UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2018
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-16244
VEECO INSTRUMENTS INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware |
|
11-2989601 |
(State or Other Jurisdiction of Incorporation or Organization) |
|
(I.R.S. Employer Identification No.) |
|
|
|
Terminal Drive |
|
|
Plainview, New York |
|
11803 |
(Address of Principal Executive Offices) |
|
(Zip Code) |
Registrants telephone number, including area code:
(516) 677-0200
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and emerging growth company in Rule 12b-2 of the Exchange Act.
Large accelerated filer x |
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Accelerated filer o |
Non-accelerated filer o |
(Do not check if a smaller reporting company) |
Smaller reporting company o |
|
|
|
|
|
Emerging growth company o |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date:
Title of Class |
|
Shares Outstanding |
Common Stock |
|
as of April 30, 2018 |
par value $0.01 per share |
|
48,691,999 |
VEECO INSTRUMENTS INC.
This quarterly report on Form 10-Q (the Report) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Discussions containing such forward-looking statements may be found in Part I - Items 1, 2, and 3 hereof, as well as within this Report generally. In addition, when used in this Report, the words believes, anticipates, expects, estimates, targets, plans, intends, will, and similar expressions related to the future are intended to identify forward-looking statements. All forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from projected results.
In addition, the preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles (U.S. GAAP) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although these estimates and assumptions are based on knowledge of current events and planned actions to be undertaken in the future, they may ultimately differ from actual results. Operating results for the three months ended March 31, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. All estimates and assumptions are subject to a number of risks and uncertainties that could cause actual results to differ materially from these estimates and assumptions.
The risks and uncertainties of Veeco Instruments Inc. (together with its consolidated subsidiaries, Veeco, the Company, we, us, and our, unless the context indicates otherwise) include, without limitation, the following:
· Unfavorable market conditions may adversely affect our operating results;
· We are exposed to the risks of operating a global business;
· We may be unable to effectively enforce and protect our intellectual property rights;
· We may be subject to claims of intellectual property infringement by others;
· We may be unable to successfully integrate the Ultratech business and may not realize the anticipated benefits of the acquisition;
· The price of our common shares is volatile and could further decline;
· We face significant competition;
· We operate in industries characterized by rapid technological change;
· Our sales to manufacturers are highly dependent on sales of consumer electronics applications, which can experience significant volatility due to seasonal and other factors;
· We have a concentrated customer base, located primarily in a limited number of regions, which operate in highly concentrated industries;
· A further reduction or elimination of foreign government subsidies and economic incentives may adversely affect the future order rate for our MOCVD equipment;
· The cyclicality of the industries we serve directly affects our business;
· The timing of our orders, shipments, and revenue recognition may cause our quarterly operating results to fluctuate significantly;
· Our sales cycle is long and unpredictable;
· Our backlog is subject to customer cancellation or modification which could result in decreased sales, increased inventory obsolescence, and liabilities to our suppliers for products no longer needed;
· Our failure to estimate customer demand accurately could result in inventory obsolescence, liabilities to our suppliers for products no longer needed, and manufacturing interruptions or delays which could affect our ability to meet customer demand;
· Our failure to successfully manage our outsourcing activities or failure of our outsourcing partners to perform as anticipated could adversely affect our results of operations;
· We rely on a limited number of suppliers, some of whom are our sole source for particular components;
· Our inability to attract, retain, and motivate employees could have a material adverse effect on our business;
· We are exposed to risks associated with business combinations, acquisitions, and strategic investments;
· We may be unable to obtain required export licenses for the sale of our products;
· Our operating results may be adversely affected by tightening credit markets;
· We may be exposed to liabilities under the Foreign Corrupt Practices Act and other similar laws;
· We are subject to internal control evaluations and attestation requirements of Section 404 of the Sarbanes-Oxley Act and any delays or difficulties in satisfying these requirements or negative reports concerning our internal controls could adversely affect our future results of operations and our stock price;
· Changes in accounting pronouncements or taxation rules or practices may adversely affect our financial results;
· Our income taxes may change;
· We may be required to take additional impairment charges on assets;
· We have indebtedness in the form of convertible senior notes which could adversely affect our financial position, prevent us from implementing our strategy, and dilute the ownership interest of our existing shareholders;
· The accounting method for convertible debt securities that may be settled in cash, such as the Convertible Senior Notes, could have a material effect on our reported financial results;
· We are subject to foreign currency exchange risks;
· Our previously announced share repurchase program could affect the price of our common stock and increase volatility and may be suspended or terminated at any time, which may result in a decrease in the trading price of our common stock;
· If we are subject to cyber-attacks we could incur substantial costs and, if such attacks are successful, we could incur significant liabilities, reputational harm, and disruption to our operations;
· We have adopted certain measures that may have anti-takeover effects which may make an acquisition of our Company by another company more difficult;
· We are subject to risks of non-compliance with environmental, health, and safety regulations;
· Regulations related to conflict minerals will force us to incur additional expenses, may make our supply chain more complex, and may harm our relationships with customers; and
· We have significant operations in locations which could be materially and adversely impacted in the event of a natural disaster, an act of terrorism, or other significant disruption.
Consequently, such forward looking statements and estimates should be regarded solely as the current plans and beliefs of Veeco. We do not undertake any obligation to update any forward looking statements to reflect future events or circumstances after the date of such statements.
Veeco Instruments Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share amounts)
(unaudited)
|
|
March 31,
|
|
December 31,
|
|
||
Assets |
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
245,525 |
|
$ |
279,736 |
|
Restricted cash |
|
841 |
|
847 |
|
||
Short-term investments |
|
65,130 |
|
47,780 |
|
||
Accounts receivable, net |
|
108,219 |
|
98,866 |
|
||
Contract assets |
|
1,984 |
|
160 |
|
||
Inventories |
|
130,964 |
|
120,266 |
|
||
Deferred cost of sales |
|
1,080 |
|
15,994 |
|
||
Prepaid expenses and other current assets |
|
29,615 |
|
33,437 |
|
||
Total current assets |
|
583,358 |
|
597,086 |
|
||
Property, plant, and equipment, net |
|
83,100 |
|
85,058 |
|
||
Intangible assets, net |
|
356,311 |
|
369,843 |
|
||
Goodwill |
|
307,131 |
|
307,131 |
|
||
Deferred income taxes |
|
3,281 |
|
3,047 |
|
||
Other assets |
|
28,847 |
|
25,310 |
|
||
Total assets |
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$ |
1,362,028 |
|
$ |
1,387,475 |
|
|
|
|
|
|
|
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Liabilities and stockholders equity |
|
|
|
|
|
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Current liabilities: |
|
|
|
|
|
||
Accounts payable |
|
$ |
58,273 |
|
$ |
50,318 |
|
Accrued expenses and other current liabilities |
|
54,297 |
|
58,068 |
|
||
Customer deposits and deferred revenue |
|
94,473 |
|
112,032 |
|
||
Income taxes payable |
|
1,581 |
|
3,846 |
|
||
Total current liabilities |
|
208,624 |
|
224,264 |
|
||
Deferred income taxes |
|
36,794 |
|
36,845 |
|
||
Long-term debt |
|
278,489 |
|
275,630 |
|
||
Other liabilities |
|
10,164 |
|
10,643 |
|
||
Total liabilities |
|
534,071 |
|
547,382 |
|
||
Stockholders equity: |
|
|
|
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Preferred stock, $0.01 par value; 500,000 shares authorized; no shares issued and outstanding. |
|
|
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Common stock, $0.01 par value; 120,000,000 shares authorized; 48,691,371 and 48,229,251 shares issued at March 31, 2018 and December 31, 2017, respectively; 48,691,371 and 48,144,416 shares outstanding at March 31, 2018 and December 31, 2017, respectively. |
|
487 |
|
482 |
|
||
Additional paid-in capital |
|
1,054,331 |
|
1,051,953 |
|
||
Accumulated deficit |
|
(228,697 |
) |
(212,870 |
) |
||
Accumulated other comprehensive income |
|
1,836 |
|
1,812 |
|
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Treasury stock, at cost, 84,835 shares at December 31, 2017. |
|
|
|
(1,284 |
) |
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Total stockholders equity |
|
827,957 |
|
840,093 |
|
||
Total liabilities and stockholders equity |
|
$ |
1,362,028 |
|
$ |
1,387,475 |
|
See accompanying Notes to the Consolidated Financial Statements.
Veeco Instruments Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
|
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Three months ended March 31, |
|
||||
|
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2018 |
|
2017 |
|
||
Net sales |
|
$ |
158,574 |
|
$ |
94,499 |
|
Cost of sales |
|
101,894 |
|
59,999 |
|
||
Gross profit |
|
56,680 |
|
34,500 |
|
||
Operating expenses, net: |
|
|
|
|
|
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Research and development |
|
24,320 |
|
14,989 |
|
||
Selling, general, and administrative |
|
26,383 |
|
19,105 |
|
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Amortization of intangible assets |
|
13,532 |
|
2,867 |
|
||
Restructuring |
|
2,695 |
|
1,338 |
|
||
Acquisition costs |
|
1,342 |
|
1,361 |
|
||
Asset impairment |
|
|
|
463 |
|
||
Other, net |
|
(157 |
) |
(78 |
) |
||
Total operating expenses, net |
|
68,115 |
|
40,045 |
|
||
Operating income (loss) |
|
(11,435 |
) |
(5,545 |
) |
||
Interest income |
|
624 |
|
793 |
|
||
Interest expense |
|
(5,246 |
) |
(4,135 |
) |
||
Income (loss) before income taxes |
|
(16,057 |
) |
(8,887 |
) |
||
Income tax expense (benefit) |
|
(230 |
) |
(10,527 |
) |
||
Net income (loss) |
|
$ |
(15,827 |
) |
$ |
1,640 |
|
|
|
|
|
|
|
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Income (loss) per common share: |
|
|
|
|
|
||
Basic |
|
$ |
(0.34 |
) |
$ |
0.04 |
|
Diluted |
|
$ |
(0.34 |
) |
$ |
0.04 |
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|
|
|
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Weighted average number of shares: |
|
|
|
|
|
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Basic |
|
46,963 |
|
39,619 |
|
||
Diluted |
|
46,963 |
|
40,140 |
|
See accompanying Notes to the Consolidated Financial Statements.
Veeco Instruments Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
(unaudited)
|
|
Three months ended March 31, |
|
||||
|
|
2018 |
|
2017 |
|
||
Net income (loss) |
|
$ |
(15,827 |
) |
$ |
1,640 |
|
Other comprehensive income (loss), net of tax: |
|
|
|
|
|
||
Unrealized gain (loss) on available-for-sale securities |
|
(8 |
) |
(114 |
) |
||
Foreign currency translation |
|
32 |
|
15 |
|
||
Total other comprehensive income (loss), net of tax |
|
24 |
|
(99 |
) |
||
|
|
|
|
|
|
||
Total comprehensive income (loss) |
|
$ |
(15,803 |
) |
$ |
1,541 |
|
See accompanying Notes to the Consolidated Financial Statements.
Veeco Instruments Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
|
|
Three months ended March 31, |
|
||||
|
|
2018 |
|
2017 |
|
||
Cash Flows from Operating Activities |
|
|
|
|
|
||
Net income (loss) |
|
$ |
(15,827 |
) |
$ |
1,640 |
|
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
|
|
|
|
|
||
Depreciation and amortization |
|
17,726 |
|
5,799 |
|
||
Non-cash interest expense |
|
2,859 |
|
2,185 |
|
||
Deferred income taxes |
|
(269 |
) |
(6,246 |
) |
||
Share-based compensation expense |
|
4,537 |
|
4,186 |
|
||
Asset impairment |
|
|
|
463 |
|
||
Provision for bad debts |
|
|
|
92 |
|
||
Changes in operating assets and liabilities: |
|
|
|
|
|
||
Accounts receivable and contract assets |
|
(11,177 |
) |
5,871 |
|
||
Inventories and deferred cost of sales |
|
4,555 |
|
13,603 |
|
||
Prepaid expenses and other current assets |
|
3,824 |
|
(3,743 |
) |
||
Accounts payable and accrued expenses |
|
2,009 |
|
613 |
|
||
Customer deposits and deferred revenue |
|
(17,559 |
) |
(13,727 |
) |
||
Income taxes receivable and payable, net |
|
(2,283 |
) |
130 |
|
||
Long-term income tax liability |
|
|
|
(4,877 |
) |
||
Other, net |
|
(202 |
) |
343 |
|
||
Net cash provided by (used in) operating activities |
|
(11,807 |
) |
6,332 |
|
||
|
|
|
|
|
|
||
Cash Flows from Investing Activities |
|
|
|
|
|
||
Capital expenditures |
|
(2,259 |
) |
(4,187 |
) |
||
Proceeds from the sale of investments |
|
34,000 |
|
27,411 |
|
||
Payments for purchases of investments |
|
(54,300 |
) |
(219,141 |
) |
||
Net cash provided by (used in) investing activities |
|
(22,559 |
) |
(195,917 |
) |
||
|
|
|
|
|
|
||
Cash Flows from Financing Activities |
|
|
|
|
|
||
Cash withholdings for employee stock purchase plans |
|
1,136 |
|
585 |
|
||
Restricted stock tax withholdings |
|
(427 |
) |
(461 |
) |
||
Purchases of common stock |
|
(592 |
) |
|
|
||
Proceeds from long-term debt borrowings |
|
|
|
335,752 |
|
||
Principal payments on long-term debt |
|
|
|
(89 |
) |
||
Net cash provided by (used in) financing activities |
|
117 |
|
335,787 |
|
||
|
|
|
|
|
|
||
Effect of exchange rate changes on cash and cash equivalents |
|
32 |
|
15 |
|
||
Net increase (decrease) in cash, cash equivalents, and restricted cash |
|
(34,217 |
) |
146,217 |
|
||
Cash, cash equivalents, and restricted cash - beginning of period |
|
280,583 |
|
277,444 |
|
||
Cash, cash equivalents, and restricted cash - end of period |
|
$ |
246,366 |
|
$ |
423,661 |
|
|
|
|
|
|
|
||
Supplemental Disclosure of Cash Flow Information |
|
|
|
|
|
||
Interest paid |
|
$ |
4,674 |
|
$ |
31 |
|
Income taxes paid |
|
2,373 |
|
672 |
|
||
Non-cash operating and financing activities |
|
|
|
|
|
||
Net transfer of property, plant, and equipment to (from) inventory |
|
339 |
|
(81 |
) |
See accompanying Notes to the Consolidated Financial Statements.
Veeco Instruments Inc. and Subsidiaries
Notes to the Consolidated Financial Statements - continued
(unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited Consolidated Financial Statements of Veeco have been prepared in accordance with U.S. GAAP as defined in Financial Accounting Standards Board (FASB) Accounting Standards Codification 270 for interim financial information and with the instructions to Rule 10-01 of Securities and Exchange Commission Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements as the interim information is an update of the information that was presented in Veecos most recent annual financial statements. For further information, refer to Veecos Consolidated Financial Statements and Notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2017 (2017 Form 10-K). In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal, recurring nature.
Veeco reports interim quarters on a 13-week basis ending on the last Sunday of each quarter. The fourth quarter always ends on the last day of the calendar year, December 31. The 2018 interim quarters end on April 1, July 1, and September 30, and the 2017 interim quarters ended on April 2, July 2, and October 1. These interim quarters are reported as March 31, June 30, and September 30 in Veecos interim consolidated financial statements.
Change in Accounting Policy
The Company adopted ASC Topic 606, Revenue from Contracts with Customers (ASC 606), as of January 1, 2018, using the full retrospective method. All amounts and disclosures set forth in this Form 10-Q reflect these changes. The most significant financial statement impacts of adopting ASC 606 are the elimination of the constraint on revenue associated with the billing retention related to the receipt of customer final acceptance and the identification of installation services as a performance obligation. The elimination of the constraint on revenue related to customer final acceptance, which is usually about 10 percent of a system sale, is now generally recognized at the time the Company transfers control of the system to the customer, which is earlier than under the Companys previous revenue recognition model for certain contracts that were subject to the billing constraint. The new performance obligation related to installation services is now recognized as the installation services are performed, which is later than the Companys previous revenue recognition model.
The Company applied ASC 606 retrospectively and elected to use the disclosure exemption in the transition guidance under which the Company does not disclose prior period information regarding the amount of the transaction price allocated to remaining performance obligations. The cumulative effect of the adoption was recognized as a decrease to Accumulated deficit of $6.9 million on January 1, 2016. The following tables summarize the impact of adoption on the Companys previously reported financial position and results:
|
|
December 31, 2017 |
|
|||||||
|
|
As reported |
|
Adjustments |
|
As adjusted |
|
|||
|
|
(in thousands) |
|
|||||||
Balance Sheet |
|
|
|
|
|
|
|
|
|
|
Contract assets |
|
$ |
|
|
$ |
160 |
|
$ |
160 |
|
Deferred cost of sales |
|
16,060 |
|
(66 |
) |
15,994 |
|
|||
Deferred taxes |
|
2,953 |
|
94 |
|
3,047 |
|
|||
Accrued expenses and other current liabilities |
|
60,339 |
|
(2,271 |
) |
58,068 |
|
|||
Customer deposits and deferred revenue |
|
108,953 |
|
3,079 |
|
112,032 |
|
|||
Additional paid-in capital |
|
1,053,079 |
|
(1,126 |
) |
1,051,953 |
|
|||
Accumulated deficit |
|
(213,376 |
) |
506 |
|
(212,870 |
) |
Veeco Instruments Inc. and Subsidiaries
Notes to the Consolidated Financial Statements - continued
(unaudited)
|
|
Three months ended March 31, 2017 |
|
|||||||
|
|
As reported |
|
Adjustments |
|
As adjusted |
|
|||
|
|
(in thousands, except per share amounts) |
|
|||||||
Statement of Operations |
|
|
|
|
|
|
|
|||
Net sales |
|
$ |
94,386 |
|
$ |
113 |
|
$ |
94,499 |
|
Cost of sales |
|
60,186 |
|
(187 |
) |
59,999 |
|
|||
Income tax expense (benefit) |
|
(10,282 |
) |
(245 |
) |
(10,527 |
) |
|||
Net income (loss) |
|
1,095 |
|
545 |
|
1,640 |
|
|||
Diluted earnings (loss) per share |
|
0.03 |
|
0.01 |
|
0.04 |
|
|||
The Companys adoption of the standard had no impact to cash provided by or used in operating, investing, or financing activities on the Consolidated Statements of Cash Flows.
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 Companys 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 Companys contracts with customers frequently contain multiple deliverables , such as systems, upgrades, components, spare parts, installation, maintenance, and service plans . Judgment is required to properly identify the performance obligations within a contract and to determine how the revenue should be allocated among the performance obligations. The Company also evaluates whether multiple transactions with the same customer or related parties should be considered part of a single contract based on an assessment of whether the contracts or agreements are negotiated or executed within a short time frame of each other or if there are indicators that the contracts are negotiated in contemplation of one another.
When there are separate units of accounting, the Company allocates revenue to each performance obligation on a relative stand-alone selling price basis. The stand-alone selling prices are determined based on the prices at which the Company separately sells the systems, upgrades, components, spare parts, installation, maintenance, and service plans. For items that are not sold separately, the Company estimates stand-alone selling prices generally using an expected cost plus margin approach. The maximum revenue recognized at a given point on a contract is limited to the amount for which it is probable that a significant reversal will not occur in the future.
Most of the Companys revenue is recognized at a point in time when the performance obligation is satisfied. The Company considers many facts when evaluating each of its sales arrangements to determine the timing of revenue recognition, including its contractual obligations and the nature of the customers post-delivery acceptance provisions. The Companys system sales arrangements, including certain upgrades, generally include field acceptance provisions that may include functional or mechanical test procedures. For many of these arrangements, a customer source inspection of the system is performed in the Companys facility or test data is sent to the customer documenting that the system is functioning to the agreed upon specifications prior to delivery. Historically, such source inspection or test data replicates the field acceptance provisions that are performed at the customers site prior to final acceptance of the system. When the Company objectively demonstrates that the criteria specified in the contractual acceptance provisions are achieved prior to delivery, transfer of control of the product to the customer is considered to have occurred and revenue is recognized upon system delivery since there is no substantive contingency remaining related to the acceptance provisions at that date. For new products, new applications of existing products, or for products with substantive customer acceptance provisions where the Company cannot objectively demonstrate that the criteria specified in the contractual acceptance provisions have been achieved prior to delivery, and the Company does not have a history of meeting the criteria, revenue and the associated costs are deferred and fully recognized upon obtaining objective evidence that the acceptance provisions have been achieved and thus transferring control of the product to the customer, assuming all other revenue recognition criteria have been met.
Veeco Instruments Inc. and Subsidiaries
Notes to the Consolidated Financial Statements - continued
(unaudited)
In certain cases the Companys contracts with customers contain a billing retention, typically 10% of the sales price, which is billed by the Company and payable by the customer when field acceptance provisions are completed. Revenue recognized in advance of the amount that has been billed is recorded as a contract asset on the Consolidated Balance Sheets.
The Company recognizes revenue related to maintenance and service contracts over time based upon the respective contract term. Installation revenue is recognized over time as the installation services are performed. The Company recognizes revenue from the sales of components, spare parts, and specified service engagements at a point in time, which is typically consistent with the time of delivery in accordance with the terms of the applicable sales arrangement.
The Company may receive customer deposits on system transactions. The timing of the transfer of goods or services related to the deposits is either at the discretion of the customer or expected to be within one year from the deposit receipt. As such, the Company does not adjust transaction prices for the time value of money. Incremental direct costs incurred related to the acquisition of a customer contract, such as sales commissions, are expensed as incurred since the expected amortization period is one year or less.
The Company has elected to treat shipping and handling costs as a fulfillment activity and therefore such costs are included in cost of services upon shipment of products. Taxes assessed by governmental authorities that are collected by the Company from a customer are excluded from revenue.
Income Taxes
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (2017 Tax Act), which makes broad and complex changes to the U.S. tax code. Certain income tax effects of the 2017 Tax Act are reflected in the Companys financial results in accordance with Staff Accounting Bulletin No. 118 (SAB 118), which provides SEC staff guidance regarding the application of ASC Topic 740, Income Taxes (ASC 740). Refer to Note 10, Income Taxes, for further information on the financial statement impact of the 2017 Tax Act.
Because of the complexity of the new global intangible low-taxed income (GILTI) rule, the Company is continuing to evaluate this provision of the 2017 Tax Act and the application of ASC 740. Under U.S. GAAP, the Company is allowed to make an accounting policy choice of either (1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (period cost method) or (2) factoring such amounts into a companys measurement of its deferred taxes (deferred method). The Companys selection of an accounting policy with respect to the new GILTI tax rules will depend, in part, on analyzing its global income to determine whether it expects to have future U.S. inclusions in taxable income related to GILTI, and if so, what the impact will be. This assessment depends not only on the Companys current structure and estimated future results of global operations, but also on its intent and ability to modify its structure and/or business. The Company is not yet able to reasonably estimate the effect of this provision of the 2017 Tax Act; therefore, the Company has not made any deferred tax adjustments related to potential GILTI tax in its consolidated financial statements and has not made a policy election decision regarding whether to record deferred taxes on GILTI.
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02: Leases , which generally requires operating lessee rights and obligations to be recognized as assets and liabilities on the Balance Sheet. In addition, interest on lease liabilities is to be recognized separately from the amortization of right-of-use assets in the Statement of Operations. Further, payments of the principal portion of lease liabilities are to be classified as financing activities while payments of interest on lease liabilities and variable lease payments are to be classified as operating activities in the Statement of Cash Flows. When the standard is adopted, the Company will be required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, with early application permitted. The Company is evaluating the impact of adopting the ASU on the
Veeco Instruments Inc. and Subsidiaries
Notes to the Consolidated Financial Statements - continued
(unaudited)
consolidated financial statements.
The Company is also evaluating other pronouncements recently issued but not yet adopted. The adoption of these pronouncements is not expected to have a material impact on the Companys consolidated financial statements.
Recently Adopted Accounting Pronouncements
The Company adopted ASU 2016-01, Financial Instruments Overall , as of January 1, 2018. This ASU requires certain equity investments to be measured at fair value, with changes in fair value recognized in net income. For equity investments without readily observable market prices, the Company measures these investments at cost adjusted for changes in observable prices minus impairment. Changes in measurement are included in Other, net in the Consolidated Statements of Operations. This ASU has not had a material impact on the consolidated financial statements upon adoption, and the Company will monitor its cost method investments each reporting period for changes in observable market prices, if any, which may be material in future periods.
The Company adopted ASU 2016-16, Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory , as of January 1, 2018. This ASU requires the Company to recognize the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. This ASU has not had a material impact on the consolidated financial statements.
The Company adopted ASU 2016-18, Statement of Cash Flows: Restricted Cash, as of January 1, 2018. This ASU requires the Company to include Restricted cash with Cash and cash equivalents when reconciling the beginning and end of period total amounts shown on the Statement of Cash Flows. This ASU has not had a material impact on the consolidated financial statements.
Note 2 - Income (Loss) Per Common Share
The Company considers unvested share-based awards that have non-forfeitable rights to dividends prior to vesting to be participating shares, which are treated as a separate class of security from the Companys common shares for calculating per share data. Therefore, the Company applies the two-class method when calculating income (loss) per share. The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock and participating security according to dividends declared and participation rights in undistributed earnings. However, since the holders of the participating shares are not obligated to fund losses, participating shares are excluded from the calculation of loss per share.
The dilutive effect of the Convertible Senior Notes on income (loss) per share is calculated using the treasury stock method since the Company has both the current intent and ability to settle the principal amount of the Convertible Senior Notes in cash. See Note 5, Liabilities, for additional information on the Convertible Senior Notes.
Basic income (loss) per share is calculated by dividing net income (loss) by the weighted average number of shares outstanding during the period under the two-class method. Diluted income per share is calculated by dividing net income by the weighted average number of shares used to calculate basic income (loss) per share plus the weighted average number of common share equivalents outstanding during the period. The dilutive effect of outstanding options to purchase common stock and non-participating share-based awards is considered in diluted income per share by application of the treasury stock method. The dilutive effect of performance share units is included in diluted income per common share in the periods the performance targets have been achieved. The computations of basic and diluted income (loss) per share for the three months ended March 31, 2018 and 2017 are as follows:
Veeco Instruments Inc. and Subsidiaries
Notes to the Consolidated Financial Statements - continued
(unaudited)
|
|
Three months ended March 31, |
|
||||
|
|
2018 |
|
2017 |
|
||
|
|
(in thousands, except per share amounts) |
|
||||
Net income (loss) |
|
$ |
(15,827 |
) |
$ |
1,640 |
|
|
|
|
|
|
|
||
Net income (loss) per common share: |
|
|
|
|
|
||
Basic |
|
$ |
(0.34 |
) |
$ |
0.04 |
|
Diluted |
|
$ |
(0.34 |
) |
$ |
0.04 |
|
|
|
|
|
|
|
||
Basic weighted average shares outstanding |
|
46,963 |
|
39,619 |
|
||
Effect of potentially dilutive share-based awards |
|
|
|
521 |
|
||
Diluted weighted average shares outstanding |
|
46,963 |
|
40,140 |
|
||
|
|
|
|
|
|
||
Unvested participating shares excluded from basic weighted average shares outstanding since the securityholders are not obligated to fund losses |
|
59 |
|
N/A |
|
||
|
|
|
|
|
|
||
Common share equivalents excluded from the diluted weighted average shares outstanding since Veeco incurred a net loss and their effect would be antidilutive |
|
169 |
|
N/A |
|
||
|
|
|
|
|
|
||
Potentially dilutive non-participating shares excluded from the diluted calculation as their effect would be antidilutive |
|
2,092 |
|
1,499 |
|
||
|
|
|
|
|
|
||
Maximum potential shares to be issued for settlement of Convertible Senior Notes excluded from the diluted calculation as their effect would be antidilutive |
|
8,618 |
|
8,618 |
|
Note 3 Business Combinations
Ultratech
On May 26, 2017, the Company completed its acquisition of Ultratech, Inc. (Ultratech). Ultratech develops, manufactures, sells, and supports lithography, laser annealing, and inspection equipment for manufacturers of semiconductor devices, including front-end semiconductor manufacturing and advanced packaging. Ultratech also develops, manufactures, sells, and supports ALD equipment for scientific and industrial applications. Ultratechs customers are primarily located throughout the United States, Europe, China, Japan, Taiwan, Singapore, and Korea. The results of Ultratechs operations have been included in the consolidated financial statements since the date of acquisition.
Ultratech shareholders received (i) $21.75 per share in cash and (ii) 0.2675 of a share of Veeco common stock for each Ultratech common share outstanding on the acquisition date. Approximately $2.7 million of the cash merger consideration is included in Accrued expenses and other current liabilities on the Consolidated Balance Sheets as of March 31, 2018 and December 31, 2017, related to shareholder appraisal proceedings.
The following table presents unaudited pro forma financial information as if the acquisition of Ultratech had occurred on January 1, 2016:
Veeco Instruments Inc. and Subsidiaries
Notes to the Consolidated Financial Statements - continued
(unaudited)
|
|
Three months ended March 31, |
|
|
|
|
2017 |
|
|
|
|
(in thousands, except per share
|
|
|
Net sales |
|
$ |
151,908 |
|
Loss before income taxes |
|
(13,461 |
) |
|
Diluted earnings per share |
|
$ |
(0.07 |
) |
The pro-forma results were calculated by combining the unaudited results of the Company with the stand-alone unaudited results of Ultratech for the pre-acquisition period, and adjusting for the following:
(i) Additional amortization expense related to identified intangible assets valued as part of the purchase price allocation that would have been incurred starting on January 1, 2016.
(ii) Additional depreciation expense for the property, plant, and equipment fair value adjustments that would have been incurred starting on January 1, 2016.
(iii) All acquisition related costs incurred by the Company as well as by Ultratech pre-acquisition have been removed from the year ended December 31, 2017 and included in the year ended December 31, 2016, as such expenses would have been incurred in the first quarter following the acquisition.
(iv) All amortization of inventory step-up has been removed from the year ended December 31, 2017 and recorded in the year ended December 31, 2016, as such costs would have been incurred as the corresponding inventory was sold.
(v) Additional interest expense related to the Convertible Senior Notes (see Note 5, Liabilities) as if they had been issued on January 1, 2016.
(vi) Income tax expense (benefit) was adjusted for the impact of the above adjustments for each period.
(vii) All shares issued in connection with the acquisition were considered outstanding as of January 1, 2016 for purposes of calculating diluted earnings per share.
Note 4 - Assets
Investments
Short-term investments are generally classified as available-for-sale and reported at fair value, with unrealized gains and losses, net of tax, presented as a separate component of stockholders equity under the caption Accumulated other comprehensive income in the Consolidated Balance Sheets. These securities may include U.S. treasuries, government agency securities, corporate debt, and commercial paper, all with maturities of greater than three months when purchased. All realized gains and losses and unrealized losses resulting from declines in fair value that are other than temporary are included in Other, net in the Consolidated Statements of Operations.
Fair value is the price that would be received for an asset or the amount paid to transfer a liability in an orderly transaction between market participants. Veeco classifies certain assets based on the following fair value hierarchy:
Level 1: Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2: Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly; and
Veeco Instruments Inc. and Subsidiaries
Notes to the Consolidated Financial Statements - continued
(unaudited)
Level 3: Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
A financial instruments level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Veeco has evaluated the estimated fair value of financial instruments using available market information and valuations as provided by third-party sources. The use of different market assumptions or estimation methodologies could have a significant effect on the estimated fair value amounts.
The following table presents the portion of Veecos assets that were measured at fair value on a recurring basis at March 31, 2018 and December 31, 2017:
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
||||
|
|
(in thousands) |
|
||||||||||
March 31, 2018 |
|
|
|
|
|
|
|
|
|
||||
Cash equivalents |
|
|
|
|
|
|
|
|
|
||||
U.S. treasuries |
|
$ |
6,496 |
|
$ |
|
|
$ |
|
|
$ |
6,496 |
|
Total |
|
$ |
6,496 |
|
$ |
|
|
$ |
|
|
$ |
6,496 |
|
|
|
|
|
|
|
|
|
|
|
||||
Short-term investments |
|
|
|
|
|
|
|
|
|
||||
U.S. treasuries |
|
$ |
42,228 |
|
$ |
|
|
$ |
|
|
$ |
42,228 |
|
Corporate debt |
|
|
|
10,522 |
|
|
|
10,522 |
|
||||
Commercial paper |
|
|
|
12,380 |
|
|
|
12,380 |
|
||||
Total |
|
$ |
42,228 |
|
$ |
22,902 |
|
$ |
|
|
$ |
65,130 |
|
|
|
|
|
|
|
|
|
|
|
||||
December 31, 2017 |
|
|
|
|
|
|
|
|
|
||||
Cash equivalents |
|
|
|
|
|
|
|
|
|
||||
U.S. treasuries |
|
$ |
12,490 |
|
$ |
|
|
$ |
|
|
$ |
12,490 |
|
Total |
|
$ |
12,490 |
|
$ |
|
|
$ |
|
|
$ |
12,490 |
|
Short-term investments |
|
|
|
|
|
|
|
|
|
||||
U.S. treasuries |
|
$ |
33,895 |
|
$ |
|
|
$ |
|
|
$ |
33,895 |
|
Corporate debt |
|
|
|
10,886 |
|
|
|
10,886 |
|
||||
Commercial paper |
|
|
|
2,999 |
|
|
|
2,999 |
|
||||
Total |
|
$ |
33,895 |
|
$ |
13,885 |
|
$ |
|
|
$ |
47,780 |
|
There were no transfers between fair value measurement levels during the three months ended March 31, 2018.
At March 31, 2018 and December 31, 2017, the amortized cost and fair value of available-for-sale securities consist of:
Veeco Instruments Inc. and Subsidiaries
Notes to the Consolidated Financial Statements - continued
(unaudited)
|
|
|
|
Gross |
|
Gross |
|
|
|
||||
|
|
Amortized |
|
Unrealized |
|
Unrealized |
|
Estimated |
|
||||
|
|
Cost |
|
Gains |
|
Losses |
|
Fair Value |
|
||||
|
|
(in thousands) |
|
||||||||||
March 31, 2018 |
|
|
|
|
|
|
|
|
|
||||
U.S. treasuries |
|
$ |
42,245 |
|
$ |
|
|
$ |
(17 |
) |
$ |
42,228 |
|
Corporate debt |
|
10,540 |
|
|
|
(18 |
) |
10,522 |
|
||||
Commercial paper |
|
12,379 |
|
1 |
|
|
|
12,380 |
|
||||
Total |
|
$ |
65,164 |
|
$ |
1 |
|
$ |
(35 |
) |
$ |
65,130 |
|
|
|
|
|
|
|
|
|
|
|
||||
December 31, 2017 |
|
|
|
|
|
|
|
|
|
||||
U.S. treasuries |
|
$ |
33,914 |
|
$ |
|
|
$ |
(19 |
) |
$ |
33,895 |
|
Corporate debt |
|
10,894 |
|
|
|
(8 |
) |
10,886 |
|
||||
Commercial paper |
|
2,999 |
|
|
|
|
|
2,999 |
|
||||
Total |
|
$ |
47,807 |
|
$ |
|
|
$ |
(27 |
) |
$ |
47,780 |
|
Available-for-sale securities in a loss position at March 31, 2018 and December 31, 2017 consist of:
|
|
March 31, 2018 |
|
December 31, 2017 |
|
||||||||
|
|
|
|
Gross |
|
|
|
Gross |
|
||||
|
|
Estimated |
|
Unrealized |
|
Estimated |
|
Unrealized |
|
||||
|
|
Fair Value |
|
Losses |
|
Fair Value |
|
Losses |
|
||||
|
|
(in thousands) |
|
||||||||||
U.S. treasuries |
|
$ |
37,275 |
|
$ |
(17 |
) |
$ |
33,895 |
|
$ |
(19 |
) |
Corporate debt |
|
10,522 |
|
(18 |
) |
10,886 |
|
(8 |
) |
||||
Total |
|
$ |
47,797 |
|
$ |
(35 |
) |
$ |
44,781 |
|
$ |
(27 |
) |
At March 31, 2018 and December 31, 2017, there were no short-term investments that had been in a continuous loss position for more than 12 months.
The maturities of securities classified as available-for-sale at March 31, 2018 were all due in one year or less. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. There were no realized gains for the three months ended March 31, 2018 and 2017.
Accounts Receivable
Accounts receivable is presented net of an allowance for doubtful accounts of $0.3 million at both March 31, 2018 and December 31, 2017.
Inventories
Inventories are stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis. Inventories at March 31, 2018 and December 31, 2017 consist of the following :
Veeco Instruments Inc. and Subsidiaries
Notes to the Consolidated Financial Statements - continued
(unaudited)
|
|
March 31, |
|
December 31, |
|
||
|
|
2018 |
|
2017 |
|
||
|
|
(in thousands) |
|
||||
Materials |
|
$ |
70,621 |
|
$ |
59,919 |
|
Work-in-process |
|
35,211 |
|
37,222 |
|
||
Finished goods |
|
25,132 |
|
23,125 |
|
||
Total |
|
$ |
130,964 |
|
$ |
120,266 |
|
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets primarily consist of supplier deposits, prepaid value-added tax, lease deposits, prepaid insurance, and prepaid licenses. Veeco had deposits with its suppliers of $11.5 million and $7.6 million at March 31, 2018 and December 31, 2017, respectively.
Property, Plant, and Equipment
Property, plant, and equipment at March 31, 2018 and December 31, 2017 consist of the following:
|
|
March 31,
|
|
December 31,
|
|
||
|
|
(in thousands) |
|
||||
Land |
|
$ |
5,669 |
|
$ |
5,669 |
|
Building and improvements |
|
59,972 |
|
54,449 |
|
||
Machinery and equipment (1) |
|
118,360 |
|
126,829 |
|
||
Leasehold improvements |
|
9,523 |
|
10,073 |
|
||
Gross property, plant, and equipment |
|
193,524 |
|
197,020 |
|
||
Less: accumulated depreciation and amortization |
|
110,424 |
|
111,962 |
|
||
Net property, plant, and equipment |
|
$ |
83,100 |
|
$ |
85,058 |
|
(1) Machinery and equipment also includes software, furniture and fixtures
For the three months ended March 31, 2018 and 2017, depreciation expense was $4.2 million and $2.9 million, respectively.
Goodwill
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 to goodwill during the three months ended March 31, 2018.
Intangible Assets
Intangible assets consist of purchased technology, customer relationships, patents, trademarks and tradenames, and backlog and are initially recorded at fair value. Long-lived intangible assets are amortized over their estimated useful lives in a method reflecting the pattern in which the economic benefits are consumed or amortized on a straight-line basis if such pattern cannot be reliably determined.
The components of purchased intangible assets were as follows:
Veeco Instruments Inc. and Subsidiaries
Notes to the Consolidated Financial Statements - continued
(unaudited)
|
|
March 31, 2018 |
|
December 31, 2017 |
|
||||||||||||||
|
|
|
|
Accumulated |
|
|
|
|
|
Accumulated |
|
|
|
||||||
|
|
Gross |
|
Amortization |
|
|
|
Gross |
|
Amortization |
|
|
|
||||||
|
|
Carrying |
|
and |
|
Net |
|
Carrying |
|
and |
|
Net |
|
||||||
|
|
Amount |
|
Impairment |
|
Amount |
|
Amount |
|
Impairment |
|
Amount |
|
||||||
|
|
(in thousands) |
|
||||||||||||||||
Technology |
|
$ |
307,588 |
|
$ |
142,209 |
|
$ |
165,379 |
|
$ |
307,588 |
|
$ |
133,121 |
|
$ |
174,467 |
|
Customer relationships |
|
164,595 |
|
42,703 |
|
121,892 |
|
164,595 |
|
39,336 |
|
125,259 |
|
||||||
In-process R&D |
|
43,340 |
|
|
|
43,340 |
|
43,340 |
|
|
|
43,340 |
|
||||||
Trademarks and tradenames |
|
30,910 |
|
5,370 |
|
25,540 |
|
30,910 |
|
4,321 |
|
26,589 |
|
||||||
Other |
|
3,686 |
|
3,526 |
|
160 |
|
3,686 |
|
3,498 |
|
188 |
|
||||||
Total |
|
$ |
550,119 |
|
$ |
193,808 |
|
$ |
356,311 |
|
$ |
550,119 |
|
$ |
180,276 |
|
$ |
369,843 |
|
Other intangible assets primarily consist of patents, licenses, and backlog.
Other Assets
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. The carrying value of the investment was $21.0 million at March 31, 2018 and December 31, 2017. Additionally, during the three months ended March 31, 2018, the Company made a separate non-marketable investment of $3.5 million. The Company does not exert significant influence over this investment, and its ownership interest is 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. There were no changes in observable market prices for either investment for the three months ended March 31, 2018. These investments are subject to periodic impairment reviews; as there are no open-market valuations, the impairment analyses require judgment. The analyses include assessments of the companies financial condition, the business outlooks for their products and technologies, their projected results and cash flow, 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.
Note 5 - Liabilities
Accrued Expenses and Other Current Liabilities
The components of accrued expenses and other current liabilities at March 31, 2018 and December 31, 2017 consist of:
|
|
March 31, |
|
December 31, |
|
||
|
|
2018 |
|
2017 |
|
||
|
|
(in thousands) |
|
||||
Payroll and related benefits |
|
$ |
30,890 |
|
$ |
32,996 |
|
Warranty |
|
6,455 |
|
6,532 |
|
||
Interest |
|
2,148 |
|
4,430 |
|
||
Professional fees |
|
3,654 |
|
3,942 |
|
||
Merger consideration payable |
|
2,662 |
|
2,662 |
|
||
Sales, use, and other taxes |
|
1,493 |
|
2,144 |
|
||
Restructuring liability |
|
1,390 |
|
1,520 |
|
||
Other |
|
5,605 |
|
3,842 |
|
||
Total |
|
$ |
54,297 |
|
$ |
58,068 |
|
Veeco Instruments Inc. and Subsidiaries
Notes to the Consolidated Financial Statements - continued
(unaudited)
Other liabilities include accruals for costs related to customer training, royalties, and travel.
Warranty
Warranties are typically valid for one year from the date of system final acceptance, and Veeco estimates the costs that may be incurred under the warranty. Estimated warranty costs are determined by analyzing specific product and historical configuration statistics and regional warranty support costs and are affected by product failure rates, material usage, and labor costs incurred in correcting product failures during the warranty period. Unforeseen component failures or exceptional component performance can also result in changes to warranty costs. Changes in product warranty reserves for the three months ended March 31, 2018 include:
|
|
(in thousands) |
|
|
Balance - December 31, 2017 |
|
$ |
6,532 |
|
Warranties issued |
|
1,647 |
|
|
Consumption of reserves |
|
(1,908 |
) |
|
Changes in estimate |
|
184 |
|
|
Balance - March 31, 2018 |
|
$ |
6,455 |
|
Restructuring Accruals
During the three months ended March 31, 2018, additional accruals were recognized and payments made related to previous years restructuring initiatives. During 2017, the Company substantially completed restructuring activities as part of its initiative to streamline operations, enhance efficiencies, and reduce costs, as well as reducing future investments in certain technology development. In addition, during 2017, the Company began the Ultratech acquisition integration process to enhance efficiencies, resulting in employee terminations and other facility costs.
|
|
Personnel |
|
|
|
|
|
|||
|
|
Severance and |
|
Facility |
|
|
|
|||
|
|
Related Costs |
|
Related Costs |
|
Total |
|
|||
|
|
(in thousands) |
|
|||||||
Balance - December 31, 2017 |
|
$ |
1,520 |
|
$ |
|
|
$ |
1,520 |
|
Provision |
|
655 |
|
1,868 |
|
2,523 |
|
|||
Payments |
|
(785 |
) |
(1,868 |
) |
(2,653 |
) |
|||
Balance - March 31, 2018 |
|
$ |
1,390 |
|
$ |
|
|
$ |
1,390 |
|
Included within restructuring expense in the Consolidated Statements of Operations for the three months ended March 31, 2018 is approximately $0.2 million of non-cash charges related to accelerated share-based compensation for employee terminations.
Customer Deposits and Deferred Revenue
Customer deposits totaled $45.7 million and $41.5 million at March 31, 2018 and December 31, 2017, respectively. 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:
Veeco Instruments Inc. and Subsidiaries
Notes to the Consolidated Financial Statements - continued
(unaudited)
|
|
(in thousands) |
|
|
Balance - December 31, 2017 |
|
$ |
70,536 |
|
Deferral of revenue |
|
5,360 |
|
|
Recognition of unearned revenue |
|
(27,100 |
) |
|
Balance - March 31, 2018 |
|
$ |
48,796 |
|
As of March 31, 2018, the Company has approximately $133.2 million of remaining performance obligations on contracts with an original estimated duration of one year or more, of which approximately 76% is expected to be recognized within one year, with the remaining amounts expected to be recognized between one to three years. The Company has elected to exclude disclosures regarding remaining performance obligations that have an original expected duration of one year or less.
Convertible Senior Notes
On January 10, 2017, the Company issued $345.0 million of 2.70% convertible senior unsecured notes (the Convertible Senior Notes). The Company received net proceeds, after deducting underwriting discounts and fees and expenses payable by the Company, of approximately $335.8 million. The Convertible Senior 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 Convertible Senior Notes mature on January 15, 2023 (the Maturity Date), unless earlier purchased by the Company, redeemed, or converted.
The carrying value of the Convertible Senior Notes is as follows:
|
|
March 31, |
|
December 31, |
|
||
|
|
2018 |
|
2017 |
|
||
|
|
(in thousands) |
|
||||
Principal amount |
|
$ |
345,000 |
|
$ |
345,000 |
|
Unamortized debt discount |
|
(60,424 |
) |
(63,022 |
) |
||
Unamortized transaction costs |
|
(6,087 |
) |
(6,348 |
) |
||
Net carrying value |
|
$ |
278,489 |
|
$ |
275,630 |
|
Total interest expense related to the Convertible Senior Notes is as follows:
|
|
Three months |
|
Three months |
|
||
|
|
ended March 31, |
|
ended March 31, |
|
||
|
|
2018 |
|
2017 |
|
||
|
|
(in thousands) |
|
||||
Cash Interest Expense |
|
|
|
|
|
||
Coupon interest expense |
|
$ |
2,329 |
|
$ |
1,915 |
|
Non-Cash Interest Expense |
|
|
|
|
|
||
Amortization of debt discount |
|
2,598 |
|
1,985 |
|
||
Amortization of transaction costs |
|
261 |
|
200 |
|
||
Total Interest Expense |
|
$ |
5,188 |
|
$ |
4,100 |
|
The Company determined the Convertible Senior Notes is a Level 2 liability in the fair value hierarchy and estimated its fair value as $314.1 million at March 31, 2018.
Other Liabilities
The Company maintains an executive non-qualified deferred compensation plan that was assumed from Ultratech that allows qualifying executives to defer cash compensation. At both March 31, 2018 and December 31, 2017, plan assets approximated $3.4 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 $4.5 million and $4.7 million, respectively, and is included within Other liabilities in the Consolidated Balance Sheets. Other liabilities also included
Veeco Instruments Inc. and Subsidiaries
Notes to the Consolidated Financial Statements - continued
(unaudited)
asset retirement obligations at March 31, 2018 and December 31, 2017 of $3.3 million, medical and dental benefits of $2.1 million and $2.2 million, respectively, and acquisition related accruals of $0.2 million, and $0.4 million, respectively.
Note 6 - Commitments and Contingencies
Minimum Lease Commitments
At March 31, 2018, the Companys total future minimum lease payments under non-cancelable operating leases have not changed significantly from the disclosure in the 2017 Form 10-K.
Purchase Commitments
Veeco has purchase commitments of $160.4 million at March 31, 2018, substantially all of which become due within one year.
Bank Guarantees
Veeco has bank guarantees and letters of credit issued by a financial institution on its behalf as needed. At March 31, 2018, outstanding bank guarantees and letters of credit totaled $7.2 million, and unused bank guarantees and letters of credit of $66.3 million were available to be drawn upon.
Legal Proceedings
On September 21, 2017, Blueblade Capital Opportunities LLC et al., on behalf of purported beneficial owners of 440,100 shares of Ultratech common stock, filed an action against Ultratech in Delaware Court of Chancery requesting an appraisal of the value of their Ultratech stock pursuant to 8 Del. C. §262. The Company believes that the merger price, which was the product of arms-length negotiations, was fair and reasonable, and intends to contest the appraisal claim. Discovery in the matter has commenced and a trial on the action is scheduled to begin in December 2018.
On April 12, 2017, the Company filed a patent infringement complaint in the U.S. District Court for the Eastern District of New York against SGL Carbon, LLC and SGL Carbon SE (collectively, SGL), alleging infringement of patents relating to wafer carrier technology used in MOCVD equipment. The complaint alleges that SGL infringes Veecos patents by making and selling certain wafer carriers to Veecos competitor, Advanced Micro-Fabrication Equipment, Inc. (AMEC). On November 2, 2017, the U.S. District Court granted the Companys motion for a preliminary injunction prohibiting SGL from shipping wafer carriers using the Companys patented technology without the Companys express authorization.
On July 13, 2017, AMEC filed a patent infringement complaint against Veeco Instruments Shanghai Co., Ltd. (Veeco Shanghai) with the Fujian High Court in China, alleging that the Companys MOCVD products infringed a Chinese utility model patent relating to the synchronous movement engagement mechanism in a chemical vapor deposition reactor and seeking injunctive relief and monetary damages against Veeco Shanghai. On December 7, 2017, without providing notice to Veeco and without hearing Veecos position on alleged infringement, the Fujian High Court issued a preliminary injunction, applicable in China, that requires Veeco Shanghai to stop importing, making, selling, and offering to sell Veeco EPIK 700 model MOCVD systems and to stop importing, selling, and offering to sell wafer carriers used as supplies for the EPIK 700 MOCVD system.
On February 8, 2018, Veeco, AMEC, and SGL announced that they had mutually agreed to settle the pending litigation among the parties and to amicably resolve all pending disputes, including AMECs lawsuit against Veeco before the Fujian High Court in China and Veecos lawsuit against SGL before the U.S. District Court for the Eastern District of New York. As part of the settlement, all legal actions worldwide (in court, patent offices, and otherwise), between Veeco, AMEC, and
Veeco Instruments Inc. and Subsidiaries
Notes to the Consolidated Financial Statements - continued
(unaudited)
SGL, and their affiliates, were dismissed and/or otherwise withdrawn. As a result, all business processes, including sales, service, and importation, were resumed promptly following the settlement.
The Company is involved in various other legal proceedings arising in the normal course of business. The Company does not believe that the ultimate resolution of these matters will have a material adverse effect on its consolidated financial position, results of operations, or cash flows.
Receivable Purchase Agreement
In December 2017, 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 $23.0 million at any point in time for a term of one year. There were no sales of accounts receivable under the agreement for the three months ended March 31, 2018, and as of March 31, 2018, the Company maintained $23.0 million available under the agreement for additional sales of trade receivables.
Note 7 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 Companys foreign currency denominated monetary assets and liabilities and forecasted cash flows. The Company entered 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, net in the Companys Consolidated Statements of Operations. The Company executed derivative transactions with highly rated financial institutions to mitigate counterparty risk.
A summary of the foreign exchange derivatives outstanding on March 31, 2018 and December 31, 2017 is as follows:
|
|
March 31, 2018 |
|
December 31, 2017 |
|
||||||||||||
|
|
Fair |
|
Maturity |
|
Notional |
|
Fair |
|
Maturity |
|
Notional |
|
||||
|
|
Value |
|
Dates |
|
Amounts |
|
Value |
|
Dates |
|
Amounts |
|
||||
|
|
(in thousands) |
|
||||||||||||||
Foreign currency exchange forwards |
|
$ |
|
|
April 2018 |
|
$ |
5,062 |
|
$ |
|
|
January 2018 |
|
$ |
622 |
|
The following table shows the gains and (losses) from currency exchange derivatives during the three months ended March 31, 2018 and 2017, which are included in Other, net in the Consolidated Statements of Operations, as well as the weighted average notional amount of derivatives outstanding for each period:
|
|
Three months ended March 31, 2018 |
|
Three months ended March 31, 2017 |
|
||||||||
|
|
|
|
Weighted average |
|
|
|
Weighted average |
|
||||
|
|
Gains (losses) |
|
notional amount |
|
Gains (losses) |
|
notional amount |
|
||||
|
|
(in thousands) |
|
||||||||||
Foreign currency exchange forwards |
|
$ |
17 |
|
$ |
930 |
|
$ |
|
|
$ |
|
|
Note 8 - Equity
Accumulated Other Comprehensive Income (AOCI)
The following table presents the changes in the balances of each component of AOCI, net of tax:
Veeco Instruments Inc. and Subsidiaries
Notes to the Consolidated Financial Statements - continued
(unaudited)
|
|
|
|
Unrealized |
|
|
|
|||
|
|
|
|
Gains (Losses) on |
|
|
|
|||
|
|
Foreign Currency |
|
Available for Sale |
|
|
|
|||
|
|
Translation |
|
Securities |
|
Total |
|
|||
|
|
(in thousands) |
|
|||||||
Balance - December 31, 2017 |
|
$ |
1,839 |
|
$ |
(27 |
) |
$ |
1,812 |
|
Other comprehensive income (loss) |
|
32 |
|
(8 |
) |
24 |
|
|||
Balance - March 31, 2018 |
|
$ |
1,871 |
|
$ |
(35 |
) |
$ |
1,836 |
|
There were minimal reclassifications from AOCI into net income for the three months ended March 31, 2018.
Note 9 - Share-based compensation
Restricted share awards are issued to employees that are subject to specified restrictions and a risk of forfeiture. The restrictions typically lapse over one to five years and may entitle holders to dividends and voting rights. Other types of share-based compensation include performance share awards, performance share units, and restricted share units (collectively with restricted share awards, restricted shares), as well as options to purchase common stock.
Share-based compensation expense was recognized in the following line items in the Consolidated Statements of Operations for the three months ended March 31, 2018 and 2017:
|
|
Three months ended March 31, |
|
||||
|
|
2018 |
|
2017 |
|
||
|
|
(in thousands) |
|
||||
Cost of sales |
|
$ |
554 |
|
$ |
657 |
|
Research and development |
|
954 |
|
429 |
|
||
Selling, general, and administrative |
|
2,857 |
|
3,100 |
|
||
Restructuring |
|
172 |
|
|
|
||
Total |
|
$ |
4,537 |
|
$ |
4,186 |
|
For the three months ended March 31, 2018, equity activity related to stock options was as follows:
|
|
|
|
Weighted |
|
|
|
|
Number of |
|
Average |
|
|
|
|
Shares |
|
Exercise Price |
|
|
|
|
(in thousands) |
|
|
|
|
Balance - December 31, 2017 |
|
1,394 |
|
$ |
34.97 |
|
Expired or forfeited |
|
(53 |
) |
35.45 |
|
|
Balance - March 31, 2018 |
|
1,341 |
|
$ |
34.95 |
|
For the three months ended March 31, 2018, equity activity related to non-vested restricted shares and performance shares was as follows:
Veeco Instruments Inc. and Subsidiaries
Notes to the Consolidated Financial Statements - continued
(unaudited)
|
|
|
|
Weighted
|
|
|
|
|
Number of |
|
Grant Date |
|
|
|
|
Shares |
|
Fair Value |
|
|
|
|
(in thousands) |
|
|
|
|
Balance - December 31, 2017 |
|
1,880 |
|
$ |
25.41 |
|
Granted |
|
759 |
|
19.69 |
|
|
Performance award adjustments |
|
(5 |
) |
32.67 |
|
|
Vested |
|
(44 |
) |
28.46 |
|
|
Forfeited |
|
(55 |
) |
25.87 |
|
|
Balance - March 31, 2018 |
|
2,535 |
|
$ |
23.62 |
|
Note 10 - Income Taxes
Income taxes are estimated for each of the jurisdictions in which the Company operates. Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as the tax effect of carryforwards. Realization of net deferred tax assets is dependent on future taxable income. At March 31, 2018, the Companys U.S. deferred tax assets are fully offset by a valuation allowance since the Company cannot conclude that it is more likely than not that these future benefits will be realized.
At the end of each interim reporting period, the effective tax rate is aligned with expectations for the full year. This estimate is used to determine the income tax provision on a year-to-date basis and may change in subsequent interim periods. If necessary, the year-to-date tax benefit for interim period losses is limited to the amount that could be recognizable at the end of the fiscal year.
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act. The 2017 Tax Act makes broad and complex changes to the U.S. tax code that affects the Companys 2018 financial results, including, but not limited to, a reduction in the U.S. federal corporate income tax rate from 35 percent to 21 percent; current U.S. taxation of global intangible low-taxed income (GILTI) of non-U.S. operations; additional limitations on the deductibility of executive compensation; and limitations on the deductibility of interest.
The Company recognized the income tax effects of the 2017 Tax Act in its 2017 financial statements in accordance with SAB 118, which provides SEC staff guidance for the application of ASC 740 in the reporting period in which the 2017 Tax Act was signed into law. As such, the Companys 2017 financial results reflect the income tax effects of the 2017 Tax Act, including provisional amounts for specific income tax effects of the 2017 Tax Act for which the accounting under ASC 740 is incomplete but for which a reasonable estimate could be determined. The Company is still in the process of evaluating the impacts of the 2017 Tax Act and considers the amounts previously recorded to be provisional, except for the impact of the change in tax rate on the Companys deferred tax assets and liabilities as of December 31, 2017, for which the accounting is complete. The Company has not adjusted these estimates during the three months ended March 31, 2018 and will complete its analysis and finalize the amounts within the measurement period as provided by SAB 118.
Loss before income taxes and income tax benefit for the three months ended March 31, 2018 and 2017 were as follows:
|
|
Three months ended March 31, |
|
||||
|
|
2018 |
|
2017 |
|
||
Loss before income taxes |
|
$ |
(16,057 |
) |
$ |
(8,887 |
) |
Income tax benefit |
|
$ |
(230 |
) |
$ |
(10,527 |
) |
Veeco Instruments Inc. and Subsidiaries
Notes to the Consolidated Financial Statements - continued
(unaudited)
The Companys tax benefit for the three months ended March 31, 2018 was $0.2 million compared to $10.5 million for the comparable prior period. The 2018 tax benefit included a $0.1 million tax expense relating to the Companys domestic operations and a $0.3 million tax benefit relating to the Companys non-U.S. operations, compared to 2017 when its benefit included $4.3 million related to domestic operations and $6.2 million related to non-U.S. operations. The current period domestic tax expense is primarily attributable to the tax amortization of indefinite-lived intangible assets that is not available to offset U.S. deferred tax assets. The current period non-U.S. tax benefit is primarily attributable to the amortization of intangible assets, offset by tax expense on non-U.S operation profits incurred during the period, as well as foreign withholding taxes on unremitted earnings as of March 31, 2018. The domestic tax benefit for the comparable period is primarily attributable to an income tax benefit for losses incurred during such period, as the deferred tax liability created by the issuance of the Convertible Senior Notes is treated as a source of income in fiscal 2017, offset by a deferred provision related to tax amortization on indefinite-lived intangible assets. The comparable period non-U.S. tax benefit is primarily attributable to the reversal of an uncertain tax position that was determined to be realizable in 2017.
Note 11 - Segment Reporting and Geographic Information
Veeco operates and measures its results in one operating segment and therefore has one reportable segment: the design, development, manufacture, and support of thin film process equipment primarily sold to make electronic devices.
Veeco categorizes its sales into the following four end-markets:
Advanced Packaging, MEMS & RF Filters
Advanced Packaging includes a portfolio of wafer-level assembly technologies that enable the miniaturization and performance improvement of electronic products, such as smartphones, smartwatches, tablets, and laptops. Micro-Electro Mechanical Systems (MEMS) includes tiny mechanical devices such as sensors, switches, mirrors, and actuators embedded in semiconductor chips used in vehicles, smartphones, tablets, and games. RF Filters refers to RF filters used in smartphones, tablets, and mobile devices.
LED Lighting, Display & Compound Semiconductor
LED Lighting refers to Light Emitting Diode (LED) and semiconductor illumination sources used in various applications including, but not limited to, displays such as backlights, general lighting, automotive running lights, and headlamps. Display refers to LEDs used for displays and Organic Light Emitting Diode (OLED) displays found in outdoor display/signage applications, TVs, smartphones, wearable devices, and tablets. Compound Semiconductor includes Photonics, Power Electronics, and Radio Frequency (RF) Devices. Photonics refers to laser diodes, Vertical Cavity Surface Emitting Lasers (VCSEL) in 3D sensing and communications, and various other optical devices. Power Electronics refers to semiconductor devices such as rectifiers, inverters, and converters for the control and conversion of electric power. RF devices refers to radio frequency emitting and receiving devices that enable wireless communications. Such devices include power amplifiers, switches, and transceivers for applications such as mobile (including handsets and base stations), defense, automobile, and the Internet of Things.
Front-End Semiconductor
Front-End Semiconductor refers to the early steps in the process of integrated circuit fabrication where the microchips are created but still remain on the silicon wafer. This category includes Laser Spike Anneal, Ion Beam etch for front-end semiconductor applications, and Ion Beam deposition for EUV mask blanks.
Scientific & Industrial
Scientific refers to advanced materials research at university research institutions, industry research institutions, industry consortiums, and government research agencies. Industrial refers to large-scale product manufacturing applications
Veeco Instruments Inc. and Subsidiaries
Notes to the Consolidated Financial Statements - continued
(unaudited)
including data storage and optical coatings: thin layers of material deposited on a lens or mirror that alters how light reflects and transmits.
Sales by end-market and geographic region for the three months ended March 31, 2018 and 2017 were as follows:
|
|
Three months ended March 31, |
|
||||
|
|
2018 |
|
2017 |
|
||
|
|
(in thousands) |
|
||||
Sales by end-market |
|
|
|
|
|
||
Advanced Packaging, MEMS & RF Filters |
|
$ |
27,153 |
|
$ |
10,912 |
|
LED Lighting, Display & Compound Semiconductor |
|
89,916 |
|
55,148 |
|
||
Front-End Semiconductor |
|
9,457 |
|
1,158 |
|
||
Scientific & Industrial |
|
32,048 |
|
27,281 |
|
||
Total |
|
$ |
158,574 |
|
$ |
94,499 |
|
Sales by geographic region |
|
|
|
|
|
||
United States |
|
$ |
23,754 |
|
$ |
17,046 |
|
China |
|
75,395 |
|
40,521 |
|
||
EMEA (1) |
|
15,745 |
|
22,440 |
|
||
Rest of World |
|
43,680 |
|
14,492 |
|
||
Total |
|
$ |
158,574 |
|
$ |
94,499 |
|
(1) EMEA consists of Europe, the Middle East, and Africa
For geographic reporting, sales are attributed to the location in which the customer facility is located.
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Statement Regarding Forward Looking Statements
Our discussion below constitutes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. When used in this Report, the words believes, anticipates, expects, estimates, targets, plans, intends, will, and similar expressions related to the future are intended to identify forward-looking statements. All forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from projected results. You should not place undue reliance on any forward-looking statements, which speak only as of the dates they are made.
Executive Summary
We are a technology company that develops, manufactures, sells, and supports semiconductor/compound semiconductor process equipment aligned to meet the demands of key global trends such as enhanced mobility, increased connectivity, and energy efficiency. Our primary technologies include metal organic chemical vapor deposition (MOCVD), advanced packaging lithography, wet etch and clean, laser annealing, ion beam deposition and etch, molecular beam epitaxy, 3D wafer inspection, and atomic layer deposition. These technologies play an integral role in producing LEDs for solid-state lighting and displays and in the fabrication and packaging of advanced semiconductor devices. With equipment designed to optimize performance, yield, and cost of ownership, we hold technology leadership positions in many of these served markets.
We categorize our revenue by the key markets into which we sell. Our four key markets are: Advanced Packaging, MEMS & RF Filters; LED Lighting, Display & Compound Semiconductor; Front-End Semiconductor; and Scientific & Industrial.
Sales in the Advanced Packaging, MEMS & RF Filters market were driven by shipments of lithography systems to Outsourced Semiconductor Assembly & Test companies (OSATs) in support of advanced packaging processes such as Fan-Out Wafer Level Packaging (FOWLP), Copper Pillar, and Chip on Wafer on Substrate (CoWoS). Additionally, we continue to ship Wet Etch and Clean systems to foundry customers in support of advanced packaging and MEMS applications. We anticipate OSATs will continue to add capacity in the future driven by broader technology trends such as artificial intelligence (AI), mobile connectivity, autonomous vehicles, big data processing, and 5G infrastructure deployment.
Sales in the LED Lighting, Display & Compound Semiconductor market were driven by the shipment of MOCVD systems into China for general lighting. We also sell MOCVD systems for other applications, including Photonics and RF device applications. We expect growth in this market to be driven by fine-pitch digital signage, automotive lighting, 3D sensing Vertical Cavity Surface Emitting Lasers (VCSELs) and laser diodes, 5G RF devices, and power electronics, and have focused our R&D efforts accordingly, where our technology differentiation can provide a significant advantage for our customers. Our broad portfolio of MOCVD and Wet Etch and Clean technologies has been developed to support these applications. We expect margins in the second half of 2018 to be higher than the first half as a result of a shift in our product mix in the LED market.
We continue to build momentum in the Front-End Semiconductor market with sales and orders for our 3D inspection systems and Ion Beam Etch systems for Spin Torque Transfer Magnetic Random Access Memory (STT-MRAM). We have received follow-on orders for our 3D inspection system in a 3D NAND application and are in various stages of evaluation with several other NAND, DRAM, and Logic customers. We have partnered with a large semiconductor capital equipment manufacturer to bring our STT-MRAM solution to market to initially enable applications where non-volatility and low power consumption are required, such as Internet of Things (IoT).
Sales in the Scientific & Industrial market were supported by shipments of Ion Beam deposition systems for optical coatings and data storage applications, as well as MBE shipments to universities and government laboratories. While equipment demand from each individual market may fluctuate quarter to quarter, the diverse customer base has historically provided a relatively stable revenue stream for the Company.
Results of Operations
For the three months ended March 31, 2018 and 2017
The following table presents revenue and expense line items reported in our Consolidated Statements of Operations for 2018 and 2017 and the period-over-period dollar and percentage changes for those line items. Our results of operations are reported as one business segment, represented by our single operating segment.
|
|
Three months ended March 31, |
|
Change |
|
|||||||||||
|
|
2018 |
|
2017 |
|
Period to Period |
|
|||||||||
|
|
(dollars in thousands) |
|
|||||||||||||
Net sales |
|
$ |
158,574 |
|
100% |
|
$ |
94,499 |
|
100% |
|
$ |
64,075 |
|
68% |
|
Cost of sales |
|
101,894 |
|
64% |
|
59,999 |
|
63% |
|
41,895 |
|
70% |
|
|||
Gross profit |
|
56,680 |
|
36% |
|
34,500 |
|
37% |
|
22,180 |
|
64% |
|
|||
Operating expenses, net: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Research and development |
|
24,320 |
|
15% |
|
14,989 |
|
16% |
|
9,331 |
|
62% |
|
|||
Selling, general, and administrative |
|
26,383 |
|
17% |
|
19,105 |
|
20% |
|
7,278 |
|
38% |
|
|||
Amortization of intangible assets |
|
13,532 |
|
9% |
|
2,867 |
|
3% |
|
10,665 |
|
372% |
|
|||
Restructuring |
|
2,695 |
|
2% |
|
1,338 |
|
1% |
|
1,357 |
|
101% |
|
|||
Acquisition costs |
|
1,342 |
|
1% |
|
1,361 |
|
1% |
|
(19 |
) |
(1)% |
|
|||
Asset impairment |
|
|
|
|
|
463 |
|
|
|
(463 |
) |
* |
|
|||
Other, net |
|
(157 |
) |
|
|
(78 |
) |
|
|
(79 |
) |
* |
|
|||
Total operating expenses, net |
|
68,115 |
|
43% |
|
40,045 |
|
42% |
|
28,070 |
|
70% |
|
|||
Operating income (loss) |
|
(11,435 |
) |
(7)% |
|
(5,545 |
) |
(6)% |
|
(5,890 |
) |
* |
|
|||
Interest income (expense), net |
|
(4,622 |
) |
(3)% |
|
(3,342 |
) |
(4)% |
|
(1,280 |
) |
* |
|
|||
Income (loss) before income taxes |
|
(16,057 |
) |
(10)% |
|
(8,887 |
) |
(9)% |
|
(7,170 |
) |
* |
|
|||
Income tax expense (benefit) |
|
(230 |
) |
|
|
(10,527 |
) |
(11)% |
|
10,297 |
|
* |
|
|||
Net income (loss) |
|
$ |
(15,827 |
) |
(10)% |
|
$ |
1,640 |
|
2% |
|
$ |
(17,467 |
) |
* |
|
* Not meaningful
Net Sales
The following is an analysis of sales by market and by region:
|
|
Three months ended March 31, |
|
Change |
|
|||||||||||
|
|
2018 |
|
2017 |
|
Period to Period |
|
|||||||||
|
|
(dollars in thousands) |
|
|||||||||||||
Sales by market |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Advanced Packaging, MEMS & RF Filters |
|
$ |
27,153 |
|
17% |
|
$ |
10,912 |
|
12% |
|
$ |
16,241 |
|
149% |
|
LED Lighting, Display & Compound Semiconductor |
|
89,916 |
|
57% |
|
55,148 |
|
58% |
|
34,768 |
|
63% |
|
|||
Front-End Semiconductor |
|
9,457 |
|
6% |
|
1,158 |
|
1% |
|
8,299 |
|
717% |
|
|||
Scientific & Industrial |
|
32,048 |
|
20% |
|
27,281 |
|
29% |
|
4,767 |
|
17% |
|
|||
Total |
|
$ |
158,574 |
|
100% |
|
$ |
94,499 |
|
100% |
|
$ |
64,075 |
|
68% |
|
Sales by geographic region |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
United States |
|
$ |
23,754 |
|
15% |
|
$ |
17,046 |
|
18% |
|
$ |
6,708 |
|
39% |
|
China |
|
75,395 |
|
47% |
|
40,521 |
|
43% |
|
34,874 |
|
86% |
|
|||
EMEA |
|
15,745 |
|
10% |
|
22,440 |
|
24% |
|
(6,695 |
) |
(30)% |
|
|||
Rest of World |
|
43,680 |
|
28% |
|
14,492 |
|
15% |
|
29,188 |
|
201% |
|
|||
Total |
|
$ |
158,574 |
|
100% |
|
$ |
94,499 |
|
100% |
|
$ |
64,075 |
|
68% |
|
Total sales increased across all market categories for the three months ended March 31, 2018 against the comparable prior year period, driven by increased sales to LED manufacturers, as well as additional sales from the Ultratech business acquired in May 2017, primarily in the Advanced Packaging, MEMS & RF Filters and Front-End Semiconductor markets. Pricing was not a significant driver of the change in total sales. By geography, sales increased in the China, Rest of World, and United States regions, offset by a decrease in the EMEA region. The most significant increases occurred in the China and Rest of World regions, which was largely attributable to the increased sales in the LED Lighting, Display & Compound Semiconductor market, as well as additional sales from the Ultratech business acquired. We expect there will continue to be year-to-year variations in our future sales distribution across markets and geographies.
Orders increased to $154.5 million for the three months ended March 31, 2018 from $107.3 million for the comparable prior year period. The increase in orders was primarily attributable to an increase in orders in the Front-End Semiconductor and Advanced Packaging, MEMS, and RF Filters markets of $30.9 million and $17.1 million, respectively, including additional bookings from the Ultratech business.
One of the performance measures we use as a leading indicator of the business is the book-to-bill ratio. The ratio is defined as orders recorded in a given period divided by revenue recognized in the same period. A ratio greater than one indicates we are adding orders faster than we are recognizing revenue. For the three months ended March 31, 2018, the ratio was 1.0, compared to 1.1 for the comparable prior period. Our backlog at March 31, 2018 was $331.1 million, compared to $334.3 million at December 31, 2017. During the three months ended March 31, 2018, we increased backlog by approximately $2.9 million relating to the adoption of ASC Topic 606, Revenue from Contracts with Customers, while adjusting for a decrease in backlog of approximately $2.0 million relating to orders that no longer met our bookings criteria.
Gross Profit
In the first quarter of 2018, gross profit increased compared to the first quarter of 2017 due to an increase in sales volume, including the acquisition of Ultratech, partially offset by decreased gross margins as a result of a shift in our product mix in the LED market. We expect gross margins in the second half of 2018 to be higher than the first half.
Research and Development
The markets we serve are characterized by continuous technological development and product innovation, and we invest in various research and development initiatives to maintain our competitive advantage and achieve our growth objectives.
Research and development expenses increased for the three months ended March 31, 2018 against the comparable prior period, primarily as a result of the addition of the acquired Ultratech research and development related projects, as well as increased consulting fees.
Selling, General, and Administrative
Selling, general, and administrative expenses increased primarily due to the addition of the acquired Ultratech related selling, general, and administrative costs, as well as increased professional and legal fees.
Amortization Expense
The increase in amortization expense is a result of the additional intangibles acquired as part of the acquisition of Ultratech.
Acquisition Costs
Acquisition costs are non-recurring charges incurred in connection with the acquisition of the Ultratech business, as well as legal and professional fees incurred in connection with certain integration activities.
Restructuring Expense
During the three months ended March 31, 2018, additional accruals were recognized and payments made related to previous years restructuring initiatives. Restructuring expense for the quarter ended March 31, 2018 included non-cash charges of $0.2 million related to accelerated share-based compensation for employee terminations. During 2017, we substantially completed restructuring activities as part of our initiative to streamline operations, enhance efficiencies, and reduce costs, as well as reducing future investments in certain technology development. In addition, during 2017, we began the Ultratech acquisition integration process to enhance efficiencies, resulting in additional employee terminations and other facility costs.
Interest Income (Expense)
We recorded net interest expense of $4.6 million for the three months ended March 31, 2018, compared to $3.3 million for the comparable prior period. The increase in net interest expense is primarily attributable to the Convertible Senior Notes issued in January 2017 that were outstanding for the full period in 2018, compared to a partial period in 2017. Included in interest expense for the three months ended March 31, 2018 and 2017 were non-cash charges of $2.9 million and $2.2 million, respectively, related to the Convertible Senior Notes.
Income Taxes
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (2017 Tax Act), which makes broad and complex changes to the U.S. tax code. Certain income tax effects of the 2017 Tax Act are reflected in our financial results in accordance with Staff Accounting Bulletin No. 118 (SAB 118). SAB 118 provides SEC staff guidance regarding the application of ASC Topic 740, Income Taxes (ASC 740), and the disclosures required due to the enactment of the 2017 Tax Act. Refer to Note 10, Income Taxes, in the Notes to the Consolidated Financial Statements for further information on the financial statement impact of the 2017 Tax Act.
At the end of each interim reporting period, we estimate the effective income tax rate expected to be applicable for the full year. This estimate is used to determine the income tax provision or benefit on a year-to-date basis and may change in subsequent interim periods.
Our tax benefit for the three months ended March 31, 2018 was $0.2 million compared to $10.5 million for the comparable prior period. The 2018 tax benefit included a $0.1 million tax expense relating to our domestic operations and a $0.3 million tax benefit relating to our non-U.S. operations, compared to 2017 when our benefit included $4.3 million related to domestic operations and $6.2 million related to our non-U.S. operations. The current period domestic tax expense is primarily attributable to the tax amortization of indefinite-lived intangible assets that is not available to offset U.S. deferred tax assets.
The current period non-U.S. tax benefit is primarily attributable to the amortization of intangible assets, offset by tax expense on non-U.S operation profits incurred during the period, as well as foreign withholding taxes on unremitted earnings as of March 31, 2018. The domestic tax benefit for the comparable period is primarily attributable to an income tax benefit for losses incurred during such period, as the deferred tax liability created by the issuance of the Convertible Senior Notes is treated as a source of income in fiscal 2017, offset by a deferred provision related to tax amortization on indefinite-lived intangible assets. The comparable period non-U.S. tax benefit is primarily attributable to the reversal of an uncertain tax position that was determined to be realizable in 2017.
Liquidity and Capital Resources
Our cash and cash equivalents, short-term investments, and restricted cash are as follows:
|
|
March 31, |
|
December 31, |
|
||
|
|
2018 |
|
2017 |
|
||
|
|
(in thousands) |
|
||||
Cash and cash equivalents |
|
$ |
245,525 |
|
$ |
279,736 |
|
Restricted cash |
|
841 |
|
847 |
|
||
Short-term investments |
|
65,130 |
|
47,780 |
|
||
Total |
|
$ |
311,496 |
|
$ |
328,363 |
|
At March 31, 2018 and December 31, 2017, cash and cash equivalents of $180.5 million and $214.3 million, respectively, were held outside the United States. As of March 31, 2018, we had $143.3 million of accumulated undistributed earnings generated by our non-U.S. subsidiaries for which the U.S. repatriation tax has been provided and did not require the use of cash due to the use of foreign tax and R&D credit carryforwards. Approximately $38.1 million of undistributed earnings will be subject to foreign withholding taxes of approximately $3.2 million if distributed back to the U.S. We believe that our projected cash flow from operations, combined with our cash and short term investments, will be sufficient to meet our projected working capital requirements, contractual obligations, and other cash flow needs for the next twelve months, including scheduled interest payments on our Convertible Senior Notes due 2023.
A summary of the cash flow activity for the three months ended March 31, 2018 and 2017 is as follows:
Cash Flows from Operating Activities
|
|
Three months ended March 31, |
|
||||
|
|
2018 |
|
2017 |
|
||
|
|
(in thousands) |
|
||||
Net income (loss) |
|
$ |
(15,827 |
) |
$ |
1,640 |
|
Non-cash items: |
|
|
|
|
|
||
Depreciation and amortization |
|
17,726 |
|
5,799 |
|
||
Non-cash interest expense |
|
2,859 |
|
2,185 |
|
||
Deferred income taxes |
|
(269 |
) |
(6,246 |
) |
||
Share-based compensation expense |
|
4,537 |
|
4,186 |
|
||
Asset impairment |
|
|
|
463 |
|
||
Other |
|
|
|
92 |
|
||
Changes in operating assets and liabilities |
|
(20,833 |
) |
(1,787 |
) |
||
Net cash provided by (used in) operating activities |
|
$ |
(11,807 |
) |
$ |
6,332 |
|
Net cash used in operating activities was $11.8 million for the three months ended March 31, 2018 and was due to net loss of $15.8 million plus adjustments for non-cash items of $24.8 million, offset by a decrease in cash flow from operating activities due to changes in operating assets and liabilities of $20.8 million. The changes in operating assets and liabilities were largely attributable to increases in accounts receivable and decreases in customer deposits and deferred revenue.
Cash Flows from Investing Activities
|
|
Three months ended March 31, |
|
||||
|
|
2018 |
|
2017 |
|
||
|
|
(in thousands) |
|
||||
Capital expenditures |
|
$ |
(2,259 |
) |
$ |
(4,187 |
) |
Changes in investments, net |
|
(20,300 |
) |
(191,730 |
) |
||
Net cash provided by (used in) investing activities |
|
$ |
(22,559 |
) |
$ |
(195,917 |
) |
The cash used in investing activities during the three months ended March 31, 2018 was attributable to net changes in investments as well as capital expenditures. In 2017, as part of our efforts to streamline operations, enhance efficiency, and reduce costs, we made certain investments in our facilities to support the consolidation activities. These activities were substantially completed in 2017.
Cash Flows from Financing Activities
|
|
Three months ended March 31, |
|
||||
|
|
2018 |
|
2017 |
|
||
|
|
(in thousands) |
|
||||
Net proceeds from employee equity programs |
|
$ |
709 |
|
$ |
124 |
|
Purchases of common stock |
|
(592 |
) |
|
|
||
Proceeds from long-term debt borrowings |
|
|
|
335,752 |
|
||
Repayments of long-term debt |
|
|
|
(89 |
) |
||
Net cash provided by (used in) financing activities |
|
$ |
117 |
|
$ |
335,787 |
|
The cash provided by financing activities for the three months ended March 31, 2018 was related to the net proceeds from employee equity programs, partially offset by purchases of common stock. The cash provided by financing activities for the three months ended March 31, 2017 was primarily related to the net cash proceeds received from the issuance of the Convertible Senior Notes in January 2017.
Convertible Senior Notes
On January 10, 2017, we issued $345.0 million of 2.70% convertible senior unsecured notes (the Convertible Senior Notes). We received net proceeds, after deducting underwriting discounts and fees and expenses payable by the Company, of approximately $335.8 million. The Convertible Senior 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 Convertible Senior Notes mature on January 15, 2023, unless earlier purchased by the Company, redeemed, or converted. We believe that we have sufficient capital resources and cash flows from operations to support scheduled interest payments on this debt.
Contractual Obligations and Commitments
We have commitments under certain contractual arrangements to make future payments for goods and services. These contractual arrangements secure the rights to various assets and services to be used in the future in the normal course of business. We expect to fund these contractual arrangements with cash generated from operations in the normal course of business.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, changes in financial condition, expenses, and results of operations, liquidity, capital expenditures or capital resources other than operating leases, bank guarantees, and purchase commitments disclosed in the preceding footnotes.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk
Our exposure to market rate risk for changes in interest rates primarily relates to our investment portfolio. We centrally manage our investment portfolios considering investment opportunities and risks, tax consequences, and overall financing strategies. Our investment portfolio includes fixed-income securities with a fair value of approximately $65.1 million at March 31, 2018. These securities are subject to interest rate risk and, based on our investment portfolio at March 31, 2018, a 100 basis point increase in interest rates would result in a decrease in the fair value of the portfolio of $0.4 million. While an increase in interest rates may reduce the fair value of the investment portfolio, we will not realize the losses in the Consolidated Statements of Operations unless the individual fixed-income securities are sold prior to recovery or the loss is determined to be other-than-temporary.
Currency Exchange Risk
We conduct business on a worldwide basis and, as such, a portion of our revenues, earnings, and net investments in foreign affiliates is exposed to changes in currency exchange rates. The economic impact of currency exchange rate movements is complex because such changes are often linked to variability in real growth, inflation, interest rates, governmental actions, and other factors. These changes, if material, could cause us to adjust our financing and operating strategies. Consequently, isolating the effect of changes in currency does not incorporate these other important economic factors.
Changes in currency exchange rates could affect our foreign currency denominated monetary assets and liabilities and forecasted cash flows. We entered into monthly forward derivative contracts with the intent of mitigating a portion of this risk. We only used derivative financial instruments in the context of hedging and not for speculative purposes and had not designated our foreign exchange derivatives as hedges. Accordingly, changes in fair value from these contracts were recorded as Other, net in our Consolidated Statements of Operations. We executed derivative transactions with highly rated financial institutions to mitigate counterparty risk.
Our net sales to customers located outside of the United States represented approximately 85% and 82% of our total net sales for the three months ended March 31, 2018 and 2017, respectively. We expect that net sales to customers outside the United States will continue to represent a large percentage of our total net sales. Our net sales denominated in currencies other than the U.S. dollar represented approximately 1% and 3% of total net sales for the three months ended March 31, 2018 and 2017, respectively.
A 10% change in foreign exchange rates would have an immaterial impact on the consolidated results of operations since most of our sales outside the United States are denominated in U.S. dollars.
Item 4. Controls and Procedures
Managements Report on Internal Control Over Financial Reporting
Our principal executive and financial officers have evaluated and concluded that our disclosure controls and procedures are effective as of March 31, 2018. 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 Commissions rules and forms and is accumulated and communicated to our principal executive and financial officers as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
On January 1, 2018, we adopted ASC 606, Revenue from Contracts with Customers . We implemented additional internal controls around the adoption of this new accounting standard to ensure we adequately evaluated our contracts and properly
assessed the impact on our financial statements. There were no other changes in internal control that have materially affected or are reasonably likely to materially affect internal control over financial reporting for the quarter ended March 31, 2018.
On September 21, 2017, Blueblade Capital Opportunities LLC et al., on behalf of purported beneficial owners of 440,100 shares of Ultratech common stock, filed an action against Ultratech in Delaware Court of Chancery requesting an appraisal of the value of their Ultratech stock pursuant to 8 Del. C. §262. The Company believes that the merger price, which was the product of arms-length negotiations, was fair and reasonable, and intends to contest the appraisal claim. Discovery in the matter has commenced and a trial on the action is scheduled to begin in December 2018.
On April 12, 2017, the Company filed a patent infringement complaint in the U.S. District Court for the Eastern District of New York against SGL Carbon, LLC and SGL Carbon SE (collectively, SGL), alleging infringement of patents relating to wafer carrier technology used in MOCVD equipment. The complaint alleges that SGL infringes Veecos patents by making and selling certain wafer carriers to Veecos competitor, Advanced Micro-Fabrication Equipment, Inc. (AMEC). On November 2, 2017, the U.S. District Court granted the Companys motion for a preliminary injunction prohibiting SGL from shipping wafer carriers using the Companys patented technology without the Companys express authorization.
On July 13, 2017, AMEC filed a patent infringement complaint against Veeco Instruments Shanghai Co., Ltd. (Veeco Shanghai) with the Fujian High Court in China, alleging that the Companys MOCVD products infringed a Chinese utility model patent relating to the synchronous movement engagement mechanism in a chemical vapor deposition reactor and seeking injunctive relief and monetary damages against Veeco Shanghai. On December 7, 2017, without providing notice to Veeco and without hearing Veecos position on alleged infringement, the Fujian High Court issued a preliminary injunction, applicable in China, that requires Veeco Shanghai to stop importing, making, selling, and offering to sell Veeco EPIK 700 model MOCVD systems and to stop importing, selling, and offering to sell wafer carriers used as supplies for the EPIK 700 MOCVD system.
On February 8, 2018, Veeco, AMEC, and SGL announced that they had mutually agreed to settle the pending litigation among the parties and to amicably resolve all pending disputes, including AMECs lawsuit against Veeco before the Fujian High Court in China and Veecos lawsuit against SGL before the U.S. District Court for the Eastern District of New York. As part of the settlement, all legal actions worldwide (in court, patent offices, and otherwise), between Veeco, AMEC, and SGL, and their affiliates, were dismissed and/or otherwise withdrawn. As a result, all business processes, including sales, service, and importation, were resumed promptly following the settlement.
The Company is involved in various other legal proceedings arising in the normal course of business. The Company does not believe that the ultimate resolution of these matters will have a material adverse effect on its consolidated financial position, results of operations, or cash flows.
Information regarding risk factors appears in the Safe Harbor Statement at the beginning of this quarterly report on Form 10-Q and in Part I Item 1A of our 2017 Form 10-K . There have been no material changes from the risk factors previously disclosed in our 2017 Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Share repurchase activity during the first quarter of 2018 is as follows:
|
|
|
|
|
|
Total Number of |
|
Approximate Dollar |
|
||
|
|
|
|
|
|
Shares Purchased as |
|
Value of Shares That |
|
||
|
|
|
|
|
|
Part of Publicly |
|
May Yet Be Purchased |
|
||
|
|
Total Number of |
|
Average Price |
|
Announced |
|
Under the |
|
||
Period |
|
Shares Purchased |
|
Paid Per Share |
|
Plans or Programs |
|
Plans or Programs |
|
||
|
|
(in thousands, except average price paid per share) |
|
||||||||
January 1, 2018 - January 28, 2018 |
|
|
|
$ |
|
|
|
|
$ |
96,982 |
|
January 29, 2018 - March 4, 2018 |
|
30 |
|
14.69 |
|
30 |
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March 5, 2018 - April 1, 2018 |
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96,539 |
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On December 11, 2017, Veecos Board of Directors authorized a program to repurchase up to $100 million of the Companys outstanding common stock to be completed through December 11, 2019. At March 31, 2018, $3.5 million of the $100 million had been utilized. Repurchases may be made from time to time on the open market or in privately negotiated transactions in accordance with applicable federal securities laws. The timing and amount of future repurchases, if any, will depend upon market conditions, SEC regulations, and other factors. The repurchases would be funded using available cash balances and cash generated from operations. The program does not obligate us to acquire any particular amount of common stock and may be modified or suspended at any time at our discretion.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
None.
Unless otherwise indicated, each of the following exhibits has been filed with the Securities and Exchange Commission by Veeco under File No. 0-16244.
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Herewith |
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10.1 |
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31.1 |
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32.1 |
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32.2 |
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101.INS |
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XBRL Instance. |
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101.XSD |
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XBRL Presentation. |
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101.CAL |
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XBRL Calculation. |
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101.DEF |
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XBRL Definition. |
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101.LAB |
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XBRL Label. |
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* Filed herewith
** Filed herewith electronically
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on May 7, 2018.
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Veeco Instruments Inc. |
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By: |
/S/ JOHN R. PEELER |
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John R. Peeler |
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Chairman and Chief Executive Officer |
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By: |
/s/ SHUBHAM MAHESHWARI |
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Shubham Maheshwari |
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Executive Vice President and Chief Financial Officer |
VEECO INSTRUMENTS INC. 2010 STOCK INCENTIVE PLAN
NOTICE OF PERFORMANCE SHARE AWARD (2018)
Veeco Instruments Inc. (the Company ) is pleased to confirm the award to the employee named below (the Grantee ) of Restricted Stock Units (the Award ), subject to the terms and conditions of this Notice of Restricted Stock Unit Award (2018) (the Notice ), the Veeco Instruments Inc. 2010 Stock Incentive Plan, as amended from time to time (the Plan ) and the Veeco Instruments Inc. Terms and Conditions of Restricted Stock Unit Award (2018) (the Terms and Conditions ) attached hereto, as follows. Unless otherwise provided herein, the terms in this Notice shall have the same meaning as those defined in the Plan.
Grantee: |
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Date of Award: |
March 14, 2018 |
Total Number of Performance Shares |
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Awarded (the Units): |
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Performance Period: |
Q2 2018 to Q1 2021 |
One-half (1/2) of the Units (the Cumulative Revenue Units ) shall be subject to vesting based on the Companys cumulative revenue (the Cumulative Revenue Target ). One-half (1/2) of the Units (the Cumulative Adjusted EBITDA Units ) shall be subject to vesting based on the Companys cumulative adjusted EBITDA (the Cumulative Adjusted EBITDA Target and, together with the Cumulative Revenue Target, the Targets ).
Subject to the Grantees Continuous Service and other limitations set forth in this Notice, the Terms and Conditions and the Plan, the Units will vest in accordance with the schedules set forth in Exhibit A. For purposes of this Notice and the Terms and Conditions, the term vest shall mean, with respect to any Units, that such Units are no longer subject to forfeiture to the Company. If the Grantee would become vested in a fraction of a Unit, such Unit shall not vest until the Grantee becomes vested in the entire Unit.
Vesting shall cease upon the date the Grantee terminates Continuous Service for any reason, including death or Disability. In the event the Grantee terminates Continuous Service for any reason, including death or Disability, any unvested Units held by the Grantee immediately upon such termination of the Grantees Continuous Service shall be forfeited.
Additional Provisions :
This Award shall be subject to the terms and conditions set forth in the Plan and the Terms and Conditions, including the Forfeiture for Restricted Activity, Clawback, Governing Law, and Venue and Jurisdiction provisions of Sections 2 .2, 2.3, 4.1 through 4.5, 6.5, and 6.6 of the Terms and Conditions.
IMPORTANT NOTICE
Grantee must sign this Notice and return it to the Companys Sr. Vice President, Human Resources on or before May 1, 2018. Return your executed Notice to: Robert Bradshaw by mail at Terminal Drive, Plainview, New York 11803, or email at RBradshaw@Veeco.com.
PLEASE NOTE THAT YOUR ACCEPTANCE OF THE AWARD WILL ALSO CONSTITUTE ACCEPTANCE OF, AND AGREEMENT TO BE BOUND BY THE TERMS AND CONDITIONS GOVERNING THE RESTRICTED STOCK AWARD, INCLUDING WITHOUT LIMITATION, THE RESTRICTED ACTIVITY, CLAWBACK, GOVERNING LAW, AND VENUE AND JURISDICTION PROVISIONS OF SECTIONS 2.2, 2.3, 4.1 through 4.5, 6.5, AND 6.6 OF THE TERMS AND CONDITIONS.
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VEECO INSTRUMENTS INC. |
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Name: Robert W. Bradshaw |
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Title: Sr. Vice President Human Resources |
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Grantee |
Date |
VEECO INSTRUMENTS INC. 2010 STOCK INCENTIVE PLAN
TERMS AND CONDITIONS OF
RESTRICTED STOCK UNIT AWARD (2018)
These TERMS AND CONDITIONS OF RESTRICTED STOCK UNIT AWARD (2018) (these Terms and Conditions ) apply to any award by Veeco Instruments Inc., a Delaware corporation (the Company ), of Restricted Stock Units, subject to certain restrictions pursuant to the Veeco Instruments Inc. 2010 Stock Incentive Plan (as it may be amended from time to time, the Plan ), which specifically references these Terms and Conditions.
ARTICLE 1
ISSUANCE OF UNITS
The Company hereby issues to the Grantee (the Grantee ) named in the Notice of Restricted Stock Unit Award (2018) (the Notice ) an award (the Award ) of the Total Number of Restricted Stock Units Awarded set forth in the Notice (the Units ), subject to the Notice, these Terms and Conditions, and the terms and provisions of the Plan, which is incorporated herein by reference. Unless otherwise provided herein, the terms in these Terms and Conditions shall have the same meaning as those defined in the Plan.
ARTICLE 2
CONVERSION OF UNITS AND ISSUANCE OF SHARES
2.1 General . Subject to Sections 2.2 through 2.4 below, one share of Common Stock shall be issuable for each Unit subject to the Award (the Shares ) upon vesting. Immediately thereafter, or as soon as administratively feasible, the Company will transfer the appropriate number of Shares to the Grantee after satisfaction of any required tax or other withholding obligations. Any fractional Unit remaining after the Award is fully vested shall be discarded and shall not be converted into a fractional Share. Notwithstanding the foregoing, the relevant number of Shares shall be issued no later than March 15th of the year following the calendar year in which the Award vests. The Company may however, in its sole discretion, make a cash payment in lieu of the issuance of the Shares in an amount equal to the value of one share of Common Stock multiplied by the number of Units subject to the Award. The number of Shares covered by the Award shall be proportionately adjusted for any stock dividend affecting the Shares in accordance with Section 10 of the Plan.
2.2 Forfeiture for Restricted Activity . The Grantee acknowledges that the Company is making this Award of additional compensation, among other reasons, to provide an incentive to the Grantee to remain with and to promote the best interests of, the Company, and to protect the Companys assets, including its goodwill, Confidential Information (as defined below) and trade secrets, which are legitimate business interests of the Company, and that engaging in Restricted Activities (as described in Article 4 below), would be detrimental to the legitimate business interests of the Company. Therefore, in exchange for this Award, notwithstanding anything to the contrary in these Terms and Conditions or otherwise, if the Grantee engages in Restricted Activities (as described in Sections 4.1 through 4.5 below), (a) all unvested Units will immediately be forfeited, and (b) the Grantee shall be required to (i) return to the Company, within 10 business days after the Companys request to Grantee therefor, all Shares received
pursuant to the Award that are owned, directly or indirectly, by the Grantee, any Cash Dividend Equivalents, and any cash payment made in lieu of the issuance of the Shares, and (ii) pay to the Company, within 10 business days of the Companys request to the Grantee therefor, an amount equal to the excess, if any, of the aggregate after-tax proceeds (taking into account all amounts of tax that would be recoverable upon a claim of loss for payment of such proceeds in the year of repayment) the Grantee received upon the sale or other disposition of all Shares received pursuant to the Award (the After-Tax Proceeds ). The forfeiture for Restricted Activity provisions of this Section 2.2 and Article 4 shall survive and continue to apply beyond settlement of all Awards under the Plan, any termination or expiration of this Award for any reason, and after the provisions of any employment or other agreement between the Company and the Grantee have lapsed.
2.3 Clawback . This Award, all Units received pursuant to the Award, all shares of Common Stock received pursuant to the Award that are owned, directly or indirectly, by the Grantee, any cash payments made in lieu of the issuance of the Shares, any Cash Dividend Equivalents, and any After-Tax Proceeds shall be subject to the Compensation Recoupment Policy, established by the Company, as amended from time to time, or any similar or successor policy.
2.4 Delay of Issuance of Shares . The Company shall delay the issuance of any Shares under this Article 2 to the extent necessary to comply with Section 409A(a)(2)(B)(i) of the Code (relating to payments made to certain specified employees of certain publicly-traded companies); in such event, any Shares to which the Grantee would otherwise be entitled during the six (6) month period following the date of the Grantees termination of Continuous Service will be issuable on the first business day following the expiration of such six (6) month period.
ARTICLE 3
RIGHT TO SHARES
Except as set forth herein, the Grantee shall not have any right in, to or with respect to any of the Shares (including any voting rights) issuable under the Award until the Award is settled by the issuance of such Shares to the Grantee. Notwithstanding the foregoing, while one or more Shares remain subject to this Award, the Grantee shall have the right to accrue Cash Dividend Equivalents (as defined in this Article 3). For purposes herein, a Cash Dividend Equivalent means, for each Share subject to the Award, a cash payment equal to the cash dividend, if any, that would become payable to the Grantee with respect to such Share had the Grantee been the holder of such Share. Cash Dividend Equivalents will be subject to all of the terms and conditions of the Award, including that the Cash Dividend Equivalents will vest, become payable, and be subject to forfeiture and clawback upon the same terms and at the same time as the Units to which they relate.
ARTICLE 4
FORFEITURE FOR RESTRICTED ACTIVITY
4.1 Restricted Activity . For the avoidance of doubt, the Company and the Grantee agree that the Grantee is free to engage in the activities described in this Article 4 and that the Company will not seek to enjoin or otherwise stop the Grantee from engaging in any such Restricted Activities (provided, however, that the Company reserves such right as it may exist at
law or in equity and/or pursuant to any other agreement entered into between the Company and the Grantee, including, without limitation, in the Veeco Instruments Inc. Employee Confidentiality and Inventions Agreement ( ECIA )), but that if the Grantee engages in such activities the Company shall have all of the rights set forth in Section 2.2 with respect to the Award, all Shares or cash received pursuant to the Award, and any After-Tax Proceeds.
4.2 Company Information : During the term of employment with the Company and for five years thereafter, the Grantee will not use or disclose to any individual or entity any Confidential Information (as defined below) of the Company except (i) in the performance of the Grantees duties for the Company, (ii) as authorized in writing by the Company, or (iii) as required by law or legal process, provided, that, prior to any such required disclosure, the Grantee will notify the Company of the requirement to disclose and, if requested, the Grantee will cooperate with the Companys efforts to prevent or limit such disclosure. The Grantee understands that Confidential Information means any information that: (a) is disclosed to, learned by, or created by the Grantee in connection with the Grantees employment with the Company (or a predecessor company now owned by or part of the Company), and (b) the Company treats as proprietary, private or confidential. Confidential Information may include, without limitation, information relating to the Companys products, services and methods of operation, the identities and competencies of the Companys employees, customers and suppliers, trade secrets, know-how, processes, Inventions and the Company Related Inventions (each as defined in the ECIA), techniques, data, sketches, plans, drawings, chemical formulae, computer software, financial information, operating and cost data, research databases, selling and pricing information, business and marketing plans, and information concerning potential acquisitions, dispositions or joint ventures. The Grantee further understands that Confidential Information does not include any of the foregoing items that has become publicly known or made generally available (provided that information will not cease to be Confidential Information as a result of the Grantees breach of confidentiality). The Grantee will promptly notify the Company if the Grantee becomes aware of any unauthorized use or disclosure of Confidential Information.
4.3 Third Party Information : The Grantee recognizes that the Company has received and in the future will receive from its customers, suppliers and trading partners their confidential or proprietary information subject to a duty on the Companys part to maintain the confidentiality of such information and to use it only for certain limited purposes. The Grantee agrees to hold all such confidential or proprietary information in the strictest confidence and not to disclose it to any person or entity or to use it except as necessary in carrying out the Grantees work for the Company consistent with the Companys agreement with such third party.
4.4 Non-Competition . During employment with the Company and for one year thereafter, (a) the Grantee will not own, manage, work for or otherwise participate in any business whose products, services or activities compete with the current or currently contemplated products, services or activities of the Company in any state or country in which the Company sells products or conducts business and (x) in which the Grantee was involved or (y) with respect to which the Grantee had access to Confidential Information, in each case, during the 5 years prior to termination, provided, however, that the Grantee may own up to 1% of the securities of any such public company (but without otherwise participating in the activities of such enterprise); and (b) the Grantee will not, for himself or any other person: (i) induce or try to
induce any customer, supplier, licensor or business relation to stop doing business with the Company or otherwise interfere with the relationship between the Company and any of its customers, suppliers, licensors or business relations; or (ii) solicit the business of any person known by the Grantee to be a customer of the Company, whether or not the Grantee had personal contact with such person, with respect to products or activities that compete with the products or activities of the Company in existence or contemplated at the time of termination of the Grantees Continuous Service. The Grantee agrees that this covenant is reasonable with respect to its scope, geographical area, and duration.
4.5 Non-Solicitation . During employment with the Company and for one year thereafter, the Grantee will not, for himself or any other person: (a) induce or try to induce any employee to leave the Company or otherwise interfere with the relationship between the Company and any of its employees, or (b) employ or engage as an independent contractor, any current or former employee of the Company, other than former employees who have not worked for the Company within the past year. The Grantee agrees that this covenant is reasonable with respect to its scope and duration.
4.6 Severability : The invalidity or unenforceability of any Section, paragraph, or provision (or any part thereof) of the Notice or these Terms and Conditions shall not affect the validity or enforceability of any one or more of the other paragraphs or provisions (or other parts thereof), and all other provisions shall remain in full force and effect. If any provision of the Notice or these Terms and Conditions is held to be excessively broad, then such provision shall be reformed and construed by limiting and reducing it so as to be enforceable to the maximum extent permitted by law.
4.7 Notice of Immunity under the Defend Trade Secrets Act and Other Protected Rights . The Grantee understands that, in accordance with the Defend Trade Secrets Act of 2016, the Grantee will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (a) is made (i) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (b) is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding. The Grantee also understands that if the Grantee ever files a lawsuit for retaliation by the Company for reporting a suspected violation of law, the Grantee may disclose trade secrets to the Grantees attorney and use the trade secret information in the court proceeding provided the Grantee: (a) files any document containing the trade secret under seal; and (b) does not disclose the trade secret, except pursuant to court order. Grantee understands that nothing contained in the Notice, these Terms and Conditions, or the Plan limits Grantees ability to file a charge or complaint with the Equal Employment Opportunity Commission, the National Labor Relations Board, the Occupational Safety and Health Administration, the Securities and Exchange Commission or any other federal, state or local governmental agency or commission (Government Agencies). Grantee further understands that nothing in the Notice, these Terms and Conditions, or the Plan limits Grantees ability to communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to the Company. Nothing in the Notice, these Terms and Conditions, or the Plan limits Grantees right to receive an award for information provided to any Government Agencies.
ARTICLE 5
TAXES
5.1 Tax Liability . The Grantee is ultimately liable and responsible for all taxes owed by the Grantee in connection with the Award, regardless of any action the Company or any Related Entity takes with respect to any tax withholding obligations that arise in connection with the Award. Neither the Company nor any Related Entity makes any representation or undertaking regarding the treatment of any tax withholding in connection with any aspect of the Award, including the grant, vesting, assignment, release or cancellation of the Units, the delivery of Shares, the payment of any Cash Dividend Equivalents, the subsequent sale of any Shares acquired upon vesting and the receipt of any dividends or dividend equivalents. The Company does not commit and is under no obligation to structure the Award to reduce or eliminate the Grantees tax liability.
5.2 Payment of Withholding Taxes . Prior to any event in connection with the Award ( e.g., vesting) that the Company determines may result in any tax withholding obligation, whether United States federal, state, local or non-U.S., including any social insurance, employment tax, payment on account or other tax-related obligation (the Tax Withholding Obligation ), the Grantee must arrange for the satisfaction of the amount of such Tax Withholding Obligation in a manner acceptable to the Company.
(a) By Share Withholding. If permissible under Applicable Law, the Grantee authorizes the Company to, upon the exercise of its sole discretion, withhold from those Shares otherwise issuable to the Grantee the whole number of Shares sufficient to satisfy the applicable Tax Withholding Obligation. The Grantee acknowledges that the withheld Shares may not be sufficient to satisfy the Grantees Tax Withholding Obligation. Accordingly, the Grantee agrees to pay to the Company or any Related Entity as soon as practicable, including through additional payroll withholding, any amount of the Tax Withholding Obligation that is not satisfied by the withholding of Shares described above.
(b) By Sale of Shares . Unless the Grantee determines to satisfy the Tax Withholding Obligation by some other means in accordance with clause (iii) below, the Grantees acceptance of this Award constitutes the Grantees instruction and authorization to the Company and any brokerage firm determined acceptable to the Company for such purpose to, upon the exercise of Companys sole discretion, sell on the Grantees behalf a whole number of Shares from those Shares issuable to the Grantee as the Company determines to be appropriate to generate cash proceeds sufficient to satisfy the applicable Tax Withholding Obligation. Such Shares will be sold on the day such Tax Withholding Obligation arises ( e.g., a vesting date) or as soon thereafter as practicable. The Grantee will be responsible for all brokers fees and other costs of sale, and the Grantee agrees to indemnify and hold the Company harmless from any losses, costs, damages, or expenses relating to any such sale. To the extent the proceeds of such sale exceed the Grantees Tax Withholding Obligation, the Company agrees to pay such excess in cash to the Grantee. The Grantee acknowledges that the Company or its designee is under no obligation to arrange for such sale at any particular price, and that the proceeds of any such sale may not be sufficient to satisfy the Grantees Tax Withholding Obligation. Accordingly, the Grantee agrees to pay to the Company or any Related Entity as soon as practicable, including through additional payroll withholding, any amount of the Tax Withholding Obligation that is not satisfied by the sale of Shares described above.
(c) By Check, Wire Transfer or Other Means . At any time not less than five (5) business days (or such fewer number of business days as determined by the Administrator) before any Tax Withholding Obligation arises ( e.g., a vesting date), the Grantee may elect to satisfy the Grantees Tax Withholding Obligation by delivering to the Company an amount that the Company determines is sufficient to satisfy the Tax Withholding Obligation by (x) wire transfer to such account as the Company may direct, (y) delivery of a certified check payable to the Company, or (z) such other means as specified from time to time by the Administrator.
Notwithstanding the foregoing, the Company or a Related Entity also may satisfy any Tax Withholding Obligation by offsetting any amounts (including, but not limited to, salary, bonus and severance payments) payable to the Grantee by the Company and/or a Related Entity. Furthermore, in the event of any determination that the Company has failed to withhold a sum sufficient to pay all withholding taxes due in connection with the Award, the Grantee agrees to pay the Company the amount of such deficiency in cash within five (5) calendar days after receiving a written demand from the Company to do so, whether or not the Grantee is an employee of the Company at that time.
ARTICLE 6
OTHER PROVISIONS
6.1 Transfer Restrictions . The Units may not be transferred in any manner other than by will or by the laws of descent and distribution.
6.2 No Right to Continued Employment . Nothing in the Notice, these Terms and Conditions or the Plan shall confer upon Grantee any right to continue in the service of the Company or any Related Entity or shall interfere with or restrict in any way the rights of the Company or any Related Entity, which are hereby expressly reserved, to discharge Grantee at any time for any reason whatsoever, with or without cause, except as may otherwise be provided by any written agreement entered into by and between the Company and Grantee.
6.3 No Right to Future Awards . Nothing in the Notice, these Terms and Conditions or the Plan shall confer upon Grantee any right with respect to future Awards under the Plan, or any right with respect to any other award under any plan of the Company or any Related Entity.
6.4 Entire Agreement . The Notice, the Plan, and these Terms and Conditions constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and the Grantee with respect to the subject matter hereof, and may not be modified adversely to the Grantees interest except by means of a writing signed by the Company and the Grantee. For the avoidance of doubt, the restrictions set forth in Sections 4.1 through 4.5 above do not supersede any other agreement between the Company and Grantee, including, without limitation, the ECIA. Nothing in the Notice, the Plan and these Terms and Conditions (except as expressly provided therein) is intended to confer any rights or remedies on any persons other than the parties. Should any provision of the Notice, the Plan or these Terms and Conditions be determined to be illegal or unenforceable, such provision shall be enforced to the fullest extent allowed by law and the other provisions shall nevertheless remain effective and shall remain enforceable.
6.5 Governing Law . The Notice, the Plan and these Terms and Conditions are to be construed in accordance with and governed by the internal laws of the State of New York, without giving effect to any choice of law rule that would cause the application of the laws of any jurisdiction other than the internal laws of the State of New York to the rights, duties, and obligations of the parties.
6.6 Venue and Jurisdiction . The Company and the Grantee (the parties) expressly agree that any suit, action, or proceeding arising out of or relating to the Notice, the Plan or these Terms and Conditions shall be brought in the United States District Court for the Eastern District of New York (or should such court lack jurisdiction to hear such action, suit or proceeding, in a New York state court in the County of Nassau) and that the parties shall submit to the exclusive jurisdiction of such courts. The parties irrevocably waive, to the fullest extent permitted by law, any objection the party may have to the laying of venue for any such suit, action or proceeding brought in such court. The parties agree and submit to personal jurisdiction in either court. The Parties further agree that this Venue and Jurisdiction is binding on all matters related to the Notice, the Plan, or these Terms and Conditions and may not be altered or amended by any other arrangement or agreement (including an employment agreement) without the express written consent of Grantee and the Company. If any one or more provisions of this Section 6.6 shall for any reason be held invalid or unenforceable, it is the specific intent of the parties that such provisions shall be modified to the minimum extent necessary to make it or its application valid and enforceable.
6.7 Construction . The captions used in the Notice and these Terms and Conditions are inserted for convenience and shall not be deemed a part of the Award for construction or interpretation. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term or is not intended to be exclusive, unless the context clearly requires otherwise.
6.8 Administration and Interpretation . Any question or dispute regarding the administration or interpretation of the Notice, the Plan or these Terms and Conditions shall be submitted by the Grantee or by the Company to the Administrator. The resolution of such question or dispute by the Administrator shall be final and binding on all persons.
6.9 Waiver of Jury Trial . THE PARTIES EXPRESSLY WAIVE ANY RIGHT THEY HAVE OR MAY HAVE TO A JURY TRIAL OF ANY SUCH SUIT, ACTION OR PROCEEDING.
6.10 Severability . The invalidity or unenforceability of any paragraph or provision of these Terms and Conditions shall not affect the validity or enforceability of any other paragraph or provision, and all other provisions shall remain in full force and effect. If any provision of these Terms and Conditions is held to be excessively broad, then such provision shall be reformed and construed by limiting and reducing it so as to be enforceable to the maximum extent permitted by law.
6.11 Notices . Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery, upon deposit for delivery by an internationally recognized express mail courier service or upon deposit in the United States mail by certified mail (if the parties are within the United States), with postage and fees prepaid,
addressed to the other party at its address as shown in these instruments, or to such other address as such party may designate in writing from time to time to the other party.
6.12 Nature of Award . In accepting the Award, the Grantee acknowledges and agrees that:
(a) the Plan is established voluntarily by the Company, it is discretionary in nature, and it may be modified, amended, suspended or terminated by the Company at any time, unless otherwise provided in the Plan and these Terms and Conditions;
(b) the Award is voluntary and occasional and does not create any contractual or other right to receive future awards of Units, or benefits in lieu of Units, even if Units have been awarded repeatedly in the past;
(c) all decisions with respect to future awards, if any, will be at the sole discretion of the Company;
(d) the Grantees participation in the Plan is voluntary;
(e) the Grantees participation in the Plan shall not create a right to any employment with the Grantees employer and shall not interfere with the ability of the Company or the employer to terminate the Grantees employment relationship, if any, at any time;
(f) the Award is not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments and in no event should be considered as compensation for, or relating in any way to, past services for the Company or any Related Entity;
(g) in the event that the Grantee is not an Employee of the Company or any Related Entity, the Award and the Grantees participation in the Plan will not be interpreted to form an employment or service contract or relationship with the Company or any Related Entity;
(h) the future value of the underlying Shares is unknown and cannot be predicted with certainty;
(i) in consideration of the Award, no claim or entitlement to compensation or damages shall arise from termination of the Award or diminution in value of the Award or Shares acquired upon vesting of the Award, resulting from termination of the Grantees Continuous Service by the Company or any Related Entity (for any reason whatsoever and whether or not in breach of local labor laws) and in consideration of the grant of the Award, the Grantee irrevocably releases the Company and any Related Entity from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by signing the Notice, the Grantee shall be deemed irrevocably to have waived his or her right to pursue or seek remedy for any such claim or entitlement;
(j) in the event of termination of the Grantees Continuous Service (whether or not in breach of local labor laws), the Grantees right to receive Awards under the Plan and to vest in such Awards, if any, will terminate effective as of the date that the Grantee is no longer
providing services and will not be extended by any notice period mandated under local law ( e.g. , providing services would not include a period of garden leave or similar period pursuant to local law); furthermore, in the event of termination of the Grantees Continuous Service (whether or not in breach of local labor laws), the Administrator shall have the exclusive discretion to determine when the Grantee is no longer providing services for purposes of this Award;
(k) the Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding the Grantees participation in the Plan or the Grantees acquisition or sale of the underlying Shares; and
(l) the Grantee is hereby advised to consult with the Grantees own personal tax, legal and financial advisers regarding the Grantees participation in the Plan before taking any action related to the Plan.
6.13 Data Privacy .
(a) The Grantee hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of the Grantees personal data as described in the Notice and these Terms and Conditions by and among, as applicable, the Grantees employer, the Company and any Related Entity for the exclusive purpose of implementing, administering and managing the Grantees participation in the Plan.
(b) The Grantee understands that the Company and the Grantees employer may hold certain personal information about the Grantee, including, but not limited to, the Grantees name, home address and telephone number, date of birth, social insurance or other identification number, salary, nationality, job title, any Shares or directorships held in the Company, details of all Units or any other entitlement to Shares awarded, canceled, vested, unvested or outstanding in the Grantees favor, for the exclusive purpose of implementing, administering and managing the Plan ( Data ).
(c) The Grantee understands that Data will be transferred to any third party assisting the Company with the implementation, administration and management of the Plan. The Grantee understands that the recipients of the Data may be located in the Grantees country, or elsewhere, and that the recipients country may have different data privacy laws and protections than the Grantees country. The Grantee understands that the Grantee may request a list with the names and addresses of any potential recipients of the Data by contacting the Grantees local human resources representative. The Grantee authorizes the Company and any other possible recipients which may assist the Company (presently or in the future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purpose of implementing, administering and managing the Grantees participation in the Plan. The Grantee understands that Data will be held only as long as is necessary to implement, administer and manage the Grantees participation in the Plan. The Grantee understands that the Grantee may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing the Grantees local human resources representative. The Grantee understands, however, that refusal or withdrawal of consent may affect the Grantees ability to participate in the Plan. For more information on the consequences of the Grantees refusal to
consent or withdrawal of consent, the Grantee understands that the Grantee may contact the Grantees local human resources representative.
6.14 Language . If the Grantee has received these Terms and Conditions or any other document related to the Plan translated into a language other than English and if the translated version is different than the English version, the English version will control, unless otherwise prescribed by Applicable Law.
6.15 Amendment and Delay to Meet the Requirements of Section 409A . The Grantee acknowledges that the Company, in the exercise of its sole discretion and without the consent of the Grantee, may amend or modify these Terms and Conditions in any manner and delay the issuance of any Shares issuable pursuant to these Terms and Conditions to the minimum extent necessary to meet the requirements of Section 409A of the Code as amplified by any Treasury regulations or guidance from the Internal Revenue Service as the Company deems appropriate or advisable. In addition, the Company makes no representation that the Award will comply with Section 409A of the Code and makes no undertaking to prevent Section 409A of the Code from applying to the Award or to mitigate its effects on any deferrals or payments made in respect of the Units. The Grantee is encouraged to consult a tax adviser regarding the potential impact of Section 409A of the Code.
* * * * *
VEECO INSTRUMENTS INC. 2010 STOCK INCENTIVE PLAN
NOTICE OF RESTRICTED STOCK AWARD
Veeco Instruments Inc. (the Company ), is pleased to confirm the award to the individual named below ( Grantee ) of restricted shares of common stock, par value $0.01 per share, of the Company described below, subject to the terms and conditions of this Notice of Restricted Stock Award (the Notice ), the Veeco Instruments Inc. 2010 Stock Incentive Plan, as amended from time to time (the Plan ) and the terms and conditions set forth in the Veeco Instruments Inc. Terms and Conditions of Restricted Stock Award (2018) (the Terms and Conditions ) attached hereto, as follows. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Notice.
Grantee:
Award Date:
Aggregate number of shares of
Restricted Stock subject to the Award
(the Award ):
Vesting/Lapsing of Restrictions :
Subject to Grantees Continuous Service, the shares comprising the Award will vest, and the restrictions with respect to such shares shall lapse, as follows:
· 20% on the date which is twelve (12) months from the Award Date
· 20% on the date which is eighteen (18) months from the Award Date
· 20% on the date which is thirty (30) months from the Award Date
· 20% on the date which is forty-two (42) months from the Award Date
· 20% on the date which is forty-eight (48) months from the Award Date
If Grantee would become vested in a fraction of a share on a Vesting Date, such share shall not vest until Grantee becomes vested in the entire share on the following Vesting Date.
Additional Provisions :
This Award shall be subject to the terms and conditions set forth in the Plan and the Terms and Conditions, including the Forfeiture for Restricted Activity, Clawback, Governing Law, and Venue and Jurisdiction provisions of Sections 3.5, 3.6, 4.1 through 4.5, 5.7, and 5.8 of the Terms and Conditions.
IMPORTANT NOTICE
Grantee must sign this Notice and return it to the Companys Sr. Vice President, Human Resources on or before May 1, 2018. Return your executed Notice to: Robert Bradshaw by mail at 1 Terminal Drive, Plainview, New York 11803, or email at RBradshaw@Veeco.com.
PLEASE NOTE THAT YOUR ACCEPTANCE OF THE AWARD WILL ALSO CONSTITUTE YOUR ACCEPTANCE OF, AND AGREEMENT TO BE BOUND BY, THE TERMS AND CONDITIONS GOVERNING THE RESTRICTED STOCK AWARD, INCLUDING WITHOUT LIMITATION, THE RESTRICTED ACTIVITY, CLAWBACK, GOVERNING LAW, AND VENUE AND JURISDICTION PROVISIONS OF SECTIONS 3.5, 3.6, 4.1 through 4.5, 5.7, AND 5.8 OF THE TERMS AND CONDITIONS.
VEECO INSTRUMENTS INC.
Name: Robert W. Bradshaw
Title: Sr. Vice President Human Resources
Grantee
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VEECO INSTRUMENTS INC. 2010 STOCK INCENTIVE PLAN
TERMS AND CONDITIONS OF RESTRICTED STOCK AWARD
(2018)
These TERMS AND CONDITIONS OF RESTRICTED STOCK AWARD (2018) (these Terms and Conditions ) apply to any award by Veeco Instruments Inc., a Delaware corporation (the Company ), of the Companys common stock, par value $0.01 per share ( Common Stock ), subject to certain restrictions ( Restricted Stock ), pursuant to the Veeco Instruments Inc. 2010 Stock Incentive Plan (as it may be amended from time to time, the Plan ), which specifically references these Terms and Conditions.
ARTICLE 1
DEFINITIONS
1.1 In General . Capitalized terms used but not defined herein shall have the meanings assigned to such terms in the Plan and/or the applicable Notice of Restricted Stock Award (the Notice ). In addition, wherever the following term is used in these Terms and Conditions, it shall have the meaning specified below, unless the context clearly indicates otherwise.
1.2 Restrictions shall mean the restrictions on sale or other transfer set forth in Section 5.2 and the exposure to the risk of forfeiture set forth in Section 3.1, 3.2, 3.5, and 3.6.
ARTICLE 2
RESTRICTED STOCK AWARD
2.1 Award of Restricted Stock . The Award is made in consideration of Grantees agreement to remain in the service of the Company and for other good and valuable consideration which the Administrator has determined exceeds the aggregate par value of the shares of Common Stock subject to the Award.
2.2 Award Subject to Plan . The Award is subject to the terms and provisions of the Plan, including the provisions of Section 11 of the Plan in the event of a Corporate Transaction.
ARTICLE 3
RESTRICTIONS
3.1 Forfeiture . Unless otherwise provided by written agreement between the Company and Grantee, which may be entered into at any time, including in connection with the termination of Grantees Continuous Service, any Shares subject to the Award which are not vested at the time Grantees Continuous Service terminates shall thereupon be forfeited immediately and without any further action by the Company or Grantee. Grantee also may be required to forfeit shares of Restricted Stock subject to the Award, including shares of Common Stock received pursuant to the Award, in accordance with Section 3.5 below.
3.2 Vesting and Lapse of Restrictions . Subject to Sections 3.1, 3.5, and 3.6, the Restrictions shall lapse as follows:
· 20% on the date which is twelve (12) months from the Award Date
· 20% on the date which is eighteen (18) months from the Award Date
· 20% on the date which is thirty (30) months from the Award Date
· 20% on the date which is forty-two (42) months from the Award Date
· 20% on the date which is forty-eight (48) months from the Award Date
(each a Vesting Date ); provided, however, that in each case Grantee remains in Continuous Service from the Award Date through such Vesting Date. If Grantee would become vested in a fraction of a share on a Vesting Date, such share shall not vest until Grantee becomes vested in the entire share on the following Vesting Date.
3.3 Legend . Until such time as the Restrictions have lapsed, the Company may instruct the transfer agent for the Common Stock and/or other record-keepers to include a restrictive code or similar notation in its records (or legend on stock certificates, if any) to denote the Restrictions and any applicable federal and/or state securities laws restrictions relating to Restricted Stock. The notation or legend may include the following:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS SET FORTH IN THE PLAN AND IN THE TERMS AND CONDITIONS APPLICABLE TO THE RESTRICTED STOCK AWARD, COPIES OF WHICH ARE ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION.
3.4 Payment of Taxes; Issuance of Shares .
(a) Grantee understands, acknowledges and agrees that, unless a Section 83(b) election is made (as described in Section 3.9), the difference between the Fair Market Value of a Share at the time it vests, and the amount, if any, paid by Grantee for such Share is subject to state and federal income taxes and Grantee is responsible for paying such taxes.
(b) If the Company is required to withhold any such taxes, Grantee hereby authorizes the Company and any brokerage firm determined acceptable to the Company for such purposes to sell on Grantees behalf a whole number of Shares from the number of vested Shares delivered to Grantee at the time the Restrictions lapse to generate cash proceeds sufficient to satisfy the tax withholding obligation ( Sale Provisions ). The Shares will be sold as soon as practicable following the day the tax withholding obligation arises. Grantee will be responsible for all brokerage fees and other costs of sale and Grantee agrees to indemnify and hold the Company harmless from any losses, costs, damages, or expenses relating to any such sale. Grantee acknowledges that the Company or its designee is under no obligation to arrange for such sale at any particular price, and that the proceeds of any such sale may not be sufficient to satisfy Grantees tax withholding
obligation. Accordingly, Grantee agrees to pay to the Company as soon as practicable any amount of the tax withholding obligation that is not satisfied by the sale of Shares described above. By accepting the Award, Grantee expresses his or her intent that the Sale Provisions described above regarding the sale of Shares to pay taxes are intended to constitute a Rule 10b5-1 sales plan and to satisfy the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. The Company may, at its discretion, fulfill its tax withholding obligation by reducing the number of vested Shares delivered to Grantee at the time the Restrictions lapse by the number of Shares required to satisfy such tax withholding requirements with respect to Shares (but not cash dividends) (based on the Fair Market Value of Shares at such time). Such Shares shall be returned to the Company. Grantees acknowledgement and acceptance of these tax provisions are conditions precedent to the right of Grantee to receive the Award under the Plan and these Terms and Conditions.
(c) In lieu of the sale or reduction of Shares delivered described in paragraph (b) above, Grantee may pay to the Company the amount of tax required to be withheld in cash, by check or in other form satisfactory to the Company. Such payment must be made by the date on which the Restrictions lapse or such later date as is established by the Company (not to exceed 15 days after the date on which the Restrictions lapse).
(d) The Shares will be deposited directly into Grantees brokerage account with the Companys approved broker when vested and any applicable withholding obligations have been satisfied.
(e) The Company is hereby authorized to satisfy any required withholding with respect to cash dividends from the dividends.
3.5 Forfeiture for Restricted Activity. Grantee acknowledges that the Company is making this Award of additional compensation, among other reasons, to provide an incentive to Grantee to remain with and to promote the best interests of, the Company, and to protect the Companys assets, including its goodwill, Confidential Information (as defined below) and trade secrets, which are legitimate business interests of the Company, and that engaging in Restricted Activities (as described in Article IV below), would be detrimental to the legitimate business interests of the Company. Therefore, in exchange for this Award, notwithstanding anything to the contrary in these Terms and Conditions or otherwise, if Grantee engages in Restricted Activities (as described in Sections 4.1 through 4.5 below), (a) all unvested shares of Restricted Stock will immediately be forfeited, and (b) Grantee shall be required to (i) return to the Company, within 10 business days after the Companys request to Grantee therefor, all shares of Common Stock received pursuant to the Award that are owned, directly or indirectly, by Grantee and (ii) pay to the Company, within 10 business days of the Companys request to Grantee therefor, an amount equal to the excess, if any, of the aggregate after-tax proceeds (taking into account all amounts of tax that would be recoverable upon a claim of loss for payment of such proceeds in the year of repayment) Grantee received upon the sale or other disposition of all shares of Common Stock received pursuant to the Award (the After-Tax Proceeds). The forfeiture for Restricted Activity provisions of this Section 3.5 and Article IV shall survive and continue to apply beyond settlement of all Awards under the Plan, any
termination or expiration of this Award for any reason, and after the provisions of any employment or other agreement between the Company and Grantee have lapsed.
3.6 Clawback. This Award and all shares of Common Stock received pursuant to the Award, and all shares of Common Stock received pursuant to the Award that are owned, directly or indirectly, by Grantee and any After-Tax Proceeds shall be subject to the Compensation Recoupment Policy, established by the Company, as amended from time to time, or any similar or successor policy.
3.7 Stop-Transfer Notices . In order to ensure compliance with the Restrictions and any provisions set forth in these Terms and Conditions, the Notice or the Plan, the Company may issue appropriate stop transfer instructions to its transfer agent, if any, and, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records. The Company may issue a stop transfer instruction if Grantee fails to satisfy any tax withholding obligations.
3.8 Certain Changes in Capitalization; Additional Securities . If the shares of the Companys Common Stock as a whole are increased, decreased, changed into or exchanged for a different number or kind of shares or securities of the Company, whether through merger, consolidation, reorganization, recapitalization, reclassification, stock dividend, stock split, combination of shares, exchange of shares, change in corporate structure or the like, the Administrator, in its sole discretion, shall have the discretion and power to determine and to make effective provision for acceleration of the time or times at which any Restrictions shall lapse or be removed. In addition, in the case of the occurrence of any event described in this Section 3.8, the Administrator, subject to the provisions of the Plan and these Terms and Conditions, shall make an appropriate and proportionate adjustment in the number and kind of Shares subject to the Award, to the end that after such event Grantees proportionate interest shall be maintained as before the occurrence of such event. Any such adjustment made by the Administrator shall be final and binding upon Grantee, the Company and all other interested persons. Any securities or cash received (including any regular cash dividend) as the result of ownership of the Restricted Stock (the Additional Securities ), including, but not by way of limitation, warrants, options and securities received as a stock dividend or stock split, or as a result of a recapitalization or reorganization or other similar change in the Companys capital structure, shall be retained in escrow in the same manner and subject to the same conditions and Restrictions as the Restricted Stock with respect to which they were issued, including, without limitation, the vesting provisions set forth under Vesting/Lapsing of Restrictions in the Notice. Grantee shall be entitled to direct the Company to exercise any warrant or option received as Additional Securities upon supplying the funds necessary to do so, in which event the securities so purchased shall constitute Additional Securities, but Grantee may not direct the Company to sell any such warrant or option. If Additional Securities consist of a convertible security, Grantee may exercise any conversion right, and any securities so acquired shall constitute Additional Securities. In the event of any change in certificates evidencing the Shares or the Additional Securities by reason of any recapitalization, reorganization or other transaction that results in the creation of Additional Securities, the escrow holder is authorized to deliver to the issuer the certificates evidencing the Shares or the Additional Securities in exchange for the certificates of the replacement securities.
3.9 Section 83(b) Election . Grantee understands that, under Section 83(a) of the Internal Revenue Code of 1986, as amended (the Code ), Grantee will recognize as ordinary income the difference between the amount, if any, paid for the Shares and the Fair Market Value of the Shares at the time the Restrictions on such Shares lapse. Grantee understands that, notwithstanding the preceding sentence, Grantee may elect to be taxed at the time of the Award Date, rather than at the time the Restrictions lapse, by filing an election under Section 83(b) of the Code (an 83(b) Election ) with the Internal Revenue Service within 30 days of the Award Date. In the event Grantee files an 83(b) Election, Grantee will recognize ordinary income in an amount equal to the difference between the amount, if any, paid for the Shares and the Fair Market Value of such Shares as of the Award Date, and will be responsible for paying all such taxes, and, if applicable, paying the Company the amount of any tax required to be withheld thereon at the time of such election, in the manner set forth in Section 3.4. Grantee further understands that a copy of such 83(b) Election form must be filed with his or her federal income tax return for the calendar year in which the Award falls, and a copy delivered to the Company. Grantee acknowledges that the foregoing is only a summary of the effect of United States federal income taxation with respect to this Award, and does not purport to be complete or to deal with any state, local or foreign tax requirements that might apply. GRANTEE FURTHER ACKNOWLEDGES THAT THE COMPANY IS NOT RESPONSIBLE FOR FILING GRANTEES 83(B) ELECTION, AND THE COMPANY HAS DIRECTED GRANTEE TO SEEK INDEPENDENT ADVICE REGARDING THE APPLICABLE PROVISIONS OF THE CODE, THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FEDERAL GOVERNMENT OR FOREIGN COUNTRY IN WHICH GRANTEE MAY RESIDE, AND THE TAX CONSEQUENCES OF GRANTEES DEATH.
ARTICLE 4
FORFEITURE FOR RESTRICTED ACTIVITY
4.1 Restricted Activity. For the avoidance of doubt, the Company and Grantee agree that Grantee is free to engage in the activities described in this Article IV and that the Company will not seek to enjoin or otherwise stop Grantee from engaging in any such Restricted Activities (provided, however, that the Company reserves such right as it may exist at law or in equity and/or pursuant to any other agreement entered into between the Company and Grantee, including, without limitation, in the Veeco Instruments Inc. Employee Confidentiality and Inventions Agreement (ECIA)), but that if Grantee engages in such activities the Company shall have all of the rights set forth in Section 3.5 with respect to the Award, all shares of Common Stock received pursuant to the Award, and any After-Tax Proceeds.
4.2 Company Information: During the term of employment with the Company and for five years thereafter, Grantee will not use or disclose to any individual or entity any Confidential Information (as defined below) of the Company except (i) in the performance of Grantees duties for the Company, (ii) as authorized in writing by the Company, or (iii) as required by law or legal process, provided, that, prior to any such required disclosure, Grantee will notify the Company of the requirement to disclose and, if requested, Grantee will cooperate with the Companys efforts to prevent or limit such disclosure. Grantee understands that Confidential Information means any information that: (a) is disclosed
to, learned by, or created by Grantee in connection with Grantees employment with the Company (or a predecessor company now owned by or part of the Company), and (b) the Company treats as proprietary, private or confidential. Confidential Information may include, without limitation, information relating to the Companys products, services and methods of operation, the identities and competencies of the Companys employees, customers and suppliers, trade secrets, know-how, processes, Inventions and the Company Related Inventions (each as defined in the ECIA), techniques, data, sketches, plans, drawings, chemical formulae, computer software, financial information, operating and cost data, research databases, selling and pricing information, business and marketing plans, and information concerning potential acquisitions, dispositions or joint ventures. Grantee further understands that Confidential Information does not include any of the foregoing items which has become publicly known or made generally available (provided that information will not cease to be Confidential Information as a result of Grantees breach of confidentiality). Grantee will promptly notify the Company if Grantee becomes aware of any unauthorized use or disclosure of Confidential Information.
4.3 Third Party Information: Grantee recognizes that the Company has received and in the future will receive from its customers, suppliers and trading partners their confidential or proprietary information subject to a duty on the Companys part to maintain the confidentiality of such information and to use it only for certain limited purposes. Grantee agrees to hold all such confidential or proprietary information in the strictest confidence and not to disclose it to any person or entity or to use it except as necessary in carrying out Grantees work for the Company consistent with the Companys agreement with such third party.
4.4 Non-competition. During employment with the Company and for one year thereafter, (a) Grantee will not own, manage, work for or otherwise participate in any business whose products, services or activities compete with the current or currently contemplated products, services or activities of the Company in any state or country in which the Company sells products or conducts business and (x) in which Grantee was involved or (y) with respect to which Grantee had access to Confidential Information, in each case, during the 5 years prior to termination, provided, however, that Grantee may own up to 1% of the securities of any such public company (but without otherwise participating in the activities of such enterprise); and (b) Grantee will not, for himself or any other person: (i) induce or try to induce any customer, supplier, licensor or business relation to stop doing business with the Company or otherwise interfere with the relationship between the Company and any of its customers, suppliers, licensors or business relations; or (ii) solicit the business of any person known by Grantee to be a customer of the Company, whether or not Grantee had personal contact with such person, with respect to products or activities that compete with the products or activities of the Company in existence or contemplated at the time of termination of Grantees Continuous Service. Grantee agrees that this covenant is reasonable with respect to its scope, geographical area, and duration.
4.5 Non-solicitation. During employment with the Company and for one year thereafter, Grantee will not, for himself or any other person: (a) induce or try to induce any employee to leave the Company or otherwise interfere with the relationship between the
Company and any of its employees, or (b) employ or engage as an independent contractor, any current or former employee of the Company, other than former employees who have not worked for the Company within the past year. Grantee agrees that this covenant is reasonable with respect to its scope and duration.
4.6 Severability: The invalidity or unenforceability of any paragraph or provision (or any part thereof) of the Notice or these Terms and Conditions shall not affect the validity or enforceability of any one or more of the other paragraphs or provisions (or other parts thereof), and all other provisions shall remain in full force and effect. If any provision of the Notice or these Terms and Conditions is held to be excessively broad, then such provision shall be reformed and construed by limiting and reducing it so as to be enforceable to the maximum extent permitted by law.
1. Notice of Immunity under the Defend Trade Secrets Act and Other Protected Rights. Grantee understands that, in accordance with the Defend Trade Secrets Act of 2016, Grantee will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (a) is made (i) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (b) is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding. Grantee also understands that if Grantee ever files a lawsuit for retaliation by the Company for reporting a suspected violation of law, Grantee may disclose trade secrets to Grantees attorney and use the trade secret information in the court proceeding provided Grantee: (a) files any document containing the trade secret under seal; and (b) does not disclose the trade secret, except pursuant to court order. Grantee understands that nothing contained in the Notice, these Terms and Conditions, or the Plan limits Grantees ability to file a charge or complaint with the Equal Employment Opportunity Commission, the National Labor Relations Board, the Occupational Safety and Health Administration, the Securities and Exchange Commission or any other federal, state or local governmental agency or commission (Government Agencies). Grantee further understands that nothing in the Notice, these Terms and Conditions, or the Plan limits Grantees ability to communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to the Company. Nothing in the Notice, these Terms and Conditions, or the Plan limits Grantees right to receive an award for information provided to any Government Agencies.
ARTICLE 5
OTHER PROVISIONS
5.1 Book Entry; Escrow . The unvested Shares will be held in book-entry or global certificate form. If the Company instead chooses to issue share certificates representing the Shares, the certificates for the Shares shall be deposited in escrow with the Secretary or Assistant Secretary of the Company or such other escrow holder as the Company may appoint; provided , however , that in no event shall Grantee retain physical
custody of any certificates representing unvested Shares issued to him. The deposited certificates shall remain in escrow until all of the Restrictions lapse or shall have been removed.
5.2 Restricted Stock Not Transferable . No unvested Shares or any interest or right therein or part thereof shall be liable for the debts, contracts or engagements of Grantee or his successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect; provided , however , that this Section 5.2 shall not prevent transfers by will or by applicable laws of descent and distribution.
5.3 Rights as Stockholder . Except as otherwise provided herein, upon issuance of the Shares pursuant to Section 5.1, Grantee shall have all the rights of a stockholder with respect to said Shares, subject to the Restrictions herein, including the right to vote the Shares and to receive all dividends or other distributions paid or made with respect to the Shares; provided, however, that any and all Additional Securities received by Grantee with respect to such Restricted Stock shall, as provided in Section 3.8, also be subject to the Restrictions until the Restrictions on the underlying Shares lapse or are removed pursuant to these Terms and Conditions.
5.4 No Right to Continued Employment . Nothing in the Notice, these Terms and Conditions or the Plan shall confer upon Grantee any right to continue in the service of the Company or any Related Entity or shall interfere with or restrict in any way the rights of the Company or any Related Entity, which are hereby expressly reserved, to discharge Grantee at any time for any reason whatsoever, with or without cause, except as may otherwise be provided by any written agreement entered into by and between the Company and Grantee.
5.5 No Right to Future Awards . Nothing in the Notice, these Terms and Conditions or the Plan shall confer upon Grantee any right with respect to future Awards under the Plan, or any right with respect to any other award under any plan of the Company or any Related Entity.
5.6 Entire Agreement . The Notice, these Terms and Conditions and the Plan constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Grantee with respect to the subject matter hereof, and may not be modified adversely to Grantees interest except by means of a writing signed by the Company and Grantee. For the avoidance of doubt, the restrictions set forth in Sections 4.2 through 4.5 above do not supersede any other agreement between the Company and Grantee, including, without limitation, the ECIA. Nothing in the Notice, the Plan and these Terms and Conditions (except as expressly provided therein) is intended to confer any rights or remedies on any persons other than the parties. Should any provision of the Notice, the Plan or these Terms and Conditions be determined to be illegal or unenforceable, such provision shall be
enforced to the fullest extent allowed by law and the other provisions shall nevertheless remain effective and shall remain enforceable.
5.7 Governing Law. The Notice, the Plan and these Terms and Conditions are to be construed in accordance with and governed by the internal laws of the State of New York, without giving effect to any choice of law rule that would cause the application of the laws of any jurisdiction other than the internal laws of the State of New York to the rights, duties, and obligations of the parties.
5.8 Venue and Jurisdiction. The Company, Grantee, and Grantees assignees pursuant to Section 5.2 (the parties) expressly agree that any suit, action, or proceeding arising out of or relating to the Notice, the Plan or these Terms and Conditions shall be brought in the United States District Court for the Eastern District of New York (or should such court lack jurisdiction to hear such action, suit or proceeding, in a New York state court in the County of Nassau) and that the parties shall submit to the exclusive jurisdiction of such courts. The parties irrevocably waive, to the fullest extent permitted by law, any objection the party may have to the laying of venue for any such suit, action or proceeding brought in such court. The parties agree and submit to personal jurisdiction in either court. The Parties further agree that this Venue and Jurisdiction is binding on all matters related to the Notice, the Plan, or these Terms and Conditions and may not be altered or amended by any other arrangement or agreement (including an employment agreement) without the express written consent of Grantee and the Company. If any one or more provisions of this Section 5.8 shall for any reason be held invalid or unenforceable, it is the specific intent of the parties that such provisions shall be modified to the minimum extent necessary to make it or its application valid and enforceable.
5.9 Jury Trial. THE PARTIES EXPRESSLY WAIVE ANY RIGHT THEY HAVE OR MAY HAVE TO A JURY TRIAL OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE NOTICE, THE PLAN OR THESE TERMS AND CONDITIONS.
5.10 Conformity to Securities Laws . Grantee acknowledges that the Plan and these Terms and Conditions are intended to conform to the extent necessary with all provisions of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended (the Exchange Act ), and any and all regulations and rules promulgated thereunder by the Securities and Exchange Commission, including without limitation Rule 16b-3 under the Exchange Act. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Award is granted, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and these Terms and Conditions shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.
5.11 Amendment, Suspension and Termination . The Award and these Terms and Conditions may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Committee or the Board, provided that, except as may otherwise be provided by the Plan, neither the amendment, suspension nor
termination of the Award or these Terms and Conditions shall, without the consent of Grantee, alter or impair any rights or obligations under any Award.
5.12 Administration and Interpretation . Any question or dispute regarding the administration or interpretation of the Notice, the Plan or these Terms and Conditions shall be submitted by Grantee or by the Company to the Administrator. The resolution of such question or dispute by the Administrator shall be final and binding on all persons.
5.13 Notices . Notices required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States mail by certified mail, with postage and fees prepaid, addressed to Grantee to his address shown in the Company records, and to the Company at its principal executive office.
5.14 Severability . The invalidity or unenforceability of any paragraph or provision of these Terms and Conditions shall not affect the validity or enforceability of any other paragraph or provision, and all other provisions shall remain in full force and effect. If any provision of these Terms and Conditions is held to be excessively broad, then such provision shall be reformed and construed by limiting and reducing it so as to be enforceable to the maximum extent permitted by law.
5.15 Certain Provisions Applicable to Grantees Employed at International Locations. The Company will assess its requirements regarding tax, social insurance and any other payroll tax ( Tax-Related Items ) withholding and reporting in connection with the Shares. These requirements may change from time to time as laws or interpretations change. Regardless of the actions of the Company in this regard, Grantee hereby acknowledges and agrees that the ultimate liability for any and all Tax-Related Items is and remains his or her responsibility and liability and that the Company makes no representations nor undertakings regarding treatment of any Tax-Related Items in connection with any aspect of the Award and does not commit to structure the terms of the grant or any aspect of the Award to reduce or eliminate Grantees liability regarding Tax-Related Items. In the event that the Company must withhold any Tax-Related Items in connection with the Award, Grantee agrees to make arrangements satisfactory to the Company to satisfy all withholding requirements. Grantee authorizes the Company to withhold all applicable Tax-Related Items legally due from Grantee from his or her wages or other cash compensation paid him or her by the Company and/or to cause the sale of vested Shares on Grantees behalf or reduce the number of vested Shares delivered to Grantee at the time the Restrictions lapse, as contemplated by Section 3.4 above, to satisfy such Tax-Related Items.
5.16 Data Privacy . Grantee consents to the collection, use and transfer of personal data as described in this Section. Grantee understands that the Company and its Subsidiaries hold certain personal information about Grantee, including Grantees name, home address and telephone number, date of birth, social security number or identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of all options or any other entitlement to shares of stock (restricted or otherwise) awarded, cancelled, exercised, vested, unvested or outstanding in Grantees
favor, for the purpose of managing and administering the Plan ( Data ). Grantee further understands that the Company and/or its Subsidiaries will transfer Data amongst themselves as necessary for the purpose of implementation, administration and management of Grantees participation in the Plan, and that the Company and/or any of its Subsidiaries may each further transfer Data to any third parties assisting the Company in the implementation, administration and management of the Plan ( Data Recipients ). Grantee understands that these Data Recipients may be located in Grantees country of residence, the European Economic Area, or elsewhere throughout the world, such as the United States. Grantee authorizes the Data Recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing Grantees participation in the Plan, including any transfer of such Data, as may be required for the administration of the Plan and/or the subsequent holding of Shares on Grantees behalf, to a broker or other third party with whom Grantee may elect to deposit any Shares of stock acquired upon vesting of the Shares. Grantee understands that he or she may, at any time, review the Data, require any necessary amendments to it or withdraw the consent herein in writing by contacting the Company. Withdrawal of consent may, however, affect Grantees ability to participate in the Plan.
* * * * *
CERTIFICATION PURSUANT TO
RULE 13a 14(a) or RULE 15d 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
I, John R. Peeler, certify that:
1. I have reviewed this quarterly report on Form 10-Q for the period ended March 31, 2018 of Veeco Instruments Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
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By: |
/s/ JOHN R. PEELER |
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John R. Peeler |
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Chairman and Chief Executive Officer |
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Veeco Instruments Inc. |
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May 7, 2018 |
CERTIFICATION PURSUANT TO
RULE 13a 14(a) or RULE 15d 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
I, Shubham Maheshwari, certify that:
1. I have reviewed this quarterly report on Form 10-Q for the period ended March 31, 2018 of Veeco Instruments Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
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By: |
/s/ SHUBHAM MAHESHWARI |
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Shubham Maheshwari |
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Executive Vice President and Chief Financial Officer |
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Veeco Instruments Inc. |
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May 7, 2018 |
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Veeco Instruments Inc. (the Company) on Form 10-Q for the period ended March 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, John R. Peeler, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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By: |
/s/ JOHN R. PEELER |
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John R. Peeler |
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Chairman and Chief Executive Officer |
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Veeco Instruments Inc. |
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May 7, 2018 |
A signed original of this written statement required by Section 906 has been provided to Veeco Instruments Inc. and will be retained by Veeco Instruments Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Veeco Instruments Inc. (the Company) on Form 10-Q for the period ended March 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Shubham Maheshwari, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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By: |
/s/ SHUBHAM MAHESHWARI |
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Shubham Maheshwari |
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Executive Vice President and Chief Financial Officer |
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Veeco Instruments Inc. |
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May 7, 2018 |
A signed original of this written statement required by Section 906 has been provided to Veeco Instruments Inc. and will be retained by Veeco Instruments Inc. and furnished to the Securities and Exchange Commission or its staff upon request.