<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
---- Act of 1934
For the quarterly period ended JUNE 30, 1995
---- --- ----
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the transition period from _______________ to _______________
Commission file number 0-13470
---------------------------------------------------
NANOMETRICS INCORPORATED
-------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
CALIFORNIA 94-2276314
--------------------------------- --------------------
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
310 DEGUIGNE DRIVE, SUNNYVALE, CA 94086
----------------------------------- ---------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (408) 746-1600
--------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
------- ------
At July 12, 1995 there were 7,604,129 shares of common stock, no par value,
issued and outstanding.
<PAGE>
NANOMETRICS INCORPORATED
INDEX
Part I. Financial Information PAGE
----
Item 1. Financial Statements
Consolidated Balance Sheets -
June 30, 1995 and December 31, 1994 . . . . . . . . . . . . .3
Consolidated Statements of Operations -
Three months and six months ended
June 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . .5
Consolidated Statements of Cash Flows -
Six months ended June 30, 1995
and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial
Statement . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of . . . . . . . . . . . . .8
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders . . . . 10
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 10
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
NANOMETRICS INCORPORATION
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except share amounts)
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
---------- ------------
<S> <C> <C>
Current assets:
Cash and equivalents $ 2,303 $ 2,135
Short-term investments 5,631 493
Accounts receivable, less allowance for
doubtful accounts of $293 and $270 6,591 4,881
Other receivables 43 115
Inventories 4,457 4,752
Deferred income taxes and prepaid expenses 471 112
------ ------
Total current assets 19,496 12,488
Property, plant and equipment, net 3,535 3,179
Other assets 192 119
------ ------
$ 23,223 $ 15,786
------- -------
------- -------
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE>
NANOMETRICS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
(Amounts in thousands except share amounts)
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
---------- ------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 1,077 $ 696
Accrued payroll and related expenses 658 236
Other current liabilities 982 1,117
Income taxes payable 343 7
Current portion of long-term debt 679 227
------- -------
Total current liabilities 3,739 2,283
Long-term debt 4,668 421
Deferred income taxes 91 87
Shareholders' equity:
Common stock, no par value;
25,000,000 shares authorized;
7,576,379 and 7,370,978 outstanding 10,159 10,018
Retained earnings 3,001 2,117
Cumulative translation adjustment 1,565 860
------- -------
Total shareholders' equity 14,725 12,995
------- -------
$23,223 $15,786
------- -------
------- -------
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
NANOMETRICS INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Month Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Net sales $ 3,947 $ 2,446 $ 7,556 $ 4,127
Service 1,257 968 2,190 1,926
--------- --------- --------- ---------
Total revenues 5,204 3,414 9,746 6,053
Costs and expenses:
Cost of sales 1,831 1,235 3,581 2,178
Cost of service 810 679 1,554 1,351
Research and development 684 609 1,189 1,240
Selling 872 681 1,624 1,317
General and administrative 529 475 1,026 943
--------- --------- --------- --------
Total costs and expenses 4,726 3,679 8,974 7,029
--------- --------- --------- --------
Operating income (loss) 478 (265) 772 (976)
Other income, net 296 18 468 92
--------- --------- --------- --------
Income (loss) before provision
for income taxes 774 (247) 1,240 (884)
Provision for income taxes 194 6 354 13
--------- --------- --------- --------
Net income (loss) $ 580 $ (253) $ 886 $ (897)
--------- --------- --------- --------
--------- --------- --------- --------
Per share amounts:
Net income (loss) per share $ .07 $ (.03) $ .11 $ (.12)
--------- --------- --------- --------
--------- --------- --------- --------
Weighted average shares
outstanding 8,349 7,326 8,029 7,240
--------- --------- --------- --------
--------- --------- --------- --------
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE>
NANOMETRICS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1995 1994
---------- ----------
<S> <C> <C>
Operating activities:
Net income (loss) $ 886 $ (897)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Depreciation and amortization 157 169
Deferred income taxes (214) -
Changes in assets and liabilities:
Accounts receivable (1,065) (65)
Other receivables 75 (10)
Inventories 489 (430)
Prepaid expense (144) (57)
Other assets (59) 10
Accounts payable and other liabilities 571 (340)
Income taxes payable 320 (136)
---------- ----------
Net cash provided by (used in) operating
activities 1,016 (1,756)
---------- ----------
Investing activities:
Short term investments, net (5,138) 1,981
Capital expenditures (6) (19)
---------- ----------
Net cash provided by (used in) investing
activities (5,144) 1,962
---------- ----------
Financing activities:
Proceeds from long-term borrowings 4,700 -
Repayments of long-term debt (160) (265)
Issuance of common stock 141 155
---------- ----------
Net cash provided by (used in) financing
activities 4,681 (110)
---------- ----------
Effect of exchange rate changes on cash (385) (19)
---------- ----------
Net change in cash and equivalents 168 77
Cash and equivalents at beginning of period 2,135 1,210
---------- ----------
Cash and equivalents at end of period $ 2,303 $ 1,287
---------- ----------
---------- ----------
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 35 $ 29
---------- ----------
---------- ----------
Cash paid for income taxes $ 23 $ 136
---------- ----------
---------- ----------
</TABLE>
See Notes to Consolidated Financial Statements
6
<PAGE>
NANOMETRICS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Consolidated Financial Statements
The consolidated financial statements include the accounts of Nanometrics
Incorporated and its wholly owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
While the quarterly financial information is unaudited, the financial
statements included in this report reflect all adjustments (consisting only of
normal recurring adjustments) which the Company considers necessary for a fair
presentation of the results of operations for the interim periods covered and of
the financial condition of the Company at the date of the interim balance sheet.
The operating results for interim periods are not necessarily indicative of the
operating results for the entire year. The information included in this report
should be read in conjunction with the information included in the Company's
1994 Form 10-K.
Note 2. Per Share Information
Net income (loss) per share is based on the weighted average number of
common and common equivalent shares outstanding during the period. Common
equivalent shares include dilutive common stock options (using the treasury
stock method) and are excluded in loss periods as they are anti-dilutive.
Note 3. Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market
and consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
--------- ------------
(Amounts in thousands)
<S> <C> <C>
Raw materials and subassemblies $ 1,917 $ 1,225
Work in process 1,418 735
Finished goods 1,122 2,792
--------- ------------
$ 4,457 $ 4,752
--------- ------------
--------- ------------
</TABLE>
Note 4. Borrowing Arrangements
The Company, in June 1995, borrowed $4.7 million (400,000,000 Yen) from the
Mitsubishi Bank, Ltd in Chiba, Japan to provide supplemental working capital for
the Company's operations. The loan was secured using the Company's factory and
adjacent land in Japan as collateral. This obligation bears interest at the
bank's prime rate (2.375% at June 30, 1995) plus 1.3% and is due in quarterly
installments of principal and interest through 2005.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Total revenues for the three months ended June 30, 1995 were $5,204,000, an
increase of $1,790,000 or 52% from the comparable period in 1994. For the six
months ended June 30, 1995, total revenues of $9,746,000 increased by $3,693,000
or 61% from the comparable period in 1994. Net sales of $3,947,000 and
$7,556,000 for the three months and six months ended June 30, 1995,
respectively, increased $1,501,000 or 61% and $3,429,000 or 83%, respectively,
as compared with the same periods during 1994. The increases in net sales
resulted from stronger demand for all of the Company's products especially from
semiconductor manufacturers in the U.S., Europe and Japan. Service revenue of
$1,257,000 and $2,190,000 for the three months and six months ended June 30,
1995, respectively, increased $289,000 or 30% and $264,000 or 14%, respectively,
as compared to the same periods in 1994. These increases in service revenue are
primarily attributable to increased sales of accessories and upgrades in the
U.S. and Japan in 1995. The Company believes that its revenue growth for the
three and six month periods ended June 30, 1995 is not necessarily indicative of
future results.
Cost of sales as a percentage of net sales decreased from 50% in the second
quarter of 1994 to 46% in the second quarter of 1995 primarily because of higher
sales volume resulting in lower per unit manufacturing costs. Cost of service
as a percentage of service revenue decreased from 70% in the second quarter of
1994 to 64% in the second quarter of 1995. This decrease was primarily
attributable to to strong margins on the additional sales of accessories and
upgrades in 1995. Cost of sales as a percentage of net sales for the six months
ended June 30, 1995 decreased to 47% from 53% a year ago as a result of higher
sales volume resulting in lower per unit manufacturing costs. Cost of service
as a percentage of service revenue for the six months ended June 30, 1995
increased slightly to 71% from 70% a year ago.
Research and development expenses for the three months ended June 30, 1995
increased $75,000 or 12% compared to the same period in 1994 resulting from
higher development costs at the Japanese subsidiary. Research and development
expenses for the six months ended June 30, 1995 decreased $51,000 or 4% compared
to the same period in 1994 primarily due to lower materials expenses, especially
in the first quarter of 1995, as the Company directs more of its efforts on
software development.
Selling expenses for the three month and six month periods ended June 30,
1995 increased by $191,000 or 28% and $307,000 or 23%, respectively, compared to
the same periods in 1994 primarily because of higher commission expenses
resulting from higher sales and the cost of opening a sales office in Austin,
Texas.
General and administrative expenses for the three month and six month
periods ended June 30, 1995 increased by $54,000 or 11% and $83,000 or 9%,
respectively, compared to the same periods in 1994 as a result of higher
overhead expenses mainly at the Japanese subsidiary.
Other income for the three month and six month periods ended June 30, 1995
increased $278,000 and $376,000, respectively, from the comparable periods in
1994 due to more favorable exchange rate results.
For the quarter and the six months ended June 30, 1995, the effective
income tax rates were 25% and 29%, respectively. The income tax provision for
interim periods reflects the Company's estimated
8
<PAGE>
annual income tax rate. The difference between income taxes computed at the
federal statutory rate and the effective tax rate in the second quarter and the
first six months of 1995 is due to the effect of foreign income taxed at a lower
overall effective rate due to the utilization of previously reserved net
operating loss carryforwards and foreign tax credits.
The Company reported an operating income of $478,000 and net income of
$580,000 for the second quarter of 1995 compared to an operating loss of
$265,000 and a net loss of $253,000 for the same period in 1994. For the first
six months of 1995, the Company reported an operating income of $772,000 and net
income of $886,000 which compared to an operating loss of $976,000 and a net
loss of $897,000 for the same period in 1994.
With sufficient capital, the introduction of new products and increased
demand for established products, the Company is optimistic about its prospects
for the third quarter.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1995, the Company had working capital of $15,757,000
compared to $10,205,000 at December 31, 1994. The current ratio at June 30,
1995 was 5.2 to 1. The Company believes working capital including cash and
short-term investments of $7,934,000 will be sufficient to meet its needs at
least through the next twelve months. Operating activities for the first six
months of 1995 provided cash of $1,016,000 primarily from net income,
increased liabilities and reduced inventory while the purchase of short-term
investments used $5,138,000, capital expenditures used $6,000, a long-term
loan from a Japanese bank provided $4,700,000, debt repayment used $160,000
and issuance of common stock provided $141,000.
9
<PAGE>
NANOMETRICS INCORPORATE
PART II
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A. The annual meeting of shareholders was held on May 23, 1995.
B. The following directors were elected to the board of directors:
Vincent J. Coates
Nathaniel Brenner
Norman V. Coastes
Roger G. Novesky
C. The following matters were voted upon at the annual meeting:
For Against Abstain
---------- ---------- ----------
1. To elect the following directors
to serve for the ensuing year:
Vincent J. Coates, Chairman 5,425,755 0 2,029,540
Nathaniel Brenner, Director 5,426,388 0 2,028,907
Norman V. Coates, Director 5,426,388 0 2,028,907
Roger G. Novesky, Director 5,426,388 0 2,028,907
2. To ratify the appointment of
Deloitte & Touche LLP as
independent auditors for the fiscal
year ending December 31, 1995. 5,425,766 100 2,029,429
ITEM 6. EXHIBIT AND REPORTS ON FORM 8-K
A. Exhibits
None
B. Reports on Form 8-K.
None.
10
<PAGE>
NANOMETRICS INCORPORATED
SIGNATURE
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.
NANOMETRICS INCORPORATED
(Registrant)
/s/ Vincent J. Coates
---------------------------
Vincent J. Coates
Chairman and Chief Executive Officer
/s/ Paul B. Nolan
---------------------------
Paul B. Nolan
Chief Financial Officer
Dated: August 9, 1995
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> APR-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 2,303
<SECURITIES> 5,631
<RECEIVABLES> 6,884
<ALLOWANCES> 293
<INVENTORY> 4,457
<CURRENT-ASSETS> 19,496
<PP&E> 3,535
<DEPRECIATION> 0
<TOTAL-ASSETS> 23,223
<CURRENT-LIABILITIES> 3,739
<BONDS> 4,668
<COMMON> 10,159
0
0
<OTHER-SE> 4,566
<TOTAL-LIABILITY-AND-EQUITY> 23,223
<SALES> 7,556
<TOTAL-REVENUES> 9,746
<CGS> 3,581
<TOTAL-COSTS> 5,135
<OTHER-EXPENSES> 3,839
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,240
<INCOME-TAX> 354
<INCOME-CONTINUING> 886
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 886
<EPS-PRIMARY> .11
<EPS-DILUTED> .11
</TABLE>
