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Veeco Announces Second Quarter and Six Month 2008 Financial Results

July 28, 2008

PLAINVIEW, N.Y., Jul 28, 2008 (BUSINESS WIRE) -- Veeco Instruments Inc. (Nasdaq: VECO) today announced its financial results for the second quarter and six months ended June 30, 2008. 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 details of the reconciliation of GAAP operating income to earnings excluding certain items.

Veeco will host a conference call reviewing these results at 5:00 pm EDT today at 1-877-856-1964 (toll free) or 1-719-325-4812. 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 ET through midnight on August 12, 2008 at 888-203-1112 or 719-457-0820, using passcode 3021674, or on the Veeco website. Please also see the Veeco website for a slide presentation reviewing financial data.

Second Quarter 2008 Highlights

-- Revenue was $114.4 million, up 16% compared to $98.8 million last year, and ahead of guidance of $102-$110 million;

-- Bookings were $136.5 million, up 21% compared to $112.5 million last year, and ahead of guidance of $110-$118 million;

-- Net income was $4.2 million, or $0.13 per share, compared to a net loss of ($2.6) million, or ($0.08) per share, last year. Veeco's guidance was for GAAP EPS to be between ($0.07) - $0.02 per share.

-- Veeco's earnings per share, excluding certain items, was $0.16 compared to earnings per share of $0.05 last year, ahead of Veeco's guidance of $0.03-$0.09 per share.

John R. Peeler, Veeco's Chief Executive Officer, commented, "We are pleased to report second quarter results that were ahead of our guidance for bookings, revenues and earnings. Second quarter LED & Solar Process Equipment revenues were $45.1 million, up 61% compared to the prior year and 7% sequentially, representing our largest segment. Data Storage Process Equipment revenues increased to $36.7 million, up 15% from last year and 52% sequentially, with some customer acceleration of delivery dates for Veeco equipment. Metrology revenue was $32.6 million, down 16% compared to prior year and 10% sequentially, primarily due to continued weak semiconductor and research end market conditions."

"Veeco's $136.5 million in second quarter bookings reflect the best quarterly performance we have had in two years. LED & Solar bookings were $52.1 million, up 43% compared to last year and 35% sequentially, with customers making significant technology and capacity investments. Our Data Storage business reported second quarter orders of $51.7 million, up approximately 25% from the prior year and 27% sequentially, as key hard drive manufacturers invested in equipment capacity aligned to their wafer size change programs. Veeco's Metrology bookings were $32.7 million, declining 6% versus the prior year but increasing 9% on a sequential basis."

Mr. Peeler added, "We completed the purchase of Mill Lane Engineering, a key equipment supplier to Global Solar Energy Inc., during the second quarter, expanding Veeco's solar product offerings to include web coaters for flexible photovoltaic applications. As expected, this business had no contribution to our second quarter revenue due to purchase accounting requirements and the timing of the completion of the acquisition, and no new orders for web coaters were received during the quarter."

Second Quarter 2008 Summary

Veeco's revenue for the second quarter of 2008 was $114.4 million, compared to $98.8 million in the second quarter of 2007. Second quarter 2008 operating income was $6.2 million compared with an operating loss of ($1.0) million in the second quarter of 2007. Veeco's second quarter 2008 earnings before interest, taxes and amortization excluding certain charges (EBITA) was $8.7 million, compared to $2.8 million last year. Second quarter 2008 net income was $4.2 million, or $0.13 per share, compared to a net loss of ($2.6) million, or ($0.08) per share, last year. Excluding amortization expenses and using a 35% tax rate in both periods and certain charges in 2007, second quarter 2008 earnings per share were $0.16, compared to $0.05 in 2007.

Six Month 2008 Summary

Veeco's revenue for the first six months of 2008 was $216.8 million, compared to $197.9 million in the first six months of 2007. Six month 2008 operating income was $6.3 million compared with $0.7 million in the first six months of 2007. Veeco's EBITA was $13.9 million for the first six months of 2008, compared to $8.5 million last year. Net income was $2.6 million, or $0.08 per share in the first six months of 2008, compared to a net loss of ($2.3) million, or ($0.07) per share, last year. Excluding certain charges, amortization expenses and using a 35% tax rate both periods, earnings per share were $0.25 in the first six months of 2008, compared to $0.15 in the first six months of 2007.

Outlook

The Company forecasts third quarter 2008 revenues to be in the range of $113-$118 million. Veeco's earnings per share are currently forecasted to be between ($0.12) - ($0.03) on a GAAP basis. In the third quarter Veeco will incur a charge to earnings of $3.7 million related to the expense associated with the mutually agreed termination of the employment agreement of Veeco's former CEO Edward Braun, following the successful completion of the CEO transition (Mr. Braun remains Veeco's Chairman). In addition, Veeco will also incur a $0.7 million third quarter charge for restructuring in Metrology, and a $0.4 million charge related to the required purchase accounting adjustment to write up inventory to fair value in connection with the purchase of Mill Lane Engineering. Excluding these charges and amortization of $3.1 million, and using a 35% tax rate, Veeco's third quarter earnings per share are currently forecasted to be between $0.10 to $0.15 on a non-GAAP basis. Veeco currently expects that its third quarter 2008 bookings will be in the range of $113-$118 million, with some normal seasonality anticipated.

Mr. Peeler commented, "We are pleased that at the mid-point of the year, even with the backdrop of difficult overall economic conditions, Veeco is achieving results ahead of our original expectations. We remain on track to significantly improve Veeco's performance on both the top and bottom line in 2008. We currently forecast that 2008 revenues will be between $450 and 455 million."

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 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)
                             (Unaudited)

                                  Three months ended Six months ended
                                       June 30,          June 30,
                                  ------------------ -----------------
                                       2008     2007     2008     2007
                                  --------- -------- -------- --------

Net sales                          $114,449  $98,769 $216,756 $197,935
Cost of sales                        66,719   56,524  126,400  111,995
                                  --------- -------- -------- --------
Gross profit                         47,730   42,245   90,356   85,940

Operating expenses:
Selling, general and
 administrative expense              24,311   23,818   46,939   46,624
Research and development expense     15,145   15,903   29,871   31,292
Amortization expense                  2,426    2,368    4,382    6,277
Restructuring expense                     -    1,445    2,875    1,445
Asset impairment charge                   -        -      285        -
Other income, net                     (382)    (279)    (378)    (426)
                                  --------- -------- -------- --------

Operating income (loss)               6,230  (1,010)    6,382      728

Interest expense, net                   969      772    1,861    1,591
Gain on extinguishment of debt            -        -        -    (738)
                                  --------- -------- -------- --------

Income (loss) before income taxes
 and noncontrolling interest          5,261  (1,782)    4,521    (125)

Income tax provision                  1,129    1,042    2,048    2,536
Noncontrolling interest                (70)    (229)    (146)    (359)
                                  --------- -------- -------- --------
Net income (loss)                    $4,202 ($2,595)   $2,619 ($2,302)
                                  ========= ======== ======== ========

Income (loss) per common share:
Net income (loss) per common
 share                                $0.13  ($0.08)    $0.08  ($0.07)
Diluted net income (loss) per
 common share                         $0.13  ($0.08)    $0.08  ($0.07)

Weighted average shares
 outstanding                         31,255   30,926   31,197   30,912
Diluted weighted average shares
 outstanding                         31,590   30,926   31,435   30,912

               Veeco Instruments Inc. and Subsidiaries
                Condensed Consolidated Balance Sheets
                            (In thousands)

                                             June 30,    December 31,
                                               2008           2007
                                           ------------  -------------
                                           (Unaudited)
ASSETS
Current assets:
   Cash and cash equivalents               $    109,644   $    117,083
   Accounts receivable, net                      76,413         75,207
   Inventories, net                             115,025         98,594
   Prepaid expenses and other current
    assets                                        6,741          8,901
   Deferred income taxes                          2,808          2,649
                                           ------------  -------------
Total current assets                            310,631        302,434

Property, plant and equipment, net               66,458         66,142
Goodwill                                        101,828        100,898
Other assets, net                                63,842         59,860
                                           ------------  -------------
Total assets                               $    542,759   $    529,334
                                           ============  =============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable                        $     37,091   $     36,639
   Accrued expenses                              65,532         60,201
   Deferred profit                                2,890          3,250
   Income taxes payable                           1,086          2,278
   Current portion of long-term debt             25,422         25,550
                                           ------------  -------------
Total current liabilities                       132,021        127,918

Deferred income taxes                             4,673          3,712
Long-term debt                                  120,939        121,035
Other non-current liabilities                     2,514          1,978

Noncontrolling interest                             868          1,014

Shareholders' equity                            281,744        273,677
                                           ------------  -------------
Total liabilities and shareholders' equity $    542,759   $    529,334
                                           ============  =============

               Veeco Instruments Inc. and Subsidiaries
   Reconciliation of operating income (loss) to earnings excluding
                             certain items
                (In thousands, except per share data)
                             (Unaudited)

                                     Three months      Six months
                                         ended            ended
                                       June 30,        June 30,
                                    --------------- ---------------
                                      2008     2007   2008     2007
                                    ------ -------- ------   ------


Operating income (loss)             $6,230 ($1,010) $6,382     $728

Adjustments:

Amortization expense                 2,426    2,368  4,382    6,277
Restructuring expense                    -    1,445  2,875(1) 1,445
Asset impairment charge                  -        -    285(2)     -
                                    ------ -------- ------   ------

Earnings before interest, income
 taxes and amortization
 excluding certain items ("EBITA")   8,656    2,803 13,924    8,450

Interest expense, net                  969      772  1,861    1,591
Gain on extinguishment of debt           -        -      -    (738)(3)
Adjustment to exclude gain on
 extinguishment of debt                  -        -      -      738
                                    ------ -------- ------   ------

Earnings excluding certain items
 before income taxes                 7,687    2,031 12,063    6,859

Income tax provision at 35%          2,690      711  4,222    2,401
Noncontrolling interest, net of
 income tax provision at 35%          (46)    (149)   (95)    (233)

                                    ------ -------- ------   ------
Earnings excluding certain items    $5,043   $1,469 $7,936   $4,691
                                    ====== ======== ======   ======

Earnings excluding certain items
 per diluted share                   $0.16    $0.05  $0.25    $0.15

Diluted weighted average shares
 outstanding                        31,590   31,263 31,435   31,278




(1) During the first quarter of 2008, the Company recorded a
 restructuring charge of $2.9 million, consisting of $2.6 million of
 costs associated with the consolidation and relocation of the lease
 for our Corporate headquarters, and $0.3 million of personnel
 severance costs.

(2) During the first quarter of 2008, the Company recorded a $0.3
 million asset impairment charge related to fixed asset write-offs
 associated with the consolidation and relocation of our Corporate
 headquarters.


(3) 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 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 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 Revenues, Bookings, and Reconciliation
                 of Operating Income (Loss) to EBITA
                            (In millions)
                             (Unaudited)

----------------------------------------------------------------------
                                Three months ended   Six months ended
                                June 30,  June 30,   June 30, June 30,
                               -------------------- ------------------
                                     2008      2007       2008    2007
--------------------------------------------------- ------------------
LED & Solar Process Equipment
Bookings                        $    52.1 $    36.4    $  90.8  $ 72.8
Revenues                             45.1      28.0       87.2    50.4

Operating income                      7.8       2.8       15.8     2.3
Amortization expense                  1.0       1.0        1.5     3.3
                               -------------------- ------------------
EBITA                                 8.8       3.8       17.3     5.6

--------------------------------------------------- ------------------
Data Storage Process Equipment
Bookings                             51.7      41.3       92.3    73.6
Revenues                             36.7      32.0       60.9    67.7

Operating income                      4.3       0.7        1.7     2.1
Amortization expense                  0.9       0.9        1.9     1.9
Restructuring expense                   -         -        0.1       -
                               -------------------- ------------------
EBITA                                 5.2       1.6        3.7     4.0

--------------------------------------------------- ------------------
Metrology
Bookings                             32.7      34.8       62.7    72.0
Revenues                             32.6      38.7       68.7    79.8

Operating (loss) income             (1.6)     (1.3)      (0.4)     2.3
Amortization expense                  0.4       0.3        0.8     0.7
Restructuring expense                   -       1.4        0.2     1.4
                               -------------------- ------------------
EBITA                               (1.2)       0.4        0.6     4.4

--------------------------------------------------- ------------------
Unallocated Corporate
Operating loss                      (4.2)     (3.3)     (10.8)   (6.0)
Amortization expense                  0.1       0.2        0.2     0.4
Restructuring expense                   -       0.1        2.6     0.1
Asset impairment charge                 -         -        0.3       -
                               -------------------- ------------------
EBITA                               (4.1)     (3.0)      (7.7)   (5.5)

--------------------------------------------------- ------------------
Total
Bookings                            136.5     112.5      245.8   218.4
Revenues                            114.4      98.7      216.8   197.9

Operating income (loss)               6.3     (1.1)        6.3     0.7
Amortization expense                  2.4       2.4        4.4     6.3
Restructuring expense                   -       1.5        2.9     1.5
Asset impairment charge                 -         -        0.3       -
                               -------------------- ------------------
EBITA                           $     8.7 $     2.8    $  13.9  $  8.5

----------------------------------------------------------------------


** Refer to footnotes on Reconciliation of operating income to
 earnings excluding certain items

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