December 31,
2019
2020
(dollars in thousands)
Change
Period to Period
Sales by end-market
Semiconductor
Compound Semiconductor
Data Storage
Scientific & Other
Total
Sales by geographic region
United States
EMEA
China
Rest of APAC
Rest of World
Total
$ 165,909 36 % $ 175,608 42 % $ (9,699) (6)%
22,045 26 %
39,213 47 %
(16,745) (23)%
8 %
107,922 24 %
123,288 27 %
57,044 13 %
85,877 21 %
84,075 19 %
73,789 18 %
$ 454,163 100 % $ 419,349 100 % $ 34,814
$ 145,353 32 % $ 126,160 30 % $ 19,193 15 %
15,773 28 %
(13,489) (19)%
8 %
13,206
131 33 %
8 %
57,351 14 %
71,078 17 %
164,363 39 %
397 —
73,124 16 %
57,589 13 %
177,569 39 %
528 —
$ 454,163 100 % $ 419,349 100 % $ 34,814
Total sales increased for the year ended December 31, 2020 against the comparable prior year period in the Data Storage and
Compound Semiconductor markets, partially offset by decreases in the Semiconductor and Scientific & Other
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markets. Pricing did not have a significant impact on the change in total sales. By geography, sales increased in the United States,
EMEA, and Rest of APAC regions, partially offset by a decrease in the China region. Sales in the United States and EMEA
regions were largely driven by increased sales in the Data Storage market, while sales in the Rest of APAC region were largely
driven by increased sales in the Compound Semiconductor market. Included within the Rest of APAC region for the year ended
December 31, 2020 were sales in Singapore and Taiwan of $49.4 million and $40.0 million, respectively, while sales in Japan
and Taiwan were $48.1 million and $48.8 million for the year ended December 31, 2019. We expect there will continue to be
year-to-year variations in our future sales distribution across markets and geographies. In light of the global nature of our
business, we are impacted by conditions in the various countries in which we and our customers operate. Several markets
continue to remain challenged in light of ongoing restrictions on business and travel, and decreased business and consumer
spending generally, resulting from the COVID-19 pandemic.
Gross Profit
In 2020, gross profit increased compared to 2019 primarily due to an increase in sales volume, as well as increased gross
margins. Gross margins increased principally due to higher production activity, as well as reductions in inventory reserves and
warranty expenses. We expect our gross margins to fluctuate each period due to product mix and other factors.
Research and Development
The markets we serve are characterized by continuous technological development and product innovation, and we invest in
various research and development initiatives to maintain our competitive advantage and achieve our growth objectives. Research
and development expenses decreased in 2020 compared to 2019 primarily from reductions to personnel-related expenses, project
materials, and professional fees as a result of our initiative to streamline operations, enhance efficiency, and reduce costs. In the
second half of 2019, we executed an initiative to reorganize various functions along product lines and created a central research
and development organization to better allocate our resources to our highest priority projects. Additionally, we had a decrease in
travel-related expenses as a result of COVID-19 related restrictions.
Selling, General, and Administrative
Selling, general, and administrative expenses decreased in 2020 compared to 2019 primarily related to personnel-related expenses
and professional fees as a result of our initiative to streamline operations, enhance efficiency, and reduce costs. Additionally, we
had a decrease in travel-related expenses as a result of COVID-19 related restrictions. Given the uncertainty regarding the
impacts on our business resulting from the COVID-19 pandemic, we are focused on the proactive management of expenses. In
future periods, we may incur additional selling, general and administrative expenses to support our responses to the COVID-19
pandemic.
Amortization Expense
Amortization expense decreased in 2020 compared to 2019 primarily due to the sale of a non-core product line, including related
intangible assets, as well as changes in amortization expense to reflect expected cash flows of certain intangible assets.
Restructuring Expense
We continued to record restructuring charges in 2019 as a result of our efforts to further streamline operations, enhance
efficiencies, and reduce costs. In the second half of 2019, we executed an initiative to reorganize various functions along product
lines and created a central research and development organization to better allocate our resources to our highest priority projects.
In addition, we delayered the organization while preserving our ability to execute. Collectively, these actions impacted
approximately 60 employees. During the year ended December 31, 2020, additional accruals were recognized and payments were
made related to these restructuring initiatives, which are largely completed at December 31, 2020.
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Asset Impairment
During the fourth quarter of 2019, we determined that one of our non-core product lines met the criteria for held for sale
accounting treatment and recorded a non-cash impairment charge of $4.0 million to reduce these assets to their expected fair
value upon sale. During the second quarter of 2020, we recorded additional impairment charges of $0.3 million related to the
finalization of the sale of this product line.
Interest Income (Expense)
For the year ended December 31, 2020, we recorded net interest expense of $23.2 million, compared to $17.4 million for the
comparable prior period. The increase in interest expense was primarily related to the issuance of the 2027 Notes in May 2020
and the 2025 Notes in November 2020, partially offset by the partial repurchase and exchange of the 2023 Notes. Included in
interest expense for the year ended December 31, 2020 were non-cash charges of $13.8 million related to the amortization of debt
discount and transaction costs of the 2023 Notes, 2025 Notes, and 2027 Notes, while the year ended December 31, 2019 included
non-cash charges of $12.7 million related to the amortization of debt discount and transaction costs of the 2023 Notes.
Additionally, interest income decreased approximately $3.1 million for the year ended December 31, 2020 as compared to the
prior period, primarily as a result of lower interest rates, and we expect interest income to remain depressed as a result.
Other Income (Expense)
On May 18, 2020, in connection with the completion of a private offering of $125 million aggregate principal amount of 3.75%
convertible senior notes, we repurchased and retired approximately $88.3 million in aggregate principal amount of our
outstanding 2023 Notes, with a carrying amount of $78.1 million, for approximately $81.2 million of cash. Additionally, on
November 11, 2020, we entered into a privately negotiated exchange agreement with a holder of our outstanding 2023 Notes,
under which we agreed to retire $125.0 million in aggregate original principal amount of the 2023 Notes, with a carrying amount
of $113.1 million, in exchange for the issuance of $132.5 million in aggregate principal amount of new 3.50% convertible senior
notes. We accounted for both transactions as an extinguishment of the 2023 Notes, and as such, recorded a loss on
extinguishment of approximately $7.8 million for the year ended December 31, 2020.
During the fourth quarter of 2019, we determined that our equity investment in Kateeva had indicators of impairment, and as
such, we reviewed this investment for impairment. Based on this review, we recorded a non-cash impairment charge of $21.0
million.
Income Taxes
The 2020 income tax benefit of $0.1 million is comprised of: (i) a $0.8 million income tax benefit related to the amortization and
subsequent sale of certain intangible assets during the year, which was partially offset by (ii) a $0.5 million income tax expense
attributed to the profitable non-U.S. operations, as well as withholding tax to repatriate certain foreign earnings as a result of
changes in tax laws under the 2017 Tax Act, and (iii) a $0.2 million income tax expense related primarily to U.S. tax amortization
of our indefinite-lived intangible assets that is not available to offset existing deferred tax assets, as well as state and local income
taxes.
The 2019 income tax expense of $0.8 million is comprised of: (i) a $1.0 million income tax expense attributed to the profitable
non-U.S. operations, as well as withholding tax as we now expect to repatriate certain foreign earnings as a result of changes in
tax laws under the 2017 Tax Act, (ii) a $0.3 million income tax expense related primarily to U.S. tax amortization of our
indefinite-lived intangible assets that is not available to offset existing deferred tax assets, as well as state and local income taxes,
which were partially offset by (iii) a $0.5 million income tax benefit related to the amortization and subsequent impairment of
certain non-U.S. intangible assets during the year.
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Years Ended December 31, 2019 and 2018
See Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the SEC on
February 21, 2020, for Management’s Discussions and Analysis of Financial Condition and Results of Operations for the fiscal
year ended December 31, 2018. In addition, in order to align with our evolving strategy, we have changed the end-markets by
which we categorize sales. Prior period sales have been reclassified to the new end-markets for comparative purposes. The
following is an analysis of sales by end-market:
Year ended December 31,
2018
2019
(dollars in thousands)
Change
Period to Period
Sales by end-market
Semiconductor
Compound Semiconductor
Data Storage
Scientific & Other
Total
$ 175,608 42 % $ 137,797 26 % $
260,323 48 %
69,141 12 %
74,821 14 %
37,811 27 %
(174,446) (67)%
14,934 22 %
(1,032) (1)%
$ 419,349 100 % $ 542,082 100 % $ (122,733) (23)%
85,877 20 %
84,075 20 %
73,789 18 %
Total sales decreased for the year ended December 31, 2019 against the comparable prior year period principally in the
Compound Semiconductor market, partially offset by increases in the Semiconductor and Data Storage markets. Pricing did not
have a significant impact on the change in total sales. The decrease in sales in the Compound Semiconductor market was largely
driven by our exit out of the low margin commoditized LED market. We expect there will continue to be year-to-year variations
in our future sales distribution across markets.
Liquidity and Capital Resources
Our cash and cash equivalents, restricted cash, and short-term investments are as follows:
Cash and cash equivalents
Restricted cash
Short-term investments
Total
December 31,
2020
December 31,
2019
(in thousands)
$
$
129,625
658
189,771
320,054
$
$
129,294
657
115,252
245,203
A portion of our cash and cash equivalents is held by our subsidiaries throughout the world, frequently in each subsidiary’s
respective functional currency, which is typically the U.S. dollar. At December 31, 2020 and 2019, cash and cash equivalents of
$40.2 million and $73.0 million, respectively, were held outside the United States. As of December 31, 2020, we had $12.6
million of accumulated undistributed earnings generated by our non-U.S. subsidiaries for which the U.S. repatriation tax has been
provided and did not require the use of cash due to the use of net operating loss carryforwards. Approximately $6.0 million of
undistributed earnings would be subject to foreign withholding taxes if distributed back to the United States. We believe that our
projected cash flow from operations, combined with our cash and short-term investments, will be sufficient to meet our projected
working capital requirements, contractual obligations, and other cash flow needs for the next twelve months, including scheduled
interest payments on our convertible senior notes.
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A summary of the cash flow activity for the year ended December 31, 2020 and 2019 is as follows:
Cash Flows from Operating Activities
Net income (loss)
Non-cash items:
Depreciation and amortization
Non-cash interest expense
Deferred income taxes
Share-based compensation expense
Loss on extinguishment of debt
Asset impairment
Impairment of equity investments
Provision for bad debts
For the year ended December 31,
2020
2019
(in thousands)
$
(8,391)
$
(78,733)
30,697
13,792
(299)
12,703
7,841
281
—
140
(13,743)
43,021
$
34,399
12,676
360
15,270
—
4,020
20,973
392
(16,773)
(7,416)
Changes in operating assets and liabilities
Net cash provided by (used in) operating activities
$
Net cash provided by operating activities was $43.0 million for the year ended December 31, 2020 and was due to the net loss of
$8.4 million plus a decline in cash flow from operating activities due to changes in operating assets and liabilities of $13.7
million, being more than offset by adjustments for non-cash items of $65.2 million. The changes in operating assets and liabilities
was largely attributable to increases in accounts receivable and inventories and decreases in deferred revenue, partially offset by
increases in accounts payable and customer deposits.
Net cash used in operating activities was $7.4 million for the year ended December 31, 2019 and was due to the net loss of $78.7
million plus a decline in cash flow from operating activities due to changes in operating assets and liabilities of $16.8 million,
partially offset by adjustments for non-cash items of $88.1 million. The changes in operating assets and liabilities was largely
attributable to decreases in accounts payable and accrued expenses and customer deposits and deferred revenue, partially offset
by decreases in inventories and deferred cost of sales, accounts receivable and contract assets, and prepaid expenses and other
current assets.
Cash Flows from Investing Activities
Capital expenditures
Changes in investments, net
Proceeds from held for sale assets, net of costs to sell
Net cash provided by (used in) investing activities
For the year ended December 31,
2020
2019
(in thousands)
$
$
(6,802)
(74,493)
9,503
(71,792)
$
$
(10,873)
(65,639)
645
(75,867)
The net cash used in investing activities during the year ended December 31, 2020 was attributable to capital expenditures and
net change in investments, partially offset by the proceeds from the sale of a non-core product line. As discussed in Note 20 to the
Consolidated Financial Statements, we have entered into a new lease agreement in San Jose, California, and as such, capital
expenditures associated with the build-out of the new facility are expected to total between $30 million and $40 million over the
next two years. In addition, we expect a period of duplicate operating expenses until the transition from our existing facility to
our new facility is completed over the next two years. The net cash used in investing activities during the year ended
December 31, 2019 was attributable to net change in investments as well as capital expenditures.
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Cash Flows from Financing Activities
Proceeds from issuance of 2025 Notes and 2027 Notes, net of issuance costs
Purchase of capped calls
Repurchase of 2023 Notes
Settlement of equity awards, net of withholding taxes
Net cash provided by (used in) financing activities
For the year ended December 31,
2020
2019
(in thousands)
$
$
120,095
(10,313)
(81,240)
556
29,098
$
$
—
—
—
126
126
The net cash provided by financing activities for the year ended December 31, 2020 was primarily related to the net cash
proceeds received from the issuance of the 2025 Notes and 2027 Notes, net of issuance costs, partially offset by the cash used to
repurchase the 2023 Notes as well as the purchase of capped calls.
Convertible Senior Notes
2023 Notes
On January 10, 2017, we issued $345.0 million of 2.70% convertible senior notes. On May 18, 2020, in connection with the
completion of a private offering of $125 million aggregate principal amount of 3.75% convertible senior notes described below,
we repurchased and retired approximately $88.3 million in aggregate principal amount of our outstanding 2023 Notes.
Additionally, on November 11, 2020, we entered into a privately negotiated exchange agreement with a holder of our outstanding
2023 Notes, under which we agreed to retire $125.0 million in aggregate original principal amount of the 2023 Notes, in
exchange for the issuance of $132.5 million in aggregate principal amount of new 3.50% convertible senior notes described
below. The remaining 2023 Notes bear interest at a rate of 2.70% per year, payable semiannually in arrears on January 15 and
July 15 of each year. The 2023 Notes mature on January 15, 2023, unless earlier purchased by the Company, redeemed, or
converted.
2025 Notes
On November 17, 2020, as part of the privately negotiated exchange agreement described above, we issued $132.5 million of
3.50% convertible senior notes. The 2025 Notes bear interest at a rate of 3.50% per year, payable semiannually in arrears on
January 15 and July 15 of each year, commencing on July 15, 2021. The 2025 Notes mature on January 15, 2025, unless earlier
purchased by the Company, redeemed, or converted.
2027 Notes
On May 18, 2020, we completed a private offering of $125.0 million of 3.75% convertible senior notes. We received net
proceeds of approximately $121.9 million, after deducting underwriting discounts and fees and expenses payable by the
Company. Additionally, we used approximately $10.3 million of cash to purchase the capped calls. The 2027 Notes bear interest
at a rate of 3.75% per year, payable semiannually in arrears on June 1 and December 1 of each year, commencing on December
1, 2020. The 2027 Notes mature on June 1, 2027, unless earlier purchased by the Company, redeemed, or converted.
We believe that we have sufficient capital resources and cash flows from operations to support scheduled interest payments on
these debts.
Contractual Obligations and Commitments
We have commitments under certain contractual arrangements to make future payments for goods and services. These contractual
arrangements secure the rights to various assets and services to be used in the future in the normal course of business. We expect
to fund these contractual arrangements with cash generated from operations in the normal course of business, as well as existing
cash and cash equivalents and short-term investments. In addition, we have bank guarantees and letters of credit issued by a
financial institution on our behalf as needed. At December 31, 2020, outstanding bank
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guarantees and letters of credit totaled $9.5 million and unused bank guarantees and letters of credit of $23.2 million were
available to be drawn upon.
The following table summarizes our contractual arrangements at December 31, 2020 and the timing and effect that those
commitments are expected to have on our liquidity and cash flow in future periods.
Principal payments on long-term debt
Cash interest on debt
Operating leases
Purchase commitments(1)
Total
Total
$ 389,195
57,450
11,364
126,415
$ 584,424
Less than
1 year
Payments due by period
1 – 3
years
(in thousands)
3 – 5
years
More than
5 years
— $ 131,695
23,984
6,627
$
10,104
4,671
126,415
$ 141,190
—
$ 132,500
16,331
66
—
$ 125,000
7,031
—
—
$ 132,031
$ 162,306
$ 148,897
(1) Purchase commitments are generally for inventory used in the manufacturing of our products. We generally do not enter into purchase
commitments extending beyond one year. At December 31, 2020, we have $7.2 million of offsetting supplier deposits that will be
applied against these purchase commitments.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect
on our financial condition, changes in financial condition, expenses, results of operations, liquidity, capital expenditures, or
capital resources other than bank guarantees and purchase commitments reflected in the preceding “Contractual Obligations and
Commitments” table.
Application of Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based upon our Consolidated Financial
Statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The
preparation of these financial statements requires a high degree of judgment, either in the application and interpretation of
existing accounting literature or in the development of estimates that affect the reported amounts of assets, liabilities, revenues,
and expenses. We continuously evaluate our estimates and judgments based on historical experience, as well as other factors that
we believe to be reasonable under the circumstances. The results of our evaluation form the basis for making judgments about the
carrying values of assets and liabilities that are not readily apparent from other sources. These estimates may change in the future
if underlying assumptions or factors change, and actual results may differ from these estimates.
We consider the following significant accounting policies to be critical because of their complexity and the high degree of
judgment involved in maintaining them.
Revenue Recognition
Revenue is recognized upon the transfer of control of the promised product or service to the customer in an amount that reflects
the consideration we expect to receive in exchange for such product or service. Our contracts with customers generally do not
contain variable consideration. In the rare instances where variable consideration is included, we estimate the amount of variable
consideration and determine what portion of that, if any, has a high probability of significant subsequent revenue reversal, and if
so, that amount is excluded from the transaction price. Our contracts with customers frequently contain multiple deliverables,
such as systems, upgrades, components, spare parts, installation, maintenance, and service plans. Judgment is required to properly
identify the performance obligations within a contract and to determine how the revenue should be allocated among the
performance obligations. We also evaluate whether multiple transactions with the same customer or related parties should be
considered part of a single contract based on an assessment of whether the contracts or agreements are negotiated or executed
within a short time frame of each other or if there are indicators that the contracts are negotiated in contemplation of one another.
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When there are separate units of accounting, we allocate revenue to each performance obligation on a relative stand-alone selling
price basis. The stand-alone selling prices are determined based on the prices at which we separately sell the systems, upgrades,
components, spare parts, installation, maintenance, and service plans. For items that are not sold separately, we estimate stand-
alone selling prices generally using an expected cost plus margin approach.
Most of our revenue is recognized at a point in time when the performance obligation is satisfied. We consider many facts when
evaluating each of our sales arrangements to determine the timing of revenue recognition, including our contractual obligations
and the nature of the customer’s post-delivery acceptance provisions. Our system sales arrangements, including certain upgrades,
generally include field acceptance provisions that may include functional or mechanical test procedures. For many of these
arrangements, a customer source inspection of the system is performed in our facility, test data is sent to the customer
documenting that the system is functioning to the agreed upon specifications prior to delivery, or other quality assurance testing
is performed internally to ensure system functionality prior to shipment. Historically, such source inspection or test data
replicates the field acceptance provisions that are performed at the customer’s site prior to final acceptance of the system. When
we objectively demonstrate that the criteria specified in the contractual acceptance provisions are achieved prior to delivery either
through customer testing or our historical experience of our tools meeting specifications, transfer of control of the product to the
customer is considered to have occurred and revenue is recognized upon system delivery since there is no substantive
contingency remaining related to the acceptance provisions at that date. For new products, new applications of existing products,
or for products with substantive customer acceptance provisions where we cannot objectively demonstrate that the criteria
specified in the contractual acceptance provisions have been achieved prior to delivery, revenue and the associated costs are
deferred. We recognize such revenue and costs upon obtaining objective evidence that the acceptance provisions can be achieved,
assuming all other revenue recognition criteria have been met.
In certain cases, our contracts with customers contain a billing retention which is billed by us and payable by the customer when
field acceptance provisions are completed. Revenue recognized in advance of the amount that has been billed is recorded as a
contract asset on the Consolidated Balance Sheets.
We recognize revenue related to maintenance and service contracts over time based upon the respective contract term.
Installation revenue is recognized over time as the installation services are performed. We recognize revenue from the sales of
components, spare parts, and specified service engagements at a point in time, which is typically consistent with the time of
delivery in accordance with the terms of the applicable sales arrangement.
We may receive customer deposits on system transactions. The timing of the transfer of goods or services related to the deposits
is either at the discretion of the customer or expected to be within one year from the deposit receipt. As such, we do not adjust
transaction prices for the time value of money. Incremental direct costs incurred related to the acquisition of a customer contract,
such as sales commissions, are expensed as incurred since the expected performance period is one year or less.
We have elected to treat shipping and handling costs as a fulfillment activity, and we include such costs in cost of services when
we recognize revenue for the related goods. Taxes assessed by governmental authorities that are collected by us from a customer
are excluded from revenue.
Inventory Valuation
Inventories are stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis. Each quarter
we assess the valuation and recoverability of all inventories: materials (raw materials, spare parts, and service inventory); work-
in-process; and finished goods. Obsolete inventory or inventory in excess of our estimated usage requirements is written down to
its estimated net realizable value if less than cost. We evaluate usage requirements by analyzing historical usage, anticipated
demand, alternative uses of materials, and other qualitative factors. Unanticipated changes in demand for our products may
require a write down of inventory that could materially affect our operating results.
40
Table of Contents
Goodwill and Intangible Assets
Goodwill is tested for impairment at least annually in the beginning of the fourth quarter of our fiscal year. We may first perform
a qualitative assessment of whether it is more likely than not that the reporting unit’s fair value is less than its carrying amount,
and, if so, we then quantitatively compare the fair value of our reporting unit to its carrying amount. If the fair value of the
reporting unit exceeds its carrying amount, goodwill is not impaired. If the carrying amount of the reporting unit exceeds its fair
value, we then record an impairment loss equal to the difference, up to the carrying value of goodwill.
We determine the fair value of our reporting unit based on a reconciliation of the aggregate fair value of our reporting unit to our
adjusted market capitalization. The adjusted market capitalization is calculated by multiplying the average share price of our
common stock for the last ten trading days prior to the measurement date by the number of outstanding common shares and
adding a control premium. The control premium is estimated using historical transactions in similar industries.
The carrying values of long-lived assets, including identifiable intangible assets, are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-
lived asset or asset group be tested for possible impairment, a recoverability test is performed utilizing undiscounted cash flows
expected to be generated by that asset or asset group compared to its carrying amount. If the carrying amount of the long-lived
asset or asset group is not recoverable on an undiscounted cash flow basis, impairment is recognized to the extent the carrying
amount exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow
models or, when available, quoted market values and third-party appraisals. It is not possible for us to predict the likelihood of
any possible future impairments or, if such an impairment were to occur, the magnitude of any impairment.
Intangible assets with finite useful lives, including purchased technology, customer-related intangible assets, patents, trademarks,
backlog, and software licenses, are subject to amortization over the expected period of economic benefit to us. We evaluate
whether events or circumstances have occurred that warrant a revision to the remaining useful lives of intangible assets. In cases
where a revision is deemed appropriate, the remaining carrying amounts of the intangible assets are amortized over the revised
remaining useful life.
Intangible assets related to in-process research and development (“IPR&D”) projects are considered to be indefinite-lived until
the completion or abandonment of the associated R&D efforts. If and when development is complete, the associated assets would
be deemed long-lived and would then be amortized based on their respective estimated useful lives at that point in time.
Indefinite-lived intangible assets are tested for impairment at least annually in the beginning of the fourth quarter of our fiscal
year. In testing indefinite-lived intangible assets for impairment, we may first perform a qualitative assessment of whether it is
more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying amount, and, if so, we then
quantitatively compare the fair value of the indefinite-lived intangible asset to its carrying amount. We determine the fair value of
our indefinite-lived intangible assets using a discounted cash flow method.
Income Taxes
We estimate our income taxes in each of the jurisdictions in which we operate. Deferred income taxes reflect the net tax effect of
temporary differences between the asset and liability balances recognized for financial reporting purposes and the balances used
for income tax purposes, as well as the tax effect of carry forwards. We record a valuation allowance to reduce our deferred tax
assets to the amount that is more likely than not to be realized. Realization of our net deferred tax assets is dependent on future
taxable income.
We recognize the effect of income tax positions for only those positions which are estimated to more likely than not be sustained
if challenged. We reflect changes in recognition or measurement in the period in which our change in judgment occurs. We
record interest and penalties related to uncertain tax positions in income tax expense. Income taxes related to the global intangible
low-taxed income (“GILTI”) rules are expensed as incurred.
41
Table of Contents
Recent Accounting Pronouncements
We adopted ASC 842 as of January 1, 2019 and ASU 2019-12 in the second quarter of 2020. Additionally, we are currently
evaluating the impact of ASU 2020-06 on our consolidated financial statements, which will be effective for us starting January 1,
2022, with early adoption permitted. Refer to Note 1, “Significant Accounting Policies,” for additional information.
We are also evaluating other pronouncements recently issued but not yet adopted. The adoption of these pronouncements is not
expected to have a material impact on our consolidated financial statements.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk
Our exposure to market rate risk for changes in interest rates primarily relates to our investment portfolio. We centrally manage
our investment portfolios considering investment opportunities and risks, tax consequences, and overall financing strategies. Our
investment portfolio includes fixed-income securities with a fair value of approximately $189.8 million at December 31, 2020.
These securities are subject to interest rate risk and, based on our investment portfolio at December 31, 2020, a 100 basis point
increase in interest rates would result in a decrease in the fair value of the portfolio of $0.7 million. While an increase in interest
rates may reduce the fair value of the investment portfolio, we will not realize the losses in the Consolidated Statements of
Operations unless the individual fixed-income securities are sold prior to recovery or the loss is determined to be other-than-
temporary.
Currency Exchange Risk
We conduct business on a worldwide basis and, as such, a portion of our revenues, earnings, and net investments in foreign
affiliates is exposed to changes in currency exchange rates. The economic impact of currency exchange rate movements is
complex because such changes are often linked to variability in real growth, inflation, interest rates, governmental actions, and
other factors. These changes, if material, could cause us to adjust our financing and operating strategies. Consequently, isolating
the effect of changes in currency does not incorporate these other important economic factors.
Changes in currency exchange rates could affect our foreign currency denominated monetary assets and liabilities and forecasted
cash flows. We may enter into monthly forward derivative contracts with the intent of mitigating a portion of this risk. We only
use derivative financial instruments in the context of hedging and not for speculative purposes and have not designated our
foreign exchange derivatives as hedges. Accordingly, changes in fair value from these contracts are included in “Other operating
expense (income), net” in our Consolidated Statements of Operations. We execute derivative transactions with highly rated
financial institutions to mitigate counterparty risk.
Our net sales to customers located outside of the United States represented approximately 68%, 70%, and 77% of our total net
sales in 2020, 2019, and 2018, respectively. We expect that net sales to customers outside the United States will continue to
represent a large percentage of our total net sales. Our net sales denominated in currencies other than the U.S. dollar represented
approximately 5%, 4%, and 1% of total net sales in 2020, 2019, and 2018, respectively.
A 10% change in foreign exchange rates would have an immaterial impact on the consolidated results of operations since most of
our sales outside the United States are denominated in U.S. dollars.
Item 8. Financial Statements and Supplementary Data
Our Consolidated Financial Statements are listed in the Index to Consolidated Financial Statements and Financial Statement
Schedule filed as part of this Form 10-K.
42
Table of Contents
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Management’s Report on Internal Control over Financial Reporting
Our principal executive and financial officers have evaluated and concluded that our disclosure controls and procedures are
effective as of December 31, 2020. The disclosure controls and procedures are designed to ensure that the information required to
be disclosed in this report filed under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported
within the time periods specified in the Securities and Exchange Commission’s rules and forms and is accumulated and
communicated to our principal executive and financial officers as appropriate to allow timely decisions regarding required
disclosure.
Our principal executive and financial officers are responsible for establishing and maintaining adequate internal control over
financial reporting, which is a process designed and put into effect to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. Using the criteria established in the Internal Control — Integrated Framework (2013) published by the
Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), Management has evaluated, assessed, and
concluded that internal control over financial reporting is effective as of December 31, 2020.
KPMG LLP, an independent registered public accounting firm, has audited the consolidated financial statements included in this
Annual Report on Form 10-K and, as part of their audit, has issued their report, included herein, on the effectiveness of our
internal control over financial reporting.
Changes in Internal Control over Financial Reporting
During the quarter ended December 31, 2020, there were no changes in internal control that have materially affected or are
reasonably likely to materially affect internal control over financial reporting.
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Table of Contents
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Veeco Instruments Inc.:
Opinion on Internal Control Over Financial Reporting
We have audited Veeco Instruments Inc.’s and subsidiaries’ (the Company) internal control over financial reporting as of
December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control –
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated
statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-
year period ended December 31, 2020, and the related notes and financial statement schedule II – valuation and qualifying
accounts (collectively, the consolidated financial statements), and our report dated February 22, 2021 expressed an unqualified
opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report
on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over
financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KPMG LLP
Melville, New York
February 22, 2021
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Item 9B. Other Information
None.
Item 10. Directors, Executive Officers and Corporate Governance
PART III
Information required by this Item that will appear under the headings “Governance,” “Executive Officers,” and “Delinquent
Section 16(a) Reports” in the definitive proxy statement to be filed with the SEC relating to our 2021 Annual Meeting of
Stockholders is incorporated herein by reference.
We have adopted a Code of Ethics for Senior Officers (the “Code”) which applies to our chief executive officer, principal
financial officer, principal accounting officer, and persons performing similar functions. A copy of the Code can be found on our
website (www.veeco.com). We intend to disclose on our website the nature of any future amendments to and waivers of the Code
that apply to the chief executive officer, principal financial officer, principal accounting officer, or persons performing similar
functions. We have also adopted a Code of Business Conduct which applies to all of our employees, including those listed above,
as well as to our directors. A copy of the Code of Business Conduct can be found on our website (www.veeco.com). The website
address above is intended to be an inactive, textual reference only. None of the material on this website is part of this report.
Item 11. Executive Compensation
Information required by this Item that will appear under the heading “Compensation” in the definitive proxy statement to be filed
with the SEC relating to our 2021 Annual Meeting of Stockholders is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information required by this Item that will appear under the headings “Security Ownership of Certain Beneficial Owners and
Management” and “Equity Compensation Plan Information” in the definitive proxy statement to be filed with the SEC relating to
our 2021 Annual Meeting of Stockholders is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Information required by this Item that will appear under the headings “Certain Relationships and Related Transactions” and
“Independence of Board” in the definitive proxy statement to be filed with the SEC relating to our 2021 Annual Meeting of
Stockholders is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services
Information required by this Item that will appear under the heading “Independent Auditor Fees and Other Matters” in the
definitive proxy statement to be filed with the SEC relating to our 2021 Annual Meeting of Stockholders is incorporated herein
by reference.
45
Table of Contents
Item 15. Exhibits, Financial Statement Schedules
PART IV
(a) (1) The Registrant’s financial statements together with a separate table of contents are annexed hereto
(2) Financial Statement Schedules are listed in the separate table of contents annexed hereto.
(3) Exhibits
Unless otherwise indicated, each of the following exhibits has been previously filed with the Securities and Exchange
Commission by the Company under File No. 0-16244.
Exhibit
Number
3.1
3.2
3.3
3.4
3.5
3.6
3.7
4.1
4.2
4.3
4.4
4.5
4.6
4.7
10.1*
10.2*
Exhibit Description
Amended and Restated Certificate of Incorporation of
Veeco dated December 1, 1994, as amended June 2,
1997 and July 25, 1997.
Amendment to Certificate of Incorporation of Veeco
dated May 29, 1998.
Amendment to Certificate of Incorporation of Veeco
dated May 5, 2000.
Amendment to Certificate of Incorporation of Veeco
dated May 16, 2002.
Amendment to Certificate of Incorporation of Veeco
dated May 18, 2010.
Sixth Amended and Restated Bylaws of Veeco effective
January 22, 2021.
Certificate of Designation, Preferences, and Rights of
Series A Junior Participating Preferred Stock of Veeco
dated March 14, 2001.
Indenture, dated as of January 18, 2017, by and between
Veeco Instruments Inc. and U.S. Bank National
Association, as Trustee (relating to the 2.70%
Convertible Notes due 2023).
First Supplemental Indenture, dated as of January 18,
2017, by and between Veeco Instruments Inc. and U.S.
Bank National Association, as Trustee (relating to the
2.70% Convertible Notes due 2023).
Indenture, dated as of May 18, 2020, between Veeco
Instruments Inc. and U.S. Bank National Association, as
trustee.
Form of 3.75% Convertible Senior Notes due 2027.
Indenture, dated as of November 17, 2020, between
Veeco Instruments Inc. and U.S. Bank National
Association, as trustee.
Form of 3.50% Convertible Senior Notes due 2025.
Description of the Registrant’s Securities Registered
Pursuant to Section 12 of the Securities Exchange Act of
1934.
Veeco Severance Benefits Policy, effective May 1,
2009.
Veeco Amended and Restated 2010 Stock Incentive
Plan, effective May 14, 2010.
46
Incorporated by Reference
Form
Exhibit
Filing Date
Filed or
Furnished
Herewith
10-Q
10-K
10-Q
10-Q
10-K
8-K
10-Q
3.1
3.2
3.1
3.1
3.8
3.1
3.1
8/14/1997
3/14/2001
8/14/2000
10/26/2009
2/24/2011
1/22/2021
5/9/2001
8-K
4.1
1/18/2017
8-K
4.2
1/18/2017
8-K
8-K
8-K
8-K
10-K
4.1
4.2
4.1
4.2
4.3
5/18/2020
5/18/2020
11/17/2020
11/17/2020
2/21/2020
10-K
10.1
X
Def 14A
Appendix A
11/4/2013
Table of Contents
Exhibit
Number
10.3*
10.4*
10.5*
10.6*
10.7*
10.8*
10.9*
10.10*
10.11*
10.12*
10.13*
10.14*
10.15*
10.16*
10.17*
10.18*
10.19*
10.20*
10.21*
Exhibit Description
Form
Exhibit
Incorporated by Reference
Filed or
Furnished
Filing Date Herewith
Veeco Amended and Restated 2010 Stock Incentive
Plan, effective May 5, 2016.
Veeco Amended and Restated 2010 Stock Incentive
Plan, effective March 3, 2017.
Veeco Instruments Inc. 2019 Stock Incentive Plan.
Ultratech, Inc. 1993 Stock Option/Stock Issuance Plan
(as Amended and Restated as of May 31, 2011).
Form of Capped Call Confirmation.
Exchange Agreement.
Form of Notice of Performance Share Award and
related terms and conditions pursuant to the Veeco 2010
Stock Incentive Plan, effective June 2016.
Form of Notice of Critical Priorities Performance Share
Award and related terms and conditions pursuant to the
Veeco 2010 Stock Incentive Plan, effective June 2016.
Form of Notice of Performance Share Award and
related terms and conditions pursuant to the Veeco 2010
Stock Incentive Plan, effective March 2018.
Form of Notice of Restricted Stock Award and related
terms and conditions pursuant to the Veeco 2010 Stock
Incentive Plan, effective March 2018.
Form of Notice of Performance Restricted Stock Unit
Award and related terms and conditions pursuant to the
Veeco 2010 Stock Incentive Plan, effective March
2019.
Form of Notice of Restricted Stock Award and related
terms and conditions pursuant to the Veeco 2010 Stock
Incentive Plan, effective March 2019 (time-based
version A).
Form of Notice of Restricted Stock Award and related
terms and conditions pursuant to the Veeco 2010 Stock
Incentive Plan, effective March 2019 (time-based
version B).
Form of Notice of Performance Restricted Stock Unit
Award and related terms and conditions pursuant to the
Veeco 2019 Stock Incentive Plan, effective March
2020.
Form of Notice of Restricted Stock Award and related
terms and conditions pursuant to the Veeco 2019 Stock
Incentive Plan, effective March 2020.
Veeco 2013 Inducement Stock Incentive Plan, effective
September 26, 2013.
Veeco Instruments Inc. 2016 Employee Stock Purchase
Plan.
First Amendment to Veeco Instruments Inc. 2016
Employee Stock Purchase Plan.
Form of Amended and Restated Indemnification
Agreement entered into between Veeco and each of its
directors and executive officers (August 2017).
47
S-8
10-Q
S-8
S-8
8-K
8-K
10-Q
10.1
10.1
10.1
10.1
10.1
10.1
10.1
6/2/2016
11/3/2017
5/7/2019
5/26/2017
5/18/2020
11/17/2020
11/1/2016
10-Q
10.2
11/1/2016
10-Q
10.1
5/7/2018
10-Q
10-Q
10.2
10.1
5/7/2018
5/7/2019
10-Q
10.2
5/7/2019
10-Q
10.3
5/7/2019
10-K
10.16
10-K
10.17
X
X
10-Q
10.1
11/4/2013
S-8
S-8
10.9
10.11
6/2/2016
5/7/2019
10-Q
10.2
8/3/2017
Table of Contents
Exhibit
Number
10.22*
10.23*
10.24*
10.25*
10.26*
10.27*
10.28*
10.29*
10.30*
10.31*
10.32*
21.1
23.1
31.1
31.2
32.1
32.2
Exhibit Description
Veeco Amended and Restated Senior Executive Change
in Control Policy, effective as of January 1, 2014.
Letter Agreement dated January 30, 2012 between
Veeco and Dr. William J. Miller.
Letter Agreement dated August 29, 2018 between
Veeco and Dr. William J. Miller.
Amendment dated March 22, 2019 to the Letter
Agreement between Veeco and William J. Miller, Ph.D.
Letter Agreement dated January 21, 2004 between
Veeco and John P. Kiernan.
Amendment effective June 9, 2006 to Letter Agreement
between Veeco and John P. Kiernan.
Amendment effective December 31, 2008 to Letter
Agreement between Veeco and John P. Kiernan.
Letter dated January 1, 2020 from Veeco to John P.
Kiernan.
Letter Agreement dated March 20, 2019 between Veeco
and Adrian Devasahayam.
Letter Agreement dated August 4, 2017 between Veeco
and Peter Porshnev.
Letter Agreement dated March 9, 2020 between Veeco
and Susan Wilkerson.
Subsidiaries of the Registrant.
Consent of KPMG LLP.
Certification of Chief Executive Officer pursuant to
Rule 13a—14(a) or Rule 15d—14(a) of the Securities
and Exchange Act of 1934.
Certification of Chief Financial Officer pursuant to
Rule 13a—14(a) or Rule 15d—14(a) of the Securities
and Exchange Act of 1934.
Certification of Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes - Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes - Oxley Act of 2002.
101.INS XBRL Instance Document – the instance document does
not appear in the Interactive Data File because its XBRL
tags are embedded within the Inline. XBRL document.
101.XSD XBRL Schema.
101.PRE XBRL Presentation.
101.CAL XBRL Calculation.
101.DEF XBRL Definition.
101.LAB XBRL Label.
104
Cover Page Interactive Data File (formatted as Inline
XBRL and contained in Exhibit 101).
Incorporated by Reference
Form
Exhibit
Filing Date
Filed or
Furnished
Herewith
10-K
10-K
8-K
10-Q
10-K
10-Q
10-K
8-K
10-K
10-K
10-K
10.22
2/28/2014
10.30
2/22/2012
10.2
10.4
9/4/2018
5/7/2019
10.38
3/12/2004
10.3
8/4/2006
3/2/2009
1/2/2020
10.40
99.2
10.30
10.31
10.32
X
X
X
X
X
X
X
X
X
**
**
**
**
**
**
**
* Indicates a management contract or compensatory plan or arrangement, as required by Item 15(a) (3) of Form 10-K.
** Filed herewith electronically
48
Table of Contents
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 22, 2021.
SIGNATURES
Veeco Instruments Inc.
By:
/S/ WILLIAM J. MILLER, Ph.D.
William J. Miller, Ph.D.
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities indicated, on February 22, 2021.
Signature
Title
/s/ WILLIAM J. MILLER, Ph.D.
William J. Miller, Ph.D.
/s/ JOHN P. KIERNAN
John P. Kiernan
/s/ RICHARD A. D’AMORE
Richard A. D’Amore
/s/ KATHLEEN A. BAYLESS
Kathleen A. Bayless
/s/ GORDON HUNTER
Gordon Hunter
/s/ KEITH D. JACKSON
Keith D. Jackson
/s/ MARY JANE RAYMOND
Mary Jane Raymond
/s/ PETER J. SIMONE
Peter J. Simone
/s/ THOMAS ST. DENNIS
Thomas St. Dennis
Chief Executive Officer and Director
(principal executive officer)
Senior Vice President and Chief Financial Officer
(principal financial & accounting officer)
Chairman
Director
Director
Director
Director
Director
Director
49
Table of Contents
Veeco Instruments Inc. and Subsidiaries
Index to Consolidated Financial Statements and Financial Statement Schedule
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets at December 31, 2020 and 2019
Consolidated Statements of Operations for the years ended December 31, 2020, 2019, and 2018
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2020, 2019, and 2018
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2020, 2019, and 2018
Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019, and 2018
Notes to Consolidated Financial Statements
Schedule II—Valuation and Qualifying Accounts
Page
F-2
F-4
F-5
F-6
F-7
F-8
F-9
S-1
F-1
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Veeco Instruments Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Veeco Instruments Inc. and subsidiaries (the Company) as of
December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income (loss), stockholders’
equity, and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes and financial
statement schedule II – valuation and qualifying accounts (collectively, the consolidated financial statements). In our opinion, the
consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December
31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three-year period ended
December 31, 2020, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in
Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission, and our report dated February 22, 2021 expressed an unqualified opinion on the effectiveness of the Company’s
internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the
consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a
reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or
disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or
complex judgment. The communication of a critical audit matter does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Assessment of the value of excess and obsolete inventory
As discussed in Note 1 of the consolidated financial statements, the Company assesses the valuation of all inventories,
including materials, work-in-process, and finished goods, each reporting period. Obsolete inventory or inventory in excess of
the Company’s estimated usage requirement is written down to its estimated net realizable value if less than
F-2
Table of Contents
cost. Estimates of usage include the Company’s analysis of anticipated demand, possible alternative uses of its inventory, as
well as other qualitative factors. As of December 31, 2020, the Company’s inventories totaled $145.9 million.
We identified the assessment of the value of excess and obsolete inventory as a critical audit matter. Subjective auditor
judgment was required to evaluate the Company’s estimates of anticipated demand, which can be affected by market and
economic conditions outside the Company’s control.
The primary procedures we performed to address this critical audit matter included the following. We evaluated the design and
tested the operating effectiveness of certain internal controls related to the Company’s inventory valuation process. This
included controls related to the development of estimates of anticipated demand of inventory. We evaluated current year
estimates of anticipated demand used to assess the value of excess and obsolete inventory by comparing them to historical sales
volumes and inspecting documentation when they differed significantly. For certain inventory items, we compared the prior
year estimate of anticipated demand to actual results to assess the Company’s ability to accurately forecast.
/s/ KPMG LLP
We have served as the Company’s auditor since 2015.
Melville, New York
February 22, 2021
F-3
Table of Contents
Veeco Instruments Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share amounts)
Assets
Current assets:
Cash and cash equivalents
Restricted cash
Short-term investments
Accounts receivable, net
Contract assets
Inventories
Deferred cost of sales
Prepaid expenses and other current assets
Assets held for sale
Total current assets
Property, plant, and equipment, net
Operating lease right-of-use assets
Intangible assets, net
Goodwill
Deferred income taxes
Other assets
Total assets
Liabilities and stockholders' equity
Current liabilities:
Accounts payable
Accrued expenses and other current liabilities
Customer deposits and deferred revenue
Income taxes payable
Total current liabilities
Deferred income taxes
Long-term debt
Operating lease long-term liabilities
Other liabilities
Total liabilities
Stockholders' equity:
Preferred stock, $0.01 par value; 500,000 shares authorized; no shares issued and outstanding.
Common stock, $0.01 par value; 120,000,000 shares authorized; 49,723,751 shares issued and
outstanding at December 31, 2020 and 48,994,346 shares issued and outstanding at
December 31, 2019
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive income
Total stockholders' equity
Total liabilities and stockholders' equity
See accompanying Notes to the Consolidated Financial Statements.
F-4
December 31,
2020
December 31,
2019
$
$
$
$
$
$
129,625
658
189,771
79,991
21,246
145,906
433
19,301
—
586,931
65,271
10,275
46,185
181,943
1,440
6,019
898,064
33,656
44,876
67,235
914
146,681
5,240
321,115
6,305
10,349
489,690
129,294
657
115,252
45,666
25,351
133,067
445
14,966
11,180
475,878
75,711
14,453
61,518
181,943
1,549
7,036
818,088
21,281
41,243
54,870
830
118,224
5,648
300,068
10,300
9,336
443,576
—
—
497
1,113,352
(707,321)
1,846
408,374
898,064
$
490
1,071,058
(698,930)
1,894
374,512
818,088
$
Table of Contents
Net sales
Cost of sales
Gross profit
Operating expenses, net:
Research and development
Selling, general, and administrative
Amortization of intangible assets
Restructuring
Acquisition costs
Asset impairment
Other operating expense (income), net
Total operating expenses, net
Operating income (loss)
Interest income
Interest expense
Other income (expense), net
Income (loss) before income taxes
Income tax expense (benefit)
Net income (loss)
Income (loss) per common share:
Basic
Diluted
Weighted average number of shares:
Basic
Diluted
Veeco Instruments Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands, except per share amounts)
$
$
$
$
For the year ended December 31,
2019
419,349
261,155
158,194
2020
454,163
259,863
194,300
$
$
78,994
76,251
15,333
1,097
—
281
(221)
171,735
22,565
1,551
(24,739)
(7,841)
(8,464)
(73)
(8,391)
(0.17)
(0.17)
48,362
48,362
$
$
$
90,557
79,749
17,085
6,403
—
4,020
(42)
197,772
(39,578)
4,680
(22,085)
(20,973)
(77,956)
777
(78,733)
(1.66)
(1.66)
47,482
47,482
$
$
$
2018
542,082
348,363
193,719
97,755
92,060
32,351
8,556
2,959
375,172
368
609,221
(415,502)
3,186
(21,518)
—
(433,834)
(26,746)
(407,088)
(8.63)
(8.63)
47,151
47,151
See accompanying Notes to the Consolidated Financial Statements.
F-5
Table of Contents
Veeco Instruments Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
Net income (loss)
Other comprehensive income (loss), net of tax:
Available-for-sale securities:
Change in net unrealized gains or losses
Unrealized gain (loss) on available-for-sale securities
Currency translation adjustments:
Change in currency translation adjustments
Reclassification adjustments for net (gains) losses included in net income
Net changes related to currency translation adjustments
Total other comprehensive income (loss), net of tax
For the year ended December 31,
2018
$ (407,088)
2019
$ (78,733)
2020
$ (8,391)
(53)
(53)
5
—
5
(48)
49
49
(19)
44
25
74
11
11
5
(8)
(3)
8
Total comprehensive income (loss)
$ (8,439)
$ (78,659)
$ (407,080)
See accompanying Notes to the Consolidated Financial Statements.
F-6
Table of Contents
Balance at December 31, 2017
Net loss
Other comprehensive income, net of tax
Share-based compensation expense
Net issuance under employee stock plans
Purchases of common stock
Balance at December 31, 2018
Net loss
Other comprehensive income, net of tax
Share-based compensation expense
Net issuance under employee stock plans
Balance at December 31, 2019
Net loss
Other comprehensive income, net of tax
Share-based compensation expense
Net issuance under employee stock plans
Extinguishment of equity component of
repurchased/exchanged 2023 Notes
Equity component of 2025 Notes
Equity component of 2027 Notes
Purchase of capped calls
Balance at December 31, 2020
48,547
—
—
—
447
48,994
—
—
—
730
—
—
—
—
49,724
Veeco Instruments Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
(in thousands)
Treasury Stock
Shares Amount
$ (1,284)
85
Common Stock
Shares Amount
482
$
48,229
— —
—
— —
—
—
— —
318
—
—
—
—
3
(512)
— 950
523
485
—
—
—
—
—
—
(523)
5
—
490
—
—
—
—
—
—
—
7
6,721
(11,309)
(5,872)
—
—
—
5,872
—
—
—
—
—
Additional
Paid-in
Capital
$ 1,051,953
$
—
—
16,074
(6,702)
—
1,061,325
—
—
15,270
(5,537)
1,071,058
—
—
12,703
549
Accumulated
Other
Accumulated Comprehensive
Income
1,820
1,812
Total
$ 840,093
— (407,088)
8
8
16,074
—
(3)
—
(11,309)
—
437,775
(78,733)
74
15,270
126
374,512
(8,391)
(48)
12,703
556
—
(48)
—
—
—
74
—
—
1,894
Deficit
(212,870)
(407,088)
$
—
—
(25)
—
(619,983)
(78,733)
—
—
(214)
(698,930)
(8,391)
—
—
—
—
—
—
—
(707,321)
—
—
—
—
497
$
—
—
—
—
— $
(14,714)
—
20,706
—
33,363
—
—
(10,313)
— $ 1,113,352
$
—
—
—
—
(14,714)
20,706
33,363
(10,313)
$ 408,374
$
1,846
See accompanying Notes to the Consolidated Financial Statements.
F-7
Table of Contents
Veeco Instruments Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
For the year ended December 31,
2019
2018
2020
Cash Flows from Operating Activities
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating
activities:
$
(8,391)
$
(78,733)
$
(407,088)
Depreciation and amortization
Non-cash interest expense
Deferred income taxes
Share-based compensation expense
Loss on extinguishment of debt
Asset impairment
Impairment of equity investments
Provision for bad debts
Changes in operating assets and liabilities:
Accounts receivable and contract assets
Inventories and deferred cost of sales
Prepaid expenses and other current assets
Accounts payable and accrued expenses
Customer deposits and deferred revenue
Income taxes receivable and payable, net
Other, net
Net cash provided by (used in) operating activities
Cash Flows from Investing Activities
Capital expenditures
Proceeds from the sale of investments
Payments for purchases of investments
Proceeds from held for sale assets, net of costs to sell
Acquisitions of businesses, net of cash acquired
Net cash provided by (used in) investing activities
Cash Flows from Financing Activities
Proceeds from issuance of 2025 Notes and 2027 Notes, net of issuance costs
Purchase of capped calls
Repurchase of 2023 Notes
Proceeds (net of tax withholdings) from option exercises and employee stock purchase
plan
Restricted stock tax withholdings
Purchases of common stock
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash, cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash - beginning of period
Cash, cash equivalents, and restricted cash - end of period
Supplemental Disclosure of Cash Flow Information
Interest paid
Income taxes paid
Non-cash operating and financing activities
Net transfer of property, plant and equipment to inventory
Right-of-use assets obtained in exchange for lease obligations
30,697
13,792
(299)
12,703
7,841
281
—
140
(30,361)
(11,528)
(2,610)
15,959
12,424
86
2,287
43,021
(6,802)
173,530
(248,023)
9,503
—
(71,792)
120,095
(10,313)
(81,240)
2,878
(2,322)
—
29,098
5
332
129,951
130,283
12,700
329
1,624
1,741
$
$
34,399
12,676
360
15,270
—
4,020
20,973
392
5,796
14,969
7,520
(26,945)
(17,866)
(655)
408
(7,416)
(10,873)
127,349
(192,988)
645
—
(75,867)
—
—
—
3,106
(2,980)
—
126
26
(83,131)
213,082
129,951
9,408
2,931
(4,916)
5,576
$
$
$
$
49,998
11,762
(27,620)
16,074
—
375,172
—
—
21,821
(24,678)
11,216
(19,672)
(39,296)
(4,800)
(627)
(37,738)
(12,654)
90,065
(93,046)
—
(2,662)
(18,297)
—
—
—
3,064
(3,069)
(11,457)
(11,462)
(4)
(67,501)
280,583
213,082
9,708
4,799
(1,479)
—
See accompanying Notes to the Consolidated Financial Statements.
F-8
Table of Contents
Veeco Instruments Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 1 — Significant Accounting Policies
(a) Description of Business
Veeco Instruments Inc. (together with its consolidated subsidiaries, “Veeco,” or the “Company”) operates in a single segment:
the development, manufacture, sales, and support of semiconductor and thin film process equipment primarily sold to make
electronic devices.
(b) Basis of Presentation
The accompanying audited Consolidated Financial Statements of the Company have been prepared in accordance with United
States generally accepted accounting principles (“GAAP”). The Company reports interim quarters on a 13-week basis ending on
the last Sunday of each period, which is determined at the start of each year. The Company’s fourth quarter always ends on the
last day of the calendar year, December 31. During 2020 the interim quarters ended on March 29, June 28, and September 27, and
during 2019 the interim quarters ended on March 31, June 30, and September 29. The Company reports these interim quarters as
March 31, June 30, and September 30 in its interim consolidated financial statements.
(c) Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes. Although these estimates are based on
management’s knowledge of current events and actions it may undertake in the future, these estimates may ultimately differ from
actual results. Significant items subject to such estimates and assumptions include: (i) stand-alone selling prices for the
Company’s products and services; (ii) allowances for doubtful accounts; (iii) inventory obsolescence; (iv) the useful lives and
expected future cash flows of property, plant, and equipment and identifiable intangible assets; (v) the fair value of the
Company’s reporting unit and related goodwill; (vi) investment valuations and the valuation of derivatives, deferred tax assets,
and assets acquired in business combinations; (vii) the recoverability of long-lived assets; (viii) liabilities for product warranty
and legal contingencies; (ix) share-based compensation; (x) lease term and incremental borrowing rates used in determining
operating lease assets and liabilities; and (xi) income tax uncertainties.
(d) Principles of Consolidation
The Consolidated Financial Statements include the accounts of the Company and its subsidiaries. Intercompany balances and
transactions have been eliminated in consolidation. Companies acquired during each reporting period are reflected in the results
of the Company effective from their respective dates of acquisition through the end of the reporting period.
(e) Foreign Currencies
Assets and liabilities of the Company’s foreign subsidiaries that operate using functional currencies other than the U.S. dollar are
translated using the exchange rates in effect at the balance sheet date. Results of operations are translated using monthly average
exchange rates. Adjustments arising from the translation of the foreign currency financial statements of the Company’s
subsidiaries into U.S. dollars, including intercompany transactions of a long-term nature, are reported as currency translation
adjustments in “Accumulated other comprehensive income” in the Consolidated Balance Sheets. Foreign currency transaction
gains or losses are included in “Other operating expense (income), net” in the Consolidated Statements of Operations.
(f) Revenue Recognition
Revenue is recognized upon the transfer of control of the promised product or service to the customer in an amount that reflects
the consideration the Company expects to receive in exchange for such product or service. The Company’s contracts with
customers generally do not contain variable consideration. In the rare instances where variable
F-9
Table of Contents
Veeco Instruments Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
consideration is included, the Company estimates the amount of variable consideration and determines what portion of that, if
any, has a high probability of significant subsequent revenue reversal, and if so, that amount is excluded from the transaction
price. The Company’s contracts with customers frequently contain multiple deliverables, such as systems, upgrades, components,
spare parts, installation, maintenance, and service plans. Judgment is required to properly identify the performance obligations
within a contract and to determine how the revenue should be allocated among the performance obligations. The Company also
evaluates whether multiple transactions with the same customer or related parties should be considered part of a single contract
based on an assessment of whether the contracts or agreements are negotiated or executed within a short time frame of each other
or if there are indicators that the contracts are negotiated in contemplation of one another.
When there are separate units of accounting, the Company allocates revenue to each performance obligation on a relative stand-
alone selling price basis. The stand-alone selling prices are determined based on the prices at which the Company separately sells
the systems, upgrades, components, spare parts, installation, maintenance, and service plans. For items that are not sold
separately, the Company estimates stand-alone selling prices generally using an expected cost plus margin approach.
Most of the Company’s revenue is recognized at a point in time when the performance obligation is satisfied. The Company
considers many facts when evaluating each of its sales arrangements to determine the timing of revenue recognition, including its
contractual obligations and the nature of the customer’s post-delivery acceptance provisions. The Company’s system sales
arrangements, including certain upgrades, generally include field acceptance provisions that may include functional or
mechanical test procedures. For many of these arrangements, a customer source inspection of the system is performed in the
Company’s facility, test data is sent to the customer documenting that the system is functioning to the agreed upon specifications
prior to delivery, or other quality assurance testing is performed internally to ensure system functionality prior to shipment.
Historically, such source inspection or test data replicates the field acceptance provisions that are performed at the customer’s site
prior to final acceptance of the system. When the Company objectively demonstrates that the criteria specified in the contractual
acceptance provisions are achieved prior to delivery either through customer testing or the Company’s historical experience of its
tools meeting specifications, transfer of control of the product to the customer is considered to have occurred and revenue is
recognized upon system delivery since there is no substantive contingency remaining related to the acceptance provisions at that
date. For new products, new applications of existing products, or for products with substantive customer acceptance provisions
where the Company cannot objectively demonstrate that the criteria specified in the contractual acceptance provisions have been
achieved prior to delivery, revenue and the associated costs are deferred. The Company recognizes such revenue and costs upon
obtaining objective evidence that the acceptance provisions can be achieved, assuming all other revenue recognition criteria have
been met.
In certain cases, the Company’s contracts with customers contain a billing retention, which is billed by the Company and payable
by the customer when field acceptance provisions are completed. Revenue recognized in advance of the amount that has been
billed is recorded as a contract asset on the Consolidated Balance Sheets.
The Company recognizes revenue related to maintenance and service contracts over time based upon the respective contract term.
Installation revenue is recognized over time as the installation services are performed. The Company recognizes revenue from the
sales of components, spare parts, and specified service engagements at a point in time, which is typically consistent with the time
of delivery in accordance with the terms of the applicable sales arrangement.
The Company may receive customer deposits on system transactions. The timing of the transfer of goods or services related to
the deposits is either at the discretion of the customer or expected to be within one year from the deposit receipt. As such, the
Company does not adjust transaction prices for the time value of money. Incremental direct costs incurred related to the
acquisition of a customer contract, such as sales commissions, are expensed as incurred since the expected performance period is
one year or less.
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Table of Contents
Veeco Instruments Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
The Company has elected to treat shipping and handling costs as a fulfillment activity, and the Company includes such costs in
“Cost of sales” in the Consolidated Statements of Operations when the Company recognizes revenue for the related goods. Taxes
assessed by governmental authorities that are collected by the Company from a customer are excluded from revenue.
(g) Warranty Costs
The Company typically provides standard warranty coverage on its systems for one year from the date of final acceptance by
providing labor and parts necessary to repair the systems during the warranty period. The Company records the estimated
warranty cost when revenue is recognized on the related system. Warranty cost is included in “Cost of sales” in the Consolidated
Statements of Operations. The estimated warranty cost is based on the Company’s historical experience with its systems and
regional labor costs. The Company calculates the average service hours by region and parts expense per system utilizing actual
service records to determine the estimated warranty charge. The Company updates its warranty estimates on a quarterly basis
when the actual product performance or field expense differs from original estimates.
(h) Shipping and Handling Costs
Shipping and handling costs are expenses incurred to move, package, and prepare the Company’s products for shipment and to
move the products to a customer’s designated location. These costs are generally comprised of payments to third-party shippers.
Shipping and handling costs are included in “Cost of sales” in the Consolidated Statements of Operations.
(i) Research and Development Costs
Research and development costs are expensed as incurred and include charges for the development of new technology and the
transition of existing technology into new products or services.
(j) Advertising Expense
The cost of advertising is expensed as incurred and totaled $0.4 million, $0.5 million, and $0.9 million for the years ended
December 31, 2020, 2019, and 2018, respectively.
(k) Accounting for Share-based Compensation
Share-based awards exchanged for employee services are accounted for under the fair value method. Accordingly, share-based
compensation cost is measured at the grant date based on the estimated fair value of the award. The expense for awards is
recognized over the employee’s requisite service period (generally the vesting period of the award). The Company has elected to
treat awards with only service conditions and with graded vesting as one award. Consequently, the total compensation expense is
recognized straight-line over the entire vesting period, so long as the compensation cost recognized at any date at least equals the
portion of the grant date fair value of the award that is vested at that date.
In addition to stock options, restricted share awards (“RSAs”) and restricted stock units (“RSUs”) with time-based vesting, the
Company grants performance share units and awards (“PSUs” and “PSAs”) that have either performance or market conditions.
Compensation cost for PSUs and PSAs with performance conditions is recognized over the requisite service period based on the
timing and expected level of achievement of the performance targets. A change in the assessment of performance attainment prior
to the conclusion of the performance period is recognized in the period of the change in estimate. Compensation cost for PSUs
and PSAs with market conditions is recognized over the requisite service period regardless of the expected level of achievement.
For all PSUs and PSAs, the number of shares issued to the employee at the conclusion of the service period may vary from the
original target based upon the level of attainment of the performance or market conditions.
F-11
Table of Contents
Veeco Instruments Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
The Company uses the Black-Scholes option-pricing model to compute the estimated fair value of option awards and purchase
rights under the Employee Stock Purchase Plan. The Company uses a Monte Carlo simulation to compute the estimated fair value
of awards with market conditions. The Black-Scholes model and Monte Carlo simulation include assumptions regarding dividend
yields, expected volatility, expected option term, and risk-free interest rates. See Note 14, “Stock Plans,” for additional
information.
(l) Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and liabilities from a change in tax rate is recognized in
income in the period that includes the enactment date.
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and
Jobs Act (the “2017 Tax Act”), which made broad and complex changes to the U.S. tax code. In response to the 2017 Tax Act,
the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) which provided guidance on accounting for the tax effects
of 2017 Tax Act, including addressing any uncertainty or diversity of view in applying ASC 740, Income Taxes (“ASC 740”), in
the reporting period in which the 2017 Tax Act was enacted. In addition, SAB 118 provided a measurement period that should
not extend beyond one year from the 2017 Tax Act enactment date for companies to complete the accounting under ASC 740.
During the year ended December 31, 2018, the Company finalized the accounting for the tax effects of 2017 Tax Act.
In January 2018, the FASB released guidance on the accounting for taxes under the global intangible low-taxed income
(“GILTI”) provisions of the 2017 Tax Act. The GILTI provisions impose a tax on foreign income in excess of a deemed return on
tangible assets of foreign operations. The Company has made a policy election to account for income taxes incurred under GILTI
as a period cost.
(m) Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash
equivalents, investments, derivative financial instruments used in hedging activities, and accounts receivable. The Company
invests in a variety of financial instruments and, by policy, limits the amount of credit exposure with any one financial institution
or commercial issuer. Historically, the Company has not experienced any material credit losses on its investments.
The Company maintains an allowance reserve for potentially uncollectible accounts for estimated losses resulting from the
inability of its customers to make required payments. The Company evaluates its allowance for doubtful accounts based on a
combination of factors. In circumstances where specific invoices are deemed to be uncollectible, the Company provides a specific
allowance for bad debt against the amount due to reduce the net recognized receivable to the amount reasonably expected to be
collected. The Company also provides allowances based on its write-off history. Finally, the Company also considers its current
expectations of future economic conditions, including the impact of COVID-19, when estimating its allowance for doubtful
accounts. The allowance for doubtful accounts totaled $0.7 million and $0.6 million at December 31, 2020 and 2019,
respectively.
To further mitigate the Company’s exposure to uncollectable accounts, the Company may request certain customers provide a
negotiable irrevocable letter of credit drawn on a reputable financial institution. These irrevocable letters of credit are typically
issued to mature between zero and 90 days from the date the documentation requirements are met, typically when a system ships
or upon receipt of final acceptance from the customer. The Company, at its discretion, may monetize these letters of credit on a
non-recourse basis after they become negotiable but before maturity. The fees
F-12
Table of Contents
Veeco Instruments Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
associated with the monetization are included in “Selling, general, and administrative” in the Consolidated Statements of
Operations and were immaterial for the years ended December 31, 2020, 2019, and 2018.
(n) Fair Value of Financial Instruments
The carrying amounts of financial instruments, including cash equivalents, accounts receivable, accounts payable, and accrued
expenses reflected in the consolidated financial statements approximate fair value due to their short-term maturities. The fair
value of debt for footnote disclosure purposes, including current maturities, if any, is estimated using recently quoted market
prices of the instrument, or if not available, a discounted cash flow analysis based on the estimated current incremental borrowing
rates for similar types of instruments.
(o) Cash, Cash Equivalents, and Short-term Investments
All financial instruments purchased with an original maturity of three months or less at the time of purchase are considered cash
equivalents. Such items may include liquid money market funds, certificate of deposit and time deposit accounts, U.S. treasuries,
government agency securities, and corporate debt. Investments that are classified as cash equivalents are carried at cost, which
approximates fair value. The Company’s cash and cash equivalents includes $86.2 million and $78.5 million of cash equivalents
at December 31, 2020 and 2019, respectively.
A portion of the Company’s cash and cash equivalents is held by its subsidiaries throughout the world, frequently in each
subsidiary’s respective functional currency, which is typically the U.S. dollar. Approximately 31% and 56% of cash and cash
equivalents were maintained outside the United States at December 31, 2020 and 2019, respectively.
Short-term investments consist of marketable debt securities, and are generally classified as available-for-sale for use in current
operations, if required, and are 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” on the Consolidated Balance
Sheets. These securities can 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 operating expense (income), net” in the Consolidated
Statements of Operations. The specific identification method is used to determine the realized gains and losses on investments.
Non-marketable equity securities are equity securities without readily observable market prices and are included in “Other assets”
in the Consolidated Balance Sheets. Non-marketable securities are measured at cost, adjusted for changes in observable prices
minus impairment. Changes in fair value are included in “Other operating expense (income), net” in the Consolidated Statements
of Operations.
(p) Inventories
Inventories are stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis. Each quarter
the Company assesses the valuation and recoverability of all inventories: materials (raw materials, spare parts, and service
inventory); work-in-process; and finished goods. Obsolete inventory or inventory in excess of management’s estimated usage
requirement is written down to its estimated net realizable value if less than cost. The Company evaluates usage requirements by
analyzing historical usage, anticipated demand, alternative uses of materials, and other qualitative factors. Unanticipated changes
in demand for the Company’s products may require a write down of inventory, which would be reflected in cost of sales in the
period the revision is made. Inventory acquired as part of a business combination is recorded at fair value on the date of
acquisition.
F-13
Table of Contents
(q) Business Combinations
Veeco Instruments Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
The Company allocates the fair value of the purchase consideration of the Company’s acquisitions to the tangible assets,
intangible assets, including in-process research and development (“IPR&D”), if any, and liabilities assumed, based on estimated
fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is
recorded as goodwill. Acquisition-related expenses are recognized separately from the business combination and are expensed as
incurred.
(r) Goodwill and Indefinite-Lived Intangible Assets
Goodwill is an asset representing the future economic benefits arising from assets acquired in a business combination that are not
individually identified and separately recognized. Goodwill is measured as the excess of the consideration transferred over the net
fair value of identifiable assets acquired and liabilities assumed. Intangible assets with indefinite useful lives are measured at
their respective fair values on the acquisition date. Intangible assets related to IPR&D projects are considered to be indefinite-
lived until the completion or abandonment of the associated research and development (“R&D”) efforts. If and when
development is complete, the associated assets would be deemed long-lived and would then be amortized based on their
respective estimated useful lives at that point in time. Goodwill and indefinite-lived intangibles are not amortized into results of
operations but instead are evaluated for impairment. The Company performs the evaluation in the beginning of the fourth quarter
of each year or more frequently if impairment indicators arise.
In testing goodwill for impairment, the Company may first perform a qualitative assessment of whether it is more likely than not
that the reporting unit’s fair value is less than its carrying amount, and, if so, the Company then quantitatively compares the fair
value of the reporting unit to its carrying amount. If the fair value exceeds the carrying amount, goodwill is not impaired. If the
carrying amount exceeds fair value, the Company then records an impairment loss equal to the difference, up to the carrying
value of goodwill.
The Company determines the fair value of its reporting unit based on a reconciliation of the fair value of the reporting unit to the
Company’s adjusted market capitalization. The adjusted market capitalization is calculated by multiplying the average share price
of the Company’s common stock for the last ten trading days prior to the measurement date by the number of outstanding
common shares and adding a control premium. The control premium is estimated using historical transactions in similar
industries.
In testing indefinite-lived intangible assets for impairment, the Company may first perform a qualitative assessment of whether it
is more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying amount, and, if so, the
Company then quantitatively compares the fair value of the indefinite-lived intangible asset to its carrying amount. The Company
determines the fair value of its indefinite-lived intangible assets using a discounted cash flow method.
(s) Long-lived Assets
Long-lived 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 straight-lined if such pattern cannot be reliably
determined.
Property, plant, and equipment are recorded at cost. Depreciation expense is calculated based on the estimated useful lives of the
assets by using the straight-line method. Amortization of leasehold improvements is recognized using the straight-line method
over the shorter of the remaining lease term or the estimated useful lives of the improvements.
F-14
Table of Contents
Veeco Instruments Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, a
recoverability test is performed utilizing undiscounted cash flows expected to be generated by that asset or asset group compared
to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash
flow basis, impairment is recognized to the extent the carrying amount exceeds its fair value. Fair value is determined through
various valuation techniques including discounted cash flow models or, when available, quoted market values and third-party
appraisals.
(t) Leases
Upon the adoption of ASC Topic 842, Leases (“ASC 842”) as of January 1, 2019, the Company determines at contract inception
if an arrangement is a lease, or contains a lease, of an identified asset for which the Company has the right to obtain substantially
all of the economic benefits from its use and the right to direct its use. Right-of-use (“ROU”) assets represent the Company’s
right to use an underlying asset for the lease term, while lease liabilities represent the Company’s obligation to make lease
payments arising from the lease. Operating lease ROU assets and liabilities are recognized at lease commencement date based on
the present value of lease payments over the lease term. The implicit discount rate in the Company’s leases generally cannot
readily be determined, and therefore the Company uses its incremental borrowing rate based on information available at lease
commencement date in determining the present value of future payments. The Company has options to renew or terminate certain
leases. These options are included in the determination of lease term when it is reasonably certain that the Company will exercise
such options. The Company does not separate lease and non-lease components in determining ROU assets or lease liabilities for
real estate leases. Additionally, the Company does not recognize ROU assets or lease liabilities for leases with original terms or
renewals of one year or less.
(u) Recently Adopted Accounting Standards
The Company adopted ASC Topic 842, Leases (“ASC 842”), as of January 1, 2019. ASC 842 generally requires operating lessee
rights and obligations to be recognized as assets and liabilities on the balance sheet. The new standard offers a transition option
whereby companies can recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of
adoption rather than in the earliest period presented. The Company has adopted using this transition method, and therefore prior
period balances have not been adjusted. In addition, ASC 842 provides for a number of optional exemptions in transition. The
Company has elected certain exemptions whereby prior conclusions regarding lease identification, lease classification, and initial
direct costs were not reassessed under the new standard. The adoption of the standard impacted the Company’s Consolidated
Balance Sheets through the recognition of ROU assets and lease liabilities of approximately $14.2 million each as of January 1,
2019 but did not have an impact on the Consolidated Statements of Operations, Statements of Comprehensive Income, or
Statements of Cash Flows.
The Company adopted ASU 2019-12: Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes in the second
quarter of 2020, effective as of the beginning of fiscal year 2020. This ASU simplifies the accounting for income taxes by
eliminating certain exceptions to the general principles and simplifying several aspects of ASC 740, Income Taxes, including, but
not limited to, requirements related to the following: a) exception to the incremental approach for intraperiod tax allocation; b)
the tax basis step-up in goodwill obtained in a transaction that is not a business combination; c) ownership changes in
investments - changes from a subsidiary to an equity method investment; d) separate financial statements of entities not subject to
tax; e) interim-period accounting for enacted changes in tax law; and f) the year-to-date loss limitation in interim-period tax
accounting. The adoption did not have a material impact on the Company’s consolidated financial statements as of the date of
adoption.
(v) Recent Accounting Pronouncements Not Yet Adopted
In August 2020, the FASB issued ASU 2020-06: Debt – Debt with Conversion and Other Options (Subtopic 470-20) and
Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments
F-15
Table of Contents
Veeco Instruments Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
and Contracts in an Entity’s Own Equity. This standard simplifies the accounting for convertible debt instruments by removing
the separation models for convertible debt with a cash conversion feature, as well as convertible instruments with a beneficial
conversion feature. As a result, entities will account for a convertible debt instrument wholly as debt, unless certain other
conditions are met. The elimination of these models will reduce non-cash interest expense for entities that have issued a
convertible instrument that was within the scope of those models before the adoption of ASU 2020-06. Additionally, ASU 2020-
06 requires the application of the if-converted method for calculating diluted earnings per share, and precludes the use of the
treasury stock method for certain debt instruments. The provisions of ASU 2020-06 are applicable for fiscal years beginning after
December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. An entity
should adopt the provisions at the beginning of its annual fiscal year. The Company is evaluating the impact of ASU 2020-06 on
its consolidated financial statements.
The Company is evaluating other pronouncements recently issued but not yet adopted. The adoption of these pronouncements is
not expected to have a material impact on our consolidated financial statements.
Note 2 — Income (Loss) Per Share
Basic income (loss) per share is calculated by dividing net income (loss) by the weighted average number of shares outstanding
during the period. Diluted income per share is calculated by dividing net income by the weighted average number of shares used
to calculate basic income per share plus the weighted average number of common share equivalents outstanding during the
period. The dilutive effect of outstanding options to purchase common stock and non-participating share-based awards is
considered in diluted income per share by application of the treasury stock method. The dilutive effect of performance share units
is included in diluted income per common share in the periods the performance targets have been achieved, or would have been
achieved if the reporting date was the end of the contingency period.
The computations of basic and diluted income (loss) per share for the years ended December 31, 2020, 2019, and 2018 are as
follows:
Net income (loss)
Net income (loss) per common share:
Basic
Diluted
Basic weighted average shares outstanding
Effect of potentially dilutive share-based awards
Diluted weighted average shares outstanding
$
$
$
Common share equivalents excluded from the diluted weighted average shares
outstanding since the Company incurred a net loss and their effect would be
antidilutive
Potentially dilutive shares excluded from the diluted calculation as their effect
would be antidilutive
Maximum potential shares to be issued for settlement of the 2023, 2025, and 2027
Notes excluded from the diluted calculation as their effect would be antidilutive
F-16
For the year ended December 31,
2020
2018
2019
(in thousands, except per share amounts)
(8,391)
(78,733)
$
$ (407,088)
(0.17)
(0.17)
$
$
(1.66)
(1.66)
$
$
(8.63)
(8.63)
48,362
47,482
—
—
48,362
47,482
47,151
—
47,151
947
923
17,753
531
1,689
8,618
28
2,474
8,618
Table of Contents
Veeco Instruments Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Note 3 — Fair Value Measurements
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. The Company is required to classify certain assets and liabilities 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. The Company 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 Company’s assets that were measured at fair value on a recurring basis at December 31, 2020
and 2019:
December 31, 2020
Cash equivalents
Certificate of deposits and time deposits
Commercial paper
U.S. treasuries
Total
Short-term investments
U.S. treasuries
Corporate debt
Commercial paper
Total
December 31, 2019
Cash equivalents
Certificate of deposits and time deposits
Commercial paper
Corporate debt
Total
Short-term investments
U.S. treasuries
Government agency securities
Corporate debt
Commercial paper
Total
Level 1
Level 2 Level 3
(in thousands)
Total
$
$
59,168
—
24,997
84,165
$ 149,219
—
—
$ 149,219
$
$
$
— $
2,000
—
2,000
$
— $
32,554
7,998
$ 40,552
$
— $
—
—
— $
59,168
2,000
24,997
86,165
— $ 149,219
32,554
—
—
7,998
— $ 189,771
$
$
67,009
—
—
67,009
$
— $
10,484
1,000
$ 11,484
$
— $
—
—
— $
67,009
10,484
1,000
78,493
$ 105,130
—
—
—
$ 105,130
$
— $
1,139
6,002
2,981
$ 10,122
$
— $ 105,130
1,139
—
6,002
—
—
2,981
— $ 115,252
F-17
Table of Contents
Veeco Instruments Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
The Company’s investments classified as Level 1 are based on quoted prices that are available in active markets, as well as
certificates of deposits and time deposits that are classified as Level 1 due to their short-term nature. The Company’s investments
classified as Level 2 are valued using observable inputs to quoted market prices, benchmark yields, reported trades, broker/dealer
quotes, or alternative pricing sources with reasonable levels of price transparency.
Note 4 — Investments
At December 31, 2020 and 2019 the amortized cost and fair value of marketable securities, which are included in “Short-term
investments” on the Consolidated Balance Sheets, were as follows:
December 31, 2020
U.S. treasuries
Corporate debt
Commercial paper
Total
December 31, 2019
U.S. treasuries
Government agency securities
Corporate debt
Commercial paper
Total
Amortized
Cost
$ 149,206
32,588
7,997
$ 189,791
$ 105,096
1,139
6,003
2,981
$ 115,219
Gross
Unrealized
Gains
Gross
Unrealized
Losses
(in thousands)
Estimated
Fair Value
$
$
$
$
14
—
1
15
$
$
(1)
(34)
—
(35)
$ 149,219
32,554
7,998
$ 189,771
$
38
—
—
—
38
$
(4)
—
(1)
—
(5)
$ 105,130
1,139
6,002
2,981
$ 115,252
Available-for-sale securities in a loss position at December 31, 2020 and 2019 were as follows:
U.S. treasuries
Corporate debt
Total
December 31, 2020
Gross
Unrealized
Losses
Estimated
Fair Value
December 31, 2019
Gross
Unrealized
Losses
Estimated
Fair Value
$ 19,991
32,554
$ 52,545
$
$
(in thousands)
(1)
(34)
(35)
$ 22,943
6,002
$ 28,945
$
$
(4)
(1)
(5)
At December 31, 2020 and 2019, 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 December 31, 2020 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. The realized gains or losses for the years ended December 31, 2020, 2019, and 2018 were
immaterial.
Other Investments
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. Additionally, the Company has a separate, non-marketable investment in another entity, with
a carrying value of $3.0 million at December 31, 2020. The Company does not exert significant influence over this investment
and its ownership interest is also less than 20%. Neither equity investment has a readily
F-18
Table of Contents
Veeco Instruments Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
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.
These investments are subject to periodic impairment reviews which require judgment. The analyses include assessments of the
companies’ financial condition, the business outlooks for their products and technologies, their projected results and cash flows,
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. During the quarter ended December 31, 2019, the
Company identified impairment indicators on the Company’s investment in Kateeva, and as a result of a valuation analysis,
concluded that its investment in Kateeva is fully impaired, and recorded a non-cash impairment charge of $21.0 million, included
in “Other income (expense), net” in the Consolidated Statements of Operations. There were no impairment charges recorded for
either investment for the years ended December 31, 2020 or 2018.
Note 5 — Inventories
Inventories are stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis. Inventories
consist of the following:
Materials
Work-in-process
Finished goods
Total
Note 6 — Property, Plant, and Equipment
Property, plant, and equipment, net, consist of the following:
Land
Building and improvements
Machinery and equipment (1)
Leasehold improvements
Gross property, plant, and equipment
Less: accumulated depreciation and amortization
Net property, plant, and equipment
December 31,
2020
December 31,
2019
(in thousands)
$
$
82,679
53,979
9,248
145,906
$
$
82,155
42,575
8,337
133,067
December 31,
2020
December 31,
2019
(in thousands)
Average Useful Life
$
$
5,061
62,865
140,493
6,671
215,090
149,819
65,271
$
$
5,061
61,884
137,692
6,703
211,340
135,629
75,711
N/A
10 – 40 years
3 – 10 years
3 – 7 years
(1) Machinery and equipment also includes software, furniture, and fixtures
Depreciation expense was $15.4 million, $17.3 million, and $17.6 million for the years ended December 31, 2020, 2019, and
2018, respectively. During the year ended December 31, 2019, the Company classified vacant land in St. Paul, Minnesota as held
for sale, and subsequently sold the land for approximately $0.6 million, which approximated its carrying value.
F-19
Table of Contents
Veeco Instruments Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Note 7 — Goodwill and Intangible Assets
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 during the years indicated:
Balance at December 31, 2018
Allocated to Assets held for sale
Balance at December 31, 2019 and 2020
Gross carrying
amount
Accumulated
impairment
(in thousands)
Net amount
$
$
430,331
—
430,331
$
246,029
2,359
248,388
184,302
(2,359)
181,943
The Company performs its annual goodwill impairment test at the beginning of the fourth quarter each year. As the Company
maintains a single goodwill reporting unit, it determines the fair value of its reporting unit based upon the Company’s adjusted
market capitalization. The annual test performed at the beginning of the fourth quarter of fiscal 2018, 2019, and 2020 did not
result in any potential impairment as the fair value of the reporting unit was determined to exceed the carrying amount of the
reporting unit.
As a result of a significant decline in the Company’s stock price during the fourth quarter of 2018, the Company concluded it was
appropriate to perform an interim goodwill impairment test as of the end of fiscal 2018. The fair value of its reporting unit, as
calculated using the adjusted market capitalization approach, was determined to be below the carrying value of the reporting unit,
and the Company recorded an impairment charge equal to the excess of carrying value over fair value, or $122.8 million, for the
year ended December 31, 2018. The impairment charge is included in “Asset impairment” in the Consolidated Statements of
Operations. The valuation of goodwill will continue to be subject to changes in the Company’s market capitalization and
observable market control premiums. This analysis is sensitive to changes in the Company’s stock price and absent other
qualitative factors, the Company may be required to record additional goodwill impairment charges in future periods if the stock
price declines and remains depressed for an extended period of time.
The components of purchased intangible assets were as follows:
Technology
Customer relationships
Trademarks and tradenames
Other
Total
Amortization
Period
(in years)
4.6
8.2
3.5
0.8
5.8
Average
Remaining Gross
December 31, 2020
Accumulated
Amortization
and
Impairment
Net
Amount
Gross
Carrying
Amount
(in thousands)
December 31, 2019
Accumulated
Amortization
and
Impairment
Carrying
Amount
$ 327,908
146,465
30,910
3,686
$ 508,969
$ 302,358
130,131
26,614
3,681
$ 462,784
$ 25,550
16,334
4,296
5
$ 46,185
$ 327,908
146,465
30,910
3,686
$ 508,969
$ 291,766
126,764
25,256
3,665
$ 447,451
Net
Amount
$ 36,142
19,701
5,654
21
$ 61,518
Other intangible assets primarily consist of patents, licenses, and backlog.
During the second quarter of 2018, the Company lowered its projected results for the Ultratech asset group. The reduced
projections were based on lower than expected unit volume of certain smartphones, which incorporate advanced packaging
methods such as fan-out wafer level packaging (“FOWLP”), and a delay in the adoption of FOWLP advanced packaging by other
electronics manufacturers, both of which slowed orders and reduced revenue projections for the Company’s advanced packaging
lithography systems. In addition, there had 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 systems. Taken
F-20
Table of Contents
Veeco Instruments Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
together, the reduced projections identified during the second quarter of 2018 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
impairment charge is included in “Asset impairment” in the Consolidated Statement of Operations. Subsequently, certain in-
process research and development projects were completed and moved to the “Technology” line in the above table.
Based on the intangible assets recorded at December 31, 2020, and assuming no subsequent additions to or impairment of the
underlying assets, the remaining estimated annual amortization expense, is expected to be as follows:
2021
2022
2023
2024
2025
Thereafter
Total
$
Amortization
(in thousands)
12,280
10,018
8,347
6,708
3,136
5,696
46,185
$
Note 8 — Accrued Expenses and Other Liabilities
The components of accrued expenses and other current liabilities were as follows:
Payroll and related benefits
Warranty
Operating lease liabilities
Interest
Professional fees
Sales, use, and other taxes
Restructuring liability
Other
Total
Customer deposits and deferred revenue
December 31,
2020
December 31,
2019
(in thousands)
$
$
26,630
5,058
4,148
2,574
1,112
2,658
279
2,417
44,876
$
$
15,174
7,067
4,196
4,321
2,443
811
2,841
4,390
41,243
Customer deposits totaled $49.3 million and $26.6 million at December 31, 2020 and 2019, respectively, which are included in
“Customer deposits and deferred revenue” in the Consolidated Balance Sheets. Deferred revenue represents amounts billed, other
than deposits, in excess of the revenue that can be recognized on a particular contract at the balance sheet date. Changes in
deferred revenue were as follows:
Balance - December 31, 2019
Deferral of revenue
Recognition of previously deferred revenue
Balance - December 31, 2020
(in thousands)
28,249
9,955
(20,219)
17,985
$
$
F-21
Table of Contents
Veeco Instruments Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
As of December 31, 2020, the Company has approximately $27.9 million of remaining performance obligations on contracts with
an original estimated duration of one year or more, of which approximately 56% is expected to be recognized within one year,
with the remaining amounts expected to be recognized between one to three years. The Company has elected to exclude
disclosures regarding remaining performance obligations that have an original expected duration of one year or less.
Other liabilities
As part of a prior acquisition, the Company assumed an executive non-qualified deferred compensation plan that allowed
qualifying executives to defer cash compensation. The plan was frozen at the time of acquisition and no further contributions
have been made. At December 31, 2020 and 2019, plan assets approximated $2.4 million and $2.7 million, respectively,
representing the cash surrender value of life insurance policies and is included within “Other assets” in the Consolidated Balance
Sheets, while plan liabilities approximated $2.5 million and $3.1 million, respectively and is included within “Other liabilities” in
the Consolidated Balance Sheets. At December 31, 2020 and 2019, other liabilities also included (i) asset retirement obligations
of $2.7 million and $3.2 million, respectively; (ii) income tax payables of $1.4 million and $1.0 million, respectively; and (iii)
medical and dental benefits for former executives of $1.9 million and $2.0 million, respectively. Additionally, as a result of the
Coronavirus, Aid, Relief, and Economic Security Act, the Company has accrued for and deferred the deposit and payment of its
share of social security taxes, resulting in a liability of $3.6 million at December 31, 2020, of which $1.8 million is included
within “Accrued expenses and other current liabilities”, and $1.8 million is included within “Other liabilities” in the Consolidated
Balance Sheets.
Note 9 — Restructuring Charges
During the second quarter of 2018, the Company initiated plans to reduce excess capacity associated with the manufacture and
support of the Company’s advanced packaging lithography and 3D wafer inspection systems by consolidating these operations
into its San Jose, California facility. As a result of this and other cost saving initiatives, the Company announced headcount
reductions of approximately 40 employees.
In the second half of 2019, the Company executed an initiative to reorganize various functions along product lines and created a
central research and development organization to better allocate its resources to the Company’s highest priority projects. In
addition, the Company delayered the organization. Collectively, these actions impacted approximately 60 employees. During the
year ended December 31, 2020, additional accruals were recognized and payments were made related to these restructuring
initiatives, which are largely completed at December 31, 2020.
F-22
Table of Contents
Veeco Instruments Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
The following table shows the amounts incurred and paid for restructuring activities during the years ended December 31, 2020,
2019, and 2018 and the remaining accrued balance of restructuring costs at December 31, 2020, which is included in “Accrued
expenses and other current liabilities” in the Consolidated Balance Sheets:
Balance - December 31, 2017
Provision
Payments
Balance - December 31, 2018
Provision
Payments
Balance - December 31, 2019
Provision
Payments
Balance - December 31, 2020
Personnel
Facility
Severance and Related Costs
Related Costs
and Other
(in thousands)
Total
$
$
1,520
4,681
(4,058)
2,143
5,803
(5,105)
2,841
1,097
(3,659)
279
$
$
— $ 1,520
7,395
(6,702)
2,213
6,006
(5,378)
2,841
1,097
(3,659)
279
2,714
(2,644)
70
203
(273)
—
—
—
— $
Restructuring expense for the years ended December 31, 2019 and 2018 included non-cash charges of $0.4 million and $1.2
million, respectively, which are excluded from the table above, related to accelerated share-based compensation for employee
terminations.
Note 10 — Commitments and Contingencies
Warranty
Changes in the Company’s product warranty reserves were as follows:
Balance, beginning of the year
Warranties issued
Consumption of reserves
Changes in estimate
Balance, end of the year
Minimum Lease Commitments
2020
7,067
4,626
(6,691)
56
5,058
$
$
December 31,
2019
(in thousands)
7,852
$
5,865
(6,242)
(408)
7,067
$
$
$
2018
6,532
6,737
(6,573)
1,156
7,852
The Company’s operating leases primarily include real estate leases for properties used for manufacturing, R&D activities, sales
and service, and administration, as well as certain equipment leases. Some leases may include options to renew for a period of up
to 5 years, while others may include options to terminate the lease. The weighted average remaining lease term of the Company’s
operating leases as of December 31, 2020 was 3 years, and the weighted average discount rate used in determining the present
value of future lease payments was 6.1%.
F-23
Table of Contents
Veeco Instruments Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
The following table provides the maturities of lease liabilities at December 31, 2020:
Payments due by period:
2021
2022
2023
2024
2025
Thereafter
Total future minimum lease payments
Less: Imputed interest
Total
Reported as of December 31, 2020
Accrued expenses and other current liabilities
Operating lease long-term liabilities
Total
Operating
Leases
(in thousands)
4,671
4,690
1,306
631
66
—
11,364
(911)
10,453
4,148
6,305
10,453
$
$
$
$
Operating lease cost for the years ended December 31, 2020 and 2019 was $5.4 million and $5.5 million, respectively. Variable
lease cost for both years ended December 31, 2020 and 2019 was $1.7 million. Additionally, the Company has an immaterial
amount of short-term leases. Lease expense was $7.1 million, $7.2 million, and $6.3 million for the years ended December 31,
2020, 2019, and 2018, respectively. In addition, the Company is obligated under such leases for certain other expenses, including
real estate taxes and insurance. Operating cash outflows from operating leases for the year ended December 31, 2020, 2019, and
2018 were $6.9 million, $7.2 million, and $6.3 million, respectively.
Legal Proceedings
On June 8, 2018, an Ultratech shareholder who received Veeco stock as part of the consideration for the Ultratech acquisition
filed a purported class action complaint in the Superior Court of the State of California, County of Santa Clara, captioned
Wolther v. Maheshwari et al., Case No. 18CV329690, on behalf of himself and others who purchased or acquired shares of
Veeco pursuant to the registration statement and prospectus which Veeco filed with the SEC in connection with the Ultratech
acquisition (the “Wolther Action”). On August 2 and August 8, 2018, two purported class action complaints substantially similar
to the Wolther Action were filed on behalf of different plaintiffs in the same court as the Wolther Action. These cases have been
consolidated with the Wolther Action, and a consolidated complaint was filed on December 11, 2018. The consolidated
complaint seeks to recover damages and fees under Sections 11, 12, and 15 of the Securities Act of 1933 for, among other things,
alleged false/misleading statements in the registration statement and prospectus relating to the Ultratech acquisition, relating
primarily to the alleged failure to disclose delays in the advanced packaging business, increased MOCVD competition in China,
and an intellectual property dispute. Veeco is defending this matter vigorously.
On December 21, 2018, a purported Veeco stockholder filed a derivative action in the Superior Court of the State of California,
County of Santa Clara, captioned Vladimir Gusinsky Revocable Trust v. Peeler, et al., Case No. 18CV339925, on behalf of
nominal defendant Veeco. The complaint seeks to assert claims for breach of fiduciary duty, waste of corporate assets, and unjust
enrichment against current and former Veeco directors premised on purported misstatements and omissions in the registration
statement relating to the Ultratech acquisition. Veeco is defending this matter vigorously.
F-24
Table of Contents
Veeco Instruments Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
The Company is involved in various other legal proceedings arising in the normal course of business. The Company does not
believe that the ultimate resolution of these matters will have a material adverse effect on its consolidated financial position,
results of operations, or cash flows.
Concentrations of Credit Risk
The Company depends on purchases from its ten largest customers, which accounted for 62% and 67% of net accounts receivable
at December 31, 2020 and 2019, respectively.
Customers who accounted for more than 10% of net accounts receivable or net sales are as follows:
Customer
Customer A
Customer B
Customer C
Accounts Receivable
December 31,
2020
2019
Net Sales
For the Year Ended December 31,
2019
2018
2020
*
*
*
16 %
21 %
*
13 %
*
*
11 %
*
*
*
*
12 %
*
Less than 10% of aggregate accounts receivable or net sales
The Company manufactures and sells its products to companies in different geographic locations. Refer to Note 18, “Segment
Reporting and Geographic Information,” for additional information. In certain instances, the Company requires deposits from its
customers for a portion of the sales price in advance of shipment and performs periodic credit evaluations on its customers.
Where appropriate, the Company requires letters of credit on certain non-U.S. sales arrangements. Receivables generally are due
within 30 to 90 days from the date of invoice. In some geographies, receivables may be payable up to 150 days from the date of
the invoice.
Receivable Purchase Agreement
In December 2020, the Company entered into a receivable purchase agreement with a financial institution to sell certain of its
trade receivables from customers without recourse, up to $15.0 million at any point in time. Pursuant to this agreement, the
Company sold $11.6 million of receivables during the year ended December 31, 2020, of which approximately $5.9 million
remained outstanding at December 31, 2020, and therefore $9.1 million is available under the agreement for additional sales of
receivables as of December 31, 2020. The net sale of accounts receivable under the agreement is reflected as a reduction of
accounts receivable in the Company’s Consolidated Balance Sheet at the time of sale and any fees for the sale of trade
receivables were not material for the periods presented.
Suppliers
The Company outsources certain functions to third parties, including the manufacture of several of its systems. While the
Company relies on its outsourcing partners to perform their contracted functions, the Company maintains some level of internal
manufacturing capability for these systems. In addition, certain of the components and sub-assemblies included in the Company’s
products are obtained from a single source or a limited group of suppliers. The failure of the Company’s present outsourcing
partners and suppliers to meet their contractual obligations and the Company’s inability to make alternative arrangements or
resume the manufacture of these systems could have a material adverse effect on the Company’s revenues, profitability, cash
flows, and relationships with its customers.
The Company had deposits with its suppliers of $7.2 million and $5.9 million at December 31, 2020 and 2019, respectively, that
were included in “Prepaid expenses and other current assets” on the Consolidated Balance Sheets.
F-25
Table of Contents
Purchase Commitments
Veeco Instruments Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
The Company had purchase commitments of $126.4 million at December 31, 2020, substantially all of which will come due
within one year. Purchase commitments are primarily for inventory used in manufacturing products and are partially offset by
existing deposits with suppliers.
Bank Guarantees
The Company has bank guarantees and letters of credit issued by a financial institution on its behalf as needed. At December 31,
2020, outstanding bank guarantees and letters of credit totaled $9.5 million and unused bank guarantees and letters of credit of
$23.2 million were available to be drawn upon.
Note 11 — Debt
Convertible Senior Notes
2023 Notes
On January 10, 2017, the Company issued $345.0 million of 2.70% convertible senior unsecured notes due 2023 (the “2023
Notes”). The Company received net proceeds, after deducting underwriting discounts and fees and expenses payable by the
Company, of approximately $335.8 million. The 2023 Notes bear interest at a rate of 2.70% per year, payable semiannually in
arrears on January 15 and July 15 of each year, commencing on July 15, 2017. The 2023 Notes mature on January 15, 2023,
unless earlier purchased by the Company, redeemed, or converted.
On May 18, 2020, in connection with the completion of a private offering of $125.0 million aggregate principal amount of 3.75%
convertible senior notes due 2027 described below, the Company repurchased and retired approximately $88.3 million in
aggregate principal amount of its outstanding 2023 Notes, with a carrying amount of $78.1 million, for approximately
$81.2 million of cash. The Company accounted for the partial settlement of the 2023 Notes as an extinguishment, and as such,
recorded a loss on extinguishment of approximately $3.0 million for the year ended December 31, 2020, which is included in
“Other income (expense), net” in the Consolidated Statements of Operations, as well as a reduction of additional paid-in capital
of $0.1 million for the repurchase of the conversion feature.
Additionally, on November 11, 2020, the Company entered into a privately negotiated exchange agreement with a holder of its
outstanding 2023 Notes, under which the Company agreed to retire $125.0 million in aggregate original principal amount of the
2023 Notes, with a carrying amount of $113.1 million, in exchange for the issuance of $132.5 million in aggregate principal
amount of new 3.50% convertible senior notes due 2025 described below, which had a fair value that approximated the principal
amount of notes issued. The Company accounted for the partial settlement of the 2023 Notes as an extinguishment, and as such,
recorded a loss on extinguishment of approximately $4.8 million for the year ended December 31, 2020, which is included in
“Other income (expense), net” in the Consolidated Statements of Operations, as well as a reduction of additional paid-in capital
of $14.6 million for the exchange of the conversion feature.
2025 Notes
On November 17, 2020, as part of the privately negotiated exchange agreement described above, the Company issued $132.5
million of 3.50% convertible senior notes due 2025 (the “2025 Notes”). The 2025 Notes bear interest at a rate of 3.50% per year,
payable semiannually in arrears on January 15 and July 15 of each year, commencing on July 15, 2021. The 2025 Notes mature
on January 15, 2025, unless earlier purchased by the Company, redeemed, or converted.
F-26
Table of Contents
2027 Notes
Veeco Instruments Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
On May 18, 2020, the Company completed a private offering of $125.0 million of 3.75% convertible senior notes due 2027 (the
“2027 Notes”). The Company received net proceeds of approximately $121.9 million, after deducting underwriting discounts and
fees and expenses payable by the Company. Additionally, the Company used approximately $10.3 million of cash to purchase
capped calls, discussed below. The 2027 Notes bear interest at a rate of 3.75% per year, payable semiannually in arrears on June
1 and December 1 of each year, commencing on December 1, 2020. The 2027 Notes mature on June 1, 2027, unless earlier
purchased by the Company, redeemed, or converted.
The 2023 Notes, 2025 Notes, and 2027 Notes (collectively, the “Notes”) are unsecured obligations of Veeco and rank senior in
right of payment to any of Veeco’s subordinated indebtedness; equal in right of payment to all of Veeco’s unsecured
indebtedness that is not subordinated; effectively subordinated in right of payment to any of Veeco’s secured indebtedness to the
extent of the value of the assets securing such indebtedness; and structurally subordinated to all indebtedness and other liabilities
(including trade payables) of Veeco’s subsidiaries.
The Notes are convertible into cash, shares of the Company’s common stock, or a combination thereof, at the Company’s
election, upon the satisfaction of specified conditions and during certain periods as described below. The initial conversion rates
are 24.9800, 41.6667, and 71.5372 shares of the Company’s common stock per $1,000 principal amount of the 2023 Notes, 2025
Notes, and 2027 Notes, respectively, representing initial effective conversion prices of $40.03, $24.00, and $13.98 per share of
common stock, respectively. The conversion rates may be subject to adjustment upon the occurrence of certain specified events.
Holders may convert all or any portion of their notes, in multiples of one thousand dollar principal amount, at their option at any
time prior to the close of business on the business day immediately preceding October 15, 2022 with respect to the 2023 Notes,
October 15, 2024 with respect to the 2025 Notes, and October 1, 2027 with respect to the 2027 Notes, only under the following
circumstances:
(i)
During any calendar quarter (and only during such calendar quarter), if the last reported sale price of the common
stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days
ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of
the conversion price on each applicable trading day;
(ii) During the five consecutive business day period after any five consecutive trading day period (the “measurement
period”) in which the trading price per one thousand dollar principal amount of Notes for each trading day of the
measurement period was less than 98% of the product of the last reported sale price of Veeco’s common stock
and the conversion rate on each such trading day;
(iii)
If the Company calls any or all of applicable series of the Notes for redemption at any time prior to the close of
business on the scheduled trading day immediately preceding the redemption date; or
(iv) Upon the occurrence of specified corporate events.
Holders may convert their notes at any time, regardless of the foregoing circumstances, on or after October 15, 2022 with respect
to the 2023 Notes, October 15, 2024 with respect to the 2025 Notes, and October 1, 2026 with respect to the 2027 Notes, until the
close of business on the business day immediately preceding the respective maturity date.
Upon conversion by the holders, the Company may elect to settle such conversion in shares of its common stock, cash, or a
combination thereof. As a result of its cash conversion options, the Company segregated the liability component of the
instruments from the equity components. The liability components were measured by estimating the fair value of a non-
convertible debt instrument that is similar in its terms to the Notes. The calculation of the fair value of the debt components
required the use of Level 3 inputs, including utilization of convertible investors’ credit assumptions and
F-27
Table of Contents
Veeco Instruments Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
high yield bond indices. Fair value was estimated through discounting future interest and principal payments, an income
approach, due under the Notes at a discount rate equal to the estimated borrowing rate for similar non-convertible debt, or 7.0%,
8.0%, and 9.1% with respect to the 2023 Notes, 2025 Notes, and 2027 Notes, respectively. The excess of the aggregate face
values of the Notes over the estimated fair values of the liability components of $72.5 million, $21.0 million, and $34.2 million
with respect to the 2023 Notes, 2025 Notes, and 2027 Notes, respectively, were recognized as debt discounts and recorded as an
increase to additional paid-in capital and will be amortized over the expected lives of the Notes using the effective interest rate
method. Amortization of the debt discounts are recognized as non-cash interest expense.
The transaction costs of $9.2 million, $1.9 million, and $3.1 million incurred in connection with the issuance of the 2023 Notes,
2025 Notes, and 2027 Notes, respectively, were allocated to the liability and equity components based on their relative values.
Transaction costs allocated to the liability component are being amortized using the effective interest rate method and recognized
as non-cash interest expense over the expected terms of the Notes. Transaction costs allocated to the equity component of $1.9
million, $0.3 million, and $0.8 million with respect to the 2023 Notes, 2025 Notes, and 2027 Notes, respectively, reduced the
value of the equity components recognized in stockholders' equity.
In connection with the offering of the 2027 Notes, on May 13, 2020, the Company entered into privately negotiated capped call
transactions (the “Capped Call Transactions”), pursuant to capped call confirmations, covering the total principal amount of the
2027 Notes for an aggregate premium of $10.3 million. The Capped Call Transactions are expected generally to reduce the
potential dilution to the Company’s common stock upon any conversion of the 2027 Notes and/or offset any cash payments the
Company is required to make in excess of the aggregate principal amount of converted 2027 Notes, as the case may be, with such
reduction and/or offset subject to a cap based on the capped price of the Capped Call Transactions. The Capped Call Transactions
exercise price is equal to the initial conversion price of the 2027 Notes, and the capped price of the Capped Call Transactions is
approximately $18.46 per share and is subject to certain adjustments under the terms of the capped call confirmations.
The Capped Call Transactions are separate transactions entered into by the Company with the capped call counterparties, are not
part of the terms of the 2027 Notes and do not change the holders’ rights under the 2027 Notes. Holders of the 2027 Notes do not
have any rights with respect to the Capped Call Transactions. The cost of the Capped Call Transactions is not expected to be tax-
deductible as the Company did not elect to integrate the Capped Call Transactions into the 2027 Notes for tax purposes. The
Company used a portion of the net proceeds from the offering of the 2027 Notes to pay for the Capped Call Transactions, and the
cost of the Capped Call Transactions was recorded as a reduction of the Company’s additional paid-in capital in the
accompanying consolidated financial statements.
The carrying values of the Notes are as follows:
Principal amount
Unamortized debt discount/transaction costs
Net carrying value
2023 Notes
December 31, 2020
2025 Notes 2027 Notes
Total
December 31, 2019
2023 Notes
(in thousands)
$ 131,695 $ 132,500 $ 125,000 $ 389,195
(68,080)
(34,058)
90,942 $ 321,115
(22,097)
$ 119,770 $ 110,403 $
(11,925)
$
$
345,000
(44,932)
300,068
F-28
Table of Contents
Veeco Instruments Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Total interest expense related to the Notes is as follows:
Cash Interest Expense
Coupon interest expense - 2023 Notes
Coupon interest expense - 2025 Notes
Coupon interest expense - 2027 Notes
Non-cash Interest Expense
Amortization of debt discount/transaction costs- 2023 Notes
Amortization of debt discount/transaction costs- 2025 Notes
Amortization of debt discount/transaction costs- 2027 Notes
Total Interest Expense
2020
For the year ended December 31,
2019
(in thousands)
2018
$
$
7,390 $
554
2,904
10,887
546
2,359
24,640 $
9,315 $
—
—
12,676
—
—
21,991 $
9,315
—
—
11,762
—
—
21,077
The Company determined the Notes are Level 2 liabilities in the fair value hierarchy and estimated their fair values as $125.4
million, $140.2 million, and $180.9 million at December 31, 2020 for the 2023 Notes, 2025 Notes, and 2027 Notes, respectively.
Note 12 — Derivative Financial Instruments
The Company is exposed to financial market risks arising from changes in currency exchange rates. Changes in currency
exchange rates could affect the Company’s foreign currency denominated monetary assets and liabilities and forecasted cash
flows. The Company sometimes enters into monthly forward derivative contracts with the intent of mitigating a portion of this
risk. The Company only used derivative financial instruments in the context of hedging and not for speculative purposes and had
not designated its foreign exchange derivatives as hedges. Accordingly, changes in fair value from these contracts were recorded
as “Other operating expense (income), net” in the Company’s Consolidated Statements of Operations. The Company executed
derivative transactions with highly rated financial institutions to mitigate counterparty risk.
The Company did not have any outstanding derivative contracts at December 31, 2020 and 2019. The following table shows the
gains and (losses) from currency exchange derivatives during the year ended December 31, 2018, which is included in “Other
operating expense (income), net” in the Consolidated Statement of Operations as well as the weighted average notional amount of
derivatives outstanding:
Foreign currency exchange forwards
F-29
Year ended December 31,
2018
Gains (losses)
Weighted average
notional amount
(in thousands)
327
$
2,869
$
Table of Contents
Veeco Instruments Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Note 13 — Stockholders’ Equity
Accumulated Other Comprehensive Income (“AOCI”)
The following table presents the changes in the balances of each component of AOCI, net of tax:
Balance - December 31, 2017
Other comprehensive income (loss)
Balance - December 31, 2018
Other comprehensive income (loss)
Balance - December 31, 2019
Other comprehensive income (loss)
Balance - December 31, 2020
Foreign
Currency
Translation
$
$
1,839
(3)
1,836
25
1,861
5
1,866
Unrealized
Gains (Losses)
on Available
for Sale
Securities
(in thousands)
(27)
$
11
(16)
49
33
(53)
(20)
$
Total
1,812
8
1,820
74
1,894
(48)
1,846
$
$
The Company did not allocate additional tax expense (benefit) to other comprehensive income (loss) for all years presented as the
Company is in a full valuation allowance position such that a deferred tax asset related to amounts recognized in other
comprehensive income is not regarded as realizable on a more-likely-than-not basis.
Preferred Stock
The Board of Directors has authority under the Company’s Certificate of Incorporation to issue shares of preferred stock, par
value $0.01, with voting and economic rights to be determined by the Board of Directors. As of December 31, 2020, no preferred
shares have been issued.
Treasury Stock
On December 11, 2017, the Company’s Board of Directors authorized a program to repurchase up to $100 million of the
Company’s common stock to be completed through December 11, 2019. At the end of the program, $14.3 million of the $100
million had been utilized.
The Company records treasury stock purchases under the cost method using the first-in, first-out (“FIFO”) method. Upon
reissuance of treasury stock, amounts in excess of the acquisition cost are credited to additional paid-in capital. If the Company
reissues treasury stock at an amount below its acquisition cost and if additional paid-in capital associated with prior treasury
stock transactions is insufficient to cover the difference between the acquisition cost and the reissue price, this difference is
charged to accumulated deficit.
Note 14 — Stock Plans
Share-based incentive awards are provided to employees under the terms of the Company’s equity incentive compensation plans
(the “Plans”), which are administered by the Compensation Committee of the Board of Directors. The 2019 Plan originated as the
2010 Stock Incentive Plan and was originally approved by the Company’s shareholders in May 2010. This Plan was subsequently
amended, as approved by shareholders, in 2013, 2016, and 2019 (at which time the Plan was renamed the 2019 Stock Incentive
Plan (as amended to date, the “2019 Plan”). The Company’s employees, non-employee directors, and consultants are eligible to
receive awards under the 2019 Plan, which can include non-qualified stock options, incentive stock options, RSAs, RSUs, PSAs,
PSUs, share appreciation rights,
F-30
Table of Contents
Veeco Instruments Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
dividend equivalent rights, or any combination thereof. The Company settles awards under the Plans with newly issued shares or
with shares held in treasury.
In 2013, the Board of Directors granted equity awards to certain employees under the Company’s 2013 Inducement Stock
Incentive Plan (the “Inducement Plan”). The Company issued 124,500 stock option shares and 87,000 RSUs under this plan.
Stock options under this plan vest over a three year period and have a 10-year term, and RSUs under this plan vest over a two or
four year period. At December 31, 2013, the Inducement Plan was merged into the 2019 Plan and is considered an inactive plan
with no further shares available for grant. At December 31, 2020, there are 2,000 option shares and no RSUs outstanding under
the Inducement Plan.
The Company is authorized to issue up to 13.3 million shares under the 2019 Plan. Option awards are granted with an exercise
price equal to the closing price of the Company’s common stock on the trading day prior to the date of grant; option awards
generally vest over a three year period and have a seven or ten year term. RSAs and RSUs generally vest over one to five years.
Certain option and share awards provide for accelerated vesting if there is a change in control, as defined in the 2019 Plan. At
December 31, 2020, there are 0.7 million option shares and 0.8 million RSUs and PSUs outstanding under the 2019 Plan.
The Company is authorized to issue up to 1.5 million shares under the approved 2016 employee stock purchase plan (“ESPP”),
including additional shares authorized under a plan amendment approved by shareholders in 2019. Under the ESPP, substantially
all employees in the U.S. may purchase the Company’s common stock through payroll deductions at a price equal to 85 percent
of the lower of the fair market value of the Company’s common stock at the beginning or end of each six-month offer period, as
defined in the ESPP, and subject to certain limits. The ESPP was approved by the Company’s shareholders.
During 2017, in connection with an acquisition, the Company assumed certain restricted stock units (the “Assumed RSUs”)
available and outstanding under the assumed plan (the “Assumed Plan”). The Assumed RSUs remain subject to the terms set
forth in the award agreement governing the award and the Assumed Plan, except that the Assumed RSUs relate to shares of
Company common stock and the number of restricted stock units was adjusted pursuant to the terms of the acquisition to reflect
the difference in the value of a share of Company common stock and a share of the acquired company’s common stock prior to
closing the acquisition. The Assumed RSUs were converted into 338,144 restricted stock units of the Company and generally
vest over 50 months. After the acquisition and notwithstanding any other provisions of the Assumed Plan, no further grants will
be made under the Assumed Plan, and the Company is solely maintaining the Assumed Plan with respect to the Assumed RSUs.
At December 31, 2020, there are 4,030 RSUs outstanding under the Assumed Plan.
Shares Reserved for Future Issuance
At December 31, 2020, the Company has 5.1 million shares reserved to cover exercises of outstanding stock options, vesting of
RSUs, and additional grants under the 2019 Plan. At December 31, 2020, the Company has 0.3 million shares reserved to cover
future issuances under the ESPP Plan.
F-31
Table of Contents
Share-Based Compensation
Veeco Instruments Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
The Company recognized share-based compensation in the following line items in the Consolidated Statements of Operations for
the periods indicated:
For the year ended December 31,
2018
2019
2020
(in thousands)
Cost of sales
Research and development
Selling, general, and administrative
Restructuring
Total
$ 1,870 $ 1,903 $
2,900
7,933
—
$ 12,703
3,340
9,630
397
$ 15,270
1,885
3,611
9,417
1,161
$ 16,074
The Company did not realize any tax benefits associated with share-based compensation for the years ended December 31, 2020,
2019, and 2018 due to the full valuation allowance on its U.S. deferred tax assets. See Note 17, “Income Taxes” for additional
information. The Company capitalized an immaterial amount of share-based compensation into inventory for the years ended
December 31, 2020, 2019, and 2018.
Unrecognized share-based compensation costs at December 31, 2020 are summarized below:
Restricted stock units
Restricted stock awards
Performance share units
Total unrecognized share-based compensation cost
Stock Option Awards
Unrecognized Weighted
Share-Based
Compensation
Costs
(in thousands)
1,325
10,709
3,269
15,303
$
$
Average Period
Expected to be
Recognized
(in years)
2.0
2.0
1.6
1.9
Stock options are awards issued to employees that entitle the holder to purchase shares of the Company’s stock at a fixed price.
The following table summarizes the equity activity related to stock options:
Balance - December 31, 2017
Expired or forfeited
Balance - December 31, 2018
Expired or forfeited
Balance - December 31, 2019
Expired or forfeited
Balance - December 31, 2020
Number of
Shares
(in thousands)
1,394
(172)
1,222
(103)
1,119
(389)
730
Weighted
Average
Exercise Price
$
34.97
36.21
34.80
33.97
34.88
34.15
35.26
F-32
Table of Contents
Veeco Instruments Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
The following table summarizes stock option information at December 31, 2020:
Range of Exercise Prices
$20.00 - $30.00
$30.01 - $40.00
$40.01 - $50.00
$50.01 - $60.00
Options Outstanding and Exercisable
Aggregate
Intrinsic
Value
(in thousands)
Weighted
Average
Remaining
Contractual Life
(in years)
Weighted
Average
Exercise Price
—
—
—
—
—
$
2.1
1.5
0.3
0.4
1.4
28.68
32.34
47.95
51.69
35.26
Shares
(in thousands)
16
600
5
109
730
$
$
There were no unvested options outstanding as of December 31, 2020. Additionally, there were no options exercised for the years
ended December 31, 2020, 2019, or 2018.
RSAs, RSUs, PSAs, PSUs
RSAs are stock awards issued to employees and directors that are subject to specified restrictions and a risk of forfeiture. RSUs
are stock awards issued to employees that entitle the holder to receive shares of common stock as the awards vest. PSAs and
PSUs are awards that result in an issuance of shares of common stock to employees if certain performance or market conditions
are achieved. All of these awards typically vest over one to four years and vesting is subject to the employee's continued service
with the Company and, in the case of performance awards, meeting certain performance or market conditions. The fair value of
the awards is determined and fixed based on the closing price of the Company’s common stock on the trading day prior to the
date of grant, or, in the case of performance awards with market conditions, fair value is determined using a Monte Carlo
simulation.
The following table summarizes the equity activity of non-vested restricted shares and performance shares:
Balance - December 31, 2017
Granted
Performance award adjustments
Vested
Forfeited
Balance - December 31, 2018
Granted
Performance award adjustments
Vested
Forfeited
Balance - December 31, 2019
Granted
Performance award adjustments
Vested
Forfeited
Balance - December 31, 2020
Weighted
Average
Grant Date
Fair Value
$
25.41
17.37
32.67
26.39
24.66
20.74
11.53
28.91
21.77
18.48
16.20
9.53
30.94
16.01
14.87
12.73
Number of
Shares
(in thousands)
1,880
1,257
(5)
(523)
(391)
2,218
1,107
(25)
(768)
(275)
2,257
1,054
(51)
(798)
(422)
2,040
The total fair value of shares that vested during the years ended December 31, 2020, 2019, and 2018 was $9.0 million, $8.8
million, and $9.1 million, respectively. For performance awards, the final number of shares earned will vary
F-33
Table of Contents
Veeco Instruments Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
depending on the achievement of the actual results relative to the performance or market conditions. Each performance award is
included in the table above at the grant date target share amount until the end of the performance period if not previously
forfeited.
The fair value of performance awards with market conditions is estimated on the date of grant using a Monte Carlo simulation.
Estimates of fair value are not intended to predict actual future events or the value ultimately realized by employees who receive
these awards. The weighted average fair value and the assumptions used in calculating such values during fiscal years 2020,
2019, and 2018 for performance awards with market conditions were based on estimates at the date of grant as follows:
Weighted average fair value
Dividend yield
Expected volatility factor(1)
Risk-free interest rate(2)
Expected life (in years)(3)
Year ended December 31,
2019
$ 16.45
$
2020
$ 10.59
2018
15.58
0 %
60.27 %
0.54 %
3.0
0 %
53 %
2.37 %
2.8
0 %
49 %
2.88 %
3.0
(1) Expected volatility is measured using historical daily price changes of the Company’s stock over the respective expected term.
(2) The risk-free rate for periods within the contractual term is based on the U.S. Treasury yield curve in effect at the time of grant.
(3) The expected life is the number of years the Company estimates that the awards will be outstanding prior to exercise.
Employee Stock Purchase Plan
For the years ended December 31, 2020, 2019, and 2018 the Company received cash proceeds of $2.9 million, $3.1 million, and
$3.1 million, and issued shares of 254,703, 395,941, and 332,096, respectively, under the ESPP Plan. The weighted average
estimated values of employee purchase rights as well as the weighted average assumptions that were used in calculating such
values during fiscal years 2020, 2019, and 2018 were based on estimates at the date of grant as follows:
Weighted average fair value
Dividend yield
Expected volatility factor(1)
Risk-free interest rate(2)
Expected life (in years)(3)
Year ended December 31,
2020
2019
2018
$ 4.81
$ 2.96
$ 4.94
0 %
70 %
0.95 %
0.5
0 %
60 %
2.41 %
0.5
0 %
62 %
1.81 %
0.5
(1) Expected volatility is measured using historical daily price changes of the Company’s stock over the respective expected term.
(2) The risk-free rate for periods within the contractual term is based on the U.S. Treasury yield curve in effect at the time of grant.
(3) The expected life is the number of years the Company estimates that the purchase rights will be outstanding prior to exercise.
Note 15 — Retirement Plans
The Company maintains a defined contribution plan for the benefit of its U.S. employees. The plan is intended to be tax qualified
and contains a qualified cash or deferred arrangement as described under Section 401(k) of the Internal Revenue Code. Eligible
participants may elect to contribute a percentage of their base compensation, and the Company may make matching
contributions, generally equal to fifty cents for every dollar employees contribute, up to the lesser of three percent of the
employee’s eligible compensation or three percent of the maximum the employee is permitted to contribute under then current
Internal Revenue Code limitations. Generally, the plan calls for vesting in the Company contributions over the initial five years of
a participant’s employment. The Company provided employer contributions
F-34
Table of Contents
Veeco Instruments Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
associated with this plan of approximately $2.4 million, $2.4 million, and $2.0 million for the years ended December 31, 2020,
2019, and 2018, respectively.
Note 16 — Dispositions
In the fourth quarter of 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 Sheet as of
December 31, 2019. During the second quarter of 2020, the Company completed the sale of this product line for approximately
$11.4 million, with approximately 85% of the transaction price received upon closing, and 15% held in escrow for a period of 18
months and included within “Prepaid expenses and other current assets” in the Consolidated Balance Sheet as of December 31,
2020. Long-lived assets and definite-lived intangible assets were not depreciated or amortized while classified as held for sale.
The sale of this disposal group did 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, which resulted in a corresponding held for sale valuation allowance
on its assets held for sale in the Consolidated Balance Sheet. During the second quarter of 2020, the Company recorded
additional impairment charges of $0.3 million related to the finalization of the sale of this disposal group.
The major classes of assets that were sold are as follows:
Net assets sold:
Inventories
Property, plant, and equipment, net
Intangible assets, net
Goodwill
Deferred revenue
Total net assets sold
Net proceeds after costs to sell
Total impairment on sale of disposal group
Note 17 — Income Taxes
(in thousands)
6,311
372
6,546
2,359
(59)
15,529
(11,228)
4,301
$
$
$
The amounts of income (loss) before income taxes attributable to domestic and foreign operations were as follows:
Domestic
Foreign
Total
2020
Year ended December 31,
2019
(in thousands)
$ (10,292) $ (78,486) $ (286,561)
1,828
(147,273)
530
(8,464) $ (77,956) $ (433,834)
2018
$
F-35
Table of Contents
Veeco Instruments Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Significant components of the expense (benefit) for income taxes consisted of the following:
2020
Year ended December 31,
2019
(in thousands)
2018
Current:
Federal
Foreign
State and local
Total current expense (benefit) for income taxes
Deferred:
Federal
Foreign
State and local
Total deferred expense (benefit) for income taxes
Total expense (benefit) for income taxes
$
$
— $ — $
304
22
113
204
417
226
(1,682)
2,518
38
874
162
136
116
(320)
82
(115)
(299)
360
(73) $ 777
205
(27,932)
107
(27,620)
$ (26,746)
The income tax expense was reconciled to the tax expense computed at the U.S. federal statutory tax rate as follows:
2018
2020
Year ended December 31,
2019
(in thousands)
$ (1,777) $ (16,396) $ (91,105)
(2,848)
11,847
(2,230)
7,747
2,868
1,848
(1,690)
46,872
—
(55)
$ (26,746)
(121)
(131)
726
388
(6)
2,248
—
728
(2,292)
164
(73) $
(835)
785
(1,692)
15,098
1,232
1,947
—
495
—
143
777
$
Income tax expense (benefit) at U.S. statutory rates
State taxes, net of U.S. federal impact
Effect of international operations
Research and development tax credit
Net change in valuation allowance
Change in accrual for unrecognized tax benefits
Share-based compensation
Effect of 2017 Tax Act
Asset impairment
Partial extinguishment of 2023 Notes
Other
Total expense (benefit) for income taxes
F-36
Table of Contents
Veeco Instruments Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Deferred income taxes reflect the effect of temporary differences between the carrying amounts of assets and liabilities
recognized for financial reporting purposes and the amounts recognized for tax purposes. The tax effects of the temporary
differences were as follows:
Deferred tax assets:
Inventory valuation
Net operating losses
Credit carry forwards
Warranty and installation accruals
Share-based compensation
Customer deposits and deferred revenue
Operating leases
Other
Total deferred tax assets
Valuation allowance
Net deferred tax assets
Deferred tax liabilities:
Purchased intangible assets
Convertible Senior Notes
Operating leases
Depreciation
Total deferred tax liabilities
Net deferred taxes
$
December 31,
2020
2019
(in thousands)
10,949
51,260
54,160
1,045
4,587
10,982
2,281
4,741
140,005
(118,443)
21,562
$
11,170
63,342
55,103
1,391
6,296
5,986
3,181
3,501
149,970
(130,053)
19,917
7,227
13,674
2,241
2,220
25,362
(3,800) $
9,345
8,831
3,172
2,668
24,016
(4,099)
$
The Company is no longer permanently reinvesting future earnings from certain foreign jurisdictions and has accrued for foreign
tax withholdings of $0.7 million on its unremitted earnings as of December 31, 2020.
At December 31, 2020, the Company had U.S. federal NOL carryforwards of approximately $219.3 million, of which $6.9
million has an indefinite carryforward period, with the remaining expiring in varying amounts between 2034 and 2037, if not
utilized. At December 31, 2020, the Company had U.S. federal research and development credits of $28.8 million that will expire
between 2021 and 2040. The Company also has $9.4 million of foreign tax credits that expire in 2027. Additionally, the
Company has state and local NOL carryforwards of approximately $122.7 million (a net deferred tax asset of $7.7 million, net of
federal tax benefits and before the valuation allowance) that will expire between 2021 and 2040. Finally, the Company has state
credits of $28.4 million, some of which are indefinite and others that will expire between 2024 and 2035.
The Company makes assessments to estimate if sufficient taxable income will be generated in the future to use existing deferred
tax assets. As of December 31, 2020, the Company continued to have a cumulative three year loss with respect to its U.S.
operations. As such, the Company maintains a valuation allowance against its U.S. deferred tax assets. During 2020, the
Company’s valuation allowance decreased by approximately $11.6 million.
F-37
Table of Contents
Veeco Instruments Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
A roll-forward of the Company’s uncertain tax positions for all U.S. federal, state, and foreign tax jurisdictions was as follows:
Balance at beginning of year
Additions for tax positions related to current year
Additions for tax positions related to prior years
Reductions for tax positions related to prior years
Reductions due to the lapse of the statute of limitations
Settlements
Balance at end of year
2020
$ 12,369
1,217
47
(1,166)
December 31,
2019
(in thousands)
$ 11,137
3,075
21
(1,814)
—
—
(50)
$ 12,369
(104)
$ 12,363
2018
$
8,269
2,154
1,721
(934)
(26)
(47)
$ 11,137
If the amount of unrecognized tax benefits at December 31, 2020 were recognized, the Company’s income tax provision would
decrease by $1.4 million. The gross amount of interest and penalties accrued in income tax payable in the Consolidated Balance
Sheets was approximately $0.4 million at both December 31, 2020 and 2019.
The Company, or one of its subsidiaries, files income tax returns in the United States federal jurisdiction, and various state, local,
and foreign jurisdictions. All material consolidated federal income tax matters have been concluded for years through 2017
subject to subsequent utilization of NOLs generated in such years. All material state and local income tax matters have been
reviewed through 2012. The majority of the Company’s foreign jurisdictions have been reviewed through 2015. The Company’s
major foreign jurisdictions’ statutes of limitation remain open with respect to the tax years 2015 through 2019 for China,
Germany, and Singapore, and 2019 for Taiwan. The Company does not anticipate that its uncertain tax position will change
significantly within the next twelve months subject to the completion of the ongoing tax audits and any resultant settlement.
Note 18 — Segment Reporting and Geographic Information
The Company operates and measures its results in one operating segment and therefore has one reportable segment: the
development, manufacture, sales, and support of semiconductor and thin film process equipment primarily sold to make
electronic devices. The Company’s Chief Operating Decision Maker, the Chief Executive Officer, evaluates performance of the
Company and makes decisions regarding the allocation of resources based on total Company results.
In order to align with the Company’s evolving strategy, the Company now categorizes its sales into the following four end-
markets: 1) Semiconductor; 2) Compound Semiconductor; 3) Data Storage; and 4) Scientific & Other.
Prior period sales have been reclassified to the new end-markets for comparative purposes. Sales by end-market is as follows:
Sales by end-market
Semiconductor
Compound Semiconductor
Data Storage
Scientific & Other
Total
For the year ended December 31,
2019
2018
2020
(in thousands)
$ 165,909
107,922
123,288
57,044
$ 454,163
$ 175,608
85,877
84,075
73,789
$ 419,349
$ 137,797
260,323
69,141
74,821
$ 542,082
The Company’s significant operations outside the United States include sales and service offices in China, Europe, and Rest of
APAC. For geographic reporting, sales are attributed to the location in which the customer facility is located.
F-38
Table of Contents
Veeco Instruments Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Sales and long-lived tangible assets by geographic region are as follows:
Net Sales to Unaffiliated Customers
2018
2019
2020
(in thousands)
Long-lived Tangible Assets
2019
2018
2020
United States
EMEA(1)
China
Rest of APAC
Rest of World
Total
$ 145,353
73,124
57,589
177,569
528
$ 454,163
$ 126,160
57,351
71,078
164,363
397
$ 419,349
$ 125,659
89,102
194,032
131,519
1,770
$ 542,082
(1) EMEA consists of Europe, the Middle East, and Africa
Note 19 — Selected Quarterly Financial Information (unaudited)
$ 64,967
120
84
100
$ 75,187
143
130
251
—
$ 78,503
205
81
1,495
—
$ 80,284
—
$ 65,271
$ 75,711
The following table presents selected unaudited financial data for each fiscal quarter of 2020 and 2019. Although unaudited, this
information has been prepared on a basis consistent with the Company’s audited Consolidated Financial Statements and, in the
opinion of management, reflects all adjustments (consisting only of normal recurring adjustments) that are considered necessary
for a fair presentation of this information in accordance with GAAP. Such quarterly results are not necessarily indicative of future
results of operations.
Net sales
Gross profit
Net income (loss)
Basic income (loss)
per common share
Diluted income (loss)
per common share
Q1
Fiscal 2020
Q2
Q3
Q4
Q1
Q2
Q3
Q4
(in thousands, except per share amounts)
Fiscal 2019
$ 104,502
46,419
(567)
$ 98,637
41,894
(8,302)
$ 112,078
49,142
580
$ 138,946
56,845
(102)
$ 99,371
34,716
(18,530)
$ 97,822
36,285
(15,565)
$ 108,954
42,223
(11,767)
$ 113,202
44,970
(32,871)
(0.01)
(0.17)
(0.01)
(0.17)
0.01
0.01
(0.00)
(0.40)
(0.33)
(0.25)
(0.69)
(0.00)
(0.40)
(0.33)
(0.25)
(0.69)
As discussed in Note 11, “Debt”, the Company accounted for the partial settlements of the 2023 Notes in the second quarter and
fourth quarter of 2020 as extinguishments, and as such, recorded losses on extinguishment of approximately $3.0 million and
$4.8 million for the second and fourth quarter, respectively, which were included in “Other income (expense), net” in the
Consolidated Statements of Operations. Refer to Note 11, “Debt” for additional information.
During the fourth quarter of 2019, the Company recorded a non-cash impairment charge of $21.0 million related to its equity
investment in Kateeva which is included in “Other income (expense), net” in the Consolidated Statements of Operations, as well
as a non-cash impairment charge of $4.0 million related to the classification of a disposal group as held for sale which is included
in “Asset impairment” in the Consolidated Statements of Operations. Refer to Note 4, “Investments,” and Note 16,
“Dispositions,” for additional information.
F-39
Table of Contents
Note 20 — Subsequent Event
Veeco Instruments Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
On February 18, 2021, the Company entered into a lease agreement through 2037 for a new manufacturing facility in San Jose,
California in order to expand its manufacturing capabilities to meet growing demand for its advanced laser annealing technology
that serves the world’s leading semiconductor technology companies. With the transition to the new facility, the Company will
remain in the Silicon Valley area in close proximity to leading U.S. semiconductor companies. The lease agreement contains two
renewal options for a period of three years each, and has various escalation and abatement clauses, with annual base rent payable
of between $2.0 million and $3.7 million through the initial lease period as well as certain other expenses, including maintenance,
real estate taxes, and insurance. In addition, the lease agreement includes a tenant improvement allowance of $6.8 million to be
used for the initial build-out.
F-40
Table of Contents
Schedule II — Valuation and Qualifying Accounts
Deducted from asset accounts:
Year ended December 31, 2020
Allowance for doubtful accounts
Valuation allowance in net deferred tax assets
Year ended December 31, 2019
Allowance for doubtful accounts
Valuation allowance in net deferred tax assets
Year ended December 31, 2018
Allowance for doubtful accounts
Valuation allowance in net deferred tax assets
Balance at
Beginning
of Period
Additions
Charged
(Credited) Charged to
to Costs and
Expenses
Other
Accounts
(in thousands)
Balance at
End of
Period
Deductions
602
$
130,053
$ 130,655
$
270
114,955
$ 115,225
$
270
100,456
$ 100,726
$
$
$
$
$
$
140
513
653
392
15,098
15,490
$
$
$
$
— $
14,499
14,499
$
(6)
— $
—
(12,123)
— $ (12,129)
736
$
118,443
$ 119,179
— $
—
— $
— $
—
— $
$
(60)
602
— 130,053
$ 130,655
(60)
— $
270
— 114,955
— $ 115,225
S-1
VEECO INSTRUMENTS INC.
SEVERANCE BENEFITS SUMMARY PLAN DESCRIPTION
Exhibit 10.1
Purpose
The purpose of this Severance Benefits Plan (“Plan”) is to provide severance benefits to U.S.-based employees of Veeco
Instruments Inc. (the “Company”) whose employment is involuntarily terminated by the Company under Plan-qualifying
conditions. This Plan is effective with respect to terminations applicable after this Plan's effective date, and supersedes all
previous policies, practices, programs or plans which may have been previously followed by the Company. This Plan
commences on March 1, 2009 and will continue indefinitely until modified or terminated by the Company.
Eligibility
1.
An employee1 is eligible for benefits under this Plan if he or she meets all of the following requirements:
a.
b.
c.
d.
He or she is a full-time or part-time regular Employee of the Company; and
His or her employment has been involuntarily terminated by the Company for one of the following reasons:
i) Due to a change in operations, a facility relocation or closing, or a reduction in staff for other economic
reasons, and the Employee does not refuse or otherwise fail to accept another position which may be
available with the Company; or
ii) As a result of a sale or merger of all or part of the Company’s business or assets, or other form of
corporate reorganization, including an outsourcing of an Employee’s position, and the Employee is not
offered a position by the acquiring or resulting company; and
He or she signs a Waiver and Release Agreement in a form prepared by the Company, and the Agreement
becomes effective in accordance with its terms. A Waiver and Release Agreement may include non-
competition, non-disparagement and/or non-solicitation provisions, and such other terms, as the Company
deems appropriate in its sole discretion, and
He or she remains actively employed and diligently performs his or her duties and responsibilities until his or
her termination date, which shall be determined by the Company in its sole discretion, and which is subject to
change at the Company’s sole discretion.2
An Employee who is eligible for benefits under the Plan is called a “Participant” below.
2.
An Employee will not be eligible for benefits under this Plan if any of the following apply:
Conditions of Ineligibility
a.
b.
c.
d.
e.
f.
g.
He or she voluntarily resigns, abandons his or her job, fails to return from an approved leave of absence,
initiates termination on any similar basis, or does not satisfy the criteria in the preceding paragraphs; or
He or she is terminated for cause or unsatisfactory performance, which shall be determined in the Company’s
sole discretion; or
If an Employee has a written employment agreement or offer letter that provides severance benefits greater
than those provided herein, in which case the terms of that agreement or letter shall apply to such Employee;
or
He or she fails to execute and return the Waiver and Release Agreement within the time designated by the
Company or attempts to revoke the Agreement; or
He or she violates the terms of the Waiver and Release Agreement; or
He or she has been laid off from his/her position, and there is a reasonable expectation, in the opinion of the
Company, that the layoff will be temporary and that the Employee will be recalled to work; or
He or she fails to return all Company property within his/her possession or control within seven (7) days
following termination of employment, including, but not limited to: files, records, keys, credit
1 The Employee must be an Employee classified and treated for federal income tax purposes by the Company as a regular full-time or part-
time Employee (as opposed to a temporary or seasonal Employee, an independent contractor or consultant, an agency worker or a leased
Employee). Interns and co-ops are not eligible for severance.
2 For example, an Employee may be provided with a projected future separation date, which date may be extended. To be eligible for
benefits under this Plan, the Employee must remain in the Company’s employment until the actual termination date.
Exhibit 10.1
h.
cards, ID/building access card, computer equipment, pagers and cell phones, fax and answering machines; or
He or she fails to provide the Plan Administrator with required information regarding his or her eligibility for
state unemployment benefits, the Participant’s employment status or efforts to find new employment.
A Participant may lose eligibility to receive Severance Benefits if the Company becomes aware of circumstances which could or
would have caused a Participant’s termination from employment, such as engaging in violations of law or Company policy,
including, without limitation, fraud, theft, inappropriate use of confidential information, or misconduct (including, but not
limited to, dishonesty or harassment).
Full Benefits
3.
Participants will be eligible to receive full benefits under the Plan, as described below. Benefits will be calculated based upon the
Participant’s (i) years of service,3 and (ii) pay4 at the time of the termination. Full severance benefits for an eligible Participant
are as follows, although the Plan Administrator reserves the right, in his or her sole discretion, to make payments in excess of the
amounts described in this Summary Plan Description:
a.
b.
c.
d.
e.
f.
g.
Primary Severance Plan: Employees shall receive one (1) week of severance pay plus an additional one (1)
week of severance pay for each completed full year of service, with a minimum of two (2) weeks and a
maximum of twenty six (26) weeks of severance pay. If an employee is part-time his/her severance calculation
will be based on the average weekly rate they have received for the prior 6 months, or, if time worked is less
than 6 months, the average weekly wages received for the actual time worked.
Management-Level Employees5: Management-level employees will receive an additional four (4) weeks of
severance, supplementing the severance provided by the Primary Severance Plan, up to a maximum of thirty
(30) weeks.
Director-Level Employees5: Director-level employees will receive an additional ten (10) weeks of severance,
supplementing the severance provided by the Primary Severance Plan, to a maximum of thirty six (36) weeks.
Vice President-Level Employees5: Vice President-level employees will receive an additional eighteen (18)
weeks of severance, supplementing the severance provided by the Primary Severance Plan, up to a maximum
of thirty nine (39) weeks.
Vice President/General Manager and Higher Level Employees5: Vice President/General Manager and Higher
Level Employees will receive an additional twenty eight (28) weeks of severance, supplementing the
severance provided by the Primary Severance Plan, up to a maximum of thirty nine (39) weeks.
In addition to the severance payments described above, for the number of weeks of severance payments, if
Employee is enrolled in Employer’s healthcare plans at the time of termination and elects to continue
coverage in accordance with the continuation of benefits requirements of COBRA, the employee's
contribution amount will be the normal employee contribution rate. Thereafter, the Employee's contribution
amount will be the full COBRA rate. The Participant shall bear the cost of any increase in premium costs
resulting from a change in the level or type of coverage provided, and for any COBRA premium payments
after the expiration of the severance period. The Company will not pay any premiums under this paragraph for
any period in which the Participant is not eligible for COBRA or has not elected COBRA coverage.
Severance benefits will be reduced by any notice payments (such as, the federal Worker Adjustment
Retraining and Notification Act or any state plant or facility closing law or similar law of any applicable
foreign country) to which an employee may be entitled, provided the employee is not actively working
during the notice period. An eligible employee's severance will not be reduced by
3 “Year of service” means years of uninterrupted service as an Employee of the Company, determined from the Employee’s
most recent date of hire, including prior continuous service with an acquired company provided the Employee becomes an
Employee of the Company in connection with such transaction.
4 “Pay” means base pay, exclusive of commissions, incentive compensation, bonuses or any other form of remuneration. Pay
is determined at the time of termination of employment, and any performance/merit reviews that are pending will not affect the
amount of such pay.
5 “Level” shall be determined both by job title and job function at the discretion of the Plan Administrator.
any WARN or similar notice period during which an employee is actually working. In no event will the
reduction of any eligible employee's severance result in the employee receiving less than two weeks'
severance pay.
Exhibit 10.1
4.
Source and Payment of Benefits
The Company shall pay benefits under the Plan from its general assets. Benefits shall be paid in installments coincident with the
Company’s normal payroll cycle. To the extent necessary to comply with Section 409A of the Internal Revenue Code and
thereby avoid a penalty tax on the Participant, severance payments to a “specified employee” (as defined for purposes of Section
409A(a)(2)) that would otherwise be deferred compensation under Section 409A will not commence until six (6) months after
the Participant’s separation from service. In general, this refers to one of the 50 highest paid employees of the Company.
Installments are designated as “separate payments” for this purpose, so the six-month delay provision will not apply to the extent
that severance payments are “short-term deferral” under Section 409A (i.e., paid prior to March 15 of the year following
termination of employment) or to amounts that qualify as separation pay due to involuntary separation from service or another
applicable exception under Section 409A regulations.
5.
Effect of Reemployment
If a former Employee who is receiving severance benefits accepts new employment with the Company, he or she will not be
eligible to receive any further severance or other payments or benefits under the Plan with respect to the prior termination as of
the date he or she re-enters employment. However, such reemployment will not affect the validity of the Waiver and Release
Agreement previously executed by the Employee.
Review of Denial of Benefits
6.
In general, a Participant is not required to file a claim for a benefit under the Plan. However, if any person believes he or she is
entitled to any benefit under the Plan that he or she has not received, that person, or his or her duly authorized representative,
may file a written claim for such benefit filed with the Plan Administrator, in person or by certified mail, within one (1) year
after the date the benefit claimed would otherwise have been paid. In no event may any former Employee file a claim for a
severance benefit more than one (1) year after his or her termination of employment with the Company.
a.
b.
c.
d.
Within ninety (90) days after receipt of such claim, the Plan Administrator will send to the claimant, by mail,
notice of the granting or denying, in whole or in part, of such claim, unless special circumstances require an
extension of time for processing the claim. In no event may the extension exceed ninety (90) days from the
end of the initial period. If such extension is necessary, the claimant will be given a written notice to this
effect prior to the expiration of the initial ninety (90) day period. The Plan Administrator will have full
discretion to deny or grant a claim in whole or in part.
The Plan Administrator will provide, to every claimant whose claim is denied, a written notice setting forth
the following information, in a manner calculated to be understood by the claimant:
●
●
●
●
the specific reason or reasons for the denial;
specific reference to pertinent Plan provisions on which the denial is based;
a description of any additional material or information necessary for the claimant to perfect the claim
and an explanation of why such material is necessary; and
an explanation of the Plan’s claim review procedure.
Within sixty (60) days after the receipt by the claimant of written notification of the denial (in whole or in
part) of his claim, the claimant or his duly authorized representative, upon written application to the Plan
Administrator, in person or by certified mail, may request a review of such denial and may review pertinent
documents, and may submit issues and comments in writing.
The appeal of a denied claim shall be reviewed by a committee consisting of the Plan Administrator and the
General Counsel of the Company (or his delegate). The decision on review will be written in a manner
calculated to be understood by the claimant and will include specific reasons for the decision and specific
references to the pertinent plan provisions on which the decision is based. The decision on review will be
made not later than sixty (60) days after the Plan Administrator’s receipt of a
Exhibit 10.1
request for a review, unless special circumstances require an extension of time for processing, in which case a
decision will be rendered not later than one hundred-twenty (120) days after receipt of a request for review. If
an extension is necessary, the claimant will be given written notice of the extension prior to the expiration of
the initial sixty (60) day period.
7.
Amendment or Termination of the Plan
The Company reserves the right to amend or terminate the Plan at any time, with or without advance notice, by action of the
CEO or his delegate.
8.
Your Rights Under ERISA
As a participant in this Plan, you are entitled to certain rights and protections under the Employee Retirement Income Security
Act of 1974 (“ERISA”). ERISA provides that all Plan participants shall be entitled to:
a.
b.
Examine, free of charge, at the Administrative Office, all Plan documents and copies of all documents filed by
the Plan with the U.S. Department of Labor; and
Obtain copies of all Plan documents and other Plan information upon written request to the Plan
Administrator. The Plan Administrator may make a reasonable charge for the copies.
In addition to creating rights for the Plan participants, ERISA imposes obligations upon the persons who are responsible for the
operation of the Plan. The people who operate your Plan, called “fiduciaries” of the Plan, have a duty to do so prudently and in
the interest of you and other Plan participants and beneficiaries.
No one, including your employer or any other persons, may discriminate against you to prevent you from obtaining a benefit or
exercising your rights under ERISA. If your claim for a benefit is denied in whole or in part, you must receive a written
explanation of the reason for the denial. You have the right to have the Plan Administrator review and reconsider your claim.
Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request materials from the Plan
Administrator and do not receive them within 30 days, you may file suit in a federal court. In such a case, the court may require
the Plan Administrator to provide the materials and pay you up to $110 a day until you receive the materials, unless the materials
were not sent because of reasons beyond the control of the Plan Administrator. If a claim for benefits under the Plan is denied or
ignored, in whole or in part, you may file suit on that claim in a state or federal court.
If you are discriminated against for asserting your rights, you may seek assistance from the U.S. Department of Labor or you
may file suit in a federal court. The court will decide who should pay court costs and legal fees. If you are successful, the court
may order the person you have sued to pay these costs and fees. If you lose, the court may order you to pay these costs and fees,
for example, if it finds your claim is frivolous.
If you have any questions about the Plan, you should contact the Plan Administrator. If you have any questions about this
statement or about your rights under ERISA, you should contact your nearest Area Office of the Labor-Management Services
Administration, U.S. Department of Labor.
9.
General Information
a.
b.
The Plan is sponsored by Veeco Instruments Inc.
The Company’s Senior Vice President of Human Resources is the Plan Administrator. The Plan Administrator
makes the rules and regulations necessary to administer the Plan. The Plan Administrator shall have the
discretionary authority and responsibility to determine eligibility for benefits and the amount of such benefits,
and to construe the terms of this Plan. The determinations and constructions of the Plan Administrator shall be
final and binding, unless found by a court of competent jurisdiction to be arbitrary and capricious. The address
of the Plan Administrator is Veeco Instruments Inc., 1 Terminal Drive, Plainview, NY 11803.
The Plan Administrator may pay severance benefits in excess of those provided under the Plan. In doing so (or
declining to do so), the Plan Administrator is acting on behalf of the Company, rather than the Plan, and is not
required to act uniformly among Plan Participants.
c.
The Plan is a severance benefits plan.
d.
e.
f.
The General Counsel of the Company is the agent for service of legal process. Any communications should be
sent to the General Counsel, Veeco Instruments Inc., 1 Terminal Drive, Plainview, NY 11803.
The records of the Plan are kept on a calendar year.
If you need to discuss the Plan with a federal government agency, you may need the following numbers. The
Plan Number is 20090301. The Company’s Employer Identification Number is 11-2989601.
Exhibit 10.1
10.
Effective Date
The Plan is adopted effective the 1st day of May 2009.
Exhibit 10.16
VEECO INSTRUMENTS INC. 2019 STOCK INCENTIVE PLAN
NOTICE OF PERFORMANCE RESTRICTED STOCK UNIT AWARD (2020)
Veeco Instruments Inc. (the “Company”) is pleased to confirm the award to the employee named below (the
“Grantee”) of Restricted Stock Units (the “Award”), subject to the terms and conditions of this Notice of Performance
Restricted Stock Unit Award (2020) (the “Notice”), the Veeco Instruments Inc. 2019 Stock Incentive Plan, as amended from
time to time (the “Plan”) and the Veeco Instruments Inc. Terms and Conditions of Restricted Stock Unit Award (2020) (the
“Terms and Conditions”) attached hereto, as follows. Unless otherwise provided herein, the terms in this Notice shall have
the same meaning as those defined in the Plan.
Grantee:
Date of Award:
Target Number of Restricted Stock Units
Awarded (the “Units”):
Performance Period:
The Units shall be earned based on the Company’s Three Year Total Shareholder Return (“TSR”) versus the Three
Year TSR of the Russell 2000 Index (the “Index”) measured at the end of the Performance Period. Subject to the Grantee’s
Continuous Service and other limitations set forth in this Notice, the Terms and Conditions and the Plan, the Units shall be
earned and will “vest” in accordance with the schedules set forth in Exhibit A. For purposes of this Notice and the Terms and
Conditions, the term “vest” shall mean, with respect to any Units, that such Units are no longer subject to forfeiture to the
Company. If the Grantee would become vested in a fraction of a Unit, such Unit shall not vest until the Grantee becomes
vested in the entire Unit.
Except as may otherwise be specifically provided for under the terms of any other agreement or policy between the
Company and the Grantee, vesting shall cease upon the date the Grantee terminates Continuous Service for any reason,
including death or Disability, and in the event the Grantee terminates Continuous Service for any reason, including death or
Disability, any unvested Units held by the Grantee at the time of such termination of the Grantee’s Continuous Service shall
be forfeited.
Additional Provisions:
This Award shall be subject to the terms and conditions set forth in the Plan and the Terms and Conditions,
including, without limitation, the Forfeiture for Restricted Activity, Clawback, Governing Law, and Venue and Jurisdiction
provisions of Sections 2.2, 2.3, 4.1 through 4.5, 6.5, and 6.6 of the Terms and Conditions.
IMPORTANT NOTICE
Grantee must sign this Notice and return it to the Company’s Sr. Vice President, Chief Administrative Officer on or
before April 17, 2020. Return your executed Notice to: Robert Bradshaw by mail at Terminal Drive, Plainview, New
York 11803, or email at RBradshaw@Veeco.com.
PLEASE NOTE THAT YOUR ACCEPTANCE OF THE AWARD WILL ALSO CONSTITUTE
ACCEPTANCE OF, AND AGREEMENT TO BE BOUND BY THE TERMS AND CONDITIONS GOVERNING
THE PERFORMANCE RESTRICTED STOCK UNIT AWARD, INCLUDING WITHOUT LIMITATION, THE
RESTRICTED ACTIVITY, CLAWBACK, GOVERNING LAW, AND VENUE AND JURISDICTION
PROVISIONS OF SECTIONS 2.2, 2.3, 4.1 through 4.5, 6.5, AND 6.6 OF THE TERMS AND CONDITIONS.
VEECO INSTRUMENTS INC.
Name: Robert W. Bradshaw
Title: Sr. Vice President Human Resources
______________________________
Grantee
Date
VEECO INSTRUMENTS INC. 2019 STOCK INCENTIVE PLAN
TERMS AND CONDITIONS OF
RESTRICTED STOCK UNIT AWARD (2020)
These TERMS AND CONDITIONS OF RESTRICTED STOCK UNIT AWARD (2020) (these “Terms and
Conditions”) apply to any award by Veeco Instruments Inc., a Delaware corporation (the “Company”), of Restricted Stock
Units, subject to certain restrictions pursuant to the Veeco Instruments Inc. 2019 Stock Incentive Plan (as it may be amended
from time to time, the “Plan”), which specifically references these Terms and Conditions.
ARTICLE 1
ISSUANCE OF UNITS
The Company hereby issues to the Grantee (the “Grantee”) named in the Notice of Performance Restricted Stock
Unit Award (2020) (the “Notice”) an award (the “Award”) of Restricted Stock Units, as set forth in the Notice (the “Units”),
subject to the Notice, these Terms and Conditions, and the terms and provisions of the Plan, which is incorporated herein by
reference. Unless otherwise provided herein, the terms in these Terms and Conditions shall have the same meaning as those
defined in the Plan.
ARTICLE 2
CONVERSION OF UNITS AND ISSUANCE OF SHARES
2.1
General. Subject to Sections 2.2 through 2.4 below, one share of Common Stock shall be issuable for each
Unit subject to the Award (the “Shares”) upon vesting. Immediately thereafter, or as soon as administratively feasible, the
Company will transfer the appropriate number of Shares to the Grantee after satisfaction of any required tax or other
withholding obligations. Any fractional Unit remaining after the Award is fully vested shall be discarded and shall not be
converted into a fractional Share. Notwithstanding the foregoing, the relevant number of Shares shall be issued no later than
March 15th of the year following the calendar year in which the Award vests. The Company may however, in its sole
discretion, make a cash payment in lieu of the issuance of the Shares in an amount equal to the value of one share of
Common Stock multiplied by the number of Units subject to the Award. The number of Shares covered by the Award shall
be proportionately adjusted for any stock dividend affecting the Shares in accordance with Section 10 of the Plan.
2.2
Forfeiture for Restricted Activity. The Grantee acknowledges that the Company is making this Award of
additional compensation, among other reasons, to provide an incentive to the Grantee to remain with and to promote the best
interests of, the Company, and to protect the Company’s assets, including its goodwill, Confidential Information (as defined
below) and trade secrets, which are legitimate business interests of the Company, and that engaging in “Restricted
Activities” (as described in Article 4 below), would be detrimental to the legitimate business interests of the Company.
Therefore, in exchange for this Award, notwithstanding anything to the contrary in these Terms and Conditions or otherwise,
if the Grantee engages in “Restricted Activities” (as described in Sections 4.1 through 4.5 below), (a) all unvested Units will
immediately be forfeited, and (b) the Grantee shall be required to (i) return to the Company, within 10 business days after the
Company’s request to Grantee therefor, all Shares received pursuant to the Award that are owned, directly or indirectly, by
the Grantee, any Cash Dividend Equivalents, and any cash payment made in lieu of the issuance of the Shares, and (ii) pay to
the Company, within 10 business days of the Company’s request to the Grantee therefor, an amount equal to the excess, if
any, of the aggregate after-tax proceeds (taking into account all amounts of tax that would be recoverable upon a claim of
loss for payment of such proceeds in the year of repayment) the Grantee received upon the sale or other disposition of all
Shares received pursuant to the Award (the “After-Tax Proceeds”). The forfeiture for Restricted Activity provisions of this
Section 2.2 and Article 4 shall survive and continue to apply beyond settlement of all Awards under the Plan, any
termination or expiration of this Award for any reason, and after the provisions of any employment or other agreement
between the Company and the Grantee have lapsed.
2.3
Clawback. This Award, all Units received pursuant to the Award, all shares of Common Stock received
pursuant to the Award that are owned, directly or indirectly, by the Grantee, any cash payments made in lieu of the issuance
of the Shares, any Cash Dividend Equivalents, and any After-Tax Proceeds shall be subject to
the Compensation Recoupment Policy, established by the Company, as amended from time to time, or any similar or
successor policy.
2.4
Delay of Issuance of Shares. The Company shall delay the issuance of any Shares under this Article 2 to the
extent necessary to comply with Section 409A(a)(2)(B)(i) of the Code (relating to payments made to certain “specified
employees” of certain publicly-traded companies); in such event, any Shares to which the Grantee would otherwise be
entitled during the six (6) month period following the date of the Grantee’s termination of Continuous Service will be
issuable on the first business day following the expiration of such six (6) month period.
ARTICLE 3
RIGHT TO SHARES
Except as set forth herein, the Grantee shall not have any right in, to or with respect to any of the Shares (including
any voting rights) issuable under the Award until the Award is settled by the issuance of such Shares to the Grantee.
Notwithstanding the foregoing, while one or more Shares remain subject to this Award, the Grantee shall have the right to
accrue Cash Dividend Equivalents. For purposes herein, a “Cash Dividend Equivalent” means, for each Share subject to the
Award, a cash payment equal to the cash dividend, if any, that would become payable to the Grantee with respect to such
Share had the Grantee been the holder of such Share on the record date for such cash dividend. Cash Dividend Equivalents
will be subject to all of the terms and conditions of the Award, including that the Cash Dividend Equivalents will vest,
become payable, and be subject to forfeiture and clawback upon the same terms and at the same time as the Units to which
they relate.
ARTICLE 4
FORFEITURE FOR RESTRICTED ACTIVITY
4.1
Restricted Activity. For the avoidance of doubt, the Company and the Grantee agree that the Grantee is free
to engage in the activities described in this Article 4 and that the Company will not seek to enjoin or otherwise stop the
Grantee from engaging in any such Restricted Activities (provided, however, that the Company reserves such rights as may
exist at law or in equity and/or pursuant to any other agreement entered into between the Company and the Grantee,
including, without limitation, in the Veeco Instruments Inc. Employee Confidentiality and Inventions Agreement (“ECIA”)),
but that if the Grantee engages in such activities the Company shall have all of the rights set forth in Section 2.2 with respect
to the Award, all Shares or cash received pursuant to the Award, and any After-Tax Proceeds.
4.2
Company Information. During the term of employment with the Company and for five years thereafter, the
Grantee will not use or disclose to any individual or entity any Confidential Information (as defined below) of the Company
except (i) in the performance of the Grantee’s duties for the Company, (ii) as authorized in writing by the Company, or (iii)
as required by law or legal process, provided, that, prior to any such required disclosure, the Grantee will notify the
Company of the requirement to disclose and, if requested, the Grantee will cooperate with the Company’s efforts to prevent
or limit such disclosure. The Grantee understands that “Confidential Information” means any information that: (a) is
disclosed to, learned by, or created by the Grantee in connection with the Grantee’s employment with the Company (or a
predecessor company now owned by or part of the Company), and (b) the Company treats as proprietary, private or
confidential. Confidential Information may include, without limitation, information relating to the Company’s products,
services and methods of operation, the identities and competencies of the Company’s employees, customers and suppliers,
trade secrets, know-how, processes, Inventions and the Company Related Inventions (each as defined in the ECIA),
techniques, data, sketches, plans, drawings, chemical formulae, computer software, financial information, operating and cost
data, research databases, selling and pricing information, business and marketing plans, and information concerning potential
acquisitions, dispositions or joint ventures. The Grantee further understands that “Confidential Information” does not include
any of the foregoing items that has become publicly known or made generally available (provided that information will not
cease to be “Confidential Information” as a result of the Grantee’s breach of confidentiality). The Grantee will promptly
notify the Company if the Grantee becomes aware of any unauthorized use or disclosure of Confidential Information.
4.3
Third Party Information. The Grantee recognizes that the Company has received and in the future will
receive from its customers, suppliers and trading partners their confidential or proprietary information subject to a duty on
the Company’s part to maintain the confidentiality of such information and to use it only for certain
limited purposes. The Grantee agrees to hold all such confidential or proprietary information in the strictest confidence and
not to disclose it to any person or entity or to use it except as necessary in carrying out the Grantee’s work for the Company
consistent with the Company’s agreement with such third party.
4.4
Non-Competition. During employment with the Company and for one year thereafter, (a) the Grantee will
not own, manage, work for or otherwise participate in any business whose products, services or activities compete with the
current or currently contemplated products, services or activities of the Company in any state or country in which the
Company sells products or conducts business and (x) in which the Grantee was involved or (y) with respect to which the
Grantee had access to Confidential Information, in each case, during the 5 years prior to termination, provided, however, that
the Grantee may own up to 1% of the securities of any such public company (but without otherwise participating in the
activities of such enterprise); and (b) the Grantee will not, for himself or any other person: (i) induce or try to induce any
customer, supplier, licensor or business relation to stop doing business with the Company or otherwise interfere with the
relationship between the Company and any of its customers, suppliers, licensors or business relations; or (ii) solicit the
business of any person known by the Grantee to be a customer of the Company, whether or not the Grantee had personal
contact with such person, with respect to products or activities that compete with the products or activities of the Company
in existence or contemplated at the time of termination of the Grantee’s Continuous Service. The Grantee agrees that this
covenant is reasonable with respect to its scope, geographical area, and duration.
4.5
Non-Solicitation. During employment with the Company and for one year thereafter, the Grantee will not,
for himself or any other person: (a) induce or try to induce any employee to leave the Company or otherwise interfere with
the relationship between the Company and any of its employees, or (b) employ or engage as an independent contractor, any
current or former employee of the Company, other than former employees who have not worked for the Company within the
past year. The Grantee agrees that this covenant is reasonable with respect to its scope and duration.
4.6
Severability. The invalidity or unenforceability of any Section, paragraph, or provision (or any part thereof)
of the Notice or these Terms and Conditions shall not affect the validity or enforceability of any one or more of the other
paragraphs or provisions (or other parts thereof), and all other provisions shall remain in full force and effect. If any
provision of the Notice or these Terms and Conditions is held to be excessively broad, then such provision shall be reformed
and construed by limiting and reducing it so as to be enforceable to the maximum extent permitted by law.
4.7
Notice of Immunity under the Defend Trade Secrets Act and Other Protected Rights. The Grantee
understands that, in accordance with the Defend Trade Secrets Act of 2016, the Grantee will not be held criminally or civilly
liable under any federal or state trade secret law for the disclosure of a trade secret that: (a) is made (i) in confidence to a
federal, state or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of
reporting or investigating a suspected violation of law; or (b) is made in a complaint or other document that is filed under
seal in a lawsuit or other proceeding. The Grantee also understands that if the Grantee ever files a lawsuit for retaliation by
the Company for reporting a suspected violation of law, the Grantee may disclose trade secrets to the Grantee’s attorney and
use the trade secret information in the court proceeding provided the Grantee: (a) files any document containing the trade
secret under seal; and (b) does not disclose the trade secret, except pursuant to court order. Grantee understands that nothing
contained in the Notice, these Terms and Conditions, or the Plan limits Grantee’s ability to file a charge or complaint with
the Equal Employment Opportunity Commission, the National Labor Relations Board, the Occupational Safety and Health
Administration, the Securities and Exchange Commission or any other federal, state or local governmental agency or
commission (“Government Agencies”). Grantee further understands that nothing in the Notice, these Terms and Conditions,
or the Plan limits Grantee’s ability to communicate with any Government Agencies or otherwise participate in any
investigation or proceeding that may be conducted by any Government Agency, including providing documents or other
information, without notice to the Company. Nothing in the Notice, these Terms and Conditions, or the Plan limits Grantee’s
right to receive an award for information provided to any Government Agencies.
ARTICLE 5
TAXES
5.1
Tax Liability. The Grantee is ultimately liable and responsible for all taxes owed by the Grantee in
connection with the Award, regardless of any action the Company or any Related Entity takes with respect to any tax
withholding obligations that arise in connection with the Award. Neither the Company nor any Related Entity makes any
representation or undertaking regarding the treatment of any tax withholding in connection with any aspect of the Award,
including the grant, vesting, assignment, release or cancellation of the Units, the delivery of Shares, the payment of any Cash
Dividend Equivalents, the subsequent sale of any Shares acquired upon vesting and the receipt of any dividends or dividend
equivalents. The Company does not commit and is under no obligation to structure the Award to reduce or eliminate the
Grantee’s tax liability.
5.2
Payment of Withholding Taxes. Prior to any event in connection with the Award (e.g., vesting) that the
Company determines may result in any tax withholding obligation, whether United States federal, state, local or non-U.S.,
including any social insurance, employment tax, payment on account or other tax-related obligation (the “Tax Withholding
Obligation”), the Grantee must arrange for the satisfaction of the amount of such Tax Withholding Obligation in a manner
acceptable to the Company.
(a)
By Share Withholding. If permissible under Applicable Law, the Grantee authorizes the
Company to, upon the exercise of its sole discretion, withhold from those Shares otherwise issuable to the Grantee the whole
number of Shares sufficient to satisfy the applicable Tax Withholding Obligation. The Grantee acknowledges that the
withheld Shares may not be sufficient to satisfy the Grantee’s Tax Withholding Obligation. Accordingly, the Grantee agrees
to pay to the Company or any Related Entity as soon as practicable, including through additional payroll withholding, any
amount of the Tax Withholding Obligation that is not satisfied by the withholding of Shares described above.
(b)
By Sale of Shares. Unless the Grantee determines to satisfy the Tax Withholding Obligation by
some other means in accordance with clause (iii) below, the Grantee’s acceptance of this Award constitutes the Grantee’s
instruction and authorization to the Company and any brokerage firm determined acceptable to the Company for such
purpose to, upon the exercise of Company’s sole discretion, sell on the Grantee’s behalf a whole number of Shares from
those Shares issuable to the Grantee as the Company determines to be appropriate to generate cash proceeds sufficient to
satisfy the applicable Tax Withholding Obligation. Such Shares will be sold on the day such Tax Withholding Obligation
arises (e.g., a vesting date) or as soon thereafter as practicable. The Grantee will be responsible for all broker’s fees and other
costs of sale, and the Grantee agrees to indemnify and hold the Company harmless from any losses, costs, damages, or
expenses relating to any such sale. To the extent the proceeds of such sale exceed the Grantee’s Tax Withholding Obligation,
the Company agrees to pay such excess in cash to the Grantee. The Grantee acknowledges that the Company or its designee
is under no obligation to arrange for such sale at any particular price, and that the proceeds of any such sale may not be
sufficient to satisfy the Grantee’s Tax Withholding Obligation. Accordingly, the Grantee agrees to pay to the Company or
any Related Entity as soon as practicable, including through additional payroll withholding, any amount of the Tax
Withholding Obligation that is not satisfied by the sale of Shares described above.
(c)
By Check, Wire Transfer or Other Means. At any time not less than five (5) business days (or
such fewer number of business days as determined by the Administrator) before any Tax Withholding Obligation arises (e.g.,
a vesting date), the Grantee may elect to satisfy the Grantee’s Tax Withholding Obligation by delivering to the Company an
amount that the Company determines is sufficient to satisfy the Tax Withholding Obligation by (x) wire transfer to such
account as the Company may direct, (y) delivery of a certified check payable to the Company, or (z) such other means as
specified from time to time by the Administrator.
Notwithstanding the foregoing, the Company or a Related Entity also may satisfy any Tax Withholding Obligation by
offsetting any amounts (including, but not limited to, salary, bonus and severance payments) payable to the Grantee by the
Company and/or a Related Entity. Furthermore, in the event of any determination that the Company has failed to withhold a
sum sufficient to pay all withholding taxes due in connection with the Award, the Grantee agrees to pay the Company the
amount of such deficiency in cash within five (5) calendar days after receiving a written demand from the Company to do so,
whether or not the Grantee is an employee of the Company at that time.
ARTICLE 6
OTHER PROVISIONS
6.1
Transfer Restrictions. The Units may not be transferred in any manner other than by will or by the laws of
descent and distribution (if permitted under the Plan).
6.2
No Right to Continued Employment. Nothing in the Notice, these Terms and Conditions or the Plan shall
confer upon Grantee any right to continue in the service of the Company or any Related Entity or shall interfere with or
restrict in any way the rights of the Company or any Related Entity, which are hereby expressly reserved, to discharge
Grantee at any time for any reason whatsoever, with or without cause, except as may otherwise be provided by any written
agreement entered into by and between the Company and Grantee.
6.3
No Right to Future Awards. Nothing in the Notice, these Terms and Conditions or the Plan shall confer
upon Grantee any right with respect to future Awards under the Plan, or any right with respect to any other award under any
plan of the Company or any Related Entity.
6.4
Entire Agreement. The Notice, the Plan, and these Terms and Conditions constitute the entire agreement of
the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of
the Company and the Grantee with respect to the subject matter hereof, and may not be modified adversely to the Grantee’s
interest except by means of a writing signed by the Company and the Grantee. For the avoidance of doubt, the restrictions set
forth in Sections 4.1 through 4.5 above do not supersede any other agreement between the Company and Grantee, including,
without limitation, the ECIA. Nothing in the Notice, the Plan and these Terms and Conditions (except as expressly provided
therein) is intended to confer any rights or remedies on any persons other than the parties. Should any provision of the
Notice, the Plan or these Terms and Conditions be determined to be illegal or unenforceable, such provision shall be
enforced to the fullest extent allowed by law and the other provisions shall nevertheless remain effective and shall remain
enforceable.
6.5
Governing Law. The Notice, the Plan and these Terms and Conditions are to be construed in accordance
with and governed by the internal laws of the State of New York, without giving effect to any choice of law rule that would
cause the application of the laws of any jurisdiction other than the internal laws of the State of New York to the rights,
duties, and obligations of the parties.
6.6
Venue and Jurisdiction. The Company and the Grantee (the “parties”) expressly agree that any suit, action,
or proceeding arising out of or relating to the Notice, the Plan or these Terms and Conditions shall be brought in the United
States District Court for the Eastern District of New York (or should such court lack jurisdiction to hear such action, suit or
proceeding, in a New York state court in the County of Nassau) and that the parties shall submit to the exclusive jurisdiction
of such courts. The parties irrevocably waive, to the fullest extent permitted by law, any objection the party may have to the
laying of venue for any such suit, action or proceeding brought in such court. The parties agree and submit to personal
jurisdiction in either court. The Parties further agree that this Venue and Jurisdiction is binding on all matters related to the
Notice, the Plan, or these Terms and Conditions and may not be altered or amended by any other arrangement or agreement
(including an employment agreement) without the express written consent of Grantee and the Company. If any one or more
provisions of this Section 6.6 shall for any reason be held invalid or unenforceable, it is the specific intent of the parties that
such provisions shall be modified to the minimum extent necessary to make it or its application valid and enforceable.
6.7
Construction. The captions used in the Notice and these Terms and Conditions are inserted for convenience
and shall not be deemed a part of the Award for construction or interpretation. Except when otherwise indicated by the
context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to
be exclusive, unless the context clearly requires otherwise.
6.8
Administration and Interpretation. Any question or dispute regarding the administration or interpretation of
the Notice, the Plan or these Terms and Conditions shall be submitted by the Grantee or by the Company to the
Administrator. The resolution of such question or dispute by the Administrator shall be final and binding on all persons.
6.9
Waiver of Jury Trial. THE PARTIES EXPRESSLY WAIVE ANY RIGHT THEY HAVE OR MAY HAVE
TO A JURY TRIAL OF ANY SUCH SUIT, ACTION OR PROCEEDING.
6.10
Severability. The invalidity or unenforceability of any paragraph or provision of these Terms and
Conditions shall not affect the validity or enforceability of any other paragraph or provision, and all other provisions
shall remain in full force and effect. If any provision of these Terms and Conditions is held to be excessively broad, then
such provision shall be reformed and construed by limiting and reducing it so as to be enforceable to the maximum extent
permitted by law.
6.11
Notices. Any notice required or permitted hereunder shall be given in writing and shall be deemed
effectively given upon personal delivery, upon deposit for delivery by an internationally recognized express mail courier
service or upon deposit in the United States mail by certified mail (if the parties are within the United States), with postage
and fees prepaid, addressed to the other party at its address as shown in these instruments, or to such other address as such
party may designate in writing from time to time to the other party.
6.12
Nature of Award. In accepting the Award, the Grantee acknowledges and agrees that:
(a)
the Plan is established voluntarily by the Company, it is discretionary in nature, and it may be
modified, amended, suspended or terminated by the Company at any time, unless otherwise provided in the Plan and these
Terms and Conditions;
(b)
the Award is voluntary and occasional and does not create any contractual or other right to
receive future awards of Units, or benefits in lieu of Units, even if Units have been awarded repeatedly in the past;
(c)
(d)
all decisions with respect to future awards, if any, will be at the sole discretion of the Company;
the Grantee’s participation in the Plan is voluntary;
(e)
the Grantee’s participation in the Plan shall not create a right to any employment with the
Grantee’s employer and shall not interfere with the ability of the Company or the employer to terminate the Grantee’s
employment relationship, if any, at any time;
(f)
the Award is not part of normal or expected compensation or salary for any purposes, including,
but not limited to, calculating any severance, resignation, termination, redundancy, end of service payments, bonuses, long-
service awards, pension or retirement or welfare benefits or similar payments and in no event should be considered as
compensation for, or relating in any way to, past services for the Company or any Related Entity;
(g)
in the event that the Grantee is not an Employee of the Company or any Related Entity, the
Award and the Grantee’s participation in the Plan will not be interpreted to form an employment or service contract or
relationship with the Company or any Related Entity;
(h)
(i)
the future value of the underlying Shares is unknown and cannot be predicted with certainty;
in consideration of the Award, no claim or entitlement to compensation or damages shall arise
from termination of the Award or diminution in value of the Award or Shares acquired upon vesting of the Award, resulting
from termination of the Grantee’s Continuous Service by the Company or any Related Entity (for any reason whatsoever and
whether or not in breach of local labor laws) and in consideration of the grant of the Award, the Grantee irrevocably releases
the Company and any Related Entity from any such claim that may arise; if, notwithstanding the foregoing, any such claim is
found by a court of competent jurisdiction to have arisen, then, by signing the Notice, the Grantee shall be deemed
irrevocably to have waived his or her right to pursue or seek remedy for any such claim or entitlement;
(j)
in the event of termination of the Grantee’s Continuous Service (whether or not in breach of local
labor laws), the Grantee’s right to receive Awards under the Plan and to vest in such Awards, if any, will terminate effective
as of the date that the Grantee is no longer providing services and will not be extended by any notice period mandated under
local law (e.g., providing services would not include a period of “garden leave” or similar period pursuant to local law);
furthermore, in the event of termination of the Grantee’s Continuous Service
(whether or not in breach of local labor laws), the Administrator shall have the exclusive discretion to determine when the
Grantee is no longer providing services for purposes of this Award;
(k)
the Company is not providing any tax, legal or financial advice, nor is the Company making any
recommendations regarding the Grantee’s participation in the Plan or the Grantee’s acquisition or sale of the underlying
Shares; and
(l)
the Grantee is hereby advised to consult with the Grantee’s own personal tax, legal and financial
advisers regarding the Grantee’s participation in the Plan before taking any action related to the Plan.
6.13
Data Protection and Privacy. The Grantee understands that the Company may (a) collect, process, store, use
and disclose Grantee’s personal data, (b) make such data available to the Company’s affiliates and subsidiaries, as well as to
certain appropriate third parties who provide products or services to the Company (for example, human resource service
providers), and (c) transmit, transfer and store such data to/on the Company’s information systems which may be located
outside Grantee’s home country, in countries which may have different data protection and privacy laws than Participant’s
home country. Any such collection, processing, storage, use, disclosure, transmission or transfer shall be made only for
lawful purposes, for example, managing Grantee’s employment relationship with the Company and administering the
Company’s compensation programs. For more information, please consult the Company’s applicable policies covering
personal data protection and privacy, as may be in effect from time to time.
6.14
Language. If the Grantee has received these Terms and Conditions or any other document related to the
Plan translated into a language other than English and if the translated version is different than the English version, the
English version will control, unless otherwise prescribed by Applicable Law.
6.15
Amendment and Delay to Meet the Requirements of Section 409A. The Grantee acknowledges that the
Company, in the exercise of its sole discretion and without the consent of the Grantee, may amend or modify these Terms
and Conditions in any manner and delay the issuance of any Shares issuable pursuant to these Terms and Conditions to the
minimum extent necessary to meet the requirements of Section 409A of the Code as amplified by any Treasury regulations
or guidance from the Internal Revenue Service as the Company deems appropriate or advisable. In addition, the Company
makes no representation that the Award will comply with Section 409A of the Code and makes no undertaking to prevent
Section 409A of the Code from applying to the Award or to mitigate its effects on any deferrals or payments made in respect
of the Units. The Grantee is encouraged to consult a tax adviser regarding the potential impact of Section 409A of the Code.
* * * * *
VEECO INSTRUMENTS INC. 2019 STOCK INCENTIVE PLAN
NOTICE OF RESTRICTED STOCK AWARD
Exhibit 10.17
Veeco Instruments Inc. (the “Company”), is pleased to confirm the award to the individual named below
(“Grantee”) of restricted shares of common stock, par value $0.01 per share, of the Company described below, subject to
the terms and conditions of this Notice of Restricted Stock Award (the “Notice”), the Veeco Instruments Inc. 2019 Stock
Incentive Plan, as amended from time to time (the “Plan”) and the terms and conditions set forth in the Veeco
Instruments Inc. Terms and Conditions of Restricted Stock Award (2020) (the “Terms and Conditions”) attached hereto,
as follows. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this
Notice.
Grantee:
Award Date:
Aggregate number of shares of
Restricted Stock subject to the Award
(the “Award”):
Vesting/Lapsing of Restrictions:
Subject to Grantee’s Continuous Service, the shares comprising the Award will vest, and the restrictions with
respect to such shares shall lapse, on each of the first (1st), second (2nd) and third (3rd) anniversaries of the Award Date
(each a “Vesting Date”). If Grantee would become vested in a fraction of a share on a Vesting Date, such share shall not
vest until Grantee becomes vested in the entire share on the following Vesting Date.
Additional Provisions:
This Award shall be subject to the terms and conditions set forth in the Plan and the Terms and Conditions,
including the Forfeiture for Restricted Activity, Clawback, Governing Law, and Venue and Jurisdiction provisions of
Sections 3.5, 3.6, 4.1 through 4.5, 5.7, and 5.8 of the Terms and Conditions.
IMPORTANT NOTICE
Grantee must sign this Notice and return it to the Company’s Sr. VP, Chief Administrative Officer on or before
April 17, 2020. Return your executed Notice to: Robert Bradshaw by mail at 1 Terminal Drive, Plainview, New
York 11803, or email at RBradshaw@Veeco.com. If Grantee has received this Notice by way of email from the
Company, and if Grantee is unable to sign and return the Notice on or before the aforementioned date due to
restrictions or challenges associated with COVID-19, Grantee may accept the Award by reply email to the
Company, stating “I accept” (or words to this effect) on or before the aforementioned date.
PLEASE NOTE THAT YOUR ACCEPTANCE OF THE AWARD WILL ALSO CONSTITUTE YOUR
ACCEPTANCE OF, AND AGREEMENT TO BE BOUND BY, THE TERMS AND CONDITIONS
GOVERNING THE RESTRICTED STOCK AWARD, INCLUDING WITHOUT LIMITATION, THE
RESTRICTED ACTIVITY, CLAWBACK, GOVERNING LAW, AND VENUE AND JURISDICTION
PROVISIONS OF SECTIONS 3.5, 3.6, 4.1 through 4.5, 5.7, AND 5.8 OF THE TERMS AND CONDITIONS.
VEECO INSTRUMENTS INC.
Name: Robert Bradshaw
Title: Sr. VP, Chief Administrative Officer
Grantee
____________________________ ________________________
Print Name Signature
Date
__________
2
VEECO INSTRUMENTS INC. 2019 STOCK INCENTIVE PLAN
TERMS AND CONDITIONS OF RESTRICTED STOCK AWARD
(2020)
These TERMS AND CONDITIONS OF RESTRICTED STOCK AWARD (2020) (these “Terms and
Conditions”) apply to any award by Veeco Instruments Inc., a Delaware corporation (the “Company”), of the
Company’s common stock, par value $0.01 per share (“Common Stock”), subject to certain restrictions
(“Restricted Stock”), pursuant to the Veeco Instruments Inc. 2019 Stock Incentive Plan (as it may be amended
from time to time, the “Plan”), which specifically references these Terms and Conditions.
ARTICLE 1
DEFINITIONS
1.1
In General. Capitalized terms used but not defined herein shall have the meanings assigned to
such terms in the Plan and/or the applicable Notice of Restricted Stock Award (the “Notice”). In addition, wherever
the following term is used in these Terms and Conditions, it shall have the meaning specified below, unless the
context clearly indicates otherwise.
1.2
“Restrictions” shall mean the restrictions on sale or other transfer set forth in Section 5.2 and the
exposure to the risk of forfeiture set forth in Section 3.1, 3.2, 3.5, and 3.6.
ARTICLE 2
RESTRICTED STOCK AWARD
2.1
Award of Restricted Stock. The Award is made in consideration of Grantee’s agreement to
remain in the service of the Company and for other good and valuable consideration which the Administrator has
determined exceeds the aggregate par value of the shares of Common Stock subject to the Award.
2.2
Award Subject to Plan. The Award is subject to the terms and provisions of the Plan, including
the provisions of Section 11 of the Plan in the event of a Corporate Transaction.
ARTICLE 3
RESTRICTIONS
3.1
Forfeiture. Unless otherwise provided by written agreement between the Company and Grantee,
which may be entered into at any time, including in connection with the termination of Grantee’s Continuous
Service, any Shares subject to the Award which are not vested at the time Grantee’s Continuous Service terminates
shall thereupon be forfeited immediately and without any further action by the Company or Grantee. Grantee also
may be required to forfeit shares of Restricted Stock subject to the Award, including shares of Common Stock
received pursuant to the Award, in accordance with Section 3.5 below.
Vesting and Lapse of Restrictions. Subject to Sections 3.1, 3.5, and 3.6, the Restrictions shall lapse, on each of the
first (1st), second (2nd) and third (3rd) anniversaries of the Award Date (each a “Vesting Date”); provided, however,
that in each case Grantee remains in Continuous Service from the Award Date through such Vesting Date. If
Grantee would become vested in a fraction of a share on a Vesting Date, such share shall not vest until Grantee
becomes vested in the entire share on the following Vesting Date.
3.2
Legend. Until such time as the Restrictions have lapsed, the Company may instruct the transfer
agent for the Common Stock and/or other record-keepers to include a restrictive code or similar notation in its
records (or legend on stock certificates, if any) to denote the Restrictions and any applicable federal and/or state
securities laws restrictions relating to Restricted Stock. The notation or legend may include the following:
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS SET FORTH IN THE PLAN AND IN THE TERMS AND
CONDITIONS APPLICABLE TO THE RESTRICTED STOCK AWARD, COPIES
OF WHICH ARE ON FILE AT THE PRINCIPAL OFFICE OF THE
CORPORATION.”
3.3
Payment of Taxes; Issuance of Shares.
(a)
Grantee understands, acknowledges and agrees that, unless a Section 83(b) election is
made (as described in Section 3.9), the difference between the Fair Market Value of a Share at the time it vests, and
the amount, if any, paid by Grantee for such Share is subject to state and federal income taxes and Grantee is
responsible for paying such taxes.
(b)
If the Company is required to withhold any such taxes, Grantee hereby authorizes the
Company and any brokerage firm determined acceptable to the Company for such purposes to sell on Grantee’s
behalf a whole number of Shares from the number of vested Shares delivered to Grantee at the time the
Restrictions lapse to generate cash proceeds sufficient to satisfy the tax withholding obligation (“Sale Provisions”).
The Shares will be sold as soon as practicable following the day the tax withholding obligation arises. Grantee will
be responsible for all brokerage fees and other costs of sale and Grantee agrees to indemnify and hold the Company
harmless from any losses, costs, damages, or expenses relating to any such sale. Grantee acknowledges that the
Company or its designee is under no obligation to arrange for such sale at any particular price, and that the
proceeds of any such sale may not be sufficient to satisfy Grantee’s tax withholding obligation. Accordingly,
Grantee agrees to pay to the Company as soon as practicable any amount of the tax withholding obligation that is
not satisfied by the sale of Shares described above. By accepting the Award, Grantee expresses his or her intent
that the Sale Provisions described above regarding the sale of Shares to pay taxes are intended to constitute a Rule
10b5-1 sales plan and to satisfy the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934, as
amended. The Company may, at its discretion, fulfill its tax withholding obligation by reducing the number of
vested Shares delivered to Grantee at the time the Restrictions lapse by the number of Shares required to satisfy
such tax withholding requirements with respect to Shares (but not cash dividends) (based on the Fair Market Value
of Shares at such time). Such Shares shall be returned to the Company. Grantee’s acknowledgement and
acceptance of these tax provisions are conditions precedent to the right of Grantee to receive the Award under the
Plan and these Terms and Conditions.
(c)
In lieu of the sale or reduction of Shares delivered described in paragraph (b) above,
Grantee may pay to the Company the amount of tax required to be withheld in cash, by check or in other form
satisfactory to the Company. Such payment must be made by the date on which the Restrictions lapse or such later
date as is established by the Company (not to exceed 15 days after the date on which the Restrictions lapse).
Company’s approved broker when vested and any applicable withholding obligations have been satisfied.
(d)
The Shares will be deposited directly into Grantee’s brokerage account with the
cash dividends from the dividends.
(e)
The Company is hereby authorized to satisfy any required withholding with respect to
3.4
Forfeiture for Restricted Activity. Grantee acknowledges that the Company is making this
Award of additional compensation, among other reasons, to provide an incentive to Grantee to remain with and to
promote the best interests of, the Company, and to protect the Company’s assets, including its goodwill,
Confidential Information (as defined below) and trade secrets, which are legitimate business interests of the
Company, and that engaging in “Restricted Activities” (as described in Article IV below), would be detrimental to
the legitimate business interests of the Company. Therefore, in exchange for this Award, notwithstanding anything
to the contrary in these Terms and Conditions or otherwise, if Grantee engages in “Restricted Activities” (as
described in Sections 4.1 through 4.5 below), (a) all unvested shares of Restricted Stock will immediately be
forfeited, and (b) Grantee shall be required to (i) return to the Company, within 10 business days after the
Company’s request to Grantee therefor, all shares of Common
Stock received pursuant to the Award that are owned, directly or indirectly, by Grantee and (ii) pay to the
Company, within 10 business days of the Company’s request to Grantee therefor, an amount equal to the excess, if
any, of the aggregate after-tax proceeds (taking into account all amounts of tax that would be recoverable upon a
claim of loss for payment of such proceeds in the year of repayment) Grantee received upon the sale or other
disposition of all shares of Common Stock received pursuant to the Award (the “After-Tax Proceeds”). The
forfeiture for Restricted Activity provisions of this Section 3.5 and Article IV shall survive and continue to apply
beyond settlement of all Awards under the Plan, any termination or expiration of this Award for any reason, and
after the provisions of any employment or other agreement between the Company and Grantee have lapsed.
3.5
Clawback. This Award and all shares of Common Stock received pursuant to the Award, and all
shares of Common Stock received pursuant to the Award that are owned, directly or indirectly, by Grantee and any
After-Tax Proceeds shall be subject to the Compensation Recoupment Policy, established by the Company, as
amended from time to time, or any similar or successor policy.
3.6
Stop-Transfer Notices. In order to ensure compliance with the Restrictions and any provisions
set forth in these Terms and Conditions, the Notice or the Plan, the Company may issue appropriate “stop transfer”
instructions to its transfer agent, if any, and, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records. The Company may issue a “stop transfer” instruction if Grantee
fails to satisfy any tax withholding obligations.
3.7
Certain Changes in Capitalization; Additional Securities. If the shares of the Company’s
Common Stock as a whole are increased, decreased, changed into or exchanged for a different number or kind of
shares or securities of the Company, whether through merger, consolidation, reorganization, recapitalization,
reclassification, stock dividend, stock split, combination of shares, exchange of shares, change in corporate
structure or the like, the Administrator, in its sole discretion, shall have the discretion and power to determine and
to make effective provision for acceleration of the time or times at which any Restrictions shall lapse or be
removed. In addition, in the case of the occurrence of any event described in this Section 3.8, the Administrator,
subject to the provisions of the Plan and these Terms and Conditions, shall make an appropriate and proportionate
adjustment in the number and kind of Shares subject to the Award, to the end that after such event Grantee’s
proportionate interest shall be maintained as before the occurrence of such event. Any such adjustment made by the
Administrator shall be final and binding upon Grantee, the Company and all other interested persons. Any
securities or cash received (including any regular cash dividend) as the result of ownership of the Restricted Stock
(the “Additional Securities”), including, but not by way of limitation, warrants, options and securities received as a
stock dividend or stock split, or as a result of a recapitalization or reorganization or other similar change in the
Company’s capital structure, shall be retained in escrow in the same manner and subject to the same conditions and
Restrictions as the Restricted Stock with respect to which they were issued, including, without limitation, the
vesting provisions set forth under Vesting/Lapsing of Restrictions in the Notice. Grantee shall be entitled to direct
the Company to exercise any warrant or option received as Additional Securities upon supplying the funds
necessary to do so, in which event the securities so purchased shall constitute Additional Securities, but Grantee
may not direct the Company to sell any such warrant or option. If Additional Securities consist of a convertible
security, Grantee may exercise any conversion right, and any securities so acquired shall constitute Additional
Securities. In the event of any change in certificates evidencing the Shares or the Additional Securities by reason of
any recapitalization, reorganization or other transaction that results in the creation of Additional Securities, the
escrow holder is authorized to deliver to the issuer the certificates evidencing the Shares or the Additional
Securities in exchange for the certificates of the replacement securities.
3.8
Section 83(b) Election. Grantee understands that, under Section 83(a) of the Internal Revenue
Code of 1986, as amended (the “Code”), Grantee will recognize as ordinary income the difference between the
amount, if any, paid for the Shares and the Fair Market Value of the Shares at the time the Restrictions on such
Shares lapse. Grantee understands that, notwithstanding the preceding sentence, Grantee may elect to be taxed at
the time of the Award Date, rather than at the time the Restrictions lapse, by filing an election under Section 83(b)
of the Code (an “83(b) Election”) with the Internal Revenue Service within 30 days of the Award Date. In the event
Grantee files an 83(b) Election, Grantee will
recognize ordinary income in an amount equal to the difference between the amount, if any, paid for the Shares and
the Fair Market Value of such Shares as of the Award Date, and will be responsible for paying all such taxes, and,
if applicable, paying the Company the amount of any tax required to be withheld thereon at the time of such
election, in the manner set forth in Section 3.4. Grantee further understands that a copy of such 83(b) Election form
must be filed with his or her federal income tax return for the calendar year in which the Award falls, and a copy
delivered to the Company. Grantee acknowledges that the foregoing is only a summary of the effect of United
States federal income taxation with respect to this Award, and does not purport to be complete or to deal with any
state, local or foreign tax requirements that might apply. GRANTEE FURTHER ACKNOWLEDGES THAT THE
COMPANY IS NOT RESPONSIBLE FOR FILING GRANTEE’S 83(B) ELECTION, AND THE COMPANY
HAS DIRECTED GRANTEE TO SEEK INDEPENDENT ADVICE REGARDING THE APPLICABLE
PROVISIONS OF THE CODE, THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FEDERAL
GOVERNMENT OR FOREIGN COUNTRY IN WHICH GRANTEE MAY RESIDE, AND THE TAX
CONSEQUENCES OF GRANTEE’S DEATH.
ARTICLE 4
FORFEITURE FOR RESTRICTED ACTIVITY
4.1
Restricted Activity. For the avoidance of doubt, the Company and Grantee agree that Grantee is
free to engage in the activities described in this Article IV and that the Company will not seek to enjoin or
otherwise stop Grantee from engaging in any such Restricted Activities (provided, however, that the Company
reserves such right as it may exist at law or in equity and/or pursuant to any other agreement entered into between
the Company and Grantee, including, without limitation, in the Veeco Instruments Inc. Employee Confidentiality
and Inventions Agreement (“ECIA”)), but that if Grantee engages in such activities the Company shall have all of
the rights set forth in Section 3.5 with respect to the Award, all shares of Common Stock received pursuant to the
Award, and any After-Tax Proceeds.
4.2
Company Information: During the term of employment with the Company and for five years
thereafter, Grantee will not use or disclose to any individual or entity any Confidential Information (as defined
below) of the Company except (i) in the performance of Grantee’s duties for the Company, (ii) as authorized in
writing by the Company, or (iii) as required by law or legal process, provided, that, prior to any such required
disclosure, Grantee will notify the Company of the requirement to disclose and, if requested, Grantee will
cooperate with the Company’s efforts to prevent or limit such disclosure. Grantee understands that “Confidential
Information” means any information that: (a) is disclosed to, learned by, or created by Grantee in connection with
Grantee’s employment with the Company (or a predecessor company now owned by or part of the Company), and
(b) the Company treats as proprietary, private or confidential. Confidential Information may include, without
limitation, information relating to the Company’s products, services and methods of operation, the identities and
competencies of the Company’s employees, customers and suppliers, trade secrets, know-how, processes,
Inventions and the Company Related Inventions (each as defined in the ECIA), techniques, data, sketches, plans,
drawings, chemical formulae, computer software, financial information, operating and cost data, research
databases, selling and pricing information, business and marketing plans, and information concerning potential
acquisitions, dispositions or joint ventures. Grantee further understands that “Confidential Information” does not
include any of the foregoing items which has become publicly known or made generally available (provided that
information will not cease to be “Confidential Information” as a result of Grantee’s breach of confidentiality).
Grantee will promptly notify the Company if Grantee becomes aware of any unauthorized use or disclosure of
Confidential Information.
4.3
Third Party Information: Grantee recognizes that the Company has received and in the future
will receive from its customers, suppliers and trading partners their confidential or proprietary information subject
to a duty on the Company’s part to maintain the confidentiality of such information and to use it only for certain
limited purposes. Grantee agrees to hold all such confidential or proprietary information in the strictest confidence
and not to disclose it to any person or entity or to use it except as necessary in carrying out Grantee’s work for the
Company consistent with the Company’s agreement with such third party.
4.4
Non-competition. During employment with the Company and for one year thereafter, (a) Grantee
will not own, manage, work for or otherwise participate in any business whose products, services or activities
compete with the current or currently contemplated products, services or activities of the Company in any state or
country in which the Company sells products or conducts business and (x) in which Grantee was involved or (y)
with respect to which Grantee had access to Confidential Information, in each case, during the 5 years prior to
termination, provided, however, that Grantee may own up to 1% of the securities of any such public company (but
without otherwise participating in the activities of such enterprise); and (b) Grantee will not, for himself or any
other person: (i) induce or try to induce any customer, supplier, licensor or business relation to stop doing business
with the Company or otherwise interfere with the relationship between the Company and any of its customers,
suppliers, licensors or business relations; or (ii) solicit the business of any person known by Grantee to be a
customer of the Company, whether or not Grantee had personal contact with such person, with respect to products
or activities that compete with the products or activities of the Company in existence or contemplated at the time of
termination of Grantee’s Continuous Service. Grantee agrees that this covenant is reasonable with respect to its
scope, geographical area, and duration.
4.5
Non-solicitation. During employment with the Company and for one year thereafter, Grantee
will not, for himself or any other person: (a) induce or try to induce any employee to leave the Company or
otherwise interfere with the relationship between the Company and any of its employees, or (b) employ or engage
as an independent contractor, any current or former employee of the Company, other than former employees who
have not worked for the Company within the past year. Grantee agrees that this covenant is reasonable with respect
to its scope and duration.
4.6
Severability: The invalidity or unenforceability of any paragraph or provision (or any part
thereof) of the Notice or these Terms and Conditions shall not affect the validity or enforceability of any one or
more of the other paragraphs or provisions (or other parts thereof), and all other provisions shall remain in full
force and effect. If any provision of the Notice or these Terms and Conditions is held to be excessively broad, then
such provision shall be reformed and construed by limiting and reducing it so as to be enforceable to the maximum
extent permitted by law.
Notice of Immunity under the Defend Trade Secrets Act and Other Protected Rights. Grantee understands
that, in accordance with the Defend Trade Secrets Act of 2016, Grantee will not be held criminally or civilly liable
under any federal or state trade secret law for the disclosure of a trade secret that: (a) is made (i) in confidence to a
federal, state or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the
purpose of reporting or investigating a suspected violation of law; or (b) is made in a complaint or other document
that is filed under seal in a lawsuit or other proceeding. Grantee also understands that if Grantee ever files a lawsuit
for retaliation by the Company for reporting a suspected violation of law, Grantee may disclose trade secrets to
Grantee’s attorney and use the trade secret information in the court proceeding provided Grantee: (a) files any
document containing the trade secret under seal; and (b) does not disclose the trade secret, except pursuant to court
order. Grantee understands that nothing contained in the Notice, these Terms and Conditions, or the Plan limits
Grantee’s ability to file a charge or complaint with the Equal Employment Opportunity Commission, the National
Labor Relations Board, the Occupational Safety and Health Administration, the Securities and Exchange
Commission or any other federal, state or local governmental agency or commission (“Government Agencies”).
Grantee further understands that nothing in the Notice, these Terms and Conditions, or the Plan limits Grantee’s
ability to communicate with any Government Agencies or otherwise participate in any investigation or proceeding
that may be conducted by any Government Agency, including providing documents or other information, without
notice to the Company. Nothing in the Notice, these Terms and Conditions, or the Plan limits Grantee’s right to
receive an award for information provided to any Government Agencies.
ARTICLE 5
OTHER PROVISIONS
5.1
Book Entry; Escrow. The unvested Shares will be held in book-entry or global certificate form.
If the Company instead chooses to issue share certificates representing the Shares, the certificates for the Shares
shall be deposited in escrow with the Secretary or Assistant Secretary of the Company or such other escrow holder
as the Company may appoint; provided, however, that in no event shall Grantee retain physical custody of any
certificates representing unvested Shares issued to him. The deposited certificates shall remain in escrow until all
of the Restrictions lapse or shall have been removed.
5.2
Restricted Stock Not Transferable. No unvested Shares or any interest or right therein or part
thereof shall be liable for the debts, contracts or engagements of Grantee or his successors in interest or shall be
subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means
whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment,
garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition
thereof shall be null and void and of no effect; provided, however, that this Section 5.2 shall not prevent transfers
by will or by applicable laws of descent and distribution.
5.3
Rights as Stockholder. Except as otherwise provided herein, upon issuance of the Shares
pursuant to Section 5.1, Grantee shall have all the rights of a stockholder with respect to said Shares, subject to the
Restrictions herein, including the right to vote the Shares and to receive all dividends or other distributions paid or
made with respect to the Shares; provided, however, that any and all Additional Securities received by Grantee
with respect to such Restricted Stock shall, as provided in Section 3.8, also be subject to the Restrictions until the
Restrictions on the underlying Shares lapse or are removed pursuant to these Terms and Conditions.
5.4
No Right to Continued Employment. Nothing in the Notice, these Terms and Conditions or the
Plan shall confer upon Grantee any right to continue in the service of the Company or any Related Entity or shall
interfere with or restrict in any way the rights of the Company or any Related Entity, which are hereby expressly
reserved, to discharge Grantee at any time for any reason whatsoever, with or without cause, except as may
otherwise be provided by any written agreement entered into by and between the Company and Grantee.
5.5
No Right to Future Awards. Nothing in the Notice, these Terms and Conditions or the Plan shall
confer upon Grantee any right with respect to future Awards under the Plan, or any right with respect to any other
award under any plan of the Company or any Related Entity.
5.6
Entire Agreement. The Notice, these Terms and Conditions and the Plan constitute the entire
agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior
undertakings and agreements of the Company and Grantee with respect to the subject matter hereof, and may not
be modified adversely to Grantee’s interest except by means of a writing signed by the Company and Grantee. For
the avoidance of doubt, the restrictions set forth in Sections 4.2 through 4.5 above do not supersede any other
agreement between the Company and Grantee, including, without limitation, the ECIA. Nothing in the Notice, the
Plan and these Terms and Conditions (except as expressly provided therein) is intended to confer any rights or
remedies on any persons other than the parties. Should any provision of the Notice, the Plan or these Terms and
Conditions be determined to be illegal or unenforceable, such provision shall be enforced to the fullest extent
allowed by law and the other provisions shall nevertheless remain effective and shall remain enforceable.
5.7
Governing Law. The Notice, the Plan and these Terms and Conditions are to be construed in
accordance with and governed by the internal laws of the State of New York, without giving effect to any choice of
law rule that would cause the application of the laws of any jurisdiction other than the internal laws of the State of
New York to the rights, duties, and obligations of the parties.
5.8
Venue and Jurisdiction. The Company, Grantee, and Grantee’s assignees pursuant to Section 5.2
(the “parties”) expressly agree that any suit, action, or proceeding arising out of or relating to
the Notice, the Plan or these Terms and Conditions shall be brought in the United States District Court for the
Eastern District of New York (or should such court lack jurisdiction to hear such action, suit or proceeding, in a
New York state court in the County of Nassau) and that the parties shall submit to the exclusive jurisdiction of such
courts. The parties irrevocably waive, to the fullest extent permitted by law, any objection the party may have to
the laying of venue for any such suit, action or proceeding brought in such court. The parties agree and submit to
personal jurisdiction in either court. The Parties further agree that this Venue and Jurisdiction is binding on all
matters related to the Notice, the Plan, or these Terms and Conditions and may not be altered or amended by any
other arrangement or agreement (including an employment agreement) without the express written consent of
Grantee and the Company. If any one or more provisions of this Section 5.8 shall for any reason be held invalid or
unenforceable, it is the specific intent of the parties that such provisions shall be modified to the minimum extent
necessary to make it or its application valid and enforceable.
5.9
Jury Trial. THE PARTIES EXPRESSLY WAIVE ANY RIGHT THEY HAVE OR MAY HAVE
TO A JURY TRIAL OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE
NOTICE, THE PLAN OR THESE TERMS AND CONDITIONS.
5.10
Conformity to Securities Laws. Grantee acknowledges that the Plan and these Terms and
Conditions are intended to conform to the extent necessary with all provisions of the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and any and all regulations
and rules promulgated thereunder by the Securities and Exchange Commission, including without limitation Rule
16b-3 under the Exchange Act. Notwithstanding anything herein to the contrary, the Plan shall be administered,
and the Award is granted, only in such a manner as to conform to such laws, rules and regulations. To the extent
permitted by applicable law, the Plan and these Terms and Conditions shall be deemed amended to the extent
necessary to conform to such laws, rules and regulations.
5.11
Amendment, Suspension and Termination. The Award and these Terms and Conditions may be
wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by
the Committee or the Board, provided that, except as may otherwise be provided by the Plan, neither the
amendment, suspension nor termination of the Award or these Terms and Conditions shall, without the consent of
Grantee, alter or impair any rights or obligations under any Award.
5.12
Administration and Interpretation. Any question or dispute regarding the administration or
interpretation of the Notice, the Plan or these Terms and Conditions shall be submitted by Grantee or by the
Company to the Administrator. The resolution of such question or dispute by the Administrator shall be final and
binding on all persons.
5.13
Notices. Notices required or permitted hereunder shall be given in writing and shall be deemed
effectively given upon personal delivery or upon deposit in the United States mail by certified mail, with postage
and fees prepaid, addressed to Grantee to his address shown in the Company records, and to the Company at its
principal executive office.
5.14
Severability. The invalidity or unenforceability of any paragraph or provision of these Terms and
Conditions shall not affect the validity or enforceability of any other paragraph or provision, and all other
provisions shall remain in full force and effect. If any provision of these Terms and Conditions is held to be
excessively broad, then such provision shall be reformed and construed by limiting and reducing it so as to be
enforceable to the maximum extent permitted by law.
5.15
Certain Provisions Applicable to Grantees Employed at International Locations. The Company
will assess its requirements regarding tax, social insurance and any other payroll tax (“Tax-Related Items”)
withholding and reporting in connection with the Shares. These requirements may change from time to time as
laws or interpretations change. Regardless of the actions of the Company in this regard, Grantee hereby
acknowledges and agrees that the ultimate liability for any and all Tax-Related Items is and remains his or her
responsibility and liability and that the Company makes no representations nor undertakings regarding treatment of
any Tax-Related Items in connection with any aspect of the Award
and does not commit to structure the terms of the grant or any aspect of the Award to reduce or eliminate Grantee’s
liability regarding Tax-Related Items. In the event that the Company must withhold any Tax-Related Items in
connection with the Award, Grantee agrees to make arrangements satisfactory to the Company to satisfy all
withholding requirements. Grantee authorizes the Company to withhold all applicable Tax-Related Items legally
due from Grantee from his or her wages or other cash compensation paid him or her by the Company and/or to
cause the sale of vested Shares on Grantee’s behalf or reduce the number of vested Shares delivered to Grantee at
the time the Restrictions lapse, as contemplated by Section 3.4 above, to satisfy such Tax-Related Items.
5.16
Data Protection and Privacy. The Grantee understands that the Company may (a) collect,
process, store, use and disclose Grantee’s personal data, (b) make such data available to the Company’s affiliates
and subsidiaries, as well as to certain appropriate third parties who provide products or services to the Company
(for example, human resource service providers), and (c) transmit, transfer and store such data to/on the
Company’s information systems which may be located outside Grantee’s home country, in countries which may
have different data protection and privacy laws than Participant’s home country. Any such collection, processing,
storage, use, disclosure, transmission or transfer shall be made only for lawful purposes, for example, managing
Grantee’s employment relationship with the Company and administering the Company’s compensation programs.
For more information, please consult the Company’s applicable policies covering personal data protection and
privacy, as may be in effect from time to time.
* * * * *
Exhibit 10.30
March 20, 2019
Adrian Devasahayam
Dear Adrian:
I am very pleased to confirm the details of your promotion to Sr. VP/GM, AD&E/PSP, reporting to Bill Miller, CEO. The
location for this position is Plainview, NY. The elements of your package, which will become effective on March 25, 2019
unless otherwise indicated below, include the following:
● Your bi-weekly base salary will be increased to $11,923.08 which, when annualized, is equal to $310,000. This
increase will constitute your 2019 base salary.
◾ You will continue to be eligible to participate in the Management Bonus Plan. Your target bonus will be increased to
60% of your base salary.
●
In connection with your promotion and the Company’s 2019 equity award program, the Compensation Committee of
the Board of Directors has approved a grant to you of 25,000 shares of restricted stock under the Veeco Instruments
2010 Stock Incentive Plan, effective March 14, 2019 (the “Award Date”). This award is subject to the terms of the
applicable plan and your written acceptance of the related award agreements. A portion of your award representing
19,000 shares will be granted as time-based restricted stock that is subject to a substantial risk of forfeiture which will
lapse, subject to your continued employment, over a four-year period; a portion of your award representing 6,000
shares will be granted as performance-based restricted stock units that will vest, subject first to being earned, on the
third anniversary of the Award Date. Additional details will be provided under separate cover.
All other elements of your current compensation and benefits will continue unchanged.
This letter is not a contract of employment and does not provide any rights regarding your continued employment with Veeco.
Your employment with Veeco will continue on an “at will” basis. This means that the employment relationship is non-
contractual, for no fixed period and terminable at any time by either you or the Company. In addition, no subsequent oral or
written agreements on this subject shall be valid unless they are in writing and signed by an authorized representative of Veeco.
Adrian, I’d like to thank you for your many contributions to Veeco and congratulate you on your promotion. I’m looking
forward to working with you in your new role. Should you have any questions regarding the above items, please let me know.
Sincerely,
/s/ ROBERT W. BRADSHAW
__________________________
Robert W. Bradshaw
Sr. Vice President, Human Resources
CC: William J. Miller, CEO
Exhibit 10.31
August 4, 2017
Peter Porshnev
Dear Peter:
I am very pleased to confirm the details of your promotion to Senior Vice President and General Manager, Ultratech, effective
August 28, 2017. In this role, you will continue to report to Bill Miller, President.
The following summarizes the terms of your compensation:
● Your bi-weekly salary will be increased to $13,461.54 which, when annualized, is equal to
$350,000.00.
● You will continue to participate in Veeco's performance-based management bonus plan with an increased target of 60% of
your base salary as in effect on the last day of the performance period (December 31, 2017).
● As part of your promotion, the Compensation Committee of the Board of Directors has approved a restricted stock award
with a value equal to $200,000 under the Veeco Instruments 2010 Stock Incentive Plan. Restricted stock awards are
subject to a substantial risk of forfeiture which will lapse, subject to your continued employment, over four years with one
quarter of the total award vesting on each anniversary of the Grant Date. Your award will be granted and the number of
shares of Common Stock underlying your award will be determined on September 1, 2017, the first business day of the
month following the effective date of your promotion.
●
●
In addition, we will recommend to the Compensation Committee that you be named as a participant in the Company's
Senior Executive Change in Control Policy. As a participant, you will be eligible for certain benefits in connection with a
change in control. You will also be subject to the Veeco Instruments Inc. Stock Ownership Guidelines. These benefits and
our Stock Ownership Guidelines are described in the attached documents: Senior Executive Change in Control Policy and
Veeco Stock Ownership Guidelines.
This position requires that you relocate. The Company will provide relocation assistance to move you and your family
from New York to California. All relocation activities must be coordinated through Veeco's designated relocation partner
to be eligible for reimbursement and you will be required to execute Veeco's Relocation Acknowledgement/Repayment
Agreement specifying the terms and conditions for all relocation benefits. Please see the enclosed Relocation Policy and
Repayment Agreement for additional details.
All other elements of your current compensation and benefits will continue unchanged.
This letter is not a contract of employment and does not provide any rights regarding your continued employment with Veeco. Your
employment continues on an "at will" basis. This means that the employment relationship is non-contractual, for no fixed period and
terminable at any time by either you or Veeco. In addition, no subsequent oral or written agreements on this subject shall be valid
unless they are in writing and signed by an authorized representative of Veeco.
Kindly indicate your acceptance by signing and returning a copy of this letter to my attention.
Peter, I'd like to personally congratulate you and wish you success in your new role at Veeco. Should you have any questions
regarding the above items, please contact me.
Exhibit 10.31
Sincerely,
/s/ MAUREEN BIES
________________________
Maureen Bies
Senior Director, Human Resources
ACCEPTED & AGREED:
/s/ PETER PORSHNEV
___________________________
Peter Porshnev
August 7, 2017
Exhibit 10.32
March 9, 2020
Susan Wilkerson
Dear Susan:
We are very pleased to confirm our offer to you to join Veeco Instruments Inc. (“Veeco” or the “Company”) as Senior Vice
President, Global Sales and Services, reporting to Bill Miller, Chief Executive Officer. In this capacity, you will be
responsible for the leadership and management of Veeco’s global sales and services organization, including all of the
Company’s sales and services resources and functions.
The elements of our offer are as follows:
● Your bi-weekly base salary will be $14,423.08 which, when annualized, is equal to $375,000. The Company’s regular
payday is every other Friday. Your salary will next be reviewed in connection with the Company’s 2021
compensation planning process, generally occurring in March 2021.
● You will participate in a performance-based management bonus plan, beginning in 2020. Your target bonus will be
75% of your base earnings for the plan year (January 1 through December 31). As an additional inducement, we will
guarantee that your 2020 award will be no less than $210,000. Awards under the plan are based on measures of both
corporate financial performance and individual goals and objectives. Additional details describing the plan will be
provided once you join Veeco.
● As part of your offer, the Compensation Committee of the Board of Directors has approved a restricted stock award
comprised of 66,667 shares under the Veeco Instruments 2019 Stock Incentive Plan. Restricted stock awards are
subject to a substantial risk of forfeiture which will lapse, subject to your continued employment, over four (4) years
in accordance to the following schedule (the “Vesting Schedule”): (i) 20% on the date which is twelve (12) months
from the Award Date, (ii) 20% on the date which is eighteen (18) months from the Award Date, (iii) 20% on the date
which is thirty (30) months from the Award Date, (iv) 20% on the date which is forty-two (42) months from the
Award Date, and (v) 20% on the date which is forty-eight (48) months from the Award Date. Your award will be
granted (the “Award Date”) on the first business day of the month following, or coinciding with, your hire date. This
award is subject to your written acceptance of this Agreement and subsequent commencement of employment, the
terms of the applicable plan, and any related award agreement. Additionally, we are pleased to commit that your 2021
equity award will be not less than 25,000 shares, which will likely be delivered in the form of performance-based
restricted stock units (65%) and time-based restricted stock (35%).
●
In addition, we are pleased to provide you with a bi-weekly car allowance in the gross amount of $323.08 which,
when annualized, is equal to $8,400. The Allowance is subject to applicable federal, state, and local taxes.
● You will accrue vacation at the rate of twenty (20) days per year, earned at the rate of 6.16 hours for each bi-weekly
payroll. The vacation accrual period runs from January 1st through December 31st.
●
●
It is agreed that the work location for this position will be your home office. Your assignment will require that you are
available for travel to Veeco locations, customer facilities, and other destinations (domestic and international) as may
be deemed necessary to successfully carry out your work responsibilities.
In addition to the foregoing, effective with your hire date, the Compensation Committee has named you as a
participant in the Company’s Senior Executive Change in Control Policy. As a participant, you will be eligible for
certain benefits in connection with a change in control. You will also be subject to the Veeco
Exhibit 10.32
Instruments Inc. Stock Ownership Guidelines. Additional information about the Senior Executive Change in Control
Policy and Stock Ownership Guidelines are included in the attached documents. Finally, as we discussed, your
position will be designated as an executive officer of the Company, which will require disclosure with the U.S.
Securities and Exchange Commission of certain elements of your compensation.
● Veeco offers a comprehensive benefit program that is summarized in the enclosed “Total Benefit Solutions” brochure.
You will be eligible to enroll in the Company’s health and welfare benefits programs on the first of the month next
following your start date and you will be eligible to enroll in the Company’s pre-tax 401(k) savings plan on the first
day of the calendar quarter after you commence employment. Additional information regarding these benefits will be
communicated to you in detail upon joining Veeco.
Susan, we are pleased to offer you this comprehensive compensation package. Additional information important to your
joining Veeco includes the following:
● Veeco is required by federal immigration laws to verify the identity and legal ability to work in the United States of all
individuals employed by the Company. This offer of employment is contingent upon your ability to demonstrate valid
work authorization at the time of your employment. Please bring proof of your eligibility to legally work in the United
States with you on your first day of work. The list of acceptable documents (all must be unexpired) are included with
the form (e.g.; valid U.S. passport (List A), driver’s license and Social Security Card (List B & C). This offer of
employment is contingent upon our receiving favorable background and reference checks, including approved
technology clearance for Veeco products, information and processes in compliance with U.S. Export Administration
Regulations. During your initial employment period, before your technology clearance is received, you will have
access only to unrestricted products, technologies and facilities.
● Our Company promotes a drug-free work environment and in that regard we have implemented a pre-employment
drug screening program for job applicants. Information regarding the drug screening process (along with the Fair
Crediting Reporting Act Disclosure and Authorization Statement that must be completed and returned to me before
the expiration of this offer) and the participating collection facility closest to your home is included with this letter.
Your refusal to consent to this testing, falsification of a test or positive test results will result in denial of employment.
The drug screening process should be completed within two (2) business days from the date of your acceptance of this
position.
● As a condition of your employment, you will be required to sign an Employee Confidentiality & Inventions
Agreement (copy enclosed) upon commencing employment with Veeco. This Agreement ensures a common
understanding regarding your responsibilities in this matter.
Employment at Veeco is on an at-will basis which means that employment is not for any specific period and either the
Company or its employees can terminate the employment relationship at any time, with or without cause or notice.
This letter constitutes all the terms of Veeco’s offer of employment and supersedes all previous conditions, whether verbal,
written or implied. The terms of this offer can only be changed in writing and must be signed by both the employee and
appropriate representative of Veeco. By signing this letter you are agreeing to the terms and conditions contained in it and you
agree to comply with Veeco’s Code of Business Conduct. Additionally, you agree that these documents, taken together with
our Employment Application, constitute the entire agreement and understanding between Veeco and you. Finally, you
acknowledge that any of Veeco’s policies and procedures and benefit programs may be amended from time to time by Veeco
in its sole discretion.
This offer will expire on Friday, March 13, 2020. Kindly indicate your acceptance by signing and returning a copy of this
letter to my attention.
Exhibit 10.32
Susan, we are very impressed with your potential for success and we look forward to having you join the Veeco team at a
most exciting time in the history of the Company. Please let Bill or me know if we can be of assistance with respect to any
aspect of our offer.
Sincerely,
/s/ ROBERT W. BRADSHAW
Robert W. Bradshaw
Sr. Vice President, Chief Administrative Officer
ACCEPTED AND AGREED:
/s/ SUSAN WILKERSON
______________________________
Susan Wilkerson
cc: Bill Miller, Al Climent (Spencer Stuart)
____________________________
Proposed Start Date
Subsidiaries of the Registrant
As of December 31, 2020
Exhibit 21.1
Subsidiary
Jurisdiction of Organization Percentage Ownership(A)
U.S. Subsidiaries
Ultratech International Inc.
Veeco APAC LLC
Veeco Process Equipment Inc.
Foreign Subsidiaries
Veeco Asia Pte. Ltd.
Veeco GmbH
Veeco Instruments Limited
Veeco Instruments (Shanghai) Co. Ltd.
Veeco Japan Ltd.
Veeco Korea LLC
Veeco Malaysia Sdn. Bhd.
Veeco Netherlands BV
Veeco Taiwan Inc.
Ultra-Tech Technologies Israel Ltd.
Ultratech Korea Holdings LLC
(A) Includes direct and indirect ownership.
DE
DE
DE
Singapore
Germany
England
China
Japan
South Korea
Malaysia
Netherlands
Taiwan
Israel
Korea
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Consent of Independent Registered Public Accounting Firm
Exhibit 23.1
The Board of Directors
Veeco Instruments Inc.:
We consent to the incorporation by reference in the registration statements listed below of Veeco Instruments Inc. (the Company)
of our reports, dated February 22, 2021, with respect to the consolidated balance sheets of Veeco Instruments Inc. and
subsidiaries as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income (loss),
stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2020, and the related
notes and financial statement schedule II – valuation and qualifying accounts (collectively, the consolidated financial statements),
and the effectiveness of internal control over financial reporting as of December 31, 2020, which reports appear in the
December 31, 2020 annual report on Form 10-K of Veeco Instruments Inc.
Plan
Veeco Instruments Inc. 2010 Stock Incentive Plan
Veeco Instruments Inc. 2010 Stock Incentive Plan, Veeco Instruments Inc. 2013 Inducement Stock
Incentive Plan
Veeco Instruments Inc. Amended and Restated 2010 Stock Incentive Plan, Veeco Instruments Inc.
2016 Employee Stock Purchase Plan
Ultratech, Inc. 1993 Stock Option/Stock Issuance Plan as amended and restated May 31, 2017
Veeco Instruments Inc. 2019 Stock Incentive Plan
Veeco Instruments Inc. Shelf Registration Statement
Registration No. Form
333-166852
333-194737
S-8
S-8
333-211781
333-218256
333-231266
333-242450
S-8
S-8
S-8
S-3
/s/ KPMG LLP
Melville, New York
February 22, 2021
CERTIFICATION PURSUANT TO
RULE 13a—14(a) or RULE 15d—14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Exhibit 31.1
I, William J. Miller, Ph.D., certify that:
1.
I have reviewed this annual report on Form 10-K for the year ended December 31, 2020 (the “Report”) of the Company;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by
this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
/s/ WILLIAM J. MILLER, Ph.D.
William J. Miller, Ph.D.
Chief Executive Officer and Director
Veeco Instruments Inc.
February 22, 2021
CERTIFICATION PURSUANT TO
RULE 13a—14(a) or RULE 15d—14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Exhibit 31.2
I, John P. Kiernan, certify that:
1.
I have reviewed this annual report on Form 10-K for the year ended December 31, 2020 (the “Report”) of the Company;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by
this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
/s/ John P. Kiernan
John P. Kiernan
Senior Vice President and Chief Financial Officer
Veeco Instruments Inc.
February 22, 2021
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report of Veeco Instruments Inc. (the “Company”) on Form 10-K for the year ended
December 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William J. Miller,
Ph.D., Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
/s/ WILLIAM J. MILLER, Ph.D.
William J. Miller, Ph.D.
Chief Executive Officer and Director
Veeco Instruments Inc.
February 22, 2021
A signed original of this written statement required by Section 906 has been provided to Veeco Instruments Inc. and will
be retained by Veeco Instruments Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
In connection with the Annual Report of Veeco Instruments Inc. (the “Company”) on Form 10-K for the year ended
December 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John P. Kiernan,
Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
/s/ John P. Kiernan
John P. Kiernan
Senior Vice President and Chief Financial Officer
Veeco Instruments Inc.
February 22, 2021
A signed original of this written statement required by Section 906 has been provided to Veeco Instruments Inc. and will
be retained by Veeco Instruments Inc. and furnished to the Securities and Exchange Commission or its staff upon request.