News

News

Veeco Announces Fourth Quarter and 2007 Financial Results

February 11, 2008

WOODBURY, N.Y.--(BUSINESS WIRE)--Feb. 11, 2008--Veeco Instruments Inc. (Nasdaq: VECO) today announced its financial results for the fourth quarter and year ended December 31, 2007. Veeco reports its results on a generally accepted accounting principles ("GAAP") basis, and also provides results excluding certain items. Investors should refer to the attached table for further details of the reconciliation of GAAP operating (loss) income to earnings excluding certain items.

Veeco will host a conference call reviewing these results at 5:00 pm ET today at 1-877-723-9521 (toll free) or 1-719-325-4825. The call will also be webcast live on the Veeco website at www.veeco.com. A replay of the call will be available beginning at 8:00 pm ET tonight through midnight on February 26, 2008 at 1-888-203-1112 (toll free) or 1-719-457-0820, using pass code 4865894, or on the Veeco website. Please also see the Veeco website for a slide presentation reviewing financial data.

    Fourth Quarter 2007 Highlights

    --  Revenue was $106.8 million, in line with Veeco's guidance of
        $104-$112 million;

    --  Bookings were $114.9 million, at the high end of Veeco's
        guidance of $105-$115 million;

    --  Net loss was ($9.4) million, or ($0.30) per share, compared to
        net income of $7.6 million, or $0.24 per share, last year. The
        current quarter net loss includes restructuring and other
        charges of $10.6 million;

    --  Veeco's earnings per share, excluding certain items, was $0.07
        compared to earnings per share of $0.29 last year, ahead of
        Veeco's guidance of $0.00-$0.06 per share.

John R. Peeler, Veeco's Chief Executive Officer commented, "Veeco's revenues of $106.8 million were in line with our guidance, representing a decrease of 13% compared to the prior year fourth quarter but a sequential increase of 9%. We are pleased that fourth quarter bookings, at $114.9 million, were at the high end of our guidance. We received orders of over $40 million from HB-LED/wireless and solar customers for our metal organic chemical vapor deposition (MOCVD) systems and thermal deposition sources. Veeco's fourth quarter data storage orders of $36 million were flat sequentially."

"During the fourth quarter, Veeco made significant progress on our profit improvement programs," continued Mr. Peeler. "We completed a 7.5% reduction in force, representing an annualized savings of nearly $12 million. We are on track to consolidate corporate headquarters into our Plainview, NY site, which we anticipate will save $1.8 million annually. In addition, we have right-sized our data storage businesses, including the discontinuation of two products and consolidation of our Fremont, CA R&D center into Plainview, representing another $1.3 million of annual savings. Veeco remains committed to our data storage customers and will focus our R&D and engineering expenditures on specific products aligned to their technology needs and transition to larger wafer sizes. While we will continue to rigorously focus on cost-containment activities, we are investing in our global field sales and service organization, strengthening our management team, and aligning our R&D spending to growth opportunities in LED, solar and nanotechnology."

Fourth Quarter 2007 Summary

Veeco's revenue for the fourth quarter of 2007 was $106.8 million, compared to $123.1 million in the fourth quarter of 2006. Fourth quarter 2007 operating loss was ($8.6) million, which includes the previously noted $10.6 million in restructuring and other charges, compared with operating income of $10.2 million in the fourth quarter of 2006. Veeco's fourth quarter 2007 earnings before interest, taxes and amortization excluding certain charges (EBITA) was $4.1 million, compared to $14.3 million last year. Fourth quarter net loss was ($9.4) million, or ($0.30) per share, compared to net income of $7.6 million, or $0.24 per share, in the fourth quarter of 2006. Excluding $10.6 million in charges for severance, as well as asset impairment and inventory write-offs related to discontinued product lines in 2007, and excluding amortization expenses and using a 35% tax rate in both periods, fourth quarter 2007 earnings per share were $0.07 compared to $0.29 in 2006. Veeco's fourth quarter 2007 bookings were $114.9 million compared to $109.1 million last year. Veeco recorded $16.2 million in backlog cancellations during the fourth quarter, primarily relating to certain discontinued data storage products.

2007 Summary

Veeco's 2007 revenue was $402.5 million, compared to $441.0 million last year, and the Company's 2007 operating loss was ($12.1) million compared with operating income of $22.5 million in 2006. Veeco's 2007 EBITA was $10.8 million, compared to $39.7 million last year. 2007 net loss was ($17.4) million, or ($0.56) per share, compared to net income of $14.9 million, or $0.48 per share in 2006. Excluding certain charges and gains as well as amortization expense, and using a 35% tax rate in both periods, 2007 earnings were $0.17 per share, compared to $0.75 per share in 2006. Veeco's 2007 bookings were $451.6 million compared to $493.8 million last year.

Outlook

The Company forecasts first quarter 2008 revenues to be in the range of $98-$105 million. Veeco's loss per share is currently forecasted to be between ($0.19) - ($0.09) on a GAAP basis, and earnings per share are currently forecasted to be between $0.00 to $0.06 on a non-GAAP basis (excluding amortization of $2.0 million and restructuring charges of $3.6 million, using a 35% tax rate). As previously announced, the Company expects to incur restructuring charges principally related to the consolidation of its corporate headquarters in the first quarter. The range for these charges is $3.5 million to $4.0 million. ($3.6 million is the current estimate of these charges). Veeco currently expects that its first quarter 2008 bookings will be $105-$112 million.

Mr. Peeler commented, "As we have previously stated, the first half of 2008 will start off slowly. We expect 2008 to be a recovery year for Veeco in terms of growth and profitability. While we always face unpredictability in our served markets, our 2008 goal is for revenue growth at a minimum of 10% and for operating spending to decline as a percentage of sales. While we are cautious about macro-economic issues, we are currently experiencing positive growth trends for Veeco's MOCVD and MBE technologies in the HB-LED/wireless market, as well as early penetration in solar applications. In data storage, Veeco is well-aligned with our customers' technology requirements, and focused on improving profitability in 2008. We also anticipate strength in the scientific research/industrial market to continue, driven by several new instrumentation products. While softness in the semiconductor market continues, our newly launched InSight(TM) 3DAFM offers Veeco opportunities for growth."

About Veeco

Veeco Instruments Inc. manufactures Process Equipment and Metrology and Instrumentation solutions for the data storage, HB-LED, solar, wireless, semiconductor and scientific research markets. Veeco's manufacturing and engineering facilities are located in New York, New Jersey, California, Colorado, Arizona and Minnesota. Global sales and service offices are located throughout the U.S., Europe, Japan and APAC. http://www.veeco.com/

To the extent that this news release discusses expectations or otherwise makes statements about the future, such statements are forward-looking and are subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made. These factors include the risks discussed in the Business Description and Management's Discussion and Analysis sections of Veeco's Annual Report on Form 10-K for the year ended December 31, 2006 and in our subsequent quarterly reports on Form 10-Q, current reports on Form 8-K and press releases. Veeco does not undertake any obligation to update any forward-looking statements to reflect future events or circumstances after the date of such statements.

               Veeco Instruments Inc. and Subsidiaries
                Consolidated Statements of Operations
                (In thousands, except per share data)
                             (Unaudited)

                              Three months ended       Year ended
                                 December 31,         December 31,
                              ------------------- --------------------
                                2007      2006       2007      2006
                              --------- --------- ---------- ---------

Net sales                     $106,822  $123,112  $ 402,475  $441,034
Cost of sales                   71,145    68,325    244,964   246,910
                              --------- --------- ---------- ---------
Gross profit                    35,677    54,787    157,511   194,124

Operating expenses:
Selling, general and
 administrative expense         21,625    24,488     90,972    93,110
Research and development
 expense                        14,833    16,371     61,174    61,925
Amortization expense             2,014     4,016     10,250    16,045
Restructuring expense            4,752         -      6,726         -
Asset impairment charge          1,068         -      1,068         -
Write-off of purchased in-
 process technology                  -         -          -     1,160
Other income, net                  (13)     (329)      (618)     (572)
                              --------- --------- ---------- ---------

Operating (loss) income         (8,602)   10,241    (12,061)   22,456

Interest expense, net              757       685      3,013     4,268
Gain on extinguishment of
 debt                                -         -       (738)     (330)
                              --------- --------- ---------- ---------

(Loss) income before income
 taxes and noncontrolling
 interest                       (9,359)    9,556    (14,336)   18,518

Income tax provision               161     2,081      3,651     4,959
Noncontrolling interest           (146)     (151)      (628)   (1,358)
                              --------- --------- ---------- ---------
Net (loss) income              ($9,374) $  7,626   ($17,359) $ 14,917
                              ========= ========= ========== =========

(Loss) income per common
 share:
Net (loss) income per common
 share                          ($0.30) $   0.25     ($0.56) $   0.49
Diluted net (loss) income per
 common share                   ($0.30) $   0.24     ($0.56) $   0.48

Weighted average shares
 outstanding                    31,128    30,859     31,020    30,492
Diluted weighted average
 shares outstanding             31,128    31,185     31,020    31,059
               Veeco Instruments Inc. and Subsidiaries
   Reconciliation of operating (loss) income to earnings excluding
                             certain items
                (In thousands, except per share data)
                             (Unaudited)

                        Three months ended         Year ended
                           December 31,           December 31,
                       --------------------- ----------------------
                         2007         2006      2007         2006
                       ---------    -------- ----------    --------


Operating (loss)
 income                 ($8,602)    $10,241   ($12,061)    $22,456

Adjustments:

Amortization expense      2,014       4,016     10,250      16,045

Restructuring expense     4,752 (1)       -      6,726 (1)       -

Asset impairment
 charge                   1,068 (2)       -      1,068 (2)       -

Inventory write-off       4,821 (3)       -      4,821 (3)       -

Write-off of purchased
 in-process technology        -           -          -       1,160 (4)
                       ---------    -------- ----------    --------

Earnings before
 interest, income
 taxes and
 amortization
 excluding certain
  items ("EBITA")         4,053      14,257     10,804      39,661

Interest expense, net       757         685      3,013       4,268

Gain on extinguishment
 of debt                      -           -       (738)(5)    (330)(6)

Adjustment to exclude
 gain on
 extinguishment of
 debt                         -           -        738         330
                       ---------    -------- ----------    --------

Earnings excluding
 certain items
before income taxes       3,296      13,572      7,791      35,393

Income tax provision
 at 35%                   1,154       4,750      2,727      12,388

Noncontrolling
 interest, net of
 income tax provision
 at 35%                     (95)        (98)      (408)       (279)

                       ---------    -------- ----------    --------
Earnings excluding
 certain items         $  2,237     $ 8,920  $   5,472     $23,284
                       =========    ======== ==========    ========

Earnings excluding
 certain items per
 diluted share         $   0.07     $  0.29  $    0.17     $  0.75

Diluted weighted
 average shares
 outstanding             31,399      31,185     31,346      31,059
(1) During the fourth quarter of 2007, the Company recorded a
 restructuring charge of $4.7 million, consisting of $2.9 million of
 severance costs, and $1.8 million of commitments associated with
 discontinued product lines. In the second and third quarters of 2007,
 the company recorded an additional $2.0 million of severance costs,
 for a total restructuring charge for the full year of $6.7 million.

(2) During the fourth quarter of 2007, the Company recorded a $1.1
 million asset impairment charge related to fixed asset write-offs
 associated with discontinued product lines.

(3) During the fourth quarter of 2007, the Company recorded a $4.8
 million inventory write-off associated with discontinued product
 lines. This was included in cost of sales in the GAAP income
 statement.

(4) During 2006, the Company purchased a 19.9% interest in Fluens
 Corporation. During the third quarter of 2006, the Company finalized
 its purchase accounting for Fluens determining that Fluens is a
 variable interest entity and the Company is its primary beneficiary
 as defined by FIN46(R). As such, the Company has consolidated the
 results of Fluens' operations from the acquisition date. As part of
 that acquisition, the Company acquired $1.2 million of in-process
 technology, which was written off as of the acquisition date.

(5) During the second quarter of 2007, the Company repurchased $56.0
 million aggregate principal amount of its 4.125% convertible
 subordinated notes. As a result of these repurchases, the Company
 recorded a gain from the early extinguishment of debt in the amount
 of $0.7 million.

(6) During the first quarter of 2006, the Company repurchased $20.0
 million aggregate principal amount of its 4.125% convertible
 subordinated notes. As a result of this repurchase, the Company
 recorded a gain from the early extinguishment of debt in the amount
 of $0.3 million.

NOTE - The above reconciliation is intended to present Veeco's
 operating results, excluding certain items and providing income taxes
 at a 35% statutory rate. This reconciliation is not in accordance
 with, or an alternative method for, generally accepted accounting
 principles in the United States, and may be different from similar
 measures presented by other companies. Management of the Company
 evaluates performance of its business units based on EBITA, which is
 the primary indicator used to plan and forecast future periods. The
 presentation of this financial measure facilitates meaningful
 comparison with prior periods, as management of the Company believes
 EBITA reports baseline performance and thus provides useful
 information.
               Veeco Instruments Inc. and Subsidiaries
                Condensed Consolidated Balance Sheets
                            (In thousands)
                             (Unaudited)

                                            December 31,  December 31,
                                                2007          2006
                                            ------------- ------------
ASSETS
Current assets:
   Cash and cash equivalents                 $    117,083  $   147,046
   Accounts receivable, net                        75,207       86,589
   Inventories, net                                98,594      100,355
   Prepaid expenses and other current
    assets                                          8,901        9,378
   Deferred income taxes                            2,649        2,565
                                            ------------- ------------
Total current assets                              302,434      345,933

Property, plant and equipment, net                 66,142       73,510
Goodwill                                          100,898      100,898
Other assets, net                                  59,860       69,259
                                            ------------- ------------
Total assets                                 $    529,334  $   589,600
                                            ============= ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable                          $     36,639  $    40,588
   Accrued expenses                                60,201       48,714
   Deferred profit                                  3,250          251
   Income taxes payable                             2,278        2,723
   Current portion of long-term debt               25,550        5,597
                                            ------------- ------------
Total current liabilities                         127,918       97,873

Deferred income taxes                               3,712        2,423
Long-term debt                                    121,035      203,607
Other non-current liabilities                       1,978        2,304
                                            ------------- ------------
Total non-current liabilities                     126,725      208,334

Noncontrolling interest                             1,014        1,642

Shareholders' equity                              273,677      281,751
                                            ------------- ------------
Total liabilities and shareholders' equity   $    529,334  $   589,600
                                            ============= ============
               Veeco Instruments Inc. and Subsidiaries
                    Revenue and Bookings Analysis
                             (Unaudited)

-------------------
Q4 2007 Revenue
-------------------

----------------------------------  ------------------  --------------
                       $            Market              Regional
Segment Analysis     Millions  %     Analysis      %     Analysis  %
----------------------------------  ------------------  --------------

Process Equipment                   Data Storage        North
                       $ 71.0  66%                 39%   America   33%
                                    Semiconductor   4%  Europe     23%
Metrology                           HB-                 Japan
                         35.8  34%   LED/wireless  31%             11%
                                    Scientific          APAC
                                     Research      26%             33%
                   ---------------                ----            ----
Total                  $106.8 100%  Total         100%  Total     100%
----------------------------------  ------------------  --------------

-------------------
Q4 2007 Bookings
-------------------

----------------------------------  ------------------  --------------
                       $            Market              Regional
Segment Analysis     Millions  %     Analysis      %     Analysis  %
----------------------------------  ------------------  --------------

Process Equipment                   Data Storage        North
                       $ 78.3  68%                 32%   America   25%
                                    Semiconductor   5%  Europe     37%
Metrology                           HB-                 Japan
                         36.6  32%   LED/wireless  36%              6%
                                    Scientific          APAC
                                     Research      27%             32%
                   ---------------                ----            ----
Total                  $114.9 100%  Total         100%  Total     100%
----------------------------------  ------------------  --------------

-------------------
Twelve Month 2007
 Revenue
-------------------

----------------------------------  ------------------  --------------
                       $            Market              Regional
Segment Analysis     Millions  %     Analysis      %     Analysis  %
----------------------------------  ------------------  --------------

Process Equipment                   Data Storage        North
                       $252.0  63%                 34%   America   33%
                                    Semiconductor   9%  Europe     19%
Metrology                           HB-                 Japan
                        150.5  37%   LED/wireless  28%             14%
                                    Scientific          APAC
                                     Research      29%             34%
                   ---------------                ----            ----
Total                  $402.5 100%  Total         100%  Total     100%
----------------------------------  ------------------  --------------

-------------------
Twelve Month 2007
 Bookings
-------------------

----------------------------------  ------------------  --------------
                       $            Market              Regional
Segment Analysis     Millions  %     Analysis      %     Analysis  %
----------------------------------  ------------------  --------------

Process Equipment                   Data Storage        North
                       $305.6  68%                 32%   America   33%
                                    Semiconductor   7%  Europe     24%
Metrology                           HB-                 Japan
                        146.0  32%   LED/wireless  35%             11%
                                    Scientific          APAC
                                     Research      26%             32%
                   ---------------                ----            ----
Total                  $451.6 100%  Total         100%  Total     100%
----------------------------------  ------------------  --------------
    CONTACT: Veeco Instruments Inc.
             Financial Contact:
             Debra Wasser, 1-516-677-0200 x1472
             SVP, Investor Relations & Corporate Communications
             or
             Media Contact:
             Fran Brennen, 1-516-677-0200 x1222
             Senior Director, Marcom

    SOURCE: Veeco Instruments Inc.