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Veeco Reports Fourth Quarter and Full Year 2011 Financial Results

February 06, 2012

PLAINVIEW, N.Y.--(BUSINESS WIRE)--Feb. 6, 2012-- Veeco Instruments Inc. (Nasdaq: VECO) announced its financial results for the fourth quarter and year ended December 31, 2011. Veeco reports its results on a U.S. generally accepted accounting principles (“GAAP”) basis, and also provides results excluding certain items. Please refer to the attached table for details of the reconciliation between GAAP operating results and Non-GAAP operating results. All results presented herein are for Veeco’s “Continuing Operations” which excludes the Metrology business sold to Bruker Corporation on October 7, 2010 and reflects the discontinuation of Veeco’s CIGS Solar Systems business in the third quarter of 2011.

GAAP Results ($M except EPS)

 
  Q4 ‘11   Q4 ‘10
Revenues $191.7 $ 299.8
Net income $23.6 $ 103.4
EPS (diluted) $0.61 $ 2.46
 

Non-GAAP Results ($M except EPS)

 
  Q4 ‘11   Q4 ‘10
Net income $28.1 $73.5
EPS (diluted) $0.72 $1.75

Fourth Quarter 2011 Results in Line with Guidance

John R. Peeler, Veeco’s Chief Executive Officer, commented, “Veeco’s fourth quarter performance was within our guidance range with revenue of $192 million and non-GAAP earnings per share of $0.72. Business conditions in LED remained weak, as expected, with some customer-driven rescheduling of tool shipments. Fourth quarter LED & Solar revenues were $160 million, including $150 million in MOCVD. Data Storage revenues were $32 million.”

“We are proud of our 2011 performance as we continued to execute in a challenging overall business environment, achieving a record $979 million in revenue, 48% gross margin and non-GAAP earnings per share of $5.01,” continued Mr. Peeler. “Some of our key accomplishments for the year included the launch of the industry’s first multi-chamber MOCVD system which contributed to dramatic market share gains, close connectivity to our hard drive customers as we support them in the aftermath of the Thailand flood, and significant expansion of our Asian customer support infrastructure. We were able to respond quickly to customers’ changing business plans and remained nimble through both the up and down cycles of our business.”

Veeco’s fourth quarter 2011 bookings totaled $143 million, up 8% sequentially. LED business conditions deteriorated during the quarter, with LED and Solar bookings declining 40% sequentially to $67 million ($59 million in MOCVD). Data Storage bookings were a record $76 million, a 258% sequential increase, with Veeco equipment being ordered by key hard drive customers to rebuild or expand manufacturing capacity. The Company’s Q4 2011 book-to-bill ratio was .75 to 1 and quarter-end backlog was $333 million.

First Quarter 2012 Guidance & Outlook

Veeco’s first quarter 2012 revenue is currently forecasted to be between $115 million and $140 million. Earnings per share are currently forecasted to be between $0.04 to $0.25 on a GAAP basis, and $0.13 to $0.34 on a non - GAAP basis. Please refer to the attached financial table for more details.

Mr. Peeler commented, “We don’t see signs of near-term improvement in the LED environment and the current overcapacity situation could mean that MOCVD orders remain at these depressed levels for multiple quarters. In Data Storage, while overall market conditions are healthy, the continued consolidation of our customer base will likely mean that order patterns will fluctuate from quarter to quarter.”

“While consumer electronics has been the dominant end market for LED technology over the past decade, and for which most MOCVD capacity was installed, these applications are expected to reach saturation in the next few years,” added Mr. Peeler. “Conversely, the LED general lighting market is in its infancy. We believe that after a transition year in 2012, demand for MOCVD tools will reaccelerate, driving demand for thousands of additional next-generation reactors to make lower-cost, higher efficiency, brighter LEDs for lighting applications. While estimates vary, LEDs are expected to represent more than 25% of the global lighting market by 2015 and the majority of the market by 2020, a dramatic increase from today’s penetration of less than 5%.”

Mr. Peeler concluded, “We remain focused on driving next-generation product development to secure our MOCVD technology leadership position for the lighting wave. With nearly $500 million in cash at the end of 2011, virtually no debt and leading market share in all our core technologies, we can invest through this downturn and emerge even stronger when the market returns. We currently forecast 2012 revenue in the range of $500-$600 million. We believe that, with the work that has been done over the past three years to outsource our manufacturing and utilize variable costs where possible, we will maintain a reasonable level of profitability and generate cash through this temporary pause in the LED market.”

Conference Call Information

A conference call reviewing these results has been scheduled for 5:00pm ET today at 1-877-857-6176 (toll free) or 1-719-325-4907 and use passcode 2749163. 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 tonight through 8:00pm ET on February 20, 2012 at 888-203-1112 or 719-457-0820, using passcode 2749163, and on the Veeco website. Please follow along with our slide presentation also posted on the website.

About Veeco

Veeco makes equipment to develop and manufacture LEDs, solar cells, hard disk drives and other devices. We support our customers through product development, manufacturing, sales and service sites in the U.S., Korea, Taiwan, China, Singapore, Japan, Europe and other locations. Please visit us at 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, 2010 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
Condensed Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited)
       
Three months ended Year ended
December 31, December 31,
  2011     2010     2011     2010  
 
Net sales $ 191,685 $ 299,762 $ 979,135 $ 930,892
Cost of sales   108,597     144,579     504,801     481,407  
Gross profit 83,088 155,183 474,334 449,485
 
Operating expenses (income):
Selling, general and administrative 21,168 27,924 95,134 87,250
Research and development 26,669 17,827 96,596 56,948
Amortization 1,215 918 4,734 3,703
Restructuring 1,288 - 1,288 (179 )
Asset impairment 584 - 584 -
Other, net   (34 )   (1,674 )   (261 )   (1,490 )
Total operating expenses   50,890     44,995     198,075     146,232  
 
Operating income 32,198 110,188 276,259 303,253
 
Interest (income) expense, net (317 ) 1,390 824 6,572
Loss on extinguishment of debt   -     -     3,349     -  
 
Income from continuing operations before income taxes 32,515 108,798 272,086 296,681
Income tax provision   8,927     5,375     81,584     19,505  
Income from continuing operations   23,588     103,423     190,502     277,176  
 
(Loss) income from discontinued operations, net of tax (3,312 ) 93,737 (62,515 ) 84,584
       
Net income $ 20,276   $ 197,160   $ 127,987   $ 361,760  
 
Income (loss) per common share:
Basic:
Continuing operations $ 0.62 $ 2.62 $ 4.80 $ 7.02
Discontinued operations   (0.09 )   2.38     (1.57 )   2.14  
Income $ 0.53   $ 5.00   $ 3.23   $ 9.16  
 
Diluted:
Continuing operations $ 0.61 $ 2.46 $ 4.63 $ 6.52
Discontinued operations   (0.09 )   2.24     (1.52 )   1.99  
Income $ 0.52   $ 4.70   $ 3.11   $ 8.51  
 
Weighted average shares outstanding:
Basic 38,212 39,453 39,658 39,499
Diluted 38,771 41,972 41,155 42,514
Veeco Instruments Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
   
December 31, December 31,
  2011   2010
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 217,922 $ 245,132
Short-term investments 273,591 394,180
Restricted cash 577 76,115
Accounts receivable, net 95,038 150,528
Inventories, net 113,434 108,487
Prepaid expenses and other current assets 40,756 34,328
Assets held for sale 2,341 -
Deferred income taxes, current   10,885   13,803
Total current assets 754,544 1,022,573
 
Property, plant and equipment, net 86,067 42,320
Goodwill 55,828 52,003
Deferred income taxes - 9,403
Other assets, net   39,624   21,735
Total assets $ 936,063 $ 1,148,034
 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 40,398 $ 32,220
Accrued expenses and other current liabilities 107,656 183,010
Deferred profit 10,275 4,109
Income taxes payable 3,532 56,369
Liabilities of discontinued segment held for sale 5,359 5,359
Current portion of long-term debt   248   101,367
Total current liabilities 167,468 382,434
 
Deferred income taxes 5,029 -
Long-term debt 2,406 2,654
Other liabilities   640   434
Total liabilities 175,543 385,522
 
Equity 760,520 762,512
   
Total liabilities and equity $ 936,063 $ 1,148,034
Veeco Instruments Inc. and Subsidiaries
Reconciliation of GAAP to non-GAAP results
(In thousands, except per share data)
(Unaudited)
 
Three months ended Year ended
December 31, December 31,
  2011     2010     2011     2010  
Adjusted EBITA
 
Operating income $ 32,198 $ 110,188 $ 276,259 $ 303,253
 
Adjustments:
 
Amortization 1,215 918 4,734 3,703
Equity-based compensation 3,335 2,547 12,807 8,769
Restructuring 1,288 (1 ) - 1,288 (1 ) (179 ) (1 )
Asset impairment 584 (2 ) - 584 (2 ) -
Inventory write-off   758   (3 )   -     758   (3 )   -  
 

 

Earnings from continuing operations before interest, income taxes and amortization excluding certain items ("Adjusted EBITA")

$ 39,378   $ 113,653   $ 296,430   $ 315,546  
 
Non-GAAP Net Income
 
Net income from continuing operations (GAAP basis) $ 23,588 $ 103,423 $ 190,502 $ 277,176
 
Non-GAAP adjustments:
 
Amortization 1,215 918 4,734 3,703
Equity-based compensation 3,335 2,547 12,807 8,769
Restructuring 1,288 (1 ) - 1,288 (1 ) (179 ) (1 )
Loss on extinguishment of debt - - 3,349 -
Asset impairment 584 (2 ) - 584 (2 ) -
Inventory write-off 758 (3 ) - 758 (3 ) -
Non-cash portion of interest expense - 788 (4 ) 1,259 (4 ) 3,058 (4 )
Income tax effect of non-GAAP adjustments   (2,667 ) (5 )   (34,193 ) (5 )   (9,108 ) (5 )   (89,706 ) (5 )
 
Non-GAAP Net Income $ 28,101   $ 73,483   $ 206,173   $ 202,821  
 
Non-GAAP earnings per diluted share excluding certain items ("Non-GAAP EPS") $ 0.72   $ 1.75   $ 5.01   $ 4.77  
 
Diluted weighted average shares outstanding 38,771 41,972 41,155 42,514
 
(1) During the fourth quarter of 2011, we recorded a restructuring expense of $1.3 million related to a company-wide reorganization. During the first quarter of 2010, we recorded a restructuring credit of $0.2 million associated with a change in estimate.
 
(2) During the fourth quarter of 2011, we recorded a $0.6 million asset impairment charge associated with the discontinuance of a certain product line in our LED & Solar Segment.
 
(3) During the fourth quarter of 2011, we recorded an inventory write-off of $0.8 million as a result of the discontinuance of a certain product line in our LED & Solar segment, which is included in cost of sales in the GAAP statement of income.
 
(4) Adjustment to exclude non-cash interest expense on convertible subordinated notes.
 
(5) By the end of 2010, the Company had fully utilized all prior NOL and tax credit carryfowards. As a result, beginning in 2011, the Company utilized the with and without method to determine the income tax effect of non-GAAP adjustments. During 2010 we provided for income taxes at a 35% statutory rate to determine income taxes on non-GAAP income.
 
NOTE - 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 adjusted 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 adjusted EBITA reports baseline performance and thus provides useful information.
Veeco Instruments Inc. and Subsidiaries
Reconciliation of GAAP to non-GAAP results
(In thousands, except per share data)
(Unaudited)
 
Guidance for the three months ending

March 31, 2012

 
LOW HIGH
Adjusted EBITA
 
Operating income $ 2,343 $ 13,150
 
Adjustments:
 
Amortization 1,298 1,298
Equity-based compensation   3,530     3,530  
 

 

Earnings from continuing operations before interest, income taxes and amortization excluding certain items ("Adjusted EBITA")

$ 7,171   $ 17,978  
 
Non-GAAP Net Income
 
Net income from continuing operations (GAAP basis) $ 1,662 $ 9,659
 
Non-GAAP adjustments:
 
Amortization 1,298 1,298
Equity-based compensation 3,530 3,530
Income tax effect of non-GAAP adjustments   (1,255 ) (1 )   (1,255 ) (1 )
 
Non-GAAP Net Income $ 5,235   $ 13,232  
 
Non-GAAP earnings per diluted share excluding certain items ("Non-GAAP EPS") $ 0.13   $ 0.34  
 
Diluted weighted average shares outstanding 38,900 38,900
 
 
(1) The Company utilizes the with and without method to determine the income tax effect of non-GAAP adjustments.
 
NOTE - 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 adjusted 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 adjusted EBITA reports baseline performance and thus provides useful information.
Veeco Instruments Inc. and Subsidiaries
Segment Bookings, Revenues, and Reconciliation
of Operating Income (Loss) to Adjusted EBITA (Loss)
(In thousands)
(Unaudited)
       
Three months ended Year ended
December 31, December 31,
      2011     2010     2011     2010  
LED & Solar
Bookings $ 67,184 $ 252,912 $ 650,608 $ 968,143
 
Revenues $ 160,100 $ 257,902 $ 827,797 $ 795,565
 
Operating income $ 30,896 $ 106,328 $ 258,813 $ 296,599
Amortization 863 487 3,227 1,948
Equity-based compensation 906 826 3,473 1,764
Restructuring 204 - 204 -
Asset impairment 584 - 584 -
Inventory write-off   758     -     758     -  
Adjusted EBITA $ 34,211 $ 107,641 $ 267,059 $ 300,311
           
Data Storage
Bookings $ 75,899 $ 42,037 $ 167,249 $ 153,406
 
Revenues $ 31,585 $ 41,860 $ 151,338 $ 135,327
 
Operating income $ 4,377 $ 11,796 $ 35,464 $ 31,427
Amortization 352 373 1,424 1,522
Equity-based compensation 459 359 1,458 1,140
Restructuring   12     -     12     (179 )
Adjusted EBITA $ 5,200 $ 12,528 $ 38,358 $ 33,910
           
Unallocated Corporate
Operating loss $ (3,075 ) $ (7,936 ) $ (18,018 ) $ (24,773 )
Amortization - 58 83 233
Equity-based compensation 1,970 1,362 7,876 5,865
Restructuring   1,072     -     1,072     -  
Adjusted loss $ (33 ) $ (6,516 ) $ (8,987 ) $ (18,675 )
           
Total
Bookings $ 143,083 $ 294,949 $ 817,857 $ 1,121,549
 
Revenues $ 191,685 $ 299,762 $ 979,135 $ 930,892
 
Operating income $ 32,198 $ 110,188 $ 276,259 $ 303,253
Amortization 1,215 918 4,734 3,703
Equity-based compensation 3,335 2,547 12,807 8,769
Restructuring 1,288 - 1,288 (179 )
Asset impairment 584 - 584 -
Inventory write-off   758     -     758     -  
Adjusted EBITA $ 39,378   $ 113,653   $ 296,430   $ 315,546  

Source: Veeco Instruments Inc.

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