Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-16244
VEECO INSTRUMENTS INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
11-2989601
(State or Other Jurisdiction of Incorporation or Organization)
(I.R.S. Employer Identification No.)
Terminal DrivePlainview, New York
11803
(Address of Principal Executive Offices)
(Zip Code)
Registrant’s telephone number, including area code:
(516) 677-0200
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.01 per share
VECO
The NASDAQ Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ◻
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).Yes ☒ No ◻
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒
Accelerated filer ☐
Non-accelerated filer ☐
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of October 27, 2021, there were 50,503,953 shares of the registrant’s common stock outstanding.
INDEX
Safe Harbor Statement
1
PART I—FINANCIAL INFORMATION
4
Item 1. Financial Statements
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
27
Item 3. Quantitative and Qualitative Disclosures about Market Risk
37
Item 4. Controls and Procedures
38
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
Item 1A. Risk Factors
39
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
40
SIGNATURES
41
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, including the potential impact of the COVID-19 pandemic on our business, and planned actions to be undertaken in the future, they may ultimately differ from actual results. Operating results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. 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, those set forth under the heading “Risk Factors” Part 1, Item 1A in our 2020 Form 10-K, and the following:
Risks Related to Our Business, Finance and Operations
Risks Associated with Operating a Global Business
Risks Related to Intellectual Property and Cybersecurity
Risks Associated with Our Industry
2
General Risk Factors
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.
3
Veeco Instruments Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share amounts)
September 30,
December 31,
2021
2020
(unaudited)
Assets
Current assets:
Cash and cash equivalents
$
121,602
129,625
Restricted cash
629
658
Short-term investments
213,985
189,771
Accounts receivable, net
86,759
79,991
Contract assets
27,467
21,246
Inventories
170,835
145,906
Deferred cost of sales
635
433
Prepaid expenses and other current assets
31,592
19,301
Total current assets
653,504
586,931
Property, plant, and equipment, net
93,851
65,271
Operating lease right-of-use assets
26,481
10,275
Intangible assets, net
36,880
46,185
Goodwill
181,943
Deferred income taxes
1,440
Other assets
3,709
6,019
Total assets
997,808
898,064
Liabilities and stockholders' equity
Current liabilities:
Accounts payable
48,749
33,656
Accrued expenses and other current liabilities
76,033
44,876
Customer deposits and deferred revenue
60,703
67,235
Income taxes payable
1,737
914
Total current liabilities
187,222
146,681
5,228
5,240
Long-term debt
331,877
321,115
Long-term operating lease liabilities
30,325
6,305
Other liabilities
7,843
10,349
Total liabilities
562,495
489,690
Stockholders' equity:
Preferred stock, $0.01 par value; 500,000 shares authorized; no shares issued and outstanding.
—
Common stock, $0.01 par value; 120,000,000 shares authorized; 50,321,048 shares issued and outstanding at September 30, 2021 and 49,723,751 shares issued and outstanding at December 31, 2020
503
497
Additional paid-in capital
1,122,526
1,113,352
Accumulated deficit
(689,486)
(707,321)
Accumulated other comprehensive income
1,770
1,846
Total stockholders' equity
435,313
408,374
Total liabilities and stockholders' equity
See accompanying Notes to the Consolidated Financial Statements.
Consolidated Statements of Operations
(in thousands, except per share amounts)
Three months ended September 30,
Nine months ended September 30,
Net sales
150,246
112,078
430,305
315,216
Cost of sales
87,077
62,936
252,055
177,761
Gross profit
63,169
49,142
178,250
137,455
Operating expenses, net:
Research and development
21,999
19,129
66,397
57,577
Selling, general, and administrative
21,603
19,415
63,325
55,541
Amortization of intangible assets
2,976
3,831
9,305
11,502
Restructuring
1,097
Asset impairment
281
Other operating expense (income), net
175
(218)
138
(502)
Total operating expenses, net
46,753
42,157
139,165
125,496
Operating income (loss)
16,416
6,985
39,085
11,959
Interest income
95
231
464
1,458
Interest expense
(7,107)
(6,425)
(20,685)
(18,131)
Loss on extinguishment of debt
(3,046)
Income (loss) before income taxes
9,404
791
18,864
(7,760)
Income tax expense (benefit)
411
211
1,029
530
Net income (loss)
8,993
580
17,835
(8,290)
Income (loss) per common share:
Basic
0.18
0.01
0.36
(0.17)
Diluted
0.17
0.33
Weighted average number of shares:
49,021
48,341
48,968
48,327
53,849
49,174
53,606
5
Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on available-for-sale securities
(12)
(69)
(16)
Change in currency translation adjustments
(21)
9
(60)
Total other comprehensive income (loss), net of tax
(33)
(76)
(37)
Total comprehensive income (loss)
8,960
520
17,759
(8,327)
6
Consolidated Statements of Cash Flows
Cash Flows from Operating Activities
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization
19,634
23,021
Non-cash interest expense
10,762
10,282
330
Share-based compensation expense
11,735
9,562
3,046
Provision for bad debts
140
Changes in operating assets and liabilities:
Accounts receivable and contract assets
(12,987)
(30,677)
Inventories and deferred cost of sales
(24,879)
(10,336)
9,829
(982)
Accounts payable and accrued expenses
21,786
11,130
(6,532)
16,728
Income taxes receivable and payable, net
823
61
Other, net
2,655
3,295
Net cash provided by (used in) operating activities
50,649
27,591
Cash Flows from Investing Activities
Capital expenditures
(31,453)
(3,331)
Proceeds from the sale of investments
199,475
139,531
Payments for purchases of investments
(225,112)
(185,576)
Proceeds from held for sale assets, net of costs to sell
9,503
Net cash provided by (used in) investing activities
(57,090)
(39,873)
Cash Flows from Financing Activities
Proceeds from issuance of 2027 Notes, net of issuance costs
121,946
Purchase of capped calls
(10,313)
Repurchase of 2023 Notes
(81,240)
Proceeds (net of tax withholdings) from option exercises and employee stock purchase plan
2,709
2,428
Restricted stock tax withholdings
(4,260)
(2,217)
Net cash provided by (used in) financing activities
(1,551)
30,604
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash, cash equivalents, and restricted cash
(8,052)
18,301
Cash, cash equivalents, and restricted cash - beginning of period
130,283
129,951
Cash, cash equivalents, and restricted cash - end of period
122,231
148,252
Supplemental Disclosure of Cash Flow Information
Interest paid
9,039
8,989
Net income taxes paid (refunds received)
(130)
248
Non-cash activities
Capital expenditures included in accounts payable and accrued expenses
9,133
705
Net transfer of property, plant and equipment to inventory
253
1,624
Right-of-use assets obtained in exchange for lease obligations
20,353
951
7
Notes to the Consolidated Financial Statements
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 Veeco’s most recent annual financial statements. For further information, refer to Veeco’s Consolidated Financial Statements and Notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2020 (“2020 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 2021 interim quarters end on April 4, July 4, and October 3, and the 2020 interim quarters ended on March 29, June 28, and September 27. These interim quarters are reported as March 31, June 30, and September 30 in Veeco’s interim consolidated financial statements.
The preparation of financial statements in conformity with U.S GAAP requires the Company’s management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although these estimates are based on management’s knowledge of current events and actions it may undertake in the future, actual results may differ from these estimates. In particular, the COVID-19 pandemic has adversely impacted and is likely to further adversely impact the Company’s business and markets, including the Company’s workforce and operations and the operations of the Company’s customers, suppliers, and business partners. The full extent to which the pandemic will directly or indirectly impact the Company's business, results of operations and financial condition, including sales, expenses, manufacturing, research and development costs, reserves and allowances, fair value measurements, and asset impairment charges, will depend on future developments that are highly uncertain and difficult to predict. These developments include, but are not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or address its impact, governmental actions to contain the spread of the pandemic and respond to the reduction in global economic activity, and how quickly and to what extent normal economic and operating conditions can resume.
Revenue Recognition
Revenue is recognized upon the transfer of control of the promised product or service to the customer in an amount that reflects the consideration the Company expects to receive in exchange for such product or service. The Company’s contracts with customers generally do not contain variable consideration. In the rare instances where variable consideration is included, the Company estimates the amount of variable consideration and determines what portion of that, if any, has a high probability of significant subsequent revenue reversal, and if so, that amount is excluded from the transaction price. The Company’s contracts with customers frequently contain multiple deliverables, such as systems, upgrades, components, spare parts, installation, maintenance, and service plans. Judgment is required to properly identify the performance obligations within a contract and to determine how the revenue should be allocated among the performance obligations. The Company also evaluates whether multiple transactions with the same customer or related parties should be considered part of a single contract based on an assessment of whether the contracts or agreements are negotiated or executed within a short time frame of each other or if there are indicators that the contracts are negotiated in contemplation of one another.
When there are separate units of accounting, the Company allocates revenue to each performance obligation on a relative stand-alone selling price basis. The stand-alone selling prices are determined based on the prices at which the Company separately sells the systems, upgrades, components, spare parts, installation, maintenance, and service plans. For items
8
Notes to the Consolidated Financial Statements - continued
that are not sold separately, the Company estimates stand-alone selling prices generally using an expected cost plus margin approach.
Most of the Company’s revenue is recognized at a point in time when the performance obligation is satisfied. The Company considers many facts when evaluating each of its sales arrangements to determine the timing of revenue recognition, including its contractual obligations and the nature of the customer’s post-delivery acceptance provisions. The Company’s system sales arrangements, including certain upgrades, generally include field acceptance provisions that may include functional or mechanical test procedures. For many of these arrangements, a customer source inspection of the system is performed in the Company’s facility, test data is sent to the customer documenting that the system is functioning to the agreed upon specifications prior to delivery, or other quality assurance testing is performed internally to ensure system functionality prior to shipment. Historically, such source inspection or test data replicates the field acceptance provisions that are performed at the customer’s site prior to final acceptance of the system. When the Company objectively demonstrates that the criteria specified in the contractual acceptance provisions are achieved prior to delivery either through customer testing or the Company’s historical experience of its tools meeting specifications, transfer of control of the product to the customer is considered to have occurred and revenue is recognized upon system delivery since there is no substantive contingency remaining related to the acceptance provisions at that date. For new products, new applications of existing products, or for products with substantive customer acceptance provisions where the Company cannot objectively demonstrate that the criteria specified in the contractual acceptance provisions have been achieved prior to delivery, revenue and the associated costs are deferred. The Company recognizes such revenue and costs upon obtaining objective evidence that the acceptance provisions can be achieved, assuming all other revenue recognition criteria have been met.
In certain cases the Company’s contracts with customers contain a billing retention, which is billed by the Company and payable by the customer when field acceptance provisions are completed. Revenue recognized in advance of the amount that has been billed is recorded as a contract asset on the Consolidated Balance Sheets.
The Company recognizes revenue related to maintenance and service contracts over time based upon the respective contract term. Installation revenue is recognized over time as the installation services are performed. The Company recognizes revenue from the sales of components, spare parts, and specified service engagements at a point in time, which is typically consistent with the time of delivery in accordance with the terms of the applicable sales arrangement.
The Company may receive customer deposits on system transactions. The timing of the transfer of goods or services related to the deposits is either at the discretion of the customer or expected to be within one year from the deposit receipt. As such, the Company does not adjust transaction prices for the time value of money. Incremental direct costs incurred related to the acquisition of a customer contract, such as sales commissions, are expensed as incurred since the expected amortization period is one year or less.
The Company has elected to treat shipping and handling costs as a fulfillment activity, and the Company includes such costs in cost of sales when the Company recognizes revenue for the related goods. Taxes assessed by governmental authorities that are collected by the Company from a customer are excluded from revenue.
Inventories are stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis. Each quarter the Company assesses the valuation and recoverability of all inventories: materials (raw materials, spare parts, and service inventory); work-in-process; and finished goods. Obsolete inventory or inventory in excess of management’s estimated usage requirement is written down to its estimated net realizable value if less than cost. The Company evaluates usage requirements by analyzing historical usage, anticipated demand, alternative uses of materials, and other qualitative factors. Unanticipated changes in demand for the Company’s products may require a write down of
inventory, which would be reflected in cost of sales in the period the revision is made. Inventory acquired as part of a business combination is recorded at fair value on the date of acquisition.
Recently Adopted Accounting Standards
The Company adopted ASU 2019-12: Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes in the second quarter of 2020, effective as of the beginning of fiscal year 2020. This ASU simplifies the accounting for income taxes by eliminating certain exceptions to the general principles and simplifying several aspects of ASC 740, Income Taxes, including, but not limited to, requirements related to the following: a) exception to the incremental approach for intraperiod tax allocation; b) the tax basis step-up in goodwill obtained in a transaction that is not a business combination; c) ownership changes in investments - changes from a subsidiary to an equity method investment; d) separate financial statements of entities not subject to tax; e) interim-period accounting for enacted changes in tax law; and f) the year-to-date loss limitation in interim-period tax accounting. The adoption did not have a material impact on the Company’s consolidated financial statements as of the date of adoption.
Recent Accounting Standards Not Yet Adopted
In August 2020, the FASB issued ASU 2020-06: Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This standard simplifies the accounting for convertible debt instruments by removing the separation models for convertible debt with a cash conversion feature, as well as convertible instruments with a beneficial conversion feature. As a result, entities will account for a convertible debt instrument wholly as debt, unless certain other conditions are met. The elimination of these models will reduce non-cash interest expense for entities that have issued a convertible instrument that was within the scope of those models before the adoption of ASU 2020-06. Additionally, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share, and precludes the use of the treasury stock method for certain debt instruments. The provisions of ASU 2020-06 are applicable for fiscal years beginning after December 15, 2021. The Company’s 2023 Notes, 2025 Notes, and 2027 Notes all are currently accounted for using the separation models for convertible debt with a cash conversion feature, and therefore upon adoption of ASU 2020-06 in the first quarter of 2022, the Company expects a decrease in non-cash interest expense. Additionally, the Company will be required to use the if-converted method for its current convertible debt when calculating diluted earnings (loss) per share, which will result in an increase in income available to common shareholders, as well as an increase in diluted shares outstanding. The Company expects to use the modified retrospective method of adoption.
i
10
Note 2 — Income (Loss) Per Common Share
Basic income (loss) per share is calculated by dividing net income (loss) by the weighted average number of shares outstanding during the period. Diluted income per share is calculated by dividing net income by the weighted average number of shares used to calculate basic income (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 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 if the performance targets have been achieved, or would have been achieved if the reporting date was the end of the contingency period. The Company has determined that it has the ability and intent to settle the principal amount of its convertible senior notes in cash, and the excess of the principal portion in shares of its common stock. As such, the Company accounts for the conversion spread using the treasury stock method, and the shares issuable upon conversion of the Notes are not included in the calculation of diluted earnings per share except to the extent that the conversion value of the Notes exceeds their principal amount and if the effect would be dilutive. The computations of basic and diluted income (loss) per share for the three and nine months ended September 30, 2021 and 2020 are as follows:
Net income (loss) per common share:
Basic weighted average shares outstanding
Dilutive effect of share-based awards
1,507
833
1,377
Dilutive effect of the 2027 Notes
3,321
3,261
Diluted weighted average shares outstanding
Common share equivalents excluded from the diluted weighted average shares outstanding since the Company incurred a net loss and their effect would be antidilutive
N/A
650
Potentially dilutive shares excluded from the diluted calculation as their effect would be antidilutive
451
984
447
Maximum potential shares to be issued for settlement of the 2023, 2025, and 2027 Notes excluded from the diluted calculation as their effect would be antidilutive due to a net loss or the fact that the conversion value of the Notes did not exceed their principal amount
8,811
15,354
Note 3 — 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 operating expense (income), net” in the Consolidated Statements of Operations.
11
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
Level 3: Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. 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 Veeco’s assets that were measured at fair value on a recurring basis at September 30, 2021 and December 31, 2020:
Level 1
Level 2
Level 3
Total
September 30, 2021
Cash equivalents
Certificate of deposits and time deposits
55,358
Corporate debt
Commercial paper
Money market cash
1,069
56,427
U.S. treasuries
118,782
Government agency securities
12,086
67,678
15,439
95,203
December 31, 2020
59,168
2,000
24,997
84,165
86,165
149,219
32,554
7,998
40,552
12
There were no transfers between fair value measurement levels during the three and nine months ended September 30, 2021.
At September 30, 2021 and December 31, 2020, the amortized cost and fair value of available-for-sale securities consist of:
Gross
Amortized
Unrealized
Estimated
Cost
Gains
Losses
Fair Value
118,801
(28)
12,092
(6)
67,689
28
(39)
214,021
(73)
149,206
14
(1)
32,588
(34)
7,997
189,791
15
(35)
Available-for-sale securities in a loss position at September 30, 2021 and December 31, 2020 consist of:
64,093
19,991
39,549
115,728
52,545
At September 30, 2021 and December 31, 2020, there were no short-term investments that had been in a continuous loss position for more than 12 months.
The contractual maturities of securities classified as available-for-sale at September 30, 2021 were as follows:
Due in one year or less
121,123
121,128
Due after one year through two years
87,080
87,037
Due after two years through three years
5,818
5,820
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 minimal realized gains or losses for the nine months ended September 30, 2021 and no realized gains or losses for the nine months ended September 30, 2020.
13
Accounts Receivable
Accounts receivable is presented net of an allowance for doubtful accounts of $0.7 million at September 30, 2021 and December 31, 2020. The Company considered its current expectations of future economic conditions, including the impact of COVID-19, when estimating its allowance for doubtful accounts.
Inventories at September 30, 2021 and December 31, 2020 consist of the following:
Materials
90,982
82,679
Work-in-process
64,134
53,979
Finished goods
15,719
9,248
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, prepaid licenses, and other receivables. The balance as of September 30, 2021 includes a current receivable of $15.0 million for insurance recoveries related to the legal settlement referenced in Note 5, “Commitments and Contingencies,” as well as a current receivable of $1.1 million related to landlord reimbursement for leasehold improvements associated with the Company’s new leased facility in San Jose, California. In addition, Veeco had deposits with its suppliers of $4.2 million and $7.2 million at September 30, 2021 and December 31, 2020, respectively.
Property, Plant, and Equipment
Property, plant, and equipment at September 30, 2021 and December 31, 2020 consist of the following:
Land
5,061
Building and improvements
63,944
62,865
Machinery and equipment (1)
144,937
140,493
Leasehold improvements
38,262
6,671
Gross property, plant, and equipment
252,204
215,090
Less: accumulated depreciation and amortization
158,353
149,819
Net property, plant, and equipment
For the three and nine months ended September 30, 2021, depreciation expense was $3.5 million and $10.3 million, respectively, and $3.8 million and $11.5 million, respectively, for the comparable 2020 periods.
Goodwill represents the future economic benefits arising from assets acquired in a business combination that are not individually identified and separately recognized. The Company continues to assess potential triggering events related to
the value of its goodwill and concluded that there were no indicators of impairment during the three and nine months ended September 30, 2021.
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 Company continues to assess potential triggering events related to the value of its intangible assets and concluded that there were no indicators of impairment during the three and nine months ended September 30, 2021.
The components of purchased intangible assets were as follows:
Accumulated
Amortization
Carrying
and
Net
Amount
Impairment
Technology
327,908
308,587
19,321
302,358
25,550
Customer relationships
146,465
132,260
14,205
130,131
16,334
Trademarks and tradenames
30,910
27,556
3,354
26,614
4,296
Other
3,686
3,681
508,969
472,089
462,784
Other intangible assets primarily consist of patents, licenses, and backlog.
Note 4 — Liabilities
Accrued Expenses and Other Current Liabilities
The components of accrued expenses and other current liabilities at September 30, 2021 and December 31, 2020 consist of:
Payroll and related benefits
33,868
26,630
Warranty
6,544
5,058
Operating lease liabilities
4,162
4,148
Interest
3,459
2,574
Professional fees
1,140
1,112
Legal settlement
15,000
Sales, use, and other taxes
6,092
2,658
5,768
2,696
Warranties are typically valid for one year from the date of system final acceptance. The Company estimates the costs that may be incurred under the warranty which 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 nine months ended September 30, 2021 include:
Balance - December 31, 2020
Warranties issued
4,766
Consumption of reserves
(4,401)
Changes in estimate
1,121
Balance - September 30, 2021
Customer Deposits and Deferred Revenue
Customer deposits totaled $44.6 million and $49.3 million at September 30, 2021 and December 31, 2020, 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:
17,985
Deferral of revenue
7,008
Recognition of unearned revenue
(8,913)
16,080
As of September 30, 2021, the Company has approximately $34.6 million of remaining performance obligations on contracts with an original estimated duration of one year or more, of which approximately 73% 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
2023 Notes
On January 10, 2017, the Company issued $345.0 million of 2.70% convertible senior unsecured notes due 2023 (the “2023 Notes”). The Company received net proceeds, after deducting underwriting discounts and fees and expenses payable by the Company, of approximately $335.8 million. The 2023 Notes bear interest at a rate of 2.70% per year, payable semiannually in arrears on January 15 and July 15 of each year, commencing on July 15, 2017. The 2023 Notes mature on January 15, 2023, unless earlier purchased by the Company, redeemed, or converted.
On May 18, 2020, in connection with the completion of a private offering of $125.0 million aggregate principal amount of 3.75% convertible senior notes due 2027 described below, the Company repurchased and retired approximately
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$88.3 million in aggregate principal amount of its outstanding 2023 Notes, with a carrying amount of $78.1 million, for approximately $81.2 million of cash.
Additionally, on November 11, 2020, the Company entered into a privately negotiated exchange agreement with a holder of its outstanding 2023 Notes, under which the Company agreed to retire $125.0 million in aggregate original principal amount of the 2023 Notes, with a carrying amount of $113.1 million, in exchange for the issuance of $132.5 million in aggregate principal amount of new 3.50% convertible senior notes due 2025 described below, which had a fair value that approximated the principal amount of notes issued.
2025 Notes
On November 17, 2020, as part of the privately negotiated exchange agreement described above, the Company issued $132.5 million of 3.50% convertible senior notes due 2025 (the “2025 Notes”). The 2025 Notes bear interest at a rate of 3.50% per year, payable semiannually in arrears on January 15 and July 15 of each year, commencing on July 15, 2021. The 2025 Notes mature on January 15, 2025, unless earlier purchased by the Company, redeemed, or converted.
2027 Notes
On May 18, 2020, the Company completed a private offering of $125.0 million of 3.75% convertible senior notes due 2027 (the “2027 Notes”). The Company received net proceeds of approximately $121.9 million, after deducting underwriting discounts and fees and expenses payable by the Company. Additionally, the Company used approximately $10.3 million of cash to purchase capped calls, discussed below. The 2027 Notes bear interest at a rate of 3.75% per year, payable semiannually in arrears on June 1 and December 1 of each year, commencing on December 1, 2020. The 2027 Notes mature on June 1, 2027, unless earlier purchased by the Company, redeemed, or converted.
The 2023 Notes, 2025 Notes, and 2027 Notes (collectively, the “Notes”) are unsecured obligations of Veeco and rank senior in right of payment to any of Veeco’s subordinated indebtedness; equal in right of payment to all of Veeco’s unsecured indebtedness that is not subordinated; effectively subordinated in right of payment to any of Veeco’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally subordinated to all indebtedness and other liabilities (including trade payables) of Veeco’s subsidiaries.
The Notes are convertible at the option of the holders upon the satisfaction of specified conditions and during certain periods as described below. The initial conversion rates are 24.9800, 41.6667, and 71.5372 shares of the Company’s common stock per $1,000 principal amount of the 2023 Notes, 2025 Notes, and 2027 Notes, respectively, representing initial effective conversion prices of $40.03, $24.00, and $13.98 per share of common stock, respectively. The conversion rates may be subject to adjustment upon the occurrence of certain specified events.
Holders may convert all or any portion of their notes, in multiples of one thousand dollar principal amount, at their option at any time prior to the close of business on the business day immediately preceding October 15, 2022 with respect to the 2023 Notes, October 15, 2024 with respect to the 2025 Notes, and October 1, 2026 with respect to the 2027 Notes, only under the following circumstances:
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For the calendar quarter ended September 30, 2021, the last reported sales price of common stock during the 30 consecutive trading days, based on the criteria outlined in (i) above, was greater than 130% of the conversion price of the 2027 Notes, and as such the 2027 Notes are convertible by the holders until December 31, 2021.
Holders may convert their notes at any time, regardless of the foregoing circumstances, on or after October 15, 2022 with respect to the 2023 Notes, October 15, 2024 with respect to the 2025 Notes, and October 1, 2026 with respect to the 2027 Notes, until the close of business on the business day immediately preceding the respective maturity date.
Upon conversion by the holders, the Company may elect to settle such conversion in shares of its common stock, cash, or a combination thereof. As a result of its cash conversion options, the Company segregated the liability component of the instruments from the equity components. The liability components were measured by estimating the fair value of a non-convertible debt instrument that is similar in its terms to the Notes. The calculation of the fair value of the debt components required the use of Level 3 inputs, including utilization of convertible investors’ credit assumptions and high yield bond indices. Fair value was estimated through discounting future interest and principal payments, an income approach, due under the Notes at a discount rate equal to the estimated borrowing rate for similar non-convertible debt, or 7.0%, 8.0%, and 9.1% with respect to the 2023 Notes, 2025 Notes, and 2027 Notes, respectively. The excess of the aggregate face values of the Notes over the estimated fair values of the liability components of $72.5 million, $21.0 million, and $34.2 million with respect to the 2023 Notes, 2025 Notes, and 2027 Notes, respectively, were recognized as debt discounts and recorded as an increase to additional paid-in capital and will be amortized over the expected lives of the Notes using the effective interest rate method. Amortization of the debt discounts are recognized as non-cash interest expense.
The transaction costs of $9.2 million, $1.9 million, and $3.1 million incurred in connection with the issuance of the 2023 Notes, 2025 Notes, and 2027 Notes, respectively, were allocated to the liability and equity components based on their relative values. Transaction costs allocated to the liability component are being amortized using the effective interest rate method and recognized as non-cash interest expense over the expected terms of the Notes. Transaction costs allocated to the equity component of $1.9 million, $0.3 million, and $0.8 million with respect to the 2023 Notes, 2025 Notes, and 2027 Notes, respectively, reduced the value of the equity components recognized in stockholders' equity.
In connection with the offering of the 2027 Notes, on May 13, 2020, the Company entered into privately negotiated capped call transactions (the “Capped Call Transactions”), pursuant to capped call confirmations, covering the total principal amount of the 2027 Notes for an aggregate premium of $10.3 million. The Capped Call Transactions are expected generally to reduce the potential dilution to the Company’s common stock upon any conversion of the 2027 Notes and/or offset any cash payments the Company is required to make in excess of the aggregate principal amount of converted 2027 Notes, as the case may be, with such reduction and/or offset subject to a cap based on the capped price of the Capped Call Transactions. The Capped Call Transactions exercise price is equal to the initial conversion price of the 2027 Notes, and the capped price of the Capped Call Transactions is approximately $18.46 per share and is subject to certain adjustments under the terms of the capped call confirmations.
The Capped Call Transactions are separate transactions entered into by the Company with the capped call counterparties, are not part of the terms of the 2027 Notes and do not change the holders’ rights under the 2027 Notes. Holders of the 2027 Notes do not have any rights with respect to the Capped Call Transactions. The cost of the Capped Call
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Transactions is not expected to be tax-deductible as the Company did not elect to integrate the Capped Call Transactions into the 2027 Notes for tax purposes. The Company used a portion of the net proceeds from the offering of the 2027 Notes to pay for the Capped Call Transactions, and the cost of the Capped Call Transactions was recorded as a reduction of the Company’s additional paid-in capital in the accompanying consolidated financial statements.
The carrying value of the 2023 Notes, 2025 Notes and 2027 Notes are as follows:
Principal Amount
Unamortized debt discount/transaction costs
Net carrying value
131,695
(7,754)
123,941
(11,925)
119,770
132,500
(18,539)
113,961
(22,097)
110,403
125,000
(31,025)
93,975
(34,058)
90,942
389,195
(57,318)
(68,080)
Total interest expense related to the 2023 Notes, 2025 Notes and 2027 Notes is as follows:
Cash Interest Expense
Coupon interest expense - 2023 Notes
889
1,733
2,667
6,060
Coupon interest expense - 2025 Notes
1,159
3,478
Coupon interest expense - 2027 Notes
1,172
3,516
1,745
Non-cash Interest Expense
Amortization of debt discount/transaction costs- 2023 Notes
1,417
2,563
4,171
8,887
Amortization of debt discount/transaction costs- 2025 Notes
1,211
3,558
Amortization of debt discount/transaction costs- 2027 Notes
1,035
941
3,033
1,395
Total Interest Expense
6,883
6,409
20,423
18,087
The Company determined the 2023 Notes, 2025 notes, and 2027 Notes are Level 2 liabilities in the fair value hierarchy and had an estimated fair value at September 30, 2021 of $132.6 million, $158.2, and $223.9 million, respectively.
Other Liabilities
As part of the acquisition of Ultratech, the Company assumed an executive non-qualified deferred compensation plan that allowed qualifying executives to defer cash compensation. The plan was frozen at the time of acquisition and no further contributions have been made. At December 31, 2020, plan assets approximated $2.4 million, representing the cash surrender value of life insurance policies and is included within “Other assets” in the Consolidated Balance Sheets, while plan liabilities approximated $2.5 million at December 31, 2020 and was included within “Other liabilities” in the Consolidated Balance Sheets. The plan was terminated and fully liquidated during the first quarter of 2021. Other liabilities at September 30, 2021 and December 31, 2020 also included (i) medical and dental benefits for former executives of $1.8 million and $1.9 million, respectively; (ii) asset retirement obligations of $2.8 million and $2.7 million, respectively; and (iii) income tax payables of $1.4 million. Additionally, as a result of the Coronavirus, Aid,
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Relief, and Economic Security Act, the Company has accrued for and deferred the deposit and payment of its share of social security taxes, resulting in a liability of $3.5 million at both September 30, 2021 and December 31, 2020, of which $1.7 million is included within “Accrued expenses and other current liabilities”, and $1.8 million is included within “Other liabilities” in the Consolidated Balance Sheets for both periods.
Note 5 — Commitments and Contingencies
Leases
The Company’s operating leases primarily include real estate leases for properties used for manufacturing, R&D activities, sales and service, and administration, as well as certain equipment leases. Some leases may include options to renew for a period of up to 5 years, while others may include options to terminate the lease. The weighted average remaining lease term of the Company’s operating leases as of September 30, 2021 was 13 years, and the weighted average discount rate used in determining the present value of future lease payments was 5.6%.
The following table provides the maturities of lease liabilities at September 30, 2021:
Operating
Payments due by period:
918
2022
4,679
2023
3,160
2024
2,914
2025
2,508
Thereafter
38,367
Total future minimum lease payments
52,546
Less: Imputed interest
(18,059)
34,487
Reported as of September 30, 2021
Operating lease cost for the three and nine months ended September 30, 2021 were $1.8 million and $4.8 million, respectively, and $1.3 million and $4.1 million, respectively, for the comparable 2020 periods. Variable lease cost for the three and nine months ended September 30, 2021 were $0.4 million and $1.3 million, respectively, and $0.4 million and $1.3 million, respectively, for the comparable 2020 periods. Additionally, the Company has an immaterial amount of short-term leases. Operating cash outflows from operating leases for the nine months ended September 30, 2021 and 2020 were $4.9 million and $4.8 million, respectively.
Purchase Commitments
Veeco has purchase commitments of $141.6 million at September 30, 2021, substantially all of which become due within one year.
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Bank Guarantees
Veeco has bank guarantees and letters of credit issued by a financial institution on its behalf as needed. At September 30, 2021, outstanding bank guarantees and standby letters of credit totaled $5.4 million, and unused bank guarantees and letters of credit of $16.7 million were available to be drawn upon.
Legal Proceedings
On June 8, 2018, an Ultratech shareholder who received Veeco stock as part of the consideration for the Ultratech acquisition filed a purported class action complaint in the Superior Court of the State of California, County of Santa Clara, captioned Wolther v. Maheshwari et al., Case No. 18CV329690, on behalf of himself and others who purchased or acquired shares of Veeco pursuant to the registration statement and prospectus which Veeco filed with the SEC in connection with the Ultratech acquisition (the “Wolther Action”). On August 2 and August 8, 2018, two purported class action complaints substantially similar to the Wolther Action were filed on behalf of different plaintiffs in the same court as the Wolther Action. These cases have been consolidated with the Wolther Action, and a consolidated complaint was filed on December 11, 2018. The consolidated complaint seeks to recover damages and fees under Sections 11, 12, and 15 of the Securities Act of 1933 for, among other things, alleged false/misleading statements in the registration statement and prospectus relating to the Ultratech acquisition, relating primarily to the alleged failure to disclose delays in the advanced packaging business, increased MOCVD competition in China, and an intellectual property dispute. In October 2021, Veeco and the court-appointed class representatives signed an agreement to settle the Wolther Action on a class-wide basis for $15.0 million, subject to court approval and class members’ opportunity to object and opt-out. The settlement amount will be funded by insurance carriers.
On December 21, 2018, a purported Veeco stockholder filed a derivative action in the Superior Court of the State of California, County of Santa Clara, captioned Vladimir Gusinsky Revocable Trust v. Peeler, et al., Case No. 18CV339925, on behalf of nominal defendant Veeco. The complaint seeks to assert claims for breach of fiduciary duty, waste of corporate assets, and unjust enrichment against current and former Veeco directors premised on purported misstatements and omissions in the registration statement relating to the Ultratech acquisition. Veeco is defending this matter vigorously. On January 25, 2021, the court granted the defendants’ demurrer without leave to amend effecting the dismissal of the case. Plaintiff is appealing the dismissal of its case.
The Company is involved in various other legal proceedings arising in the normal course of business. 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.
Note 6 — Derivative Financial Instruments
The Company is exposed to financial market risks arising from changes in currency exchange rates. Changes in currency exchange rates could affect the Company’s foreign currency denominated monetary assets and liabilities and forecasted cash flows. The Company enters into monthly forward derivative contracts from time to time with the intent of mitigating a portion of this risk. The Company only uses 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 are recorded as “Other operating expense (income), net” in the Company’s Consolidated Statements of Operations. The Company executes derivative transactions with highly rated financial institutions to mitigate counterparty risk.
The Company did not have any outstanding derivative contracts at September 30, 2021 or December 31, 2020. Additionally, the Company did not have any gains or losses from currency exchange derivatives during the nine months ended September 30, 2021 and 2020.
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Note 7 — Equity
Statement of Stockholders’ Equity
The following tables present the changes in Stockholders’ Equity:
Additional
Common Stock
Paid-in
Comprehensive
Shares
Capital
Deficit
Income
Balance at December 31, 2020
49,724
2,494
Other comprehensive income (loss), net of tax
(19)
3,237
Net issuance under employee stock plans
459
(1,630)
(1,625)
Balance at March 31, 2021
50,183
502
1,114,959
(704,827)
1,827
412,461
6,348
(24)
4,367
166
582
583
Balance at June 30, 2021
50,349
1,119,908
(698,479)
1,803
423,735
Other comprehensive income, net of tax
4,131
(1,513)
Balance at September 30, 2021
50,321
Balance at December 31, 2019
48,994
490
1,071,058
(698,930)
1,894
374,512
(567)
153
3,646
434
(684)
(680)
Balance at March 31, 2020
49,428
494
1,074,020
(699,497)
2,047
377,064
(8,302)
2,974
191
753
755
Extinguishment of equity component of repurchased 2023 Notes
(80)
Equity component of 2027 Notes
33,363
Balance at June 30, 2020
49,619
496
1,100,717
(707,799)
1,917
395,331
2,942
(7)
(700)
Balance at September 30, 2020
49,612
1,102,959
(707,219)
1,857
398,093
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Accumulated Other Comprehensive Income (“AOCI”)
The following table presents the changes in the balances of each component of AOCI, net of tax:
Gains (Losses)
Foreign
on Available
Currency
for Sale
Translation
Securities
1,866
(20)
Other comprehensive income (loss)
1,806
(36)
There were minimal reclassifications from AOCI into net income for the three and nine months ended September 30, 2021 and 2020.
Note 8 — 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 and nine months ended September 30, 2021 and 2020:
620
389
1,765
1,384
1,007
674
2,957
2,161
2,504
1,879
7,013
6,017
For the nine months ended September 30, 2021, equity activity related to stock options was as follows:
Weighted
Number of
Average
Exercise Price
730
35.26
Expired or forfeited
(285)
40.19
445
32.11
23
For the nine months ended September 30, 2021, equity activity related to non-vested restricted shares and performance shares was as follows:
Grant Date
2,040
12.73
Granted
879
23.86
Performance award adjustments
19.75
Vested
(617)
13.84
Forfeited
(64)
14.36
2,202
16.70
Note 9 — 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 September 30, 2021, the Company’s 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.
Income (loss) before income taxes and income tax expense (benefit) for the three and nine months ended September 30, 2021 and 2020 were as follows:
The Company’s tax expense for the three months ended September 30, 2021 was $0.4 million, compared to $0.2 million for the comparable prior period. The 2021 tax expense included a $0.4 million expense related to the Company’s non-U.S. operations and minimal expense related to the Company’s domestic operations, compared to 2020 when the expense included a $0.2 million expense related to the Company’s non-U.S. operations and minimal expense related to the Company’s domestic operations.
The Company’s tax expense for the nine months ended September 30, 2021 was $1.0 million, compared to $0.5 million for the comparable prior period. The 2021 tax expense included a $0.2 million expense related to the Company’s domestic operations and a $0.8 million expense related to the Company’s non-U.S. operations, compared to 2020 when the expense included a $0.2 million expense related to the Company’s domestic operations and a $0.3 million expense related to the Company’s 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 foreign tax expense is primarily attributable to non-U.S operation profits and foreign withholding taxes on unremitted earnings as of September 30, 2021, offset by the amortization of intangible assets.
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Note 10 — Segment Reporting and Geographic Information
Veeco operates and measures its results in one operating segment and therefore has one reportable segment: the development, manufacture, sales, and support of semiconductor and thin film process equipment primarily sold to make electronic devices.
Veeco categorizes its sales into the following four end-markets:
Semiconductor
The Semiconductor market refers to early process steps in logic and memory applications where silicon wafers are processed. There are many different process steps in forming patterned wafers, such as deposition, etching, masking, and doping, where the microchips are created but remain on the silicon wafer. This market includes mask blank production for extreme ultraviolet (“EUV”) lithography. This market also includes Advanced Packaging which refers to a portfolio of wafer-level assembly technologies that enable improved performance of electronic products, such as smartphones, high-end servers, and graphical processors.
Compound Semiconductor
The Compound Semiconductor market includes Photonics, Power Electronics, RF Filters and Amplifiers, and Solar applications. Photonics refers to light source technologies and laser-based solutions for 3D sensing, datacom and telecom applications. This includes micro-LED, laser diodes, edge emitting lasers and vertical cavity surface emitting lasers (“VCSELs”). Power Electronics refers to semiconductor devices such as rectifiers, inverters and converters for the control and conversion of electric power in applications such as fast or wireless charging of consumer electronics and automotive applications. RF power amplifiers and filters (including surface acoustic wave (“SAW”) and bulk acoustic wave (“BAW”) filters) are used in 5G communications infrastructure, smartphones, tablets, and mobile devices. They make use of radio waves for wireless broadcasting and/or communications. Solar refers to power obtained by harnessing the energy of the sun through the use of compound semiconductor devices such as photovoltaics.
Data Storage
Data Storage refers to the Hard Disk Drive (“HDD”) market, for which our systems enable customers to manufacture thin film magnetic heads for hard disk drives as part of large capacity storage applications.
Scientific & Other
Scientific & Other refers to advanced materials research and a range of manufacturing applications including optical coatings (laser mirrors, optical filters, and anti-reflective coatings).
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Sales by end-market and geographic region for the three and nine months ended September 30, 2021 and 2020 were as follows:
Sales by end-market
76,320
33,578
181,641
108,461
23,273
26,584
72,255
62,753
39,256
36,897
132,261
104,085
11,397
15,019
44,148
39,917
Sales by geographic region
United States
48,776
39,602
160,908
108,869
EMEA(1)
13,564
14,991
36,128
57,271
China
27,261
10,464
68,148
38,328
Rest of APAC
60,589
46,953
164,926
110,328
Rest of World
56
68
195
420
For geographic reporting, sales are attributed to the location in which the customer facility is located.
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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 an innovative manufacturer of semiconductor process equipment. Our proven ion beam, laser annealing, lithography, MOCVD and single wafer etch & clean technologies play an integral role in the fabrication and packaging of advanced semiconductor devices. With equipment designed to optimize performance, yield and cost of ownership, Veeco holds leading technology positions in the markets we serve. To learn more about Veeco’s systems and service offerings, visit www.veeco.com.
COVID-19 Update
As a result of the COVID-19 pandemic, governmental authorities have implemented and are continuing to implement numerous and constantly evolving measures to try to contain the virus, such as travel bans and restrictions, limits on gatherings, quarantines, shelter-in-place orders, vaccine mandates, and business shutdowns. We have important manufacturing operations in the U.S. and Singapore, and sales and support operations in China, Germany, Japan, Malaysia, Philippines, Singapore, South Korea, Thailand, Taiwan and the United Kingdom, all of which have been affected by the COVID-19 pandemic.
Measures providing for business shutdowns generally exclude certain essential services, and those essential services include critical infrastructure and the businesses that support that critical infrastructure. Our operations are considered part of the critical and essential infrastructure defined by applicable government authorities, and, although governmental measures to contain the pandemic may be modified or extended, our manufacturing facilities remain open. We believe our diverse product offerings and the critical nature of certain of our products for infrastructure insulate us, to some extent, from the adverse effects of the pandemic; however, a prolonged economic downturn will adversely affect our customers, which could have a material adverse effect on our revenues, particularly if customers from whom we derive a significant amount of revenue reduce or delay purchases to mitigate the impacts of the pandemic or fail to make payments to us on time or at all.
We serve a global and highly interconnected customer base across the Asia-Pacific region, Europe, and North America. Our net sales to customers located outside of the United States represented approximately 62% of our total net sales for the nine months ended September 30, 2021, and 68% and 70% for the years ended December 31, 2020 and 2019, respectively, and we expect that net sales to customers outside the United States will continue to represent a significant percentage of our total net sales. As a result, our business will be adversely impacted by further deterioration in global economic conditions, particularly in markets in Asia and Europe.
We are starting to see the effects of the macroeconomic inflationary cost environment and supply chain disruptions due to strained transportation capacity, labor shortages and absenteeism associated with COVID-19, and high global demand as markets reopen and economic stimulus drives growth. These effects include longer lead times and increased costs. We are taking proactive steps to manage the impact to our business, including buying in advance and re-sourcing components on a more frequent basis. We continue to monitor our global supply chain and may experience additional disruptions in future periods, which could cause a disruption in our ability to obtain raw materials or components required to manufacture our products.
Like many in our industry, we are managing through the effects of the COVID-19 pandemic. Although the full extent of the COVID-19 pandemic’s impact on our business, results of operations, supply chain, and growth can not be predicted or quantified, we proactively identified potential challenges to our business and have been executing business continuity activities to manage disruptions in our business and continue to provide critical infrastructure to our customers. In response to the pandemic, we have taken, or intend to take, the following steps, among others, to keep our employees safe and minimize the spread of the virus, while continuing to serve our customers:
While these steps have been effective so far, there could be additional challenges ahead that may impact either our operations or those of our customers, which could have a negative effect on our financial performance, including productivity and capacity impacts as a result of the ongoing pandemic. We expect to continue to implement these measures until we determine that the COVID-19 pandemic is adequately contained for purposes of our business, and we may take further actions as government authorities require or recommend or as we determine to be in the best interests of our employees, customers and suppliers. As a result, we may incur additional expenses in future periods in response to the pandemic, which could adversely affect our financial position, results of operations, or cash flows. In addition, we may revise our approach to these initiatives or take additional actions to meet the needs of our employees and customers, and mitigate the impact of the pandemic on our business.
Business Update
We categorize our revenue by the end-markets into which we sell. Our four end-markets are: Semiconductor; Compound Semiconductor; Data Storage; and Scientific & Other.
Sales in the Semiconductor market were driven by our laser annealing systems for leading and trailing node logic, lithography systems for Advanced Packaging, and our ion beam system for EUV mask blank production. We continue to build momentum for our laser annealing solutions with advanced node logic customers. We are currently production tool of record at multiple leading-edge customers for their most advanced nodes. We also have multiple systems currently being evaluated at both logic and memory customers for their next nodes. Our lithography systems for Advanced Packaging are aligned with longer-term growth of heterogeneous integration, fan-out wafer-level packaging and other Advanced Packaging applications. We are seeing an increase in demand for our lithography systems and recently received a multi-system repeat order from a leading OSAT in support of GPU and high-performance computing device manufacturing. Additionally, EUV Lithography is critical to the progression of Moore’s law, and its ongoing adoption
for advanced node, semiconductor manufacturing continues to drive requirements for our mask blank deposition systems. Overall, we believe that our technology and market strategy is well aligned with trends such as artificial intelligence, mobile connectivity and high performance computing that drive the Semiconductor market. We have experienced growth in this market in 2021 and expect the Semiconductor market to contribute toward our 2022 growth. Finally, construction is ahead of schedule at our new San Jose facility, which we believe will allow us to better meet the demands of our semiconductor customers.
We address the Compound Semiconductor market with a broad portfolio of technologies including primarily Wet Processing and MOCVD, along with MBE and Ion Beam, all of which have been developed to support emerging applications such as 5G driven RF device/filter manufacturing, Gallium Nitride power electronics, and photonics applications including edge-emitting lasers and micro-LEDs. Sales in the Compound Semiconductor market were driven by equipment shipments for RF applications, Photonics applications, and power devices.
Sales in the Data Storage market have been growing for several years, primarily driven by shipments of Ion Beam systems. Demand for our Ion Beam products for data storage is being driven by big data and cloud-based storage growth. In order to be successful, hard disk drive manufacturers are required to improve areal density of magnetic heads for hard disk drives and are manufacturing drives with an increasing number of magnetic heads. These two factors taken together have been driving additional capacity requirements and equipment upgrades. However, after multiple years of customers accelerating their capacity additions, including in 2021, we expect revenue to decline from recent levels. With data proliferation forecasted to continue to grow, however, we feel confident about the long-term prospects of our data storage business.
Sales in the Scientific & Other market are largely driven by sales to governments, universities, and research institutions. We are beginning to see signs of a recovery in this market which we expect to grow more in line with GDP.
Overall, while demand for our products remains strong, we continue to monitor and proactively manage actual and potential supply chain challenges related to the inflationary cost environment and supply chain disruptions. Our laser annealing, 5G RF, data storage, and advanced packaging lithography products are all performing well. Long-term revenue growth for 2022 and beyond is expected to primarily come from the Semiconductor market. As such, we have been making strategic investments in R&D and inventory, including evaluation systems, as well as improving our service capabilities, to support anticipated semiconductor growth opportunities. We also continue to make strategic investments in the Compound Semiconductor market in order to capitalize on potential future growth opportunities.
29
Results of Operations
For the three months ended September 30, 2021 and 2020
The following table presents revenue and expense line items reported in our Consolidated Statements of Operations for the indicated periods in 2021 and 2020 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 September 30,
Change
Period to Period
(dollars in thousands)
100%
38,168
34%
58%
56%
24,141
38%
42%
44%
14,027
29%
15%
17%
2,870
14%
2,188
11%
2%
3%
(855)
(22)%
-
393
*
31%
4,596
6%
9,431
135%
Interest income (expense), net
(7,012)
(5)%
(6,194)
(6)%
(818)
13%
1%
8,613
200
95%
8,413
Not meaningful
Net Sales
The following is an analysis of sales by market and by region:
51%
30%
42,742
127%
24%
(3,311)
(12)%
26%
33%
2,359
8%
(3,622)
(24)%
36%
9,174
23%
EMEA
9%
(1,427)
(10)%
18%
16,797
161%
40%
13,636
(18)%
Sales increased for the three months ended September 30, 2021 against the comparable prior year period, primarily in the Semiconductor market. By geography, sales increased in the United States, China, and Rest of APAC regions. The increase in sales in the United States was primarily driven by shipments to data storage customers, while the increase in sales in the China and Rest of APAC regions were primarily driven by shipments to semiconductor customers. Sales in the Rest of APAC region for the three months ended September 30, 2021 included sales in Taiwan, South Korea, and
30
Japan of $19.2 million, $14.3 million, and $13.7 million, respectively. Sales in the Rest of APAC region for the three months ended September 30, 2020 included sales in Singapore of $18.0 million. Pricing was not a significant driver of the change in total sales. We expect there will continue to be year-to-year variations in our future sales distribution across markets and geographies. In light of the global nature of our business, we are impacted by conditions in the various countries in which we and our customers operate.
Gross Profit
For the three months ended September 30, 2021, gross profit increased against the comparable prior period primarily due to an increase in sales volume, partially offset by decreased gross margins. Gross margins decreased principally due to product and region mix of sales in the period and an increase in spending to support higher business activity. We expect our gross margins to fluctuate each period due to product mix and other factors.
Research and Development
The markets we serve are characterized by continuous technological development and product innovation, and we invest in various research and development initiatives to maintain our competitive advantage and achieve our growth objectives. Research and development expenses increased for the three months ended September 30, 2021 against the comparable prior period primarily due to personnel-related expenses as we selectively invest in new research and development and developing additional applications for our technology in order to be well positioned to capitalize on emerging global megatrends and support longer term growth in Semiconductor and Compound Semiconductor markets. However, expenses as a percentage of revenue have decreased when compared to the prior period.
Selling, General, and Administrative
Selling, general, and administrative expenses increased for the three months ended September 30, 2021 against the comparable prior period primarily due to higher variable expenses associated with the increase in revenue, profitability, and order in-take. However, expenses as a percentage of revenue have decreased when compared to the prior year period. Given the uncertainty regarding the impacts on our business resulting from the COVID-19 pandemic, we are focused on the proactive management of expenses. In future periods, we may incur additional selling, general and administrative expenses to support our responses to the COVID-19 pandemic. In addition, we are currently experiencing duplicate operating expenses for the transition from our existing facility in San Jose, California to our new leased facility, and will continue to do so until this transition is completed over the next several quarters.
Amortization Expense
Amortization expense decreased compared to the comparable prior year period primarily due to changes in amortization expense to reflect expected cash flows of certain intangible assets, as well as certain other intangible assets becoming fully amortized in 2021.
Interest Income (Expense)
We recorded net interest expense of $7.0 million for the three months ended September 30, 2021, compared to $6.2 million for the comparable prior year period. The increase in interest expense was primarily related to the issuance of the 2027 Notes in May 2020 and the 2025 Notes in November 2020, partially offset by the partial repurchase and exchange of the 2023 Notes. Included in interest expense for the three months ended September 30, 2021 were non-cash charges of $3.7 million related to the amortization of debt discount and transaction costs of the 2023 Notes, 2025 Notes, and 2027 Notes, while the three months ended September 30, 2020 included non-cash charges of $3.5 million related to the amortization of debt discount and transaction costs of the 2023 Notes and 2027 Notes.
31
Income Taxes
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 expense for the three months ended September 30, 2021 was $0.4 million, compared to $0.2 million for the comparable prior year period. The 2021 tax expense included an expense of $0.4 million related to our non-U.S. operations and minimal expense related to our domestic operations, compared to the comparable period in 2020 when the expense included a $0.2 million expense related to our non-U.S. operations and minimal expense related to our domestic operations.
For the three months ended September 30, 2021 and 2020, the Company’s 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. The domestic tax expense for both periods 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 foreign tax expense is primarily attributable to non-U.S operations profits and foreign withholding taxes on unremitted earnings as of September 30, 2021, offset by the amortization of intangible assets.
32
For the nine months ended September 30, 2021 and 2020
The following table presents revenue and expense line items reported in our Consolidated Statements of Operations for 2021 and 2020 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.
Nine Months Ended September 30,
115,089
37%
59%
74,294
41%
40,795
8,820
7,784
4%
(2,197)
(19)%
0%
(1,097)
(281)
640
32%
13,669
27,126
227%
(20,221)
(16,673)
(3,548)
21%
(2)%
26,624
499
94%
(3)%
26,125
73,180
67%
20%
9,502
28,176
27%
10%
4,231
35%
52,039
48%
(21,143)
(37)%
16%
12%
29,820
78%
54,598
49%
(225)
(54)%
Sales increased for the nine months ended September 30, 2021 against the comparable prior year period across all markets. By geography, sales increased in the United States, China, and Rest of APAC regions, partially offset by a decrease in a sales in the EMEA region. The increase in sales in the United States was primarily driven by shipments to data storage customers, while the increase in sales in the Rest of APAC region was primarily driven by shipments to semiconductor and data storage customers. The increase in sales in the China region was primarily driven by shipments to semiconductor customers. The decrease in sales in the EMEA region was primarily driven by a decrease in shipments to data storage customers. Sales in the Rest of APAC region for the nine months ended September 30, 2021 included
33
sales in Taiwan and South Korea of $53.0 million and $39.9 million, respectively. Sales in the Rest of APAC region for the nine months ended September 30, 2020 included sales in Singapore and Taiwan of $34.0 million and $29.2 million, respectively. Pricing was not a significant driver of the change in total sales. We expect there will continue to be year-to-year variations in our future sales distribution across markets and geographies. In light of the global nature of our business, we are impacted by conditions in the various countries in which we and our customers operate.
For the nine months ended September 30, 2021, gross profit increased against the comparable prior year period primarily due to an increase in sales volume, partially offset by decreased gross margins. Gross margins decreased principally due to an increase in spending to support higher business activity, as well as product and region mix of sales in the period. We expect our gross margins to fluctuate each period due to product mix and other factors.
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 nine months ended September 30, 2021 against the comparable prior year period primarily due to personnel-related expenses as we selectively invest in new research and development and developing additional applications for our technology in order to be well positioned to capitalize on emerging global megatrends and support longer term growth in Semiconductor and Compound Semiconductor markets. However, expenses as a percentage of revenue have decreased when compared to the comparable prior year period.
Selling, general, and administrative expenses increased for the nine months ended September 30, 2021 against the comparable prior year period primarily due to higher variable expenses associated with the increase in revenue, profitability, and order in-take. However, expenses as a percentage of revenue have decreased when compared to the prior year period. Given the uncertainty regarding the impacts on our business resulting from the COVID-19 pandemic, we are focused on the proactive management of expenses. In future periods, we may incur additional selling, general and administrative expenses to support our responses to the COVID-19 pandemic. In addition, we are currently experiencing duplicate operating expenses for the transition from our existing facility in San Jose, California to our new leased facility, and will continue to do so until this transition is completed over the next several quarters.
We recorded net interest expense of $20.2 million for the nine months ended September 30, 2021, compared to $16.7 million for the comparable prior year period. The increase in interest expense was primarily related to the issuance of the 2027 Notes in May 2020 and the 2025 Notes in November 2020, partially offset by the partial repurchase and exchange of the 2023 Notes. Included in interest expense for the nine months ended September 30, 2021 were non-cash charges of $10.8 million related to the amortization of debt discount and transaction costs of the 2023 Notes, 2025 Notes, and 2027 Notes, while the nine months ended September 30, 2020 included non-cash charges of $10.3 million related to the amortization of debt discount and transaction costs of the 2023 Notes and 2027 Notes. Additionally, interest income decreased approximately $1.0 million for the nine months ended September 30, 2021 compared to the prior year period, primarily as a result of lower interest rates, and we expect interest income to remain depressed as a result.
34
Loss on Extinguishment of Debt
On May 18, 2020, in connection with the completion of a private offering of $125 million aggregate principal amount of 3.75% convertible senior notes, we repurchased and retired approximately $88.3 million in aggregate principal amount of our outstanding 2023 Notes, with a carrying amount of $78.1 million, for approximately $81.2 million of cash. We accounted for the repurchase of the $88.3 million of the 2023 Notes as an extinguishment, and as such, recorded a loss on extinguishment of approximately $3.0 million for the nine months ended September 30, 2020.
Our tax expense for the nine months ended September 30, 2021 was $1.0 million, compared to $0.5 million for the comparable prior year period. The 2021 tax expense included an expense of $0.2 million related to our domestic operations and $0.8 million related to our non-U.S. operations, compared to 2020 when the expense included a $0.2 million expense related to our domestic operations and a $0.3 million expense related to our non-U.S. operations.
For the nine months ended September 30, 2021 and 2020, the Company’s 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. The domestic tax expense for the current period 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 foreign tax expense is primarily attributable to non-U.S operation profits and foreign withholding taxes on unremitted earnings as of September 30, 2021, offset by the amortization of intangible assets.
Liquidity and Capital Resources
Our cash and cash equivalents, restricted cash, and short-term investments are as follows:
336,216
320,054
At September 30, 2021 and December 31, 2020, cash and cash equivalents of $45.0 million and $40.2 million, respectively, were held outside the United States. As of September 30, 2021, we had $16.8 million of accumulated undistributed earnings generated by our non-U.S. subsidiaries for which the U.S. repatriation tax has been provided and did not require the use of cash due to the use of net operating loss carryforwards. Approximately $7.1 million of undistributed earnings will be subject to foreign withholding taxes if distributed back to the United States.
We believe that our projected cash flow from operations, combined with our cash and short-term investments, will be sufficient to meet our projected working capital requirements, contractual obligations, and other cash flow needs for the next twelve months, including scheduled interest payments on our convertible senior notes, purchase commitments, and payments in respect of operating leases. Although there is uncertainty related to the anticipated impact of the COVID-19 outbreak on our future results, we believe our business model, our current cash and short-term investments, and our proactive management of expenses, leave us well-positioned to manage our business through this crisis as it continues to unfold.
35
A summary of the cash flow activity for the nine months ended September 30, 2021 and 2020 is as follows:
Non-cash items:
Changes in operating assets and liabilities
(9,305)
(10,781)
Net cash provided by operating activities was $50.6 million for the nine months ended September 30, 2021 and was due to net income of $17.8 million and adjustments for non-cash items of $42.1 million, partially offset by a decrease in cash flow from changes in operating assets and liabilities of $9.3 million. The changes in operating assets and liabilities were largely attributable to increases in accounts receivable and inventories, partially offset by increases in accounts payable and accrued expenses.
Changes in investments, net
(25,637)
(46,045)
The cash used by investing activities during the nine months ended September 30, 2021 was primarily attributable capital expenditures, as well as net changes in investments. We expect increased capital expenditures associated with the build-out of our newly leased facility in San Jose, California over the next several quarters. In addition, we expect a period of duplicate operating expenses until the transition from our existing facility to our new facility is completed. The cash used in investing activities during the nine months ended September 30, 2020 was primarily attributable to the net changes in investments, as well as capital expenditures, partially offset by the net proceeds from the sale of a non-core product line.
Settlement of equity awards, net of withholding taxes
36
The cash used in financing activities for the nine months ended September 30, 2021 was related to cash used to settle taxes related to employee equity programs, partially offset by cash received under the Employee Stock Purchase Plan. The cash provided by financing activities for the nine months ended September 30, 2020 was primarily related to the net cash proceeds received from the issuance of the 2027 Notes, partially offset by the cash used to repurchase $88.3 million principal amount of our outstanding 2023 Notes as well as the purchase of the capped call transactions.
We have $131.7 million outstanding principal balance of 2.70% convertible senior notes that bear interest at a rate of 2.70% per year, payable semiannually in arrears on January 15 and July 15 of each year, and mature on January 15, 2023, unless earlier purchased by the Company, redeemed, or converted. In addition, we have $132.5 million outstanding principal balance of 3.50% convertible senior notes that bear interest at a rate of 3.50% per year, payable semiannually in arrears on January 15 and July 15 of each year, and mature on January 15, 2025, unless earlier purchased by the Company, redeemed, or converted. Finally, we have $125.0 million outstanding principal balance of 3.75% convertible senior notes that bear interest at a rate of 3.75% per year, payable semiannually in arrears on June 1 and December 1 of each year, and mature on June 1, 2027, unless earlier purchased by the Company, redeemed, or converted. The 2027 Notes are currently convertible by shareholders until December 31, 2021.
We believe that we have sufficient capital resources and cash flows from operations to support scheduled interest payments on these debts, as well as the payment in cash of principal amounts of any notes that are converted.
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 bank guarantees and purchase commitments disclosed in the preceding footnotes.
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 $214.0 million at September 30, 2021. These securities are subject to interest rate risk and, based on our investment portfolio at September 30, 2021, a 100 basis point increase in interest rates would result in a decrease in the fair value of the portfolio of $2.1 million. While an increase in interest rates may reduce the fair value of the investment portfolio, we will not realize the losses in the Consolidated Statements of Operations unless the individual fixed-income securities are sold prior to recovery or the loss is determined to be other-than-temporary.
Currency Exchange Risk
We conduct business on a worldwide basis and, as such, a portion of our revenues, earnings, and net investments in foreign affiliates is exposed to changes in currency exchange rates. The economic impact of currency exchange rate movements is complex because such changes are often linked to variability in real growth, inflation, interest rates, governmental actions, and other factors. These changes, if material, could cause us to adjust our financing and operating
strategies. Consequently, isolating the effect of changes in currency does not incorporate these other important economic factors.
Changes in currency exchange rates could affect our foreign currency denominated monetary assets and liabilities and forecasted cash flows. We may enter into monthly forward derivative contracts from time to time with the intent of mitigating a portion of this risk. We only use derivative financial instruments in the context of hedging and not for speculative purposes and have not historically designated our foreign exchange derivatives as hedges. Accordingly, changes in fair value from these contracts are recorded as “Other, net” in our Consolidated Statements of Operations. We execute derivative transactions with highly rated financial institutions to mitigate counterparty risk.
Our net sales to customers located outside of the United States represented approximately 67% and 62% of our total net sales for the three and nine months ended September 30, 2021, respectively, and 64% and 65% for the comparable 2020 periods. We expect that net sales to customers outside the United States will continue to represent a large percentage of our total net sales. Our sales denominated in currencies other than the U.S. dollar represented 3% of total net sales in both the three and nine months ended September 30, 2021, and 7% and 5% for the comparable 2020 periods.
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.
Evaluation of Disclosure Controls and Procedures
Our principal executive and financial officers have evaluated and concluded that our disclosure controls and procedures are effective as of September 30, 2021. The disclosure controls and procedures are designed to ensure that the information required to be disclosed in this report filed under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to our principal executive and financial officers as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
During the quarter ended September 30, 2021, there were no changes in internal control that have materially affected or are reasonably likely to materially affect internal control over financial reporting.
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 2020 Form 10-K. There have been no material changes from the risk factors previously disclosed.
None.
Not Applicable.
Unless otherwise indicated, each of the following exhibits has been filed with the Securities and Exchange Commission by Veeco under File No. 0-16244.
Exhibit
Incorporated by Reference
Filed orFurnished
Number
Exhibit Description
Form
Filing Date
Herewith
31.1
Certification of Chief Executive Officer pursuant to Rule 13a—14(a) or Rule 15d—14(a) of the Securities and Exchange Act of 1934.
31.2
Certification of Chief Financial Officer pursuant to Rule 13a—14(a) or Rule 15d—14(a) of the Securities and Exchange Act of 1934.
32.1
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002.
32.2
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002.
101.INS
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.XSD
XBRL Schema.
**
101.PRE
XBRL Presentation.
101.CAL
XBRL Calculation.
101.DEF
XBRL Definition.
101.LAB
XBRL Label.
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
* 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 November 2, 2021.
Veeco Instruments Inc.
By:
/S/ WILLIAM J. MILLER, Ph.D.
William J. Miller, Ph.D.
Chief Executive Officer
/s/ JOHN P. KIERNAN
John P. Kiernan
Senior Vice President and Chief Financial Officer