What changed in this filing

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Item 9A. Controls and Procedures

2023-02-22 compared with 2022-02-18 · 227 added, 212 removed, 1067 unchanged (29% of the section changed)

2 unchanged sentences

Our principal executive and financial officers have evaluated and concluded that our disclosure controls and procedures are effective as of December 31, 2022.

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.

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.

10 unchanged sentences

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, 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, 2021 and 2020, 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, 2021, and the related notes and financial statement schedule II – valuation and qualifying accounts (collectively, the consolidated financial statements), and our report dated February 18, 2022 expressed an unqualified opinion on those consolidated financial statements.

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, 2022 and December 31, 2021, 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, 2022, and the related notes and financial statement schedule II - valuation and qualifying accounts (collectively, the consolidated financial statements), and our report dated February 22, 2023 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

15 unchanged sentences

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.

Melville, New York

Santa Clara, California

February 22, 2023

29 unchanged sentences

Amendment to Certificate of Incorporation of Veeco dated May 18, 2010.

Sixth Amended and Restated Bylaws of Veeco effective January 22, 2021.

Seventh Amended and Restated Bylaws of Veeco effective January 9, 2023.

Certificate of Designation, Preferences, and Rights of Series A Junior Participating Preferred Stock of Veeco dated March 14, 2001.

19 unchanged sentences

2019 Stock Incentive Plan .

Amendment No.

1 to the Veeco Instruments Inc.2019 Stock Incentive Plan.

Ultratech, Inc.

6 unchanged sentences

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.

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.

2 unchanged sentences

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.

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) .

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.

56 unchanged sentences

/s/ KATHLEEN A.

/s/ SUJEET CHAND

/s/ SUJEET CHAND, Ph.D.

Sujeet Chand, Ph.D.

/s/ GORDON HUNTER

Gordon Hunter

/s/ LENA NICOLAIDES, Ph.D.

Lena Nicolaides, Ph.D.

/s/ MARY JANE RAYMOND

17 unchanged sentences

We have audited the accompanying consolidated balance sheets of Veeco Instruments Inc.

and subsidiaries (the Company) as of December 31, 2021 and 2020, 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, 2021, 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, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with U.S.

and subsidiaries (the Company) as of December 31, 2022 and December 31, 2021, 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, 2022, 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, 2022 and December 31, 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022, 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, 2022, 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, 2023 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for the covertible senior notes as of January 1, 2022 due to the adoption of Accounting Standards Update No.

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, using the modified retrospective method.

Basis for Opinion

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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 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.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate 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 critical audit matters 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 matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

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 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

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 cost.

Estimates of usage include the Company’s analysis of anticipated demand, possible alternative uses of its inventory, as well as other qualitative factors.

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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.

Subjective auditor judgement 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 following are the primary procedures we performed to address this critical audit matter.

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.

We evaluated current year estimates of anticipated demand used to assess the value of excess and obsolete inventory when they differed significantly from historical sales volumes.

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.

Evaluation of the realizability of domestic deferred tax assets

As discussed in Note 1 and 15 to the consolidated financial statements, 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.

A valuation allowance is provided for deferred tax assets if it is more likely than not that these items will not be realized, which is dependent upon the generation of future taxable income.

As of December 31, 2022, the Company had deferred tax assets before valuation allowances of $143.2 million.

We identified the evaluation of the realizability of the domestic deferred tax assets as a critical audit matter.

The evaluation of the realizability of domestic deferred tax assets required subjective auditor judgment to assess the projections of future taxable income, including projected revenue growth rates, over the periods in which those deferred tax assets will be utilized.

We performed a sensitivity analysis to determine the assumptions used in the Company’s forecast of projected future taxable income, including projected revenue growth rates, that have a significant impact on utilization of the domestic deferred tax assets.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls related to assessing the realizability of domestic deferred tax assets, which included controls related to the Company's evaluation of assumptions used to estimate projected revenue growth rates and projected future taxable income.

We evaluated management’s projections of revenue growth rates by comparing them to (i) historical growth for certain product lines, (ii) industry data and economic trends, and (iii) known customer orders.

We also assessed the Company’s ability to project future revenue growth rates by comparing previous annual projections to actual results.

We evaluated management’s projections of future taxable income by comparing them to (i) recent financial profitability trends of the Company and (ii) industry data and economic trends.

We assessed the Company’s ability to project future taxable income by comparing previous annual projections to actual results.

We also performed a sensitivity analysis over the amount and timing of future taxable income to assess the impact on utilization of the domestic deferred tax assets.

We have served as the Company’s auditor since 2015.

Melville, New York

Santa Clara, California

February 22, 2023

9 unchanged sentences

Contract assets

Deferred cost of sales

Prepaid expenses and other current assets

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Income taxes payable

Current portion of long-term debt

Total current liabilities

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Total operating expenses, net

Operating income (loss)

Operating income

Interest income

1 unchanged sentence

Other income (expense), net

Income (loss) before income taxes

Income before income taxes

Income tax expense (benefit)

Net income (loss)

Income (loss) per common share:

Income per common share:

Weighted average number of shares:

5 unchanged sentences

For the year ended December 31,

Net income (loss)

Other comprehensive income (loss), net of tax:

4 unchanged sentences

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

Total comprehensive income (loss)

Total comprehensive income

See accompanying Notes to the Consolidated Financial Statements.

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(in thousands)

Treasury Stock

Comprehensive

4 unchanged sentences

Net issuance under employee stock plans

Balance at December 31, 2019

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/exchanged 2023 Notes

9 unchanged sentences

Balance at December 31, 2021

Cumulative effect of change in accounting principle - adoption of ASU 2020-06

Net income (loss)

Other comprehensive income (loss), net of tax

Share-based compensation expense

Net issuance under employee stock plans

Balance at December 31, 2022

See accompanying Notes to the Consolidated Financial Statements.

5 unchanged sentences

Cash Flows from Operating Activities

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation and amortization

8 unchanged sentences

Accounts receivable and contract assets

Inventories and deferred cost of sales

Prepaid expenses and other current assets

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Interest paid

Net income taxes paid (refunds received)

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

Net transfer of inventory to property, plant and equipment

Right-of-use assets obtained in exchange for lease obligations

12 unchanged sentences

The Company’s fourth quarter always ends on the last day of the calendar year, December 31.

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.

During 2022 the interim quarters ended on April 3, July 3, and October 2, and during 2021 the interim quarters ended on April 4, July 4, and October 3.

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

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The Company’s contracts with customers generally do not contain variable consideration.

In the rare instances where variable

In the rare instances where variable consideration is included, the Company estimates the amount of variable consideration and determines what portion of

Veeco Instruments Inc.

1 unchanged sentence

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.

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.

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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.

Veeco Instruments Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements (Continued)

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.

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.

34 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.

A valuation allowance is provided for deferred tax assets if it is more likely than not that these items will not be realized, which is dependent upon the generation of future taxable income.

(l) Concentration of Credit Risk

77 unchanged sentences

Fair value is determined through various valuation techniques including discounted cash flow models or, when available, quoted market values and third-party appraisals.

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.

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.

4 unchanged sentences

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.

Veeco Instruments Inc.

1 unchanged sentence

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.

(t) Recently Adopted Accounting Standards

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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.

(u) Recent Accounting Pronouncements Not Yet Adopted

In August 2020, the FASB issued ASU 2020-06:

The Company adopted 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 .

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity on January 1, 2022, using the modified retrospective method for all financial instruments that were outstanding as of the adoption date.

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.

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 elimination of these models reduces 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, such as the Company’s 2023 Notes, 2025 Notes, and 2027 Notes.

The adoption of ASU 2020-06 resulted in the following adjustments to the Consolidated Balance Sheets:

December 31, 2021

January 1, 2022

(in thousands)

Balance Sheet line item:

Long-term debt

Additional paid-in capital

Accumulated deficit

The adoption of ASU 2020-06 resulted in the following adjustments to the Company’s calculations of basic and diluted income per share for the year ended December 31, 2022:

Year ended December 31, 2022

legacy accounting

Income per common share:

Basic income per common share

Diluted income per common share

(u) Recent Accounting Pronouncements Not Yet Adopted

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.

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 2 — Income (Loss) Per Share

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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.

Upon the adoption of ASU 2020-06 on January 1, 2022, the Company includes the dilutive effect of shares issuable upon conversion of its Notes in the calculation of diluted income per share using the if-converted method.

Prior to the adoption of ASU 2020-06, based on the Company’s 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, the Company accounted for the conversion spread using the treasury stock method, and the shares issuable upon conversion of the Notes were not included in the calculation of diluted earnings per share except to the extent that the conversion 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, 2022, 2021, and 2020 are as follows:

1 unchanged sentence

(in thousands, except per share amounts)

Net income (loss)

Net income (loss) per common share:

Interest expense associated with convertible notes

Net income available to common shareholders

Basic weighted average shares outstanding

2 unchanged sentences

Diluted weighted average shares outstanding

Net income per common share:

Unvested participating shares excluded from basic weighted average shares outstanding since the securityholders are not obligated to fund losses

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

Maximum potential shares to be issued for settlement of the convertible notes excluded from the diluted calculation as their effect would be antidilutive

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

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, 2022 and 2021:

11 unchanged sentences

Certificate of deposits and time deposits

Commercial paper

Money market cash

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

6 unchanged sentences

December 31, 2021

Government agency securities

Corporate debt

3 unchanged sentences

December 31, 2021

Continuous Loss Position

for Less than 12 Months

for 12 Months or More

for Less than 12 Months

(in thousands)

1 unchanged sentence

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.

At December 31, 2021, there were no short-term investments that had been in a continuous loss position for more than 12 months.

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

The contractual maturities of securities classified as available-for-sale at December 31, 2022 were as follows:

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The realized gains or losses for the years ended December 31, 2022, 2021, and 2020 were immaterial.

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

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 $ 2.0 million at December 31, 2021.

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 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.

Veeco has an ownership interest of less than 20 % in a non-marketable investment in a separate entity, with a carrying value of $ 2.0 million at December 31, 2022 and 2021.

The Company does not exert significant influence over this entity.

This equity investment does not have a readily observable market price, and therefore the Company has elected to measure this investment at cost, adjusted for changes in observable market prices minus impairment.

The investment is included in “Other assets” on the Consolidated Balance Sheets.

The investment is 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 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.

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

This impairment charge was included in “Other income (expense), net” in the Consolidated Statement of Operations.

Note 5 — Inventories

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Finished goods

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 6 — Property, Plant, and Equipment

11 unchanged sentences

Depreciation expense was $ 15.6 million, $ 13.8 million, and $ 15.4 million for the years ended December 31, 2022, 2021, and 2020, respectively.

During the year ended December 31, 2019, the Company classified vacant land in St.

Veeco Instruments Inc.

and Subsidiaries

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

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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.

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

The components of purchased intangible assets were as follows:

5 unchanged sentences

Other intangible assets primarily consist of patents, licenses, and backlog.

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Based on the intangible assets recorded at December 31, 2022, and assuming no subsequent additions to or impairment of the underlying assets, the remaining estimated annual amortization expense, is expected to be as follows:

12 unchanged sentences

Changes in deferred revenue were as follows:

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(in thousands)

5 unchanged sentences

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.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

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.

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;

(ii) income tax payables of $ 0.4 million and $ 1.4 million, respectively;

and (iii) medical and dental benefits for former executives of $ 1.8 million and $ 1.9 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.

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.”

At December 31, 2022 and 2021, other liabilities included (i) asset retirement obligations of $ 0.7 million and $ 2.8 million, respectively;

(ii) income tax payables of $ 0.4 million for both periods, and (iii) medical and dental benefits for former executives of $ 2.0 million and $ 1.8 million, respectively.

Note 9 — Commitments and Contingencies

22 unchanged sentences

Operating lease cost for the years ended December 31, 2022, 2021, and 2020 was $ 7.4 million, $ 6.6 million, and $ 5.4 million, respectively.

Variable lease cost for all years ended December 31, 2021, 2020, and 2019 was $ 1.7 million.

Variable lease cost was $ 2.0 million for the year ended December 31, 2022, and $ 1.7 million for the years ended December 31, 2021, and 2020.

Additionally, the Company has an immaterial amount of short-term leases.

1 unchanged sentence

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, 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.

Operating cash outflows from operating leases for the year ended December 31, 2022, 2021, and 2020 were $ 7.5 million, $ 6.6 million (excluding landlord reimbursements for leasehold improvements of $ 6.1 million included within “Other, net” in the Consolidated Statements of Cash Flows), and $ 6.9 million, respectively.

Legal Proceedings

3 unchanged sentences

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.

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.

These cases were consolidated with the Wolther Action, and a consolidated complaint was filed on December 11, 2018.

The consolidated complaint sought 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.

On June 27, 2022, the court granted final approval to the class action settlement.

The settlement amount was funded by insurance carriers.

The corresponding receivable and liability had been included within “Prepaid expenses and other current assets” and “Accrued expenses and other current liabilities”, respectively, in the Consolidated Balance Sheets as of December 31, 2021.

Veeco Instruments Inc.

3 unchanged sentences

Peeler, et al., Case No.

18CV339925, on behalf of nominal defendant Veeco.

18CV339925, on behalf of nominal defendant Veeco (the “Derivative Action”).

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.

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.

On March 26, 2021, plaintiff filed its notice of appeal of the trial court’s order granting defendants’ demurrer without leave to amend.

In April 2022, Veeco and plaintiff reached an agreement to settle the Derivative Action subject to court approval.

As part of the settlement and subject to court approval, Veeco agreed to make certain revisions to its internal Disclosure Committee Charter and its director education program.

After the court gave final approval in November 2022 to the Derivative Action settlement and the request for fees and costs made by plaintiff’s counsel, $ 0.3 million was paid to plaintiff’s counsel for fees and expenses.

The amount was funded by insurance that Veeco maintains in the normal course of its business.

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 $ 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.

Pursuant to this agreement, the Company sold $ 13.2 million of receivables during the year ended December 31, 2022, of which $ 5.4 million remained outstanding as of December 31, 2022 as defined in the receivable purchase agreement, and $ 9.6 million was available under the agreement for additional sales of receivables.

There were no sales of receivables under this agreement during 2021.

The net sale of accounts receivable under the agreement is reflected as a reduction of

Veeco Instruments Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements (Continued)

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.

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

4 unchanged sentences

Purchase Commitments

The Company had purchase commitments of $ 193.0 million at December 31, 2021, 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.

The Company had purchase commitments of $ 289.2 million at December 31, 2022, the majority of which will come due within one year.

Purchase commitments are primarily for inventory used in manufacturing products, as well as equipment and project materials used to support research and development activities, and are partially offset by existing deposits with suppliers.

Bank Guarantees

9 unchanged sentences

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

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.

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.

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.

The 2023 Notes matured on January 15, 2023 and were paid in cash and settled by the Company at that time.

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”).

13 unchanged sentences

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;

Veeco Instruments Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements (Continued)

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:

(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;

3 unchanged sentences

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.

Accounting for the Notes after the adoption of ASU 2020-06

The Company adopted ASU 2020-06 on January 1, 2022 as further described in Note 1, “Basis of Presentation”.

Following the adoption of ASU 2020-06, the Notes are recorded as a single unit within liabilities in the consolidated balance sheets as the conversion features within the Notes are not derivatives that require bifurcation and the Notes do not involve a substantial premium.

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 recorded as direct deductions from the related debt liabilities and recognized as non-cash interest expense using the effective interest method over the expected terms of the Notes.

Accounting for the Notes prior to the adoption of ASU 2020-06

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.

As a result of its cash conversion options, prior to the adoption of ASU 2020-06, 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.

1 unchanged sentence

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

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 were to be amortized over the expected lives of the Notes using the effective interest rate method.

Amortization of the debt discounts were recognized as non-cash interest expense.

Veeco Instruments Inc.

1 unchanged sentence

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.

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.

Transaction costs allocated to the liability component were being amortized using the effective interest rate method and recognized as non-cash interest expense over the expected terms of the Notes.

The carrying values of the Notes are as follows:

2 unchanged sentences

Principal Amount

debt discount/

transaction costs

19 unchanged sentences

The Company determined the Notes are Level 2 liabilities in the fair value hierarchy and estimated their fair values as $ 19.5 million, $ 143.6 million, and $ 192.0 million at December 31, 2022 for the 2023 Notes, 2025 Notes, and 2027 Notes, respectively.

Capped Call Transactions

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

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.

Revolving Credit Facility

6 unchanged sentences

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

Veeco Instruments Inc.

and Subsidiaries

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).

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 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.

6 unchanged sentences

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

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, 2021 and 2020.

No amounts were outstanding under the Credit Facility as of December 31, 2022 or December 31, 2021.

Veeco Instruments Inc.

13 unchanged sentences

Balance - December 31, 2022

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.

The Company did not allocate additional tax expense (benefit) to other comprehensive income (loss) for the years ended December 31, 2021 and 2020, as the Company was in a full valuation allowance position such that a deferred tax asset related to amounts recognized in other comprehensive income was not regarded as realizable on a more-likely-than-not basis.

The Company allocated an immaterial amount of additional tax benefit to other comprehensive income (loss) for the year ended December 31, 2022, as the Company is no longer in a full valuation allowance position.

Preferred Stock

1 unchanged sentence

As of December 31, 2022, 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 12 — Stock Plans

1 unchanged sentence

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,

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.

This Plan was subsequently amended, as approved by shareholders, in 2013, 2016, 2019 (at which time the Plan was renamed the 2019 Stock Incentive Plan), and 2022 (as amended to date, the “2019 Plan”).

In 2013, the Board of Directors granted equity awards to certain employees under the Company’s 2013 Inducement Stock Incentive Plan (the “Inducement Plan”).

3 unchanged sentences

At December 31, 2022, there are 2,000 option shares and no RSUs outstanding under the Inducement Plan.

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

The Company is authorized to issue up to 17.8 million shares under the 2019 Plan.

18 unchanged sentences

Selling, general, and administrative

Restructuring

The Company did not realize any tax benefits associated with share-based compensation for the years ended December 31, 2021 and 2020 due to the full valuation allowance on its U.S.

1 unchanged sentence

See Note 15, “Income Taxes” for additional information.

The Company recognized a tax benefit of approximately $ 4.5 million associated with share-based compensation for the year ended December 31, 2022.

The Company capitalized an immaterial amount of share-based compensation into inventory for the years ended December 31, 2022, 2021, and 2020.

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Unrecognized share-based compensation costs at December 31, 2022 are summarized below:

6 unchanged sentences

Total unrecognized share-based compensation cost

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Stock Option Awards

22 unchanged sentences

Intrinsic value of options exercised

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

RSAs, RSUs, PSAs, PSUs

4 unchanged sentences

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.

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

The following table summarizes the equity activity of non-vested restricted shares and performance shares:

17 unchanged sentences

Expected volatility factor (1)

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Risk-free interest rate (2)

6 unchanged sentences

For the years ended December 31, 2022, 2021, and 2020 the Company received cash proceeds of $ 3.7 million, $ 3.4 million, and $ 2.9 million, and issued shares of 208,140 , 196,024 , and 254,703 , 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 2021, 2020, and 2019 were based on estimates at the date of grant as follows:

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

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 2022, 2021, and 2020 were based on estimates at the date of grant as follows:

Year ended December 31,

15 unchanged sentences

Note 14 — 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.

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 and subsequently collected in 2021.

In 2019, the Company determined that one of its non-core product lines (the “disposal group”) met the held for sale criteria.

During 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 subsequently collected in 2021.

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

Veeco Instruments Inc.

and Subsidiaries

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.

The major classes of assets that were sold are as follows:

Net assets sold:

(in thousands)

Property, plant, and equipment, net

Intangible assets, net

Deferred revenue

Total net assets sold

Net proceeds after costs to sell

Total impairment on sale of disposal group

During 2020, the Company recorded additional impairment charges of $ 0.3 million related to the finalization of the sale of this disposal group.

Note 15 — Income Taxes

2 unchanged sentences

(in thousands)

Veeco Instruments Inc.

and Subsidiaries

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

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

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

13 unchanged sentences

Partial extinguishment of 2023 Notes

Adoption of new accounting standard

Total expense (benefit) for income taxes

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.

9 unchanged sentences

Operating leases

Research and experimental ("R&E") capitalization

Total deferred tax assets

7 unchanged sentences

Net deferred taxes

The Company is no longer permanently reinvesting future earnings from certain foreign jurisdictions and has accrued for foreign tax withholdings of $ 0.8 million on its unremitted earnings as of December 31, 2021.

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

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.

The Company does not permanently reinvest its earnings from certain foreign jurisdictions and has accrued for foreign tax withholdings of $ 0.9 million on its unremitted earnings as of December 31, 2022.

During the year ended December 31, 2022, the Company recognized a net decrease of $ 104.9 million of its valuation allowance.

This decrease was primarily related to the reversal of valuation allowances on domestic deferred tax assets.

After considering recent significant positive evidence, including a consistent pattern of earnings in the past three years, as well as forecasted future earnings, it was determined that a valuation allowance was no longer required for certain deferred tax assets primarily recorded on tax credits and net operating losses in U.S.

jurisdictions.

The Company’s remaining valuation allowance of approximately $ 11.1 million relates primarily to state and local, and certain foreign jurisdiction tax attributes for which the Company could not conclude were realizable on a more-likely-than-not basis.

At December 31, 2022, the Company had U.S.

1 unchanged sentence

The Company also has $ 8.7 million of foreign tax credits that expire in 2027.

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

Additionally, the Company has state and local NOL carryforwards of approximately $ 59.3 million (a net deferred tax asset of $ 4.1 million, net of federal tax benefits and before the valuation allowance) that will expire between 2023 and 2041.

Finally, the Company has state credits of $ 32.6 million, some of which are indefinite and others that will expire between 2024 and 2037.

Veeco Instruments Inc.

1 unchanged sentence

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, 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.

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

8 unchanged sentences

If the amount of unrecognized tax benefits at December 31, 2022 were recognized, the Company’s income tax provision would decrease by $ 13.5 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, 2021 and 2020.

The gross amount of interest and penalties accrued in income tax payable in the Consolidated Balance Sheets was approximately $ 0.5 million and $ 0.4 million at December 31, 2022 and 2021, respectively.

The Company, or one of its subsidiaries, files income tax returns in the United States federal jurisdiction, and various state, local, and foreign jurisdictions.

2 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 2020 for Germany, 2017 through 2020 for China, and 2020 for Taiwan and Singapore.

The Company’s major foreign jurisdictions’ statutes of limitation remain open with respect to the tax years 2015 through 2021 for Germany, 2017 through 2021 for China, 2021 for Taiwan, and 2020 and 2021 for 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.

Veeco Instruments Inc.

and Subsidiaries

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.

and Subsidiaries

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 17 — Subseqent Events

On January 31, 2023, the Company acquired Epiluvac AB, a privately held manufacturer of chemical vapor deposition epitaxy systems that enable advanced silicon carbide applications in the electric vehicle market.

Epiluvac is an early-stage revenue company with 11 employees.

The purchase price for the transaction, all payable in cash, was $ 30 million paid at the time of closing with a potential additional $ 35 million in performance based earn-outs.

Schedule II — Valuation and Qualifying Accounts

11 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures