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, 1996
---------------
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, 1996 there were 8,068,672 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, 1996 and December 31, 1995 . . . . . . . . . . . . . . . 3
Consolidated Statements of Income -
Three months and six months ended
June 30, 1996 and 1995. . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows -
Six months ended June 30, 1996
and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial
Statements . . . . . . . . . . . . . . . . . . . . . . . . . .7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . .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 INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except share amounts)
(Unaudited)
ASSETS
June 30, December 31,
1996 1995
--------- ------------
Current assets:
Cash and equivalents ............................ $ 1,680 $ 3,625
Short-term investments .......................... 6,072 4,458
Accounts receivable, less allowance for
doubtful accounts of $378 and $380 ............ 10,598 7,567
Inventories ..................................... 4,976 3,955
Prepaid and deferred income taxes ............... 1,600 2,069
Prepaid expenses and other ..................... 550 428
------- -------
Total current assets ............................... 25,476 22,102
Property, plant and equipment, net ................. 2,645 2,900
Other assets ....................................... 187 165
------- -------
$28,308 $25,167
======= =======
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
June 30, December 31,
1996 1995
------- ------------
Current liabilities:
Accounts payable ................................. $ 1,487 $1,111
Accrued payroll and related expenses ............. 711 486
Other current liabilities ........................ 1,871 1,216
Income taxes payable ............................. 677 398
Current portion of long-term debt ................ 365 553
------- -------
Total current liablities ...................... 5,111 3,764
Long-term debt ..................................... 3,646 3,528
Deferred income taxes .............................. 196 301
------- -------
Total liabilities ............................. 8,953 7,593
------- -------
Shareholders' equity:
Common stock, no par value;
25,000,000 shares authorized
8,065,339 and 7,883,910 outstanding ............ 11,156 10,983
Retained earnings ................................ 8,189 6,394
Accumulated translation adjustment ............... 10 197
------- -------
Total shareholders' equity .................... 19,355 17,574
------- -------
$28,308 $25,167
======= =======
See Notes to Consolidated Financial Statements
4
<PAGE>
<TABLE>
NANOMETRICS INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues:
Net sales .......................................... $ 5,991 $ 3,947 $11,545 $ 7,556
Service ............................................ 1,566 1,257 3,080 2,190
------- ------- ------- -------
Total revenues ................................ 7,557 5,204 14,625 9,746
Costs and expenses:
Cost of sales ...................................... 2,533 1,831 4,902 3,581
Cost of service .................................... 1,045 810 2,048 1,554
Research and development ........................... 665 684 1,335 1,189
Selling ............................................ 1,255 872 2,266 1,624
General and administrative ......................... 582 529 1,152 1,026
------- ------- ------- -------
Total costs and expenses ......................... 6,080 4,726 11,703 8,974
------- ------- ------- -------
Operating income ....................................... 1,477 478 2,922 772
Other income, net ..................................... 117 296 189 468
------- ------- ------- -------
Income before provision
for income taxes ..................................... 1,594 774 3,111 1,240
Provision for income taxes ............................. 633 194 1,316 354
------- ------- ------- -------
Net income ............................................. $ 961 $ 580 $ 1,795 $ 886
======= ======= ======= =======
Net income per common
and equivalent share .................................. $ .11 $ .07 $ .21 $ .11
======= ======= ======= =======
Weighted average common and
equivalent shares outstanding ........................ 8,583 8,349 8,567 8,029
======= ======= ======= =======
<FN>
See Notes to Consolidated Financial Statements
</FN>
</TABLE>
5
<PAGE>
NANOMETRICS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Six Months Ended
June 30,
1996 1995
------- --------
Operating activities:
Net income ......................................... $ 1,795 $ 886
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization .................. 143 157
Deferred income taxes .......................... 500 (214)
Changes in assets and liabilities:
Accounts receivable ......................... (3,164) (990)
Inventories ................................. (1,077) 489
Prepaid expenses and other .................. (333) (203)
Accounts payable and other liabilities ...... 1,291 571
Income taxes payable ........................ (409) 320
------- -------
Net cash provided by (used in) operating activities .... (1,254) 1,016
------- -------
Investing activities:
Purchase of short-term investments ................. (7,603) (6,714)
Sales/maturities of short-term investments ......... 5,989 1,576
Capital expenditures ............................... (32) (6)
------- -------
Net cash used in investing activities .................. (1,646) (5,144)
------- -------
Financing activities:
Proceeds from long-term borrowings ................. 762 4,700
Repayments of long-term debt ....................... (594) (160)
Issuance of common stock ........................... 786 141
------- -------
Net cash provided by financing activities .............. 954 4,681
------- -------
Effect of exchange rate changes on cash ................ 1 (385)
------- -------
Net change in cash and equivalents ..................... (1,945) 168
Cash and equivalents at beginning of period ............ 3,625 2,135
------- -------
Cash and equivalents at end of period .................. $ 1,680 $ 2,303
======= =======
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest ............................. $ 61 $ 35
======= =======
Cash paid for income taxes ......................... $ 87 $ 23
======= =======
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 that may 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 1995 Form 10-K filed with the Securities and Exchange
Commission.
Note 2. Per Share Information
Net income 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).
Note 3. Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market
and consist of the following:
June 30, December 31,
1996 1995
-------- ------------
(Amounts in thousands)
Raw materials and subassemblies .................. $1,817 $1,727
Work in process .................................. 2,093 830
Finished goods ................................... 1,066 1,398
------ ------
$4,976 $3,955
====== ======
Note 4. Borrowing Arrangements
In April 1996, the Company borrowed approximately $762,000 (80,000,000 Yen)
from the Japan Development Bank in Tokyo, 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 rate of 3.4% and is due in quarterly installments of principal and
interest through 2006.
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, 1996 were $7,557,000, an
increase of $2,353,000 or 45% from the comparable period in 1995. For the six
months ended June 30, 1996, total revenues of $14,625,000 increased by
$4,879,000 or 50% from the comparable period in 1995. Net sales of $5,991,000
and $11,545,000 for the three months and six months ended June 30, 1996,
respectively, increased $2,044,000 or 52% and $3,989,000 or 53%, respectively,
as compared with the same periods during 1995. The increases in net sales
resulted from stronger demand for, and increased shipments of, the Company's
products, especially its automated products, from customers in the U.S., Korea
and Japan. Service revenue of $1,566,000 and $3,080,000 for the three months and
six months ended June 30, 1996, respectively, increased $309,000 or 25% and
$890,000 or 41%, respectively, as compared to the same periods in 1995. These
increases in service revenue are primarily attributable to increased sales of
accessories and upgrades in the U.S. and Japan in 1996. The Company believes
that its revenue growth for the three and six month periods ended June 30, 1996
is not necessarily indicative of future results.
Cost of sales as a percentage of net sales decreased from 46% in the second
quarter of 1995 to 42% in the second quarter of 1996 primarily because of higher
sales volume resulting in lower per unit manufacturing costs. Cost of service as
a percentage of service revenue increased from 64% in the second quarter of 1995
to 67% in the second quarter of 1996. This increase was primarily attributable
to the addition of service personnel needed to support the Company's growing
sales and installed base of systems at customer locations. Cost of sales as a
percentage of net sales for the six months ended June 30, 1996 decreased to 42%
from 47% 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, 1996 decreased to 66% from 71% a year ago. This
decrease was primarily attributable to relatively higher margins on the
additional sales of accessories in the first quarter of 1996.
Research and development expenses for the three months ended June 30, 1996
decreased $19,000 or 3% compared to the same period in 1995 resulting from lower
material costs associated with continuing product development at the Japanese
subsidiary. Research and development expenses for the six months ended June 30,
1996 increased $146,000 or 12% compared to the same period in 1995 primarily due
to the addition of software engineers in the U.S.
Selling expenses for the three month and six month periods ended June 30,
1996 increased by $383,000 or 44% and $642,000 or 40%, respectively, compared to
the same periods in 1995 primarily because of higher commission expenses
resulting from higher sales and the addition of sales offices and sales staff
during the past 12 months.
General and administrative expenses for the three month and six month
periods ended June 30, 1996 increased by $53,000 or 10% and $126,000 or 12%,
respectively, compared to the same periods in 1995 as a result of spending
associated with increased operating activity.
Other income for the three month and six month periods ended June 30, 1996
decreased $179,000 and $279,000, respectively, from the comparable periods in
1995 due to lower exchange rate gains in 1996.
The Company reported an operating income of $1,477,000 and net income of
$961,000 for the second quarter of 1996 compared to an operating income of
$478,000 and net income of $580,000 for the same
8
<PAGE>
period in 1995. For the first six months of 1996, the Company reported an
operating income of $2,922,000 and net income of $1,795,000 which compared to an
operating income of $772,000 and net income of $886,000 for the same period in
1995.
Liquidity and Capital Resources
At June 30, 1996, the Company had working capital of $20,365,000 compared to
$18,338,000 at December 31, 1995. The current ratio at June 30, 1996 was 5.0 to
1. The Company believes working capital including cash and short-term
investments of $7,752,000 will be sufficient to meet its needs at least through
the next twelve months. Operating activities for the first six months of 1996
used cash of $1,254,000 primarily from increased accounts receivable and
inventory, which were offset to some extent by increased accounts payable, while
the net purchases of short-term investments used $1,614,000, capital
expenditures used $32,000, a long-term loan from a Japanese bank provided
$762,000, debt repayment used $594,000 and issuance of common stock provided
$786,000.
The foregoing Management Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, and Section 21E of the Securities
Exchange Act of 1934. These statements involve risks and uncertainties as set
forth under "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Risk Factors" in the 1995 Annual Report. The Company's
actual results could differ materially from the results anticipated in such
forward-looking statements.
9
<PAGE>
NANOMETRICS INCORPORATED
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 22, 1996.
B. The following directors were elected to the board of directors:
Vincent J. Coates
Nathaniel Brenner
Norman V. Coates
John D. Heaton
Clifford F. Smedley
Kanegi Nagai
C. The following matters were voted upon at the annual meeting:
For Again Abstain
--------- ----- -------
1. To elect the following directors
to serve for the ensuing year:
Vincent J. Coates, Chairman 5,872,118 0 2,450
Nathaniel Brenner, Director 5,872,118 0 2,450
Norman V. Coates, Director 5,872,118 0 2,450
John D. Heaton, Director 5,872,118 0 2,450
Clifford F. Smedley, Director 5,872,118 0 2,450
Kanegi Nagai, Director 5,872,118 0 2,450
2. To ratify the appointment of
Deloitte & Touche LLP as independ-
ent auditors for the fiscal
year ending December 31, 1996. 5,871,518 2,750 300
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 6, 1996
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Apr-01-1996
<PERIOD-END> Jun-30-1996
<CASH> 1,680
<SECURITIES> 6,072
<RECEIVABLES> 10,976
<ALLOWANCES> 378
<INVENTORY> 4,976
<CURRENT-ASSETS> 25,476
<PP&E> 2,645
<DEPRECIATION> 0
<TOTAL-ASSETS> 28,308
<CURRENT-LIABILITIES> 5,111
<BONDS> 3,646
<COMMON> 11,156
0
0
<OTHER-SE> 8,199
<TOTAL-LIABILITY-AND-EQUITY> 28,308
<SALES> 11,545
<TOTAL-REVENUES> 14,625
<CGS> 4,902
<TOTAL-COSTS> 6,950
<OTHER-EXPENSES> 4,753
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,111
<INCOME-TAX> 1,316
<INCOME-CONTINUING> 1,795
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,795
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
</TABLE>
