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Assets

3 Months Ended

Mar. 31, 2020

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, net” in the Consolidated Statements of Operations.

Fair value is the price that would be received for an asset or the amount paid to transfer a liability in an orderly transaction between market participants. Veeco classifies certain assets based on the following fair value hierarchy:

Level 1: Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly; and

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 March 31, 2020 and December 31, 2019:


	Level 1		Level 2		Level 3		Total
	(in thousands)
March 31, 2020
Cash equivalents
Certificate of deposits and time deposits	$	81,796	$	—	$	—	$	81,796
Government money market fund		47,500		—		—		47,500
Commercial paper		—		9,498		—		9,498
Total	$	129,296	$	9,498	$	—	$	138,794
Short-term investments
U.S. treasuries	$	52,507	$	—	$	—	$	52,507
Government agency securities		—		5,976		—		5,976
Corporate debt		—		7,015		—		7,015
Commercial paper		—		13,931		—		13,931
Total	$	52,507	$	26,922	$	—	$	79,429

December 31, 2019
Cash equivalents
Certificate of deposits and time deposits	$	67,009	$	—	$	—	$	67,009
Commercial paper		—		10,484		—		10,484
Corporate debt		—		1,000		—		1,000
Total	$	67,009	$	11,484	$	—	$	78,493
Short-term investments
U.S. treasuries	$	105,130	$	—	$	—	$	105,130
Government agency securities		—		1,139		—		1,139
Corporate debt		—		6,002		—		6,002
Commercial paper		—		2,981		—		2,981
Total	$	105,130	$	10,122	$	—	$	115,252

There were no transfers between fair value measurement levels during the three months ended March 31, 2020.

At March 31, 2020 and December 31, 2019, the amortized cost and fair value of available-for-sale securities consist of:


			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
	(in thousands)
March 31, 2020
U.S. treasuries	$	52,285	$	222	$	—	$	52,507
Government agency securities		5,947		29		—		5,976
Corporate debt		7,032		—		(17)		7,015
Commercial paper		13,930		1		—		13,931
Total	$	79,194	$	252	$	(17)	$	79,429

December 31, 2019
U.S. treasuries	$	105,096	$	38	$	(4)	$	105,130
Government agency securities		1,139		—		—		1,139
Corporate debt		6,003		—		(1)		6,002
Commercial paper		2,981		—		—		2,981
Total	$	115,219	$	38	$	(5)	$	115,252

Available-for-sale securities in a loss position at March 31, 2020 and December 31, 2019 consist of:


	March 31, 2020				December 31, 2019
			Gross				Gross
	Estimated		Unrealized		Estimated		Unrealized
	Fair Value		Losses		Fair Value		Losses
		(in thousands)
U.S. treasuries	$	—	$	—	$	22,943	$	(4)
Corporate debt		7,015		(17)		6,002		(1)
Total	$	7,015	$	(17)	$	28,945	$	(5)

At March 31, 2020 and December 31, 2019, there were no short-term investments that had been in a continuous loss position for more than 12 months.

The maturities of securities classified as available-for-sale at March 31, 2020 were all due in one year or less, and an allowance for credit loss is considered unnecessary. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. There were no realized gains or losses for the three months ended March 31, 2020 and 2019.

Accounts Receivable

Accounts receivable is presented net of an allowance for doubtful accounts of $0.6 million at March 31, 2020 and December 31, 2019. The Company considered its current expectations of future economic conditions, including the impact of COVID-19, when estimating its allowance for doubtful accounts. As a result of this assessment, no increase to the Company’s allowance for doubtful accounts was deemed necessary as a result of the Company’s current estimate of the impact COVID-19 will have on the collectability of the Company’s accounts receivable.

Inventories

Inventories at March 31, 2020 and December 31, 2019 consist of the following:


	March 31,		December 31,
	2020		2019
	(in thousands)
Materials	$	81,684	$	82,155
Work-in-process		41,706		42,575
Finished goods		6,221		8,337
Total	$	129,611	$	133,067

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets primarily consist of supplier deposits, prepaid value-added tax, lease deposits, prepaid insurance, and prepaid licenses. Veeco had deposits with its suppliers of $5.4 million and $5.9 million at March 31, 2020 and December 31, 2019, respectively.

Assets Held for Sale (including subsequent event)

In the fourth quarter of 2019, the Company determined that one of its non-core product lines (the “disposal group”) met the held for sale criteria, and as such, the related assets are presented as “Assets held for sale” on the Consolidated Balance Sheets. Subsequent to March 31, 2020, the Company completed the sale of this product line for approximately $11.4 million, with approximately 85% of the transaction price due upon closing, and 15% held in escrow for a period of 18 months. Long-lived assets and definite-lived intangible assets were not depreciated or amortized while classified as held for sale. The sale of this disposal group does not represent a strategic shift that will have a material effect on the Company’s operations and financial results, nor is it considered a component of the Company, and as such it did not meet the criteria to be reported as discontinued operations.

For the year ended December 31, 2019, the Company recorded a non-cash impairment charge on these assets held for sale of $4.0 million in order to measure the disposal group at the lower of its carrying value or fair value less costs to sell, which resulted in a corresponding held for sale valuation allowance on its assets held for sale in the Consolidated Balance Sheet. The major classes of assets that were classified as held for sale as of March 31, 2020 are as follows:


	March 31, 2020
	(in thousands)
Assets held for sale:
Inventories	$	5,988
Property, plant, and equipment, net		310
Intangible assets, net		6,546
Goodwill		2,359
Impairment		(4,020)
Total Assets held for sale	$	11,183

Property, Plant, and Equipment

Property, plant, and equipment at March 31, 2020 and December 31, 2019 consist of the following:


	March 31,		December 31,
	2020		2019
	(in thousands)
Land	$	5,061	$	5,061
Building and improvements		62,631		61,884
Machinery and equipment ⁽¹⁾		136,625		137,692
Leasehold improvements		6,770		6,703
Gross property, plant, and equipment		211,087		211,340
Less: accumulated depreciation and amortization		138,796		135,629
Net property, plant, and equipment	$	72,291	$	75,711

(1)	Machinery and equipment also includes software, furniture and fixtures

For the three months ended March 31, 2020 and 2019, depreciation expense was $3.9 million and $4.6 million, respectively.

Goodwill

Goodwill represents the future economic benefits arising from assets acquired in a business combination that are not individually identified and separately recognized. The Company continues to assess the COVID-19 pandemic as a potential triggering event related to the value of its goodwill and concluded that there were no indicators of impairment during the three months ended March 31, 2020.

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 the COVID-19 pandemic as a potential triggering event related to the value of its intangible assets and concluded that there were no indicators of impairment during the three months ended March 31, 2020.

The components of purchased intangible assets were as follows:


	March 31, 2020						December 31, 2019
			Accumulated						Accumulated
	Gross		Amortization				Gross		Amortization
	Carrying		and		Net		Carrying		and		Net
	Amount		Impairment		Amount		Amount		Impairment		Amount
	(in thousands)
Technology	$	327,908	$	294,414	$	33,494	$	327,908	$	291,766	$	36,142
Customer relationships		146,465		127,606		18,859		146,465		126,764		19,701
Trademarks and tradenames		30,910		25,596		5,314		30,910		25,256		5,654
Other		3,686		3,673		13		3,686		3,665		21
Total	$	508,969	$	451,289	$	57,680	$	508,969	$	447,451	$	61,518

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