<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 2000
COMMISSION FILE NUMBER 0-16244
------------------------
VEECO INSTRUMENTS INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 11-2989601
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
TERMINAL DRIVE 11803
PLAINVIEW, NEW YORK (Zip Code)
</TABLE>
Registrant's telephone number, including area code
(516) 349-8300
------------------------
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 / /
23,542,620 shares of common stock, $0.01 par value per share, were outstanding
as of the close of business on May 5, 2000.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SAFE HARBOR STATEMENT
This Quarterly Report on Form 10-Q (the "Report") contains forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Discussions containing such forward-looking statements may be found in
Items 2 and 3 hereof, as well as within this Report generally. In addition, when
used in this Report, the words "believes," "anticipates," "expects,"
"estimates," "plans," "intends," and similar expressions are intended to
identify forward-looking statements. All forward-looking statements are subject
to a number of risks and uncertainties that could cause actual results to differ
materially from projected results. Factors that may cause these differences
include, but are not limited to:
- the dependence on principal customers and the cyclical nature of the data
storage, semiconductor and optical telecommunications industries,
- fluctuations in quarterly operating results,
- rapid technological change and risks associated with the acceptance of new
products by individual customers and by the marketplace,
- limited sales backlog,
- the highly competitive nature of industries in which the company operates,
- changes in foreign currency exchange rates, and
- the other matters discussed in the Business Description contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 1999.
Consequently, such forward-looking statements should be regarded solely as
the Company's current plans, estimates and beliefs. The Company does not
undertake any obligation to update any forward-looking statements to reflect
future events or circumstances after the date of such statements.
2
<PAGE>
VEECO INSTRUMENTS INC.
INDEX
PART 1. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Statements of Income-- 4
Three Months Ended March 31, 2000 and 1999..................
Condensed Consolidated Balance Sheets-- 5
March 31, 2000 and December 31, 1999........................
Condensed Consolidated Statements of Cash Flows-- 6
Three Months Ended March 31, 2000 and 1999..................
Notes to Condensed Consolidated Financial Statements........ 7
Management's Discussion and Analysis of Financial Condition 11
Item 2. and Results of Operations...................................
Item 3. Quantitative and Qualitative Disclosure About Market Risk... 13
PART II. OTHER INFORMATION
Item 5. Other Information........................................... 14
Item 6. Exhibits and Reports on Form 8-K............................ 14
SIGNATURES........................................................... 15
</TABLE>
3
<PAGE>
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,
-------------------
2000 1999
-------- --------
<S> <C> <C>
Net sales................................................... $51,454 $59,884
Cost of sales............................................... 26,026 31,324
------- -------
Gross Profit................................................ 25,428 28,560
Costs and expenses:
Research and development expense.......................... 8,621 7,300
Selling, general and administrative expense............... 12,978 12,291
Amortization expense...................................... 469 129
Other income, net......................................... (21) (68)
Merger expenses........................................... 250 --
------- -------
Operating income............................................ 3,131 8,908
Interest income, net........................................ (549) (116)
------- -------
Income before income taxes.................................. 3,680 9,024
Income tax provision........................................ 1,284 3,338
------- -------
Net income.................................................. $ 2,396 $ 5,686
======= =======
Net income per common share................................. $ 0.13 $ 0.33
Diluted net income per common share......................... $ 0.13 $ 0.32
Weighted average shares outstanding......................... 17,933 17,040
Diluted weighted average shares outstanding................. 18,692 17,521
</TABLE>
SEE ACCOMPANYING NOTES.
4
<PAGE>
VEECO INSTRUMENTS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................... $ 13,324 $ 29,418
Short-term investments...................................... 51,490 50,888
Accounts and trade notes receivable, net.................... 61,841 58,393
Inventories................................................. 67,012 56,689
Prepaid expenses and other current assets................... 2,736 6,111
Deferred income taxes....................................... 8,337 9,544
-------- --------
Total current assets........................................ 204,740 211,043
Property, plant and equipment at cost, net.................. 44,936 41,924
Excess of cost over net assets acquired..................... 8,555 5,509
Other assets, net........................................... 17,229 6,803
-------- --------
Total assets................................................ $275,460 $265,279
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable............................................ 19,128 16,444
Accrued expenses............................................ 31,705 28,911
Short-term borrowings from line of credit................... 10,000 --
Notes payable to former Digital shareholders................ -- 8,000
Other current liabilities................................... 354 7,815
-------- --------
Total current liabilities................................... 61,187 61,170
Long-term debt, net of current portion...................... 8,655 8,759
Other non-current liabilities............................... 2,869 2,999
Shareholders' equity........................................ 202,749 192,351
-------- --------
Total liabilities and shareholders' equity.................. $275,460 $265,279
======== ========
</TABLE>
SEE ACCOMPANYING NOTES.
5
<PAGE>
VEECO INSTRUMENTS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
2000 1999
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 2,396 $ 5,686
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization............................... 2,193 1,382
Deferred income taxes....................................... 1,199 127
Other, net.................................................. 165 (222)
Changes in operating assets and liabilities:
Accounts receivable......................................... (4,220) (13,752)
Inventories................................................. (8,526) (1,824)
Accounts payable............................................ 2,759 962
Accrued expenses and other current liabilities.............. (10,060) 5,052
Other, net.................................................. (106) (1,323)
-------- --------
Net cash used in operating activities....................... (14,200) (3,912)
INVESTING ACTIVITIES
Capital expenditures........................................ (4,825) (3,477)
Proceeds from sale of property, plant and equipment......... -- 2,679
Proceeds from sale of leak detection business............... 3,000 --
Net assets of businesses acquired........................... (7,177) --
Net purchases of short-term investments..................... (619) --
-------- --------
Net cash used in investing activities....................... (9,621) (798)
FINANCING ACTIVITIES
Proceeds from stock issuance................................ 5,059 50,607
Distribution to Ion Tech shareholders....................... -- (25)
Repayment of long-term debt, net............................ (7,985) (51)
Proceeds from borrowings under line of credit............... 10,000 --
Other....................................................... -- (55)
-------- --------
Net cash provided by financing activities................... 7,074 50,476
Effect of exchange rates on cash............................ 653 763
-------- --------
Net change in cash and cash equivalents..................... (16,094) 46,529
Cash and cash equivalents at beginning of period............ 29,418 23,493
-------- --------
Cash and cash equivalents at end of period.................. $ 13,324 $ 70,022
======== ========
</TABLE>
SEE ACCOMPANYING NOTES.
6
<PAGE>
VEECO INSTRUMENTS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1--BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements 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, 2000 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2000. 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, 1999.
Earnings per share are computed using the weighted average number of common
shares outstanding during the period. Diluted earnings per share are computed
using the weighted average number of common and common equivalent shares
outstanding during the period.
The following table sets forth the reconciliation of diluted weighted
average shares outstanding:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------
2000 1999
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Weighted average shares outstanding.................... 17,933 17,040
Dilutive effect of stock options....................... 759 481
------ ------
Diluted weighted average shares outstanding............ 18,692 17,521
====== ======
</TABLE>
NOTE 2--INVENTORIES
Interim inventories have been determined by lower of cost (principally
first-in, first-out) or market. Inventories consist of:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
Components and spare parts............................ $42,731 $36,213
Work-in-progress...................................... 11,041 10,062
Finished goods........................................ 13,240 10,414
------- -------
$67,012 $56,689
======= =======
</TABLE>
7
<PAGE>
VEECO INSTRUMENTS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 3--BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
Allowance for doubtful accounts....................... $ 1,479 $ 1,516
Accumulated depreciation and amortization of property,
plant and equipment................................. $23,013 $21,668
Accumulated amortization of excess of cost over net
assets acquired..................................... $ 1,504 $ 1,301
</TABLE>
SHORT-TERM INVESTMENTS
The carrying amounts of available-for-sale securities approximate fair
value. The following is a summary of available-for-sale securities:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
Commercial paper...................................... $12,855 $19,047
Municipal bonds....................................... 16,005 14,527
Floating rate bonds................................... 9,096 9,029
Corporate bonds....................................... 8,895 6,071
Obligations of U.S. Government agencies............... 2,030 2,003
Other debt securities................................. 2,609 211
------- -------
$51,490 $50,888
======= =======
</TABLE>
All investments at March 31, 2000 have contractual maturities of one year or
less. During the three months ended March 31, 2000, available-for-sale
securities with fair values at the date of sale of approximately $15.6 million
were sold.
NOTE 4--SEGMENT INFORMATION
The following represents the reportable product segments of the Company as
of and for the three months ended March 31, 2000 and 1999, in thousands:
<TABLE>
<CAPTION>
OPERATING INCOME
NET SALES (LOSS) TOTAL ASSETS
------------------- ------------------- -------------------
2000 1999 2000 1999 2000 1999
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Metrology.................................... $30,886 $30,973 $5,376 $ 6,714 $ 89,035 $ 73,045
Process Equipment............................ 17,841 23,393 (615) 3,606 81,166 72,816
Industrial Measurement....................... 2,727 5,518 (460) (6) 11,815 16,334
Unallocated Corporate amount................. -- -- (1,170) (1,406) 93,444 78,035
------- ------- ------ ------- -------- --------
Total........................................ $51,454 $59,884 $3,131 $ 8,908 $275,460 $240,230
======= ======= ====== ======= ======== ========
</TABLE>
8
<PAGE>
VEECO INSTRUMENTS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 5--COMPREHENSIVE INCOME
Total comprehensive income was $2.0 million and $4.8 million for the three
months ended March 31, 2000 and 1999, respectively. Other comprehensive income
is comprised of foreign currency translation adjustments and net unrealized
holding gains and losses on available-for-sale securities.
NOTE 6--RECENT EVENTS
On May 5, 2000, a wholly-owned subsidiary of the Company merged with
CVC, Inc. ("CVC") of Rochester, New York. As a result, CVC became a subsidiary
of the Company. Under the terms of the agreement, CVC shareholders received 0.43
shares of Veeco Common Stock (approximately 5.4 million shares in total) for
each share of CVC Common Stock outstanding. The merger is accounted for as a
pooling of interests and, as a result, historical financial data will be
restated in future reports. CVC provides cluster tool manufacturing equipment
used in the production of evolving tape and disk drive recording head
fabrication, optical components, passive components, MRAM, bump metallization,
and next generation logic devices.
The following table displays the pro forma results of Veeco and CVC, as if
the combination had been consummated at the date of the financial statements:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------
2000 1999
-------- --------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
Net sales.............................................. $77,890 $74,539
Net income............................................. $ 2,467 $ 6,166
Net income per common share............................ $ 0.11 $ 0.35
Diluted net income per common share.................... $ 0.10 $ 0.30
</TABLE>
Prior to the merger, CVC's fiscal year end was September 30. Therefore,
quarterly results for 1999 were derived from CVC's three months ended
December 31, 1998.
On March 23, 2000, the Company purchased certain atomic force microscope
assets. The acquisition was accounted for using the purchase method of
accounting. Results of operations prior to the acquisition are not material to
the Consolidated Statements of Income for the three months ended March 31, 2000
and 1999.
On February 11, 2000, Veeco entered into a strategic alliance with Seagate
Technology, Inc. ("Seagate") under which Veeco assumed production responsibility
for Seagate's internal Slider Level Crown ("SLC") product line and acquired
rights to commercialize such products for sale to third parties. The acquisition
was accounted for using the purchase method of accounting. Results of operations
prior to the acquisition are not material to the Consolidated Statements of
Income for the three months ended March 31, 2000 and 1999.
On January 31, 2000, Monarch Labs, Inc. ("Monarch"), a developer and
manufacturer of automated quasi-static test systems for the data storage
industry, merged with a subsidiary of Veeco. Monarch was a privately held
company located in Longmont, Colorado. Under the terms of the merger, Monarch
shareholders received 282,224 shares of Veeco Common Stock. The merger was
accounted for as a pooling of interests transaction, however, as Monarch's
historical results of operations and financial position are not material in
relation to those of Veeco, financial information prior to the merger is not
restated.
9
<PAGE>
VEECO INSTRUMENTS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 7--NEW STAFF ACCOUNTING BULLETIN
On December 3, 1999, the SEC staff issued Staff Accounting Bulletin
No. 101, "Revenue Recognition" ("SAB 101"). The SEC Staff addresses several
issues in SAB 101, including the timing for recognizing revenue derived from
selling arrangements involving contractual customer acceptance provisions where
installation of the product occurs after shipment and transfer of title. The
Company's current policy is to recognize revenue at the time the customer takes
title to the product, generally at the time of shipment. Applying the
requirements of SAB No. 101 to the present selling arrangements used by the
Company may result in a change in the Company's accounting policy for revenue
recognition and the deferral of the recognition of revenue until installation is
complete and the product is accepted by the customer. The effect of the change
will be recognized as a cumulative effect of a change in accounting in the
Company's second quarter ending on June 30, 2000. Management is currently
evaluating the impact of this change and believes that, in the period of
adoption, the amount of revenue that will be deferred could be material.
10
<PAGE>
VEECO INSTRUMENTS INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS.
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
Net sales of $51.5 million for the three months ended March 31, 2000
represents a decrease of 14% from the 1999 comparable period sales of
$59.9 million, reflecting a decrease principally in process equipment sales.
Sales in the U.S., Europe, Japan and Asia Pacific, accounted for 46%, 16%, 17%
and 21%, respectively, of the Company's net sales for the three months ended
March 31, 2000. Sales in the U.S. increased 12% from the comparable 1999 period
due to a 20% increase in U.S. process equipment sales and a 37% increase in U.S.
metrology sales, partially offset by a 55% decrease in industrial measurement
sales. Sales in Europe, Japan and Asia Pacific decreased 18%, 38% and 25%,
respectively. The decrease in Europe and Japan is principally due to a decrease
in process equipment sales. The decrease in Asia Pacific is a result of lower
sales in both the process equipment and metrology segments. The Company believes
that there will continue to be quarter to quarter variations in the geographic
concentration of sales.
Metrology sales of $30.9 million for the three months ended March 31, 2000
remained relatively flat from the comparable 1999 period. Process equipment
sales of $17.8 million for the three months ended March 31, 2000 represents a
decrease of $5.6 million, or 24%, from the comparable 1999 period, due primarily
to significant data storage shipment delays and reduced capital spending by the
Company's data storage customers. Industrial measurement sales of $2.7 million
for the three months ended March 31, 2000 represents a decrease of
$2.8 million, or 51%, from the comparable 1999 period, principally due to the
sale on January 17, 2000 of the Company's leak detection business.
Veeco received $79.1 million of orders during the three months ended
March 31, 2000, a 13% increase compared to $70.1 million of orders for the
comparable 1999 period. Process equipment orders decreased 31% to
$28.5 million, while metrology orders increased by 90% to $47.4 million,
reflecting an increase in bookings for semiconductor and research applications
for the Company's atomic force metrology products, as well as approximately
$14.5 million of orders for Veeco's two recently acquired metrology businesses.
Monarch Labs and the Slider Level Crown product line were both acquired during
the first quarter 2000. The decrease in process equipment orders reflects a 75%
reduction in orders for data storage process equipment products, offset by a
284% increase in orders for Veeco's Ion Tech subsidiary's Dense Wavelength
Division Multiplexing ("DVDM") related equipment. The book/bill ratio for the
Company's first quarter of 2000 was 1.54.
Gross profit for the three months ended March 31, 2000 of $25.4 million
represents a decrease of $3.1 million from the comparable 1999 period. Despite
the sales volume decrease, gross profit as a percentage of net sales increased
to 49.4% for 2000 from 47.7% for the comparable 1999 period, due to a favorable
mix, as sales of equipment for the optical telecommunications market increased
137%, while industrial measurement sales decreased 51% due to the sale of the
leak detection business in January 2000.
Research and development expenses of $8.6 million for the three months ended
March 31, 2000 increased by $1.3 million, or 18%, over the comparable period of
1999, due primarily to the increase in research and development for Ion Tech's
optical telecommunications equipment, as well as product development in the
newly acquired metrology businesses of OptiMag, Monarch and the Seagate crown
adjust tools.
Selling, general and administrative expenses of $13.0 million for the three
months ended March 31, 2000 increased by approximately $0.7 million to 25.2% of
net sales in 2000 from 20.5% in 1999, principally due to the expansion of direct
sales and service presence in both Japan and the Asia Pacific regions.
11
<PAGE>
VEECO INSTRUMENTS INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. (CONTINUED)
The Company recorded merger expenses of approximately $0.25 million in the
three months ended March 31, 2000 principally related to the merger with Monarch
Labs, Inc. representing transaction and other costs.
Income taxes for the three months ended March 31, 2000 amounted to
$1.3 million, or 35%, of income before income taxes, as compared to
$3.3 million, or 37%, of income before income taxes, for the same period of
1999.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operations totaled $14.2 million for the three months ended
March 31, 2000 compared to $3.9 million for the comparable 1999 period. This
change in cash used in operations reflects a decrease in net income for the 2000
period of $3.3 million from the comparable 1999 period, along with the use of
cash for changes in operating assets and liabilities. Accrued expenses and other
current liabilities decreased by $10.1 million during the three months ended
March 31, 2000, while increasing $5.1 million during the comparable 1999 period.
The decrease in accrued expenses and other current liabilities is due primarily
to the payment of income taxes. Accounts receivable increased by $4.2 million
during the three months ended March 31, 2000, while increasing $13.8 million
during the comparable 1999 period. The increase in accounts receivable in 1999
is due to the timing of sales, which were skewed towards the end of the
March 31, 1999 quarter, as well as increased sales volume in 1999. Inventories
increased by $8.5 million due to shipment delays, as well as production ramp at
Ion Tech and the metrology acquisitions completed this quarter.
Net cash used in investing activities for the three months ended March 31,
2000 totaled $9.6 million compared to $0.8 million for the comparable 1999
period. Cash used in 2000 consisted of $4.8 million of capital expenditures
partially offset by $3.0 million of proceeds from the sale of the leak detection
business. The Company also expended approximately $7.2 million for the purchase
of assets of acquired businesses in 2000.
Net cash provided by financing activities for the three months ended
March 31, 2000 totaled $7.1 million, compared to $50.5 million for the
comparable 1999 period. Cash provided by financing activities in 2000 consisted
of $10.0 million of proceeds from borrowings under the Company's line of credit,
as well as proceeds of $5.1 million from stock issuances upon exercise of stock
options, partially offset by $8.0 million of debt repayments, related to the
repayment of promissory notes owed to the former shareholders of Digital
Instruments, Inc., which was merged into the Company in May 1998. Cash provided
by financing activities in 1999 of $50.5 million primarily resulted from a
public offering by the Company in February 1999.
The Company has an unsecured $40.0 million Credit Facility (the "Credit
Facility") which may be used for working capital, acquisitions and general
corporate purposes. The Credit Facility bears interest at the prime rate of the
lending banks, but is adjustable to a maximum rate of 1/4% above the prime rate
in the event the Company's ratio of debt to cash flow exceeds a defined ratio. A
LIBOR-based interest rate option is also provided. As of March 31, 2000 there
was $10.0 million outstanding under the Credit Facility. In May 2000, this
credit facility was amended to allow for the recently completed CVC merger.
In connection with the atomic force microscope acquisition, the Company will
be required to pay approximately $4.8 million of the purchase price to the
seller, due in four equal quarterly installments, commencing on June 23, 2000
and with the final payment due on March 23, 2001.
12
<PAGE>
VEECO INSTRUMENTS INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. (CONTINUED)
In connection with the OptiMag acquisition, the Company will be required to
pay consideration to the former shareholders of OptiMag based upon both future
sales and the future appraised value of OptiMag. The consideration will be
calculated based upon a predetermined percentage of OptiMag's sales for the
period from January 1, 2000 to December 31, 2000, as well as the appraised fair
market value of OptiMag, adjusted for certain items, as of December 31, 2000.
The Company believes that existing cash balances together with cash
generated from operations and amounts available under the Company's Credit
Facility will be sufficient to meet the Company's projected working capital and
other cash flow requirements for the next twelve months.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
Veeco's investment portfolio consists of cash equivalents, corporate bonds,
commercial paper, floating rate bonds, obligations of U.S. Government agencies
and municipal bonds. These investments are considered available-for-sale
securities; accordingly, the carrying amounts approximate fair value. Assuming
March 31, 2000 variable debt and investment levels, a one-point change in
interest rates would not have a material impact on net interest expense. Veeco's
net sales to foreign customers represented approximately 54% of Veeco's total
net sales for the three months ended March 31, 2000 and 65% for the comparable
1999 period. The Company expects net sales to foreign customers will continue to
represent a large percentage of Veeco's total net sales. Veeco's net sales
denominated in foreign currencies represented approximately 16% of Veeco's total
net sales for the three months ended March 31, 2000 and 12% for the comparable
1999 period. The Company generally has not engaged in foreign currency hedging
transactions. The aggregate foreign currency exchange loss included in
determining consolidated results of operations was $44,000 for the three months
ended March 31, 2000 and was not material during the three months ended
March 31, 1999. Changes in currency exchange rates that have the largest impact
on translating Veeco's international operating profit include the German mark
and Japanese yen. The Company estimates that a 10% change in foreign currency
exchange rates would impact reported operating profit for the three months ended
March 31, 2000 by approximately $1.3 million. The Company believes that this
quantitative measure has inherent limitations because it does not take into
account any governmental actions or changes in either customer purchasing
patterns or financing and operating strategies.
13
<PAGE>
VEECO INSTRUMENTS INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION.
On May 5, 2000, a wholly-owned subsidiary of the Company merged with
CVC, Inc. ("CVC") of Rochester, New York. As a result, CVC became a subsidiary
of the Company. Under the terms of the agreement, CVC shareholders received 0.43
shares of Veeco Common Stock (approximately 5.4 million shares in total) for
each share of CVC Common Stock outstanding. The merger is accounted for as a
pooling of interests and, as a result, historical financial data will be
restated in future reports. CVC provides cluster tool manufacturing equipment
used in the production of evolving tape and disk drive recording head
fabrication, optical components, passive components, MRAM, bump metallization,
and next generation logic devices.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Unless otherwise indicated, each of the following exhibits has been
previously filed with the Securities and Exchange Commission by the Company
under File No. 0-16244.
<TABLE>
<CAPTION>
INCORPORATED BY REFERENCE
NUMBER EXHIBIT TO THE FOLLOWING DOCUMENTS
- ------ ------- --------------------------
<S> <C> <C>
2.1 Agreement and Plan of Merger among Veeco Current Report on Form 8-K filed on
Instruments Inc., Veeco Acquisition Corp. March 13, 2000, Exhibit 2.1
and CVC, Inc. dated February 29, 2000.
10.1 Amendment No. 3 and Waiver to Credit Annual Report on Form 10-K for the Year
Agreement, dated March 3, 2000 between Ended December 31, 1999, Exhibit 10.4
Veeco Instruments Inc., Fleet Bank N.A.
and The Chase Manhattan Bank.
27.1 Financial Data Schedule of Veeco *
Instruments Inc. for the quarterly period
ended March 31, 2000.
27.2 Financial Data Schedule of Veeco *
Instruments Inc. for the quarterly period
ended March 31, 1999. (restated)
</TABLE>
- ------------------------
* Filed herewith
(b) Reports on Form 8-K.
The Registrant filed an amendment on Form 8-K/A on January 12, 2000 to its
Current Report on Form 8-K dated November 17, 1999, to clarify that neither its
acquisition of Ion Tech, Inc. nor its acquisition of Tulakes Real Estate
Investments, Inc. was a significant business combination which would require the
filing of financial statements or pro forma financial information.
The Registrant filed a Current Report on Form 8-K on March 13, 2000
regarding the Agreement and Plan of Merger dated February 29, 2000 among Veeco
Instruments Inc., Veeco Acquisition Corp. and CVC, Inc.
14
<PAGE>
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: May 11, 2000
Veeco Instruments Inc.
By: /s/ Edward H. Braun
----------------------------------------
Edward H. Braun
Chairman and Chief Executive Officer
By: /s/ John F. Rein, Jr.
----------------------------------------
John F. Rein, Jr.
Executive Vice President, Finance,
Chief Financial Officer, Treasurer and
Secretary
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2000 WHICH ARE CONTAINED IN
OUR 10Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 13,324
<SECURITIES> 51,490
<RECEIVABLES> 63,320
<ALLOWANCES> 1,479
<INVENTORY> 67,012
<CURRENT-ASSETS> 204,740
<PP&E> 67,949
<DEPRECIATION> 23,013
<TOTAL-ASSETS> 275,460
<CURRENT-LIABILITIES> 61,187
<BONDS> 19,009
0
0
<COMMON> 181
<OTHER-SE> 202,568
<TOTAL-LIABILITY-AND-EQUITY> 275,460
<SALES> 51,454
<TOTAL-REVENUES> 51,454
<CGS> 26,026
<TOTAL-COSTS> 22,318
<OTHER-EXPENSES> (21)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (549)
<INCOME-PRETAX> 3,680
<INCOME-TAX> 1,284
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,396
<EPS-BASIC> .13
<EPS-DILUTED> .13
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2000 WHICH ARE CONTAINED ON
OUR 10Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERNCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 70,022
<SECURITIES> 0
<RECEIVABLES> 58,030
<ALLOWANCES> 1,726
<INVENTORY> 57,662
<CURRENT-ASSETS> 192,594
<PP&E> 57,442
<DEPRECIATION> 18,398
<TOTAL-ASSETS> 240,230
<CURRENT-LIABILITIES> 57,060
<BONDS> 18,691
0
0
<COMMON> 174
<OTHER-SE> 171,590
<TOTAL-LIABILITY-AND-EQUITY> 240,230
<SALES> 59,884
<TOTAL-REVENUES> 59,884
<CGS> 31,324
<TOTAL-COSTS> 19,720
<OTHER-EXPENSES> (68)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (116)
<INCOME-PRETAX> 9,024
<INCOME-TAX> 3,338
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,686
<EPS-BASIC> .33
<EPS-DILUTED> .32
</TABLE>
