Business Combinations

12 Months Ended

Dec. 31, 2016

Business Combinations

Business Combinations

Note 5 — Business Combinations

PSP

On December 4, 2014 the Company acquired 100% of Solid State Equipment, LLC (“SSEC”) and rebranded the business Veeco Precision Surface Processing (“PSP”). The results of PSP operations have been included in the consolidated financial statements since the date of acquisition. PSP designs and develops wafer wet processing capabilities. Target market applications include semiconductor advanced packaging (including 2.5D and 3D ICs), micro-electromechanical systems (“MEMS”), compound semiconductor (RF, power electronics, LED and others), data storage, photomask, and flat panel displays. PSP further extends the Company’s penetration in the compound semiconductor and MEMS markets and represents the Company’s entry into the advanced packaging market.

The acquisition date fair value of the consideration totaled $145.5 million, net of cash acquired, which consisted of the following:

	Acquisition Date (December 4, 2014)
	(in thousands)
Amount paid, net of cash acquired	$	145,382
Working capital adjustment	88
Acquisition date fair value	$	145,470

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date. The Company utilized third-party valuations to estimate the fair value of certain of the acquired tangible and intangible assets:

	Acquisition Date (December 4, 2014)
	(in thousands)
Accounts receivable	$	9,383
Inventory	13,812
Other current assets	463
Property, plant, and equipment	6,912
Intangible assets	79,810
Total identifiable assets acquired	110,380
Accounts payable and accrued expenses	6,473
Customer deposits	6,039
Deferred tax liability, net	2,705
Other	1,089
Total liabilities assumed	16,306
Net identifiable assets acquired	94,074
Goodwill	51,396
Net assets acquired	$	145,470

The gross contractual value of the acquired accounts receivable was approximately $10.5 million. The fair value of the accounts receivables is the amount expected to be collected by the Company. Goodwill generated from the acquisition is primarily attributable to expected synergies from future growth and strategic advantages provided through the expansion of product offerings as well as assembled workforce. Approximately 80% of the value of the goodwill is deductible for income tax purposes.

During 2015, the Company finalized the purchase accounting, including taxes and the working capital adjustment under the purchase agreement. Based on the final adjustments, net working capital increased $0.7 million, goodwill decreased $0.1 million, deferred tax liabilities decreased $0.2 million, and a lease-related asset retirement obligation of $0.8 million was recognized.

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

	Acquisition Date
	(December 4, 2014)
	Amount		Useful life
	(in thousands)
Technology	$	39,950	10 years
Customer relationships	34,310		14 years
Backlog	3,340		6 months
Non-compete agreements	1,130		2 years
Trademark and tradenames	1,080		1 year
Intangible assets acquired	$	79,810

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

During 2014, the Company recognized $3.2 million of acquisition related costs that are included in “Selling, general, and administrative” in the Consolidated Statements of Operations.

The amounts of revenue and income (loss) from continuing operations before income taxes of PSP included in the Company’s consolidated statement of operations from the acquisition date (December 4, 2014) to the period ending December 31, 2014 are as follows:

	Total
	(in thousands)
Revenue	$	7,906
Loss from operations before income taxes	$	(3,011	)

The following represents the unaudited pro forma Consolidated Statements of Operations as if PSP had been included in the Company’s consolidated results for the periods indicated. These amounts have been calculated after applying the Company’s accounting policies to material amounts and also adjusting the results of PSP to reflect the additional amortization and depreciation that would have been expensed assuming the fair value adjustments to the acquired assets had been applied on January 1, 2013:

	December 31,
	2014
	(in thousands)
Revenue	$	447,089
Loss from operations before income taxes	$	(68,715	)