News

WOODBURY, N.Y.--(BUSINESS WIRE)--Oct. 22, 2007--Veeco Instruments Inc. (Nasdaq: VECO) today announced its financial results for the third quarter and nine months ended September 30, 2007. Veeco reports its results on a generally accepted accounting principles ("GAAP") basis, and also provides results excluding certain items. Investors should refer to the attached table for further details of the reconciliation of GAAP operating loss to loss excluding certain items.

Veeco will host a conference call reviewing these results at 5:00pm ET today at 1-800-500-0177 (toll free) or 1-719-457-2679. 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 8:00pm ET tonight through midnight on November 5th, 2007 at 1-888-203-1112 (toll free) or 1-719-457-0820, using pass code 7040334, or on the Veeco website. Please also see the Veeco website for a slide presentation to accompany this conference call.

    Third Quarter 2007 Highlights

    --  Revenue was $97.7 million, in line with Veeco's guidance of
        $92-$97 million, flat sequentially and down 13% versus third
        quarter 2006 revenue of $112.4 million.

    --  Bookings were $118.3 million, above Veeco's guidance of
        $100-$115 million, up 5% sequentially and up 3% versus the
        prior year.

    --  Net loss was ($5.7) million, or ($0.18) per share (GAAP),
        compared to net income of $4.5 million, or $0.14 per share,
        last year, in line with Veeco's guidance of a loss per share
        of ($0.25)-($0.18).

    --  Veeco's loss per share, excluding certain items, was ($0.05)
        compared to earnings per share of $0.21 last year, in line
        with guidance of ($0.09)-($0.05) per share.

John R. Peeler, Veeco's Chief Executive Officer commented, "Third quarter revenues were in line with our expectations. We have initiated the first phase of a multi-quarter turn-around plan to improve Veeco's profitability through a combination of increased focus on our best growth opportunities, gross margin improvement and expense reduction and containment. Short-term activities include a reduction in staff of approximately 100 employees, consultants and temporary workers, a reduction of discretionary expenses, the realignment of our sales organization to more closely match current market/regional opportunities, consolidation of certain engineering groups, and the downsizing and consolidation of corporate headquarters. I am also taking specific steps to strengthen Veeco's leadership team and we have begun to identify strategies to accelerate the Company's growth."

Mr. Peeler continued, "We are pleased that Veeco's bookings of $118.3 million were ahead of guidance based on very strong activity in the HB-LED/wireless market, with orders up 26% sequentially and 49% compared with the third quarter of 2006. Veeco's scientific research orders also increased significantly, up 17% sequentially and 26% from prior year. The data storage and semiconductor markets remain challenging for Veeco, with orders down 15% and 22% sequentially, respectively."

Third Quarter 2007 Summary

Veeco's revenue for the third quarter of 2007 was $97.7 million, compared to $112.4 million in the third quarter of last year. Third quarter 2007 operating loss was ($4.2) million, compared with operating income of $5.0 million in the third quarter of 2006. Veeco's third quarter 2007 EBITA loss was ($1.7) million, compared to earnings of $10.2 million last year. Third quarter net loss was ($5.7) million, or ($0.18) per share, compared to net income of $4.5 million, or $0.14 per share, in the third quarter of 2006. Excluding the $0.5 million restructuring charge in 2007 and a $1.2 million write-off of purchased in-process technology in 2006, and excluding amortization expenses and using a 35% tax rate in both periods, third quarter 2007 loss per share was ($0.05), compared to earnings per share of $0.21 in 2006. Veeco's third quarter book-to-bill ratio was 1.21 to 1.0. Details of third quarter revenues and bookings appear in the attached financial tables.

First Nine Months 2007 Summary

Veeco's revenue for the first nine months of 2007 was $295.7 million, compared to $317.9 million in the first nine months of last year. Nine month 2007 operating loss was ($3.5) million, compared with operating income of $12.2 million last year. Veeco's nine month 2007 EBITA was $6.8 million, compared to $25.4 million last year. Nine month net loss was ($8.0) million, or ($0.26) per share, compared to net income of $7.3 million, or $0.23 per share, in the first nine months of 2006. Excluding certain charges and gains as well as amortization expense, and using a 35% tax rate in both periods, nine month 2007 earnings were $0.10 per share, compared to $0.48 per share in 2006. Veeco's nine month book-to-bill ratio was 1.14 to 1.0. Details of revenues and bookings appear in the following tables.

Outlook

The Company forecasts fourth quarter revenues to be in the range of $104-$112 million. Veeco's loss per share is currently forecasted to be between ($0.26) - ($0.14) on a GAAP basis, and earnings per share are currently forecasted to be between $0.00 to $0.06 on a non-GAAP basis (excluding amortization of $1.9 million and restructuring charges of $5.0 million, using a 35% tax rate). Additional restructuring charges in the range of $8-13 million could potentially impact fourth quarter 2007 and first quarter 2008 earnings depending upon the timing and extent of additional actions under consideration. Veeco currently expects that its fourth quarter 2007 bookings will be $105-$115 million.

This fourth quarter expectation will bring Veeco's full year 2007 revenue to $400-408 million, down approximately 10% from 2006 levels. Mr. Peeler commented, "While the 2007 performance for Veeco is disappointing primarily due to the challenging overall data storage and semiconductor markets, we believe these markets have stabilized. We currently anticipate exiting the year with approximately $180 million in backlog, setting the stage for an improved 2008. We are seeing favorable growth trends for Veeco's MOCVD and MBE technologies in the HB-LED/wireless market, as well as early penetration in specific solar applications, such as multi-junction solar cells and CIGS thermal deposition sources. We also anticipate strength in the scientific research/industrial market to continue as we are experiencing strong customer acceptance of several new instrumentation products, including our Innova(TM) SPM and Dektak(R) 150 Optical Profilers."

About Veeco

Veeco Instruments Inc. provides solutions for nanoscale applications in the worldwide data storage, semiconductor, HB-LED/wireless and scientific research markets. Our Metrology products are used to measure at the nanoscale and our Process Equipment tools help create nanoscale devices. Veeco's manufacturing and engineering facilities are located in New York, New Jersey, California, Colorado, Arizona and Minnesota. Global sales and service offices are located throughout the United States, 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, 2006 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.

               Veeco Instruments Inc. and Subsidiaries
                Consolidated Statements of Operations
                (In thousands, except per share data)
                             (Unaudited)

                               Three months ended   Nine months ended
                                  September 30,       September 30,
                               ------------------- -------------------
                                 2007      2006      2007      2006
                               --------- --------- --------- ---------

Net sales                      $ 97,718  $112,369  $295,653  $317,922
Cost of sales                    61,824    64,513   173,819   178,585
                               --------- --------- --------- ---------
Gross profit                     35,894    47,856   121,834   139,337

Costs and expenses:
Selling, general and
 administrative expense          22,723    22,296    69,347    68,622
Research and development
 expense                         15,049    15,716    46,341    45,554
Amortization expense              1,959     4,025     8,236    12,029
Restructuring expense               529         -     1,974         -
Write-off of purchased in-
 process technology                   -     1,160         -     1,160
Other income, net                  (179)     (310)     (605)     (243)
                               --------- --------- --------- ---------

Operating (loss) income          (4,187)    4,969    (3,459)   12,215

Interest expense, net               665     1,056     2,256     3,583
Gain on extinguishment of debt        -         -      (738)     (330)
                               --------- --------- --------- ---------

(Loss) income before income
 taxes and
noncontrolling interest          (4,852)    3,913    (4,977)    8,962

Income tax provision                954       612     3,490     2,878
Noncontrolling interest            (123)   (1,207)     (482)   (1,207)
                               --------- --------- --------- ---------
Net (loss) income               ($5,683) $  4,508   ($7,985) $  7,291
                               ========= ========= ========= =========

(Loss) income per common
 share:
Net (loss) income per common
 share                           ($0.18) $   0.15    ($0.26) $   0.24
Diluted net (loss) income per
 common share                    ($0.18) $   0.14    ($0.26) $   0.23

Weighted average shares
 outstanding                     31,100    30,693    30,975    30,369
Diluted weighted average
 shares outstanding              31,100    31,393    30,975    31,100

               Veeco Instruments Inc. and Subsidiaries
Reconciliation of operating (loss) income to earnings (loss) excluding
                             certain items
                (In thousands, except per share data)
                             (Unaudited)

                         Three months ended     Nine months ended
                            September 30,         September 30,
                          2007        2006       2007        2006
                         --------   --------   ---------   --------


Operating (loss) income  ($4,187)   $ 4,969     ($3,459)   $12,215

Adjustments:

Write-off of purchased
 in-process technology         -      1,160 (1)       -      1,160

Amortization expense       1,959      4,025       8,236     12,029

Restructuring expense        529 (2)      -       1,974 (2)      -
                         --------   --------   ---------   --------

Earnings (loss) before
 interest, income taxes
 and amortization
 excluding certain items
  ("EBITA")               (1,699)    10,154       6,751     25,404

Interest expense, net        665      1,056       2,256      3,583

Gain on extinguishment
 of debt                       -          -        (738)(3)   (330)(4)

Adjustment to exclude
 gain on extinguishment
 of debt                       -          -         738        330
                         --------   --------   ---------   --------

Earnings (loss)
 excluding certain items
before income taxes       (2,364)     9,098       4,495     21,821

Income tax (benefit)
 provision at 35%           (827)     3,184       1,573      7,637

Noncontrolling interest,
 net of income tax
 provision at 35%            (80)      (785)       (313)      (785)

                         --------   --------   ---------   --------
Earnings (loss)
 excluding certain items ($1,457)   $ 6,699    $  3,235    $14,969
                         ========   ========   =========   ========

Earnings excluding
 certain items per
 diluted share            ($0.05)   $  0.21    $   0.10    $  0.48

Diluted weighted average
 shares outstanding       31,100     31,393      31,319     31,100


(1) During 2006, the Company purchased a 19.9% interest in Fluens
 Corporation. During the third quarter of 2006, the Company finalized
 its purchase accounting for Fluens determining that Fluens is a
 variable interest entity and the Company is its primary beneficiary
 as defined by FIN46(R). As such, the Company has consolidated the
 results of Fluens' operations from the acquisition date. As part of
 that acquisition, the Company acquired $1.2 million of in-process
 technology, which was written off as of the acquisition date.

(2) During the second quarter of 2007, the Company incurred $1.5
 million in expenses for personnel severance costs associated with its
 restructuring plan. During the third quarter of fiscal 2007, the
 Company incurred an additional $0.5 million of these costs.

(3) During the first quarter of 2007, the Company repurchased $56.0
 million aggregate principal amount of its 4.125% convertible
 subordinated notes. As a result of these repurchases, the amount of
 convertible subordinated notes outstanding was reduced to $144.0
 million, and the Company recorded a gain from the extinguishment of
 debt in the amount of $0.7 million.

(4) During the first quarter of 2006, the Company repurchased $20.0
 million aggregate principal amount of its 4.125% convertible
 subordinated notes. As a result of this repurchase, the amount of
 convertible subordinated notes outstanding was reduced to $200.0
 million, and the Company recorded a gain from the extinguishment of
 debt in the amount of $0.3 million.

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.

               Veeco Instruments Inc. and Subsidiaries
                Condensed Consolidated Balance Sheets
                            (In thousands)


                                            September 30, December 31,
                                                2007          2006
                                            ------------- ------------
                                             (Unaudited)

ASSETS
Current assets:
   Cash and cash equivalents                     $108,402     $147,046
   Accounts receivable, net                        68,603       86,589
   Inventories, net                               105,659      100,355
   Prepaid expenses and other current
    assets                                         10,254        9,378
   Deferred income taxes                            2,605        2,565
                                            ------------- ------------
Total current assets                              295,523      345,933

Property, plant and equipment, net                 69,505       73,510
Goodwill                                          100,898      100,898
Other assets, net                                  61,438       69,259
                                            ------------- ------------
Total assets                                     $527,364     $589,600
                                            ============= ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable                              $ 35,619     $ 40,588
   Accrued expenses                                50,369       48,714
   Deferred profit                                  1,342          251
   Income taxes payable                             1,382        2,723
   Current portion of long-term debt                5,434        5,597
                                            ------------- ------------
Total current liabilities                          94,146       97,873

Deferred income taxes                               3,470        2,423
Long-term debt                                    146,450      203,607
Other non-current liabilities                       1,716        2,304
                                            ------------- ------------
Total non-current liabilities                     151,636      208,334

Noncontrolling interest                             1,160        1,642

Shareholders' equity                              280,422      281,751
                                            ------------- ------------
Total liabilities and shareholders' equity       $527,364     $589,600
                                            ============= ============

               Veeco Instruments Inc. and Subsidiaries
                    Revenue and Bookings Analysis
                             (Unaudited)


Q3 2007 Revenue
---------------------

-------------------------- -------------------- ----------------------
Segment
 Analysis  $ Millions  %   Market Analysis  %   Regional Analysis  %
-------------------------- -------------------- ----------------------

Process                    Data Storage         North America
 Equipment      $62.9  64%                  30%                    30%
                           Semiconductor    12% Europe             19%
Metrology        34.8  36% HB-LED/Wireless  32% Japan              13%
                           Scientific           APAC
                            Research        26%                    38%
           ---------------                 ----                   ----
Total           $97.7 100% Total           100% Total             100%
-------------------------- -------------------- ----------------------


Q3 2007 Bookings
---------------------

-------------------------- -------------------- ----------------------
Segment
 Analysis  $ Millions  %   Market Analysis  %   Regional Analysis  %
-------------------------- -------------------- ----------------------

Process                    Data Storage         North America
 Equipment      $80.9  68%                  30%                    41%
                           Semiconductor     5% Europe             19%
Metrology        37.4  32% HB-LED/Wireless  37% Japan              10%
                           Scientific           APAC
                            Research        28%                    30%
           ---------------                 ----                   ----
Total          $118.3 100% Total           100% Total             100%
-------------------------- -------------------- ----------------------

---------------------
Nine Month 2007
 Revenue
---------------------

-------------------------- -------------------- ----------------------
Segment
 Analysis  $ Millions  %   Market Analysis  %   Regional Analysis  %
---------- ---------- ---- --------------- ---- ----------------- ----

Process                    Data Storage         North America
 Equipment     $181.0  61%                  33%                    32%
                           Semiconductor    11% Europe             18%
Metrology       114.7  39% HB-LED/Wireless  26% Japan              15%
                           Scientific           APAC
                            Research        30%                    35%
           ---------------                 ----                   ----
Total          $295.7 100% Total           100% Total             100%
-------------------------- -------------------- ----------------------

---------------------
Nine Month 2007
 Bookings
---------------------

-------------------------- -------------------- ----------------------
Segment
 Analysis  $ Millions  %   Market Analysis  %   Regional Analysis  %
-------------------------- -------------------- ----------------------

Process                    Data Storage         North America
 Equipment     $227.3  68%                  31%                    36%
                           Semiconductor     8% Europe             19%
Metrology       109.4  32% HB-LED/Wireless  35% Japan              13%
                           Scientific           APAC
                            Research        26%                    32%
           ---------------                 ----                   ----
Total          $336.7 100% Total           100% Total             100%
-------------------------- -------------------- ----------------------

    CONTACT: For Veeco Instruments Inc.
             Financial:
             Debra Wasser, 1-516-677-0200 x1472
             SVP Investor Relations & Corporate Communications
             or
             Media:
             Fran Brennen, 1-516-677-0200 x1222
             Senior Director Marcom

    SOURCE: Veeco Instruments Inc.