Veeco: Fiscal 1Q09 Financial Results

Veeco Instruments, Inc. announced its financial results for the first quarter ended March 31, 2009.

John R. Peeler, Veeco’s Chief Executive Officer, commented: “Veeco’s first quarter results were in line with guidance in an extremely challenging market environment. Our balance sheet remained healthy with Veeco’s quarter-ending cash balance standing at $93 million after a $9.6 million earn-out was paid for our 2008 solar acquisition. We are on-track with cost reduction plans, including increased outsourcing, manufacturing consolidation, materials cost management and workforce reductions. These efforts have already yielded declines in manufacturing overhead, service and operating expenses of over 20% since the third quarter of 2008."

Mr. Peeler continued: “Veeco’s first quarter orders were $53 million, with extremely weak business conditions in all segments. LED & Solar orders were $28 million, down 26% from the first quarter of last year and 35% sequentially. One bright spot in Veeco’s first quarter order rate is that we continue to build our solar business even in this difficult time: we booked a large, multi-system order from a Korean company entering the CIGS solar market, as well as orders for thermal sources from several leading European CIGS manufacturers. Data Storage orders were $8 million, down 44% sequentially to a historically low level, as customers continued their capital spending freeze. Metrology orders were $17 million, down approximately 45% both sequentially and compared to last year’s first quarter, with weakness across all end markets including semiconductor, data storage, scientific research and industry.”

First Quarter 2009 Summary
Veeco’s revenue for the first quarter of 2009 was $62.8 million, compared to $102.3 million in the first quarter of 2008. Veeco’s first quarter operating loss, including $4.4 million in restructuring charges and a $1.5 million inventory write-off, was ($18.9) million, compared to operating income of $0.2 million in the first quarter of 2008 (which also included restructuring and other charges). Veeco’s first quarter 2009 (loss) earnings before interest, taxes and amortization (EBITA) excluding certain items was a loss of ($9.7) million compared to EBITA of $6.9 million in the prior year. First quarter 2009 net loss was ($20.9) million, or ($0.66) per share, compared to a net loss of ($2.3) million, or ($0.07) per share, last year. Excluding certain charges and using a 35% tax rate in both periods as detailed in the attached financial tables, loss per share was ($0.22) in the first quarter of 2009, compared to earnings per share of $0.13 in 2008. Historical financial data reflects the retrospective application of FASB Staff Position No. APB 14-1 “Accounting for Convertible Debt Instruments” which impacted the classification of debt, equity and the incurrence of non-cash interest expense.

Business Outlook and Guidance
Mr. Peeler commented: “We have moved swiftly to restructure Veeco in light of the very challenging start to 2009, and saw the initial impact of these cost reduction actions in the first quarter. Given the low first quarter order rate, beginning in the second quarter of 2009 we will be implementing additional cost cutting actions, primarily consisting of temporary salary reductions, reductions in bonuses and profit sharing, and plant shut-downs. These actions, when combined with those already underway, will reduce Veeco’s manufacturing overhead, service and operating expenses by approximately $40 million in 2009, compared to last year.”

“While we remain extremely cautious about business conditions, we see early signs of improvement going forward,” continued Mr. Peeler. “These include improved equipment utilization rates, increased quoting activity across our three businesses and no significant additional push-outs. We currently believe that second quarter orders will improve from the trough levels we experienced in the first quarter.”

Veeco’s second quarter 2009 revenues are currently forecasted to be between $60-70 million. Veeco is currently forecasting a per share loss of between ($0.64) – ($0.48) on a GAAP basis for the second quarter of 2009. Veeco expects to incur charges to earnings in the range of $2.7 to $3.2 million related to restructuring activities during the second quarter. Excluding these charges, amortization of $1.9 million, non-cash equity-based compensation of $2.3 million and non-cash interest of $0.7 million, and using a 35% tax rate, Veeco’s second quarter loss per share is currently forecasted to be between ($0.24) to ($0.15) on a non-GAAP basis.

Mr. Peeler concluded: “We remain confident that Veeco will emerge from the present downturn with leading edge technology, a solid balance sheet and a leaner, more cost-effective organizational structure. Despite the near-term pause in customer spending, we continue to invest heavily in R&D to remain aligned with technology roadmaps across our three businesses. We anticipate strong multi-year LED industry growth tied to further adoption for applications such as TVs and laptops, driving purchases of Veeco MOCVD tools. In Solar, we are excited about customer interest in our CIGS thin film solar equipment product line. In Data Storage, we remain focused on providing customers with solutions that increase thin film magnetic head areal density while maximizing their equipment return on capital. In Metrology, Veeco is receiving positive customer response to our recently launched Dimension ICON and BioScope Catalyst AFMs, and we continue to accelerate development of new high-performance products, featuring expanded functionality and ease of use.”