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, 1996
Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
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Commission file number 0-13470
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NANOMETRICS INCORPORATED
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(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
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (408) 746-1600
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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
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At October 11, 1996 there were 8,090,670 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 -
September 30, 1996 and December 31, 1995 . . . . . . . . . . . 3
Consolidated Statements of Operations -
Three months and nine months ended
September 30, 1996 and 1995 . . . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows -
Nine months ended September 30, 1996
and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . 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
2
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
NANOMETRICS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except share amounts)
(Unaudited)
ASSETS
September 30, December 31,
1996 1995
------------- ------------
Current assets:
Cash and equivalents ......................... $ 957 $ 3,625
Short-term investments ....................... 8,127 4,458
Accounts receivable, less allowance for
doubtful accounts of $404 and $380 ......... 9,485 7,567
Inventories .................................. 4,998 3,955
Prepaid and deferred income taxes ............ 1,673 2,069
Prepaid expenses and other ................... 658 428
------- -------
Total current assets ............................ 25,898 22,102
Property, plant and equipment, net .............. 2,756 2,900
Other assets .................................... 282 165
------- -------
$28,936 $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
September 30, December 31,
1996 1995
------------- ------------
Current liabilities:
Accounts payable ............................ $ 1,281 $ 1,111
Accrued payroll and related expenses ........ 565 486
Other current liabilities ................... 1,501 1,216
Income taxes payable ........................ 1,164 398
Current portion of long-term debt ........... 361 553
Total current liabilities ............... 4,872 3,764
Long-term debt ................................. 3,519 3,528
Deferred income taxes .......................... 185 301
------- -------
Total liabilities ........................ 8,576 7,593
Shareholders' equity:
Common stock, no par value;
25,000,000 shares authorized;
8,085,337 and 7,883,910 outstanding ....... 11,168 10,983
Retained earnings .......................... 9,215 6,394
Cumulative translation adjustment ........... (23) 197
------- -------
Total shareholders' equity ..................... 20,360 17,574
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$28,936 $25,167
======= =======
See Notes to Consolidated Financial Statements
4
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<TABLE>
NANOMETRICS INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share amounts)
(Unaudited)
<CAPTION>
Three Month Ended Nine Months Ended
September 30, September 30,
--------------------- ---------------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues:
Net sales ............................. $ 6,481 $ 4,945 $18,026 $12,501
Service ............................... 1,258 1,161 4,338 3,351
------- ------- ------- -------
Total revenues .................... 7,739 6,106 22,364 15,852
Costs and expenses:
Cost of sales ......................... 2,589 2,124 7,491 5,705
Cost of service ....................... 998 928 3,046 2,482
Research and development .............. 713 654 2,048 1,843
Selling ............................... 1,158 978 3,424 2,602
General and administrative ............ 639 557 1,791 1,583
------- ------- ------- -------
Total costs and expenses ........... 6,097 5,241 17,800 14,215
------- ------- ------- -------
Operating income ......................... 1,642 865 4,564 1,637
Other income, net ....................... 113 222 302 690
------- ------- ------- -------
Income before provision
for income taxes ........................ 1,755 1,087 4,866 2,327
Provision for income taxes ............... 728 245 2,044 599
------- ------- ------- -------
Net income ............................... $ 1,027 $ 842 $ 2,822 $ 1,728
======= ======= ======= =======
Per share amounts:
Net income per share ..................... $ .12 $ .10 $ .33 $ .21
======= ======= ======= =======
Weighted average shares
outstanding ............................ 8,514 8,444 8,549 8,167
======= ======= ======= =======
<FN>
See Notes to Consolidated Financial Statements
</FN>
</TABLE>
5
<PAGE>
NANOMETRICS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Nine Months Ended
September 30,
-----------------------
1996 1995
-------- --------
Operating activities:
Net income ....................................... $ 2,822 $ 1,728
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization .................. 227 241
Deferred income taxes .......................... 425 (218)
Changes in assets and liabilities:
Accounts receivable .......................... (2,039) (2,541)
Inventories .................................. (1,106) 634
Prepaid expenses and other ................... (572) (342)
Accounts payable and other liabilities ....... 575 363
Income taxes payable ......................... 683 579
-------- --------
Net cash provided by operating activities ........... 1,015 444
-------- --------
Investing activities:
Purchase of short-term investments ............... (10,546) (7,601)
Sales/maturities of short-term investments ....... 6,877 2,459
Capital expenditures ............................. (254) (93)
-------- --------
Net cash used in investing activities ............... (3,923) (5,235)
-------- --------
Financing activities:
Proceeds from long-term borrowings ............... 762 4,700
Repayments of long-term debt ..................... (688) (588)
Issuance of common stock ......................... 185 290
-------- --------
Net cash provided by financing activities ........... 259 4,402
-------- --------
Effect of exchange rate changes on cash ............. (19) (508)
-------- --------
Net change in cash and equivalents .................. (2,668) (897)
Cash and equivalents at beginning of period ......... 3,625 2,135
-------- --------
Cash and equivalents at end of period ............... $ 957 $ 1,238
======== ========
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest ........................... $ 91 $ 76
======== ========
Cash paid for income taxes ....................... $ 767 $ 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 Annual Report on 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) and
shares subscribed under the Employee Stock Purchase Plan.
Note 3. Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market
and consist of the following:
September 30, December 31,
1996 1995
------------- ------------
(Amounts in thousands)
Raw materials and subassemblies ...... $1,640 $1,727
Work in process ...................... 2,162 830
Finished goods ....................... 1,196 1,398
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$4,998 $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 September 30, 1996 were
$7,739,000, an increase of $1,633,000 or 27% from the comparable period in 1995.
For the nine months ended September 30, 1996, total revenues of $22,364,000
increased by $6,512,000 or 41% from the comparable period in 1995. Net sales of
$6,481,000 and $18,026,000 for the three months and nine months ended September
30, 1996, respectively, increased $1,536,000 or 31% and $5,525,000 or 44%,
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, to its customers in the
U.S. and the Far East. Service revenue of $1,258,000 and $4,338,000 for the
three months and nine months ended September 30, 1996, respectively, increased
$97,000 or 8% and $987,000 or 29%, 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 nine month periods
ended September 30, 1996 is not necessarily indicative of future results.
Cost of sales as a percentage of net sales decreased from 43% in the third
quarter of 1995 to 40% in the third 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 decreased slightly from 80% in the third quarter
of 1995 to 79% in the third quarter of 1996. Cost of sales as a percentage of
net sales for the nine months ended September 30, 1996 decreased to 42% from 46%
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
nine months ended September 30, 1996 decreased slightly to 70% from 74% a year
ago. This decrease was primarily attributable to relatively higher margins on
the increased sales of accessories in 1996.
Research and development expenses for the three month and nine month
periods ended September 30, 1996 increased $59,000 or 9% and $205,000 or 11%,
respectively, compared to the same periods in 1995 due primarily to the addition
of software engineers in the U.S.
Selling expenses for the three month and nine month periods ended September
30, 1996 increased by $180,000 or 18% and $822,000 or 32%, respectively,
compared to the same periods in 1995 primarily because of higher commission
expenses resulting from higher sales and the cost of opening additional sales
offices during the past 12 months.
General and administrative expenses for the three month and nine month
periods ended September 30, 1996 increased by $82,000 or 15% and 208,000 or 13%,
respectively, compared to the same periods in 1995 primarily as a result of
spending associated with increased operating activity.
Other income for the three month and nine month periods ended September 30,
1996 decreased $109,000 and $388,000, respectively, from the comparable periods
in 1995 due primarily to lower exchange rate gains in 1996.
The Company's effective tax rate for the three month and nine month periods
ended September 30, 1996 was 41% and 42%, respectively, compared to 23% and 26%
for the comparable prior year periods.
8
<PAGE>
The Company's effective tax rate was lower in 1995 due primarily to the
utilization of net operating loss carryforwards.
The Company reported an operating income of $1,642,000 and net income of
$1,026,000 for the third quarter of 1996 compared to an operating income of
$865,000 and net income of $842,000 for the same period in 1995. For the first
nine months of 1996, the Company reported an operating income of $4,574,000 and
net income of $2,821,000 which compared to an operating income of $1,637,000 and
net income of $1,728,000 for the same period in 1995.
Liquidity and Capital Resources
At September 30, 1996, the Company had working capital of $21,026,000
compared to $18,338,000 at December 31, 1995. The current ratio at September 30,
1996 was 5.3 to 1. The Company believes working capital including cash and
short-term investments of $9,084,000 will be sufficient to meet its needs at
least through the next twelve months. Operating activities for the first nine
months of 1996 provided cash of $1,015,000 primarily from net income which was
offset to some extent by increased accounts receivable and inventory, while the
purchase of short-term investments used $3,669,000, capital expenditures used
$254,000, a long-term loan from a Japanese bank provided $762,000, debt
repayment used $688,000 and issuance of common stock provided $185,000.
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 on Form 10-K.
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 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 5, 1996
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 957
<SECURITIES> 8,127
<RECEIVABLES> 9,889
<ALLOWANCES> 404
<INVENTORY> 4,998
<CURRENT-ASSETS> 25,898
<PP&E> 2,756
<DEPRECIATION> 0
<TOTAL-ASSETS> 28,936
<CURRENT-LIABILITIES> 4,872
<BONDS> 3,519
<COMMON> 11,168
0
0
<OTHER-SE> 9,192
<TOTAL-LIABILITY-AND-EQUITY> 28,936
<SALES> 18,026
<TOTAL-REVENUES> 22,364
<CGS> 7,491
<TOTAL-COSTS> 10,537
<OTHER-EXPENSES> 7,263
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,866
<INCOME-TAX> 2,044
<INCOME-CONTINUING> 2,822
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,822
<EPS-PRIMARY> .33
<EPS-DILUTED> .33
</TABLE>
