What changed in this filing

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Item 9A. Controls and Procedures

2024-02-16 compared with 2023-02-22 · 241 added, 218 removed, 1076 unchanged (30% of the section changed)

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Our principal executive and financial officers have evaluated and concluded that our disclosure controls and procedures are effective as of December 31, 2023.

rules and forms and is accumulated and communicated to our principal executive and financial officers as appropriate to allow timely decisions regarding required disclosure.

The disclosure controls and procedures are designed to ensure that the information required to be disclosed in this report filed under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to our principal executive and financial officers as appropriate to allow timely decisions regarding required disclosure.

Our principal executive and financial officers are responsible for establishing and maintaining adequate internal control over financial reporting, which is a process designed and put into effect to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

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Form of 3.50% Convertible Senior Notes due 2025 .

Indenture, dated as of May 19, 2023, between Veeco Instruments Inc.

Bank Trust Company, National Association, as trustee.

Form of 2.875% Convertible Senior Notes due 2029.

Incorporated by Reference

Exhibit Description

Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 .

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and Trimble-Junction Ventures LLC.

Incorporated by Reference

Exhibit Description

Veeco Severance Benefits Policy, effective May 1, 2009.

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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 March 2018.

Form of Notice of Restricted Stock Award and related terms and conditions pursuant to the Veeco 2010 Stock Incentive Plan, effective March 2018.

First Amendment to Loan and Security Agreement, dated as of May 19, 2023, by and among Veeco Instruments Inc., as borrower, the guarantors party thereto, the lenders from time to time party thereto and 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.

Form of Notice of Performance Restricted Stock Unit Award and related terms and conditions pursuant to the Veeco 2010 Stock Incentive Plan, effective March 2019 .

Form of Notice of Restricted Stock Award and related terms and conditions pursuant to the Veeco 2010 Stock Incentive Plan, effective March 2019 (time-based version A) .

Form of Notice of Restricted Stock Award and related terms and conditions pursuant to the Veeco 2010 Stock Incentive Plan, effective March 2019 (time-based version B) .

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

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 Performance Restricted Stock Unit Award and related terms and conditions pursuant to the Veeco 2019 Stock Incentive Plan, effective March 2020.

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

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Form of Notice of Restricted Stock Award and related terms and conditions pursuant to the Veeco 2019 Stock Incentive Plan, effective March 2022.

Form of Notice of Performance Restricted Stock Unit Award and related terms and conditions pursuant to the Veeco 2019 Stock Incentive Plan, effective March 2023.

Form of Notice of Restricted Stock Award and related terms and conditions pursuant to the Veeco 2019 Stock Incentive Plan, effective March 2023.

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

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Letter Agreement dated August 29, 2018 between Veeco and Dr.

Incorporated by Reference

Exhibit Description

Amendment dated March 22, 2019 to the Letter Agreement between Veeco and William J.

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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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Section 1350, as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002.

Compensation Recoupment Policy for Executive Officers

XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline.

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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.

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for the convertible 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):

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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.

Acquisition-date fair value of a developed technology intangible asset and contingent consideration in the acquisition of Epiluvac AB

As discussed in Note 5 to the consolidated financial statements, on January 31, 2023, the Company acquired Epiluvac AB (Epiluvac) in a business combination for total purchase consideration of $56.4 million, including contingent consideration.

In connection with the transaction, the purchase price was allocated to the assets and liabilities assumed by the Company based on their fair values as of the acquisition date, primarily comprised of developed technology with the estimated fair value of $28.0 million.

The acquisition date fair value of the contingent consideration was approximately $26.1 million, which includes payments up to $15.0 million based on the timely completion of certain defined milestones tied to strategic targets, and up to $20.0 million based on the percentage of orders received during the defined earn-out period.

The Company estimated the fair value of the developed technology based on a discounted cash flow model.

The Company estimated the fair value of the contingent consideration by assigning probabilities and discount factors to each of the various defined performance milestones, while using a Monte-Carlo simulation model to determine the most likely outcome for payments to be based on value of orders received.

We identified the evaluation of the acquisition-date fair value of developed technology and the acquisition-date fair value of the contingent consideration related to the orders received during the defined earn-out period as a critical audit matter.

A higher degree of auditor judgment was required to evaluate the Company’s determination of certain projected revenues used in the fair value of the developed technology and the fair value of the contingent consideration because there was limited observable market information.

Additionally, specialized skills and knowledge were required to evaluate the discount rates used to determine in the fair value of the developed technology and the fair value of the contingent consideration.

Changes in certain projected revenues and discount rates could have a significant impact on the fair value of the acquired developed technology and the contingent consideration liability.

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

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s acquisition-date valuation process, including controls over the determination of certain projected revenues and discount rates.

We evaluated the Company’s determination of certain projected revenues by (1) inquiring of individuals outside of the accounting function about the underlying assumptions used to determine certain projected revenues and the process used to develop them, (2) comparing the underlying assumptions to relevant industry reports, (3) and comparing the underlying assumptions to relevant competitor investor presentation materials.

In addition, we involved valuation professionals with specialized skills and knowledge who assisted in:

● evaluating the discount rate applied to the developed technology intangible asset by reconciling it to the weighted average cost of capital that was calculated using publicly available market data

● evaluating the discount rate applied to the contingent consideration by comparing it to a discount rate that was independently developed using publicly available market data

● developing a fair value estimate of the contingent consideration using a parallel Monte-Carlo simulation and comparing it to the Company’s estimate.

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

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Accrued expenses and other current liabilities

Customer deposits and deferred revenue

Contract liabilities

Income taxes payable

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Amortization of intangible assets

Restructuring

Asset impairment

Other operating expense (income), net

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Other income (expense), net

Income before income taxes

Income (loss) before income taxes

Income tax expense (benefit)

Income per common share:

Net income (loss)

Income (loss) per common share:

Weighted average number of shares:

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For the year ended December 31,

Net income (loss)

Other comprehensive income (loss), net of tax:

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Total other comprehensive income (loss), net of tax

Total comprehensive income

Total comprehensive income (loss)

See accompanying Notes to the Consolidated Financial Statements.

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Extinguishment of equity component of repurchased/exchanged 2023 Notes

Equity component of 2025 Notes

Equity component of 2027 Notes

Purchase of capped calls

Balance at December 31, 2021

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

Net income (loss)

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Net issuance under employee stock plans

Extinguishment of equity component of repurchased 2023 Notes

Balance at December 31, 2022

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

Net income (loss)

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Net issuance under employee stock plans

Partial extinguishment of 2025 and 2027 Notes

Balance at December 31, 2023

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Cash Flows from Operating Activities

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

Net income (loss)

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

Depreciation and amortization

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Loss on extinguishment of debt

Asset impairment

Impairment of equity investments

Provision for bad debts

Change in contingent consideration

Changes in operating assets and liabilities:

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Accounts payable and accrued expenses

Customer deposits and deferred revenue

Contract liabilities

Income taxes receivable and payable, net

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Capital expenditures

Acquisition of businesses, net of cash acquired

Proceeds from the sale of investments

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Proceeds from issuance of 2029 Notes, net of issuance costs

Purchase of capped calls

Repurchase of 2023 Notes

Extinguishment of Convertible Notes

Debt issuance costs

Contingent consideration payment

Proceeds (net of tax withholdings) from option exercises and employee stock purchase plan

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(x) lease term and incremental borrowing rates used in determining operating lease assets and liabilities;

and (xi) income tax uncertainties.

(xi) income tax uncertainties;

(xii) purchase accounting estimates;

and (xiii) contingent consideration estimates.

(d) Principles of Consolidation

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Foreign currency transaction gains or losses are included in “Other operating expense (income), net” in the Consolidated Statements of Operations.

(f) Revenue Recognition

Revenue is recognized upon the transfer of control of the promised product or service to the customer in an amount that reflects the consideration the Company expects to receive in exchange for such product or service.

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

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

Veeco Instruments Inc.

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Notes to Consolidated Financial Statements (Continued)

that, if any, has a high probability of significant subsequent revenue reversal, and if so, that amount is excluded from the transaction price.

(f) Revenue Recognition

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

In the rare instances where variable consideration is included, the Company estimates the amount of variable consideration and determines what portion of that, if any, has a high probability of significant subsequent revenue reversal, and if so, that amount is excluded from the transaction price.

The Company’s contracts with customers frequently contain multiple deliverables, such as systems, upgrades, components, spare parts, installation, maintenance, and service plans.

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The Company recognizes revenue from the sales of components, spare parts, and specified service engagements at a point in time, which is typically consistent with the time of delivery in accordance with the terms of the applicable sales arrangement.

The Company may receive customer deposits on system transactions.

The timing of the transfer of goods or services related to the deposits is either at the discretion of the customer or expected to be within one year from the deposit receipt.

As such, the Company does not adjust transaction prices for the time value of money.

Incremental direct costs incurred related to the acquisition of a customer contract, such as sales commissions, are expensed as incurred since the expected performance period is one year or less.

Veeco Instruments Inc.

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Notes to Consolidated Financial Statements (Continued)

fulfillment activity, and the Company includes such costs in “Cost of sales” in the Consolidated Statements of Operations as incurred.

The Company may receive advanced payments on system transactions.

The timing of the transfer of goods or services related to the advanced payments is either at the discretion of the customer or expected to be within one year from the advanced receipt.

As such, the Company does not adjust transaction prices for the time value of money.

Incremental direct costs incurred related to the acquisition of a customer contract, such as sales commissions, are expensed as incurred since the expected performance period is one year or less.

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.

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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.

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

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(k) Income Taxes

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The Company also provides allowances based on its write-off history.

Finally, the Company also considers its current expectations of future economic conditions, including the impact of COVID-19, when estimating its allowance for doubtful accounts.

The allowance for doubtful accounts totaled $ 0.7 million at both December 31, 2022 and 2021.

Finally, the Company also considers its current expectations of future economic conditions, when estimating its allowance for doubtful accounts.

The allowance for doubtful accounts totaled $ 1.0 million and $ 0.7 million at December 31, 2023 and 2022 respectively.

To further mitigate the Company’s exposure to uncollectable accounts, the Company may request certain customers provide a negotiable irrevocable letter of credit drawn on a reputable financial institution.

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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.

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(n) Cash, Cash Equivalents, and Short-term Investments

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The Company’s cash and cash equivalents includes $ 97.8 million and $ 61.5 million of cash equivalents at December 31, 2023 and 2022, 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.

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work-in-process;

and finished goods.

finished goods;

and evaluation inventory at customer facilities.

Obsolete inventory or inventory in excess of management’s estimated usage requirement is written down to its estimated net realizable value if less than cost.

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

Additionally, the Company estimates the fair value of contingent consideration included as part of the purchase price by assigning probabilities and discount factors to each of the various defined performance milestones, while using a Monte-Carlo simulation model to determine the most likely outcome for payments to be based on value of orders received.

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(q) Goodwill and Indefinite-Lived Intangible Assets

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

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

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.

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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.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

(t) Recently Adopted Accounting Standards

The Company adopted ASU 2020-06:

Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes in the second quarter of 2020, effective as of the beginning of fiscal year 2020.

This ASU simplifies the accounting for income taxes by eliminating certain exceptions to the general principles and simplifying several aspects of ASC 740, Income Taxes, including, but not limited to, requirements related to the following:

a) exception to the incremental approach for intraperiod tax allocation;

b) the tax basis step-up in goodwill obtained in a transaction that is not a business combination;

c) ownership changes in investments - changes from a subsidiary to an equity method investment;

d) separate financial statements of entities not subject to tax;

e) interim-period accounting for enacted changes in tax law;

and f) the year-to-date loss limitation in interim-period tax accounting.

The adoption did not have a material impact on the Company’s consolidated financial statements as of the date of adoption.

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):

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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

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures,” which requires public entities to disclose consistent categories and greater disaggregation of information in the rate reconciliation and for income taxes paid.

It also includes certain other amendments to improve the effectiveness of income tax disclosures.

The guidance is effective for financial statements issued for annual periods beginning after December 15, 2024, with early adoption permitted.

The Company is currently in the process of evaluating the impact of adoption on its consolidated financial statements .

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

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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.

The Company has the option for the 2025 and 2027 Notes to settle the conversion value in any combination of cash or shares, and as such, the maximum number of shares issuable are included in the dilutive share count if the effect would be dilutive.

The Company must settle the principal amount of the 2029 Notes in cash, and has the option to settle any excess of the conversion value over the principal amount in any combination of cash or shares.

As such, the Company only includes the excess shares that may be issuable above the principal amount of the 2029 Notes in the dilutive share count, if the effect would be dilutive.

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, 2023, 2022, and 2021 are as follows:

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

For the year ended December 31,

(in thousands, except per share amounts)

Net income (loss)

Interest expense associated with convertible notes

Net income available to common shareholders

Net income (loss) available to common shareholders

Basic weighted average shares outstanding

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Potentially dilutive shares excluded from the diluted calculation as their effect would be antidilutive

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)

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

Note 3 — Fair Value Measurements

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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, 2023 and 2022:

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Certificate of deposits and time deposits

Corporate debt

Money market cash

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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.

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Notes to Consolidated Financial Statements (Continued)

Note 4 — Investments

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Available-for-sale securities in a loss position at December 31, 2023 and 2022 were as follows:

December 31, 2022

December 31, 2021

Continuous Loss Position

for Less than 12 Months

for 12 Months or More

for Less than 12 Months

(in thousands)

December 31, 2023

Government agency securities

Corporate debt

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

December 31, 2022

Government agency securities

Corporate debt

Veeco Instruments Inc.

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

Note 5 — Business Combination

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

This acquisition is expected to accelerate penetration into the emerging, high-growth SiC equipment market.

The results of Epiluvac’s operations have been included in the consolidated financial statements since the date of acquisition.

The acquisition date fair value of the consideration totaled $ 56.4 million, net of cash acquired, which consisted of the following:

Acquisition Date

(January 31, 2023)

(in thousands)

Cash paid, net of cash acquired

Contingent consideration

Acquisition date fair value

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

The purchase agreement included performance milestones that, if achieved, could trigger additional payments to the original selling shareholders.

The contingent arrangements include payments up to $ 15.0 million based on the timely completion of certain defined milestones tied to strategic targets, and up to $ 20.0 million based on the percentage of orders received during the defined Earn-out period.

The Earn-out period is four years after the closing date of the acquisition, or earlier if certain conditions are met.

These fair value measurements are based on significant inputs not observable in the market and thus represent a Level 3 measurement as defined in ASC 820.

The discount rate used was 5.54 % for the strategic target and order value related contingent payments.

The rate was determined based on the nature of the milestone, the risks and uncertainties involved and the time period until the milestone was measured.

The determination of the various probabilities and discount factors is highly subjective, requires significant judgment and is influenced by a number of factors, including the adoption of SiC technology.

The aggregate fair value of the contingent consideration arrangement at the acquisition date was $ 26.1 million.

While the use of SiC is expected to grow in the near future, it is difficult to predict the rate at which SiC will be adopted by the market and thus would impact the sales of our equipment.

The Company updates its estimate of fair value of the contingent consideration each reporting period, utilizing the same methodologies described above.

During the year ended December 31, 2023, the Company recognized approximately $ 0.7 million of additional contingent consideration, included within “Other operating expense (income) net” in the Consolidated Statement of Operations.

Additionally, during the year ended December 31, 2023, the Company paid $ 2.5 million to the selling shareholders in recognition of a performance milestone having been successfully completed.

Total contingent consideration liability as of December 31, 2023 was $ 24.2 million, of which $ 1.8 million was included in “Accrued expenses and other current liabilities” and $ 22.4 million was included within “Other liabilities” on the Consolidated Balance Sheet.

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

Acquisition Date

(January 31, 2023)

(in thousands)

Accounts receivable

Prepaid expense and other current assets

Property, plant, and equipment

Intangible assets

Total identifiable assets acquired

Accounts payable and accrued expenses

Contract liabilities

Deferred income taxes

Other liabilities

Total liabilities assumed

Net identifiable assets acquired

Net assets acquired

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

The gross contractual value of the acquired accounts receivable is the amount expected to be collected by the Company, and therefore is also considered its fair value.

Goodwill generated from the acquisition is primarily attributed to expected synergies from future growth and strategic advantages provided through the expansion of product offerings as well as assembled workforce and is not expected to be deductible for income tax purposes.

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

Acquisition Date

(January 31, 2023)

(in thousands)

Customer relationships

Intangible assets acquired

The Company determined the estimated fair value of the identifiable intangible assets based on various factors including cost, discounted cash flow, income method, loss-of-revenue/income method, and relief-from-royalty method in determining the purchase price allocation.

For the year ended December 31, 2023, the Company incurred approximately $ 1.1 million of acquisition related costs, included within “Selling, general, and administrative” in the Consolidated Statement of Operations.

Epiluvac’s results of operations were immaterial to the Company’s Consolidated Statement of Operations for the year ended December 31, 2023.

Additionally, the pro forma Consolidated Statement of Operations as if Epiluvac had been acquired as of January 1, 2022 would not be materially different from the Company’s actual Consolidated Statement of Operations for the year ended December 31, 2023 or 2022.

Note 6 — Inventories

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Finished goods

Evaluation inventory

Veeco Instruments Inc.

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Goodwill represents the future economic benefits arising from assets acquired in a business combination that are not individually identified and separately recognized.

There were no changes in goodwill balances during the years ended December 31, 2022 or 2021, while the below table reflects the gross carrying amounts and accumulated impairments as of the respective periods:

The following table presents the changes in goodwill balances for the year ending December 31, 2023:

Gross carrying

(in thousands)

Balance at December 31, 2022 and 2021

Balance at December 31, 2022

Balance at December 31, 2023

The Company performs its annual goodwill impairment test at the beginning of the fourth quarter each year.

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Professional fees

Legal settlement

Sales, use, and other taxes

Customer deposits and deferred revenue

Customer deposits totaled $ 110.2 million and $ 46.9 million at December 31, 2022 and 2021, respectively, which are included in “Customer deposits and deferred revenue” in the Consolidated Balance Sheets.

Deferred revenue represents amounts billed, other than deposits, in excess of the revenue that can be recognized on a particular contract at the balance sheet date.

Changes in deferred revenue were as follows:

Contingent consideration

Contract Liabilities and Performance Obligations

Contract liabilities consist of unsatisfied performance obligations related to advanced payments received and billing in excess of revenue recognized.

The contract liability balance as of December 31, 2022 was approximately $ 127.2 million, of which the Company recognized approximately $ 78.4 million into revenue during the year ended December 31, 2023.

Veeco Instruments Inc.

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Notes to Consolidated Financial Statements (Continued)

(in thousands)

Balance - December 31, 2021

Deferral of revenue

Recognition of unearned revenue

Balance - December 31, 2022

This reduction in contract liabilities was offset by new billings for products and services which were unsatisfied performance obligations to customers and revenue had not yet been recognized as of December 31, 2023.

As of December 31, 2023, the Company has approximately $ 195.1 million of remaining performance obligations on contracts with an original estimated duration of one year or more, of which approximately 92 % is expected to be recognized within one year , with the remaining amounts expected to be recognized between one to three years .

1 unchanged sentence

Other 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.

Other Liabilities at December 31, 2023 was approximately $ 25.5 million, which included contingent consideration of $ 22.4 million.

Additionally, at December 31, 2023 and 2022, other liabilities included medical and dental benefits for former executives of $ 1.9 million and $ 2.0 million, respectively;

and asset retirement obligations of $ 0.9 million and $ 0.7 million, respectively.

Note 10 — Commitments and Contingencies

3 unchanged sentences

Warranties issued

Addition from Epiluvac acquisition

Consumption of reserves

17 unchanged sentences

Operating lease cost for the years ended December 31, 2023, 2022, and 2021 was $ 5.0 million, $ 7.4 million, and $ 6.6 million, respectively.

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.

Variable lease expense, which includes costs not included in the operating lease costs, for the years ended December 31, 2023, 2022, and 2021 was $ 1.1 million, $ 2.0 million, and $ 1.7 million, respectively.

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, 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.

Operating cash outflows from operating leases for the year ended December 31, 2023, 2022, and 2021 were $ 5.8 million, $ 7.5 million, and $ 6.6 million (excluding landlord reimbursements for leasehold improvements of $ 6.1 million in 2021 included within “Other, net” in the Consolidated Statements of Cash Flows), respectively.

Legal Proceedings

On June 8, 2018, an Ultratech shareholder who received Veeco stock as part of the consideration for the Ultratech acquisition filed a purported class action complaint in the Superior Court of the State of California, County of Santa Clara, captioned Wolther v.

Maheshwari et al., Case No.

18CV329690, on behalf of himself and others who purchased or acquired shares of Veeco pursuant to the registration statement and prospectus which Veeco filed with the SEC in connection with the Ultratech acquisition (the “Wolther Action”).

On August 2 and August 8, 2018, two purported class action complaints substantially similar to the Wolther Action were filed on behalf of different plaintiffs in the same court as the Wolther Action.

These cases 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.

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.

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.

and Subsidiaries

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.

Peeler, et al., Case No.

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.

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

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

The Company does not believe that the ultimate resolution of these matters will have a material adverse effect on its consolidated financial position, results of operations, or cash flows.

1 unchanged sentence

The Company depends on purchases from its ten largest customers, which accounted for 65 % and 63 % of net accounts receivable at December 31, 2023 and 2022, respectively.

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Customers who accounted for more than 10% of net accounts receivable or net sales are as follows:

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Receivable Purchase Agreement

In December 2020, the Company entered into a receivable purchase agreement with a financial institution to sell certain of its trade receivables from customers without recourse, up to $ 15.0 million at any point in time.

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 $ 30.0 million at any point in time.

Pursuant to this agreement, the Company sold $ 32.7 million of receivables during the year ended December 31, 2023, of which $ 19.9 million remained outstanding as of December 31, 2023 as defined in the receivable purchase agreement, and $ 10.1 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.

and Subsidiaries

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 sold $ 13.2 million of receivables during the year ended December 31, 2022.

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.

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

6 unchanged sentences

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.

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Bank Guarantees

6 unchanged sentences

The 2023 Notes bear interest at a rate of 2.70 % per year, payable semiannually in arrears on January 15 and July 15 of each year, commencing on July 15, 2017.

The 2023 Notes mature on January 15, 2023, unless earlier purchased by the Company, redeemed, or converted.

The 2023 Notes had a maturity date of January 15, 2023, unless earlier purchased by the Company, redeemed, or converted.

On May 18, 2020, in connection with the completion of a private offering of $ 125.0 million aggregate principal amount of 3.75 % convertible senior notes due 2027 described below, the Company repurchased and retired approximately $ 88.3 million in aggregate principal amount of its outstanding 2023 Notes, with a carrying amount of $ 78.1 million, for approximately $ 81.2 million of cash.

The Company accounted for the partial settlement of the 2023 Notes as an extinguishment, and as such, recorded a loss on extinguishment of approximately $ 3.0 million for the year ended December 31, 2020, which is included in “Other income (expense), net” in the Consolidated Statements of Operations, as well as a reduction of additional paid-in capital of $ 0.1 million for the repurchase of the conversion feature.

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

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.

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.

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.

The 2023 notes that remained outstanding 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”).

1 unchanged sentence

The 2025 Notes mature on January 15, 2025, unless earlier purchased by the Company, redeemed, or converted.

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

On May 19, 2023, in connection with the completion of a private offering of $ 230.0 million aggregate principal amount of 2.875 % convertible senior notes due 2029 described below, the Company repurchased and retired approximately $ 106.0 million in aggregate principal amount of its outstanding 2025 Notes, with a carrying amount of $ 105.4 million, for approximately $ 106.0 million of cash and 0.7 million shares of the Company’s common stock.

The Company accounted for the partial settlement of the 2025 Notes as an extinguishment, and as such, recorded a loss on extinguishment of approximately $ 16.5 million for the year ended December 31, 2023, which is included in “Other income (expense), net” in the Consolidated Statements of Operations.

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”).

3 unchanged sentences

The 2027 Notes mature on June 1, 2027, unless earlier purchased by the Company, redeemed, or converted.

On May 19, 2023, in connection with the completion of a private offering of $ 230.0 million aggregate principal amount of 2.875 % convertible senior notes due 2029 described below, the Company repurchased and retired approximately $ 100.0 million in aggregate principal amount of its outstanding 2027 Notes, with a carrying amount of $ 98.5 million, for approximately $ 92.8 million of cash and 3.8 million shares of the Company’s common stock.

The Company accounted for the partial settlement of the 2027 Notes as an extinguishment, and as such, recorded a loss on extinguishment of approximately $ 80.6 million for the year ended December 31, 2023, which is included in “Other income (expense), net” in the Consolidated Statements of Operations.

On May 19, 2023, the Company completed a private offering of $ 230.0 million of 2.875 % convertible senior notes due 2029 (the “2029 Notes”).

The Company received net proceeds of approximately $ 223.2 million, after deducting underwriting discounts and fees and expenses payable by the Company.

Additionally, the Company used approximately $ 198.8 million of net proceeds from the offering to fund the cash portion of the 2025 Notes and 2027 Notes extinguishments described above and retained the remainder for general corporate purposes.

The 2029 Notes bear interest at a rate of 2.875 % per year, payable semiannually in arrears on June 1 and December 1 of each year, commencing on December 1, 2023.

The 2029 Notes mature on June 1, 2029, unless earlier purchased by the Company, redeemed, or converted.

The Company will settle any conversions of the 2029 Notes by paying cash up to the aggregate principal amount of the 2029 Notes to be converted, and paying or delivering either cash, shares of the Company’s stock, or a combination of cash and shares of common stock at the Company’s election, in respect of the remainder, if any, of the conversion obligation in excess of the aggregate principal amount of the 2029 Notes being converted.

The 2025 Notes, 2027 Notes, and 2029 Notes (collectively, the “Notes”) are unsecured obligations of Veeco and rank senior in right of payment to any of Veeco’s subordinated indebtedness;

2 unchanged sentences

and structurally subordinated to all indebtedness and other liabilities (including trade payables) of Veeco’s subsidiaries.

The Notes are convertible into cash, shares of the Company’s common stock, or a combination thereof, at the Company’s election, upon the satisfaction of specified conditions and during certain periods as described below.

The Notes are convertible at the option of the holders upon the satisfaction of specified conditions and during certain periods as described below.

The initial conversion rates are 41.6667 , 71.5372 , and 34.21852 shares of the Company’s common stock per $ 1,000 principal amount of the 2025 Notes, 2027 Notes, and 2029 Notes, respectively, representing initial effective conversion prices of $ 24.00 , $ 13.98 , and $ 29.22 per share of common stock, respectively.

The conversion rates may be subject to adjustment upon the occurrence of certain specified events.

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:

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, 2024 with respect to the 2025 Notes, October 1, 2026 with respect to the 2027 Notes, and February 1, 2029, with respect to the 2029 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;

3 unchanged sentences

For the calendar quarter ended December 31, 2023, 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, 2024.

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.

Holders may convert their notes at any time, regardless of the foregoing circumstances, on or after October 15, 2024 with respect to the 2025 Notes, October 1, 2026 with respect to the 2027 Notes, and February 1, 2029 with respect to the 2029 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

1 unchanged sentence

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.

Transaction costs of $ 9.2 million, $ 1.9 million, $ 3.1 million, and $ 6.8 million incurred in connection with the issuance of the 2023 Notes, 2025 Notes, 2027 Notes, and 2029 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.

With respect to the 2023 Notes, 2025 Notes, and 2027 Notes, 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, prior to the adoption of ASU 2020-06, the Company segregated the liability component of the instruments from the equity components.

2 unchanged sentences

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 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)

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.

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 were 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.

Transaction costs allocated to the equity component of $ 1.9 million, $ 0.3 million, and $ 0.8 million, for the 2023 Notes, 2025 Notes, and 2027 Notes, respectively, reduced the value of the equity components recognized in stockholders' equity.

The carrying values of the Notes are as follows:

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Coupon interest expense - 2027 Notes

Coupon interest expense - 2029 Notes

Non-cash Interest Expense

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Amortization of debt discount/transaction costs- 2027 Notes

Amortization of debt discount/transaction costs- 2029 Notes

Total Interest Expense

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.

The Company determined the 2025 Notes , 2027 Notes , and 2029 Notes are Level 2 liabilities in the fair value hierarchy and had estimated fair values at December 31, 2023 of $ 36.5 million, $ 57.6 million, and $ 298.0 million, respectively.

Capped Call Transactions

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.

Veeco Instruments Inc.

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Notes to Consolidated Financial Statements (Continued)

of the Capped Call Transactions.

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.

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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.

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

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, 2023.

3 unchanged sentences

No amounts were outstanding under the Credit Facility as of December 31, 2023 or December 31, 2022.

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 12 — Stockholders’ Equity

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Balance - December 31, 2023

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 did not allocate additional tax expense (benefit) to other comprehensive income (loss) for the years ended December 31, 2021, 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.

The Company allocated an immaterial amount of additional tax expense to other comprehensive income (loss) for the year ended December 31, 2023.

Preferred Stock

1 unchanged sentence

As of December 31, 2023, no preferred shares have been issued.

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 13 — Stock Plans

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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, dividend equivalent rights, or any combination thereof.

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

The Company issued 124,500 stock option shares and 87,000 RSUs under this plan.

Stock options under this plan vest over a three year period and have a 10-year term, and RSUs under this plan vest over a two or four year period.

At December 31, 2013, the Inducement Plan was merged into the 2019 Plan and is considered an inactive plan with no further shares available for grant.

At December 31, 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.

3 unchanged sentences

Certain option and share awards provide for accelerated vesting if there is a change in control, as defined in the 2019 Plan.

At December 31, 2022, there are 0.2 million option shares and 0.8 million RSUs and PSUs outstanding under the 2019 Plan.

At December 31, 2023, there is an immaterial amount of option shares and 1.7 million RSUs and PSUs outstanding under the 2019 Plan.

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.

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Selling, general, and administrative

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.

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

deferred tax assets.

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 recognized a tax benefit of approximately $ 3.9 million and $ 4.5 million associated with share-based compensation for the years ended December 31, 2023 and 2022, respectively.

The Company capitalized an immaterial amount of share-based compensation into inventory for the years ended December 31, 2023, 2022, and 2021.

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Unrecognized share-based compensation costs at December 31, 2023 are summarized below:

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Total unrecognized share-based compensation cost

Veeco Instruments Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Stock Option Awards

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Balance - December 31, 2023

The following table summarizes stock option information at December 31, 2022:

Options Outstanding and Exercisable

Range of Exercise Prices

Contractual Life

Exercise Price

(in thousands)

$ 20.00 - $ 30.00

$ 30.01 - $ 40.00

There were no unvested options outstanding as of December 31, 2022.

At December 31, 2023, stock option shares outstanding had a weighted average remaining contractual life of 0.5 years.

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

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(3) The expected life is the number of years the Company estimates that the awards will be outstanding prior to exercise.

Employee Stock Purchase Plan

For the years ended December 31, 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.

Veeco Instruments Inc.

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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:

Employee Stock Purchase Plan

For the years ended December 31, 2023, 2022, and 2021 the Company received cash proceeds of $ 4.6 million, $ 3.7 million, and $ 3.4 million, and issued shares of 258,153 , 208,140 , and 196,024 , 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 2023, 2022, and 2021 were based on estimates at the date of grant as follows:

Year ended December 31,

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The Company provided employer contributions associated with this plan of approximately $ 3.4 million, $ 3.0 million, and $ 2.6 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Note 14 — Dispositions

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.

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

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Share-based compensation

Asset impairment

Partial extinguishment of 2023 Notes

Extinguishment of debt

Adoption of new accounting standard

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Share-based compensation

Customer deposits and deferred revenue

Contract liabilities

Operating leases

Research and experimental ("R&E") capitalization

Total deferred tax assets

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The Company does not permanently reinvest its earnings from certain foreign jurisdictions and has accrued for foreign tax withholdings of $ 1.0 million on its unremitted earnings as of December 31, 2023.

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.

During the year ended December 31, 2023, income tax expense of $ 2.0 million was primarily comprised of 1) a $ 16.2 million income tax expense on pre-tax income from operations;

2) a $ 2.0 million income tax expense for share based compensation, partially offset by 3) a $ 7.5 million tax benefit related to Foreign-Derived Intangible Income;

4) a $ 7.7 million tax benefit associated with research and development tax credits;

and 5) a $ 1.0 million tax benefit associated with the loss on extinguishment of convertible notes under Section 249 of the Internal Revenue Code of 1986, as amended (Section 249).

At December 31, 2023, the Company had U.S.

federal research and development credits of $ 34.9 million that will expire between 2030 and 2043.

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 $ 56.8 million (a net deferred tax asset of $ 4.0 million, net of federal tax benefits and before the valuation allowance) that will expire between 2024 and 2042.

10 unchanged sentences

Reductions for tax positions related to prior years

Reductions due to the lapse of the statute of limitations

Balance at end of year

5 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 2021 for Germany, 2017 through 2021 for China, 2021 for Taiwan, and 2020 and 2021 for Singapore.

The Company’s major foreign jurisdictions’ statutes of limitation remain open with respect to the tax years 2016 through 2022 for Germany, 2017 through 2022 for China, 2022 for Taiwan, and 2020 through 2022 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.

22 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