Veeco Reports Q4, Full Year

WOODBURY, N.Y. -- Veeco Instruments Inc. (Nasdaq: VECO - News) today announced its financial results for the fourth quarter and year ended December 31, 2002. Results were in line with guidance Veeco provided on October 28, 2002. 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) earnings to (loss) earnings excluding certain charges. Fourth Quarter 2002 Results Veeco's sales for the fourth quarter of 2002 were $68.6 million, a 30% decrease from the $97.5 million reported for the fourth quarter of 2001 and a 6% sequential decline from the third quarter of 2002. Metrology sales were $34.2 million in the fourth quarter of 2002 compared to $39.7 million in the fourth quarter of 2001. Veeco's Process Equipment sales were $34.4 million in the fourth quarter of 2002 compared with $57.8 million in the fourth quarter of 2001. Veeco's sales by market in the fourth quarter of 2002 were 31% data storage, 15% semiconductor, 10% telecommunications/wireless and 44% scientific research. Veeco's bookings for the fourth quarter of 2002 were $71.3 million, up 6% from the $67.0 million reported in the fourth quarter of 2001, and a 3% sequential increase from the third quarter of 2002. Fourth quarter 2002 Metrology bookings were $42.0 million, a 15% increase from the $36.5 million reported in the fourth quarter of 2001. Fourth quarter 2002 Process Equipment bookings were $29.3 million, a decrease of 4% from the $30.5 million reported in the fourth quarter of 2001. The Company's fourth quarter book-to-bill ratio was 1.04. Veeco's bookings by market in the fourth quarter were 25% data storage, 21% semiconductor, 12% telecommunications/wireless and 42% scientific research. In October 2002, Veeco announced a plan designed to reduce its operating costs by approximately $24 million in 2003. The plan included layoffs of approximately 20% of the Company's employees, primarily in the Process Equipment group, and the closure or reduction of certain facilities. As a result of these actions and due to the continued weakness in the Company's served markets and the uncertainty of their recovery, the Company has taken a fourth quarter charge totaling $124.0 million, of which $119.5 million does not require future cash outlays. This charge consists of a $15.0 million inventory write-down in the Process Equipment group, due to the rationalization and discontinuance of certain product lines; $2.6 million of severance and business relocation costs as a result of the workforce reduction and the consolidation or elimination of certain facilities; $6.4 million of FEI merger-related expenses (including investment banking, legal, accounting and other expenses related to the merger agreement which was terminated on January 8, 2003); $0.3 million for a prepayment penalty on early extinguishment of debt; and $99.7 million in asset impairment charges, primarily in the Process Equipment group, including $94.4 million of impairment to goodwill, in accordance with Statement of Financial Accounting Standard ("SFAS") No. 142. The Company concluded that the goodwill arising from the Applied Epi acquisition, which took place in September 2001, was significantly impaired due to the severe and continued weakness in the telecommunications/wireless industry and the uncertainty of recovery. In addition to the goodwill impairment, asset impairment charges also include $3.5 million for the impairment of two buildings, and $1.8 million for the impairment of other fixed assets. On a GAAP basis including the above described charges Veeco incurred an operating loss of $130.6 million for the fourth quarter of 2002, compared to an operating loss of $19.5 million in the fourth quarter of 2001. Excluding the above-mentioned fourth quarter charges of $124.0 million, Veeco's fourth quarter 2002 earnings before interest, taxes and amortization (EBITA) was a loss of $3.4 million compared to EBITA of $5.7 million for the fourth quarter of 2001, which also excludes restructuring charges. Veeco's fourth quarter 2002 net loss was $116.5 million (($4.00) per share) compared to net loss of $14.4 million (($0.50) per share) in the fourth quarter of 2001. (Loss) earnings excluding certain charges per share for the fourth quarter of 2002 was ($0.11) compared to $0.11 per diluted share in the fourth quarter of 2001. Veeco's guidance was for the loss excluding certain charges to be between ($0.10-0.15) per share. Veeco had positive cash flow of approximately $6.6 million in the fourth quarter of 2002. Year-End 2002 Results Veeco's sales for 2002 were $298.9 million, a decrease of 33% from the $449.3 million reported for 2001. Metrology sales were $152.2 million in 2002 compared to $172.0 million in 2001. Veeco's Process Equipment sales were $146.7 million in 2002 compared with $277.3 million in 2001. Veeco's sales by market in 2002 consisted of 32% data storage, 13% semiconductor, 15% telecommunications/wireless, and 40% scientific research. Veeco's 2002 bookings were $289.1 million compared to $318.9 million reported in 2001. Metrology bookings in 2002 were $154.1 million compared to $145.0 million in 2001. Process Equipment bookings in 2002 were $135.0 million compared with $173.9 million in 2001. The Company's book-to-bill ratio for 2002 was 0.97. Veeco's bookings by market in 2002 consisted of 30% data storage, 16% semiconductor, 14% telecommunications/wireless and 40% scientific research. Veeco reported an operating loss of $137.9 million in 2002, compared to operating income of $20.3 million in 2001. Excluding the above-mentioned fourth quarter charges of $124.0 million, as well as restructuring expenses of $2.0 million incurred during the first nine months of 2002, Veeco's EBITA for 2002 was $1.3 million compared to $58.0 million in 2001. Veeco's net loss for 2002 was $123.7 million (($4.25) per share) compared to net income of $10.3 million ($0.39 per diluted share) in 2001. (Loss) earnings excluding certain charges per share for 2002 was ($0.10) per share compared with $1.44 per diluted share in 2001. Management Review of Results Edward H. Braun, Veeco's Chairman, President and Chief Executive Officer commented, "The fourth quarter remained challenging as weak industry conditions persisted; and we implemented previously described significant cost reduction programs. Despite difficult market conditions, we met our fourth quarter guidance, and positioned ourselves to be profitable on an EBITA basis in the first quarter. We are encouraged that our fourth quarter orders exceeded our guidance, and were up 3% on a sequential basis from prior quarter and up 6% from the fourth quarter of 2001; reflecting market stabilization across our key served markets. Fourth quarter orders reflected sequential growth in semiconductor (up 44%) and telecommunications/wireless (up 10%) sectors. We are hopeful that the worst is behind us, but continue to see uncertainty in the timing of an end market recovery. Veeco's customers are placing emphasis on purchases of 'must have next-generation technology' and our priority is to ensure that our new product development roadmaps are aligned with customer requirements." Mr. Braun continued, "We are pleased with the performance of our Metrology group in 2002, which remained profitable despite an 11% decline in revenue. Metrology orders increased 6% in 2002 driven largely by increased use of our atomic force microscope (AFM) products in both the scientific research sector and as a critical semiconductor metrology tool. Low semiconductor yields in 300mm and 0.13um feature size applications continue to drive AFM technology buys for etch, CMP and lithography applications despite a weak capital funding environment. In addition, our Metrology group has an aggressive new AFM/SPM product launch campaign for scientific research and nanotechnology applications scheduled for 2003 to allow further Veeco growth in this sector." Veeco's Outlook Mr. Braun commented, "Considering the continued economic uncertainty and weak capex environment, we remain focused on overall cost reductions and delivering improved earnings in 2003. We will continue to invest in our core leadership products to meet our customers' next generation product roadmaps. We are optimistic about Veeco's positioning for a recovery in our end markets." Veeco currently forecasts that first quarter 2003 bookings will be approximately flat compared to the fourth quarter of 2002, in the range of $67-71 million. Veeco currently estimates that first quarter 2003 sales will be in the range of $60 - $65 million, and that it will lose between ($0.07) and ($0.09) per share on a GAAP basis and earn between $0.00 and $0.02 per share excluding amortization of $3.2 million and certain charges of approximately $1.0 million, using a 35% tax rate.Veeco Instruments Inc.