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Note 1 — Significant Accounting Policies
(a) Description of Business
Veeco Instruments Inc. (together with its consolidated subsidiaries, “Veeco,” or the “Company”) operates in a single segment: the design, development, manufacture, and support of thin film process equipment primarily sold to make electronic devices including light emitting diodes (“LED”s), power electronics, wireless devices, hard disk drives, and semiconductors.
(b) Basis of Presentation
The accompanying audited Consolidated Financial Statements of the Company have been prepared in accordance with United States generally accepted accounting principles (GAAP). The Company reports interim quarters on a 13-week basis ending on the last Sunday of each period, which is determined at the start of each year. The Company’s fourth quarter always ends on the last day of the calendar year, December 31. During 2014 the interim quarters ended on March 30, June 29 and September 28, and during 2013 the interim quarters ended on March 31, June 30 and September 29. The Company reports these interim quarters as March 31, June 30 and September 30 in its interim consolidated financial statements.
(c) Use of Estimates
The preparation of financial statements in conformity with GAAP requires 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, these estimates may ultimately differ from actual results. Significant items subject to such estimates and assumptions include: (i) the best estimate of selling price for the Company’s products and services; (ii) allowances for doubtful accounts and inventory obsolescence; (iii) the useful lives and expected future cash flows of property, plant, and equipment and identifiable intangible assets; (iv) the fair value of the Company’s reporting units and related goodwill; (v) the fair value, less cost to sell, of assets held for sale; (vi) investment valuations and the valuation of derivatives, deferred tax assets, and assets acquired in business combinations; (vii) the recoverability of long lived assets; (viii) liabilities for product warranty and legal contingencies; (ix) share-based compensation; and (x) income tax uncertainties. Actual results could differ from those estimates.
(d) Principles of Consolidation
The Consolidated Financial Statements include the accounts of the Company and its subsidiaries. Intercompany balances and transactions have been eliminated in consolidation. Companies acquired during each reporting period are reflected in the results of the Company effective from their respective dates of acquisition through the end of the reporting period.
(e) Foreign Currencies
Assets and liabilities of the Company’s foreign subsidiaries that operate using local functional currencies are translated using the exchange rates in effect at the balance sheet date. Results of operations are translated using monthly average exchange rates. Adjustments arising from the translation of the foreign currency financial statements of the Company’s subsidiaries into U.S. dollars, including intercompany transactions of a long-term nature, are reported as currency translation adjustments in “Accumulated other comprehensive income” in the Consolidated Balance Sheets. Foreign currency transaction gains or losses are included in “Other, net” in the Consolidated Statements of Operations.
(f) Revenue Recognition
The Company recognizes revenue when all of the following criteria have been met: persuasive evidence of an arrangement exists with a customer; delivery of the specified products has occurred or services have been rendered; prices are contractually fixed or determinable; and collectability is reasonably assured. Revenue is recorded including shipping and handling costs and excluding applicable taxes related to sales. A significant portion of the Company’s revenue is derived from contractual arrangements with customers that have multiple elements, such as systems, upgrades, components, spare parts, maintenance, and service plans. For sales arrangements that contain multiple elements, the arrangement is split into separate units of accounting if the individually delivered elements have value to the customer on a standalone basis. The Company also evaluates whether multiple transactions with the same customer or related parties should be considered part of a multiple element arrangement, 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 element based on the following selling price hierarchy: vendor-specific objective evidence (“VSOE”) if available; third party evidence (“TPE”) if VSOE is not available; or the best estimate of selling price (“BESP”) if neither VSOE nor TPE is available. The Company uses BESP for the majority of the elements in its arrangements.
The Company considers many facts when evaluating each of its sales arrangements to determine the timing of revenue recognition including its contractual obligations, the customer’s creditworthiness, 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 the majority of the arrangements, a customer source inspection of the system is performed in the Company’s facility or test data is sent to the customer documenting that the system is functioning to the agreed upon specifications prior to delivery. Historically, such source inspection or test data replicates the field acceptance provisions that are performed at the customer’s site prior to final acceptance of the system. As such, the Company objectively demonstrates that the criteria specified in the contractual acceptance provisions are achieved prior to delivery and, therefore, revenue is recognized upon system delivery since there is no substantive contingency remaining related to the acceptance provisions at that date, subject to the retention amount constraint described below. 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 and fully recognized upon the receipt of final customer acceptance, assuming all other revenue recognition criteria have been met.
The Company’s system sales arrangements, including certain upgrades, generally do not contain provisions for right of return, forfeiture, refund, or other purchase price concession. In the rare instances where such provisions are included, all revenue is deferred until such rights expire. The sales arrangements generally include installation. The installation process is not deemed essential to the functionality of the equipment since it is not complex; that is, it does not require significant changes to the features or capabilities of the equipment or involve building elaborate interfaces or connections subsequent to factory acceptance. The Company has a demonstrated history of consistently completing installations in a timely manner and can reliably estimate the costs of such activities. Most customers engage the Company to perform the installation services, although there are other third-party providers with sufficient knowledge who could complete these services. Based on these factors, installation is deemed to be inconsequential or perfunctory relative to the system sale as a whole, and as a result, installation service is not considered a separate element of the arrangement. As such, the Company accrues the cost of the installation at the time of revenue recognition for the system.
In many cases the Company’s products are sold with a billing retention, typically 10% of the sales price (the “retention amount”), which is typically payable by the customer when field acceptance provisions are completed. The amount of revenue recognized upon delivery of a system or upgrade, if any, is limited to the lower of i) the amount billed that is not contingent upon acceptance provisions or ii) the value of the arrangement consideration allocated to the delivered elements, if such sale is part of a multiple-element arrangement.
The Company’s contractual terms with customers in Japan generally specify that title and risk and rewards of ownership transfer upon customer acceptance. As a result, for customers in Japan, revenue is recognized upon the receipt of written customer acceptance. During the fourth quarter of fiscal 2013, the Company began using a distributor for almost all of its product and service sales to customers in Japan. Title passes to the distributor upon shipment, however, due to customary local business practices, the risk and rewards of ownership of the system transfers to the end-customers upon their acceptance. As such, the Company recognizes revenue upon receipt of written acceptance from the end customer.
The Company recognizes revenue related to maintenance and service contracts ratably over the applicable contract term. The Company recognizes revenue from the sales of components, spare parts, and specified service engagements at the time of delivery in accordance with the terms of the applicable sales arrangement.
Incremental direct costs incurred related to the acquisition of a customer contract, such as sales commissions, are expensed as incurred, even if the related revenue is deferred in accordance with the above policy.
(g) Warranty Costs
The Company typically provides standard warranty coverage on its systems for one year from the date of final acceptance by providing labor and parts necessary to repair the systems during the warranty period. The Company accounts for the estimated warranty cost when revenue is recognized on the related system. Warranty cost is included in “Cost of sales” in the Consolidated Statements of Operations. The estimated warranty cost is based on the Company’s historical experience with its systems and regional labor costs. The Company calculates the average service hours by region and parts expense per system utilizing actual service records to determine the estimated warranty charge. The Company updates its warranty estimates on a semiannual basis when the actual product performance and/or field expense differs from original estimates.
(h) Shipping and Handling Costs
Shipping and handling costs are expenses incurred to move, package and prepare the Company’s products for shipment and to move the products to a customer’s designated location. These costs are generally comprised of payments to third-party shippers. Shipping and handling costs are included in “Cost of sales” in the Consolidated Statements of Operations.
(i) Research and Development Costs
Research and development costs are expensed as incurred and include charges for the development of new technology and the transition of existing technology into new products or services.
(j) Advertising Expense
The cost of advertising is expensed as incurred and totaled $0.6 million, $0.5 million, and $0.8 million during 2014, 2013 and 2012, respectively.
(k) Accounting for Share-Based Compensation
Share-based awards exchanged for employee services are accounted for under the fair value method. Accordingly, share-based compensation cost is measured at the grant date based on the fair value of the award. The expense for awards expected to vest is recognized over the employee’s requisite service period (generally the vesting period of the award). Awards expected to vest are estimated based on a combination of historical experience and future expectations.
The Company has elected to treat awards with only service conditions and with graded vesting as one award. Consequently, the total compensation expense is recognized straight-line over the entire vesting period, so long as the compensation cost recognized at any date at least equals the portion of the grant date fair value of the award that is vested at that date.
The Company uses the Black-Scholes option-pricing model to compute the estimated fair value of option awards. The Black-Scholes model includes assumptions regarding dividend yields, expected volatility, expected option term, and risk-free interest rates. See Note 16, “Stock Plans,” for additional information.
In addition to stock options, restricted share awards (“RSAs”) and restricted stock units (“RSUs”) with time-based vesting, the Company issues performance share units and awards (“PSUs” and “PSAs”). Compensation cost for PSUs and PSAs is recognized over the requisite service period based on the timing and expected level of achievement of the performance targets. A change in the assessment of the probability of a performance condition being met is recognized in the period of the change in estimate. At the conclusion of the performance period, the applicable number of shares of RSAs, RSUs, or unrestricted shares granted may vary based on the level of achievement of the performance targets.
(l) Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities from a change in tax rate is recognized in income in the period that includes the enactment date.
The Company recognizes the effect of income tax positions only if those positions are more likely than not to be sustained. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties related to uncertain tax positions in income tax expense. See Note 18, “Income Taxes,” for additional information.
(m) Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, investments, derivative financial instruments used in hedging activities, and accounts receivable. The Company invests in a variety of financial instruments and, by policy, limits the amount of credit exposure with any one financial institution or commercial issuer. The Company has not experienced any material credit losses on its investments.
The Company maintains an allowance reserve for potentially uncollectible accounts for estimated losses resulting from the inability of its customers to make required payments. The Company evaluates its allowance for doubtful accounts based on a combination of factors. In circumstances where specific invoices are deemed to be uncollectible, the Company provides a specific allowance for bad debt against the amount due to reduce the net recognized receivable to the amount reasonably expected to be collected. The Company also provides allowances based on its write-off history. The allowance for doubtful accounts totaled $0.7 million and $2.4 million at December 31, 2014 and 2013, respectively.
To further mitigate the Company’s exposure to uncollectable accounts, the Company may request certain customers provide a negotiable irrevocable letter of credit drawn on a reputable financial institution. These irrevocable letters of credit are typically issued to mature between zero and 90 days from the date the documentation requirements are met, typically when a system ships or upon receipt of final acceptance from the customer. The Company, at its discretion, may monetize these letters of credit on a non-recourse basis after they become negotiable, but before maturity. The fees associates with the monetization are included in “Selling, general, and administrative” in the Consolidated Statements of Operations and were insignificant for the fiscal years ended December 31, 2014, 2013, and 2012.
(n) Fair Value of Financial Instruments
The carrying amounts of financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses reflected in the consolidated financial statements approximate fair value due to their short-term maturities. The fair value of debt for footnote disclosure purposes, including current maturities, is estimated using a discounted cash flow analysis based on the estimated current incremental borrowing rates for similar types of securities.
(o) Cash, Cash Equivalents, and Short-Term Investments
All financial instruments purchased with an original maturity of three months or less at the time of purchase are considered cash equivalents. Such items may include liquid money market accounts, U.S. treasuries, government agency securities, and corporate debt. Investments that are classified as cash equivalents are carried at cost, which approximates fair value.
A portion of the Company’s cash and cash equivalents is held by its subsidiaries throughout the world, frequently in each subsidiary’s respective functional currency, which may not be the U.S. dollar. Approximately 81% and 71% of cash and cash equivalents were maintained outside the United States at December 31, 2014 and 2013, respectively.
Marketable securities are generally classified as available-for-sale for use in current operations, if required, and are 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.” These securities can 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. The specific identification method is used to determine the realized gains and losses on investments.
(p) Inventories
Inventories are stated at the lower of cost or market, with cost determined on a first-in, first-out basis. The Company reviews and sets standard costs on a periodic basis at current manufacturing costs in order to approximate actual costs. The Company assesses the valuation of all inventories, including manufacturing raw materials, work-in-process, finished goods, and spare parts, each quarter. Obsolete inventory or inventory in excess of management’s estimated usage requirement is written down to its estimated market value if less than cost. Estimates of market value include, but are not limited to, management’s forecasts related to the Company’s future manufacturing schedules, customer demand, technological and/or market obsolescence, general market conditions, possible alternative uses, and ultimate realization of excess inventory. If future customer demand or market conditions are less favorable than the Company’s projections, additional inventory write-downs may be required and 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. See Note 5, “Business Combinations,” for additional information.
(q) Business Combinations
The Company allocates the fair value of the purchase consideration of the Company’s acquisitions to the tangible assets, intangible assets, including in-process research and development (“IPR&D”), if any, and liabilities assumed, based on estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. IPR&D is initially capitalized at fair value as an intangible asset with an indefinite life and assessed for impairment thereafter. When a project underlying reported IPR&D is completed, the corresponding amount of IPR&D is amortized over the asset’s estimated useful life. Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred in “Selling, General, and Administrative” in the Consolidated Statements of Operations. See Note 5, “Business Combinations,” for additional information.
(r) Goodwill and Indefinite-Lived Intangibles
Goodwill is an asset representing the future economic benefits arising from assets acquired in a business combination that are not individually identified and separately recognized. Goodwill is measured as the excess of the consideration transferred over the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed. Intangible assets with indefinite useful lives are measured at their respective fair values as of the acquisition date. Intangible assets related to IPR&D projects are considered to be indefinite-lived until the completion or abandonment of the associated R&D efforts. If and when development is complete, the associated assets would be deemed finite-lived and would then be amortized based on their respective estimated useful lives at that point in time. Goodwill and indefinite-lived intangibles are not amortized into results of operations but instead are evaluated for impairment. The Company performs the evaluation in the fourth quarter of each fiscal year or more frequently if impairment indicators arise.
The Company first performs a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount, and, if so, the Company then applies the two-step impairment test. The two-step impairment test first compares the fair value of the Company’s reporting units to their carrying amount. If the fair value of the reporting unit exceeds its carrying amount, goodwill is not impaired, and the Company is not required to perform further testing. If the carrying amount of the reporting unit exceeds its fair value, the Company determines the implied fair value of the reporting unit’s goodwill and, if the carrying amount of the reporting unit’s goodwill exceeds its implied fair value, then the Company records an impairment loss equal to the difference.
The Company determines the fair value of its reporting units based on income and/or market approaches. Determining the fair value of a reporting unit involves the use of significant estimates and assumptions. These estimates and assumptions include revenues and expenses, working capital requirements, residual growth rates, discount rates, and future economic and market conditions. The Company considers historical data, current internal estimates, and market growth trends when developing financial projections. Market participant assumption estimates consider the information being used internally for business planning purposes, however, actual future results may differ from those estimates. Changes in judgments on any of these factors could materially affect the estimated value of the reporting unit.
(s) Long-Lived Assets and Cost Method Investment
Definite-lived intangible assets consist of purchased technology, customer-related intangible assets, patents, trademarks, covenants not-to-compete, and software licenses, and are initially recorded at fair value. Definite-lived intangibles are amortized over their estimated useful lives for periods up to 17 years, in a method reflecting the pattern in which the economic benefits are consumed, or straight-lined if such pattern cannot be reliably determined.
Property, plant and equipment are recorded at cost. Depreciation expense is calculated based on the estimated useful lives of the assets by using the straight-line method. Amortization of leasehold improvements is recognized using the straight-line method over the shorter of the remaining lease term or the estimated useful lives of the improvements.
Long-lived assets and cost method investments are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, a recoverability test is performed utilizing undiscounted cash flows expected to be generated by that asset or asset group compared to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models or, when available, quoted market values and third-party appraisals.
(t) Recent Accounting Pronouncements
In May 2014, the FASB issued ASU No. 2014-09: Revenue from Contracts with Customers. The amendments in this ASU require that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard outlines a five-step model to be used to make the revenue recognition determination and requires new financial statement disclosures. The standard is effective for interim and annual periods beginning after December 15, 2016 and allows entities to choose among different transition alternatives. The Company is evaluating the impact of adopting the standard on its consolidated financial statements and related financial statement disclosures, and has not yet determined which method of adoption will be selected.
The Company has evaluated other pronouncements recently issued but not yet adopted and does not believe the adoption of these pronouncements will have a material impact on the consolidated financial statements.
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Note 3 — Fair Value Measurements
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. The Company is required to classify certain assets and liabilities 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. The Company 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 and/or estimation methodologies could have a significant effect on the estimated fair value amounts.
The following table presents the Company’s assets and (liabilities) that were measured at fair value on a recurring basis at December 31, 2014 and 2013:
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December 31, 2014 |
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||||||||||
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Level 1 |
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Level 2 |
|
Level 3 |
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Total |
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||||
|
|
(in thousands) |
|
||||||||||
U.S. treasuries |
|
$ |
81,527 |
|
$ |
— |
|
$ |
— |
|
$ |
81,527 |
|
Corporate debt |
|
— |
|
39,045 |
|
— |
|
39,045 |
|
||||
Assets held for sale |
|
— |
|
6,000 |
|
— |
|
6,000 |
|
|
|
December 31, 2013 |
|
||||||||||
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
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||||
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(in thousands) |
|
||||||||||
U.S. treasuries |
|
$ |
130,977 |
|
$ |
— |
|
$ |
— |
|
$ |
130,977 |
|
Corporate debt |
|
— |
|
77,601 |
|
— |
|
77,601 |
|
||||
Government agency securities |
|
— |
|
61,013 |
|
— |
|
61,013 |
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||||
Commercial paper |
|
— |
|
11,947 |
|
— |
|
11,947 |
|
||||
Derivative instrument |
|
— |
|
907 |
|
— |
|
907 |
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||||
Contingent consideration |
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— |
|
— |
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(29,368 |
) |
(29,368 |
) |
Highly liquid investments with maturities of three months or less are classified as cash equivalents and are carried at cost, which approximates fair value. All investments classified as available-for-sale are recorded at fair value within short-term investments in the Consolidated Balance Sheets. The Company’s investments classified as Level 1 are based on quoted prices that are available in active markets. The Company’s investments classified as Level 2 are valued using observable inputs to quoted market prices, benchmark yields, reported trades, broker/dealer quotes or alternative pricing sources with reasonable levels of price transparency.
A reconciliation of the amounts classified as Level 3 is as follows:
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Contingent |
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|
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Consideration |
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|
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(in thousands) |
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Balance as of December 31, 2013 |
|
$ |
(29,368 |
) |
Fair value adjustment |
|
29,368 |
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Balance as of December 31, 2014 |
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$ |
— |
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The Company estimated the fair value of the contingent consideration by applying various probabilities and discount factors to each of the performance milestones. At December 31, 2013, contingent consideration consisted of $20.1 million and $9.3 million in current and noncurrent other liabilities, respectively, in the Consolidated Balance Sheets. During 2014, the Company determined that the agreed upon post-closing milestones were not met and reversed the fair value of the liability, which is included in “Changes in contingent consideration” in the Consolidated Statements of Operations. Refer to Note 5, “Business Combinations,” for additional information.
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Note 4 — Investments
At December 31, 2014 and 2013 the amortized cost and fair value of marketable securities were as follows:
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Gross |
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Gross |
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Estimated |
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||||
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Amortized |
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Unrealized |
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|
Unrealized |
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|
Fair |
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||||
|
|
|
Cost |
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|
Gains |
|
|
Losses |
|
|
Value |
|
||||
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|
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(in thousands) |
|
|||||||||||||
December 31, 2014 |
|
|
|
|
|
|
|
|
|
||||||||
U.S. treasuries |
|
$ |
81,506 |
|
$ |
27 |
|
$ |
(6 |
) |
$ |
81,527 |
|
||||
Corporate debt |
|
39,031 |
|
20 |
|
(6 |
) |
39,045 |
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||||||||
Total available-for-sale securities |
|
$ |
120,537 |
|
$ |
47 |
|
$ |
(12 |
) |
$ |
120,572 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||||||
December 31, 2013 |
|
|
|
|
|
|
|
|
|
||||||||
U.S. treasuries |
|
$ |
130,956 |
|
$ |
22 |
|
$ |
(1 |
) |
$ |
130,977 |
|
||||
Government agency securities |
|
61,004 |
|
9 |
|
— |
|
61,013 |
|
||||||||
Corporate debt |
|
77,582 |
|
55 |
|
(36 |
) |
77,601 |
|
||||||||
Commercial paper |
|
11,947 |
|
— |
|
— |
|
11,947 |
|
||||||||
Total available-for-sale securities |
|
$ |
281,489 |
|
$ |
86 |
|
$ |
(37 |
) |
$ |
281,538 |
|
Available-for-sale securities in a loss position at December 31, 2014 and 2013 were as follows:
|
|
|
December 31, 2014 |
|
|
December 31, 2013 |
|
||||||||||
|
|
|
Estimated |
|
|
Gross |
|
|
Estimated |
|
|
Gross |
|
||||
|
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
||||
|
|
|
Value |
|
|
Losses |
|
|
Value |
|
|
Losses |
|
||||
|
|
(in thousands) |
|
||||||||||||||
U.S. treasuries |
|
$ |
35,001 |
|
$ |
(6 |
) |
$ |
29,068 |
|
$ |
(1 |
) |
||||
Corporate debt |
|
13,069 |
|
(6 |
) |
37,654 |
|
(36 |
) |
||||||||
Total |
|
$ |
48,070 |
|
$ |
(12 |
) |
$ |
66,722 |
|
$ |
(37 |
) |
As of December 31, 2014 and 2013, 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 December 31, 2014 were as follows:
|
|
|
December 31, 2014 |
|
|||||
|
|
|
|
|
|
Estimated |
|
||
|
|
|
Amortized |
|
|
Fair |
|
||
|
|
|
Cost |
|
|
Value |
|
||
|
|
|
(in thousands) |
|
|||||
Due in one year or less |
|
$ |
74,710 |
|
$ |
74,718 |
|
||
Due after one year through two years |
|
45,827 |
|
45,854 |
|
||||
Total |
|
$ |
120,537 |
|
$ |
120,572 |
|
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. Realized gains for the fiscal years ended December 31, 2014 and 2013 were $0.1 million in each period, and are included in “Other, net” in the Consolidated Statements of Operations. There were minimal realized gains for the year ended December 31, 2012 and no realized losses in any of the three years.
Restricted Cash
The total amount of restricted cash at December 31, 2014 and 2013 was $0.5 million and $2.7 million, respectively, which serves as collateral for bank guarantees that provide financial assurance that the Company will fulfill certain customer obligations. This cash is held in custody by the issuing bank, and is restricted as to withdrawal or use while the related bank guarantees are outstanding.
Cost Method Investment
The Company maintains certain investments in support of its strategic business objectives, including a non-marketable cost method investment. The Company’s ownership interest is less than 20% of the investee’s voting stock, and the Company does not exert significant influence, therefore the investment is recorded at cost. The carrying value of the investment was $19.4 million and $16.9 million at December 31, 2014 and 2013, respectively and is included in “Other assets” on the Consolidated Balance Sheet. The investment is subject to a periodic impairment review; however, there are no open-market valuations, and the impairment analysis requires significant judgment. The analysis includes assessments of the investee’s financial condition, the business outlook for its products and technology, its projected results and cash flow, the likelihood of obtaining subsequent rounds of financing, and the impact of any relevant contractual equity preferences held by the Company or others. Fair value of the investment is not estimated unless there are identified events or changes in circumstances that could have a significant adverse effect on the fair value of the investment. No such events or circumstances are present.
|
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), 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. The values assigned to certain acquired assets and liabilities are preliminary and may be adjusted as further information becomes available during the allocation period of up to 12 months from the acquisition date.
|
|
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 as indicated above 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 expected to be deductible for income tax purposes.
The classes of intangible assets acquired and the estimated useful life of each class is presented in the table below:
|
|
Acquisition Date |
|
||||
|
|
(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. The fair value of the acquired assets is provisional pending the final valuations for these assets.
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 result 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 |
|
2013 |
|
||
|
|
(in thousands) |
|
||||
Revenue |
|
$ |
447,089 |
|
$ |
379,272 |
|
Loss from operations before income taxes |
|
$ |
(68,715 |
) |
$ |
(77,252 |
) |
ALD
On October 1, 2013 the Company acquired 100% of the outstanding common shares and voting interest of Synos Technology, Inc. and rebranded the business Veeco ALD (“ALD”). The results of ALD operations have been included in the consolidated financial statements since the date of acquisition. ALD is an early stage manufacturer of fast array scanning atomic layer deposition (“FAST-ALD”) tools for the flexible organic light-emitting diode (“OLED”) and semiconductor markets.
The acquisition date fair value of the consideration totaled $102.3 million, net of cash acquired, which consisted of the following:
|
|
Acquisition Date |
|
|
|
|
(October 1, 2013) |
|
|
|
|
(in thousands) |
|
|
Cash (net of cash acquired) |
|
$ |
71,488 |
|
Contingent consideration |
|
33,539 |
|
|
Working capital adjustment |
|
(2,695 |
) |
|
Acquisition date fair value |
|
$ |
102,332 |
|
The acquisition agreement included performance milestones that could trigger contingent payments to the original selling shareholders. During the year ended December 31, 2013, the first milestone was achieved, and the Company paid the former shareholders $5.0 million and increased the estimated fair value of the remaining contingent payments by $0.8 million. During 2014, the Company determined that all of the remaining performance milestones were not met, reversed the fair value of the liability, and recorded a non-cash gain of $29.4 million, which is included in “Changes in contingent consideration” in the Consolidated Statements of Operations.
During 2014, the Company finalized the working capital adjustment under the purchase agreement. Based on the final adjustment, the working capital adjustment was reduced to $1.3 million. As a result, a $1.4 million adjustment was made that increased goodwill by $0.2 million and reduced accrued expenses by $1.2 million for the relief of a potential liability that the former shareholders have retained. During 2014, the Company received payment of the $1.3 million working capital adjustment from the former shareholders, which is included in “Acquisitions of business, net of cash acquired” within the Cash Provided by Investing Activities in the Consolidated Statements of Cash Flows.
The following table summarizes the estimated fair value of the assets acquired and liabilities assumed at the acquisition date. The Company utilized third-party valuations to estimate the fair value of the acquired tangible and intangible assets as well as the contingent consideration:
|
|
Acquisition Date |
|
|
|
|
(October 1, 2013) |
|
|
|
|
(in thousands) |
|
|
Accounts receivable |
|
$ |
1,523 |
|
Inventory |
|
386 |
|
|
Other current assets |
|
512 |
|
|
Property, plant, and equipment |
|
1,917 |
|
|
Intangible assets |
|
99,270 |
|
|
Total identifiable assets acquired |
|
103,608 |
|
|
|
|
|
|
|
Current liabilities |
|
4,370 |
|
|
Estimated deferred tax liability, net |
|
32,426 |
|
|
Total liabilities assumed |
|
36,796 |
|
|
|
|
|
|
|
Net identifiable assets acquired |
|
66,812 |
|
|
Goodwill |
|
35,520 |
|
|
Net assets acquired |
|
$ |
102,332 |
|
The goodwill is not deductible for income tax purposes.
The classes of intangible assets acquired and the original estimated useful life of each class is presented in the table below:
|
|
Acquisition Date |
|
|||
|
|
(October 1, 2013) |
|
|||
|
|
Amount |
|
Uuseful life |
|
|
|
|
(in thousands) |
|
|
|
|
Technology |
|
$ |
73,160 |
|
14 years |
|
Customer relationships |
|
20,630 |
|
8 years |
|
|
In-process research and development |
|
5,070 |
|
To be determined |
||
Trademarks and trade names |
|
140 |
|
1 year |
|
|
Non-compete agreement |
|
270 |
|
3 years |
|
|
Intangible assets acquired |
|
$ |
99,270 |
|
|
|
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 the fourth quarter of 2014, the Company determined that, while its ALD technology was successfully demonstrated at its key OLED display customer, it was unlikely to be adopted in the near-term for flexible OLED applications. The significant reduction in near-term forecasted bookings and cash flows required the Company to assess its ALD reporting unit for impairment. As a result, the Company recorded a non-cash impairment charge of $53.9 million related to goodwill and other long-lived assets for ALD. See Note 6, “Goodwill and Intangible Assets,” for additional information.
During 2013, the Company recognized $1.0 million of acquisition related costs that are included in “Selling, general, and administrative” in the Consolidated Statements of Operations.
The following represents the pro forma Consolidated Statements of Operations as if Veeco ALD had been included in the Company’s consolidated results for the periods indicated:
|
|
December 31, |
|
||||
|
|
2013 |
|
2012 |
|
||
|
|
(in thousands) |
|
||||
Revenue |
|
$ |
346,319 |
|
$ |
522,029 |
|
Income (loss) from operations before income taxes |
|
$ |
(60,983) |
|
$ |
16,840 |
|
These amounts have been calculated after applying the Company’s accounting policies to material amounts and also adjusting the result of ALD to reflect the additional amortization that would have been expensed assuming the fair value adjustments to the acquired assets had been applied on January 1, 2012.
|
Note 6 — Goodwill and Intangible Assets
Goodwill represents the excess of the purchase price over the sum of the amounts assigned to tangible and identifiable intangible assets acquired less liabilities assumed in each business combination. The following table presents the changes in goodwill balances during the fiscal years indicated:
|
|
Gross |
|
|
|
|
|
|||
|
|
Carrying |
|
Accumulated |
|
Net |
|
|||
|
|
Amount |
|
Impairment |
|
Amount |
|
|||
|
|
(in thousands) |
|
|||||||
As of December 31, 2012 |
|
$ |
151,069 |
|
$ |
95,241 |
|
$ |
55,828 |
|
Acquisition |
|
35,520 |
|
— |
|
35,520 |
|
|||
As of December 31, 2013 |
|
186,589 |
|
95,241 |
|
91,348 |
|
|||
Acquisition |
|
51,396 |
|
— |
|
51,396 |
|
|||
Purchase price adjustments |
|
173 |
|
— |
|
173 |
|
|||
Impairments |
|
— |
|
27,958 |
|
(27,958 |
) |
|||
As of December 31, 2014 |
|
$ |
238,158 |
|
$ |
123,199 |
|
$ |
114,959 |
|
Additions to the gross goodwill balance during the years ended December 31, 2014 and 2013 resulted from the acquisition of privately-held businesses as described further in Note 5, “Business Combinations.”
The Company performed its annual goodwill impairment test in the fourth quarter. The reporting units’ fair value exceeded their respective carrying amount and therefore goodwill within these reporting units was not impaired. The fair value of each reporting unit was determined using an income approach to determine the present value of expected future cash flows.
During 2014, the Company successfully demonstrated its FAST-ALD technology for flexible OLED encapsulation. But subsequent to the Company’s annual goodwill impairment test, the Company determined that the incumbent deposition technology had progressed to satisfy current market requirements. The carrying amount of the ALD reporting unit was determined to exceed its fair value, and therefore the fair value of the reporting unit’s goodwill was estimated. An impairment loss was recognized equal to the excess of the carrying amount of the reporting unit’s goodwill over its implied fair value. As part of its valuation to determine the total impairment charge, the Company also estimated the fair value of significant tangible and intangible long-lived assets within the ALD reporting unit. These tangible and intangible long-lived assets were valued using appropriate valuation techniques for assets of their nature, including income and market approaches. As a result of the impairment analysis, the Company recorded non-cash impairment charges of $28.0 million related to goodwill and $25.9 million related to other long-lived assets, including $17.4 million related to customer relationships, $4.8 million related to in-process research and development, and $3.6 million related to certain tangible assets.
The components of purchased intangible assets as of the dates indicated below were as follows:
|
|
|
|
December 31, 2014 |
|
December 31, 2013 |
|
||||||||||||||
|
|
Weighted |
|
|
|
Accumulated |
|
|
|
|
|
Accumulated |
|
|
|
||||||
|
|
Average Remaining |
|
Gross |
|
Amortization |
|
|
|
Gross |
|
Amortization |
|
|
|
||||||
|
|
Amortization |
|
Carrying |
|
and |
|
Net |
|
Carrying |
|
and |
|
Net |
|
||||||
|
|
Period |
|
Amount |
|
Impairment |
|
Amount |
|
Amount |
|
Impairment |
|
Amount |
|
||||||
|
|
(in years) |
|
(in thousands) |
|
||||||||||||||||
Technology |
|
9.6 |
|
$ |
222,358 |
|
$ |
106,342 |
|
$ |
116,016 |
|
$ |
182,408 |
|
$ |
97,524 |
|
$ |
84,884 |
|
Customer relationships |
|
13.9 |
|
69,350 |
|
35,549 |
|
33,801 |
|
35,040 |
|
14,721 |
|
20,319 |
|
||||||
Trademarks and tradenames |
|
3.5 |
|
3,050 |
|
1,096 |
|
1,954 |
|
1,970 |
|
763 |
|
1,207 |
|
||||||
Indefinite-lived trademark |
|
— |
|
2,900 |
|
— |
|
2,900 |
|
2,900 |
|
— |
|
2,900 |
|
||||||
IPR&D |
|
— |
|
5,070 |
|
5,070 |
|
— |
|
5,070 |
|
— |
|
5,070 |
|
||||||
Other |
|
1.1 |
|
5,485 |
|
848 |
|
4,637 |
|
765 |
|
429 |
|
336 |
|
||||||
Total |
|
10.2 |
|
$ |
308,213 |
|
$ |
148,905 |
|
$ |
159,308 |
|
$ |
228,153 |
|
$ |
113,437 |
|
$ |
114,716 |
|
Other intangible assets primarily consist of patents, licenses, customer backlog, and non-compete agreements.
For the fiscal years ended December 31, 2014, 2013, and 2012, amortization expense for intangible assets was $13.1 million, $5.5 million, and $4.9 million, respectively. Based on the intangible assets recorded as of December 31, 2014, and assuming no subsequent additions to or impairment of the underlying assets, the remaining estimated annual amortization expense is expected to be as follows:
|
|
|
Amortization |
|
|
|
|
|
(in thousands) |
|
|
2015 |
|
|
$ |
27,003 |
|
2016 |
|
|
20,969 |
|
|
2017 |
|
|
18,100 |
|
|
2018 |
|
|
16,492 |
|
|
2019 |
|
|
15,235 |
|
|
Thereafter |
|
|
58,609 |
|
|
Total |
|
|
$ |
156,408 |
|
|
Note 7 — Inventories
Inventories are stated at the lower of cost or market using standard costs that approximate actual costs on a first-in, first-out basis. Inventories consist of the following:
|
|
December 31, |
|
||||
|
|
2014 |
|
2013 |
|
||
|
|
(in thousands) |
|
||||
Materials |
|
$ |
30,319 |
|
$ |
34,301 |
|
Work-in-process |
|
25,096 |
|
12,900 |
|
||
Finished goods |
|
6,056 |
|
12,525 |
|
||
Total |
|
$ |
61,471 |
|
$ |
59,726 |
|
|
Note 8 — Property, Plant, and Equipment and Assets Held for Sale
Property and equipment, net, consist of the following:
|
|
|
December 31, |
|
|
Average |
|
||||
|
|
|
2014 |
|
2013 |
|
|
Useful Life |
|
||
|
|
(in thousands) |
|
|
|
|
|||||
Land |
|
$ |
9,392 |
|
$ |
12,535 |
|
|
|
||
Building and improvements |
|
51,979 |
|
52,050 |
|
10 – 40 years |
|
||||
Machinery and equipment |
|
104,815 |
|
110,228 |
|
3 – 10 years |
|
||||
Leasehold improvements |
|
4,356 |
|
5,888 |
|
3 – 7 years |
|
||||
Gross property,plant and equipment |
|
170,542 |
|
180,701 |
|
|
|
||||
Less: accumulated depreciation and amortization |
|
91,790 |
|
91,562 |
|
|
|
||||
Net property, plant, and equipment |
|
$ |
78,752 |
|
$ |
89,139 |
|
|
|
Depreciation expense was $11.4 million, $12.9 million, and $11.3 million for the years ended December 31, 2014, 2013, and 2012, respectively.
Lab Tools
At December 31, 2014 and 2013, the carrying value of systems that had previously been used in the Company’s laboratories as Veeco Certified Equipment was approximately $1.3 million and $7.2 million, respectively, and was included in “Property, plant, and equipment, net” in the Consolidated Balance Sheets. These systems are being held for sale and are the same types of tools that the Company sells to its customers in the ordinary course of business. During the years ended December 31, 2014 and 2013, the Company had aggregate sales of $8.9 million and $7.4 million, respectively, of these tools with associated costs of $7.4 million and $3.7 million, respectively, which was included in “Net sales” and “Cost of sales” in the Consolidated Statements of Operations. During the years ended December 31, 2014 and 2013, the Company evaluated certain systems and reduced the carrying value of these systems that were held for sale by $0.1 million and $0.9 million, respectively, which was included in “Asset impairment” in the Consolidated Statements of Operations.
Assets Held for Sale
During the year ended December 31, 2014, the Company classified property, plant, and equipment with a carrying value of $9.5 million as assets held for sale. Using Level 2 measurement principles, the Company determined that the carrying cost of these assets exceeded the fair market value, less cost to sell, and recorded an impairment charge of approximately $3.5 million, which consisted of $1.6 million related to the Company’s research and demonstration labs in Asia and $1.9 million related to a vacant building and land. These amounts were included in “Asset impairment” in the Consolidated Statements of Operations. The net $6.0 million carrying value of these assets are included in “Assets held for sale” in the Consolidated Balance Sheet. During the year ended December 31, 2014, the Company recognized additional asset impairment charges of $0.7 million relating to assets that were abandoned during the year, which was included in “Asset impairment” in the Consolidated Statements of Operations.
|
Note 9 — Accrued Expenses and Other Liabilities
The components of accrued expenses and other current liabilities as of the dates indicated were as follows:
|
|
December 31, |
|
||||
|
|
2014 |
|
2013 |
|
||
|
|
(in thousands) |
|
||||
Payroll and related benefits |
|
$ |
26,605 |
|
$ |
11,020 |
|
Sales, use, and other taxes |
|
1,776 |
|
5,402 |
|
||
Contingent consideration |
|
— |
|
20,098 |
|
||
Warranty |
|
5,411 |
|
5,662 |
|
||
Restructuring liability |
|
1,428 |
|
533 |
|
||
Other |
|
13,198 |
|
8,369 |
|
||
Total |
|
$ |
48,418 |
|
$ |
51,084 |
|
Customer deposits and deferred revenue
Customer deposits totaled $73.0 million and $27.5 million at December 31, 2014 and 2013, respectively, which are included in “Customer deposits and deferred revenue” in the Consolidated Balance Sheets.
|
Note 10 — Discontinued Operations
CIGS Solar Systems Business
During 2011, the Company announced a plan to discontinue its CIGS solar systems business and reflected the results of operations for the CIGS solar systems business as discontinued operations.
Metrology
During 2010, the Company completed the sale of its Metrology business, except for assets located in China due to local restrictions. The Company reflected the results of operations for the Metrology business as discontinued operations and recognized a pre-tax deferred gain of $5.4 million during 2012 related to the completion of the sale of the assets in China. The Company also recognized a $1.4 million gain ($1.1 million net of taxes) on the sale of assets of this discontinued segment that were previously held for sale and sold during 2012.
Summary information related to discontinued operations is as follows:
|
|
|
2012 |
|
|||||||||||
|
|
Solar |
|
|
|
|
|
|
|
||||||
|
|
|
Systems |
|
|
Metrology |
|
|
Total |
|
|||||
|
|
(in thousands) |
|
||||||||||||
Net sales |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|||
Net income (loss) from discontinued operations |
|
$ |
(62 |
) |
|
$ |
4,461 |
|
|
$ |
4,399 |
|
|
Note 11 — Restructuring Charges
Beginning in 2011 and in response to challenging business conditions, the Company initiated activities to reduce and contain spending, including reducing its workforce, consultants, and discretionary expenses.
During 2012, the Company recorded $3.8 million in personnel severance and related costs resulting from a headcount reduction of 52 employees. These reductions in workforce included executives, management, administration, sales and service, and manufacturing employees companywide. This consolidation was substantially complete at the end of 2012.
During 2013, the Company recorded $1.5 million in personnel severance and related costs resulting from the restructuring of one of its international sales offices and the consolidation of certain sales and administrative functions. This consolidation was substantially complete at the end of 2013.
During 2014, the Company announced the closing of its Ft. Collins, Colorado and Camarillo, California facilities. Business activities formally conducted at these sites have been transferred to the Company’s Plainview, New York facility, and the Company recorded $0.4 million of facility closing costs. The Company also took additional measures to improve profitability in the challenging business environment and notified 93 employees of their termination from the Company and recorded $4.0 million of personnel severance and related costs. These actions were substantially complete at the end of 2014. The total remaining amount expected to be incurred related to facility closing costs is approximately $0.5 million.
The following table shows the amounts incurred and paid for restructuring activities during the years ended December 31, 2014, 2013, and 2012 and the remaining accrued balance of restructuring costs as of December 31, 2014, which is included in “Accrued expenses and other current liabilities” in the Consolidated Balance Sheets:
|
|
Personnel |
|
|
|
|
|
|
|
||||||
|
|
Severance and |
|
|
Facility |
|
|
|
|
||||||
|
|
|
Related Costs |
|
|
Closing Costs |
|
|
Total |
|
|||||
|
|
(in thousands) |
|
||||||||||||
Balance at December 31, 2012 |
|
$ |
1,875 |
|
|
$ |
— |
|
|
$ |
1,875 |
|
|||
Provision |
|
1,485 |
|
|
— |
|
|
1,485 |
|
||||||
Payments |
|
(2,827 |
) |
|
— |
|
|
(2,827 |
) |
||||||
Balance at December 31, 2013 |
|
533 |
|
|
— |
|
|
533 |
|
||||||
Provision |
|
4,012 |
|
|
382 |
|
|
4,394 |
|
||||||
Payments |
|
(3,117 |
) |
|
(382 |
) |
|
(3,499 |
) |
||||||
Balance at December 31, 2014 |
|
$ |
1,428 |
|
|
$ |
— |
|
|
$ |
1,428 |
|
|
Note 12 — Commitments and Contingencies
Warranty
Warranties are typically valid for one year from the date of system final acceptance, and the Company estimates the costs that may be incurred under the warranty. Estimated warranty costs are determined by analyzing specific product and historical configuration statistics and regional warranty support costs and is 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 the Company’s product warranty reserves were as follows:
|
|
|
December 31, |
|
||||||
|
|
|
2014 |
|
|
2013 |
|
|||
|
|
(in thousands) |
|
|||||||
Balance, beginning of the year |
|
$ |
5,662 |
|
|
$ |
4,942 |
|
||
Addition for new warranties issued |
|
3,484 |
|
|
5,291 |
|
||||
Addition from PSP acquisition |
|
809 |
|
|
— |
|
||||
Settlements |
|
(3,802 |
) |
|
(5,580 |
) |
||||
Changes in estimate |
|
(742 |
) |
|
1,009 |
|
||||
Balance, end of the year |
|
$ |
5,411 |
|
|
$ |
5,662 |
|
Minimum Lease Commitments
Minimum lease commitments at December 31, 2014 for property and equipment under operating lease agreements (exclusive of renewal options) are payable as follows:
|
|
Operating |
|
||
|
|
|
Leases |
|
|
Payments due by period: |
|
|
(in thousands) |
|
|
2015 |
|
$ |
2,322 |
|
|
2016 |
|
2,423 |
|
||
2017 |
|
1,993 |
|
||
2018 |
|
1,224 |
|
||
2019 |
|
526 |
|
||
Thereafter |
|
2,700 |
|
||
Total |
|
$ |
11,188 |
|
Rent expense was $2.3 million, $2.9 million, and $3.5 million in 2014, 2013 and 2012, respectively. In addition, the Company is obligated under such leases for certain other expenses, including real estate taxes and insurance.
Environmental Remediation
The Company is aware that petroleum hydrocarbon contamination has been detected in the soil at the site of a facility formerly leased by the Company in Santa Barbara, California. The Company has been indemnified for any liabilities that may be incurred which arise from environmental contamination at the site. Even without consideration of such indemnification, the Company does not believe that any material loss or expense is probable in connection with any such liabilities. The former owner of the land and building in Santa Barbara, California in which the Company’s former Metrology operations were located (which business was sold to Bruker Corporation (“Bruker”) on October 7, 2010), has disclosed that there are hazardous substances present in the ground under the building. Management believes that the comprehensive indemnification clause that was part of the purchase contract relating to the purchase of such land provides adequate protection against any environmental issues that may arise. The Company has provided Bruker with similar indemnification as part of the sale.
Legal Proceedings
Veeco and certain other parties were named as defendants in a lawsuit filed on April 25, 2013 in the Superior Court of California, County of Sonoma. The plaintiff in the lawsuit, Patrick Colbus, seeks unspecified damages and asserts claims that he suffered burns and other injuries while he was cleaning a molecular beam epitaxy system alleged to have been manufactured by Veeco. The lawsuit alleges, among other things, that the molecular beam epitaxy system was defective and that Veeco failed to adequately warn of the potential risks of the system. The Company believes this lawsuit is without merit and intends to defend vigorously against the claims. The Company is unable to predict the outcome of this action or to reasonably estimate the possible loss or range of loss, if any, arising from the claims asserted therein. The Company believes that, in the event of any recovery by the plaintiff from Veeco, such recovery would be fully covered by insurance.
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.
Concentrations of Credit Risk
The Company depends on purchases from its ten largest customers, which accounted for 65% and 69% of total accounts receivable as of December 31, 2014 and 2013, respectively.
Customers who accounted for more than 10% of aggregate accounts receivable or net sales are as follows:
|
|
Accounts Receivable |
|
Net Sales for the Year Ended |
|
|||||||||||
|
|
Year ended December 31, |
|
December 31, |
|
|||||||||||
Customer |
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
2012 |
|
|||||
Customer A |
|
|
* |
|
|
* |
|
|
15% |
|
|
* |
|
|
* |
|
Customer B |
|
|
20% |
|
|
10% |
|
|
11% |
|
|
14% |
|
|
* |
|
Customer C |
|
|
13% |
|
|
11% |
|
|
* |
|
|
* |
|
|
* |
|
Customer D |
|
|
* |
|
|
23% |
|
|
* |
|
|
* |
|
|
14% |
|
* Less than 10% of aggregate accounts receivable or net sales.
The Company manufactures and sells its products to companies in different geographic locations. Refer to Note 19, “Segment Reporting and Geographic Information,” for additional information. In certain instances, the Company requires deposits from its customers for a portion of the sales price in advance of shipment and performs periodic credit evaluations on its customers. Where appropriate, the Company requires letters of credit on certain non-U.S. sales arrangements. Receivables generally are due within 30 – 90 days from the date of invoice. The net accounts receivable balance is concentrated in the following geographic locations:
|
|
|
December 31, |
|
||||||
|
|
|
2014 |
|
|
2013 |
|
|||
|
|
(in thousands) |
|
|||||||
China |
|
$ |
17,911 |
|
|
$ |
4,130 |
|
||
Korea |
|
8,118 |
|
|
2,411 |
|
||||
Thailand |
|
6,324 |
|
|
2,041 |
|
||||
Taiwan |
|
5,838 |
|
|
427 |
|
||||
Other |
|
3,986 |
|
|
4,890 |
|
||||
Asia Pacific |
|
42,177 |
|
|
13,899 |
|
||||
United States |
|
13,139 |
|
|
8,369 |
|
||||
EMEA and other |
|
4,769 |
|
|
1,555 |
|
||||
Total |
|
$ |
60,085 |
|
|
$ |
23,823 |
|
Suppliers
The Company outsources certain functions to third parties, including the manufacture of all or substantially all of its MOCVD systems, ion beam and other data storage systems, and ion sources. The Company primarily relies on several suppliers for the manufacturing of these systems, but the Company does maintain a minimum level of internal manufacturing capability for these systems. The failure of the Company’s present suppliers to meet their contractual obligations under its supply arrangements and the Company’s inability to make alternative arrangements or resume the manufacture of these systems could have a material adverse effect on the Company’s revenues, profitability, cash flows and relationships with its customers.
In addition, certain of the components and sub-assemblies included in the Company’s products are obtained from a single source or a limited group of suppliers. The Company’s inability to develop alternative sources, if necessary, could result in a prolonged interruption in supply or a significant increase in the price of one or more components, which could adversely affect the Company’s operating results.
The Company had deposits with its suppliers of $12.7 million and $9.4 million at December 31, 2014 and 2013, respectively, that were included in “Prepaid expenses and other current assets” on the Consolidated Balance Sheets.
Purchase Commitments
The Company had purchase commitments of $112.4 million at December 31, 2014, all of which will come due within one year.
Bank Guarantees
The Company has bank guarantees issued by a financial institution on its behalf as needed. At December 31, 2014, outstanding bank guarantees totaled $45 million, of which $0.5 million is collateralized against cash that is restricted from use. As of December 31, 2014, the Company had $26 million of unused lines of credit available, which can be drawn upon to cover performance bonds required by customers.
|
Note 13 — Debt
Debt consists of a mortgage note payable with a carrying value of $1.8 million and $2.1 million as of December 31, 2014 and 2013, respectively. The mortgage note payable is secured by certain land and buildings with a carrying value of $3.3 million and $4.7 million as of December 31, 2014 and 2013, respectively. One of the buildings is currently held for sale. The annual interest rate on the mortgage is 7.91%, and the final payment is due on January 1, 2020. The Company determined the mortgage is a Level 3 liability in the fair-value hierarchy and estimated its fair value as $2.0 million and $2.3 million at December 31, 2014 and 2013, respectively, using a discounted cash flow model. Payments due under the note are as follows:
|
|
|
Total |
|
|
|
|
(in thousands) |
|
||
2015 |
|
$ |
314 |
|
|
2016 |
|
340 |
|
||
2017 |
|
368 |
|
||
2018 |
|
398 |
|
||
2019 |
|
427 |
|
||
Total |
|
1,847 |
|
||
Less current portion |
|
314 |
|
||
Total (less current maturities) |
|
$ |
1,533 |
|
|
Note 14 — Derivative Financial Instruments
The Company is exposed to financial market risks arising from changes in currency exchange rates. Changes in currency exchange rate changes could affect the Company’s foreign currency denominated monetary assets and liabilities and forecasted cash flows. The Company enters into monthly forward derivative contracts 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 has not designated its foreign exchange derivatives as hedges. Accordingly, changes in fair value from these contracts are recorded as “Other, net” in the Company’s Consolidated Statements of Operations. The fair value of these contracts is included in “Prepaid expenses and other current assets” in the Company’s Consolidated Balance Sheets. The Company executes derivative transactions with highly rated financial institutions to mitigate counterparty risk.
The Company did not have any outstanding derivative contracts at December 31, 2014. A summary of the foreign exchange derivatives outstanding on December 31, 2013 is as follows:
|
|
Fair |
|
Maturity |
|
Notional |
|
||||||
|
|
|
Value |
|
Dates |
|
Amount |
|
|||||
|
|
(in thousands) |
|
||||||||||
December 31, 2013 |
|
|
|
|
|
|
|
||||||
Foreign currency exchange forwards |
|
$ |
1 |
|
January 2014 |
|
$ |
4,700 |
|
||||
Foreign currency collar |
|
906 |
|
October 2014 |
|
34,069 |
|
||||||
Total |
|
$ |
907 |
|
|
|
$ |
38,769 |
|
The following table shows the gains and (losses) from currency exchange derivatives during the years ended December 31, 2014, 2013, and 2012, which are included in “Other, net” in the Consolidated Statements of Operations:
|
|
Year ended December 31, |
|
|||||||
|
|
2014 |
|
2013 |
|
2012 |
|
|||
|
|
(in thousands) |
|
|||||||
Foreign currency exchange forwards |
|
$ |
(89 |
) |
$ |
248 |
|
$ |
333 |
|
Foreign currency collar |
|
(457 |
) |
906 |
|
— |
|
|||
|
|
$ |
(546 |
) |
$ |
1,154 |
|
$ |
333 |
|
|
Note 15 — Stockholders’ Equity
Accumulated Other Comprehensive Income
The following table presents the changes in the balances of each component of AOCI, net of tax:
|
|
|
Foreign |
|
|
Minimum |
|
|
Unrealized |
|
|
|
|
||||
|
|
|
Currency |
|
|
Pension |
|
|
Gains (losses) on |
|
|
|
|
||||
|
|
|
Translation |
|
|
Liability |
|
|
AFS Securities |
|
|
Total |
|
||||
|
|
(in thousands) |
|
||||||||||||||
Balance at December 31, 2012 |
|
$ |
6,701 |
|
$ |
(775 |
) |
$ |
47 |
|
$ |
5,973 |
|
||||
Other comprehensive income (loss) before reclassifications |
|
(1,322 |
) |
125 |
|
34 |
|
(1,163 |
) |
||||||||
Benefit (provision) for income taxes |
|
(53 |
) |
(86 |
) |
11 |
|
(128 |
) |
||||||||
Amounts reclassified from AOCI |
|
— |
|
— |
|
(61 |
) |
(61 |
) |
||||||||
Other comprehensive income (loss) |
|
(1,375 |
) |
39 |
|
(16 |
) |
(1,352 |
) |
||||||||
Balance at December 31, 2013 |
|
5,326 |
|
(736 |
) |
31 |
|
4,621 |
|
||||||||
Other comprehensive income (loss) before reclassifications |
|
149 |
|
(145 |
) |
51 |
|
55 |
|
||||||||
Amounts reclassified from AOCI |
|
(3,142 |
) |
— |
|
(65 |
) |
(3,207 |
) |
||||||||
Other comprehensive income (loss) |
|
(2,993 |
) |
(145 |
) |
(14 |
) |
(3,152 |
) |
||||||||
Balance at December 31, 2014 |
|
$ |
2,333 |
|
$ |
(881 |
) |
$ |
17 |
|
$ |
1,469 |
|
During the 2014, the Company completed its plan to liquidate its subsidiary in Japan, since the Company moved to a distributor model to serve its customers in that region. As a result of the liquidation, a cumulative translation gain of $3.1 million was reclassified from Other Comprehensive Income to “Other, net” on the Consolidated Statements of Operations.
Preferred Stock
The Board of Directors has authority under the Company’s Certificate of Incorporation to issue shares of preferred stock with voting and economic rights to be determined by the Board of Directors.
Treasury Stock
On August 24, 2010, the Board of Directors authorized the repurchase of up to $200 million of the Company’s common stock. All funds for this repurchase program were exhausted during fiscal year 2011, and during fiscal year 2012, the Company cancelled and retired the 5,278,828 shares of treasury stock previously purchased. During 2012 the Company recorded a reduction in treasury stock of $200.2 million and a corresponding reduction of $200.1 million and $0.1 million in retained earnings and common stock, respectively.
|
Note 16 — Stock Plans
Share-based incentive awards are provided to employees under the terms of the Company’s equity incentive compensation plans (the “Plans”). During 2010 the Company’s Board of Directors approved the 2010 Stock Incentive Plan (as amended to date, the “2010 Plan”), which replaced the 2000 Stock Incentive Plan, as amended (the “2000 Plan”). The Plans are administered by the Compensation Committee of the Board of Directors. The Company’s employees, non-employee directors, and consultants are eligible to receive awards under the 2010 Plan, which can include non-qualified stock options, incentive stock options, restricted share awards (“RSAs”), restricted share units (“RSUs”), share appreciation rights, dividend equivalent rights or any combination thereof. The Company typically settles awards under the Plans with newly issued shares. All Plans, with the exception of acquired companies’ stock plans, have been approved by the Company’s shareholders.
The Board of Directors granted equity awards to certain employees in connection with the Company’s acquisition of ALD during fiscal year 2013 (Refer to Note 5, “Business Combinations” for additional information on the acquisition). The equity awards were granted under the Company’s 2013 Inducement Stock Incentive Plan (the “Inducement Plan”), which the Board of Directors adopted to facilitate the granting of equity awards as an inducement to these employees to commence employment with the Company. The Company issued 124,500 stock option shares and 87,000 RSUs under this plan. The stock options will vest over a three year period and have a 10-year term, and the RSUs will vest over a two or four year period. As of December 31, 2013, the Inducement Plan was merged into the 2010 Plan and is considered an inactive plan with no further shares available for grant. As of December 31, 2014, there are 124,500 option shares and 82,700 RSUs outstanding under the Inducement Plan.
The Company is authorized to issue up to 6.8 million shares under the 2010 Plan, including additional shares authorized under a 2013 plan amendment approved by shareholders. Option awards are generally granted with an exercise price equal to the closing price of the Company’s common stock on the trading day prior to the date of grant; option awards generally vest over a three year period and have a seven or ten year term. RSAs and RSUs generally vest over one to five years. Certain option and share awards provide for accelerated vesting if there is a change in control, as defined in the 2010 Plan. As of December 31, 2014, there are 1.9 million option shares and 0.4 million RSUs outstanding under the 2010 Plan.
The 2000 Plan was approved by the Company’s Board of Directors and shareholders in fiscal year 2000 and was replaced by the 2010 Plan. Therefore, no additional awards are made under this plan. Stock awards granted pursuant to the 2000 Plan expire after seven years and generally vest over a two to five year period. As of December 31, 2014, there are 0.4 million option shares outstanding under the 2000 Plan.
Shares Reserved for Future Issuance
At December 31, 2014, the Company has 4.9 million shares reserved to cover exercises of outstanding stock options, vesting of RSUs, and additional grants under the 2010 Plan.
Share-Based Compensation
The Company recognized share-based compensation in the following line items in the Consolidated Statements of Operations for the periods indicated:
|
|
Year ended December 31, |
|
|||||||
|
|
2014 |
|
2013 |
|
2012 |
|
|||
|
|
|
|
(in thousands) |
|
|
|
|||
Cost of sales |
|
$ |
2,456 |
|
$ |
1,446 |
|
$ |
1,467 |
|
Selling, general, and administrative |
|
11,859 |
|
8,339 |
|
9,677 |
|
|||
Research and development |
|
4,498 |
|
3,347 |
|
2,709 |
|
|||
Share-based compensation expense before tax |
|
18,813 |
|
13,132 |
|
13,853 |
|
|||
Income tax benefit |
|
(6,011 |
) |
(4,367 |
) |
(4,849 |
) |
|||
Net share-based compensation expense |
|
$ |
12,802 |
|
$ |
8,765 |
|
$ |
9,004 |
|
The Company capitalized an insignificant amount of share-based compensation into inventory for the years ended December 31, 2014, 2013, and 2012.
The following table summarizes information about unrecognized share-based compensation costs at December 31, 2014:
|
|
Unrecognized |
|
Weighted |
|
|
|
|
Share-Based |
|
Average Period |
|
|
|
|
Compensation |
|
Expected to be |
|
|
|
|
Costs |
|
Recognized |
|
|
|
|
(in thousands) |
|
(in years) |
|
|
Stock option awards |
|
$ |
9,939 |
|
2.0 |
|
Restricted stock units |
|
9,980 |
|
2.5 |
|
|
Restricted stock awards |
|
17,501 |
|
2.8 |
|
|
Performance share units |
|
2,855 |
|
3.3 |
|
|
Performance share awards |
|
152 |
|
0.4 |
|
|
Total unrecognized share-based compensation cost |
|
$ |
40,427 |
|
2.5 |
|
Stock Option Awards
Stock options are awards issued to employees that entitle the holder to purchase shares of the Company’s stock at a fixed price. At December 31, 2014, options outstanding that have vested and are expected to vest were as follows:
|
|
|
|
|
|
Weighted |
|
|
|
||
|
|
Number |
|
Weighted |
|
Average |
|
Aggregate |
|
||
|
|
of |
|
Average |
|
Remaining |
|
Intrinsic |
|
||
|
|
Shares |
|
Exercise Price |
|
Contractual Life |
|
Value |
|
||
|
|
(in thousands) |
|
|
|
(in years) |
|
(in thousands) |
|
||
Vested |
|
1,409 |
|
$ |
30.76 |
|
5.2 |
|
$ |
10,127 |
|
Expected to vest |
|
903 |
|
$ |
32.93 |
|
7.7 |
|
2,091 |
|
|
Total |
|
2,312 |
|
$ |
31.61 |
|
6.2 |
|
$ |
12,218 |
|
Outstanding options expected to vest are net of estimated future forfeitures. The aggregate intrinsic value represents the difference between the option exercise price and $34.88, the closing price of the Company’s common stock on December 31, 2014, the last trading day of the Company’s fiscal year as reported on The NASDAQ Stock Market for all in-the-money options.
Additional information with respect to stock option activity was as follows:
|
|
|
|
Weighted |
|
|
|
|
Number of |
|
Average |
|
|
|
|
Shares |
|
Exercise Price |
|
|
|
|
(in thousands) |
|
|
|
|
Outstanding at December 31, 2011 |
|
2,106 |
|
$ |
25.58 |
|
Granted |
|
704 |
|
32.55 |
|
|
Exercised |
|
(351 |
) |
15.39 |
|
|
Expired or forfeited |
|
(137 |
) |
35.88 |
|
|
Outstanding at December 31, 2012 |
|
2,322 |
|
$ |
28.63 |
|
Granted |
|
539 |
|
32.68 |
|
|
Exercised |
|
(149 |
) |
14.74 |
|
|
Expired or forfeited |
|
(114 |
) |
35.22 |
|
|
Outstanding at December 31, 2013 |
|
2,598 |
|
$ |
29.98 |
|
Granted |
|
509 |
|
33.05 |
|
|
Exercised |
|
(561 |
) |
23.88 |
|
|
Expired or forfeited |
|
(155 |
) |
36.22 |
|
|
Outstanding at December 31, 2014 |
|
2,391 |
|
$ |
31.65 |
|
The following table summarizes stock option information at December 31, 2014:
|
|
Options Outstanding |
|
Options Exercisable |
|
||||||||||||||||
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
Weighted |
|
|
|
||||
|
|
|
|
Aggregate |
|
Average |
|
Weighted |
|
|
|
Aggregate |
|
Average |
|
Weighted |
|
||||
Range of |
|
|
|
Intrinsic |
|
Remaining |
|
Average |
|
|
|
Intrinsic |
|
Remaining |
|
Average |
|
||||
Exercise Prices |
|
Shares |
|
Value |
|
Contractual Life |
|
Exercise Price |
|
Shares |
|
Value |
|
Contractual Life |
|
Exercise Price |
|
||||
|
|
(in thousands) |
|
(in thousands) |
|
(in years) |
|
|
|
(in thousands) |
|
(in thousands) |
|
(in years) |
|
|
|
||||
$8.82 – $17.48 |
|
386 |
|
$ |
8,769 |
|
1.3 |
|
$ |
12.15 |
|
386 |
|
$ |
8,769 |
|
1.3 |
|
$ |
12.15 |
|
$20.80 – $31.45 |
|
347 |
|
1,626 |
|
8.8 |
|
30.20 |
|
125 |
|
616 |
|
8.7 |
|
29.94 |
|
||||
$31.91 – $48.04 |
|
1,429 |
|
2,000 |
|
6.9 |
|
34.14 |
|
669 |
|
742 |
|
6.4 |
|
34.63 |
|
||||
$48.90 – $51.70 |
|
229 |
|
— |
|
6.4 |
|
51.21 |
|
229 |
|
— |
|
6.4 |
|
51.21 |
|
||||
|
|
2,391 |
|
$ |
12,395 |
|
6.2 |
|
$ |
31.65 |
|
1,409 |
|
$ |
10,127 |
|
5.2 |
|
$ |
30.76 |
|
The fair value of each option is estimated on the date of grant using the Black-Scholes option pricing model. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by employees who receive equity awards. The weighted average estimated values of employee stock option grants as well as the weighted average assumptions that were used in calculating such values during fiscal years 2014, 2013, and 2012 were based on estimates at the date of grant as follows:
|
|
Year ended December 31, |
||||||||||
|
|
2014 |
|
2013 |
|
2012 |
||||||
Weighted average fair value |
|
$ |
11.58 |
|
$ |
13.47 |
|
$ |
15.56 | |||
Dividend yield |
|
0 |
% |
|
0 |
% |
|
0 |
% |
|||
Expected volatility factor(1) |
|
44 |
% |
|
49 |
% |
|
59 |
% |
|||
Risk-free interest rate(2) |
|
1.19 |
% |
|
1.27 |
% |
|
0.70 |
% |
|||
Expected life(in years)(3) |
|
3.9 |
|
4.5 |
|
4.5 |
(1) |
Expected volatility is measured using historical daily price changes of the Company’s stock over the respective expected term of the options and the implied volatility derived from the market prices of the Company’s traded opt ions. |
(2) |
The risk-free rate for periods within the contractual term of the stock options is based on the U.S. Treasury yield curve in effect at the time of grant. |
(3) |
The expected life is the number of years the Company estimates that options will be out standing prior to exercise. The Company’s computation of expected life was determined using a lattice-based model incorporating historical post vest exercise and employee termination behavior. |
The following table summarizes information on options exercised for the periods indicated:
|
|
Year ended December 31, |
|||||||
|
|
2014 |
|
2013 |
|
2012 |
|||
|
|
|
|
(in thousands) |
|
|
|||
Cash received from options exercised |
|
$ |
12,056 |
|
$ |
2,199 |
|
$ |
5,409 |
Intrinsic value of options exercised |
|
$ |
8,390 |
|
$ |
2,509 |
|
$ |
6,800 |
RSAs and RSUs
RSAs are stock awards issued to employees that are subject to specified restrictions and a risk of forfeiture. RSAs entitle holders to dividends. The restrictions typically lapse over one to five years. The fair value of the awards is determined and fixed based on the closing price of the Company’s common stock on the trading day prior to the date of grant. RSUs are stock awards issued to employees that entitle the holder to receive shares of common stock as the awards vest, typically over one to five years. RSUs do not entitle holders to dividends. The fair value of the awards is determined and fixed based on the closing price of the Company’s common stock on the trading day prior to the date of grant reduced by the present value of dividends expected to be paid on the Company’s stock prior to vesting of the RSUs, which is currently assumed to be zero.
The following table summarizes the activity of RSAs and RSUs under the Plans:
|
|
|
|
Weighted |
|
|
|
|
|
|
Average |
|
|
|
|
Number of |
|
Grant Date |
|
|
|
|
Shares |
|
Fair Value |
|
|
|
|
(in thousands) |
|
|
|
|
Outstanding at December 31, 2011 |
|
618 |
|
$ |
33.61 |
|
Granted |
|
324 |
|
32.62 |
|
|
Released |
|
(167 |
) |
20.60 |
|
|
Forfeitures |
|
(82 |
) |
34.98 |
|
|
Outstanding at December 31, 2012 |
|
693 |
|
$ |
36.11 |
|
Granted |
|
798 |
|
33.16 |
|
|
Released |
|
(207 |
) |
32.44 |
|
|
Forfeitures |
|
(126 |
) |
34.33 |
|
|
Outstanding at December 31, 2013 |
|
1,158 |
|
$ |
34.93 |
|
Granted |
|
395 |
|
34.18 |
|
|
Released |
|
(183 |
) |
38.65 |
|
|
Forfeitures |
|
(133 |
) |
33.66 |
|
|
Outstanding at December 31, 2014 |
|
1,237 |
|
$ |
34.27 |
|
Released shares include the impact of restricted stock shares that were cancelled due to elections by employees to cover withholding taxes with such shares. The total fair value of shares that vested during the years ended December 31, 2014, 2013, and 2012 was $6.2 million, $7.9 million, and $5.4 million, respectively.
|
Note 17 — Retirement Plans
The Company maintains a defined contribution plan for the benefit of its U.S. employees. The plan is intended to be tax qualified and contains a qualified cash or deferred arrangement as described under Section 401(k) of the Internal Revenue Code. Eligible participants may elect to contribute a percentage of their base compensation, and the Company may make matching contributions, generally equal to fifty cents for every dollar employees contribute, up to the lesser of three percent of the employee’s eligible compensation or three percent of the maximum the employee is permitted to contribute under then current Internal Revenue Code limitations. Generally, the plan calls for vesting in the Company contributions over the initial five years of a participant’s employment. The Company maintains a similar type of contribution plan at one of its foreign subsidiaries. The Company recognized costs associated with these plans of approximately $1.9 million, $2.3 million, and $2.5 million for fiscal years 2014, 2013, and 2012, respectively.
The Company acquired a defined benefit plan in fiscal year 2000 that had been frozen as of September 30, 1991, and no further benefits have been accrued by participants since that date. All participants are fully vested in their respective benefits. The plan year end is September 30 and is subject to the provisions of the Employee Retirement Income Security Act of 1974. At September 30, 2014, the plan had 73 participants and $1.5 million in contract assets.
|
Note 18 — Income Taxes
The amounts of income from continuing operations before income taxes attributable to domestic and foreign operations were as follows:
|
|
Year ended December 31, |
|
|||||||||
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
|||
|
|
|
|
|
(in thousands) |
|
|
|
|
|||
Domestic |
|
$ |
(95,195 |
) |
|
$ |
(84,942 |
) |
|
$ |
5,811 |
|
Foreign |
|
16,841 |
|
|
13,732 |
|
|
32,375 |
|
|||
|
|
$ |
(78,354 |
) |
|
$ |
(71,210 |
) |
|
$ |
38,186 |
|
Significant components of the provision (benefit) for income taxes from continuing operations consisted of the following:
|
|
Year ended December 31, |
|
|||||||
|
|
2014 |
|
2013 |
|
2012 |
|
|||
|
|
|
|
(in thousands) |
|
|
|
|||
Current: |
|
|
|
|
|
|
|
|||
Federal |
|
$ |
(2,464 |
) |
$ |
(21,022 |
) |
$ |
2,515 |
|
Foreign |
|
2,325 |
|
3,921 |
|
7,576 |
|
|||
State and local |
|
55 |
|
148 |
|
(317 |
) |
|||
Total current provision (benefit) for income taxes |
|
(84 |
) |
(16,953 |
) |
9,774 |
|
|||
Deferred: |
|
|
|
|
|
|
|
|||
Federal |
|
(11,230 |
) |
(11,589 |
) |
(482 |
) |
|||
Foreign |
|
(291 |
) |
(462 |
) |
727 |
|
|||
State and local |
|
191 |
|
57 |
|
1,638 |
|
|||
Total deferred provision (benefit) for income taxes |
|
(11,330 |
) |
(11,994 |
) |
1,883 |
|
|||
Total provision (benefit) for income taxes |
|
$ |
(11,414 |
) |
$ |
(28,947 |
) |
$ |
11,657 |
|
The income tax expense from continuing operations was reconciled to the tax expense computed at the U.S. federal statutory tax rate as follows:
|
|
Year ended December 31, |
|
||||||||
|
|
2014 |
|
2013 |
|
2012 |
|
||||
|
|
|
|
(in thousands) |
|
|
|
||||
Income tax provision (benefit) at U.S. statutory rates |
|
$ |
(27,424 |
) |
$ |
(24,923 |
) |
$ |
13,366 |
|
|
State taxes, net of U.S. federal impact |
|
(662 |
) |
(1,554 |
) |
(89 |
) |
||||
Effect of international operations |
|
(6,160 |
) |
(4,275 |
) |
(2,387 |
) |
||||
Domestic production activities deduction |
|
— |
|
1,554 |
|
(489 |
) |
||||
Research and development tax credit |
|
(1,935 |
) |
(3,151 |
) |
(3,013 |
) |
||||
Net change in valuation allowance |
|
27,156 |
|
2,420 |
|
2,943 |
|
||||
Change in accrual for unrecognized tax benefits |
|
(1,940 |
) |
577 |
|
533 |
|
||||
Goodwill impairment |
|
9,786 |
|
— |
|
— |
|
||||
Change in contingent consideration |
|
(10,279 |
) |
290 |
|
— |
|
||||
Other |
|
44 |
|
115 |
|
793 |
|
||||
Total provision (benefit) for income taxes |
|
$ |
(11,414 |
) |
$ |
(28,947 |
) |
$ |
11,657 |
|
The Company entered into an agreement during the fourth quarter of fiscal year 2014 that concludes that it will receive a tax incentive pursuant to a negotiated tax holiday for the period from August 1, 2010 through July 31, 2014 in one of its foreign subsidiaries. As such, the Company reversed a $4.9 million tax liability, which represents the cumulative effect of calculating the tax provision using the incentive tax rate as compared to the foreign country’s statutory rate through the end of 2013.
In connection with the acquisition of PSP, the Company recorded a $2.7 million deferred tax liability related to the difference between the basis of assets acquired as calculated for financial reporting purposes as compared with the basis of assets acquired as calculated for income tax purposes. Refer to Note 5, “Business combinations” for additional information on the acquisition of PSP.
The Company did not record any excess tax benefits related to share-based compensation in 2014 or 2013, which would have been $0.6 million and $0.5 million, respectively. In the future, the Company will record the excess tax benefits to additional paid-in capital for financial reporting purposes when the net operating losses for excess tax benefits are utilized and reduce the Company’s current taxes payable. During 2012, the tax benefit from share-based incentive awards that was deductible for tax purposes exceeded that which was recorded for financial reporting purposes by $2.1 million and was recorded to “Additional paid-in capital” in the Consolidated Balance Sheets.
Deferred income taxes reflect the effect of temporary differences between the carrying amounts of assets and liabilities recognized for financial reporting purposes and the amounts recognized for tax purposes. The tax effects of the temporary differences were as follows:
|
|
December 31, |
|
||||
|
|
2014 |
|
2013 |
|
||
|
|
(in thousands) |
|
||||
Deferred tax assets: |
|
|
|
|
|
||
Inventory valuation |
|
$ |
8,244 |
|
$ |
6,983 |
|
Net operating losses and credit carry forwards |
|
39,750 |
|
18,972 |
|
||
Warranty and installation accruals |
|
2,452 |
|
3,002 |
|
||
Share-based compensation |
|
11,794 |
|
10,638 |
|
||
Other |
|
2,647 |
|
3,716 |
|
||
Total deferred tax assets |
|
64,887 |
|
43,311 |
|
||
Valuation allowance |
|
(34,909 |
) |
(7,753 |
) |
||
Net deferred tax assets |
|
29,978 |
|
35,558 |
|
||
|
|
|
|
|
|
||
Deferred tax liabilities: |
|
|
|
|
|
||
Purchased intangible assets |
|
34,018 |
|
45,208 |
|
||
Undistributed earnings |
|
1,047 |
|
1,737 |
|
||
Depreciation |
|
2,274 |
|
4,711 |
|
||
Total deferred tax liabilities |
|
37,339 |
|
51,656 |
|
||
Net deferred taxes |
|
$ |
(7,361 |
) |
$ |
(16,098 |
) |
The Company did not make a provision for U.S. federal income taxes or additional withholding taxes on amounts invested in foreign subsidiaries in the amounts of $115.8 million and $101.0 million at December 31, 2014 and 2013, respectively, since such amounts are indefinitely reinvested. As such, it is not practicable to determine the amount of tax associated with such unremitted earnings. For financial reporting purposes, these balances are determined as amounts that exceed the tax basis of such investments. The Company has provided U.S. federal income taxes and additional withholding taxes on foreign earnings that are anticipated to be remitted.
As of December 31, 2014, the Company had U.S. federal net operating loss carryforwards of approximately $53.3 million that will expire between 2031 and 2034, if not utilized. As of December 31, 2014, the Company had U.S. foreign tax credit carryforwards of $7.0 million that will expire between 2023 and 2024 and U.S. federal research and development credits of $9.2 million that will expire between 2031 and 2034. The Company also has state and local net operating losses and credit carryforwards.
The Company makes assessments to estimate if sufficient taxable income will be generated in the future to use existing deferred tax assets. The Company’s cumulative three year loss in its domestic operations led to a full valuation allowance against the Company’s U.S. deferred tax assets, since the Company could not conclude that such amounts are realizable on a more-likely-than-not basis. As such, the Company increased the valuation allowance by approximately $27.2 million at December 31, 2014.
The Company may amortize indefinite-lived intangible assets for tax purposes, which are not amortizable for financial reporting purposes. The deferred tax liability at December 31, 2014 relates to the tax effect of differences between financial reporting and tax bases of intangible assets that are not expected to reverse within the Company’s net operating loss carryforward period.
A roll-forward of the Company’s uncertain tax positions for all U.S. federal, state, and foreign tax jurisdictions was as follows:
|
|
December 31, |
|
|||||||
|
|
2014 |
|
2013 |
|
2012 |
|
|||
|
|
(in thousands) |
|
|||||||
Balance at beginning of year |
|
$ |
6,228 |
|
$ |
5,818 |
|
$ |
4,748 |
|
Additions for tax positions related to current year |
|
244 |
|
324 |
|
435 |
|
|||
Additions for tax positions related to prior years |
|
199 |
|
477 |
|
742 |
|
|||
Reductions for tax positions related to prior years |
|
(2,345 |
) |
(224 |
) |
(59 |
) |
|||
Reductions due to the lapse of the applicable statute of limitations |
|
(38 |
) |
— |
|
(48 |
) |
|||
Settlements |
|
(12 |
) |
(167 |
) |
— |
|
|||
Balance at end of year |
|
$ |
4,276 |
|
$ |
6,228 |
|
$ |
5,818 |
|
The amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $4.3 million and $6.2 million at December 31, 2014 and 2013, respectively. The gross amount of interest and penalties accrued in income tax payable in the Consolidated Balance Sheets was approximately $0.3 million and $0.8 million at December 31, 2014 and 2013, respectively.
The Company or one of its subsidiaries files income tax returns in the United States federal jurisdiction and various states, local, and foreign jurisdictions. All material federal income tax matters have been concluded for years through 2010 subject to subsequent utilization of net operating losses generated in such years. The recently settled 2010 IRS examination resulted in the reversal of approximately $2.3 million of liabilities relating to uncertain tax positions. The 2011 federal tax return is currently under examination. All material state and local income tax matters have been reviewed through 2008. The majority of the Company’s foreign jurisdictions have been reviewed through 2009. Principally all of the Company’s foreign jurisdictions remain open with respect to the tax years from 2010 through 2014. The Company does not anticipate that its uncertain tax position will change significantly within the next twelve months subject to the completion of the ongoing federal tax audit and any resultant settlement.
|
Note 19 — Segment Reporting and Geographic Information
The Company operates and measures its results in one operating segment and therefore has one reportable segment: the design, development, manufacture, and support of thin film process equipment primarily sold to make electronic devices. The Company’s Chief Operating Decision Maker, the Chief Executive Officer, evaluates performance of the Company and makes decisions regarding allocation of resources based on total Company results.
Revenue by major class of product is as follows:
|
|
Year ended December 31, |
|
|||||||
|
|
2014 |
|
2013 |
|
2012 |
|
|||
|
|
(in thousands) |
|
|||||||
MOCVD |
|
$ |
279,751 |
|
$ |
219,914 |
|
$ |
314,152 |
|
MBE |
|
28,033 |
|
29,419 |
|
49,029 |
|
|||
Surface Processing |
|
7,906 |
|
— |
|
— |
|
|||
Ion Beam and other |
|
77,183 |
|
82,416 |
|
152,839 |
|
|||
Total Revenue |
|
$ |
392,873 |
|
$ |
331,749 |
|
$ |
516,020 |
|
The Company’s significant operations outside the United States include sales and service offices in Asia-Pacific and Europe. For geographic reporting, revenues are attributed to the location in which the customer facility is located. Revenue and long-lived tangible assets by geographic region is as follows:
|
|
Net Sales to Unaffiliated Customers |
|
Long-Lived Tangible Assets |
|
||||||||||||||
|
|
2014 |
|
2013 |
|
2012 |
|
2014 |
|
2013 |
|
2012 |
|
||||||
|
|
(in thousands) |
|
||||||||||||||||
United States |
|
$ |
44,060 |
|
$ |
57,609 |
|
$ |
83,317 |
|
$ |
63,349 |
|
$ |
66,002 |
|
$ |
74,497 |
|
Asia Pacific(1) |
|
311,182 |
|
252,199 |
|
390,995 |
|
15,325 |
|
23,042 |
|
23,769 |
|
||||||
EMEA(2) and other |
|
37,631 |
|
21,941 |
|
41,708 |
|
78 |
|
95 |
|
36 |
|
||||||
Total |
|
$ |
392,873 |
|
$ |
331,749 |
|
$ |
516,020 |
|
$ |
78,752 |
|
$ |
89,139 |
|
$ |
98,302 |
|
(1) |
Net sales to customers in China were 40%, 45%, and 42% of total net sales for the years ended December 31, 2014, 2013, 2012, respectively. |
(2) |
Consists of Europe, the Middle East, and Africa |
|
Note 20 — Selected Quarterly Financial Information (unaudited)
The following table presents selected unaudited financial data for each fiscal quarter of 2014 and 2013. Although unaudited, this information has been prepared on a basis consistent with the Company’s audited Consolidated Financial Statements and, in the opinion of management, reflects all adjustments (consisting only of normal recurring adjustments) that are considered necessary for a fair presentation of this information in accordance with GAAP. Such quarterly results are not necessarily indicative of future results of operations.
|
|
Fiscal 2014 |
|
Fiscal 2013 |
|
|||||||||||||||||||||
|
|
Q1 |
|
Q2 |
|
Q3 |
|
Q4 |
|
Q1 |
|
Q2 |
|
Q3 |
|
Q4 |
|
|||||||||
|
|
(in thousands, except per share amounts) |
||||||||||||||||||||||||
Net sales |
|
$ |
90,841 |
|
$ |
95,122 |
|
$ |
93,341 |
|
$ |
113,569 |
|
$ |
61,781 |
|
$ |
97,435 |
|
$ |
99,324 |
|
$ |
73,209 |
|
|
Gross profit |
|
$ |
33,777 |
|
$ |
30,673 |
|
$ |
|
32,558 |
|
$ |
37,874 |
|
$ |
22,552 |
|
$ |
34,640 |
|
$ |
30,308 |
|
$ |
15,642 |
|
Net income (loss) |
|
$ |
19,160 |
|
$ |
(15,211) |
|
$ |
|
(13,977) |
|
$ |
(56,912) |
|
$ |
(10,071) |
|
$ |
(4,081) |
|
$ |
(6,026) |
|
$ |
(22,085) |
|
Basic income (loss) per common share |
|
$ |
0.49 |
|
$ |
(0.39) |
|
$ |
|
(0.35) |
|
$ |
(1.44) |
|
$ |
(0.26) |
|
$ |
(0.11) |
|
$ |
(0.16) |
|
$ |
(0.57) |
|
Diluted income (loss) per common share |
|
$ |
0.48 |
|
$ |
(0.39) |
|
$ |
|
(0.35) |
|
$ |
(1.44) |
|
$ |
(0.26) |
|
$ |
(0.11) |
|
$ |
(0.16) |
|
$ |
(0.57) |
|
Impairment Charge
During the fourth quarter of 2014, the Company recorded a non-cash asset impairment charge of $53.9 million related to its ALD reporting unit. Refer to Note 6, “Goodwill and Intangible Assets,” for additional information.
Acquisition of PSP
During the fourth quarter of 2014, the Company acquired PSP. The results of operations of PSP have been included in the consolidated financial statements since that date. Refer to Note 5, “Business Combinations,” for additional information.
Change in Contingent Consideration
During the first quarter of 2014, the Company recorded a non-cash gain of $29.4 million related to a change in the Company’s assessment of potential future payments related to its ALD reporting unit. Refer to Note 5, “Business Combinations,” for additional information.
Acquisition of ALD
During the fourth quarter of 2013, the Company acquired ALD. The results of operations of ALD have been included in the consolidated financial statements since that date. Refer to Note 5, “Business Combinations,” for additional information.
|
Schedule II — Valuation and Qualifying Accounts
|
|
|
|
Additions |
|
|
|
|
|
|||||||
|
|
|
|
Charged |
|
|
|
|
|
|
|
|||||
|
|
Balance at |
|
(Credited) |
|
Charged to |
|
|
|
Balance at |
|
|||||
|
|
Beginning |
|
to Costs and |
|
Other |
|
|
|
End of |
|
|||||
Description |
|
of Period |
|
Expenses |
|
Accounts |
|
Deductions |
|
Period |
|
|||||
Deducted from asset accounts: |
|
|
|
|
|
(in thousands) |
|
|
|
|
|
|||||
Year ended December 31, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|||||
Allowance for doubtful accounts |
|
$ |
2,438 |
|
$ |
(1,814 |
) |
$ |
325 |
|
$ |
(218 |
) |
$ |
731 |
|
Valuation allowance in net deferred tax assets |
|
7,753 |
|
27,156 |
|
— |
|
— |
|
34,909 |
|
|||||
|
|
$ |
10,191 |
|
$ |
25,342 |
|
$ |
325 |
|
$ |
(218 |
) |
$ |
35,640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Year ended December 31, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|||||
Allowance for doubtful accounts |
|
$ |
492 |
|
$ |
1,946 |
|
$ |
— |
|
$ |
— |
|
$ |
2,438 |
|
Valuation allowance in net deferred tax assets |
|
4,708 |
|
2,420 |
|
625 |
|
— |
|
7,753 |
|
|||||
|
|
$ |
5,200 |
|
$ |
4,366 |
|
$ |
625 |
|
$ |
— |
|
$ |
10,191 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Year ended December 31, 2012 |
|
|
|
|
|
|
|
|
|
|
|
|||||
Allowance for doubtful accounts |
|
$ |
468 |
|
$ |
198 |
|
$ |
— |
|
$ |
(174 |
) |
$ |
492 |
|
Valuation allowance in net deferred tax assets |
|
1,765 |
|
2,943 |
|
— |
|
— |
|
4,708 |
|
|||||
|
|
$ |
2,233 |
|
$ |
3,141 |
|
$ |
— |
|
$ |
(174 |
) |
$ |
5,200 |
|
|
(b) Basis of Presentation
The accompanying audited Consolidated Financial Statements of the Company have been prepared in accordance with United States generally accepted accounting principles (GAAP). The Company reports interim quarters on a 13-week basis ending on the last Sunday of each period, which is determined at the start of each year. The Company’s fourth quarter always ends on the last day of the calendar year, December 31. During 2014 the interim quarters ended on March 30, June 29 and September 28, and during 2013 the interim quarters ended on March 31, June 30 and September 29. The Company reports these interim quarters as March 31, June 30 and September 30 in its interim consolidated financial statements.
(c) Use of Estimates
The preparation of financial statements in conformity with GAAP requires 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, these estimates may ultimately differ from actual results. Significant items subject to such estimates and assumptions include: (i) the best estimate of selling price for the Company’s products and services; (ii) allowances for doubtful accounts and inventory obsolescence; (iii) the useful lives and expected future cash flows of property, plant, and equipment and identifiable intangible assets; (iv) the fair value of the Company’s reporting units and related goodwill; (v) the fair value, less cost to sell, of assets held for sale; (vi) investment valuations and the valuation of derivatives, deferred tax assets, and assets acquired in business combinations; (vii) the recoverability of long lived assets; (viii) liabilities for product warranty and legal contingencies; (ix) share-based compensation; and (x) income tax uncertainties. Actual results could differ from those estimates.
(d) Principles of Consolidation
The Consolidated Financial Statements include the accounts of the Company and its subsidiaries. Intercompany balances and transactions have been eliminated in consolidation. Companies acquired during each reporting period are reflected in the results of the Company effective from their respective dates of acquisition through the end of the reporting period.
(e) Foreign Currencies
Assets and liabilities of the Company’s foreign subsidiaries that operate using local functional currencies are translated using the exchange rates in effect at the balance sheet date. Results of operations are translated using monthly average exchange rates. Adjustments arising from the translation of the foreign currency financial statements of the Company’s subsidiaries into U.S. dollars, including intercompany transactions of a long-term nature, are reported as currency translation adjustments in “Accumulated other comprehensive income” in the Consolidated Balance Sheets. Foreign currency transaction gains or losses are included in “Other, net” in the Consolidated Statements of Operations.
(f) Revenue Recognition
The Company recognizes revenue when all of the following criteria have been met: persuasive evidence of an arrangement exists with a customer; delivery of the specified products has occurred or services have been rendered; prices are contractually fixed or determinable; and collectability is reasonably assured. Revenue is recorded including shipping and handling costs and excluding applicable taxes related to sales. A significant portion of the Company’s revenue is derived from contractual arrangements with customers that have multiple elements, such as systems, upgrades, components, spare parts, maintenance, and service plans. For sales arrangements that contain multiple elements, the arrangement is split into separate units of accounting if the individually delivered elements have value to the customer on a standalone basis. The Company also evaluates whether multiple transactions with the same customer or related parties should be considered part of a multiple element arrangement, 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 element based on the following selling price hierarchy: vendor-specific objective evidence (“VSOE”) if available; third party evidence (“TPE”) if VSOE is not available; or the best estimate of selling price (“BESP”) if neither VSOE nor TPE is available. The Company uses BESP for the majority of the elements in its arrangements.
The Company considers many facts when evaluating each of its sales arrangements to determine the timing of revenue recognition including its contractual obligations, the customer’s creditworthiness, 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 the majority of the arrangements, a customer source inspection of the system is performed in the Company’s facility or test data is sent to the customer documenting that the system is functioning to the agreed upon specifications prior to delivery. Historically, such source inspection or test data replicates the field acceptance provisions that are performed at the customer’s site prior to final acceptance of the system. As such, the Company objectively demonstrates that the criteria specified in the contractual acceptance provisions are achieved prior to delivery and, therefore, revenue is recognized upon system delivery since there is no substantive contingency remaining related to the acceptance provisions at that date, subject to the retention amount constraint described below. 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 and fully recognized upon the receipt of final customer acceptance, assuming all other revenue recognition criteria have been met.
The Company’s system sales arrangements, including certain upgrades, generally do not contain provisions for right of return, forfeiture, refund, or other purchase price concession. In the rare instances where such provisions are included, all revenue is deferred until such rights expire. The sales arrangements generally include installation. The installation process is not deemed essential to the functionality of the equipment since it is not complex; that is, it does not require significant changes to the features or capabilities of the equipment or involve building elaborate interfaces or connections subsequent to factory acceptance. The Company has a demonstrated history of consistently completing installations in a timely manner and can reliably estimate the costs of such activities. Most customers engage the Company to perform the installation services, although there are other third-party providers with sufficient knowledge who could complete these services. Based on these factors, installation is deemed to be inconsequential or perfunctory relative to the system sale as a whole, and as a result, installation service is not considered a separate element of the arrangement. As such, the Company accrues the cost of the installation at the time of revenue recognition for the system.
In many cases the Company’s products are sold with a billing retention, typically 10% of the sales price (the “retention amount”), which is typically payable by the customer when field acceptance provisions are completed. The amount of revenue recognized upon delivery of a system or upgrade, if any, is limited to the lower of i) the amount billed that is not contingent upon acceptance provisions or ii) the value of the arrangement consideration allocated to the delivered elements, if such sale is part of a multiple-element arrangement.
The Company’s contractual terms with customers in Japan generally specify that title and risk and rewards of ownership transfer upon customer acceptance. As a result, for customers in Japan, revenue is recognized upon the receipt of written customer acceptance. During the fourth quarter of fiscal 2013, the Company began using a distributor for almost all of its product and service sales to customers in Japan. Title passes to the distributor upon shipment, however, due to customary local business practices, the risk and rewards of ownership of the system transfers to the end-customers upon their acceptance. As such, the Company recognizes revenue upon receipt of written acceptance from the end customer.
The Company recognizes revenue related to maintenance and service contracts ratably over the applicable contract term. The Company recognizes revenue from the sales of components, spare parts, and specified service engagements at the time of delivery in accordance with the terms of the applicable sales arrangement.
Incremental direct costs incurred related to the acquisition of a customer contract, such as sales commissions, are expensed as incurred, even if the related revenue is deferred in accordance with the above policy.
(g) Warranty Costs
The Company typically provides standard warranty coverage on its systems for one year from the date of final acceptance by providing labor and parts necessary to repair the systems during the warranty period. The Company accounts for the estimated warranty cost when revenue is recognized on the related system. Warranty cost is included in “Cost of sales” in the Consolidated Statements of Operations. The estimated warranty cost is based on the Company’s historical experience with its systems and regional labor costs. The Company calculates the average service hours by region and parts expense per system utilizing actual service records to determine the estimated warranty charge. The Company updates its warranty estimates on a semiannual basis when the actual product performance and/or field expense differs from original estimates.
(h) Shipping and Handling Costs
Shipping and handling costs are expenses incurred to move, package and prepare the Company’s products for shipment and to move the products to a customer’s designated location. These costs are generally comprised of payments to third-party shippers. Shipping and handling costs are included in “Cost of sales” in the Consolidated Statements of Operations.
(i) Research and Development Costs
Research and development costs are expensed as incurred and include charges for the development of new technology and the transition of existing technology into new products or services.
(j) Advertising Expense
The cost of advertising is expensed as incurred and totaled $0.6 million, $0.5 million, and $0.8 million during 2014, 2013 and 2012, respectively.
(k) Accounting for Share-Based Compensation
Share-based awards exchanged for employee services are accounted for under the fair value method. Accordingly, share-based compensation cost is measured at the grant date based on the fair value of the award. The expense for awards expected to vest is recognized over the employee’s requisite service period (generally the vesting period of the award). Awards expected to vest are estimated based on a combination of historical experience and future expectations.
The Company has elected to treat awards with only service conditions and with graded vesting as one award. Consequently, the total compensation expense is recognized straight-line over the entire vesting period, so long as the compensation cost recognized at any date at least equals the portion of the grant date fair value of the award that is vested at that date.
The Company uses the Black-Scholes option-pricing model to compute the estimated fair value of option awards. The Black-Scholes model includes assumptions regarding dividend yields, expected volatility, expected option term, and risk-free interest rates. See Note 16, “Stock Plans,” for additional information.
In addition to stock options, restricted share awards (“RSAs”) and restricted stock units (“RSUs”) with time-based vesting, the Company issues performance share units and awards (“PSUs” and “PSAs”). Compensation cost for PSUs and PSAs is recognized over the requisite service period based on the timing and expected level of achievement of the performance targets. A change in the assessment of the probability of a performance condition being met is recognized in the period of the change in estimate. At the conclusion of the performance period, the applicable number of shares of RSAs, RSUs, or unrestricted shares granted may vary based on the level of achievement of the performance targets.
(l) Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities from a change in tax rate is recognized in income in the period that includes the enactment date.
The Company recognizes the effect of income tax positions only if those positions are more likely than not to be sustained. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties related to uncertain tax positions in income tax expense. See Note 18, “Income Taxes,” for additional information.
(m) Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, investments, derivative financial instruments used in hedging activities, and accounts receivable. The Company invests in a variety of financial instruments and, by policy, limits the amount of credit exposure with any one financial institution or commercial issuer. The Company has not experienced any material credit losses on its investments.
The Company maintains an allowance reserve for potentially uncollectible accounts for estimated losses resulting from the inability of its customers to make required payments. The Company evaluates its allowance for doubtful accounts based on a combination of factors. In circumstances where specific invoices are deemed to be uncollectible, the Company provides a specific allowance for bad debt against the amount due to reduce the net recognized receivable to the amount reasonably expected to be collected. The Company also provides allowances based on its write-off history. The allowance for doubtful accounts totaled $0.7 million and $2.4 million at December 31, 2014 and 2013, respectively.
To further mitigate the Company’s exposure to uncollectable accounts, the Company may request certain customers provide a negotiable irrevocable letter of credit drawn on a reputable financial institution. These irrevocable letters of credit are typically issued to mature between zero and 90 days from the date the documentation requirements are met, typically when a system ships or upon receipt of final acceptance from the customer. The Company, at its discretion, may monetize these letters of credit on a non-recourse basis after they become negotiable, but before maturity. The fees associates with the monetization are included in “Selling, general, and administrative” in the Consolidated Statements of Operations and were insignificant for the fiscal years ended December 31, 2014, 2013, and 2012.
(n) Fair Value of Financial Instruments
The carrying amounts of financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses reflected in the consolidated financial statements approximate fair value due to their short-term maturities. The fair value of debt for footnote disclosure purposes, including current maturities, is estimated using a discounted cash flow analysis based on the estimated current incremental borrowing rates for similar types of securities.
(o) Cash, Cash Equivalents, and Short-Term Investments
All financial instruments purchased with an original maturity of three months or less at the time of purchase are considered cash equivalents. Such items may include liquid money market accounts, U.S. treasuries, government agency securities, and corporate debt. Investments that are classified as cash equivalents are carried at cost, which approximates fair value.
A portion of the Company’s cash and cash equivalents is held by its subsidiaries throughout the world, frequently in each subsidiary’s respective functional currency, which may not be the U.S. dollar. Approximately 81% and 71% of cash and cash equivalents were maintained outside the United States at December 31, 2014 and 2013, respectively.
Marketable securities are generally classified as available-for-sale for use in current operations, if required, and are 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.” These securities can 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. The specific identification method is used to determine the realized gains and losses on investments.
(p) Inventories
Inventories are stated at the lower of cost or market, with cost determined on a first-in, first-out basis. The Company reviews and sets standard costs on a periodic basis at current manufacturing costs in order to approximate actual costs. The Company assesses the valuation of all inventories, including manufacturing raw materials, work-in-process, finished goods, and spare parts, each quarter. Obsolete inventory or inventory in excess of management’s estimated usage requirement is written down to its estimated market value if less than cost. Estimates of market value include, but are not limited to, management’s forecasts related to the Company’s future manufacturing schedules, customer demand, technological and/or market obsolescence, general market conditions, possible alternative uses, and ultimate realization of excess inventory. If future customer demand or market conditions are less favorable than the Company’s projections, additional inventory write-downs may be required and 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. See Note 5, “Business Combinations,” for additional information.
(q) Business Combinations
The Company allocates the fair value of the purchase consideration of the Company’s acquisitions to the tangible assets, intangible assets, including in-process research and development (“IPR&D”), if any, and liabilities assumed, based on estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. IPR&D is initially capitalized at fair value as an intangible asset with an indefinite life and assessed for impairment thereafter. When a project underlying reported IPR&D is completed, the corresponding amount of IPR&D is amortized over the asset’s estimated useful life. Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred in “Selling, General, and Administrative” in the Consolidated Statements of Operations. See Note 5, “Business Combinations,” for additional information.
(r) Goodwill and Indefinite-Lived Intangibles
Goodwill is an asset representing the future economic benefits arising from assets acquired in a business combination that are not individually identified and separately recognized. Goodwill is measured as the excess of the consideration transferred over the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed. Intangible assets with indefinite useful lives are measured at their respective fair values as of the acquisition date. Intangible assets related to IPR&D projects are considered to be indefinite-lived until the completion or abandonment of the associated R&D efforts. If and when development is complete, the associated assets would be deemed finite-lived and would then be amortized based on their respective estimated useful lives at that point in time. Goodwill and indefinite-lived intangibles are not amortized into results of operations but instead are evaluated for impairment. The Company performs the evaluation in the fourth quarter of each fiscal year or more frequently if impairment indicators arise.
The Company first performs a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount, and, if so, the Company then applies the two-step impairment test. The two-step impairment test first compares the fair value of the Company’s reporting units to their carrying amount. If the fair value of the reporting unit exceeds its carrying amount, goodwill is not impaired, and the Company is not required to perform further testing. If the carrying amount of the reporting unit exceeds its fair value, the Company determines the implied fair value of the reporting unit’s goodwill and, if the carrying amount of the reporting unit’s goodwill exceeds its implied fair value, then the Company records an impairment loss equal to the difference.
The Company determines the fair value of its reporting units based on income and/or market approaches. Determining the fair value of a reporting unit involves the use of significant estimates and assumptions. These estimates and assumptions include revenues and expenses, working capital requirements, residual growth rates, discount rates, and future economic and market conditions. The Company considers historical data, current internal estimates, and market growth trends when developing financial projections. Market participant assumption estimates consider the information being used internally for business planning purposes, however, actual future results may differ from those estimates. Changes in judgments on any of these factors could materially affect the estimated value of the reporting unit.
(s) Long-Lived Assets and Cost Method Investment
Definite-lived intangible assets consist of purchased technology, customer-related intangible assets, patents, trademarks, covenants not-to-compete, and software licenses, and are initially recorded at fair value. Definite-lived intangibles are amortized over their estimated useful lives for periods up to 17 years, in a method reflecting the pattern in which the economic benefits are consumed, or straight-lined if such pattern cannot be reliably determined.
Property, plant and equipment are recorded at cost. Depreciation expense is calculated based on the estimated useful lives of the assets by using the straight-line method. Amortization of leasehold improvements is recognized using the straight-line method over the shorter of the remaining lease term or the estimated useful lives of the improvements.
Long-lived assets and cost method investments are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, a recoverability test is performed utilizing undiscounted cash flows expected to be generated by that asset or asset group compared to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models or, when available, quoted market values and third-party appraisals.
(t) Recent Accounting Pronouncements
In May 2014, the FASB issued ASU No. 2014-09: Revenue from Contracts with Customers. The amendments in this ASU require that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard outlines a five-step model to be used to make the revenue recognition determination and requires new financial statement disclosures. The standard is effective for interim and annual periods beginning after December 15, 2016 and allows entities to choose among different transition alternatives. The Company is evaluating the impact of adopting the standard on its consolidated financial statements and related financial statement disclosures, and has not yet determined which method of adoption will be selected.
The Company has evaluated other pronouncements recently issued but not yet adopted and does not believe the adoption of these pronouncements will have a material impact on the consolidated financial statements.
|
|
|
December 31, 2014 |
|
||||||||||
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
||||
|
|
(in thousands) |
|
||||||||||
U.S. treasuries |
|
$ |
81,527 |
|
$ |
— |
|
$ |
— |
|
$ |
81,527 |
|
Corporate debt |
|
— |
|
39,045 |
|
— |
|
39,045 |
|
||||
Assets held for sale |
|
— |
|
6,000 |
|
— |
|
6,000 |
|
|
|
December 31, 2013 |
|
||||||||||
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
||||
|
|
(in thousands) |
|
||||||||||
U.S. treasuries |
|
$ |
130,977 |
|
$ |
— |
|
$ |
— |
|
$ |
130,977 |
|
Corporate debt |
|
— |
|
77,601 |
|
— |
|
77,601 |
|
||||
Government agency securities |
|
— |
|
61,013 |
|
— |
|
61,013 |
|
||||
Commercial paper |
|
— |
|
11,947 |
|
— |
|
11,947 |
|
||||
Derivative instrument |
|
— |
|
907 |
|
— |
|
907 |
|
||||
Contingent consideration |
|
— |
|
— |
|
(29,368 |
) |
(29,368 |
) |
|
|
Contingent |
|
|
|
|
Consideration |
|
|
|
|
(in thousands) |
|
|
Balance as of December 31, 2013 |
|
$ |
(29,368 |
) |
Fair value adjustment |
|
29,368 |
|
|
Balance as of December 31, 2014 |
|
$ |
— |
|
|
|
|
|
|
|
|
Gross |
|
|
Gross |
|
|
Estimated |
|
||||
|
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair |
|
||||
|
|
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Value |
|
||||
|
|
|
(in thousands) |
|
|||||||||||||
December 31, 2014 |
|
|
|
|
|
|
|
|
|
||||||||
U.S. treasuries |
|
$ |
81,506 |
|
$ |
27 |
|
$ |
(6 |
) |
$ |
81,527 |
|
||||
Corporate debt |
|
39,031 |
|
20 |
|
(6 |
) |
39,045 |
|
||||||||
Total available-for-sale securities |
|
$ |
120,537 |
|
$ |
47 |
|
$ |
(12 |
) |
$ |
120,572 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||||||
December 31, 2013 |
|
|
|
|
|
|
|
|
|
||||||||
U.S. treasuries |
|
$ |
130,956 |
|
$ |
22 |
|
$ |
(1 |
) |
$ |
130,977 |
|
||||
Government agency securities |
|
61,004 |
|
9 |
|
— |
|
61,013 |
|
||||||||
Corporate debt |
|
77,582 |
|
55 |
|
(36 |
) |
77,601 |
|
||||||||
Commercial paper |
|
11,947 |
|
— |
|
— |
|
11,947 |
|
||||||||
Total available-for-sale securities |
|
$ |
281,489 |
|
$ |
86 |
|
$ |
(37 |
) |
$ |
281,538 |
|
|
|
|
December 31, 2014 |
|
|
December 31, 2013 |
|
||||||||||
|
|
|
Estimated |
|
|
Gross |
|
|
Estimated |
|
|
Gross |
|
||||
|
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
||||
|
|
|
Value |
|
|
Losses |
|
|
Value |
|
|
Losses |
|
||||
|
|
(in thousands) |
|
||||||||||||||
U.S. treasuries |
|
$ |
35,001 |
|
$ |
(6 |
) |
$ |
29,068 |
|
$ |
(1 |
) |
||||
Corporate debt |
|
13,069 |
|
(6 |
) |
37,654 |
|
(36 |
) |
||||||||
Total |
|
$ |
48,070 |
|
$ |
(12 |
) |
$ |
66,722 |
|
$ |
(37 |
) |
|
|
|
December 31, 2014 |
|
|||||
|
|
|
|
|
|
Estimated |
|
||
|
|
|
Amortized |
|
|
Fair |
|
||
|
|
|
Cost |
|
|
Value |
|
||
|
|
|
(in thousands) |
|
|||||
Due in one year or less |
|
$ |
74,710 |
|
$ |
74,718 |
|
||
Due after one year through two years |
|
45,827 |
|
45,854 |
|
||||
Total |
|
$ |
120,537 |
|
$ |
120,572 |
|
|
|
|
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 |
|
|
|
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 |
|
|
|
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 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 |
) |
|
|
December 31, |
|
||||
|
|
2014 |
|
2013 |
|
||
|
|
(in thousands) |
|
||||
Revenue |
|
$ |
447,089 |
|
$ |
379,272 |
|
Loss from operations before income taxes |
|
$ |
(68,715 |
) |
$ |
(77,252 |
) |
|
|
Acquisition Date |
|
|
|
|
(October 1, 2013) |
|
|
|
|
(in thousands) |
|
|
Cash (net of cash acquired) |
|
$ |
71,488 |
|
Contingent consideration |
|
33,539 |
|
|
Working capital adjustment |
|
(2,695 |
) |
|
Acquisition date fair value |
|
$ |
102,332 |
|
|
|
Acquisition Date |
|
|
|
|
(October 1, 2013) |
|
|
|
|
(in thousands) |
|
|
Accounts receivable |
|
$ |
1,523 |
|
Inventory |
|
386 |
|
|
Other current assets |
|
512 |
|
|
Property, plant, and equipment |
|
1,917 |
|
|
Intangible assets |
|
99,270 |
|
|
Total identifiable assets acquired |
|
103,608 |
|
|
|
|
|
|
|
Current liabilities |
|
4,370 |
|
|
Estimated deferred tax liability, net |
|
32,426 |
|
|
Total liabilities assumed |
|
36,796 |
|
|
|
|
|
|
|
Net identifiable assets acquired |
|
66,812 |
|
|
Goodwill |
|
35,520 |
|
|
Net assets acquired |
|
$ |
102,332 |
|
|
|
Acquisition Date |
|
|||
|
|
(October 1, 2013) |
|
|||
|
|
Amount |
|
Uuseful life |
|
|
|
|
(in thousands) |
|
|
|
|
Technology |
|
$ |
73,160 |
|
14 years |
|
Customer relationships |
|
20,630 |
|
8 years |
|
|
In-process research and development |
|
5,070 |
|
To be determined |
||
Trademarks and trade names |
|
140 |
|
1 year |
|
|
Non-compete agreement |
|
270 |
|
3 years |
|
|
Intangible assets acquired |
|
$ |
99,270 |
|
|
|
|
|
December 31, |
|
||||
|
|
2013 |
|
2012 |
|
||
|
|
(in thousands) |
|
||||
Revenue |
|
$ |
346,319 |
|
$ |
522,029 |
|
Income (loss) from operations before income taxes |
|
$ |
(60,983) |
|
$ |
16,840 |
|
|
|
|
Gross |
|
|
|
|
|
|||
|
|
Carrying |
|
Accumulated |
|
Net |
|
|||
|
|
Amount |
|
Impairment |
|
Amount |
|
|||
|
|
(in thousands) |
|
|||||||
As of December 31, 2012 |
|
$ |
151,069 |
|
$ |
95,241 |
|
$ |
55,828 |
|
Acquisition |
|
35,520 |
|
— |
|
35,520 |
|
|||
As of December 31, 2013 |
|
186,589 |
|
95,241 |
|
91,348 |
|
|||
Acquisition |
|
51,396 |
|
— |
|
51,396 |
|
|||
Purchase price adjustments |
|
173 |
|
— |
|
173 |
|
|||
Impairments |
|
— |
|
27,958 |
|
(27,958 |
) |
|||
As of December 31, 2014 |
|
$ |
238,158 |
|
$ |
123,199 |
|
$ |
114,959 |
|
|
|
|
|
December 31, 2014 |
|
December 31, 2013 |
|
||||||||||||||
|
|
Weighted |
|
|
|
Accumulated |
|
|
|
|
|
Accumulated |
|
|
|
||||||
|
|
Average Remaining |
|
Gross |
|
Amortization |
|
|
|
Gross |
|
Amortization |
|
|
|
||||||
|
|
Amortization |
|
Carrying |
|
and |
|
Net |
|
Carrying |
|
and |
|
Net |
|
||||||
|
|
Period |
|
Amount |
|
Impairment |
|
Amount |
|
Amount |
|
Impairment |
|
Amount |
|
||||||
|
|
(in years) |
|
(in thousands) |
|
||||||||||||||||
Technology |
|
9.6 |
|
$ |
222,358 |
|
$ |
106,342 |
|
$ |
116,016 |
|
$ |
182,408 |
|
$ |
97,524 |
|
$ |
84,884 |
|
Customer relationships |
|
13.9 |
|
69,350 |
|
35,549 |
|
33,801 |
|
35,040 |
|
14,721 |
|
20,319 |
|
||||||
Trademarks and tradenames |
|
3.5 |
|
3,050 |
|
1,096 |
|
1,954 |
|
1,970 |
|
763 |
|
1,207 |
|
||||||
Indefinite-lived trademark |
|
— |
|
2,900 |
|
— |
|
2,900 |
|
2,900 |
|
— |
|
2,900 |
|
||||||
IPR&D |
|
— |
|
5,070 |
|
5,070 |
|
— |
|
5,070 |
|
— |
|
5,070 |
|
||||||
Other |
|
1.1 |
|
5,485 |
|
848 |
|
4,637 |
|
765 |
|
429 |
|
336 |
|
||||||
Total |
|
10.2 |
|
$ |
308,213 |
|
$ |
148,905 |
|
$ |
159,308 |
|
$ |
228,153 |
|
$ |
113,437 |
|
$ |
114,716 |
|
|
|
|
Amortization |
|
|
|
|
|
(in thousands) |
|
|
2015 |
|
|
$ |
27,003 |
|
2016 |
|
|
20,969 |
|
|
2017 |
|
|
18,100 |
|
|
2018 |
|
|
16,492 |
|
|
2019 |
|
|
15,235 |
|
|
Thereafter |
|
|
58,609 |
|
|
Total |
|
|
$ |
156,408 |
|
|
|
|
December 31, |
|
||||
|
|
2014 |
|
2013 |
|
||
|
|
(in thousands) |
|
||||
Materials |
|
$ |
30,319 |
|
$ |
34,301 |
|
Work-in-process |
|
25,096 |
|
12,900 |
|
||
Finished goods |
|
6,056 |
|
12,525 |
|
||
Total |
|
$ |
61,471 |
|
$ |
59,726 |
|
|
|
|
|
December 31, |
|
|
Average |
|
||||
|
|
|
2014 |
|
2013 |
|
|
Useful Life |
|
||
|
|
(in thousands) |
|
|
|
|
|||||
Land |
|
$ |
9,392 |
|
$ |
12,535 |
|
|
|
||
Building and improvements |
|
51,979 |
|
52,050 |
|
10 – 40 years |
|
||||
Machinery and equipment |
|
104,815 |
|
110,228 |
|
3 – 10 years |
|
||||
Leasehold improvements |
|
4,356 |
|
5,888 |
|
3 – 7 years |
|
||||
Gross property,plant and equipment |
|
170,542 |
|
180,701 |
|
|
|
||||
Less: accumulated depreciation and amortization |
|
91,790 |
|
91,562 |
|
|
|
||||
Net property, plant, and equipment |
|
$ |
78,752 |
|
$ |
89,139 |
|
|
|
|
|
|
December 31, |
|
||||
|
|
2014 |
|
2013 |
|
||
|
|
(in thousands) |
|
||||
Payroll and related benefits |
|
$ |
26,605 |
|
$ |
11,020 |
|
Sales, use, and other taxes |
|
1,776 |
|
5,402 |
|
||
Contingent consideration |
|
— |
|
20,098 |
|
||
Warranty |
|
5,411 |
|
5,662 |
|
||
Restructuring liability |
|
1,428 |
|
533 |
|
||
Other |
|
13,198 |
|
8,369 |
|
||
Total |
|
$ |
48,418 |
|
$ |
51,084 |
|
|
|
|
|
2012 |
|
|||||||||||
|
|
Solar |
|
|
|
|
|
|
|
||||||
|
|
|
Systems |
|
|
Metrology |
|
|
Total |
|
|||||
|
|
(in thousands) |
|
||||||||||||
Net sales |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|||
Net income (loss) from discontinued operations |
|
$ |
(62 |
) |
|
$ |
4,461 |
|
|
$ |
4,399 |
|
|
|
|
Personnel |
|
|
|
|
|
|
|
||||||
|
|
Severance and |
|
|
Facility |
|
|
|
|
||||||
|
|
|
Related Costs |
|
|
Closing Costs |
|
|
Total |
|
|||||
|
|
(in thousands) |
|
||||||||||||
Balance at December 31, 2012 |
|
$ |
1,875 |
|
|
$ |
— |
|
|
$ |
1,875 |
|
|||
Provision |
|
1,485 |
|
|
— |
|
|
1,485 |
|
||||||
Payments |
|
(2,827 |
) |
|
— |
|
|
(2,827 |
) |
||||||
Balance at December 31, 2013 |
|
533 |
|
|
— |
|
|
533 |
|
||||||
Provision |
|
4,012 |
|
|
382 |
|
|
4,394 |
|
||||||
Payments |
|
(3,117 |
) |
|
(382 |
) |
|
(3,499 |
) |
||||||
Balance at December 31, 2014 |
|
$ |
1,428 |
|
|
$ |
— |
|
|
$ |
1,428 |
|
|
|
|
|
December 31, |
|
||||||
|
|
|
2014 |
|
|
2013 |
|
|||
|
|
(in thousands) |
|
|||||||
Balance, beginning of the year |
|
$ |
5,662 |
|
|
$ |
4,942 |
|
||
Addition for new warranties issued |
|
3,484 |
|
|
5,291 |
|
||||
Addition from PSP acquisition |
|
809 |
|
|
— |
|
||||
Settlements |
|
(3,802 |
) |
|
(5,580 |
) |
||||
Changes in estimate |
|
(742 |
) |
|
1,009 |
|
||||
Balance, end of the year |
|
$ |
5,411 |
|
|
$ |
5,662 |
|
Minimum lease commitments at December 31, 2014 for property and equipment under operating lease agreements (exclusive of renewal options) are payable as follows:
|
|
Operating |
|
||
|
|
|
Leases |
|
|
Payments due by period: |
|
|
(in thousands) |
|
|
2015 |
|
$ |
2,322 |
|
|
2016 |
|
2,423 |
|
||
2017 |
|
1,993 |
|
||
2018 |
|
1,224 |
|
||
2019 |
|
526 |
|
||
Thereafter |
|
2,700 |
|
||
Total |
|
$ |
11,188 |
|
|
|
Accounts Receivable |
|
Net Sales for the Year Ended |
|
|||||||||||
|
|
Year ended December 31, |
|
December 31, |
|
|||||||||||
Customer |
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
2012 |
|
|||||
Customer A |
|
|
* |
|
|
* |
|
|
15% |
|
|
* |
|
|
* |
|
Customer B |
|
|
20% |
|
|
10% |
|
|
11% |
|
|
14% |
|
|
* |
|
Customer C |
|
|
13% |
|
|
11% |
|
|
* |
|
|
* |
|
|
* |
|
Customer D |
|
|
* |
|
|
23% |
|
|
* |
|
|
* |
|
|
14% |
|
* Less than 10% of aggregate accounts receivable or net sales.
|
|
|
December 31, |
|
||||||
|
|
|
2014 |
|
|
2013 |
|
|||
|
|
(in thousands) |
|
|||||||
China |
|
$ |
17,911 |
|
|
$ |
4,130 |
|
||
Korea |
|
8,118 |
|
|
2,411 |
|
||||
Thailand |
|
6,324 |
|
|
2,041 |
|
||||
Taiwan |
|
5,838 |
|
|
427 |
|
||||
Other |
|
3,986 |
|
|
4,890 |
|
||||
Asia Pacific |
|
42,177 |
|
|
13,899 |
|
||||
United States |
|
13,139 |
|
|
8,369 |
|
||||
EMEA and other |
|
4,769 |
|
|
1,555 |
|
||||
Total |
|
$ |
60,085 |
|
|
$ |
23,823 |
|
|
|
|
|
Total |
|
|
|
|
(in thousands) |
|
||
2015 |
|
$ |
314 |
|
|
2016 |
|
340 |
|
||
2017 |
|
368 |
|
||
2018 |
|
398 |
|
||
2019 |
|
427 |
|
||
Total |
|
1,847 |
|
||
Less current portion |
|
314 |
|
||
Total (less current maturities) |
|
$ |
1,533 |
|
|
|
|
Fair |
|
Maturity |
|
Notional |
|
||||||
|
|
|
Value |
|
Dates |
|
Amount |
|
|||||
|
|
(in thousands) |
|
||||||||||
December 31, 2013 |
|
|
|
|
|
|
|
||||||
Foreign currency exchange forwards |
|
$ |
1 |
|
January 2014 |
|
$ |
4,700 |
|
||||
Foreign currency collar |
|
906 |
|
October 2014 |
|
34,069 |
|
||||||
Total |
|
$ |
907 |
|
|
|
$ |
38,769 |
|
|
|
Year ended December 31, |
|
|||||||
|
|
2014 |
|
2013 |
|
2012 |
|
|||
|
|
(in thousands) |
|
|||||||
Foreign currency exchange forwards |
|
$ |
(89 |
) |
$ |
248 |
|
$ |
333 |
|
Foreign currency collar |
|
(457 |
) |
906 |
|
— |
|
|||
|
|
$ |
(546 |
) |
$ |
1,154 |
|
$ |
333 |
|
|
|
|
|
Foreign |
|
|
Minimum |
|
|
Unrealized |
|
|
|
|
||||
|
|
|
Currency |
|
|
Pension |
|
|
Gains (losses) on |
|
|
|
|
||||
|
|
|
Translation |
|
|
Liability |
|
|
AFS Securities |
|
|
Total |
|
||||
|
|
(in thousands) |
|
||||||||||||||
Balance at December 31, 2012 |
|
$ |
6,701 |
|
$ |
(775 |
) |
$ |
47 |
|
$ |
5,973 |
|
||||
Other comprehensive income (loss) before reclassifications |
|
(1,322 |
) |
125 |
|
34 |
|
(1,163 |
) |
||||||||
Benefit (provision) for income taxes |
|
(53 |
) |
(86 |
) |
11 |
|
(128 |
) |
||||||||
Amounts reclassified from AOCI |
|
— |
|
— |
|
(61 |
) |
(61 |
) |
||||||||
Other comprehensive income (loss) |
|
(1,375 |
) |
39 |
|
(16 |
) |
(1,352 |
) |
||||||||
Balance at December 31, 2013 |
|
5,326 |
|
(736 |
) |
31 |
|
4,621 |
|
||||||||
Other comprehensive income (loss) before reclassifications |
|
149 |
|
(145 |
) |
51 |
|
55 |
|
||||||||
Amounts reclassified from AOCI |
|
(3,142 |
) |
— |
|
(65 |
) |
(3,207 |
) |
||||||||
Other comprehensive income (loss) |
|
(2,993 |
) |
(145 |
) |
(14 |
) |
(3,152 |
) |
||||||||
Balance at December 31, 2014 |
|
$ |
2,333 |
|
$ |
(881 |
) |
$ |
17 |
|
$ |
1,469 |
|
|
|
|
Year ended December 31, |
|
|||||||
|
|
2014 |
|
2013 |
|
2012 |
|
|||
|
|
|
|
(in thousands) |
|
|
|
|||
Cost of sales |
|
$ |
2,456 |
|
$ |
1,446 |
|
$ |
1,467 |
|
Selling, general, and administrative |
|
11,859 |
|
8,339 |
|
9,677 |
|
|||
Research and development |
|
4,498 |
|
3,347 |
|
2,709 |
|
|||
Share-based compensation expense before tax |
|
18,813 |
|
13,132 |
|
13,853 |
|
|||
Income tax benefit |
|
(6,011 |
) |
(4,367 |
) |
(4,849 |
) |
|||
Net share-based compensation expense |
|
$ |
12,802 |
|
$ |
8,765 |
|
$ |
9,004 |
|
The following table summarizes information about unrecognized share-based compensation costs at December 31, 2014:
|
|
Unrecognized |
|
Weighted |
|
|
|
|
Share-Based |
|
Average Period |
|
|
|
|
Compensation |
|
Expected to be |
|
|
|
|
Costs |
|
Recognized |
|
|
|
|
(in thousands) |
|
(in years) |
|
|
Stock option awards |
|
$ |
9,939 |
|
2.0 |
|
Restricted stock units |
|
9,980 |
|
2.5 |
|
|
Restricted stock awards |
|
17,501 |
|
2.8 |
|
|
Performance share units |
|
2,855 |
|
3.3 |
|
|
Performance share awards |
|
152 |
|
0.4 |
|
|
Total unrecognized share-based compensation cost |
|
$ |
40,427 |
|
2.5 |
|
Stock options are awards issued to employees that entitle the holder to purchase shares of the Company’s stock at a fixed price. At December 31, 2014, options outstanding that have vested and are expected to vest were as follows:
|
|
|
|
|
|
Weighted |
|
|
|
||
|
|
Number |
|
Weighted |
|
Average |
|
Aggregate |
|
||
|
|
of |
|
Average |
|
Remaining |
|
Intrinsic |
|
||
|
|
Shares |
|
Exercise Price |
|
Contractual Life |
|
Value |
|
||
|
|
(in thousands) |
|
|
|
(in years) |
|
(in thousands) |
|
||
Vested |
|
1,409 |
|
$ |
30.76 |
|
5.2 |
|
$ |
10,127 |
|
Expected to vest |
|
903 |
|
$ |
32.93 |
|
7.7 |
|
2,091 |
|
|
Total |
|
2,312 |
|
$ |
31.61 |
|
6.2 |
|
$ |
12,218 |
|
|
|
|
|
Weighted |
|
|
|
|
Number of |
|
Average |
|
|
|
|
Shares |
|
Exercise Price |
|
|
|
|
(in thousands) |
|
|
|
|
Outstanding at December 31, 2011 |
|
2,106 |
|
$ |
25.58 |
|
Granted |
|
704 |
|
32.55 |
|
|
Exercised |
|
(351 |
) |
15.39 |
|
|
Expired or forfeited |
|
(137 |
) |
35.88 |
|
|
Outstanding at December 31, 2012 |
|
2,322 |
|
$ |
28.63 |
|
Granted |
|
539 |
|
32.68 |
|
|
Exercised |
|
(149 |
) |
14.74 |
|
|
Expired or forfeited |
|
(114 |
) |
35.22 |
|
|
Outstanding at December 31, 2013 |
|
2,598 |
|
$ |
29.98 |
|
Granted |
|
509 |
|
33.05 |
|
|
Exercised |
|
(561 |
) |
23.88 |
|
|
Expired or forfeited |
|
(155 |
) |
36.22 |
|
|
Outstanding at December 31, 2014 |
|
2,391 |
|
$ |
31.65 |
|
The following table summarizes stock option information at December 31, 2014:
|
|
Options Outstanding |
|
Options Exercisable |
|
||||||||||||||||
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
Weighted |
|
|
|
||||
|
|
|
|
Aggregate |
|
Average |
|
Weighted |
|
|
|
Aggregate |
|
Average |
|
Weighted |
|
||||
Range of |
|
|
|
Intrinsic |
|
Remaining |
|
Average |
|
|
|
Intrinsic |
|
Remaining |
|
Average |
|
||||
Exercise Prices |
|
Shares |
|
Value |
|
Contractual Life |
|
Exercise Price |
|
Shares |
|
Value |
|
Contractual Life |
|
Exercise Price |
|
||||
|
|
(in thousands) |
|
(in thousands) |
|
(in years) |
|
|
|
(in thousands) |
|
(in thousands) |
|
(in years) |
|
|
|
||||
$8.82 – $17.48 |
|
386 |
|
$ |
8,769 |
|
1.3 |
|
$ |
12.15 |
|
386 |
|
$ |
8,769 |
|
1.3 |
|
$ |
12.15 |
|
$20.80 – $31.45 |
|
347 |
|
1,626 |
|
8.8 |
|
30.20 |
|
125 |
|
616 |
|
8.7 |
|
29.94 |
|
||||
$31.91 – $48.04 |
|
1,429 |
|
2,000 |
|
6.9 |
|
34.14 |
|
669 |
|
742 |
|
6.4 |
|
34.63 |
|
||||
$48.90 – $51.70 |
|
229 |
|
— |
|
6.4 |
|
51.21 |
|
229 |
|
— |
|
6.4 |
|
51.21 |
|
||||
|
|
2,391 |
|
$ |
12,395 |
|
6.2 |
|
$ |
31.65 |
|
1,409 |
|
$ |
10,127 |
|
5.2 |
|
$ |
30.76 |
|
|
|
Year ended December 31, |
||||||||||
|
|
2014 |
|
2013 |
|
2012 |
||||||
Weighted average fair value |
|
$ |
11.58 |
|
$ |
13.47 |
|
$ |
15.56 | |||
Dividend yield |
|
0 |
% |
|
0 |
% |
|
0 |
% |
|||
Expected volatility factor(1) |
|
44 |
% |
|
49 |
% |
|
59 |
% |
|||
Risk-free interest rate(2) |
|
1.19 |
% |
|
1.27 |
% |
|
0.70 |
% |
|||
Expected life(in years)(3) |
|
3.9 |
|
4.5 |
|
4.5 |
(1) |
Expected volatility is measured using historical daily price changes of the Company’s stock over the respective expected term of the options and the implied volatility derived from the market prices of the Company’s traded opt ions. |
(2) |
The risk-free rate for periods within the contractual term of the stock options is based on the U.S. Treasury yield curve in effect at the time of grant. |
(3) |
The expected life is the number of years the Company estimates that options will be out standing prior to exercise. The Company’s computation of expected life was determined using a lattice-based model incorporating historical post vest exercise and employee termination behavior. |
|
|
Year ended December 31, |
|||||||
|
|
2014 |
|
2013 |
|
2012 |
|||
|
|
|
|
(in thousands) |
|
|
|||
Cash received from options exercised |
|
$ |
12,056 |
|
$ |
2,199 |
|
$ |
5,409 |
Intrinsic value of options exercised |
|
$ |
8,390 |
|
$ |
2,509 |
|
$ |
6,800 |
|
|
|
|
Weighted |
|
|
|
|
|
|
Average |
|
|
|
|
Number of |
|
Grant Date |
|
|
|
|
Shares |
|
Fair Value |
|
|
|
|
(in thousands) |
|
|
|
|
Outstanding at December 31, 2011 |
|
618 |
|
$ |
33.61 |
|
Granted |
|
324 |
|
32.62 |
|
|
Released |
|
(167 |
) |
20.60 |
|
|
Forfeitures |
|
(82 |
) |
34.98 |
|
|
Outstanding at December 31, 2012 |
|
693 |
|
$ |
36.11 |
|
Granted |
|
798 |
|
33.16 |
|
|
Released |
|
(207 |
) |
32.44 |
|
|
Forfeitures |
|
(126 |
) |
34.33 |
|
|
Outstanding at December 31, 2013 |
|
1,158 |
|
$ |
34.93 |
|
Granted |
|
395 |
|
34.18 |
|
|
Released |
|
(183 |
) |
38.65 |
|
|
Forfeitures |
|
(133 |
) |
33.66 |
|
|
Outstanding at December 31, 2014 |
|
1,237 |
|
$ |
34.27 |
|
|
|
|
Year ended December 31, |
|
|||||||||
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
|||
|
|
|
|
|
(in thousands) |
|
|
|
|
|||
Domestic |
|
$ |
(95,195 |
) |
|
$ |
(84,942 |
) |
|
$ |
5,811 |
|
Foreign |
|
16,841 |
|
|
13,732 |
|
|
32,375 |
|
|||
|
|
$ |
(78,354 |
) |
|
$ |
(71,210 |
) |
|
$ |
38,186 |
|
|
|
Year ended December 31, |
|
|||||||
|
|
2014 |
|
2013 |
|
2012 |
|
|||
|
|
|
|
(in thousands) |
|
|
|
|||
Current: |
|
|
|
|
|
|
|
|||
Federal |
|
$ |
(2,464 |
) |
$ |
(21,022 |
) |
$ |
2,515 |
|
Foreign |
|
2,325 |
|
3,921 |
|
7,576 |
|
|||
State and local |
|
55 |
|
148 |
|
(317 |
) |
|||
Total current provision (benefit) for income taxes |
|
(84 |
) |
(16,953 |
) |
9,774 |
|
|||
Deferred: |
|
|
|
|
|
|
|
|||
Federal |
|
(11,230 |
) |
(11,589 |
) |
(482 |
) |
|||
Foreign |
|
(291 |
) |
(462 |
) |
727 |
|
|||
State and local |
|
191 |
|
57 |
|
1,638 |
|
|||
Total deferred provision (benefit) for income taxes |
|
(11,330 |
) |
(11,994 |
) |
1,883 |
|
|||
Total provision (benefit) for income taxes |
|
$ |
(11,414 |
) |
$ |
(28,947 |
) |
$ |
11,657 |
|
|
|
Year ended December 31, |
|
||||||||
|
|
2014 |
|
2013 |
|
2012 |
|
||||
|
|
|
|
(in thousands) |
|
|
|
||||
Income tax provision (benefit) at U.S. statutory rates |
|
$ |
(27,424 |
) |
$ |
(24,923 |
) |
$ |
13,366 |
|
|
State taxes, net of U.S. federal impact |
|
(662 |
) |
(1,554 |
) |
(89 |
) |
||||
Effect of international operations |
|
(6,160 |
) |
(4,275 |
) |
(2,387 |
) |
||||
Domestic production activities deduction |
|
— |
|
1,554 |
|
(489 |
) |
||||
Research and development tax credit |
|
(1,935 |
) |
(3,151 |
) |
(3,013 |
) |
||||
Net change in valuation allowance |
|
27,156 |
|
2,420 |
|
2,943 |
|
||||
Change in accrual for unrecognized tax benefits |
|
(1,940 |
) |
577 |
|
533 |
|
||||
Goodwill impairment |
|
9,786 |
|
— |
|
— |
|
||||
Change in contingent consideration |
|
(10,279 |
) |
290 |
|
— |
|
||||
Other |
|
44 |
|
115 |
|
793 |
|
||||
Total provision (benefit) for income taxes |
|
$ |
(11,414 |
) |
$ |
(28,947 |
) |
$ |
11,657 |
|
|
|
December 31, |
|
||||
|
|
2014 |
|
2013 |
|
||
|
|
(in thousands) |
|
||||
Deferred tax assets: |
|
|
|
|
|
||
Inventory valuation |
|
$ |
8,244 |
|
$ |
6,983 |
|
Net operating losses and credit carry forwards |
|
39,750 |
|
18,972 |
|
||
Warranty and installation accruals |
|
2,452 |
|
3,002 |
|
||
Share-based compensation |
|
11,794 |
|
10,638 |
|
||
Other |
|
2,647 |
|
3,716 |
|
||
Total deferred tax assets |
|
64,887 |
|
43,311 |
|
||
Valuation allowance |
|
(34,909 |
) |
(7,753 |
) |
||
Net deferred tax assets |
|
29,978 |
|
35,558 |
|
||
|
|
|
|
|
|
||
Deferred tax liabilities: |
|
|
|
|
|
||
Purchased intangible assets |
|
34,018 |
|
45,208 |
|
||
Undistributed earnings |
|
1,047 |
|
1,737 |
|
||
Depreciation |
|
2,274 |
|
4,711 |
|
||
Total deferred tax liabilities |
|
37,339 |
|
51,656 |
|
||
Net deferred taxes |
|
$ |
(7,361 |
) |
$ |
(16,098 |
) |
|
|
December 31, |
|
|||||||
|
|
2014 |
|
2013 |
|
2012 |
|
|||
|
|
(in thousands) |
|
|||||||
Balance at beginning of year |
|
$ |
6,228 |
|
$ |
5,818 |
|
$ |
4,748 |
|
Additions for tax positions related to current year |
|
244 |
|
324 |
|
435 |
|
|||
Additions for tax positions related to prior years |
|
199 |
|
477 |
|
742 |
|
|||
Reductions for tax positions related to prior years |
|
(2,345 |
) |
(224 |
) |
(59 |
) |
|||
Reductions due to the lapse of the applicable statute of limitations |
|
(38 |
) |
— |
|
(48 |
) |
|||
Settlements |
|
(12 |
) |
(167 |
) |
— |
|
|||
Balance at end of year |
|
$ |
4,276 |
|
$ |
6,228 |
|
$ |
5,818 |
|
|
|
|
Year ended December 31, |
|
|||||||
|
|
2014 |
|
2013 |
|
2012 |
|
|||
|
|
(in thousands) |
|
|||||||
MOCVD |
|
$ |
279,751 |
|
$ |
219,914 |
|
$ |
314,152 |
|
MBE |
|
28,033 |
|
29,419 |
|
49,029 |
|
|||
Surface Processing |
|
7,906 |
|
— |
|
— |
|
|||
Ion Beam and other |
|
77,183 |
|
82,416 |
|
152,839 |
|
|||
Total Revenue |
|
$ |
392,873 |
|
$ |
331,749 |
|
$ |
516,020 |
|
|
|
Net Sales to Unaffiliated Customers |
|
Long-Lived Tangible Assets |
|
||||||||||||||
|
|
2014 |
|
2013 |
|
2012 |
|
2014 |
|
2013 |
|
2012 |
|
||||||
|
|
(in thousands) |
|
||||||||||||||||
United States |
|
$ |
44,060 |
|
$ |
57,609 |
|
$ |
83,317 |
|
$ |
63,349 |
|
$ |
66,002 |
|
$ |
74,497 |
|
Asia Pacific(1) |
|
311,182 |
|
252,199 |
|
390,995 |
|
15,325 |
|
23,042 |
|
23,769 |
|
||||||
EMEA(2) and other |
|
37,631 |
|
21,941 |
|
41,708 |
|
78 |
|
95 |
|
36 |
|
||||||
Total |
|
$ |
392,873 |
|
$ |
331,749 |
|
$ |
516,020 |
|
$ |
78,752 |
|
$ |
89,139 |
|
$ |
98,302 |
|
(1) |
Net sales to customers in China were 40%, 45%, and 42% of total net sales for the years ended December 31, 2014, 2013, 2012, respectively. |
(2) |
Consists of Europe, the Middle East, and Africa |
|
|
|
Fiscal 2014 |
|
Fiscal 2013 |
|
|||||||||||||||||||||
|
|
Q1 |
|
Q2 |
|
Q3 |
|
Q4 |
|
Q1 |
|
Q2 |
|
Q3 |
|
Q4 |
|
|||||||||
|
|
(in thousands, except per share amounts) |
||||||||||||||||||||||||
Net sales |
|
$ |
90,841 |
|
$ |
95,122 |
|
$ |
93,341 |
|
$ |
113,569 |
|
$ |
61,781 |
|
$ |
97,435 |
|
$ |
99,324 |
|
$ |
73,209 |
|
|
Gross profit |
|
$ |
33,777 |
|
$ |
30,673 |
|
$ |
|
32,558 |
|
$ |
37,874 |
|
$ |
22,552 |
|
$ |
34,640 |
|
$ |
30,308 |
|
$ |
15,642 |
|
Net income (loss) |
|
$ |
19,160 |
|
$ |
(15,211) |
|
$ |
|
(13,977) |
|
$ |
(56,912) |
|
$ |
(10,071) |
|
$ |
(4,081) |
|
$ |
(6,026) |
|
$ |
(22,085) |
|
Basic income (loss) per common share |
|
$ |
0.49 |
|
$ |
(0.39) |
|
$ |
|
(0.35) |
|
$ |
(1.44) |
|
$ |
(0.26) |
|
$ |
(0.11) |
|
$ |
(0.16) |
|
$ |
(0.57) |
|
Diluted income (loss) per common share |
|
$ |
0.48 |
|
$ |
(0.39) |
|
$ |
|
(0.35) |
|
$ |
(1.44) |
|
$ |
(0.26) |
|
$ |
(0.11) |
|
$ |
(0.16) |
|
$ |
(0.57) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|