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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q/A
AMENDMENT NO. 1 TO
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31,1997
Commission file number 0-16244
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VEECO INSTRUMENTS INC.
(Exact name of registrant as specified in its charter)
Delaware 11-2989601
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Terminal Drive
Plainview, New York 11803
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 349-8300
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Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days:
YES X NO
- -
5,871,959 shares of Common Stock $.01 par value, were outstanding as of
April 28, 1997.
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The Registrant, Veeco Instruments Inc., hereby amends and restates
its Quarterly Report on Form 10-Q (the "10-Q") for the quarterly period
ended March 31, 1997, filed with the Securities and Exchange Commission (the
"Commission") on May 7, 1997, to provide certain information included in its
definitive Schedule 14A dated July 2, 1997.
VEECO INSTRUMENTS INC.
INDEX
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PAGE
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Statements of Income -Three Months Ended
March 31, 1997 and 1996....................................................... 3
Condensed Consolidated Balance Sheets -March 31, 1997
and December 31, 1996......................................................... 4
Condensed Consolidated Statements of Cash Flows -Three Months Ended
March 31, 1997 and 1996....................................................... 5
Notes to Condensed Consolidated Financial Statements.......................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations......................................................... 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................................... 10
SIGNATURES.............................................................................. 11
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Veeco Instruments Inc.
and Subsidiaries
Condensed Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
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<S> <C> <C>
1997 1996
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Net sales........................................................... $ 29,551 $ 20,644
Cost of sales....................................................... 16,642 11,437
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Gross profit........................................................ 12,909 9,207
Costs and expenses:
Research and development expense.................................... 2,952 2,004
Selling, general and administrative expense......................... 5,765 4,373
Amortization expense................................................ 69 53
Other--net.......................................................... (18) 92
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Operating income.................................................... 4,141 2,685
Interest income, net................................................ 105 200
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Income before income taxes.......................................... 4,246 2,885
Income taxes........................................................ 1,609 1,075
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Net income.......................................................... $ 2,637 $ 1,810
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Net income per common share......................................... $ 0.43 $ 0.31
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Shares used in computation.......................................... 6,150,000 5,893,000
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See accompanying notes.
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Veeco Instruments Inc.
and Subsidiaries
Consolidated Balance Sheet
(Dollars in thousands)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
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<S> <C> <C>
(UNAUDITED)
Assets
Current assets:
Cash and cash equivalents........................................... $ 24,819 $ 21,209
Accounts and trade notes receivable................................. 20,276 19,826
Inventories......................................................... 23,619 21,263
Prepaid expenses and other current assets........................... 808 858
Deferred income taxes............................................... 1,987 1,937
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Total current assets................................................ 71,509 65,093
Property, plant and equipment at cost, net.......................... 10,792 9,761
Excess of cost over net assets acquired............................. 4,433 4,448
Other assets--net................................................... 1,319 1,025
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Total assets........................................................ $ 88,053 $ 80,327
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Liabilities and shareholders' equity
Current liabilities:
Accounts payable.................................................... $ 13,901 $ 11,196
Accrued expenses.................................................... 11,015 9,964
Income taxes payable................................................ 2,002 479
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Total current liabilities........................................... 26,918 21,639
Deferred income taxes............................................... 257 257
Other liabilities................................................... 422 461
Shareholders' equity:
Common stock........................................................ 59 58
Additional paid-in capital.......................................... 47,993 47,638
Retained earnings................................................... 12,246 9,609
Cumulative translation adjustment................................... 158 665
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Total shareholders' equity.......................................... 60,456 57,970
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Total liabilities and shareholders' equity.......................... $ 88,053 $ 80,327
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</TABLE>
See accompanying notes.
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Veeco Instruments Inc.
and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
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<S> <C> <C>
1997 1996
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Operating activities
Net income.............................................................. $ 2,637 $ 1,810
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization........................................... 295 334
Deferred income taxes................................................... (50) (12)
Changes in operating assets and liabilities:
Accounts receivable..................................................... (697) 868
Inventories............................................................. (2,557) (3,649)
Accounts payable........................................................ 2,727 1,902
Accrued expenses and other current liabilities.......................... 2,660 (1,076)
Other--net.............................................................. (297) (44)
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Net cash provided by operating activities............................... 4,718 133
Investing activities
Capital expenditures.................................................... (1,266) (439)
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Net cash used in investing activities................................... (1,266) (439)
Financing activities
Proceeds from stock issuance............................................ 356 206
Other................................................................... (14) --
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Net cash provided by financing activities............................... 342 206
Effect of exchange rates on cash........................................ (184) 51
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Net change in cash and cash equivalents................................. 3,610 (49)
Cash and cash equivalents at beginning of period........................ 21,209 17,568
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Cash and cash equivalents at end of period.............................. $ 24,819 $ 17,519
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</TABLE>
See accompanying notes.
5
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VEECO INSTRUMENTS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1--BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Veeco Instruments Inc. ("Veeco") and its subsidiaries (collectively, the
"Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments considered necessary for a fair
presentation (consisting of normal recurring accruals) have been included.
Operating results for the three months ended March 31, 1997, are not
necessarily indicative of the results that may be expected for the year
ending December 31, 1997. For further information, refer to the financial
statements and footnotes thereto included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1996.
Earnings per share is computed using the weighted average number of common
and common equivalent shares outstanding during the period.
NOTE 2--INVENTORIES
Interim inventories have been determined by lower of cost (principally
first-in, first-out) or market. Inventories consist of:
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<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
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<S> <C> <C>
(DOLLARS IN THOUSANDS)
Raw materials....................................................... $ 11,108 $ 9,546
Work-in process..................................................... 6,134 4,909
Finished goods...................................................... 6,377 6,808
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$ 23,619 $ 21,263
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NOTE 3--BALANCE SHEET INFORMATION
SELECTED BALANCE SHEET ACCOUNT DISCLOSURES FOLLOW:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
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<S> <C> <C>
(DOLLARS IN THOUSANDS)
Allowance for doubtful accounts..................................... $ 491 $ 482
Accumulated depreciation and amortization of property, plant and
equipment......................................................... $ 6,991 $ 6,503
Accumulated amortization of excess of cost over net assets
acquired.......................................................... $ 925 $ 910
</TABLE>
NOTE 4--OTHER INFORMATION
Total interest paid for the three months ended March 31, 1997 and 1996 was
$15,000 and $83,000, respectively. The Company made income tax payments of
$103,000 and $308,000 for the three months ended March 31, 1997 and 1996,
respectively.
NOTE 5--SUBSEQUENT EVENTS
On April 28, 1997, Veeco signed a definitive merger agreement with Wyko
Corporation ("Wyko") of Tucson, Arizona, a leading supplier of optical
interferometric measurement systems for the data storage and semiconductor
industries providing for the merger of Veeco Acquisition Corporation, a
wholly owned subsidiary of Veeco, into Wyko. Under the merger agreement, Wyko
shareholders would receive 2,863,810 shares of Veeco common stock and holders
of options to acquire Wyko common stock would receive options to acquire an
aggregate of 136,190 shares of Veeco common stock. The merger is intended to
be accounted for as a pooling of interests transaction. The consummation of
the merger is subject to a number of conditions, including approval by the
shareholders of Veeco, receipt of a fairness opinion from Veeco's financial
advisor and confirmation from Veeco's independent accountants regarding its
concurrence that the merger may be accounted for as a pooling of interests.
On April 10, 1997, the Company acquired certain assets and personnel of the
Media and Magnetics Applications Division of Materials Research Corporation
for cash plus the assumption of certain liabilities. The acquisition is being
accounted for using the purchase method of accounting. Accordingly, a
portion of the purchase price will be allocated to the net assets acquired
based on their estimated fair values as determined by an outside appraisal,
including between $3,500,000 to $4,500,000 to be allocated to in-process
engineering and development projects. These projects have not reached
technological feasibility and have no alternative future uses and thus will
be expensed as of the date of acquisition.
NOTE 6--NEW ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board issues SFAS No.
128, "Earnings Per Share," which is effective for both interim and annual
financial statements for periods ending after December 15, 1997. At that
time, the Company will be required to change the method currently used to
compute earnings per share and to restate all prior periods. Under the new
requirements for calculating primary earnings per share, the dilutive effect
of stock options will be excluded. The impact of adopting SFAS No. 128 on
the calculation of primary and fully diluted earnings per share is not
expected to be material.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Three Months Ended March 31, 1997 and 1996
Net sales for three months ended March 31, 1997 increased by approximately
$8,907,000 or 43% over the comparable 1996 period. The increase principally
reflects continuing growth in ion beam system sales. Sales in the U.S.
increased approximately 53%, while international sales included an
approximately 45% decrease in Japan, a 31% decrease in Europe, and a 400%
increase in Asia-Pacific. The Company believes that there will continue to
be quarter to quarter variations in the geographic concentration of sales.
However, there appears to be a trend of increasing sales demand in
Asia-Pacific attributable to the expansion of hard drive and semiconductor
industries in that region.
Sales of ion beam systems for the first quarter of 1997 of approximately
$17,898,000 increased by approximately $8,278,000 or 86% over the comparable
period in 1996, driven principally by increased demand from the data storage
industry for high-density hard drives. Of this increase, approximately 73.8%
was due to growth in volume, with the balance of the increase due to an
approximately 30.7% higher average selling price of a system resulting from a
shift in customer demand to multi-process modules with increased automation.
Sales of surface metrology products for the first quarter of 1997 of
approximately $6,610,000 increased by approximately $933,000 or 16% over the
comparable 1996 period, reflecting increased SXM product sales as a result of
the semiconductor industry's investment in next generation sub-0.35 micron
and smaller-featured device production. Of this increase, approximately 39.1%
was due to growth in volume, with the balance of the increase due to an
approximately 17.2% higher average selling price of surface metrology
products. Sales of industrial measurement products for the first quarter of
1997 of approximately $5,043,000 decreased by approximately $304,000 or 6%
compared to the comparable period in 1996, as the result of a decrease in
leak detection equipment sales.
Veeco booked approximately $31,399,000 of orders in the first quarter of 1997
compared to approximately $25,449,000 of orders in the first quarter of
1996, reflecting both the increased demand for high density hard drives and
the continued industry transition to the next generation MR thin film
magnetic heads and increasing orders for SXM products.
Gross profit for the first quarter of 1997 of approximately $12,909,000
represents an increase of approximately $3,702,000 or 40% over the comparable
1996 period. Gross profit as a percentage of net sales decreased to 43.7% for
the first quarter of 1997 from 44.6% for the first quarter of 1996. This
decline was principally due to changes in product mix.
Research and development expense in the first quarter of 1997 increased by
approximately $948,000 or by 47% compared to the first quarter of 1996,
principally driven by the increased R&D investment in ion beam systems.
Selling, general and administrative expenses increased by approximately
$1,392,000 or by 32% compared to the first quarter of 1996. The increase was
primarily due to approximately $1,065,000 of additional selling expense
comprised of sales commissions related to the higher sales volume, as well as
increased sales and sales support compensation and travel expense.
Operating income increased to approximately $4,141,000 or 14% of net sales
for the first quarter of 1997 compared to approximately $2,685,000 or 13% of
net sales for the first quarter of 1996, due to the above noted factors.
Income taxes for the first quarter of 1997 amounted to approximately
$1,609,000 or 38% of income before income taxes in 1997 as compared to
approximately $1,075,000 million or 37% of income before taxes for the same
period in 1996.
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LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operations totaled approximately $4,718,000 for the
first three months of 1997 compared to approximately $133,000 for the
comparable 1996 period. This increase reflects of an increase in net income
for the first quarter of 1997 of approximately $827,000 over the comparable
1996 period coupled with favorable changes in operating assets and
liabilities.
Veeco made capital expenditures of approximately $1,266,000 for the three
months ended March 31, 1997, as compared to approximately $439,000 in the
comparable 1996 period. Capital expenditures in the first quarter of 1997
principally reflect investments in building improvements, laboratory tools
and business information systems.
Relative to the acquisition in April 1997 of the Media and Magnetics
Applications business of Materials Research Corporation, Veeco believes that
it will expend approximately $10,000,000 of cash during the last nine months
of 1997 for the purchase of this business as well as for future capital
expenditures and working capital requirements. The expected time-frame for
developing the acquired technology into commercially viable products is
approximately 12 months from the acquisition date and it is anticipated that
during this time-frame between $2,000,000 and $3,000,000 of expense will be
incurred in connection with the technical and research and development
efforts necessary to develop these products.
The Company believes that existing cash balances together with cash generated
from operations and amounts available under the Company's bank credit
facility will be sufficient to meet the Company's projected working capital
and other cash flow requirements for the foreseeable future.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
2 Agreement and Plan of Merger Among Veeco Instruments Inc., Veeco
Acquisition Corp. and Wyko Corporation and its Security Holders
dated April 28, 1997.
27 Financial Data Schedule of Veeco Instruments Inc. for the quarter
ended March 31, 1997.
b) Reports on Form 8-K:
The Registrant filed a Form 8-K dated March 13, 1997 reporting that: (I)
the Registrant entered into a letter of intent with Wyko Corporation
pursuant to which it is contemplated that the Registrant will acquire
all the issued and outstanding shares of Wyko in exchange for the
issuance of 3,000,000 shares of common stock of the Registrant and on
March 10, 1997, the Registrant issued a press release announcing the
execution of such letter of intent and, (ii) the Registrant issued a
press release on March 10, 1997 announcing it had entered into a
Memorandum of Understanding with MRC Corporation pursuant to which it is
contemplated that the Registrant will acquire certain assets and assume
certain liabilities relating to MRC's Media and Magnetics Applications
division in exchange for cash.
10
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: July 2, 1997
Veeco Instruments Inc.
By: /s/ Edward H. Braun
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Edward H. Braun
Chairman, CEO and President
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