Veeco Meets Guidance, Wins Orders

WOODBURY, N.Y. -- Veeco Instruments Inc. (Nasdaq: VECO) today announced its financial results for the fourth quarter and year ended December 31, 2003. Veeco reports its results on a GAAP basis, and also provides results excluding certain charges. Investors should refer to the attached table for further details of the reconciliation of GAAP (loss) to earnings excluding certain charges. Veeco completed two acquisitions during the fourth quarter of 2003: the acquisition of the TurboDisc MOCVD (“TurboDisc”) operations of Emcore Corporation and the purchase of Advanced Imaging, Inc., (“Aii”) a leading manufacturer of precision lapping equipment for the data storage industry, referred to collectively as the “acquisitions” below.

Highlights

Veeco’s fourth quarter 2003 sales were $76.9 million, up 22% sequentially from the $63.1 million reported in the third quarter of 2003. Veeco reported a net loss of $4.8 million, or a loss of $0.16 per share. Earnings excluding certain charges were $0.03 per diluted share (in line with Veeco’s guidance). (See tables for explanation of purchase accounting and reconciliation to GAAP loss).

The Company’s fourth quarter guidance (provided on October 27, 2003 and updated for the acquisitions in November) was: revenues of $70-$76 million and earnings excluding certain charges between $0.00 and $0.03 per diluted share.

The Company’s fourth quarter 2003 bookings were $96.8 million, up 51% sequentially from the third quarter, including bookings from the acquired companies post-acquisition.

Veeco’s fourth quarter book-to-bill was 1.26 to 1. Veeco’s fourth quarter 2003 orders without acquisitions were $84.1 million, up 31% sequentially from $64.0 million reported in the third quarter of 2003. Veeco’s fourth quarter order guidance (without acquisitions) was $64-$70 million. Veeco’s year-ending backlog was $124.4 million.

Edward H. Braun, Veeco’s Chairman and Chief Executive Officer, commented, “Veeco’s fourth quarter orders, revenues and EBITA improved both sequentially and year-over-year. Order strength reflected a broad industry upturn across all of our markets and in all geographic regions. Capacity and technology drivers were evident in semiconductor, data storage, wireless, compound semiconductor and scientific research. Fourth quarter orders of $96.8 million (up 51% sequentially) were Veeco’s strongest overall orders in ten quarters. Fourth quarter revenue of $76.9 million was up 22% sequentially.”

“The November 2003 acquisitions of TurboDisc MOCVD and Advanced Imaging Inc.’s precision lapping technologies allow us to significantly broaden our product and technology offerings to Veeco’s core markets in 2004,” commented Mr. Braun.

Mr. Braun commented on Veeco’s full year 2003, adding, “Overall 2003 was a challenging year for the equipment industry and for our customers. Veeco’s 2003 sales of $279.3 million were down 7% from 2002, while orders of $297.6 were up a modest 3%. Significant 2003 focus on cost reduction and profitability resulted in improved gross margins (up 2.2 points) to 46.0% (exclusive of purchase accounting adjustments), and 2003 EBITA (earnings excluding certain charges before interest, income taxes and amortization) was $13.0 million, up from $1.3 million in 2002 despite the decrease in revenue. Veeco also generated $21.8 million of cash from operations during 2003 and our balance sheet remains strong with $106.8 million in cash after the completion of acquisitions.”

Fourth Quarter 2003 Results

Veeco’s bookings for the fourth quarter of 2003 were $96.8 million, a 36% increase from the $71.3 million reported in the fourth quarter of 2002, and a 51% increase compared with the $64.0 million reported in the third quarter of 2003. Fourth quarter 2003 Metrology bookings were $46.7 million, compared to $42.0 million reported in the fourth quarter of 2002.

Fourth quarter 2003 Process Equipment bookings were $50.1 million, compared to the $29.3 million reported in the fourth quarter of 2002. Veeco’s bookings by market in the fourth quarter were 23% data storage, 18% semiconductor, 27% telecommunications/wireless and 32% scientific research. Q4 orders by region were 33% North America, 23% Europe, 25% APAC and 19% Japan. The Company’s fourth quarter book-to-bill ratio was 1.26 to 1.

Veeco’s sales for the fourth quarter of 2003 were $76.9 million, a 12% increase from the $68.6 million reported for the fourth quarter of 2002. Metrology sales were $35.5 million in the fourth quarter of 2003, compared to $34.2 million reported in the fourth quarter of 2002. Veeco’s Process Equipment sales were $41.4 million in the fourth quarter of 2003, compared with $34.4 million in the fourth quarter of 2002. Veeco’s sales by market in the fourth quarter of 2003 were 36% data storage, 12% semiconductor, 17% telecommunications/wireless and 35% scientific research. Revenue by geographic region was 42% North America, 16% Europe, 26% APAC and 16% Japan, with strong growth in APAC (up 127% from the fourth quarter of 2002).

Veeco incurred an operating loss of $6.0 million in the fourth quarter of 2003, compared to an operating loss of $130.6 million in the fourth quarter of 2002. Included in the fourth quarter 2003 operating result was a $1.5 million charge for the write-off of in-process R&D, a $1.7 million reduction in gross profit from purchase accounting adjustments due to the required capitalization of profit in inventory and permanent elimination of certain deferred revenue, as well as $2.1 million of merger and restructuring costs.

Exclusive of these charges, Veeco’s fourth quarter 2003 EBITA was $3.5 million compared to a loss of $3.4 million in the fourth quarter of 2002, which also excludes restructuring charges. Veeco’s fourth quarter 2003 net loss was $4.8 million (($0.16) per share) compared to a net loss of $116.5 million (($4.00) per share) in the fourth quarter of 2002. Excluding certain charges, fourth quarter 2003 earnings were $0.03 per share compared to a loss of ($0.11) per share in the fourth quarter of 2002.

Year-End 2003 Results

Veeco’s 2003 bookings were $297.6 million, an increase of 3% from the $289.1 million reported in 2002. Metrology 2003 bookings were $154.4 million compared to $154.1 million in 2002. Process Equipment 2003 bookings were $143.2 million, compared to $135.0 million reported in 2002. Veeco’s 2003 bookings by market were 31% data storage, 15% semiconductor, 18% telecommunications/wireless and 36% scientific research. Veeco’s bookings by region were 38% North America, 18% Europe, 24% APAC and 20% Japan. The Company’s 2003 book-to-bill ratio was 1.07 to 1.

Veeco’s 2003 sales were $279.3 million, a 7% decrease from the $298.9 million reported in 2002. Metrology 2003 sales were $149.1 million versus $152.2 million in 2002. Process Equipment 2003 sales were $130.2 million versus $146.7 million in 2002. Veeco’s sales by market in 2003 were 33% data storage, 14% semiconductor, 14% telecommunications/wireless and 39% scientific research. Veeco’s 2003 sales by region were 39% North America, 17% Europe, 24% APAC and 20% Japan.

Veeco incurred an operating loss of $9.3 million in 2003, compared to an operating loss of $137.9 million in 2002. Included in the 2003 operating loss was a $1.5 million charge for the write-off of in-process R&D, a $1.7 million reduction in gross profit from purchase accounting adjustments due to the required capitalization of profit in inventory and permanent elimination of certain deferred revenue, and $5.4 million of merger and restructuring costs. Exclusive of these charges, Veeco’s 2003 EBITA was $13.0 million compared to $1.3 million in 2002, which also excludes restructuring charges. Veeco’s net loss for 2003 was $9.7 million (($0.33) per share) compared to a net loss of $123.7 million (($4.25) per share) in 2002. Excluding certain charges, 2003 earnings were $0.11 per diluted share compared to a loss of ($0.10) per share in 2002.

Veeco’s Outlook

Mr. Braun commented, “Industry market conditions improved dramatically in the fourth quarter, and we appear to be at the start of a sustainable recovery cycle after two years of historically low capex investment by our customers. Veeco’s diversification strategy should serve us well as multiple Veeco markets are forecasted to experience 2004 growth.”

“We intend to work closely with our key customers to be aligned with their technology roadmaps and capacity planning requirements including: the continued 80GB production ramp and 120GB disk drive development programs, 90nm and 300mm ramps in semiconductor, growth in high brightness light-emitting diodes (HB-LEDs) for backlighting of color displays, RF devices and other wireless/lighting applications, and continued use of our atomic force microscopes in nanoscience research.” Mr. Braun concluded, “Veeco’s goal is to achieve higher levels of revenue and profitability in 2004 through a combination of improved business conditions, a continued focus on cost control, and a broadened product line of key enabling process equipment and metrology technologies.”

Veeco currently forecasts that first quarter 2004 bookings and revenue will increase approximately 10% sequentially. First quarter 2004 orders are forecasted to be in the range of $105 to $109 million and sales in the range of $84 to $88 million. Veeco’s book-to-bill is forecasted to remain at approximately 1.2 to 1. The Company currently forecasts that it will incur a net loss between ($0.09 and $0.05) per share on a GAAP basis and will earn between $0.05 and $0.09 per share, excluding amortization of $5.0 million and purchase accounting adjustments related to the acquisitions of $1.9 million, using a 35% tax rate.

In a separate release:

Veeco Instruments Inc. (Nasdaq: VECO) announced today that it received $11.8 million in orders for its family of automated Atomic Force Microscopes (AFMs) during the fourth quarter of 2003. This is the highest bookings quarter for Veeco’s automated AFMs since these systems were introduced in 2001.

Included in these orders were the first from Taiwan for Veeco’s Dimension X product, introduced last year for advanced etch metrology applications. Veeco also received two orders for its Dimension X3D in-line three-dimensional AFM for 65 nm advanced process development and high volume photomask manufacturing applications. In addition, Veeco received a follow-on order from an Asian customer for its new Vx340 for chemical mechanical planarization (CMP) production and its first 300mm automated AFM system was sold in China to a new foundry.

According to Don Kania, Ph.D., President of Veeco, “These strong orders in the fourth quarter reflect the semiconductor industry’s need for increased levels of accuracy and productivity in critical metrology. As capacity demands increase at feature sizes smaller than 90 nm, Veeco continues to work closely with our customers to meet these technology challenges and to stay ahead of their roadmaps.”

Veeco Instruments Inc.