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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 JUNE 30, ~~2001~~ 2002

Commission file number 0-16244 ~~------------------~~

VEECO INSTRUMENTS INC. ~~(Exact~~
(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) 100 Sunnyside Blvd. 11797 Woodbury, NY (zip code)

Delaware (State or other jurisdiction of incorporation or organization)		11-2989601 (I.R.S. Employer Identification Number)
100 Sunnyside Blvd. Woodbury, NY (Address of principal executive offices)		11797 (zip code)

Registrant's telephone number, including area code:(516) 677-0200 ~~-------------------~~

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|~~/x/ No ~~|_| 24,805,839~~/ /

29,134,679 shares of common stock, $0.01 par value per share, were outstanding as of the close of business on July 30, ~~2001.~~ ~~SAFE HARBOR STATEMENT~~2002.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (the "Report") contains certain forward-looking statements about Veeco within the meaning of the Private Securities Litigation Reform Act of 1995. ~~Discussions containing such~~These forward-looking statements ~~may be found~~involve risks and uncertainties. Forward-looking statements include expectations about market conditions or about market acceptance, expectations of future sales or gross profits, possible or assumed future results of operations of Veeco and the statements included in Items 2 and 3 hereof, as well as within this Report generally. ~~In addition, when used in this Report, the words "believes,~~Forward-looking statements relate to expectations concerning matters that are not historical facts. Words or phrases such as "will likely result," ~~"anticipates,~~"expect," ~~"expects,~~"will continue," ~~"estimates,~~"anticipate," ~~"plans,~~"believe," ~~"intends,~~"estimate," "intend," "plan," "project" and similar expressions are intended to identify forward-looking statements. ~~All~~Actual results may vary materially from those expressed in such forward-looking statements as a result of various factors, including:

•: The fact that these forward-looking statements are based on information of a preliminary nature which may be subject to ~~a number~~further and continuing review and adjustment;
•: The risk 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: o the dependence~~favorable customer contracts expiring or being renewed on less attractive terms;
•: Dependence on principal ~~customers and~~customers;
•: Seasonality in the scientific research sector;
•: The cyclical nature of the semiconductor, data storage, ~~semiconductor~~telecommunications/wireless and ~~optical telecommunications industries, o fluctuations~~scientific research industries;
•: Fluctuations in quarterly operating ~~results, o rapid technological change and risks~~results;
•: Risks associated with the acceptance of new products by individual customers and by the ~~marketplace, o risk~~marketplace;
•: Risk of cancellation or rescheduling of ~~orders, o the~~orders;
•: The highly competitive nature of the industries in which the Company ~~operates, o changes~~operates;
•: The financial condition of Veeco's customers;
•: Changes in foreign currency exchange ~~rates,~~rates; and ~~o the~~
•: The other matters discussed inunder the ~~Business Description~~heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2000. Consequently, such~~2001.

Although Veeco believes that these forward-looking statements are reasonable, Veeco cannot assure you that these expectations will prove to be correct.

Veeco cautions you not to put undue reliance on any forward-looking statement contained in this Report. The risk factors and cautionary statements contained or referred to in this section should be ~~regarded solely~~considered in connection with any subsequent written or oral forward-looking statements that Veeco or persons acting on its behalf may issue. Except as ~~the Company's current plans, estimates and beliefs. The Company does not undertake any~~otherwise required by federal securities laws, Veeco has no intention or obligation to update or revise any forward-looking ~~statements~~statement after this document is filed to reflect ~~future~~the occurrence of unanticipated events or to reflect events or circumstances after the date ofon which such ~~statements.~~ statement is made.

VEECO INSTRUMENTS INC.
INDEX ~~PART 1. FINANCIAL INFORMATION PAGE ----~~

		Page
Part I.	Financial Information
Item 1.	Financial Statements (Unaudited):
	Condensed Consolidated Statements of Operations—Three Months Ended June 30, 2002 and 2001	4
	Condensed Consolidated Statements of Operations—Six Months Ended June 30, 2002 and 2001	5
	Condensed Consolidated Balance Sheets—June 30, 2002 and December 31, 2001	6
	Condensed Consolidated Statements of Cash Flows—Six Months Ended June 30, 2002 and 2001	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3.	Quantitative and Qualitative Disclosure About Market Risk	17
Part II.	Other Information
Item 4.	Submission of Matters to a Vote of Security Holders	18
Item 5.	Other Information	18
Item 6.	Exhibits and Reports on Form 8-K	20
SIGNATURES		22

Part I. Financial Information

Item 1. Financial Statements ~~(Unaudited):~~

Veeco Instruments Inc. and Subsidiaries

Condensed Consolidated Statements of Operations ~~- Three Months Ended June 30, 2001~~

(In thousands, except per share data)
(Unaudited)

		Three Months Ended June 30,
		2002			2001
Net sales		$	77,339		$	112,095
Cost of sales			42,137			58,956

Gross profit			35,202			53,139
Costs and expenses:
	Selling, general and administrative expense		19,335			20,714
	Research and development expense		13,928			14,805
	Amortization expense		3,172			881
	Other (income) expense, net		(285	)		226
	Restructuring expense		1,050			1,000

Operating (loss) income from continuing operations			(1,998	)		15,513
Interest expense (income), net			1,477			(397	)

(Loss) income from continuing operations before income taxes			(3,475	)		15,910
Income tax (benefit) provision			(1,856	)		5,435

(Loss) income from continuing operations			(1,619	)		10,475
Loss from discontinued operations, net of taxes			—			(475	)

Net (loss) income		$	(1,619	)	$	10,000

(Loss) earnings per common share:
(Loss) income per common share from continuing operations		$	(0.06	)	$	0.42
Loss from discontinued operations			—			(0.02	)

Net (loss) income per common share		$	(0.06	)	$	0.40

Diluted (loss) income per common share from continuing operations		$	(0.06	)	$	0.42
Loss from discontinued operations			—			(0.02	)

Diluted net (loss) income per common share		$	(0.06	)	$	0.40

Weighted average shares outstanding			29,083			24,767
Diluted weighted average shares outstanding			29,083			25,215

See Accompanying Notes.

Veeco Instruments Inc. and ~~2000 4~~ Subsidiaries

Condensed Consolidated Statements of Operations ~~- Six Months Ended June 30, 2001~~

(In thousands, except per share data)
(Unaudited)

		Six Months Ended June 30,
		2002			2001
Net sales		$	157,488		$	237,481
Cost of sales			88,551			125,652

Gross profit			68,937			111,829
Costs and expenses:
	Selling, general and administrative expense		38,372			41,848
	Research and development expense		27,257			29,912
	Amortization expense		6,919			2,317
	Other (income) expense, net		(236	)		1,632
	Restructuring expense		1,887			1,000

Operating (loss) income from continuing operations			(5,262	)		35,120
Interest expense (income), net			2,963			(1,164	)

(Loss) income from continuing operations before income taxes			(8,225	)		36,284
Income tax (benefit) provision			(3,454	)		12,593

(Loss) income from continuing operations			(4,771	)		23,691
Discontinued operations:
	Loss from discontinued operations, net of taxes		—			(818	)
	Loss on disposal of discontinued operations, net of taxes		(346	)		—

Net (loss) income		$	(5,117	)	$	22,873

(Loss) earnings per common share:
(Loss) income per common share from continuing operations		$	(0.16	)	$	0.96
Loss from discontinued operations			(0.02	)		(0.03	)

Net (loss) income per common share		$	(0.18	)	$	0.93

Diluted (loss) income per common share from continuing operations		$	(0.16	)	$	0.94
Loss from discontinued operations			(0.02	)		(0.03	)

Diluted net (loss) income per common share		$	(0.18	)	$	0.91

Weighted average shares outstanding			29,052			24,722
Diluted weighted average shares outstanding			29,052			25,222

See Accompanying Notes.

Veeco Instruments Inc. and ~~2000 5~~ Subsidiaries

Condensed Consolidated Balance Sheets ~~- June 30, 2001~~
(In thousands)

	June 30, 2002		December 31, 2001
	(Unaudited)
Assets
Current Assets:
Cash and cash equivalents	$	221,343	$	203,154
Accounts receivable, net		73,026		88,449
Inventories		104,163		102,103
Prepaid expenses and other current assets		7,715		21,952
Deferred income taxes		54,167		46,832

Total current assets		460,414		462,490
Property, plant and equipment at cost, net		74,711		78,547
Goodwill		125,585		125,585
Long-term investments		30,453		23,519
Other assets, net		61,402		65,378

Total assets	$	752,565	$	755,519

Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable	$	21,105	$	19,657
Accrued expenses		44,605		58,070
Deferred gross profit		6,757		14,566
Other current liabilities		9,597		12,174

Total current liabilities		82,064		104,467
Long-term debt, net of current portion		234,729		215,519
Other non-current liabilities		11,924		11,562
Shareholders' equity		423,848		423,971

Total liabilities and shareholders' equity	$	752,565	$	755,519

See Accompanying Notes.

Veeco Instruments Inc. and ~~December 31, 2000 6~~ Subsidiaries

Condensed Consolidated Statements of Cash Flows ~~- Six Months Ended June 30, 2001~~
(In thousands)
(Unaudited)

	Six Months Ended June 30,
	2002			2001
Net cash (used in) provided by operating activities	$	(2,659	)	$	8,400
Investing Activities
Capital expenditures		(4,242	)		(9,074	)
Proceeds from sale of industrial measurement business		3,750			—
Proceeds from sale of property, plant and equipment		1,790			11
Payment for net assets of businesses acquired		—			(7,529	)
Net purchases of short-term investments		—			(733	)
Net maturities of long-term investments		1,779			—

Net cash provided by (used in) investing activities		3,077			(17,325	)
Financing Activities
Proceeds from stock issuance		983			2,358
Repayment of long-term debt, net		(815	)		(809	)
Proceeds from issuance of long-term debt		20,000			—
Payment for debt issuance costs		(1,260	)		—

Net cash provided by financing activities		18,908			1,549
Effect of exchange rates on cash and cash equivalents		(1,137	)		4,197

Net change in cash and cash equivalents		18,189			(3,179	)
Cash and cash equivalents at beginning of period		203,154			63,419

Cash and cash equivalents at end of period	$	221,343		$	60,240

See Accompanying Notes.

Veeco Instruments Inc. and ~~2000 7~~ Subsidiaries
Notes to Condensed Consolidated Financial Statements ~~8 Item 2. Management's Discussion and Analysis~~(Unaudited)

Note 1 — Basis of Financial Condition and Results of Operations 13 Item 3. Quantitative and Qualitative Disclosure About Market Risk 18 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 19 Item 5. Other Information 19 Item 6. Exhibits and Reports on Form 8-K 20 SIGNATURES 21 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Veeco Instruments Inc. and Subsidiaries Condensed Consolidated Statements of Operations (In thousands, except per share data) (Unaudited)
Three Months Ended June 30, -------- 2001 2000 ---- ---- Net sales $ 113,455 $ 102,324 Cost of sales 59,951 73,329 --------- --------- Gross profit 53,504 28,995 Costs and expenses: Research and development expense 15,400 14,063 Selling, general and administrative expense 21,289 19,158 Amortization expense 881 976 Other expense, net 226 61 Merger and restructuring expenses 1,000 13,956 Asset impairment charge -- 3,722 --------- --------- Operating income (loss) 14,708 (22,941) Interest income, net (397) (136) --------- --------- Income (loss) before income taxes 15,105 (22,805) Income tax provision (benefit) 5,105 (8,779) --------- --------- Net income (loss) $ 10,000 $ (14,026) ========= ========= Net income (loss) per common share $ 0.40 ($0.60) Diluted net income (loss) per common share $ 0.40 ($0.60) Weighted average shares outstanding 24,767 23,463 Diluted weighted average shares outstanding 25,215 23,463
~~SEE ACCOMPANYING NOTES. 4~~ Veeco Instruments Inc. and Subsidiaries Condensed Consolidated Statements of Operations (In thousands, except per share data) (Unaudited)
Six Months Ended June 30, -------- 2001 2000 ---- ---- Net sales $ 240,723 $ 189,155 Cost of sales 127,935 119,792 --------- --------- Gross profit 112,788 69,363 Costs and expenses: Research and development expense 31,116 27,408 Selling, general and administrative expense 42,979 36,286 Amortization expense 2,317 1,485 Other expense, net 1,632 41 Merger and restructuring expenses 1,000 14,206 Asset impairment charge -- 3,722 --------- --------- Operating income (loss) 33,744 (13,785) Interest income, net (1,163) (521) --------- --------- Income (loss) before income taxes 34,907 (13,264) Income tax provision (benefit) 12,034 (5,186) --------- --------- Net income (loss) before cumulative effect of change in accounting principle 22,873 (8,078) Cumulative effect of change in accounting principle, net of taxes -- (18,382) --------- --------- Net income (loss) $ 22,873 $ (26,460) ========= ========= Net income (loss) per common share before cumulative effect of change in accounting principle $ 0.93 $ (0.35) Cumulative effect of change in accounting principle -- (0.79) --------- --------- Net income (loss) per common share $ 0.93 $ (1.14) ========= ========= Diluted net income (loss) per common share before cumulative effect of change in accounting principle $ 0.91 $ (0.35) Cumulative effect of change in accounting principle -- (0.79) --------- --------- Diluted net income (loss) per common share $ 0.91 $ (1.14) ========= ========= Weighted average shares outstanding 24,722 23,253 Diluted weighted average shares outstanding 25,222 23,253
~~SEE ACCOMPANYING NOTES. 5~~ ~~Veeco Instruments Inc. and Subsidiaries Condensed Consolidated Balance Sheets (In thousands)~~
June 30, December 31, 2001 2000 ---- ---- (Unaudited) ASSETS Current Assets: Cash and cash equivalents $ 60,241 $ 63,420 Short-term investments 27,629 26,895 Accounts receivable, net 86,191 98,248 Inventories 134,958 100,062 Prepaid expenses and other current assets 9,467 8,307 Deferred income taxes 36,769 45,303 -------- -------- Total current assets 355,255 342,235 Property, plant and equipment at cost, net 62,981 60,094 Excess of cost over net assets acquired, net 13,437 9,481 Other assets, net 10,639 11,473 -------- -------- Total assets $442,312 $423,283 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable 33,325 33,134 Accrued expenses 58,990 56,093 Deferred gross profit 19,954 28,771 Other current liabilities 3,399 3,774 -------- -------- Total current liabilities 115,668 121,772 Long-term debt, net of current portion 13,960 14,631 Other non-current liabilities 3,845 3,972 Shareholders' equity 308,839 282,908 -------- -------- Total liabilities and shareholders' equity $442,312 $423,283 ======== ========
~~SEE ACCOMPANYING NOTES. 6~~ ~~Veeco Instruments Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited)~~
Six Months Ended June 30, -------- OPERATING ACTIVITIES 2001 2000 ---- ---- Net income (loss) $ 22,873 $(26,460) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 8,501 7,493 Deferred income taxes 8,316 1,193 Stock option income tax benefit 1,812 5,576 Other, net 2 (21) Asset impairment charge -- 3,722 Write-off of CVC inventory -- 15,322 Cumulative effect of change in accounting principle, net of taxes -- 18,382 Changes in operating assets and liabilities: Accounts receivable 8,935 (20,316) Inventories (35,798) (9,136) Accounts payable 353 6,720 Accrued expenses, deferred gross profit and other current liabilities (4,555) (18,019) Other, net (2,030) 1,472 Recoverable income taxes -- (9,487) Operating activities three months ended 12/31/99 - CVC -- 638 -------- -------- Net cash provided by (used in) operating activities 8,409 (22,921) INVESTING ACTIVITIES Capital expenditures (9,083) (11,923) Proceeds from sale of property, plant and equipment 11 230 Payment of net assets of businesses acquired (7,529) (7,177) Net purchases of short-term investments (733) (1,295) Proceeds from sale of business -- 3,000 Investing activities three months ended 12/31/99- CVC -- (528) -------- -------- Net cash used in investing activities (17,334) (17,693) FINANCING ACTIVITIES Proceeds from stock issuance 2,358 11,886 Repayment of long-term debt, net (809) (8,570) Net proceeds from borrowings under line of credit -- 17,005 Financing activities three months ended 12/31/99- CVC -- 3,627 -------- -------- Net cash provided by financing activities 1,549 23,948 Effect of exchange rates on cash and cash equivalents 4,197 672 -------- -------- Net change in cash and cash equivalents (3,179) (15,994) Cash and cash equivalents at beginning of period 63,420 29,852 -------- -------- Cash and cash equivalents at end of period $ 60,241 $ 13,858 ======== ========
~~SEE ACCOMPANYING NOTES. 7~~ ~~VEECO INSTRUMENTS INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 - BASIS OF PRESENTATION~~Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States 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 accounting principles generally accepted in the United States 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 six months ended June 30, ~~2001~~2002 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2001.~~2002. 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, ~~2000.~~2001.

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 effect of common equivalent shares for the three ~~months~~ and six months ended June 30, ~~2000~~2002 was antidilutive, ~~and~~ therefore ~~were excluded from the~~ diluted ~~weighted average shares outstanding.~~earnings per share is not presented for such periods.

The following table sets forth the reconciliation of diluted weighted average shares outstanding:
Three Months Ended Six Months Ended June 30, June 30, 2001 2000 2001 2000 ---- ---- ---- ---- (In thousands) (In thousands) Weighted average shares outstanding 24,767 23,463 24,722 23,253 Dilutive effect of stock options 448 -- 500 -- ------ ------ ------ ------ Diluted weighted average shares outstanding 25,215 23,463 25,222 23,253 ====== ====== ====== ======
8 ~~VEECO INSTRUMENTS INC. AND SUBSIDIARIES NOTE 2 - BALANCE SHEET INFORMATION SHORT-TERM INVESTMENTS~~

	Three Months Ended June 30,		Three Months Ended June 30,
	2002	2001	2002	2001
	(In thousands)		(In thousands)
Weighted average shares outstanding	29,083	24,767	29,052	24,722
Dilutive effect of stock options and warrants	—	448	-	500

Diluted weighted average shares outstanding	29,083	25,215	29,052	25,222

The ~~carrying amounts~~assumed conversion of ~~available-for-sale securities approximate fair value. The following~~subordinated convertible notes is ~~a summary of available-for-sale securities:~~
June 30, December 31, 2001 2000 ---- ---- (In thousands) Commercial paper $ 5,578 $15,730 Obligations of U.S. Government agencies 22,016 4,404 Other debt securities 35 4,054 Municipal bonds -- 2,707 ------- ------- $27,629 $26,895 ======= =======
~~All investments at June 30, 2001 have contractual maturities of one year or less. During~~antidilutive for the three and six months ended June 30, ~~2001, available-for-sale securities with fair values at~~2002 and therefore is not included in the ~~date of sale of approximately $40.4 million were sold. INVENTORIES~~above diluted weighted average shares outstanding.

Note 2—Balance Sheet Information

Inventories

Interim inventories have been determined by lower of cost (principally first-in, first-out) or market. Inventories consist of:
June 30, December 31, 2001 2000 ---- ---- (In thousands) Raw materials $ 66,915 $ 60,281 Work-in-progress 40,651 23,703 Finished goods 27,392 16,078 -------- -------- $134,958 $100,062 ======== ========
~~OTHER BALANCE SHEET INFORMATION~~
June 30, December 31, 2001 2000 ---- ---- (In thousands) ~~Allowance for doubtful accounts $ 2,229 $ 2,116 Accumulated depreciation and amortization of property, plant and equipment $44,949 $38,801~~
9 ~~VEECO INSTRUMENTS INC. AND SUBSIDIARIES NOTE 3 - SEGMENT INFORMATION~~

	June 30, 2002		December 31, 2001
	(In thousands)
Raw materials	$	58,885	$	59,065
Work-in-progress		26,012		26,068
Finished goods		19,266		16,970

	$	104,163	$	102,103

Other Balance Sheet Information

	June 30, 2002		December 31, 2001
	(In thousands)
Allowance for doubtful accounts	$	3,149	$	3,350
Accumulated depreciation and amortization of property, plant and equipment	$	61,110	$	54,826
Accumulated amortization of intangible assets	$	20,098	$	13,179

Reclassifications

Certain amounts in the 2001 condensed consolidated financial statements have been reclassified to conform to the 2002 presentation.

Note 3—Segment Information

The following represents the reportable product segments of the Company, in thousands:
Unallocated Process Industrial Corporate Non-recurring Equipment Metrology Measurement Amount Charges Total - ---------------------------------------------------------------------------------------------------------------- THREE MONTHS ENDED JUNE 30, 2001 Net sales $ 73,245 $ 38,850 $ 1,360 -- -- $ 113,455 Operating income (loss) 12,007 5,759 (805) (1,253) (1,000) 14,708 THREE MONTHS ENDED JUNE 30, 2000 Net sales 57,712 41,801 2,811 -- -- 102,324 Operating income (loss) 4,615 7,734 (542) (1,748) (33,000) (22,941) SIX MONTHS ENDED JUNE 30, 2001 Net sales 153,542 83,937 3,244 -- -- 240,723 Operating income (loss) 28,210 12,385 (1,381) (4,470) (1,000) 33,744 Total assets 183,599 102,962 7,179 148,572 442,312 SIX MONTHS ENDED JUNE 30, 2000 Net sales 112,887 70,733 5,535 -- -- 189,155 Operating income (loss) 11,251 11,828 (940) (2,674) (33,250) (13,785) Total assets $170,567 $ 99,697 $ 11,368 $ 88,395 -- $ 370,027
~~NOTE 4 - COMPREHENSIVE INCOME (LOSS)~~

	Process Equipment			Metrology		Unallocated Corporate Amount			Restructuring Charges			Total
Three Months Ended June 30, 2002
Net sales	$	36,923		$	40,416	$	—		$	—		$	77,339
Income (loss) from continuing operations before interest, taxes and amortization		(2,396	)		6,695		(2,075	)		(1,050	)		1,174
Three Months Ended June 30, 2001
Net sales		73,245			38,850		—			—			112,095
Income (loss) from continuing operations before interest, taxes and amortization		12,014			6,144		(764	)		(1,000	)		16,394
Six Months Ended June 30, 2002
Net sales		81,775			75,713		—			—			157,488
Income (loss) from continuing operations before interest, taxes and amortization		(4,252	)		11,816		(4,020	)		(1,887	)		1,657
Total assets		309,312			130,906		312,347			—			752,565
Six Months Ended June 30, 2001
Net sales		153,542			83,939		—			—			237,481
Income (loss) from continuing operations before interest, taxes and amortization		28,316			13,493		(3,372	)		(1,000	)		37,437
Total assets	$	183,599		$	102,962	$	154,260		$	—		$	440,821

Note 4—Comprehensive Income (Loss)

Total comprehensive income (loss) was $1.9 million and ($2.1) million for the three and six months ended June 30, 2002, respectively, and $9.7 million and $21.7 million for the three and six months ended June 30, 2001, ~~and ($14.5) million and ($27.3) million for the three and six months ended June 30, 2000,~~ respectively. Other comprehensive income (loss) is comprised of foreign currency translation adjustments, minimum pension liability and net unrealized holding gains and losses on available-for-sale securities. 10 ~~VEECO INSTRUMENTS INC. AND SUBSIDIARIES NOTE 5 - RECENT EVENTS On July 16, 2001,~~

Note 5—Recent Accounting Pronouncements

Effective January 1, 2002, the Company ~~acquired ThermoMicroscopes Corp. ("TM"), a manufacturer of atomic force microscopes, scanning probe microscopes, near field optical microscopes~~adopted SFAS No. 142,Goodwill and ~~probes. TM, formerly a subsidiary of Thermo Electron Corporation, is based in Sunnyvale, California.~~Other Intangible Assets. The ~~acquisition was accounted for using the purchase method of accounting. Results of operations prior to the acquisition~~intangible assets that are ~~not material to the Condensed Consolidated Statements of Operations for the three~~classified as goodwill and six months ended June 30, 2001. On April 19, 2001, the Company entered into a new revolving credit facility (the "Facility"), which replaces the Company's prior $40 million revolving credit facility. The Facility provides the Companythose with up to $100 million of availability. The Facility's interest rate is the prime rate of the lending banks and 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. The Facility has a term of four years and borrowingsindefinite lives are no longer amortized under the ~~Facility may be used for general corporate purposes, including working capital and acquisitions. The Facility contains certain restrictive covenants, which among other things, impose limitations~~provisions of this standard. Intangible assets with respect to incurrence of indebtedness, limitation on the payment of dividends, long-term leases, investments, mergers, consolidations and sales of assets. The Company is also required to satisfy certain financial tests. As of June 30, 2001, no borrowings were outstanding under the Facility. NOTE 6 - RECENT ACCOUNTING PRONOUNCEMENTS In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141, BUSINESS COMBINATIONS, and No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS, effective for fiscal years beginning after December 15, 2001. Under the new rules, goodwill and other intangible assets deemed to have indefinitedefinite lives ~~will no longer be amortized but will be subject to annual impairment tests in accordance with the Statements. Other intangible assets~~ will continue to be

amortized over their estimated useful ~~lives. In addition, Statement 141 eliminates~~life. The standard also requires that an impairment test be performed to support the ~~pooling-of-interests method~~carrying value of ~~accounting for business combinations, except for qualifying business combinations that were initiated prior to July 1, 2001.~~goodwill and indefinite lived intangible assets at least annually.

The Company will apply the new rules on accounting for goodwill and other intangible assets beginning in the first quarter of 2002. Application of the nonamortization provisions of the Statement is expected to result in a decrease in amortization expense in 2002 of approximately $1.6 million. In addition, any goodwill recorded as a result of the acquisition of TM will not be amortized in 2001 in accordance with Statement 142. During 2002, the Company will performcompleted the first of the required impairment tests of goodwill and indefinite lived intangible assets in the first quarter of 2002. The Company utilized an independent appraisal as part of its evaluation process. The Company has reviewed its business and determined that four reporting units be reviewed for impairment in accordance with the standard. The four reporting units are New York Equipment and Telecommunications Equipment, which comprise the process equipment operating segment, and Atomic Force Microscope ("AFM") and Optical, which comprise the metrology operating segment. Based upon the independent appraisal and the judgment of management, it was determined that there is no impairment to goodwill or intangibles with definite lives as of January 1, 2002.

The ~~Company has not yet determined what~~following table outlines the ~~effect~~components of ~~these tests will be on earnings~~goodwill and intangible assets by business segment at June 30, 2002 after the ~~financial position~~adoption of the ~~Company. On~~standard, in thousands:

	Process Equipment Segment		Metrology Segment		Unallocated Corporate		Total
Goodwill	$	102,808	$	22,777	$	—	$	125,585
Intangible assets		40,285		11,913		7,113		59,311

Total	$	143,093	$	34,690	$	7,113	$	184,896

Net income for the three and six months ended June 30, 2001, includes approximately $0.4 million and $0.8 million of goodwill amortization expense, respectively. Excluding these amounts would have resulted in net income per common share and diluted net income per common share of $0.42 and $0.41, and $0.96 and $0.94, respectively for the three and six months ended June 30, 2001.

In January ~~1, 2001,~~2002, the Company adopted ~~Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended 11~~ by SFAS No. ~~138, "Accounting~~144,Accounting for ~~Certain Derivative Instruments~~the Impairment or Disposal of Long Lived Assets (FAS 144), which addresses financial accounting and ~~Hedging Activities -- An Amendment~~reporting for the impairment or disposal of ~~FASB Statement No. 133."~~long-lived assets and supersedes SFAS No. ~~133 requires that all derivatives, including foreign currency exchange contracts,~~121,Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be ~~recognized~~Disposed Of, and the accounting and reporting provisions of APB Opinion No. 30,Reporting the Results of Operations for a Disposal of a Segment of a Business. Adoption of this Statement did not have an impact on the ~~balance sheet at fair value, which is recorded through earnings. If a derivative is a qualifying hedge, depending on the nature~~Company's consolidated financial position or results of the hedge, changes in the fair value of the derivative are either offset against the change in fair value of the underlying assets or liabilities through earnings or recognized in accumulated comprehensive income until the underlying hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value is to be immediately recognized in earnings.operations.

Note 6—Recent Events

Restructuring

During the six months ended June 30, 2002, the Company incurred a restructuring charge of approximately $1.9 million related to the reduction in work force announced in both the fourth quarter of 2001 and the first quarter of 2002. Of this amount, approximately $1.1 million was recorded in the second quarter of 2002. The $1.9 million charge includes severance related costs for approximately 90 employees which included both management and manufacturing employees located at each of the Company's process equipment operations, as well as at the Company's Minnesota metrology facility. As of June 30, 2002, approximately $0.7 million has been expended and approximately $1.2 million remains accrued, which is expected to be paid during the next six months.

During the year ended December 31, 2001, the Company recorded restructuring charges of approximately $20.0 million in response to the significant downturn in the telecommunications industry and the overall weak business environment. These charges consisted of a $13.6 million write-off of inventory related to order cancellations and the rationalization of certain product lines, $3.0 million

related to personnel and business relocation costs and $3.4 million related to the write-down of long-lived assets. The $3.0 million charge for personnel and business relocation costs principally related to plant consolidations and a workforce reduction of approximately 230 employees, which included both management and manufacturing employees located in all operations of the Company. As of June 30, 2002, approximately $2.2 million of the $3.0 million charge for relocation and termination benefits has been paid and approximately $0.8 million remains accrued. Of the $0.8 million, $0.3 million relates to rental payments on a lease agreement for space that the Company has vacated and will be paid over the next four years.

Discontinued Operations

In May 2002, the Company sold the remainder of its industrial measurement business. During the six months ended June 30, 2002, the Company recorded an additional loss on the disposal of the discontinued operations of $0.3 million, net of taxes of approximately $0.2 million.

Note 7—Subsequent Events

On July 11, 2002, the Company signed a definitive merger agreement with FEI Company ("FEI"), of Hillsboro, Oregon. Under the terms of the agreement, FEI shareholders will receive 1.355 shares of Veeco common stock for each share of FEI common stock outstanding. Based upon FEI's approximately 32 million shares outstanding, the FEI shareholders will receive approximately 44 million Veeco shares. The merger, which will be accounted for under the purchase method, is expected to close in the fourth quarter of 2002, subject to the approval of shareholders of both companies, certain regulatory approvals and other customary closing conditions. Upon consummation of the merger, FEI will become a wholly-owned subsidiary of Veeco, and Veeco will be renamed Veeco FEI Inc. FEI designs, manufactures, markets and services products based on focused charged particle beam technology. FEI's products include transmission electron microscopes (TEM), scanning electron microscopes (SEM), focused ion-beam systems (FIBs) and DualBeam systems that combine a FIB column and a SEM column on a single platform. FEI also designs, manufactures and sells certain components of electron microscopes and FIBs to other manufacturers.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Results of Operations.

Three Months Ended June 30, 2002 and 2001

Net sales of $77.3 million for the three months ended June 30, 2002, represent a decrease of $34.8 million, or 31%, from the 2001 comparable period sales of $112.1 million, resulting principally from a decrease in sales of process equipment products. Sales in the U.S., Europe, Japan and Asia Pacific, accounted for 36%, 21%, 18% and 25%, respectively, of the Company's net sales for the three months ended June 30, 2002. Sales in the U.S. decreased 56% from the comparable 2001 period due to a 67% decline in U.S. process equipment sales, particularly for sales of optical filter deposition products to the telecommunications industry, as well as a 27% decrease in U.S. metrology sales. Sales in Europe and Asia Pacific increased 32% and 81%, respectively. The increase in Europe is principally a result of $3.7 million of sales of molecular beam epitaxy (MBE) equipment produced by Veeco's Applied Epi subsidiary, which was acquired by the Company in September 2001. The increase in Asia Pacific is principally a result of an increase in etch and deposition equipment sales to the data storage industry, as well as an increase of $6.5 million in sales of optical metrology products. Sales in Japan decreased 49% from the 2001 comparable period, due primarily to declines in sales in both etch and deposition and optical filter deposition products. The Company believes that there will continue to be quarter-to-quarter variations in the geographic concentration of sales.

Process equipment sales of $36.9 million for the three months ended June 30, 2002, decreased by $36.3 million, or 50%, from the comparable 2001 period. The decrease in process equipment sales has resulted from a decline in sales of optical filter deposition equipment to the telecommunications industry, as well as a decrease in sales to the data storage industry. Metrology sales of $40.4 million for the three months ended June 30, 2002, increased slightly (4%) from the comparable prior period sales of $38.9 million.

Veeco received $78.2 million of orders during the three months ended June 30, 2002, a 3% decrease compared to $80.3 million of orders for the comparable 2001 period. Process equipment orders decreased 8% to $37.1 million, due to a decline in orders from optical telecommunications and data storage customers. Veeco's Ion Tech subsidiary had a decrease of $2.3 million, or 25%, in orders from the comparable 2001 period. Etch and deposition equipment orders decreased 19% to $25.2 million from $31.2 million for the comparable 2001 period. Metrology orders increased slightly (2%) to $41.1 million. The Company's book/bill ratio for the second quarter of 2002 was 1.01.

The order and sales declines are a result of the general economic slowdown that has had a very significant impact on the telecommunications, data storage and semiconductor markets that the Company serves.

The Company's backlog generally consists of product orders for which a purchase order has been received and which are scheduled for shipment within twelve months. Veeco schedules production of its systems based on order backlog and customer commitments. Because certain of the Company's orders require products to be shipped in the same quarter in which the order was received, and due to possible changes in delivery schedules, cancellations of orders and delays in shipment, the Company does not believe that the level of backlog at any point in time is an accurate indicator of the Company's future performance. Due to the current weak business environment, the Company may experience cancellation and/or rescheduling of orders.

Gross profit, as a percentage of net sales decreased to 45.5%, for the second quarter of 2002, from 47.4% for the comparable 2001 period. The decline is attributable to the decrease in sales volume of process equipment products.

Selling, general and administrative expenses of $19.3 million for the three months ended June 30, 2002, decreased by approximately $1.4 million from the 2001 comparable period due principally to cost reductions implemented by the Company in the fourth quarter of 2001 and the first quarter of 2002, as well as a decrease in selling and commission expenses as a result of the decreased sales volume. The decrease is partially offset by the selling, general and administrative expenses of Veeco's Applied Epi and TM Microscopes ("TM") subsidiaries, which were acquired in the third quarter of 2001, and thus had no comparable spending in the second quarter of 2001.

Research and development expenses of $13.9 million for the three months ended June 30, 2002, decreased by approximately $0.9 million, or 6%, from the comparable period of 2001, due primarily to cost reduction efforts implemented by the Company in the fourth quarter of 2001 and the first quarter of 2002.

Amortization expense totaled $3.2 million in the three months ended June 30, 2002 compared with $0.9 million in 2001. The increase is due primarily to the intangible assets acquired in connection with the acquisitions of Applied Epi and TM, offset in part by $0.4 million of reduced amortization expense related to the accounting requirement to no longer amortize goodwill, effective January 1, 2002, in accordance with SFAS No. 142, Goodwill and Other Intangible Assets. Under SFAS No. 142, goodwill is to be reviewed annually for impairment. As of January 1, 2002, no impairment exists.

During the three months ended June 30, 2002, the Company recorded a restructuring charge of $1.1 million. This charge includes severance related costs for approximately 30 employees, which included both management and manufacturing employees, located in each of the Company's process equipment group and the Minnesota metrology facility. As of June 30, 2002, approximately $0.2 million has been expended and approximately $0.9 million remains accrued.

Other (income) expense, net, for the three months ended June 30, 2002, decreased $0.5 million from the comparable 2001 period due to the decrease in foreign currency exchange losses.

Interest expense, net, of $1.5 million for the three months ended June 30, 2002 increased $1.9 million from the comparable 2001 period as a direct result of the issuance of $220.0 million of 4.125% convertible subordinated notes, which occurred in December 2001 and January 2002.

Income taxes for the three months ended June 30, 2002, amounted to a $1.9 million income tax benefit, or 53% of loss before income taxes, as compared to a $5.4 million income tax provision, or 34% of income before income taxes, for the same period of 2001. The higher than statutory effective benefit rate of 53% in 2002 is a result of the impact of R&D tax credits along with foreign tax benefits.

Quarterly information for the three months ended June 30, 2001, has been restated from that previously filed on the Quarterly Report on Form 10-Q for such period, due to the required accounting to reflect the discontinued operations of the Company's industrial measurement segment, which was recorded in the quarter ended December 31, 2001.

Six Months Ended June 30, 2002 and 2001

Net sales were $157.5 million for the six months ended June 30, 2002, representing a decrease of approximately $80.0 million, or 34%, from the comparable 2001 period. The decrease is primarily a result of a decrease in process equipment sales. Sales in the U.S., Europe, Japan and Asia Pacific accounted for 46%, 17%, 17% and 20%, respectively, of the Company's net sales for the six months ended June 30, 2002. Sales in the U.S. decreased by 47%, principally as a result of decreased process equipment sales of optical filter deposition products to the telecommunications industry, as well as a decline in sales to the data storage industry. Metrology sales also decreased, primarily as a result of a decline in sales to customers in the semiconductor industry. Sales in Europe remained relatively flat when compared to the comparable 2001 period. Sales in Japan decreased by 49%, primarily as a result of decreases in process equipment sales, as well as decreased metrology sales from the comparable

2001 period. Asia Pacific sales increased by 45% principally as a result of a 78% increase in process equipment sales, primarily from sales of etch and deposition equipment to data storage customers. Metrology sales for Asia Pacific also increased by 32% from the prior period, as a result of increased sales of optical metrology products.

Process equipment sales were $81.8 million for the six months ended June 30, 2002, a decrease of approximately $71.8 million, or 47%, from the comparable 2001 period. The decrease is primarily due to a decrease in process equipment sales of $89.3 million to the telecommunications and data storage industries, offset in part by sales of $17.5 million of MBE equipment produced by Veeco's Applied Epi subsidiary. Metrology sales for the six months ended June 30, 2002, were $75.7 million, a decrease of approximately $8.2 million, or 10%, compared to the comparable 2001 period, reflecting a 9% drop in sales of AFMs and a 13% decline in optical metrology sales.

Veeco received $148.5 million of orders for the six months ended June 30, 2002, a 22% decrease compared to $190.5 million of orders in the comparable 2001 period. Process equipment orders decreased 33% to $75.6 million, principally reflecting decreases in both telecommunications and data storage orders. Metrology orders decreased 6% to $72.9 million, reflecting a decrease in AFM orders. The book/bill ratio for the six months ended June 30, 2002 was 0.94.

Gross profit for the six months ended June 30, 2002, as a percentage of net sales decreased to 43.8%, from 47.1% for the comparable 2001 period. The decline from the prior period is primarily attributable to the volume decrease in process equipment sales, in particular optical filter deposition products to the telecommunications industry.

Selling, general and administrative expenses of $38.4 million for the six months ended June 30, 2002, represent a decrease of approximately $3.5 million, or 8%, from the comparable 2001 period, due principally to a decrease in selling and commission expense in response to the decreased sales volume, as well as cost reduction efforts implemented by the Company in the fourth quarter of 2001 and the first quarter of 2002. The decrease is partially offset by the selling, general and administrative expenses of Applied Epi and TM subsidiaries, which were acquired by the Company in the third quarter of 2001, and thus had no comparable spending in the first six months of 2001.

Research and development expenses of $27.3 million for the six months ended June 30, 2002, represent a decrease of approximately $2.7 million, or 9%, from the comparable period of 2001, as a result of the cost reduction efforts implemented by the Company in the fourth quarter of 2001 and the first quarter of 2002.

During the six months ended June 30, 2002, the Company incurred restructuring charges of $1.9 million in connection with a reduction in work force announced in the fourth quarter of 2001 and the first quarter of 2002. This charge includes severance related costs for approximately 90 employees which included both management and manufacturing employees located at each of the Company's process equipment operations and Minnesota metrology facility. As of June 30, 2002, approximately $0.7 million has been expended and approximately $1.2 million remains accrued. During the year ended December 31, 2001, the Company recorded restructuring charges of approximately $20.0 million in response to the significant downturn in the telecommunications industry and the overall weak business environment. These charges consisted of a $13.6 million write-off of inventory related to order cancellations and the rationalization of certain product lines, $3.0 million related to personnel and business relocation costs and $3.4 million related to the write-down of long-lived assets. The $3.0 million charge for personnel and business relocation costs principally related to plant consolidations and a workforce reduction of approximately 230 employees, which included both management and manufacturing employees located in all operations of the Company. As of June 30, 2002, approximately $2.2 million of the $3.0 million charge for relocation and termination benefits has been paid and approximately $0.8 million remains accrued.

Amortization expense totaled $6.9 million in the six months ended June 30, 2002 compared with $2.3 million in 2001 period, due to the acquisition of intangible assets discussed in the three-month results. This amount is offset in part by $0.8 million of reduced amortization expense related to the accounting requirement to no longer amortize goodwill, effective January 1, 2002, in accordance with SFAS No. 142, Goodwill and Other Intangible Assets. Under SFAS No. 142, goodwill is to be reviewed annually for impairment. As of January 1, 2002, no impairment exists.

Other (income) expense, net, for the six months ended June 30, 2002, decreased $1.9 million from the comparable 2001 period due to the foreign currency exchange losses experienced in the first quarter of 2001, which did not occur in 2002.

Interest expense, net, of $3.0 million for the six months ended June 30, 2002, increased $4.1 million from the comparable 2001 period as a direct result of the issuance of $220.0 million of 4.125% convertible subordinated notes, which occurred in December 2001 and January 2002.

Income taxes for the six months ended June 30, 2002, amounted to a $3.5 million income tax benefit, or 42% of loss before income taxes, as compared to a $12.6 million income tax provision, or 35% of income before income taxes, for the same period of 2001.

Quarterly information for the six months ended June 30, 2001, has been restated from that previously filed on the Quarterly Report on Form 10-Q for such period, due to the required accounting to reflect the discontinued operations of the Company's industrial measurement segment, which was recorded in the quarter ended December 31, 2001.

Critical Accounting Policies

General: Veeco's discussion and analysis of its financial condition and results of operations are based upon Veeco's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires Veeco to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an on-going basis, management evaluates its estimates and judgments, including those related to derivatives, bad debts, inventories, intangible assets, income taxes, warranty obligations, restructuring costs and contingent litigation. Management bases its estimates and judgments on historical experience and on various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The Company considers certain accounting policies related to revenue recognition, the valuation of inventories, the impairment of goodwill and intangible assets and derivatives to be critical policies due to the estimation processes involved in each.

Revenue Recognition: The Company recognizes revenue when persuasive evidence of an arrangement exists, the price of goods or services being sold is fixed or determinable and collectibility is reasonably assured. For products produced according to the Company's published specifications, where no installation is required or installation is deemed perfunctory and no substantive customer acceptance provisions exist, revenue is recognized when title passes to the customer, generally upon shipment. For products produced according to a particular customer's specifications, revenue is recognized when the product has been tested and it has been demonstrated that it meets the customer's specifications and title passes to the customer. The amount of revenue recorded is reduced by the amount of any customer retention (generally 10% to 20%), which is not payable by the customer until installation is completed and final customer acceptance is achieved. Installation is not deemed to be essential to the functionality of the equipment since installation does not involve significant changes to the features or capabilities of the equipment or building complex interfaces and connections. In addition, the equipment could be installed by the customer or other vendors and generally the cost of installation approximates only 1% to 2% of the sales value of the related equipment. For new applications of the

Company's existing products, for new products or for products with substantive customer acceptance provisions where performance cannot be fully assessed prior to meeting customer specifications at the customer site, revenue is recognized upon completion of installation and receipt of final customer acceptance. Service and maintenance contract revenues are recorded as deferred revenue, which is included in other accrued expenses, and recognized as revenue on a straight-line basis over the service period of the related contract. The Company provides for warranty costs at the time the related revenue is recognized.

Inventory Valuation: Inventories are stated at the lower of cost (principally first-in, first-out method) or market. Management evaluates the need to record adjustments for impairment of inventory on a quarterly basis. The Company's policy is to assess the valuation of all inventories, including raw materials, work-in-progress, finished goods and spare parts. Obsolete inventory or inventory in excess of management's estimated usage for the next 18 to 24 month's requirements is written-down to its estimated market value, if less than its cost. Inherent in the estimates of market value are management's estimates related to Veeco's future manufacturing schedules, customer demand, technological and/or market obsolescence, possible alternative uses and ultimate realization of excess inventory.

Goodwill and Intangible Asset Impairment: The Company has significant intangible assets related to goodwill and other acquired intangibles. In assessing the recoverability of the Company's goodwill and other intangible assets, the Company must make assumptions regarding estimated future cash flows and other factors to determine the fair value of the respective assets. Changes in strategy and/or market conditions could significantly impact these assumptions, and thus Veeco may be required, during the annual review process, to record an impairment charge for these assets in accordance with SFAS No. 142.

Derivatives: During the six months ended June 30, 2002, the Company used derivative financial instruments to minimize the impact of foreign exchange rate changes on earnings and cash flows. In the normal course of business, operations are exposed to fluctuations in foreign exchange rates. In order to reduce the effect of fluctuating foreign currencies on short-term foreign currency-denominated intercompany ~~transactions~~balances and other known foreign currency exposures, the Company enters into monthly forward contracts (which during the six months ended June 30, ~~2001~~2002, included ~~all~~a majority of the Company's foreign subsidiaries). The Company does not use derivative financial instruments for trading or speculative purposes. The Company's forward contracts do not subject it to material risks due to exchange rate movements because gains and losses on these contracts are intended to offset exchange gains and losses on the underlying assets and liabilities; both the forward contracts and the underlying assets and liabilities are marked-to-market through ~~earnings. For the three~~earnings.

Liquidity and ~~six months ended June 30, 2001, approximately $62,000 and $991,000, respectively, of realized gains on forward exchange contracts~~Capital Resources

Cash flows used in operations were recorded and included in other expense, net. As of June 30, 2001, approximately $767,000 of gains related to forward contracts are included in prepaid expenses and other current assets and have been subsequently received in July 2001. As of June 30, 2001, there were no open forward contracts. 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS. THREE MONTHS ENDED JUNE 30, 2001 AND 2000 Net sales of $113.5 million for the three months ended June 30, 2001, represent an increase of $11.2 million, or 11%, from the 2000 comparable period sales of $102.3 million, resulting principally from an increase in sales of process equipment products. Sales in the U.S., Europe, Japan and Asia Pacific, accounted for 57%, 11%, 23% and 9%, respectively, of the Company's net sales for the three months ended June 30, 2001. Sales in the U.S. increased 36% from the comparable 2000 period due to a 40% increase in U.S. process equipment sales, resulting from an increase in optical telecommunications sales for Veeco's Ion Tech subsidiary. Sales in Europe and Asia Pacific decreased 29% and 39%, respectively. The decrease in Europe is principally a result of lower sales of process equipment products. The decrease in Asia Pacific is principally a result of a decline in sales of optical metrology products, partially offset by increased process equipment sales. Sales in Japan increased 31% from the 2000 comparable period due to increases in both process equipment and metrology sales. The Company believes that there will continue to be quarter-to-quarter variations in the geographic concentration of sales. Process equipment sales of $73.2 million for the three months ended June 30, 2001, increased by $15.5 million, or 27%, over the comparable 2000 period. The above noted increase in process equipment is due to increased sales to the optical telecommunications industry, which were partially offset by decreased sales to the data storage industry. Metrology sales of $38.9 million for the three months ended June 30, 2001, represent a slight decrease of approximately $3 million, or 7%, from the 2000 comparable period sales of $41.8 million. The decrease is primarily attributable to lower sales of optical metrology products in the 2001 period, offset partly by increased sales of the Company's atomic force microscope (AFM) products. Veeco received $81.5 million of orders during the three months ended June 30, 2001, a 38% decrease compared to $132.4 million of orders for the comparable 2000 period. Process equipment orders decreased 52% to $40.1 million, due primarily to a decline in orders from optical telecommunications customers. Veeco's Ion Tech subsidiary had a decrease of $30.0 million, or 77%, in orders from the comparable 2000 period. Etch and deposition equipment orders decreased 30% to $31.2 million from $44.6 million for the comparable 2000 period. Metrology orders decreased by 13% to $40.2 million, reflecting a decrease in orders for optical metrology products, partially offset by a 12% increase in AFM orders. The Company's book/bill ratio for the second quarter of 2001 was 0.72. For the three months ended June 30, 2001, the Company experienced order cancellations, primarily for products related to the optical telecommunications market, representing approximately 7% of the June 30, 2001 backlog. The Company also experienced rescheduling of order delivery dates by customers. Due to the weak business environment, the Company may continue to experience cancellation or rescheduling of orders. 13 Gross profit, as a percentage of net sales increased to 47.2%, from 28.3% for the comparable 2000 period. Excluding a non-cash charge of $15.3 million in June 2000, for the write-off of inventory related to the merger with CVC Inc. ("CVC"), gross profit was 43.3%. This improvement results in part from the volume increase in Ion Tech sales, partially offset by the volume decline in optical metrology sales. In addition, gross margin improved due to overhead spending reductions in the process equipment area as well as a more favorable mix in optical metrology products. Research and development expenses of $15.4 million for the three months ended June 30, 2001, increased by approximately $1.3 million, or 10%, over the comparable period of 2000, due primarily to the Company's development of next generation products for AFMs and Ion Tech tools. Selling, general and administrative expenses of $21.3 million for the three months ended June 30, 2001, increased by approximately $2.1 million from the 2000 comparable period due to an increase in selling related expenses, principally as a result of the increased sales volume. During the three months ended June 30, 2001, the Company recorded a restructuring charge of $1.0 million related to the workforce reduction of approximately 130 people, as a result of the slowdown in orders. As of June 30, 2001, approximately $230,000 has been expended and approximately $770,000 remains accrued. During the three months ended June 30, 2000, Veeco incurred non-recurring charges of $33.0 million, in conjunction with the merger with CVC. Of these charges, a $15.3 million non-cash charge related to a write-off of inventory (included in cost of sales), $14.0 million represented merger and reorganization costs (of which $9.2 million related to transaction costs and $4.8 million pertained to duplicate facility and personnel costs) and $3.7 million was for the write-down of long-lived assets. Income taxes for the three months ended June 30, 2001, amounted to $5.1 million, or 34% of income before income taxes, as compared to an $8.8 million tax benefit, or 38% of loss before income taxes, for the same period of 2000. Effective January 1, 2000, the Company changed its method of accounting for revenue recognition in accordance with Staff Accounting Bulletin (SAB) No. 101, REVENUE RECOGNITION IN FINANCIAL STATEMENTS, which resulted in a charge to income for the cumulative effect of change in accounting principle. The Company recognized approximately $15.3 million in revenue during the three months ended June 30, 2000, that was included in the cumulative effect adjustment. The effect of that revenue was to increase second quarter income by $3.8 million (net of income taxes of $2.7 million). Quarterly information, previously filed on Form 10-Q, for the three months ended June 30, 2000, has been restated due to the adoption of SAB 101. The adoption of SAB 101 had the effect of increasing net sales and decreasing the net loss for the second quarter of 2000 by $8.7 million and $1.2 million, respectively, and basic and diluted earnings per share increased by $0.05. In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141, BUSINESS COMBINATIONS, and No. 142, GOODWILL AND OTHER 14 INTANGIBLE ASSETS, effective for fiscal years beginning after December 15, 2001. See footnote 6 to Condensed Consolidated Financial Statements for additional disclosure. SIX MONTHS ENDED JUNE 30, 2001 AND 2000 Net sales were $240.7 million for the six months ended June 30, ~~2001, representing an increase~~2002, as compared to cash flows from operations of ~~approximately $51.6~~$8.4 million ~~or 27%, over~~for the comparable ~~2000~~2001 period. ~~The increase is primarily due to an increase in Ion Tech sales~~Net income adjusted for non-cash items provided operating cash flows of $49.2 million. Sales in the U.S., Europe, Japan and Asia Pacific accounted for 58%, 12%, 21% and 9%, respectively, of the Company's net sales for the six months ended June 30, 2001. Sales in the U.S. increased by 64%, principally as a result of increased process equipment sales of optical telecommunications equipment for Veeco's Ion Tech subsidiary, as well as an increase in sales of AFMs. Sales in Europe remained relatively flat when compared to the comparable 2000 period. Sales in Japan increased by 12% as a result of an increase in AFM sales. Asia Pacific sales decreased by 25% as a result of a 65% decline in optical metrology sales, partially offset by increased Ion Tech sales. Process equipment sales were $153.5$3.6 million for the six months ended June 30, ~~2001, an increase of approximately $40.7~~2002 compared to $41.5 million ~~or 36%, from~~for the comparable ~~2000 period, due to an increase in sales~~2001 period. The amount of ~~Ion Tech products, partially offset by a decline in etch and deposition sales. Metrology sales~~net income adjusted for non-cash items for the six months ended June 30, ~~2001 were $83.9 million,~~2002 was offset by an increase in working capital of approximately $13.2 million, or 19%, compared to the comparable 2000 period, reflecting a 56% increase in the sales of AFMs, offset by a 31% decline in optical metrology sales. Veeco received $194.3 million of orders$6.2 million. Accounts receivable for the six months ended June 30, ~~2001,~~2002 decreased by $19.1 million, primarily as a ~~20% decrease compared to $243.6 million~~result of ~~orders in~~ the ~~comparable 2000 period. Process equipment orders decreased 22% to $113.0 million, principally reflecting a~~ decrease in ~~optical telecommunications orders. Metrology orders decreased 17% to $77.4 million, reflecting a 51% decrease in optical metrology products, offset by a 10% increase in AFMs. The book/bill ratio~~sales volume from the fourth quarter of 2001. Deferred gross profit for the six months ended June 30, ~~2001 was 0.81. Gross profit,~~2002 decreased by $7.8 million, primarily as a ~~percentage~~result of ~~net~~revenue recognition on tools that received final customer acceptance. Accrued expenses and other current liabilities decreased $17.2 million, primarily as a result of income tax payments made by the Company's Japanese subsidiary, and various other tax payments made in the first six months of 2002 related to sales ~~increased to 46.9%, from 36.7% for~~and foreign taxes. In addition, accrued expenses decreased as a result of bonuses

paid in the ~~comparable 2000 period. Excluding a non-cash charge~~first quarter of ~~$15.3 million~~2002 and the decrease in ~~June 2000, for the write-off of inventory~~accrued commission expense and customer deposits related to the ~~merger with CVC, gross profit was 44.8%. This improvement is principally attributable to the~~decline in sales volume ~~increase in Ion Tech~~ and ~~AFM sales. Research and development expenses~~orders.

Cash flows from investing activities of ~~$31.1~~$3.1 million for the six months ended June 30, ~~2001, represent an increase~~2002, are a result of ~~approximately~~the proceeds from the sale of the Company's industrial measurement business of $3.7 million, ~~or 14%, over~~which closed in May 2002, proceeds from the ~~comparable period~~sale of ~~2000,~~property, plant and equipment of $1.8 million and maturities of long-term investments of $1.8 million, offset by capital expenditures of $4.2 million.

In December 2001, the Company issued $200.0 million of 4.125% convertible subordinated notes, and in January 2002, the Company issued an additional $20.0 million of those notes pursuant to the exercise of an over-allotment option.

In connection with the subordinated notes issuance in December 2001 and January 2002, the Company purchased approximately $25.9 million of U.S. government securities, which have been pledged to the trustee under the indenture as security for the exclusive benefit of the holders of the notes. These securities will be sufficient to provide for the payment in full of the first six scheduled interest payments due ~~primarily to expenditures~~on the notes and represent restricted investments. The first interest payment was made on June 21, 2002 in the amount of $4.5 million.

Funds from operations, the use of proceeds received from the issuance of the subordinated notes in connection with the ~~development~~exercise of ~~new products~~the over-allotment option in January 2002 and the maturities of long-term investments were used to pay for capital expenditures and the ~~Ion Tech and AFM metrology product areas. Selling, general and administrative expenses~~scheduled repayment of ~~$43.0 million for the six months ended~~long-term debt.

At June 30, ~~2001, represent an increase of approximately $6.7 million, or 18%, over the comparable 2000 period. The increase is due to increased selling~~2002, Veeco's contractual cash obligations and commission expense as a result of increased sales volume, primarily related to the Ion Tech and AFM product lines. As a percentage of sales, selling, general and administrative expenses decreased to 17.9% of net sales in 2001 from 19.2% in 2000. 15 The Company recorded merger and restructuring charges during the six months ended June 30, 2001 and 2000 as discussed previously under the three-month results. Other expense, net for the six months ended June 30, 2001, increased $1.6 million over the comparable 2000 period due to the increase in foreign currency exchange losses. Income taxes for the six months ended June 30, 2001, amounted to $12.0 million, or 34% of income before income taxes, as compared to a $5.2 million income tax benefit, or 39% of loss before income taxes, for the same period of 2000. As noted above, the Company changed its method of accounting for revenue recognition in accordance with SAB No. 101. The cumulative effect of this change on prior years resulted in the deferral of $67.0 million of revenue and a charge to income of $18.4 million (net of income taxes of $12.6 million) recorded as of January 1, 2000, and is included in the Consolidated Statement of Operations for the six months ended June 30, 2000. The Company recognized approximately $53.0 million of this deferred revenue during the six months ended June 30, 2000. The effect of that revenue was to increase income in the first half of 2000 by $14.7 million (net of income taxes of $10.1 million). Results for the six months ended June 30, 2000, previously filed on Form 10-Q, have been restated due to the adoption of SAB 101. The adoption of SAB 101 had the effect of increasing net sales by $17.7 million for the first half of 2000. Net loss for the first half of 2000 increased by $13.7 million, and basic and diluted loss per share increased by $0.59. LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operations totaled $8.4 million for the six months ended June 30, 2001, compared to cash used in operations of $22.9 million for the comparable 2000 period. Cash provided by operations in 2001 includes adjustments to reconcile net income to net cash provided principally from net income plus non-cash charges for depreciation and amortization, deferred income taxes and a stock option income tax benefit aggregating $41.5 million, plus a decrease in accounts receivable and an increase in accounts payable of $8.9 million and $0.4 million, respectively. These items were partially offset by a decrease in accrued expenses, deferred gross profit and other current liabilities of $4.6 million and an increase in inventories of $35.8 million during the six months ended June 30, 2001. Accounts receivable decreased due to a slight decline in sales volume from the fourth quarter of 2000 and improved customer collections. The decrease in accrued expenses, deferred gross profit and other current liabilities is due primarily to a decrease in deferred revenuecommitments relating to ~~the impact of SAB 101, partially offset by an increase in customer deposits. Inventories increased by $35.8 million, due primarily to rescheduled shipments, the impact of SAB 101~~its debt obligations and new product production. Net cash used in operations for the six months ended June 30, 2000 included operating activities for the three months ended December 31, 1999, related to CVC. Prior to the merger, CVC's fiscal year end was September 30. Net cash used in investing activities for the six months ended June 30, 2001, totaled $17.3 million compared to $17.7 million for the comparable 2000 period. Cash used in 2001 consisted 16 of $9.1 million of capital expenditures. The Company also expended $7.5 million for the net assets of businesses acquired, which included a $6.3 million payment of contingent consideration to the former shareholders of OptiMag, based upon year 2000 sales and the appraised value of OptiMag and a $1.2 million payment to the seller in connection with the atomic force microscope acquisition. Included in the net cash used in investing activities for the six months ended June 30, 2000 is investing activities for the three months ended December 31, 1999, related to CVC. Net cash provided by financing activities for the six months ended June 30, 2001, totaled $1.5 million, compared to $23.9 million for the comparable 2000 period. Cash provided by financing activities in 2001 consisted of proceeds of $2.4 million from stock issuances upon exercise of stock options, offset by $0.8 million of debt repayments. Net cash provided by financing activities for the six months ended June 30, 2000 included financing activities for the three months ended December 31, 1999, related to CVC. In connection with the acquisition of TM, the Company expended approximately $22.0 million in July 2001. On April 19, 2001, the Company entered into a new revolving credit facility (the "Facility"), which replaces the Company's prior $40 million revolving credit facility. The Facility provides the Company with up to $100 million of availability. The Facility's interest rate is the prime rate of the lending banks and 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. The Facility has a term of four years and borrowings under the Facility may be used for general corporate purposes, including working capital and acquisitions. The Facility contains certain restrictive covenants, which among other things, impose limitations with respect to incurrence of indebtedness, limitation on the payment of dividends, long-term leases, investments, mergers, consolidations and sales of assets. The Company is also required to satisfy certain financial tests. As of June 30, 2001, no borrowings were outstanding under the Company's credit facility.lease payments are as follows (in thousands):

Contractual Obligations	Total		Less than 1 year		1-3 years		4-5 years		After 5 years
Long-term debt	$	238,248	$	3,519	$	2,595	$	1,261	$	230,873
Operating leases		16,241		1,637		4,558		3,205		6,841
Letters of credit		3,283		3,271		12		—		—

	$	257,772	$	8,427	$	7,165	$	4,466	$	237,714

The Company believes that existing cash balances together with cash generated from operations and amounts available under the ~~Facility~~Company's $100.0 million credit facility will be sufficient to meet the Company's projected working capital and other cash flow requirements for the next twelve months. 17 ~~ITEM~~

Item 3. ~~QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK. Veeco's investment portfolio consists of cash equivalents, commercial paper~~Quantitative and obligations of U.S. Government agencies. These investments are considered available-for-sale securities; accordingly, the carrying amounts approximate fair value. Assuming June 30, 2001 variable debt and investment levels, a one-point change in interest rates would not have a material impact on net interest income.Qualitative Disclosure About Market Risk.

Veeco's net sales to foreign customers represented approximately ~~43%~~64% and ~~42%~~54% of Veeco's total net sales for the three and six months ended June 30, ~~2001,~~2002, respectively, and ~~54%~~44% and ~~55%~~42% for the three and six months ended June 30, ~~2000,~~2001, respectively. The Company expects that 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 ~~12% and 14%~~20% of Veeco's total net sales for both the three and six months ended June 30, 2002, respectively, and 12% and 14% for the three and six months ended June 30, 2001, ~~respectively, and 8% and 9% for~~respectively. The aggregate foreign currency exchange gain included in determining consolidated results of operations was $0.2 million, net of $0.5 million of realized hedging losses in the three ~~and six~~ months ended June 30, ~~2000, respectively.~~2002. The aggregate foreign currency exchange loss in the first quarter of 2002 was immaterial. The aggregate foreign currency exchange loss included in determining consolidated results of operations was ~~$272,000~~$0.3 million and ~~$1,733,000,~~$1.7 million, net of ~~$62,000~~$0.1 million and ~~$991,000~~$1.0 million of realized hedging gains in the three and six months ended June 30, 2001, respectively. Veeco is exposed to financial market risks, including changes in foreign currency exchange rates. To mitigate these risks, Veeco uses derivative financial instruments. Veeco does not use derivative financial

instruments for speculative or trading purposes. The Company enters into monthly forward contracts to reduce the effect of fluctuating foreign currencies on short-term foreign currency-denominated intercompany balances and other known currency exposures. The average notional amount of such contracts was approximately $2.1 million and $1.6 million for the three and six months ended June 30, 2002, respectively. As of June 30, 2002, there were no open forward contracts. The change in currency exchange ~~rate~~rates that has the largest impact on translating Veeco's international operating profit isare the Japanese ~~yen.~~Yen and the Euro. The Company estimates that based upon the June 30, 2002 balance sheet, a 10% change in foreign currency exchange rates would ~~impact~~be immaterial to reported operating ~~profit for the six months ended June 30, 2001 by approximately $2.0 million.~~profit. 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. ~~Veeco is exposed~~

Part II. Other Information

Item 4. Submission of Matters to financial market risks, including changes in foreign currency exchange rates. To mitigate these risks, commencing in March 2001 the Company began using derivative financial instruments. Veeco does not use derivative financial instruments for speculative or trading purposes. The Company enters into monthly forward contracts to reduce the effecta Vote of fluctuating foreign currencies on short-term foreign currency-denominated intercompany transactions and other known currency exposures. The average notional amount of such contracts was approximately $5.2 million and $7.1 million for the three and six months ended June 30, 2001, respectively. 18 ~~PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS~~Security Holders

The annual meeting of stockholders of the Company was held on May ~~11, 2001.~~10, 2002. The matters voted on at the meeting were: (a) the election of ~~four~~three directors: (i) ~~Heinz Fridrich,~~Joel A. Elftmann, (ii) ~~Roger McDaniel,~~Paul R. Low, and (iii) ~~Irwin Pfister and (iv) Douglas Kingsley,~~Walter J. Scherr; (b) the approval of an amendment to the Veeco Instruments Inc. 2000 Stock Option Plan; (c) the approval of an amendment to the Company's Certificate of Incorporation; and ~~(c)~~(d) the ratification of the Board's appointment of Ernst & Young as the independent auditors of the Company's financial statements for the year ending December 31, ~~2001.~~2002. As of the record date for the meeting, there were ~~24,684,684~~29,027,006 shares of common stock outstanding, each of which was entitled to one vote with respect to each of the matters voted on at the meeting. The results of the voting were as follows:
~~Broker Matter For Against Abstained Non-votes - ------ --- ------- --------- ---------~~ (a)(i) 20,663,515 160,377 -- -- (a)(ii) 20,663,515 160,377 -- -- (a)(iii) 20,663,515 160,377 -- -- (a)(iv) 20,663,515 160,377 -- -- (b) 16,248,496 4,383,275 192,121 -- (c) 20,749,304 72,128 2,460 --
~~ITEM~~

Matter	For	Withheld/Against	Abstained	Broker Non-Votes
(a)(i)	22,678,943	318,596	0	0
(a)(ii)	22,678,943	318,596	0	0
(a)(iii)	22,678,943	318,596	0	0
(b)	12,469,519	3,997,196	300,343	6,230,481
(c)	22,272,046	710,913	14,580	0
(d)	22,407,787	569,862	19,890	0

Item 5. ~~OTHER INFORMATION~~Other Information

On July ~~16, 2001,~~11, 2002, the Company ~~acquired ThermoMicroscopes Corp.~~signed a definitive merger agreement with FEI Company ("~~TM"~~FEI"), ~~a manufacturer~~ of ~~atomic force microscopes, scanning probe microscopes, near field optical microscopes and probes. TM, formerly a subsidiary~~Hillsboro, Oregon. Under the terms of ~~Thermo Electron Corporation, is based in Sunnyvale, California.~~the agreement, FEI shareholders will receive 1.355 shares of Veeco common stock for each share of FEI common stock outstanding. Based upon FEI's approximately 32.0 million shares outstanding, the FEI shareholders will receive approximately 44.0 million Veeco shares. The ~~acquisition was~~merger, which will be accounted for ~~using~~under the purchase method, is expected to close in the fourth quarter of ~~accounting. Results of operations prior~~2002, subject to the ~~acquisition~~approval of shareholders of both companies, certain regulatory approvals and other customary closing conditions. Upon consummation of the merger, FEI will become a wholly-owned subsidiary of Veeco, and Veeco will be renamed Veeco FEI Inc. FEI designs, manufactures, markets and services products based on focused charged particle beam technology. FEI's products include transmission electron microscopes (TEM), scanning electron microscopes (SEM), focused ion-beam systems (FIBs) and DualBeam systems that combine a FIB column and a SEM column on a single platform. FEI also designs, manufactures and sells certain components of electron microscopes and FIBs to other manufacturers.

On August 12, 2002, in connection with the proposed merger, the Company and FEI filed with the SEC a joint proxy statement/registration statement on Form S-4 containing a prospectus relating to the

shares of the Company's common stock to be issued to FEI's shareholders. Investors and security holders are ~~not material~~urged to read the ~~Condensed Consolidated Statements~~joint proxy statement/registration statement because it contains important information about the proposed merger. Investors and security holders may obtain copies of ~~Operations~~this document, as well as other SEC filings of the Company and FEI, free of charge from the SEC's website at www.sec.gov, as well as from the applicable company by directing a request to Investor Relations for the ~~three~~Company, at (516) 677-0200, Ext. 1403 and ~~six months ended June 30, 2001.~~ to Investor Relations for FEI, at (503) 640-7500, Ext. 7527.

This report does not constitute an offer of any securities for sale.

19 ~~ITEM~~

Item 6. ~~EXHIBITS AND REPORTS ON FORM~~Exhibits and Reports on Form 8-K. ~~EXHIBITS:~~

Exhibits:

(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.


Number	Description	Incorporated by Reference ~~Number Exhibit~~ to the Following ~~Documents - ------ ------- --------------------------~~ ~~~~10.1 Credit~~ Document:~~
2.1	Agreement and Plan of Merger, dated ~~April 19, * 2001~~as of July 11, 2002, among Veeco Instruments Inc., ~~Fleet National Bank, as administrative agent, The Chase Manhattan Bank, as syndication agent, HSBC Bank USA, as documentation agent~~Venice Acquisition Corp. and ~~the lenders named therein 10.2 Amendment No. 1 to Veeco~~ FEI Company.	Registration Statement on Form S-4 (File Number 333-97977) filed August 12, 2002, Exhibit 2.1
2.2	Voting Agreement, dated as of July 11, 2002, between Veeco Instruments Inc. and the shareholders of FEI Company listed on Schedule A attached thereto.	Current Report on Form 8-K/A filed July 22, 2002, Exhibit 2.2
2.3	Voting Agreement, dated as of July 11, 2002, between Veeco Instruments Inc. and Philips Business Electronics International B.V.	Current Report on Form 8-K filed July 12, 2002, Exhibit 2.3
2.4	Investor Agreement, dated as of July 11, 2002, between Veeco Instruments Inc. and Philips Business Electronics International B.V.	Current Report on Form 8-K filed July 12, 2002, Exhibit 2.4
4.1	Amendment No. 2 to the Rights Agreement, dated as of July 11, 2002, between Veeco Instruments Inc. and American Stock Transfer and Trust Company.	Current Report on Form 8-K filed July 12, 2002, Exhibit 4.1
10.1	Amendment No. 2 to the Veeco Instruments Inc. 2000 Stock Option Plan, effective May 10, 2002.	Registration Statement on Form S-8 (File Number ~~333-66574) Plan,~~333-88946) filed May 23, 2002, Exhibit 4.1
10.2	Amendment To Loan Documents effective ~~May~~as of September 17, 2001, by and between Jackson National Life Insurance Company, as Lender, and Applied Epi, Inc., as Borrower (executed in June 2002).	*
10.3	Employment Agreement, dated as of July 11, ~~2001~~2002, between Vahè A. Sarkissian and Veeco Instruments Inc.	Current Report on Form 8-K filed ~~August 2, 2001,~~July 12, 2002, Exhibit ~~4.1~~ 10.1
10.4	Employment Agreement, dated as of July 11, 2002, between Edward H. Braun and Veeco Instruments Inc.	Current Report on Form 8-K filed July 12, 2002, Exhibit 10.2
99.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	*

*Filed herewith.

99.2

Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

*

Filed herewith

(b): Reports on Form 8-K. ~~None. 20~~

The Registrant filed a Current Report on Form 8-K on July 12, 2002 regarding the Agreement and Plan of Merger dated July 11, 2002 among Veeco Instruments Inc., Venice Acquisition Corp. and FEI Company and certain related matters.

The Registrant filed an amendment on Form 8-K/A on July 22, 2002 to its Current Report on Form 8-K dated July 12, 2002 to reflect certain additional parties to the Voting Agreement dated as of July 11, 2002 among Veeco and certain stockholders of FEI Company.

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: August 8, 2001 Veeco Instruments Inc. By: /s/ Edward H. Braun --------------------------------- Edward H. Braun Chairman, Chief Executive Officer and President By: /s/ John F. Rein, Jr. --------------------------------- John F. Rein, Jr. Executive Vice President, Chief Financial Officer and Secretary 21

Date: August 14, 2002
	VEECO INSTRUMENTS INC.
	By:	/s/ EDWARD H. BRAUN Edward H. Braun Chairman, Chief Executive Officer and President
	By:	/s/ JOHN F. REIN, JR. John F. Rein, Jr. Executive Vice President, Chief Financial Officer, Treasurer and Secretary

EXHIBIT INDEX

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.


Number	Description	Incorporated by Reference ~~Number Exhibit~~ to the Following ~~Documents - ------ ------- --------------------------~~ ~~~~10.1 Credit~~ Document:~~
2.1	Agreement and Plan of Merger, dated ~~April 19, * 2001~~as of July 11, 2002, among Veeco Instruments Inc., ~~Fleet National Bank,~~Venice Acquisition Corp. and FEI Company.	Registration Statement on Form S-4 (File Number 333-97977) filed August 12, 2002, Exhibit 2.1
2.2	Voting Agreement, dated as ~~administrative agent, The Chase Manhattan Bank, as syndication agent, HSBC Bank USA, as documentation agent~~of July 11, 2002, between Veeco Instruments Inc. and the ~~lenders named therein 10.2~~ shareholders of FEI Company listed on Schedule A attached thereto.	Current Report on Form 8-K/A filed July 22, 2002, Exhibit 2.2
2.3	Voting Agreement, dated as of July 11, 2002, between Veeco Instruments Inc. and Philips Business Electronics International B.V.	Current Report on Form 8-K filed July 12, 2002, Exhibit 2.3
2.4	Investor Agreement, dated as of July 11, 2002, between Veeco Instruments Inc. and Philips Business Electronics International B.V.	Current Report on Form 8-K filed July 12, 2002, Exhibit 2.4
4.1	Amendment No. 12 to the Rights Agreement, dated as of July 11, 2002, between Veeco ~~Registration Statement~~Instruments Inc. and American Stock Transfer and Trust Company.	Current Report on Form 8-K filed July 12, 2002, Exhibit 4.1
10.1	Amendment No. 2 to the Veeco Instruments Inc. 2000 Stock Option Plan, effective May 10, 2002.	Registration Statement on Form S-8 (File Number ~~Plan,~~333-88946) filed May 23, 2002, Exhibit 4.1
10.2	Amendment To Loan Documents effective ~~May~~as of September 17, 2001, by and between Jackson National Life Insurance Company, as Lender, and Applied Epi, Inc., as Borrower (executed in June 2002).	*
10.3	Employment Agreement, dated as of July 11, ~~2001 333-66574)~~2002, between Vahè A. Sarkissian and Veeco Instruments Inc.	Current Report on Form 8-K filed ~~August 2, 2001,~~July 12, 2002, Exhibit ~~4.1~~ 10.1
10.4	Employment Agreement, dated as of July 11, 2002, between Edward H. Braun and Veeco Instruments Inc.	Current Report on Form 8-K filed July 12, 2002, Exhibit 10.2
99.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	*
99.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	*

*Filed herewith.

QuickLinks

Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosure About Market Risk.
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K.