Veeco(VECO) - 2021 Q1 - Quarterly Report

FORM 10-Q Filing Information This section details Veeco Instruments Inc.'s Form 10-Q filing information, including the reporting period, stock exchange, and outstanding common stock - The document is a Quarterly Report on Form 10-Q for Veeco Instruments Inc. for the period ended March 31, 2021[3] - Veeco Instruments Inc. (VECO) common stock is registered on The NASDAQ Global Select Market[4] - The registrant is classified as a large accelerated filer[5] - As of April 28, 2021, there were 50,182,609 shares of common stock outstanding[5] Safe Harbor Statement and Risk Factors This section outlines the company's forward-looking statements and details various risks related to its business, global operations, intellectual property, industry, and general factors Forward-Looking Statements This section outlines the forward-looking nature of statements within the report, emphasizing that they are subject to risks and uncertainties that could cause actual results to differ materially from projections - The report contains forward-looking statements, identified by words like 'believes,' 'anticipates,' 'expects,' 'estimates,' 'targets,' 'plans,' 'intends,' and 'will,' which are subject to risks and uncertainties[9] - Preparation of financial statements requires management to make estimates and assumptions that may ultimately differ from actual results, including the potential impact of the COVID-19 pandemic[10] Risks Related to Business, Finance and Operations This section details specific risks impacting the company's business, financial health, and operations, including the effects of the COVID-19 pandemic, market conditions, sales cycle volatility, and financial instrument risks - The COVID-19 pandemic has strained and may continue to negatively impact business and operations, with uncertain duration and extent of impact on future results[11] - Unfavorable market conditions have adversely affected, and may continue to affect, operating results[11] - The timing of orders, shipments, and revenue recognition can cause significant quarterly operating result fluctuations[11] - The company may not have the ability to raise funds necessary to settle cash conversions or repurchase its 2023, 2025, and 2027 Convertible Senior Notes[11] Risks Associated with Global Business This section highlights risks inherent in operating internationally, such as exposure to foreign currency fluctuations, trade policy changes, export controls, and global regulatory requirements - The company is exposed to risks of operating businesses outside the United States, including foreign currency exchange risks[16] - Changes in U.S. trade policy, export controls, and ongoing trade disputes (e.g., U.S. and China) have adversely affected, and may continue to affect, business[16] - The company is exposed to various risks associated with global regulatory requirements and may be subject to liabilities under the Foreign Corrupt Practices Act[16] Risks Related to Intellectual Property and Cybersecurity This section addresses risks concerning the company's intellectual property rights and the potential for cybersecurity breaches, which could lead to significant harm - Disruptions in information technology systems or data security incidents could result in significant financial, legal, regulatory, business, and reputational harm[16] - The company may be unable to effectively enforce and protect its intellectual property rights and may be subject to claims of intellectual property infringement by others[16] Risks Associated with Industry This section outlines industry-specific challenges, including intense competition, rapid technological change, and the cyclical nature of the markets served, particularly the demand for consumer electronics - The company faces significant competition and operates in industries characterized by rapid technological change[16] - Certain sales are dependent on the demand for consumer electronics, which can experience significant volatility[16] - The company has a concentrated customer base in highly concentrated industries, and the cyclicality of these industries directly affects its business[16] General Risk Factors This section covers broader operational and financial risks, such as inventory management, reliance on suppliers, stock price volatility, regulatory compliance, and the ability to attract and retain employees - Failure to estimate customer demand accurately could result in inventory obsolescence, liabilities to suppliers, and manufacturing interruptions[20] - Reliance on a limited number of suppliers, some of whom are sole sources, poses a risk[20] - The price of common shares is volatile and could decrease[20] - Inability to attract, retain, and motivate employees could have a material adverse effect on the business[20] PART I—FINANCIAL INFORMATION This part presents the company's unaudited consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Financial Statements This section provides the unaudited consolidated financial statements, including the balance sheets, statements of operations, comprehensive income (loss), and cash flows, along with detailed notes explaining the basis of presentation, significant accounting policies, and specific financial line items Consolidated Balance Sheets This section presents the company's consolidated balance sheets, detailing assets, liabilities, and stockholders' equity at specific reporting dates Consolidated Balance Sheet Highlights (in thousands) | Metric | March 31, 2021 | December 31, 2020 | | :------------------------- | :------------- | :---------------- | | Total Assets | $945,242 | $898,064 | | Total Liabilities | $532,781 | $489,690 | | Total Stockholders' Equity | $412,461 | $408,374 | Consolidated Statements of Operations This section presents the company's consolidated statements of operations, detailing net sales, expenses, and net income (loss) for the periods presented Consolidated Statements of Operations Highlights (in thousands, except per share amounts) | Metric | Three months ended March 31, 2021 | Three months ended March 31, 2020 | Change (YoY) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Net sales | $133,714 | $104,502 | +28.0% | | Cost of sales | $78,800 | $58,083 | +35.7% | | Gross profit | $54,914 | $46,419 | +18.3% | | Operating income (loss) | $9,415 | $4,567 | +106.1% | | Income (loss) before income taxes | $2,792 | $(299) | N/A | | Net income (loss) | $2,494 | $(567) | N/A | | Basic EPS | $0.05 | $(0.01) | N/A | | Diluted EPS | $0.05 | $(0.01) | N/A | Consolidated Statements of Comprehensive Income (Loss) This section presents the company's consolidated statements of comprehensive income (loss), including net income and other comprehensive income (loss) Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Metric | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Net income (loss) | $2,494 | $(567) | | Total other comprehensive income (loss), net of tax | $(19) | $153 | | Total comprehensive income (loss) | $2,475 | $(414) | Consolidated Statements of Cash Flows This section presents the company's consolidated statements of cash flows, detailing cash movements from operating, investing, and financing activities Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by (used in) operating activities | $10,485 | $(2,396) | | Net cash provided by (used in) investing activities | $1,395 | $35,194 | | Net cash provided by (used in) financing activities | $(747) | $276 | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $11,103 | $33,026 | | Cash, cash equivalents, and restricted cash - end of period | $141,386 | $162,977 | Notes to the Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the consolidated financial statements, including accounting policies and specific line item breakdowns Note 1 — Basis of Presentation This note describes the basis of preparing the unaudited interim financial statements, including accounting policies and the impact of estimates - The unaudited Consolidated Financial Statements are prepared in accordance with U.S. GAAP for interim financial information and SEC Regulation S-X[32] - Management's estimates and assumptions are significantly affected by current events, including the COVID-19 pandemic, which may impact sales, expenses, and asset valuations[34] - Revenue is recognized upon the transfer of control of products or services to the customer, with judgment required for identifying performance obligations and allocating revenue for multiple deliverables[35][36] - The adoption of ASU 2020-06 in Q1 2022 is expected to decrease non-cash interest expense and increase diluted earnings per share due to changes in accounting for convertible debt instruments[47] Note 2 — Income (Loss) Per Common Share This note details the calculation of basic and diluted income (loss) per common share, including the treatment of convertible senior notes Income (Loss) Per Common Share (in thousands, except per share amounts) | Metric | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Net income (loss) | $2,494 | $(567) | | Basic weighted average shares outstanding | 48,624 | 47,811 | | Diluted weighted average shares outstanding | 53,050 | 47,811 | - The company accounts for the conversion spread of its convertible senior notes using the treasury stock method, as it intends to settle the principal in cash[49] Note 3 — Assets This note provides detailed information on the company's assets, including fair value of investments, inventories, and intangible assets - Short-term investments are generally classified as available-for-sale and reported at fair value, with unrealized gains and losses presented in accumulated other comprehensive income[50] Fair Value of Cash Equivalents and Short-term Investments (March 31, 2021, in thousands) | Category | Level 1 | Level 2 | Total | | :----------------------- | :------ | :------ | :------ | | Cash equivalents | $81,047 | $2,952 | $83,999 | | Short-term investments | $120,096 | $66,046 | $186,142 | Inventories (in thousands) | Category | March 31, 2021 | December 31, 2020 | | :--------------- | :------------- | :---------------- | | Materials | $90,115 | $82,679 | | Work-in-process | $55,995 | $53,979 | | Finished goods | $10,106 | $9,248 | | Total | $156,216 | $145,906 | Net Intangible Assets (in thousands) | Category | March 31, 2021 | December 31, 2020 | | :---------------------- | :------------- | :---------------- | | Technology | $23,247 | $25,550 | | Customer relationships | $15,623 | $16,334 | | Trademarks and tradenames | $3,957 | $4,296 | | Other | $4 | $5 | | Total | $42,831 | $46,185 | Note 4 — Liabilities This note details the company's liabilities, including accrued expenses, warranty reserves, customer deposits, and convertible senior notes Accrued Expenses and Other Current Liabilities (in thousands) | Category | March 31, 2021 | December 31, 2020 | | :-------------------------- | :------------- | :---------------- | | Payroll and related benefits | $29,238 | $26,630 | | Warranty | $5,363 | $5,058 | | Operating lease liabilities | $4,375 | $4,148 | | Interest | $4,017 | $2,574 | | Professional fees | $1,335 | $1,112 | | Sales, use, and other taxes | $3,221 | $2,658 | | Other | $3,515 | $2,696 | | Total | $51,064 | $44,876 | Changes in Product Warranty Reserves (in thousands) | Metric | Amount | | :-------------------------- | :----- | | Balance - December 31, 2020 | $5,058 | | Warranties issued | $1,561 | | Consumption of reserves | $(1,310) | | Changes in estimate | $54 | | Balance - March 31, 2021 | $5,363 | - Customer deposits totaled $52.2 million at March 31, 2021, and deferred revenue was $16.7 million[66] - The company has outstanding 2.70% Convertible Senior Notes due 2023 ($131.7M principal), 3.50% Convertible Senior Notes due 2025 ($132.5M principal), and 3.75% Convertible Senior Notes due 2027 ($125.0M principal)[142][143] Total Interest Expense Related to Convertible Senior Notes (in thousands) | Category | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :----------------------------------------- | :-------------------------------- | :-------------------------------- | | Cash Interest Expense | $3,220 | $2,329 | | Non-cash Interest Expense | $3,514 | $3,320 | | Total Interest Expense | $6,734 | $5,649 | Note 5 — Commitments and Contingencies This note outlines the company's operating lease liabilities, purchase commitments, bank guarantees, and ongoing legal proceedings - The weighted average remaining lease term for operating leases was 12 years as of March 31, 2021, with a weighted average discount rate of 5.7%[85] Maturities of Operating Lease Liabilities (March 31, 2021, in thousands) | Period | Payments Due | | :-------------------------- | :------------- | | 2021 | $3,559 | | 2022 | $4,335 | | 2023 | $3,170 | | 2024 | $2,896 | | 2025 | $2,506 | | Thereafter | $38,367 | | Total future minimum lease payments | $54,833 | - Purchase commitments totaled $158.8 million at March 31, 2021, with substantially all due within one year[87] - Outstanding bank guarantees and standby letters of credit totaled $7.2 million at March 31, 2021[88] - The company is vigorously defending two purported class action lawsuits and a derivative action related to the Ultratech acquisition, but does not believe their ultimate resolution will have a material adverse effect[89][90][91] Note 6 — Derivative Financial Instruments This note describes the company's use of derivative financial instruments to manage foreign currency exchange risk and their accounting treatment - The company uses monthly forward derivative contracts to mitigate foreign currency exchange rate risks, but these are not designated as hedges[92] - There were no outstanding derivative contracts at March 31, 2021, or December 31, 2020, and no gains or losses from currency exchange derivatives during the three months ended March 31, 2021 and 2020[93] Note 7 — Equity This note details changes in stockholders' equity, including common stock, additional paid-in capital, and accumulated deficit Changes in Stockholders' Equity (in thousands) | Metric | Balance at Dec 31, 2020 | Net Income (Loss) | Other Comprehensive Income (Loss) | Share-based Compensation | Net Issuance under Employee Stock Plans | Balance at Mar 31, 2021 | | :-------------------------- | :---------------------- | :---------------- | :-------------------------------- | :----------------------- | :-------------------------------------- | :---------------------- | | Common Stock (Amount) | $497 | — | — | — | $5 | $502 | | Additional Paid-in Capital | $1,113,352 | — | — | $3,237 | $(1,630) | $1,114,959 | | Accumulated Deficit | $(707,321) | $2,494 | — | — | — | $(704,827) | | Accumulated Other Comprehensive Income | $1,846 | — | $(19) | — | — | $1,827 | | Total Stockholders' Equity | $408,374 | $2,494 | $(19) | $3,237 | $(1,625) | $412,461 | Note 8 — Share-based Compensation This note provides details on share-based compensation expense and the balance of non-vested restricted and performance shares Share-based Compensation Expense (in thousands) | Line Item | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Cost of sales | $495 | $521 | | Research and development | $817 | $874 | | Selling, general, and administrative | $1,925 | $2,251 | | Total | $3,237 | $3,646 | - The balance of non-vested restricted shares and performance shares increased from 2,040 thousand shares at December 31, 2020, to 2,610 thousand shares at March 31, 2021, with 813 thousand shares granted during the period[97] Note 9 — Income Taxes This note details income tax expense (benefit), including domestic and foreign components, and the valuation allowance against U.S. deferred tax assets Income (Loss) Before Income Taxes and Income Tax Expense (Benefit) (in thousands) | Metric | Three months ended March 31, 2021 | Three months ended March 31, 2020 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Income (loss) before income taxes | $2,792 | $(299) | | Income tax expense (benefit) | $298 | $268 | - The company's U.S. deferred tax assets are fully offset by a valuation allowance, as realization of future benefits is not more likely than not[98][100] - Domestic tax expense is primarily attributable to the tax amortization of indefinite-lived intangible assets, while foreign tax expense is due to non-U.S. operations profits and foreign withholding taxes[100] Note 10 — Segment Reporting and Geographic Information This note provides information on the company's single operating segment and disaggregated sales data by end-market and geographic region - Veeco operates and measures its results in one operating segment: the development, manufacture, sales, and support of semiconductor and thin film process equipment[101] Sales by End-Market (in thousands) | End-Market | Three months ended March 31, 2021 | Three months ended March 31, 2020 | Change (YoY) | | :----------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Semiconductor | $51,631 | $37,423 | +38% | | Compound Semiconductor | $24,751 | $18,430 | +34% | | Data Storage | $40,980 | $38,883 | +5% | | Scientific & Other | $16,352 | $9,766 | +67% | | Total | $133,714 | $104,502 | +28% | Sales by Geographic Region (in thousands) | Geographic Region | Three months ended March 31, 2021 | Three months ended March 31, 2020 | Change (YoY) | | :------------------------ | :-------------------------------- | :-------------------------------- | :----------- | | United States | $45,162 | $39,635 | +14% | | EMEA | $13,625 | $16,150 | -16% | | China | $20,007 | $10,472 | +91% | | Rest of APAC | $54,877 | $37,943 | +45% | | Rest of World | $43 | $302 | -86% | | Total | $133,714 | $104,502 | +28% | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance and condition, discussing key factors influencing results, including the impact of COVID-19, business segment updates, and detailed analysis of revenue and expense line items Cautionary Statement Regarding Forward Looking Statements This section reiterates the cautionary statement regarding forward-looking statements, emphasizing potential material differences from actual results - The discussion contains forward-looking statements, and readers should not place undue reliance on them as actual results may differ materially due to risks and uncertainties[106] Executive Summary This section provides an overview of Veeco's business as an innovative manufacturer of semiconductor process equipment and its core technologies - Veeco is an innovative manufacturer of semiconductor process equipment, utilizing ion beam, laser annealing, lithography, MOCVD, and single wafer etch & clean technologies[107] COVID-19 Update This section details the impact of the COVID-19 pandemic on Veeco's operations, supply chain, and global sales, along with mitigation efforts - Veeco's operations are considered part of critical and essential infrastructure, allowing manufacturing facilities to remain open despite governmental measures to contain the COVID-19 pandemic[109] - Net sales to customers outside the United States represented approximately 68% of total net sales in 2020, indicating significant global exposure to economic conditions[110] - The company has not experienced significant supply chain interruptions to date but continues to monitor risks and has implemented business continuity activities, including health and safety protocols, remote work, and supply chain re-sourcing[111][112][114] Business Update This section provides updates on sales drivers and growth expectations across the Semiconductor, Compound Semiconductor, and Data Storage markets - Sales in the Semiconductor market are driven by laser annealing and lithography systems for Advanced Packaging, with momentum in advanced node logic and memory applications[116] - The Compound Semiconductor market is supported by a broad portfolio of technologies for emerging applications like 5G RF device manufacturing, photonics (micro-LEDs), and GaN-based power electronics[117] - Data Storage market sales are growing due to demand for Ion Beam systems, driven by big data, cloud-based storage, and innovations in hard disk drive manufacturing[118] - Near-term revenue growth through 2021 is expected from laser annealing, 5G RF, and data storage products, with long-term growth (2022 and beyond) anticipated from Semiconductor and Compound Semiconductor markets[120] Results of Operations This section analyzes the company's financial performance, including detailed discussions of net sales, gross profit, and operating expenses Net Sales This section analyzes net sales performance by end-market and geographic region, highlighting key drivers of change Net Sales by End-Market (in thousands) | End-Market | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change (YoY) | | :----------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Semiconductor | $51,631 | $37,423 | +38% | | Compound Semiconductor | $24,751 | $18,430 | +34% | | Data Storage | $40,980 | $38,883 | +5% | | Scientific & Other | $16,352 | $9,766 | +67% | | Total | $133,714 | $104,502 | +28% | Net Sales by Geographic Region (in thousands) | Geographic Region | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change (YoY) | | :------------------------ | :-------------------------------- | :-------------------------------- | :----------- | | United States | $45,162 | $39,635 | +14% | | EMEA | $13,625 | $16,150 | -16% | | China | $20,007 | $10,472 | +91% | | Rest of APAC | $54,877 | $37,943 | +45% | | Rest of World | $43 | $302 | -86% | | Total | $133,714 | $104,502 | +28% | - The increase in sales in the Rest of APAC region was primarily driven by shipments to data storage customers[125] Gross Profit This section analyzes gross profit and gross margin trends, explaining factors influencing changes in profitability Gross Profit (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change (YoY) | | :----------- | :-------------------------------- | :-------------------------------- | :----------- | | Gross profit | $54,914 | $46,419 | +18% | | Gross margin | 41% | 44% | -3 percentage points | - Gross margins decreased primarily due to product and region mix of sales and an increase in spending to support higher business activity[127] Research and Development This section discusses research and development expenses, detailing investments in new technologies and applications Research and Development Expenses (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change (YoY) | | :-------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | R&D expenses | $21,844 | $19,195 | +14% | | R&D as % of revenue | 16% | 18% | -2 percentage points | - The increase in R&D expenses was primarily due to personnel-related expenses as the company invests in new research and applications for Semiconductor and Compound Semiconductor markets[128] Selling, General, and Administrative This section analyzes selling, general, and administrative expenses, including factors contributing to changes and future expectations Selling, General, and Administrative Expenses (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change (YoY) | | :-------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | SG&A expenses | $20,255 | $18,304 | +11% | | SG&A as % of revenue | 15% | 18% | -3 percentage points | - The increase in SG&A expenses was primarily due to higher variable expenses associated with increased revenue and order intake[129] - The company expects a period of duplicate operating expenses during the one-to-two-year transition to its new leased facility in San Jose, California[129] Amortization Expense This section details amortization expense for intangible assets and the reasons for its change over the periods presented Amortization of Intangible Assets (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change (YoY) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Amortization expense | $3,354 | $3,837 | -13% | - Amortization expense decreased primarily due to changes in amortization schedules reflecting expected cash flows of certain intangible assets[130] Interest Income (Expense) This section analyzes net interest income (expense), including cash and non-cash components, and the impact of convertible notes Net Interest Income (Expense) (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change (YoY) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Net interest expense | $(6,623) | $(4,866) | +36% | | Non-cash charges (amortization of debt discount/transaction costs) | $3,514 | $3,320 | +6% | | Interest income decrease | ~$0.7 million | N/A | N/A | - The increase in net interest expense was primarily related to the issuance of the 2027 Notes (May 2020) and 2025 Notes (November 2020), partially offset by the partial repurchase and exchange of the 2023 Notes[131] Income Taxes This section discusses income tax expense (benefit), including domestic and foreign components, and the treatment of deferred tax assets Income Tax Expense (Benefit) (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Income tax expense (benefit) | $298 | $268 | | Domestic tax expense | $100 | $100 | | Non-U.S. operations tax expense | $200 | $200 | - The company's U.S. deferred tax assets are fully offset by a valuation allowance, as it cannot conclude that these future benefits will be realized[135] Liquidity and Capital Resources This section assesses the company's liquidity position, capital resources, cash flow activities, and management of convertible senior notes Cash Flow Activity This section details cash flow from operating, investing, and financing activities, and the overall change in cash and equivalents Cash, Cash Equivalents, and Short-term Investments (in thousands) | Metric | March 31, 2021 | December 31, 2020 | | :-------------------------- | :------------- | :---------------- | | Cash and cash equivalents | $140,733 | $129,625 | | Restricted cash | $653 | $658 | | Short-term investments | $186,142 | $189,771 | | Total | $327,528 | $320,054 | Net Cash Flow by Activity (in thousands) | Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Operating Activities | $10,485 | $(2,396) | | Investing Activities | $1,395 | $35,194 | | Financing Activities | $(747) | $276 | - Net cash provided by operating activities improved to $10.5 million in Q1 2021, driven by net income and non-cash adjustments, partially offset by increases in accounts receivable and inventories[139] - Capital expenditures are expected to total $30 million to $40 million over the next one-to-two years for the new San Jose facility, leading to duplicate operating expenses during the transition[140] Convertible Senior Notes This section provides details on the company's outstanding convertible senior notes, their terms, and management's liquidity assessment - The company has $131.7 million principal of 2.70% convertible senior notes due 2023, $132.5 million principal of 3.50% convertible senior notes due 2025, and $125.0 million principal of 3.75% convertible senior notes due 2027[142][143] - The 2027 Notes are currently convertible by shareholders until June 30, 2021[143] - Management believes it has sufficient capital resources and cash flows from operations to support scheduled interest payments and cash payment of principal amounts for any converted notes[144] Contractual Obligations and Commitments This section outlines the company's significant contractual obligations and purchase commitments, and their expected funding sources - The company has purchase commitments of $158.8 million at March 31, 2021, with substantially all due within one year, expected to be funded by cash generated from operations[87][145] Off-Balance Sheet Arrangements This section confirms the absence of material off-balance sheet arrangements beyond disclosed guarantees and commitments - The company does not have any material off-balance sheet arrangements other than disclosed bank guarantees and purchase commitments[146] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section details the company's exposure to market risks, specifically interest rate risk related to its investment portfolio and currency exchange risk from global operations, and the strategies employed to mitigate these risks Interest Rate Risk This section quantifies the company's exposure to interest rate risk on its investment portfolio and the potential impact of rate changes - The company's investment portfolio includes fixed-income securities with a fair value of approximately $186.1 million at March 31, 2021[147] - A 100 basis point increase in interest rates would result in a $0.9 million decrease in the fair value of the investment portfolio[147] Currency Exchange Risk This section details the company's exposure to foreign currency exchange risk from global operations and its mitigation strategies - Net sales to customers outside the United States represented approximately 66% of total net sales for the three months ended March 31, 2021[150] - Most of the company's sales outside the United States are denominated in U.S. dollars, leading to an immaterial impact on consolidated results from a 10% change in foreign exchange rates[152] - The company uses monthly forward derivative contracts to mitigate foreign currency exchange rate risk, but these are not designated as hedges[149] Item 4. Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures as of March 31, 2021, and states that there were no material changes in internal control over financial reporting during the quarter Evaluation of Disclosure Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures as evaluated by executive officers - The principal executive and financial officers evaluated and concluded that the company's disclosure controls and procedures were effective as of March 31, 2021[153] Changes in Internal Control Over Financial Reporting This section reports on any material changes in internal control over financial reporting during the quarter - There were no changes in internal control over financial reporting during the quarter ended March 31, 2021, that have materially affected or are reasonably likely to materially affect it[154] PART II—OTHER INFORMATION This part includes disclosures on legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits Item 1. Legal Proceedings The company is involved in two purported class action lawsuits related to the Ultratech acquisition, alleging false/misleading statements, and a derivative action alleging breach of fiduciary duty. Veeco is vigorously defending these matters and does not believe their ultimate resolution will materially affect its financial position - Two purported class action complaints (Wolther v. Maheshwari et al.) were filed alleging false/misleading statements in the registration statement for the Ultratech acquisition[156] - A derivative action (Vladimir Gusinsky Revocable Trust v. Peeler, et al.) was filed alleging breach of fiduciary duty and waste of corporate assets related to the Ultratech acquisition[157] - The company does not believe that the ultimate resolution of these legal proceedings will have a material adverse effect on its consolidated financial position, results of operations, or cash flows[158] Item 1A. Risk Factors This item refers to the risk factors previously disclosed in the Safe Harbor Statement of this 10-Q and the 2020 Form 10-K, stating that there have been no material changes - There have been no material changes from the risk factors previously disclosed in the Safe Harbor Statement at the beginning of this report and in Part I — Item 1A of the 2020 Form 10-K[159] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds during the period - No unregistered sales of equity securities and use of proceeds were reported[160] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - No defaults upon senior securities were reported[161] Item 4. Mine Safety Disclosures This item is not applicable to the company - Mine Safety Disclosures are not applicable to the company[161] Item 5. Other Information The company reported no other information required to be disclosed under this item - No other information was reported under this item[162] Item 6. Exhibits This section lists all exhibits filed with the SEC, including forms of stock awards, certifications of officers, and XBRL documents - Exhibits include forms of Notice of Performance Restricted Stock Unit Award and Restricted Stock Award, certifications of the Chief Executive Officer and Chief Financial Officer, and XBRL documents[165] SIGNATURES This section contains the official signatures of the Chief Executive Officer and Chief Financial Officer, certifying the report on behalf of Veeco Instruments Inc - The report was signed on May 4, 2021, by William J. Miller, Ph.D., Chief Executive Officer, and John P. Kiernan, Senior Vice President and Chief Financial Officer[167][168]