<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 September 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 October 6, 1995 there were 7,847,578 shares of common stock, no par value,
issued and outstanding.
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NANOMETRICS INCORPORATED
INDEX
<TABLE>
<CAPTION>
Page
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<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -
September 30, 1995 and December 31, 1994.................... 3
Consolidated Statements of Operations -
Three months and nine months ended
September 30, 1995 and 1994................................. 5
Consolidated Statements of Cash Flows -
Nine months ended September 30, 1995
and 1994.................................................... 6
Notes to Consolidated Financial
Statement................................................... 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............... 8
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K......................... 10
Signatures......................................................... 11
</TABLE>
2
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PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
NANOMETRICS INCORPORATION
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except share amounts)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $1,238 $ 2,135
Short-term investments 5,635 493
Accounts receivable, less allowance for
doubtful accounts of $305 and $270 7,268 4,881
Other receivables 116 115
Inventories 4,103 4,752
Deferred income taxes and prepaid expenses 610 112
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Total current assets 18,970 12,488
Property, plant and equipment, net 3,045 3,179
Other assets 167 119
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$22,182 $15,786
======= =======
</TABLE>
See Notes to Consolidated Financial Statements
3
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NANOMETRICS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
(Amounts in thousands except share amounts)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,055 $ 696
Accrued payroll and related expenses 502 236
Other current liabilities 833 1,117
Income taxes payable 532 7
Current portion of long-term debt 574 227
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Total current liabilities 3,496 2,283
Long-term debt 3,771 421
Deferred income taxes 87 87
Shareholders' equity:
Common stock, no par value;
25,000,000 shares authorized;
7,804,891 and 7,370,978 shares outstanding 10,308 10,018
Retained earnings 3,843 2,117
Cumulative translation adjustment 677 860
------- -------
Total shareholders' equity 14,828 12,995
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$22,182 $15,786
======= =======
</TABLE>
See Notes to Consolidated Financial Statements
4
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NANOMETRICS INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Month Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
-------- --------- --------- --------
<S> <C> <C> <C> <C>
Revenues:
Net sales $4,945 $2,288 $12,501 $ 6,415
Service 1,161 1,075 3,351 3,001
------- ------- ------- -------
Total revenues 6,106 3,363 15,852 9,416
Costs and expenses:
Cost of sales 2,124 1,241 5,705 3,419
Cost of service 928 788 2,482 2,139
Research and development 654 611 1,843 1,851
Selling 978 743 2,602 2,060
General and administrative 557 1,004 1,583 1,947
------- ------- ------- -------
Total costs and expenses 5,241 4,387 14,215 11,416
------- ------- ------- -------
Operating income (loss) 865 (1,024) 1,637 (2,000)
Other income, net 222 50 690 142
------- ------- ------- -------
Income (loss) before provision
for income taxes 1,087 (974) 2,327 (1,858)
Provision for income taxes 245 4 599 17
------- ------- ------- -------
Net income (loss) $ 842 $ (978) $ 1,728 $(1,875)
======= ======= ======= =======
Per share amounts:
Net income (loss) per share $ .10 $ (.13) $ .21 $ (.26)
======= ======= ======= =======
Weighted average shares
outstanding 8,444 7,363 8,167 7,281
======= ======= ======= =======
</TABLE>
See Notes to Consolidated Financial Statements
5
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NANOMETRICS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1995 1994
-------- --------
<S> <C> <C>
Operating activities:
Net income (loss) $ 1,728 $ (1,875)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Depreciation and amortization 241 251
Deferred income taxes (218) 155
Changes in assets and liabilities:
Accounts receivable (2,543) 1,074
Other receivables 2 (11)
Inventories 634 (1,079)
Prepaid expense (284) (19)
Other assets (58) 10
Accounts payable and other liabilities 363 (561)
Income taxes payable 579 (291)
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Net cash provided by (used in) operating activities 444 (2,346)
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Investing activities:
Short term investments, net (5,142) 2,956
Capital expenditures (93) (30)
-------- --------
Net cash provided by (used in) investing activities (5,235) 2,926
-------- --------
Financing activities:
Proceeds from long-term borrowings 4,700 -
Repayments of long-term debt (588) (433)
Issuance of common stock 290 155
-------- --------
Net cash provided by (used in) financing activities 4,402 (278)
-------- --------
Effect of exchange rate changes on cash (508) (49)
-------- --------
Net change in cash and equivalents (897) 253
Cash and equivalents at beginning of period 2,135 1,210
-------- --------
Cash and equivalents at end of period $ 1,238 $ 1,463
======== ========
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 76 $ 41
======== ========
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 to be expected 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>
September 30, December 31,
1995 1994
------------- ------------
(Amounts in thousands)
<S> <C> <C>
Raw materials and subassemblies $1,604 $1,225
Work in process 1,474 735
Finished goods 1,025 2,792
------ ------
$4,103 $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
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ------- -- ----------
Total revenues for the three months ended September 30, 1995 were $6,106,000,
an increase of $2,743,000 or 82% from the comparable period in 1994. For the
nine months ended September 30, 1995, total revenues of $15,852,000 increased by
$6,436,000 or 68% from the comparable period in 1994. Net sales of $4,945,000
and $12,501,000 for the three months and nine months ended September 30, 1995,
respectively, increased $2,657,000 or 116% and $6,086,000 or 95%, respectively,
as compared with the same periods during 1994. The increases in net sales
resulted from stronger worldwide demand for all of the Company's products
especially from semiconductor manufacturers in the U.S., Europe, Korea and
Japan. Service revenue of $1,161,000 and $3,351,000 for the three months and
nine months ended September 30, 1995, respectively, increased $86,000 or 8% and
$350,000 or 12%, 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 nine month periods ended September 30,
1995 is not necessarily indicative of future results.
Cost of sales as a percentage of net sales decreased to 43% in the third
quarter of 1995 from 54% in the third quarter of 1994. In addition, cost of
sales as a percentage of net sales for the nine months ended September 30, 1995
decreased to 46% from 53% a year ago. These improved cost of sales ratios
resulted primarily from higher sales volumes resulting in lower per unit
manufacturing costs. Cost of service as a percentage of service revenue
increased to 80% in the third quarter of 1995 from 73% in the third quarter of
1994, while cost of service as a percentage of service revenue for the nine
months ended September 30, 1995 increased to 74% from 71% a year ago. These
cost of service ratios increased primarily from the addition of service
personnel in Korea and the U.S.
Research and development expenses for the three months ended September 30,
1995 increased $44,000 or 7% compared to the same period in 1995 resulting from
higher development costs at the Japanese subsidiary. Research and development
expenses for the nine months ended September 30, 1995 decreased $8,000 compared
to the same period in 1994.
Selling expenses for the three month and nine month periods ended September
30, 1995 increased by $235,000 or 32% and $542,000 or 26%, respectively,
compared to the same periods in 1994 primarily because of higher commission
expenses resulting from higher sales and the cost of opening sales offices in
Korea and in Austin, Texas.
General and administrative expenses for the three month and nine month periods
ended September 30, 1995 decreased by $447,000 or 45% and $364,000 or 19%,
respectively, compared to the same periods in 1994. The higher general and
administrative expenses in 1994 included a $517,000 writeoff of a doubtful
receivable.
Other income for the three month and nine month periods ended September 30,
1995 increased $173,000 and $548,000, respectively, from the comparable periods
in 1994 due primarily to more favorable exchange rate results.
For the quarter and the nine months ended September 30, 1995, the effective
income tax rates were 23% and 26%, respectively. The income tax provision for
interim periods reflects the Company's
8
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estimated annual income tax rate. The difference between income taxes computed
at the federal statutory rate and the effective tax rate in the third quarter
and the first nine 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 the utilization of previously reserved
federal net operating losses and foreign tax credits.
The Company reported an operating income of $864,000 and net income of
$842,000 for the third quarter of 1995 compared to an operating loss of
$1,024,000 and a net loss of $978,000 for the same period in 1994. For the
first nine months of 1995, the Company reported an operating income of
$1,637,000 and net income of $1,728,000 which compared to an operating loss of
$2,000,000 and a net loss of $1,875,000 for the same period in 1994.
With sufficient capital and increased demand for new products and established
products, the Company is optimistic about its prospects for the fourth quarter.
Liquidity and Capital Resources
- --------- --- ------- ---------
At September 30, 1995, the Company had working capital of $15,474,000 compared
to $10,205,000 at December 31, 1994. The current ratio at September 30, 1995
was 5.4 to 1. The Company believes working capital, including cash and short-
term investments of $6,873,000, will be sufficient to meet its needs at least
through the next twelve months. Operating activities for the first nine months
of 1995 provided cash of $444,000 primarily from net income, while the purchase
of short-term investments used $5,142,000, capital expenditures used $93,000, a
long-term loan from a Japanese bank provided $4,700,000, debt repayment used
$588,000 and issuance of common stock provided $290,000.
9
<PAGE>
NANOMETRICS INCORPORATE
PART II
OTHER INFORMATION
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: November 13, 1995
11
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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)
- ------------------------------------
Vincent J. Coates
Chairman and Chief Executive Officer
- ------------------------------------
Paul B. Nolan
Chief Financial Officer
Dated: November 13, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,238
<SECURITIES> 5,635
<RECEIVABLES> 7,573
<ALLOWANCES> 305
<INVENTORY> 4,103
<CURRENT-ASSETS> 18,970
<PP&E> 3,045
<DEPRECIATION> 0
<TOTAL-ASSETS> 22,182
<CURRENT-LIABILITIES> 3,496
<BONDS> 3,771
<COMMON> 10,308
0
0
<OTHER-SE> 4,520
<TOTAL-LIABILITY-AND-EQUITY> 22,182
<SALES> 12,501
<TOTAL-REVENUES> 15,852
<CGS> 5,705
<TOTAL-COSTS> 8,187
<OTHER-EXPENSES> 6,028
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,327
<INCOME-TAX> 599
<INCOME-CONTINUING> 1,728
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,728
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
</TABLE>
