What changed in this filing

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Item 9A. Controls and Procedures

2022-02-18 compared with 2021-02-22 · 222 added, 254 removed, 1057 unchanged (31% of the section changed)

12 unchanged sentences

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.

We have audited Veeco Instruments Inc.

and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2021, 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, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

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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 2022 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.

We have adopted a Code of Ethics for Senior Officers (the “Code”) which applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or 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).

We have also adopted a Code of Conduct which applies to all of our employees, including those listed above, as well as to our directors.

A copy of the Code of Conduct can be found on our website (www.veeco.com).

The website address above is intended to be an inactive, textual reference only.

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Exhibit Description

Conflict Minerals Report of Veeco Instruments Inc.

Amended and Restated Certificate of Incorporation of Veeco dated December 1, 1994, as amended June 2, 1997 and July 25, 1997.

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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.

Lease dated February 18, 2021 between Veeco Instruments Inc.

and Trimble-Junction Ventures LLC.

Incorporated by Reference

Exhibit Description

Veeco Severance Benefits Policy, effective May 1, 2009.

Veeco Amended and Restated 2010 Stock Incentive Plan, effective May 5, 2016.

6 unchanged sentences

Exchange Agreement .

Note Purchase Agreement, dated as of November 5, 2021, by and between Veeco Instruments Inc.

and Lynrock Lake LLP.

Loan and Security Agreement, dated as of December 16, 2021, by and among Veeco Instruments Inc., as borrower, the guarantors party thereto, the lenders from time to time party thereto, HSBC Bank USA, National Association, as administrative agent, collateral agent, joint lead arranger, and joint bookrunner, Barclays bank PLC, as joint lead arranger and joint bookrunner, and Santander Bank, N.A.

Guaranty, dated as of December 16, 2021, by the guarantors, identified therin in favor of HSBC Bank USA, National Association, as agent.

Form of Notice of Performance Share Award and related terms and conditions pursuant to the Veeco 2010 Stock Incentive Plan, effective June 2016.

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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) .

Incorporated by Reference

Exhibit Description

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) .

1 unchanged sentence

Form of Notice of Restricted Stock Award and related terms and conditions pursuant to the Veeco 2019 Stock Incentive Plan, effective March 2020.

Form of Notice of Performance Restricted Stock Unit Award and related terms and conditions pursuant to the Veeco 2019 Stock Incentive Plan, effective March 2021.

Form of Notice of Restricted Stock Award and related terms and conditions pursuant to the Veeco 2019 Stock Incentive Plan, effective March 2021 .

Veeco 2013 Inducement Stock Incentive Plan, effective September 26, 2013 .

3 unchanged sentences

2016 Employee Stock Purchase Plan.

Second 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).

Incorporated by Reference

Exhibit Description

Veeco Amended and Restated Senior Executive Change in Control Policy, effective as of January 1, 2014.

9 unchanged sentences

Letter Agreement dated August 4, 2017 between Veeco and Peter Porshnev.

Incorporated by Reference

Exhibit Description

Letter Agreement dated March 9, 2020 between Veeco and Susan Wilkerson.

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/s/ KATHLEEN A.

/s/ SUJEET CHAND

/s/ GORDON HUNTER

6 unchanged sentences

Index to Consolidated Financial Statements and Financial Statement Schedule

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID 185 )

Consolidated Balance Sheets at December 31, 2021 and 2020

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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.

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

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.

As discussed in Note 1 of the consolidated financial statements, the Company assesses the valuation of its 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

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Prepaid expenses and other current assets

Assets held for sale

Total current assets

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Long-term debt

Operating lease long-term liabilities

Long-term operating lease liabilities

Other liabilities

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Restructuring

Acquisition costs

Asset impairment

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Balance at December 31, 2018

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

Other comprehensive income, net of tax

Net income (loss)

Other comprehensive income (loss), net of tax

Share-based compensation expense

1 unchanged sentence

Balance at December 31, 2019

Other comprehensive income, net of tax

Net income (loss)

Other comprehensive income (loss), net of tax

Share-based compensation expense

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Balance at December 31, 2020

Net income (loss)

Other comprehensive income (loss), net of tax

Share-based compensation expense

Net issuance under employee stock plans

Extinguishment of equity component of repurchased 2023 Notes

Balance at December 31, 2021

See accompanying Notes to the Consolidated Financial Statements.

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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

Proceeds from issuance of 2027 Notes, net of issuance costs

Purchase of capped calls

Repurchase of 2023 Notes

Debt issuance costs

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

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Interest paid

Income taxes paid

Non-cash operating and financing activities

Net income taxes paid (refunds received)

Non-cash activities

Capital expenditures included in accounts payable and accrued expenses

Net transfer of property, plant and equipment to inventory

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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.

During 2021 the interim quarters ended on April 4, July 4, and October 3, and during 2020 the interim quarters ended on March 29, June 28, and September 27.

The Company reports these interim quarters as March 31, June 30, and September 30 in its interim consolidated financial statements.

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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.

The Company has elected to treat shipping and handling costs, including those costs incurred to move, package, and prepare the Company’s products for shipment and to move the products to a customer’s designated location, as a fulfillment activity, and the Company includes such costs in “Cost of sales” in the Consolidated Statements of Operations as incurred.

These costs are generally comprised of payments to third-party shippers.

Taxes assessed by governmental authorities that are collected by the Company from a customer are excluded from revenue.

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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

(h) 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

(i) Advertising Expense

The cost of advertising is expensed as incurred and totaled $ 0.3 million, $ 0.4 million, and $ 0.5 million for the years ended December 31, 2021, 2020, and 2019, respectively.

(k) Accounting for Share-based Compensation

(j) Accounting for Share-based Compensation

Share-based awards exchanged for employee services are accounted for under the fair value method.

8 unchanged sentences

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.

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.

2 unchanged sentences

See Note 13, “Stock Plans,” for additional information.

(l) Income Taxes

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(k) Income Taxes

Income taxes are accounted for under the asset and liability method.

2 unchanged sentences

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.

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

(l) 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.

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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.

The allowance for doubtful accounts totaled $ 0.7 million at both December 31, 2021 and 2020.

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.

1 unchanged sentence

The Company, at its discretion, may monetize these letters of credit on a non-recourse basis after they become negotiable but before maturity.

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 fees 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, 2021, 2020, and 2019.

(m) 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

(n) 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.

3 unchanged sentences

The Company’s cash and cash equivalents includes $ 41.7 million and $ 86.2 million of cash equivalents at December 31, 2021 and 2020, respectively.

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

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.

7 unchanged sentences

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

Changes in fair value and impairment charges are included in “Other income (expense), net” in the Consolidated Statements of Operations.

(o) Inventories

Inventories are stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis.

7 unchanged sentences

Inventory acquired as part of a business combination is recorded at fair value on the date of acquisition.

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(q) Business Combinations

(p) Business Combinations

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.

1 unchanged sentence

Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred.

(r) Goodwill and Indefinite-Lived Intangible Assets

(q) 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.

5 unchanged sentences

The Company performs the evaluation in the beginning of the fourth quarter of each year or more frequently if impairment indicators arise.

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

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.

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The Company determines the fair value of its indefinite-lived intangible assets using a discounted cash flow method.

(s) Long-lived Assets

(r) 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.

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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.

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.

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The Company does not separate lease and non-lease components in determining ROU assets or lease liabilities for real estate leases.

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

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.

(t) Recently Adopted Accounting Standards

The Company adopted ASU 2019-12:

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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

(u) 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

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

and Contracts in an Entity’s Own Equity .

Accounting for Convertible Instruments 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.

2 unchanged sentences

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 provisions of ASU 2020-06 are applicable for fiscal years beginning after December 15, 2021.

The Company’s 2023 Notes, 2025 Notes, and 2027 Notes all are currently accounted for using the separation models for convertible debt with a cash conversion feature, and therefore upon adoption of ASU 2020-06 in the first quarter of 2022, the Company expects a decrease in non-cash interest expense.

Additionally, the Company will be required to use the if-converted method for its current convertible debt when calculating diluted earnings (loss) per share, which will result in an increase in income available to common shareholders, as well as an increase in diluted shares outstanding.

The Company expects to use the modified retrospective method of adoption, which will result in an increase in the carrying value of long-term debt of approximately $ 44.3 million as of January 1, 2022, with a corresponding decrease in stockholders’ equity .

The Company is evaluating other pronouncements recently issued but not yet adopted.

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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 Company has determined that it has the ability and intent to settle the principal amount of its convertible senior notes in cash, and the excess of the principal portion in shares of its common stock.

As such, the Company accounts for the conversion spread using the treasury stock method, and the shares issuable upon conversion of the Notes are not included in the calculation of diluted earnings per share except to the extent that the conversion

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

value of the Notes exceeds their principal amount and if the effect would be dilutive.

The computations of basic and diluted income (loss) per share for the years ended December 31, 2021, 2020, and 2019 are as follows:

5 unchanged sentences

Effect of potentially dilutive share-based awards

Dilutive effect of convertible notes

Diluted weighted average shares outstanding

1 unchanged sentence

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

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

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 due to a net loss or the fact that the conversion value of the Notes did not exceed their principal amount

Note 3 — Fair Value Measurements

7 unchanged sentences

The use of different market assumptions or estimation methodologies could have a significant effect on the estimated fair value amounts.

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

The following table presents the Company’s assets that were measured at fair value on a recurring basis at December 31, 2021 and 2020:

3 unchanged sentences

Certificate of deposits and time deposits

Commercial paper

Money market cash

Short-term investments

Government agency securities

Corporate debt

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Commercial paper

Corporate debt

Short-term investments

Government agency securities

Corporate debt

Commercial paper

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.

Veeco Instruments Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements (Continued)

Note 4 — Investments

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December 31, 2021

Government agency securities

Corporate debt

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December 31, 2020

Government agency securities

Corporate debt

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(in thousands)

Government agency securities

Corporate debt

At December 31, 2021 and 2020, 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.

The contractual maturities of securities classified as available-for-sale at December 31, 2021 were as follows:

December 31, 2021

(in thousands)

Due in one year or less

Due after one year through two years

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, 2021, 2020, and 2019 were immaterial.

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Other Investments

3 unchanged sentences

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

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.

Neither equity investment has a readily observable market price, and therefore the Company has elected to measure these investments at cost, adjusted for changes in observable market prices minus impairment.

The investments are included in “Other assets” on the Consolidated Balance Sheets.

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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.

During the year 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.

During the year ended December 31, 2021, the Company identified impairment indicators on the Company’s other investment, and recorded a non-cash impairment charge of $ 1.0 million.

Both impairment charges were included in “Other income (expense), net” in the Consolidated Statement of Operations.

Note 5 — Inventories

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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.

Veeco Instruments Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements (Continued)

Minnesota as held for sale, and subsequently sold the land for approximately $ 0.6 million, which approximated its carrying value.

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:

There were no changes in goodwill balances during the years ended December 31, 2021 or 2020, while the below table reflects the gross carrying amounts and accumulated impairments as of the respective periods:

Gross carrying

(in thousands)

Balance at December 31, 2018

Allocated to Assets held for sale

Balance at December 31, 2021 and 2020

2 unchanged sentences

The annual test performed at the beginning of the fourth quarter of fiscal 2021, 2020, and 2019 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.

This analysis is sensitive to changes in the Company’s stock price and absent other qualitative factors, the Company may be required to record 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:

5 unchanged sentences

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.

Veeco Instruments Inc.

1 unchanged sentence

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, 2021, and assuming no subsequent additions to or impairment of the underlying assets, the remaining estimated annual amortization expense, is expected to be as follows:

6 unchanged sentences

Professional fees

Legal settlement

Sales, use, and other taxes

Restructuring liability

Customer deposits and deferred revenue

5 unchanged sentences

Deferral of revenue

Recognition of previously deferred revenue

Recognition of unearned revenue

Balance - December 31, 2021

As of December 31, 2021, the Company has approximately $ 33.6 million of remaining performance obligations on contracts with an original estimated duration of one year or more, of which approximately 94 % 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.

Veeco Instruments Inc.

1 unchanged sentence

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

1 unchanged sentence

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.

The plan was terminated and fully liquidated during 2021.

At December 31, 2020, plan assets approximated $ 2.4 million, 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 is included within “Other liabilities” in the Consolidated Balance Sheets.

At December 31, 2021 and 2020, other liabilities also included (i) asset retirement obligations of $ 2.8 million and $ 2.7 million, respectively;

2 unchanged sentences

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.

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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:

Severance and

Related Costs

(in thousands)

Balance - December 31, 2017

Balance - December 31, 2018

Balance - December 31, 2019

Balance - December 31, 2020

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.

At December 31, 2021, a $ 1.7 million liability remains for these deferred payroll taxes, which is included within “Accrued expenses and other current liabilities.”

Note 9 — Commitments and Contingencies

20 unchanged sentences

Accrued expenses and other current liabilities

Operating lease long-term liabilities

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.

Long-term operating lease liabilities

Operating lease cost for the years ended December 31, 2021, 2020, and 2019 was $ 6.6 million, $ 5.4 million, and $ 5.5 million, respectively.

Variable lease cost for all years ended December 31, 2021, 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.

Lease expense, which includes operating lease costs and variable lease costs, was $ 8.4 million, $ 7.1 million, and $ 7.2 million for the years ended December 31, 2021, 2020, and 2019, 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.

Operating cash outflows from operating leases for the year ended December 31, 2021, 2020, and 2019 were $ 6.6 million (excluding landlord reimbursements for leasehold improvements of $ 6.1 million included within “Other, net” in the Consolidated Statements of Cash Flows), $ 6.9 million, and $ 7.2 million, respectively.

Legal Proceedings

5 unchanged sentences

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.

In October 2021, Veeco and the court-appointed class representatives signed an agreement to settle the Wolther Action on a class-wide basis for $ 15.0 million, subject to court approval and class members’ opportunity to object and opt-out, which is included within “Accrued expenses and other current liabilities” in the Consolidated Balance Sheets as of December 31, 2021.

The settlement amount will be funded by insurance carriers, the receivable for which is included in “Prepaid expenses and other current assets” in the Consolidated Balance Sheets as of December 31, 2021.

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Notes to Consolidated Financial Statements (Continued)

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.

3 unchanged sentences

Veeco is defending this matter vigorously.

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Notes to Consolidated Financial Statements (Continued)

On January 25, 2021, the court granted the defendants’ demurrer without leave to amend effecting the dismissal of the case.

Plaintiff is appealing the dismissal of its case.

The Company is involved in various other legal proceedings arising in the normal course of business.

15 unchanged sentences

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.

Pursuant to this agreement, the Company sold $ 11.6 million of receivables during the year ended December 31, 2020, of which $ 5.9 million was outstanding at December 31, 2020, and subsequently settled during 2021.

There were no further sales of receivables under this agreement during 2021, and therefore the full $ 15.0 million is available under the agreement for additional sales of receivables as of December 31, 2021.

The Company did not sell any receivables under this agreement during 2021.

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.

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Notes to Consolidated Financial Statements (Continued)

The Company outsources certain functions to third parties, including the manufacture of several of its systems.

3 unchanged sentences

The Company had deposits with its suppliers of $ 3.9 million and $ 7.2 million at December 31, 2021 and 2020, respectively, that were included in “Prepaid expenses and other current assets” on the Consolidated Balance Sheets.

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Notes to Consolidated Financial Statements (Continued)

Purchase Commitments

13 unchanged sentences

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.

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.

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

Veeco Instruments Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements (Continued)

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.

Finally, on November 5, 2021, the Company entered into a privately negotiated note purchase agreement with a holder of its outstanding 2023 Notes, under which the Company agreed to repurchase and retire approximately $ 111.5 million in aggregate original principal amount of the 2023 Notes, with a carrying amount of $ 105.5 million, for cash consideration of approximately $ 115.6 million, and approximately $ 1.0 million of accrued and unpaid interest.

The Company accounted for the partial settlement of the 2023 Notes as an extinguishment, and as such, recorded a loss on extinguishment of approximately $ 4.0 million for the year ended December 31, 2021, 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 $ 6.1 million for the repurchase of the conversion feature.

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.

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”).

12 unchanged sentences

(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;

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Notes to Consolidated Financial Statements (Continued)

(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;

1 unchanged sentence

(iv) Upon the occurrence of specified corporate events.

For the calendar quarter ended December 31, 2021, the last reported sales price of common stock during the 30 consecutive trading days, based on the criteria outlined in (i) above, was greater than 130 % of the conversion price of the 2027 Notes, and as such the 2027 Notes are convertible by the holders until March 31, 2022.

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.

2 unchanged sentences

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

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Notes to Consolidated Financial Statements (Continued)

high yield bond indices.

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 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.

8 unchanged sentences

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.

Holders of the

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Notes to Consolidated Financial Statements (Continued)

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.

3 unchanged sentences

December 31, 2020

(in thousands)

Principal Amount

Unamortized debt discount/transaction costs

debt discount/

transaction costs

Net carrying value

Veeco Instruments Inc.

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Notes to Consolidated Financial Statements (Continued)

Principal Amount

debt discount/

transaction costs

Net carrying value

(in thousands)

Net carrying value

Total interest expense related to the Notes is as follows:

11 unchanged sentences

The Company determined the Notes are Level 2 liabilities in the fair value hierarchy and estimated their fair values as $ 20.4 million, $ 175.0 million, and $ 258.9 million at December 31, 2021 for the 2023 Notes, 2025 Notes, and 2027 Notes, respectively.

Revolving Credit Facility

On December 16, 2021, the Company entered into a loan and security agreement providing for a senior secured revolving credit facility in an aggregate principal amount of $ 150 million (the “Credit Facility”), including a $ 15 million letter of credit sublimit.

The Credit Facility is guaranteed by the Company’s direct material U.S.

subsidiaries, subject to customary exceptions.

Borrowings under the Credit Facility are secured by a first-priority lien on substantially all of the assets of the Company, subject to customary exceptions.

The Credit Facility has a term of five years , maturing on December 16, 2026, or earlier if certain liquidity measures are not met prior to the 2025 Notes maturing.

Subject to certain conditions and the receipt of commitments from the lenders, the Loan and Security Agreement allows for revolving commitments under the Credit Facility to be increased by up to $ 75 million.

The existing lenders under the Credit Facility are entitled, but not obligated, to provide such incremental commitments.

Borrowings will bear interest at a floating rate which can be, at the Company’s option, either (a) an alternate base rate plus an applicable rate ranging from 0.50 % to 1.25 % or (b) a SOFR rate (with a floor of 0.00 %) for the specified interest

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Notes to Consolidated Financial Statements (Continued)

period plus an applicable rate ranging from 1.50 % to 2.25 %, in each case, depending on the Company’s Secured Net Leverage Ratio (as defined in the Loan and Security Agreement).

The Company will pay an unused commitment fee ranging from 0.25 % to 0.35 % based on unused capacity under the Credit Facility and the Company’s Secured Net Leverage Ratio.

The Company may use the proceeds of borrowings under the Credit Facility to pay transaction fees and expenses, provide for its working capital needs and reimburse drawings under letters of credit and for other general corporate purposes.

The Loan and Security Agreement contains customary affirmative covenants for transactions of this type, including, among others, the provision of financial and other information to the administrative agent, notice to the administrative agent upon the occurrence of certain material events, preservation of existence, maintenance of properties and insurance, compliance with laws, including environmental laws, the provision of additional guarantees, and an affiliate transactions covenant, subject to certain exceptions.

The Loan and Security Agreement contains customary negative covenants, including, among others, restrictions on the ability to merge and consolidate with other companies, incur indebtedness, refinance our existing convertible notes, grant liens or security interests on assets, make investments, acquisitions, loans, or advances, pay dividends, and sell or otherwise transfer assets.

The Loan and Security Agreement contains financial maintenance covenants that require the Borrower to maintain an Interest Coverage Ratio (as defined in the Loan and Security Agreement) of not less than 3.00 to 1.00, a Total Net Leverage Ratio (as defined in the Loan and Security Agreement) of not more than 4.50 to 1.00, and a Secured Net Leverage Ratio (as defined in the Loan and Security Agreement) of not more than 2.50 to 1.00, in each case, tested at the end of each fiscal quarter commencing with the fiscal quarter ending March 31, 2022.

The Loan and Security Agreement also provides for a number of customary events of default, including, among others:

payment defaults to the lenders; voluntary and involuntary bankruptcy proceedings; covenant defaults; material inaccuracies of representations and warranties; certain change of control events; material money judgments; and other customary events of default.

The occurrence of an event of default could result in the acceleration of obligations and the termination of lending commitments under the Loan and Security Agreement.

No amounts were outstanding under the Credit Facility as of December 31, 2021.

Note 11 — Derivative Financial Instruments

6 unchanged sentences

The Company did not have any outstanding derivative contracts at December 31, 2021 and 2020.

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:

Year ended December 31,

Gains (losses)

Weighted average notional amount

(in thousands)

Foreign currency exchange forwards

Veeco Instruments Inc.

44 unchanged sentences

At December 31, 2021, there are 0.4 million option shares and 0.7 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.

The Company is authorized to issue up to 2.25 million shares under the approved 2016 employee stock purchase plan (“ESPP”), including additional shares authorized under plan amendments approved by shareholders in 2019 and 2021.

Under the ESPP, substantially all employees in the U.S.

1 unchanged sentence

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

1 unchanged sentence

At December 31, 2021, the Company has 0.8 million shares reserved to cover future issuances under the ESPP Plan.

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Notes to Consolidated Financial Statements (Continued)

Share-Based Compensation

10 unchanged sentences

The Company capitalized an immaterial amount of share-based compensation into inventory for the years ended December 31, 2021, 2020, and 2019.

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Notes to Consolidated Financial Statements (Continued)

Unrecognized share-based compensation costs at December 31, 2021 are summarized below:

12 unchanged sentences

Balance - December 31, 2018

Expired or forfeited

Balance - December 31, 2019

Expired or forfeited

Balance - December 31, 2020

Expired or forfeited

Balance - December 31, 2021

Veeco Instruments Inc.

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Notes to Consolidated Financial Statements (Continued)

The following table summarizes stock option information at December 31, 2021:

7 unchanged sentences

$ 30.01 - $ 40.00

$ 40.01 - $ 50.00

$ 50.01 - $ 60.00

There were no unvested options outstanding as of December 31, 2021.

Additionally, there were no options exercised for the years ended December 31, 2020, 2019, or 2018.

The following table summarizes information on options exercised for the periods indicated:

Year ended December 31,

(in thousands)

Cash received from options exercised

Intrinsic value of options exercised

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Notes to Consolidated Financial Statements (Continued)

RSAs, RSUs, PSAs, PSUs

14 unchanged sentences

The total fair value of shares that vested during the years ended December 31, 2021, 2020, and 2019 was $ 22.8 million, $ 9.0 million, and $ 8.8 million, respectively.

For performance awards, the final number of shares earned will vary

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Notes to Consolidated Financial Statements (Continued)

depending on the achievement of the actual results relative to the performance or market conditions.

For performance awards, the final number of shares earned will vary 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.

6 unchanged sentences

Expected volatility factor (1)

Veeco Instruments Inc.

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Notes to Consolidated Financial Statements (Continued)

Risk-free interest rate (2)

20 unchanged sentences

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.

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 three percent of the employee’s eligible compensation, as limited by current Internal Revenue Code regulations.

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

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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.

The Company provided employer contributions associated with this plan of approximately $ 2.6 million, $ 2.4 million, and $ 2.4 million for the years ended December 31, 2021, 2020, and 2019, respectively.

Note 15 — 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.

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.

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.

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Notes to Consolidated Financial Statements (Continued)

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.

12 unchanged sentences

(in thousands)

Veeco Instruments Inc.

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Notes to Consolidated Financial Statements (Continued)

Significant components of the expense (benefit) for income taxes consisted of the following:

6 unchanged sentences

Total expense (benefit) for income taxes

The income tax expense was reconciled to the tax expense computed at the U.S.

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Notes to Consolidated Financial Statements (Continued)

The income tax expense (benefit) was reconciled to the tax expense computed at the U.S.

federal statutory tax rate as follows:

10 unchanged sentences

Share-based compensation

Effect of 2017 Tax Act

Asset impairment

1 unchanged sentence

Total expense (benefit) for income taxes

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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.

20 unchanged sentences

At December 31, 2021, 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.

federal NOL carryforwards of approximately $ 165.8 million, of which $ 6.9 million have an indefinite carryforward period, with the remaining expiring in 2036, if not utilized.

At December 31, 2021, the Company had U.S.

1 unchanged sentence

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.

Additionally, the Company has state and local NOL carryforwards of approximately $ 104.7 million (a net deferred tax asset of $ 6.8 million, net of

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Notes to Consolidated Financial Statements (Continued)

federal tax benefits and before the valuation allowance) that will expire between 2022 and 2040.

Finally, the Company has state credits of $ 30.6 million, some of which are indefinite and others that will expire between 2024 and 2036.

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.

As such, the Company maintains a valuation allowance against its U.S.

As of December 31, 2021, the Company continued to have a cumulative loss in recent years with respect to its U.S.

Based on this negative objective evidence, the Company continues to maintain a valuation allowance against its U.S.

deferred tax assets.

During 2021, the Company’s valuation allowance decreased by approximately $ 2.4 million.

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Notes to Consolidated Financial Statements (Continued)

A roll-forward of the Company’s uncertain tax positions for all U.S.

13 unchanged sentences

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’s major foreign jurisdictions’ statutes of limitation remain open with respect to the tax years 2015 through 2020 for Germany, 2017 through 2020 for China, and 2020 for Taiwan and Singapore.

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.

3 unchanged sentences

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.

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Notes to Consolidated Financial Statements (Continued)

Sales by end-market is as follows:

7 unchanged sentences

For geographic reporting, sales are attributed to the location in which the customer facility is located.

Veeco Instruments Inc.

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Notes to Consolidated Financial Statements (Continued)

Sales and long-lived tangible assets by geographic region are as follows:

5 unchanged sentences

(1) EMEA consists of Europe, the Middle East, and Africa

Note 19 — Selected Quarterly Financial Information (unaudited)

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.

(in thousands, except per share amounts)

Net income (loss)

Basic income (loss) per common share

Diluted income (loss) per common share

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.

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Notes to Consolidated Financial Statements (Continued)

Note 20 — Subsequent Event

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.

Schedule II — Valuation and Qualifying Accounts

11 unchanged sentences

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What changed 10-K

Item 9A. Controls and Procedures