Veeco Announces First Quarter 2009 Financial Results

Veeco Instruments Inc. (Nasdaq: VECO) announced its financial results for the first quarter ended March 31, 2009. Veeco will host a conference call reviewing these results at 5:00 pm today at 877-856-1962 (toll free) or 719-325-4839. 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 8:00 pm tonight through midnight on May 12, 2009 at 888-203-1112 or 719-457-0820, using passcode 5418442, or on the Veeco website. A slide presentation reviewing these results has also been posted on our website.

Veeco reports its results on a 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.

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. Please refer to the attached financial tables for more details.

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.”

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, Massachusetts 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, 2008 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.

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.

** Refer to footnotes on "Reconciliation of operating (loss) income to (loss) earnings excluding certain items" for further details.

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 earnings before interest, income taxes and amortization excluding certain items ("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.