News

News

Veeco Announces Fourth Quarter and Year-End 2008 Financial Results

February 09, 2009

PLAINVIEW, N.Y.--(BUSINESS WIRE)--Feb. 9, 2009-- Veeco Instruments Inc. (Nasdaq: VECO) announced its financial results for the fourth quarter and full year ended December 31, 2008. Veeco will host a conference call reviewing these results at 5:00pm today at 877-723-9521 (toll free) or 719-325-4811. 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 8:00pm EST tonight through midnight on February 23, 2009 at 888-203-1112 or 719-457-0820, using passcode 4780794, or on the Veeco website. A slide presentation reviewing these results has also been posted on our website.

Veeco reports its results on a generally accepted accounting principles (“GAAP”) basis, and also provides results excluding certain items. Veeco’s results for the fourth quarter of 2008 include the impact of $80.1 million in charges ($73.0 million for impairment of goodwill and other long lived assets, triggered by the decline in the Company's market capitalization and weak business environment, and $7.1 million in restructuring and other charges). Please refer to the attached table for details of the reconciliation between GAAP operating results and Non-GAAP operating results.

GAAP Results ($M except EPS)

       
    Q408   Q407   FY 2008   FY 2007
Revenues   $110.3   $106.8   $442.8   $402.5
Net loss   ($72.0)   ($9.4)   ($71.1)   ($17.4)
(Loss) EPS   ($2.29)   ($0.30)   ($2.27)   ($0.56)

Non-GAAP Results ($M except EPS)

       
    Q408   Q407   FY 2008   FY 2007
EBITA   $6.2   $4.1   $28.5   $10.8
EPS   $0.11   $0.07   $0.51   $0.17

John R. Peeler, Veeco’s Chief Executive Officer, commented, “We are pleased that, despite the extremely challenging market environment that necessitated a significant impairment charge, fourth quarter results were in line with guidance, with Veeco revenues of $110 million and non-GAAP EPS of $0.11 per share. In addition, we significantly improved our balance sheet during the fourth quarter, generating $19 million in free cash flow and retiring $37 million of convertible debt. Our year-end cash balance stood at a healthy $104 million. For the full year, we delivered on our commitments to refocus the business, grow the top line, improve profitability and contain spending, and I am proud of the progress we made to strengthen the organization and increase effectiveness across the Company. In 2008, we grew revenue by 10% to $443 million, without significantly increasing our operating expenses, resulting in a 163% increase in EBITA. LED & Solar became our largest business, with revenues increasing by 43% to $166 million and EBITA growing by 89%.”

Mr. Peeler continued, “Veeco’s fourth quarter 2008 bookings were $89 million, flat with the third quarter of 2008 despite a 57% decline in Data Storage bookings to a historically low level of $14 million, as customers froze capital spending. LED & Solar orders increased 69% sequentially to $44 million. This solid performance resulted from record orders for our molecular beam epitaxy systems for solar and other emerging applications, customer purchases of our thermal sources for solar cells, and two large multi-unit orders for metal organic chemical vapor deposition systems. Metrology bookings were down 4% sequentially.”

Fourth Quarter 2008 Summary

Veeco’s revenue for the fourth quarter of 2008 was $110.3 million, compared to $106.8 million in the fourth quarter of 2007. Veeco’s fourth quarter operating loss was ($77.1) million which included asset impairment, restructuring and other charges of $80.1 million, compared to an operating loss of ($8.6) million in the fourth quarter of 2007 which also included restructuring charges. Excluding the above mentioned charges, Veeco’s fourth quarter 2008 earnings before interest, taxes and amortization excluding certain charges (EBITA) was $6.2 million compared to $4.1 million in the prior year. Fourth quarter 2008 net loss was ($72.0) million, or ($2.29) per share, compared to a net loss of ($9.4) million, or ($0.30) per share, last year. Excluding amortization expenses and using a 35% tax rate, and excluding certain charges in both periods as detailed in the attached financial tables, earnings per share was $0.11 in the fourth quarter of 2008, compared to $0.07 in 2007.

Full Year 2008 Summary

Veeco’s 2008 revenue was $442.8 million compared to $402.5 million in 2007. Veeco’s 2008 operating loss was ($70.6) million, including $88.3 million in asset impairment, restructuring and other charges as detailed in the attached financial tables, compared to an operating loss of ($12.1) million in 2007, which also included restructuring charges. 2008 EBITA was $28.5 million compared to $10.8 million in 2007, excluding certain charges in both periods which are detailed in the attached financial tables. Net loss in 2008 was ($71.1) million, or ($2.27) per share, compared to net loss of ($17.4) million, or ($0.56) per share, last year. Excluding amortization expenses and using a 35% tax rate, and excluding charges in both periods as detailed in the attached financial tables, earnings per share were $0.51 in 2008, compared to $0.17 in 2007.

Overall Business Outlook and Restructuring Plan

Mr. Peeler commented, “We anticipate a very weak start to 2009. Some of Veeco’s key LED and data storage customers have pushed out approximately $30 million of equipment deliveries originally slotted for revenue in the first quarter due to current industry overcapacity, financing constraints and their weak business outlook. As a result, nearly half of our $147 million end-of-year backlog is currently forecasted for revenue in the second half of 2009.”

Due to deteriorating business conditions tied to the global economic slowdown, Veeco implemented a significant restructuring program during the fourth quarter of 2008 which included a 26% reduction in force, a majority having already occurred. All other impacted employees have been notified and will transition out of the Company through 2009. This workforce reduction is being achieved by organizational changes that centralize Veeco’s supply chain and operations, consolidate business units, increase outsourced manufacturing and decrease the number of manufacturing sites from eight to four. Other key cost cutting actions which are part of Veeco’s restructuring program include: senior management pay cuts, a reduction in Board of Directors compensation and an employee wage freeze.

Mr. Peeler added, “We have moved swiftly to restructure Veeco to lower our quarterly breakeven level to $80 million, with a goal to return to EBITA profitability by the fourth quarter of 2009. We currently anticipate that restructuring actions will result in annualized savings of over $36 million: approximately $20 million reduction in manufacturing labor and overhead and service costs which are included in cost of goods sold, and $16 million reduction in operating spending.”

“While we are dramatically changing the organization and cutting spending overall in 2009, we are also continuing to invest in R&D for high growth opportunities, with particular emphasis on LED & Solar and new applications for Metrology instruments. Despite the current pause in capacity spending, we anticipate strong multi-year LED industry growth tied to further adoption in applications such as TVs and laptops. Veeco’s solar growth strategy is based on building an integrated equipment offering for CIGS thin film solar cells, emerging as the next generation low cost, high efficiency solar technology. It is our goal to emerge from this downturn with a strong product portfolio well aligned to our customers’ technology needs; a solid balance sheet; and a leaner, more cost-effective organizational structure that can achieve 15% EBITA when end market conditions improve.”

First Quarter 2009 Outlook

Veeco’s first quarter revenues are currently forecasted to be between $60-70 million, and bookings are anticipated to decline sequentially from the fourth quarter of 2008. Veeco is currently forecasting a per share loss of between ($0.72) – ($0.56) on a GAAP basis for the first quarter of 2009.

Beginning in 2009, Veeco’s non-GAAP EPS calculation will exclude equity-based compensation and non cash interest pertaining to its convertible subordinated notes. Veeco expects to incur charges to earnings of $5.0 to $6.0 million related to restructuring activities during the first quarter. Excluding these charges, amortization of $1.8 million, equity compensation of $1.7 million and non cash interest of $0.7 million, and using a 35% tax rate, Veeco’s first quarter loss per share is currently forecasted to be between ($0.25) to ($0.17) on a non-GAAP basis. Please refer to the attached financial tables for more details.

About Veeco

Veeco Instruments Inc. manufactures enabling solutions for customers in the HB-LED, solar, data storage, semiconductor, scientific research and industrial markets. We have leading technology positions in our three businesses: LED & Solar Process Equipment, Data Storage Process Equipment, and Metrology Instruments. Veeco’s manufacturing and engineering facilities are located in New York, New Jersey, California, Colorado, Arizona, Massachusetts 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, 2007 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)
       
Three months ended Year ended
December 31, December 31,
2008 2007 2008 2007
(Unaudited)   (Unaudited)  
 
Net sales $110,344 $106,822 $442,809 $402,475
Cost of sales 70,189 71,145 266,215 244,964
Gross profit 40,155 35,677 176,594 157,511
 
Operating expenses:
Selling, general and administrative expense 22,310 21,625 92,838 90,972
Research and development expense 15,180 14,833 60,353 61,174
Amortization expense 3,215 2,014 10,745 10,250
Restructuring expense 3,567 4,752 10,562 6,726
Asset impairment charge 73,037 1,068 73,322 1,068
Other income, net (77) (13) (668) (618)
 
Operating loss (77,077) (8,602) (70,558) (12,061)
 
Interest expense, net 899 757 3,812 3,013
Gain on extinguishment of debt (4,969) - (4,969) (738)
 
Loss before income taxes and noncontrolling interest (73,007) (9,359) (69,401) (14,336)
 
Income tax (benefit) provision (968) 161 1,892 3,651
Noncontrolling interest (30) (146) (230) (628)
Net loss ($72,009) ($9,374) ($71,063) ($17,359)
 
Loss per common share:
Net loss per common share ($2.29) ($0.30) ($2.27) ($0.56)
Diluted net loss per common share ($2.29) ($0.30) ($2.27) ($0.56)
 
Weighted average shares outstanding 31,500 31,128 31,347 31,020
Diluted weighted average shares outstanding 31,500 31,128 31,347 31,020
Veeco Instruments Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
   
December 31, December 31,
2008 2007
(Unaudited)  
 
ASSETS
Current assets:
Cash and cash equivalents $ 103,799 $ 117,083
Accounts receivable, net 59,659 75,207
Inventories, net 94,930 98,594
Prepaid expenses and other current assets 6,425 8,901
Deferred income taxes 2,185 2,649
Total current assets 266,998 302,434
 
Property, plant and equipment, net 64,372 66,142
Goodwill 59,160 100,898
Other assets, net 39,011 59,860
Total assets $ 429,541 $ 529,334
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 29,610 $ 36,639
Accrued expenses 66,964 60,201
Deferred profit 1,346 3,250
Income taxes payable 354 2,278
Current portion of long-term debt 196 25,550
Total current liabilities 98,470 127,918
 
Deferred income taxes 4,540 3,712
Long-term debt 108,669 121,035
Other non-current liabilities 2,391 1,978
 
Noncontrolling interest 784 1,014
 
Shareholders' equity 214,687 273,677
Total liabilities and shareholders' equity $ 429,541 $ 529,334
Veeco Instruments Inc. and Subsidiaries
Reconciliation of operating loss to earnings excluding certain items
(In thousands, except per share data)
(Unaudited)
       
Three months ended Year ended
December 31, December 31,
2008 2007 2008 2007
 
 
Operating loss ($77,077) ($8,602) ($70,558) ($12,061)
 
Adjustments:
 
Amortization expense 3,215 2,014 10,745 10,250
Restructuring expense 3,567 (1) 4,752 (2) 10,562 (1) 6,726 (2)
Purchase accounting adjustment 565 (3) - 1,492 (3) -
Asset impairment charge 73,037 (4) 1,068 (5) 73,322 (4) 1,068 (5)
Inventory write-off 2,900 (6) 4,821 (7) 2,900 (6) 4,821 (7)
 

Earnings before interest, income taxes and amortization excluding certain items ("EBITA")

6,207 4,053 28,463 10,804
 
Interest expense, net 899 757 3,812 3,013
Gain on extinguishment of debt (4,969) (8) - (4,969) (8) (738) (9)
Adjustment to exclude gain on extinguishment of debt 4,969 - 4,969 738
 

Earnings excluding certain items before income taxes and noncontrolling interest

5,308 3,296 24,651 7,791
 
Income tax provision at 35% 1,858 1,154 8,628 2,727
Noncontrolling interest, net of income tax provision at 35% (20) (95) (150) (408)
       
Earnings excluding certain items $3,470 $2,237 $16,173 $5,472
 
Earnings excluding certain items per diluted share $0.11 $0.07 $0.51 $0.17
 
Diluted weighted average shares outstanding 31,564 31,399 31,516 31,346
 

(1) During 2008, the Company recorded a restructuring charge of $10.6 million, of which $3.6 million was incurred during the fourth quarter, $4.1 million was incurred during the third quarter and $2.9 million was incurred during the first quarter.  These restructuring charges consisted of personnel severance costs and lease-related commitments.

 

(2) During 2007, the Company recorded a restructuring charge of $6.7 million, of which $4.7 million was incurred during the fourth quarter, $0.5 million was incurred during the third quarter and $1.5 million was incurred during the second quarter.  The fourth quarter restructuring charge consisted of $2.9 million of personnel severance costs, and $1.8 million of commitments associated with discontinued product lines.  The third quarter and second quarter restructuring charges consisted of personnel severance costs.

 

(3) During 2008, the Company recorded $1.5 million in cost of sales related to the acquisition of Mill Lane Engineering, of which $0.6 million was recorded during the fourth quarter.  This was the result of purchase accounting, which requires adjustments to capitalize inventory at fair value.

 

(4) During 2008, the Company recorded a $73.3 million asset impairment charge, of which $73.0 million was recorded during the fourth quarter and $0.3 million was recorded during the first quarter.  The fourth quarter charge consisted of $52.3 million related to goodwill and $20.7 million related to other long-lived assets.  The first quarter charge consisted of $0.3 million related to fixed asset write-offs associated with the consolidation and relocation of our Corporate headquarters.

 

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

 

(6) During the fourth quarter of 2008, the Company recorded a $2.9 million inventory write-off in its Metrology segment associated with legacy semiconductor products.  This was included in cost of sales in the GAAP income statement.

 

(7) 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.

 

(8) During the fourth quarter of 2008, the Company repurchased $12.2 million aggregate principal amount of its 4.125% convertible subordinated notes.  As a result of these repurchases, the Company recorded a net gain from the early extinguishment of debt in the amount of $5.0 million.

 

(9) During the first 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 net gain from the early extinguishment of debt in the amount of $0.7 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 earnings before interest, income taxes and amortization excluding certain items ("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
Segment Bookings, Revenues, and Reconciliation
of Operating Income (Loss) to EBITA
(In thousands)
(Unaudited)
                 
  Three months ended   Year ended
December 31, December 31,
    2008   2007   2008   2007
LED & Solar Process Equipment    
Bookings $ 43,649 $ 42,522 $ 160,162 $ 163,970
Revenues $ 37,608 $ 33,675 $ 165,812 $ 115,863
 
Operating income $ 783 $ 4,681 $ 19,616 $ 9,694
Amortization expense 1,587 489 4,627 4,263
Restructuring expense 725 34 732 34
Purchase accounting adjustment 565   - 1,492   -
EBITA $ 3,660 $ 5,204 $ 26,467 $ 13,991
                 
Data Storage Process Equipment
Bookings $ 13,968 $ 35,826 $ 138,653 $ 141,663
Revenues $ 45,026 $ 37,329 $ 149,123 $ 136,169
 
Operating loss $ (42,877) $ (6,374) $ (35,411) $ (6,332)
Amortization expense 934 952 3,790 3,806
Restructuring expense 272 2,339 396 2,498
Asset impairment charge 51,102 1,068 51,102 1,068
Inventory write-off -   4,821 -   4,821
EBITA $ 9,431 $ 2,806 $ 19,877 $ 5,861
                 
Metrology
Bookings $ 30,884 $ 36,547 $ 125,622 $ 145,939
Revenues $ 27,710 $ 35,818 $ 127,874 $ 150,443
 
Operating loss $ (30,044) $ (2,479) $ (31,348) $ (997)
Amortization expense 585 351 1,880 1,486
Restructuring expense 511 554 1,138 1,952
Asset impairment charge 21,935 - 21,935 -
Inventory write-off 2,900   - 2,900   -
EBITA $ (4,113) $ (1,574) $ (3,495) $ 2,441
                 
Unallocated Corporate
Operating loss $ (4,939) $ (4,430) $ (23,415) $ (14,426)
Amortization expense 109 222 448 695
Restructuring expense 2,059 1,825 8,296 2,242
Asset impairment charge -   - 285   -
EBITA $ (2,771) $ (2,383) $ (14,386) $ (11,489)
                 
Total
Bookings $ 88,501 $ 114,895 $ 424,437 $ 451,572
Revenues $ 110,344 $ 106,822 $ 442,809 $ 402,475
 
Operating loss $ (77,077) $ (8,602) $ (70,558) $ (12,061)
Amortization expense 3,215 2,014 10,745 10,250
Restructuring expense 3,567 4,752 10,562 6,726
Purchase accounting adjustment 565 - 1,492 -
Asset impairment charge 73,037 1,068 73,322 1,068
Inventory write-off 2,900   4,821 2,900   4,821
EBITA $ 6,207 $ 4,053 $ 28,463 $ 10,804
                 
 
** Refer to footnotes on "Reconciliation of operating loss to earnings excluding certain items" for further details.
Veeco Instruments Inc. and Subsidiaries
Reconciliation of operating loss to earnings excluding certain items
(In thousands, except per share data)
(Unaudited)
   
Guidance for the three
months ended March 31, 2009
LOW HIGH
 
 
Operating loss ($21,000) ($15,800)
 
Adjustments:
 
Amortization expense 1,800 1,800
Restructuring expense 6,000 (1) 5,000 (1)
Equity-based compensation expense 1,700 1,700
 
Earnings before interest, income taxes and amortization
excluding certain items ("EBITA") (11,500) (7,300)
 
Interest expense, net 1,500 1,500
Adjustment for non-cash portion of interest expense (700) (2) (700) (2)
 
Earnings excluding certain items before income taxes (12,300) (8,100)
 
Income tax benefit at 35% (4,305) (2,835)
   
Earnings excluding certain items ($7,995) ($5,265)
 
Earnings excluding certain items per diluted share ($0.25) ($0.17)
 
Diluted weighted average shares outstanding 31,600 31,600
 
 
(1) During the first quarter of 2009, the Company expects to record a restructuring charge between $5.0 and $6.0 million.
(2) Adjustment to exclude non-cash interest on convertible subordinated notes.
 
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 earnings before interest, income taxes and amortization excluding certain items ("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.

Source: Veeco Instruments Inc.

Veeco Instruments Inc.
Financial:
Debra Wasser, 516-677-0200 x1472
SVP Investor Relations & Corporate Communications
or
Media:
Fran Brennen, 516-677-0200 x1222
Senior Director Marcom