Excerpts from VECO's July SEC filing (Discussion of financial condition and results of operations), accessed from here:
phx.corporate-ir.net
Highlights of the Second Quarter of 2010
· Revenue was $253.0 million, a 251.3% increase from the second quarter of 2009.
· Orders were $346.9 million, a 251.6% increase from the second quarter of 2009.
· Net income was $52.4 million, or $1.20 per share, compared to a net loss of $(14.7) million, or $(0.47) per share, in the second quarter of 2009.
· Gross margins were 45.0%, compared to 33.9% in the second quarter of 2009.
Outlook
With backlog of $597 million at the end of June 2010, Veeco continues to have very strong business momentum. We continue to experience high
levels of activity in our LED business, similar to the last three quarters, with multi-tool MOCVD system orders being quoted across a large number of
customers. Our K465i™ is performing well in the market and we are increasing manufacturing capacity to satisfy customer demand. In the second quarter
of 2010, we shipped 81 systems. We currently plan to ship approximately 100 MOCVD tools in the third quarter 2010 and plan to reach a production
capacity of 120 tools or more by the fourth quarter. As a result of our variable-cost, outsourced manufacturing strategy, we have dramatically increased our
production capacity with the ability to flex our actual MOCVD shipments up or down each quarter depending upon specific customer demand and delivery
requirements.
We currently believe that the third quarter will be another strong order quarter for our MOCVD business. In particular, China’s initiative to
subsidize the HB LED industry via seven national ‘industrial parks’ is spurring strong order quoting patterns for Veeco, both from Chinese entities as well
as from Korean and Taiwanese customers that are partnering with Chinese entities. We believe the HB LED industry is at the beginning of a multi-year
MOCVD investment cycle as HB LEDs increase their penetration in laptop and TV backlighting and gain momentum for general illumination.
We are continuing to invest in our copper, indium, gallium, selenide (“CIGS”) Solar business, with a goal to build a “best of breed” deposition
product line and ultimately help to drive CIGS technology as a low-cost, high efficiency solar technology. We shipped our first tool from our FastFlex family of deposition systems to an Asia customer during the second quarter of
2010.
Business conditions in our other segments, Data Storage and Metrology, also remain positive. In 2010, our Data Storage business is currently
anticipated to perform well as customers invest in capacity additions and next-generation recording head technology. Order rates have improved
significantly from the low levels of business experienced in late 2008 and early 2009, with customers again investing in technology and capacity purchases.
In Metrology we are winning in the market due to our new AFM and Optical products and have higher demand in the semiconductor, research and industrial
markets as the global economy improved from 2009
Based upon Veeco’s strong backlog, the Company is currently forecasting that 2010 revenues will be over $1 billion, with strong year-over year
growth from 2009 in revenue and profitability in all three business segments.
Our outlook discussion above constitutes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Our expectations regarding future results are subject to risks and
uncertainties. Our actual results may differ materially from those anticipated. Risks associated with our ability to achieve these results are set forth in Items
1, 1A, 3, 7 and 7A in our annual report on Form 10-K for the year ended December 31, 2009, as well as any modifications or revisions to risk factors
contained in our subsequent filings with the SEC
You should not place undue reliance on any forward-looking statements, which speak only as of the dates they are made.
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Sales and orders increased in each segment in the second quarter of 2010 compared with the comparable 2009 quarter due to our customers’
requirements in response to increasingly favorable economic conditions compared to 2009. LED & Solar Process Equipment sales were up 482.3% from the
comparable 2009 quarter primarily due to an increase in end user demand for HB LED backlighting applications and continued strong customer acceptance
of Veeco’s newest generation systems. Data Storage Process Equipment segment sales were up 103.2% from the comparable 2009 quarter due to an increase in demand by our data storage customers as the global economy improved from 2009. Additionally, Metrology
sales were up 40.4% from the comparable 2009 quarter, due to higher demand in the semiconductor, research and industrial markets as the global economy
improved from 2009. By region, net sales increased by 539.1% in the Asia Pacific region, primarily due to MOCVD sales to HB LED customers, while
sales in the Americas, EMEA and Japan also increased 26.6%, 78.9% and 175.2%, respectively. We believe that there will continue to be period-to-period
variations in the geographic distribution of sales.
Orders for the second quarter of 2010 increased 251.6% from the comparable 2009 quarter. By segment, the 362.2% increase in orders for
LED & Solar Process Equipment was principally driven by HB LED based manufacturers increasing production for television and laptop backlighting
applications. The 159.0% increase in Data Storage Process Equipment orders resulted from an increase in demand by our data storage customers due to both
capacity expansion and technology buys. The 58.6% increase in Metrology orders is due to higher demand in the semiconductor, research and industrial
markets.
Our book-to-bill ratio for the second quarter of 2010, which is calculated by dividing orders received in a given time period by revenue
recognized in the same time period, was 1.37 to 1, reflecting the increasingly favorable economic conditions experienced in the last four quarters,
specifically related to our LED & Solar Process Equipment segment. Our backlog as of June 30, 2010 was $597.5 million, compared to $402.0 million as of
December 31, 2009. During the three months ended June 30, 2010, we experienced backlog adjustments of approximately $1.4 million, principally due to
adjustments related to foreign currency translation. For certain sales arrangements we require a deposit for a portion of the sales price before shipment. As
of June 30, 2010 we had customer deposits and advanced billings of $113.6 million.
Gross Profit
Gross profit, as a percentage of net sales, for the second quarter of 2010, was 45.0%, compared to 33.9% in the comparable 2009 quarter. LED &
Solar Process Equipment gross margins increased to 44.0% from 32.7%, Data Storage Process Equipment gross margins increased to 48.6% from 34.3%
and Metrology gross margins increased to 46.6% from 35.2%. The increases in gross margin were driven primarily by increased sales volume in each of our
segments.
Operating Expenses
Selling, general and administrative expenses increased by $7.5 million, or 37.7%, from the comparable 2009 quarter, however, decreased from
27.5% of net sales to 10.8% of sales. The dollar increase was primarily due to an increase in bonus and profit sharing expense, equity-based compensation,
travel and entertainment expenses, salary and related expenses and professional fees associated primarily with the significant increase in business activity in
our LED & Solar Process Equipment segment.
Research and development expenses increased $7.4 million from the comparable 2009 quarter, however, decreased from 18.3% of net sales to
8.1%. The dollar increase was primarily due to increased spending in our LED & Solar Process Equipment segment to support future growth.
Restructuring expense of $1.9 million for the second quarter of 2009 consisted of $0.8 million of personnel severance costs resulting from a
reduction in workforce. In addition, there were $0.9 million of lease-related costs and $0.2 million of moving and consolidation costs incurred in our Data
Storage Process Equipment segment associated with vacating our Camarillo, CA facilities. In addition to the $1.9 million in restructuring expense, we
incurred $0.3 million of asset impairment costs.
Other, net for the second quarter of 2010 includes a foreign currency exchange loss of $0.5 million compared to a foreign currency exchange gain
of $0.1 million in the comparable 2009 quarter.
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We had a net increase in cash of $212.8 million during the six months ended June 30, 2010. Cash provided by operations was $109.0 million for
this period, as compared to cash provided by operations of $8.0 million for the comparable 2009 period. Net income adjusted for non-cash items provided
operating cash flows of $90.0 million for the six months ended June 30, 2010, whereas $17.6 million was used in the comparable 2009 period. Net cash
provided by operations for the six months ended June 30, 2010 included a net change in operating assets and liabilities of $19.0 million. Inventories
increased by approximately $6.4 million, principally due to an increase in purchases to support the significant MOCVD orders from the comparable 2009
period. Accounts receivable increased $54.6 million during the six months ended June 30, 2010, due to higher sales volume when compared to the fourth
quarter of 2009. Accrued expenses and other current liabilities increased $51.9 million during the six months ended June 30, 2010, due primarily to an
increase in customer deposits, partially offset by the payment of management bonuses and profit sharing in the first quarter of 2010. Accounts payable also
increased by $21.8 million during the first half of 2010 due to the higher level of business activity.
Cash provided by investing activities of $75.5 million for the six months ended June 30, 2010 primarily related to the redemption of short-term
investments of $160.1 million, partially offset by purchases of additional short-term investments of $78.5 million and $6.2 million in capital expenditures
principally in our LED & Solar Process Equipment segment. Cash used in investing activities of $13.7 million for the six months ended June 30, 2009
primarily related to the $9.8 million earn-out payments and $3.6 million in capital expenditures, of which $2.4 million is principally attributable to our
LED & Solar Process Equipment segment. During the remainder of 2010, we estimate we will invest an additional $22.5 million in capital expenditures
primarily related to lab tools for high-growth opportunities, as well as for plant expansion and building improvements.
Cash provided by financing activities of $30.1 million for the six months ended June 30, 2010 primarily related to stock option exercises. Cash
used in financing activities of $0.4 million for the six months ended June 30, 2009 primarily related to restricted stock tax withholdings.
Based on forecasted results of operations for the year ending December 31, 2010, we expect to exhaust our net operating loss carryforwards
(“NOLs”) and federal tax credits (“FTCs”) this year. As a result, we anticipate paying taxes when the NOLs and FTCs are exhausted. |
