-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WVkZ3DyxtwzOGCjz9dtJ3uICb6+d6xx2dZpm+7Mtgl/N5DgMMp8YEl/rJqkLq+Cy xwZknBvsR0RNqPr29Hhqng== 0000912057-00-023375.txt : 20000512 0000912057-00-023375.hdr.sgml : 20000512 ACCESSION NUMBER: 0000912057-00-023375 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000511 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VEECO INSTRUMENTS INC CENTRAL INDEX KEY: 0000103145 STANDARD INDUSTRIAL CLASSIFICATION: MEASURING & CONTROLLING DEVICES, NEC [3829] IRS NUMBER: 112989601 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-16244 FILM NUMBER: 626412 BUSINESS ADDRESS: STREET 1: TERMINAL DR CITY: PLAINVIEW STATE: NY ZIP: 11803 BUSINESS PHONE: 5163498300 10-Q 1 10-Q - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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) 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)
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. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 VEECO INSTRUMENTS INC. INDEX PART 1. FINANCIAL INFORMATION
PAGE ---- 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
3 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)
THREE MONTHS ENDED MARCH 31, ------------------- 2000 1999 -------- -------- 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
SEE ACCOMPANYING NOTES. 4 VEECO INSTRUMENTS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
MARCH 31, DECEMBER 31, 2000 1999 ----------- ------------ (UNAUDITED) 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 ======== ========
SEE ACCOMPANYING NOTES. 5 VEECO INSTRUMENTS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
THREE MONTHS ENDED MARCH 31, ------------------- 2000 1999 -------- -------- 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 ======== ========
SEE ACCOMPANYING NOTES. 6 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:
THREE MONTHS ENDED MARCH 31, ------------------------- 2000 1999 -------- -------- (IN THOUSANDS) Weighted average shares outstanding.................... 17,933 17,040 Dilutive effect of stock options....................... 759 481 ------ ------ Diluted weighted average shares outstanding............ 18,692 17,521 ====== ======
NOTE 2--INVENTORIES Interim inventories have been determined by lower of cost (principally first-in, first-out) or market. Inventories consist of:
MARCH 31, DECEMBER 31, 2000 1999 --------- ------------ (IN THOUSANDS) 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 ======= =======
7 VEECO INSTRUMENTS INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) NOTE 3--BALANCE SHEET INFORMATION
MARCH 31, DECEMBER 31, 2000 1999 --------- ------------ (IN THOUSANDS) 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
SHORT-TERM INVESTMENTS The carrying amounts of available-for-sale securities approximate fair value. The following is a summary of available-for-sale securities:
MARCH 31, DECEMBER 31, 2000 1999 --------- ------------ (IN THOUSANDS) 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 ======= =======
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:
OPERATING INCOME NET SALES (LOSS) TOTAL ASSETS ------------------- ------------------- ------------------- 2000 1999 2000 1999 2000 1999 -------- -------- -------- -------- -------- -------- 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 ======= ======= ====== ======= ======== ========
8 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:
THREE MONTHS ENDED MARCH 31, ----------------------- 2000 1999 -------- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA) 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
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 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 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 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 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 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.
INCORPORATED BY REFERENCE NUMBER EXHIBIT TO THE FOLLOWING DOCUMENTS - ------ ------- -------------------------- 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)
- ------------------------ * 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 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 EX-27.1 2 EXHIBIT 27.1
5 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. 1,000 3-MOS DEC-31-2000 MAR-31-2000 13,324 51,490 63,320 1,479 67,012 204,740 67,949 23,013 275,460 61,187 19,009 0 0 181 202,568 275,460 51,454 51,454 26,026 22,318 (21) 0 (549) 3,680 1,284 0 0 0 0 2,396 .13 .13
EX-27.2 3 EXHIBIT 27.2
5 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. 1,000 3-MOS DEC-31-1999 MAR-31-1999 70,022 0 58,030 1,726 57,662 192,594 57,442 18,398 240,230 57,060 18,691 0 0 174 171,590 240,230 59,884 59,884 31,324 19,720 (68) 0 (116) 9,024 3,338 0 0 0 0 5,686 .33 .32
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