<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(Mark One)
[X] Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (Fee Required)
For the fiscal year ended December 31, 1995 or
[_] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
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, California 94086
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (408) 746-1600
_________________________
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class Name of Each Exchange On Which Registered
------------------- -----------------------------------------
Common Stock, no par value NASDAQ
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
--- ---
The aggregate market value of the voting stock held by non-affiliates
of the Registrant as of March 11, 1996: $18,066,076 based upon the last sales
price reported for such date. For purposes of this disclosure, shares of
common stock held by officers, directors or persons who hold more than 5% of the
outstanding shares of common stock of the Registrant have been excluded in that
such persons may be deemed to be "affiliates" as that term is defined under the
rules and regulations promulgated under the Securities Exchange Act of 1934, as
amended. This determination of affiliate status is not necessarily a conclusive
determination for other purposes.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in any amendment to this Form 10-K [x].
The number of shares outstanding of the Registrant's common stock as
of March 11, 1996 was 7,982,642.
DOCUMENTS INCORPORATED BY REFERENCE
The information called for by Part III is incorporated by reference to
the definitive Proxy Statement for the Annual Meeting of Shareholders of the
Company to be held May 22, 1996 which will be filed with the Securities and
Exchange Commission no later than 120 days after December 31, 1995.
<PAGE>
NANOMETRICS INCORPORATED
ANNUAL REPORT -- FORM 10-K
TABLE OF CONTENTS
<TABLE>
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PAGE
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Part I
Item 1. Business................................................. I-1
Item 2. Properties............................................... I-8
Item 3. Legal Proceedings........................................ I-8
Item 4. Submission of Matters to a Vote of Security Holders...... I-8
Part II
Item 5. Market for Registrant's Common Equity and Related
Shareholder Matters.................................... II-1
Item 6. Selected Consolidated Financial Data..................... II-2
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... II-3
Item 8. Financial Statements and Supplementary Data.............. II-9
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.................... II-24
Part III
Item 10. Directors and Executive Officers of the Registrant....... III-1
Item 11. Executive Compensation................................... III-1
Item 12. Security Ownership of Certain Beneficial Owners
and Management......................................... III-1
Item 13. Certain Relationships and Related Transactions........... III-1
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K............................................ IV-1
Signatures............................................................ V-1
</TABLE>
(ii)
<PAGE>
PART I
THIS REPORT ON FORM 10-K CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACTION OF 1933, AS AMENDED, AND SECTION
21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THESE FORWARD-LOOKING
STATEMENTS INHERENTLY INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THE RESULTS ANTICIPATED IN SUCH FORWARD-
LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES
INCLUDE, WITHOUT LIMITATION, THE FACTORS SET FORTH UNDER "ITEM 7. MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- RISK
FACTORS," AND ELSEWHERE IN THIS REPORT.
ITEM 1. BUSINESS
--------
Introduction
- ------------
Nanometrics Incorporated ("Nanometrics" or the "Company"), incorporated in
California in 1975, designs, manufactures, markets and services optical
microscope-based measurement and inspection stations. The primary market served
by the Company is the semiconductor industry, which utilizes these instruments
to monitor processes employed in the fabrication of integrated circuits on
wafers, flat panel displays (FPDs) and magnetic recording heads (MRHs).
Nanometrics pioneered many developments in measurement and inspection and today
is a leading producer of automated instruments used to measure physical
dimensions of circuit elements. All of the Company's products contain
proprietary computer software and patented features.
Since 1977, the majority of the Company's revenues have been from the sale
of semiconductor measurement systems utilizing optical instrumentation. Newer
versions of Nanometrics' optical measurement systems utilize wide-range, high
sensitivity optics that also allow the measurement of most films used in
integrated circuit, FPD and MRH manufacturing today. In addition to its role in
supplying equipment to semiconductor manufacturers, the Company also
manufactures optical microspectrophotometer systems which are used largely in
forensic research laboratories.
Nanometrics' business has been guided mainly by the semiconductor
industry's rapid transition to smaller and more complex integrated circuits. As
devices have become more dense and as the number of process steps have
increased, the Company has responded with more efficient and sophisticated test
and measurement systems. In October 1994, a new Fully Automated Film Thickness
Measurement System, the NanoSpec 8000 was introduced to the market and began
shipping to customers in the second quarter of 1995. In December 1994, as a
result of R&D performed at its wholly owned subsidiary in Japan, the Company
introduced another major Automated Film Thickness Measurement System, the
NanoSpec 5500, aimed at large flat panel display manufacturing. These systems
are designed to meet the performance requirements of today's highly automated
and high throughput fabrication facilities.
I-1
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Products
--------
Nanometrics offers a range of products to address the varying needs of its
customers for film thickness measurement and inspection. Current products are as
follows:
NanoSpec/AFT Film Thickness Systems. These optical microscope-based systems
------------ ---- --------- -------
measure the dielectric film thickness and chemical composition of film materials
on integrated circuits, selectively and non-destructively. They measure the
spectrum of the optical interference pattern on the die to determine the
thickness and optical constants of different transparent films. A wide range of
"thick" and "thin" films can be measured, including silicon dioxide, silicon
nitride, polysilicon and photoresist on silicon, gallium arsenide, glass and
other substrates. Since its introduction in 1977, the NanoSpec/AFT has gone
through several model changes which have enhanced and improved performance based
on customer needs. With an installation base of over 4000 units, the
NanoSpec/AFT continues to be a leading product line of the Company.
Table-Top Systems
- -----------------
In 1992, Nanometrics introduced and began shipping two additions to the
NanoSpec/AFT family of Automatic Film Thickness Measurement Systems, the table-
top Models 4000 and 4100. These systems utilize the advanced IBM OS/2 (TM)
software platform and a revolutionary high-sensitivity ultraviolet-visible light
optical system that was the industry's first such measurement system. This
system first provided semiconductor manufacturers with the ability to measure
certain films and film properties important for fabrication of the latest fast,
very large scale integrated (VLSI) circuits. The Model 4150, an enhanced version
of the Model 4100 introduced in the middle of 1994, provides automated stage and
focusing systems for hands-off uniformity maps. The Model 4000 is a lower cost
system that provides manual stage and focusing controls. In 1995, the Company's
Japanese subsidiary introduced two table-top systems, the Models 5000 and 5100
specifically engineered to meet the needs of the Japanese market. These systems
are modified versions of the Models 4000 and 4150, respectively. The Company
believes that it has a significant share of the semi-automatic film thickness
measurement market for table-top systems such as the Models 4000, 4150, 5000 and
5100.
The Company offers unique capability because of its design of programmable
algorithms to the software platforms of the Models 4000 and 4150. This provides
the semiconductor process engineer with the freedom and flexibility to create
custom measurement programs to characterize the unique films and multi-layer
film stacks which have become common design elements in modern VLSI circuits.
The programmable measurement algorithms of the Models 4000 and 4150 also broaden
the instruments' markets by allowing the measurement of specialized films used
in the thin magnetic head and flat panel display equipment manufacturing
industries.
Fast, Automated Measurement and Analysis Systems
- ------------------------------------------------
In October 1994, Nanometrics introduced a new Fully Automated Film
Thickness Measurement System, the NanoSpec 8000, designed to meet the speed,
measurement, performance and reliability requirements which are essential to
high level factory automation and control of today's
I-2
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semiconductor mega-fabs. The Company believes that this system offers the lowest
cost of ownership of any system available today due to its high throughput
(greater than 100 wafers per hour), small footprint in costly clean room space,
robust construction and competitive price. It features fully automated operation
and high efficiency optics, which allow fast measurement and mapping of most
films used in the manufacture of integrated circuits. Advanced wafer handling
robot and stage systems are incorporated in the NanoSpec 8000. These mechanisms
use well-accepted principles which typically show more than 10,000 hours mean
time between failure , based on actual experience in field operation. The first
shipments of the NanoSpec 8000 were made in the second quarter of 1995. Ramp-up
to capacity was achieved in December 1995 when six NanoSpec 8000s were shipped
to customers.
For some time, semiconductor fabricators have wanted to monitor the
chemical composition of films which determine important electronic performance
of finished micro-chip circuits. In early 1995, Nanometrics and J.A. Woollam
Company made an agreement to incorporate Woollam's spectroscopic ellipsometer
into the Model 8000. The Woollam ellipsometer adds unique and powerful
capabilities to the Model 8000, allowing both the measurement and analysis of
the composition of films on advanced semiconductor wafers. The integration of
this important capability is expected to be completed in the second quarter of
1996 and introduced to key customers as soon as possible thereafter.
Also, in early 1995, SEMATECH, a consortium of large U.S. semiconductor
manufacturers, selected Nanometrics to build and design a tool which could
handle and measure film thickness of 300mm wafers. The previous standard sizes
ranged from 100mm to 200mm diameters handled by the Model 8000. This selection
of Nanometrics is part of a project SEMATECH is launching to develop tools for
the eventual industry shift to the manufacture of ICs on 300mm semiconductor
wafers. These larger diameter wafers are designed to allow increased efficiency
and lower production cost since many more chips per wafer can be simultaneously
manufactured. In response to their selection, Nanometrics unveiled the NanoSpec
8300 at the SEMICON/West trade show that same month. The Model 8300 is the
semiconductor industry's first 300mm film thickness measuring system. The system
is capable of handling a full range of wafer sizes, ranging in diameter from
100mm to 300mm (four to twelve inches). In addition, the NanoSpec 8300
incorporates both a spectroscopic ellipsometer and spectrophotometer, enabling
the system to accurately measure and analyze virtually any dielectric film used
in semiconductor manufacture today. The production version of the NanoSpec 8300
is expected to be completed in mid-1996. The foregoing statements regarding the
completion of the integration of the Woollam spectroscopic ellipsometer into the
Model 8000 and the completion of the production version of the NanoSpec 8300 are
subject to risks and uncertainties, and actual completion dates may vary
significantly.
At the Semicon Japan trade show held in Tokyo in December 1994, the Company
introduced a new film thickness metrology system for flat panel displays, the
Model 5500. The flat panel display industry, including displays for lap-top
computers, is projected to grow rapidly. Flat panel displays utilize transparent
films which must be accurately measured. The Model 5500 was developed by the
Company's Japanese subsidiary, which has been working closely with a number of
Japanese flat panel display manufacturers over the last several years. The Model
5500 is fully automated and accommodates substrates up to 650 x 550 mm.
Virtually all optically transparent films used in the manufacture of flat panel
displays can be measured. The first shipments of the Model 5500 took place in
the first quarter of 1995.
I-3
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NanoLine Linewidth Measuring Systems. The Model 50-2C is a competitive
-------- --------- --------- -------
table-top instrument in the semi-automated measurement of both linewidths and
pattern overlay alignment on semiconductor wafers. This system is composed of a
scanning microdensitometer microscope subsystem, a CRT display and a computer.
The technology is well proven and is effective in measuring linewidths to .8
microns and below on both wafers and photomasks.
Analytical Microscope Spectrometer Products. Nanometrics manufactures and
---------- ---------- ------------ --------
sells computerized microspectrophotometer systems used for substance and
materials analyses. These products have evolved from the above metrology
products already introduced which presently constitute the principal business of
the Company. In 1993, the Company introduced the Model 100DUV building block
microscope spectrophotometer. It has the unique capability of measuring spectra
over the wavelength range 195 to 900 nm from the deep ultraviolet region through
the visible light range to the near infrared. The Company has found important
applications for this product in crime laboratories, general industrial
research, biological studies of tissue and the identification and
characterization of the color or other properties of fibers, particles, and
variations in composition of films at the microscope level.
Backlog
- -------
As of December 31, 1995, the Company's backlog was approximately
$6,211,000, compared with approximately $1,700,000 at December 31, 1994. The
majority of this backlog is expected to be shipped in 1996. Historically, order
cancellations and order rescheduling have not been significant. However, there
can be no assurance that orders presently in backlog will not be cancelled or
rescheduled.
Marketing and Customers
- --------- --- ---------
Nanometrics sells its semiconductor equipment products worldwide to many of
the major integrated circuit manufacturers, including those which manufacture
circuits for use in their own products. Limited sales are also made to
manufacturers of semiconductor equipment and photomasks. Sales to one customer
represented approximately 10% of total revenue in 1995 and 11% of total revenue
in 1994. Sales to another customer represented approximately 15% of total
revenue in 1993.
The Company sells its products by means of direct sales and through
independent sales representatives whose territories cover the United States and
Canada. The majority of the Company's domestic sales representatives have sold
the Company's products for at least five years.
Export sales, which exclude sales by the Company's foreign subsidiary in
Japan, constituted approximately 25%, 30% and 30% of total revenues for 1995,
1994 and 1993, respectively. The Company's products are sold and distributed in
Japan by its wholly-owned subsidiary, Nanometrics Japan, Ltd. The Company's
products are sold in Europe to Intertrade Scientific ("ITS") an independent
dealer organization, which has offices in the United Kingdom, France, Germany
and Italy, which functions as a distributor and buys the Company's products for
resale to its customers. Direct exports of the Company's semiconductor equipment
to foreign customers and shipments to its subsidiary require general export
licenses. See Note 10 of Notes to Consolidated Financial Statements
I-4
<PAGE>
for information regarding total revenues, operating income (loss) and
identifiable assets of the Company's foreign operations.
The Company believes that the market for its products is well-defined, and
most sales are made to established customers. Marketing activities include
participation in numerous domestic and foreign trade shows, advertising in trade
magazines and periodic direct mailings.
Service
- -------
Nanometrics provides warranty and post-warranty service from its corporate
office in California. The Company also has service operations based in Arizona,
Massachusetts, Texas and Pennsylvania. In Europe, local service and spare parts
are provided by ITS. In the Far East, service is provided by Nanometrics Japan,
Ltd., and the Company's distributors and representatives provide service in
other countries. Starting in January 1996, the Company will open sales and
service offices in Korea and Taiwan to provide stronger support to a growing
customer base in those countries.
Nanometrics provides a one year warranty on parts and labor for products
sold domestically and in foreign markets. Revenues from post-warranty services
(Service Revenue), including sales of replacement parts, represented
approximately 20%, 29% and 21% of 1995, 1994 and 1993 total consolidated
revenues, respectively.
Competition
- -----------
Competition in the markets for the Company's film thickness measurement and
inspection systems continues to intensify as domestic and foreign manufacturers
continue to introduce competitive products, including automated film thickness
measurement and inspection systems. The Company is a leading supplier of
spectrophotometric film thickness measurement systems to the semiconductor
industry; however, its measurement and inspection systems face intense
competitive pressure from numerous manufacturers. Most of the Company's
competitors have strong financial resources, broad product lines, good customer
service and a large established customer base.
Nanometrics believes that the principal competitive factors in its markets
are the technical capabilities and characteristics of systems offered (including
automation and software capability), proven product reliability, quality of
service, name recognition, and price. The Company believes that it competes
favorably with respect to these factors, but continues to develop and design new
and improved products in order to remain competitive. During 1995, the Company
invested $2.6 million in research and development or approximately 12% of total
revenues.
The Company conducts some manufacturing of its products in Japan, where
modifications are required to better serve the needs of the local Japanese
markets and to address intense competition for sales.
Manufacturing
- -------------
The Company's manufacturing activities consist of assembling and testing
components and subassemblies obtained from outside suppliers. Accordingly, the
Company's manufacturing operations
I-5
<PAGE>
are not capital equipment intensive, but reflect the Company's reliance on
systems engineering and software development.
Some components and subassemblies of the Company's principal products are
technically advanced and available from only one or two suppliers, which in some
cases are not U.S. companies. As a partial safeguard against interruption or
termination of supplies, the Company attempts to maintain its inventory of such
items in quantities estimated to be sufficient to permit time for product
redesign, if necessary. However, the Company could be adversely affected if a
sole source of supply was terminated and product redesign could not be completed
in the time estimated or involved other unanticipated problems.
The Company has manufacturing operations in Japan through its Japanese
subsidiary. The Company currently ships product kits to its Japanese subsidiary,
which are then assembled, tested and shipped to customers.
Research and Development
- -------- --- -----------
The Company's current research and development efforts are directed toward
enhancing existing products and developing and introducing new products to
achieve technological leadership and to address a wider range of customer needs.
The Company is working to develop potential applications of new and emerging
technologies, including improved methods of measurement. These efforts are
conducted primarily at its facilities in California and, to a lesser extent, at
its Japanese subsidiary. Expenditures for research and development during 1995,
1994 and 1993 were $2.6 million, $2.4 million and $2.2 million and represented
12%, 18% and 13% of total consolidated revenues respectively.
Patents and Trademarks
- ------- --- ----------
Nanometrics actively pursues a program of filing patent applications to
seek protection of technologically sensitive features of its products. The
Company holds numerous United States patents and additional patents in Japan and
Europe. Additionally, the Company has several patent applications pending in the
United States and abroad which cover various features of its optical systems.
The United States patents, issued during the period 1979 to 1995, will expire
from 1996 to 2012.
The validity of the Company's patents has not been adjudicated by any
court. Competitors may bring legal challenges to the validity of one or more of
these patents, or attempt to circumvent the patents. While the Company does not
anticipate any challenges to the validity of its patents, there can be no
assurance that either of such activities by competitors will not be successful.
The Company has licensed some of its technology to other manufacturers in the
past. Although the Company believes that its patents are valuable, the Company
also depends on its trade secrets and the innovative skills of its technical
personnel to maintain its competitive position.
I-6
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Executive Officers of the Registrant
- --------- -------- -- --- ----------
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position with the Company
- ---- --- -------- ---- --- -------
<S> <C> <C>
Vincent J. Coates 71 Chairman of the Board, Chief Executive
Officer, Secretary
John Heaton 36 Director, Vice President and General Manager
Paul B. Nolan 41 Vice President and Chief Financial Officer
</TABLE>
Mr. Vincent Coates is the father of Mr. Norman Coates, a director of the
Company. There are no other family relationships among any of the executive
officers and directors of the Company. All directors hold office until the next
annual meeting of shareholders of the Company and until their successors have
been elected and qualified. Officers are elected by and serve at the discretion
of the Board of Directors.
Mr. Vincent Coates has been Chairman of the Board since the Company was
founded. He served as President from the founding through July 1988 except for
the period January 1986 through February 1987 when he served exclusively as
Chief Executive Officer. He is currently the Chief Executive Officer of the
Company and was elected secretary in February 1989.
Mr. Heaton joined the Company in September 1990 and in March 1994 he was
elected Vice President. In July 1995 he was appointed to the Board of Directors.
Mr. Heaton served as Equipment Engineer at National Semiconductor prior to
joining the Company.
Mr. Nolan joined the Company in March 1989 and in March 1994 he was elected
Vice President and Chief Financial Officer. Mr. Nolan served as Senior Financial
Analyst at Harris Corporation prior to joining the Company.
Employees
- ---------
At December 31, 1995, the Company employed 122 persons worldwide on a full-
time basis, including 32 in research and development, 30 in manufacturing and
manufacturing support, 47 in marketing, sales and field service and 13 in
general administration and finance. None of these employees is represented by a
union and the Company has never experienced a work stoppage as a result of union
actions. Many of the Company's employees have specialized skills of value to the
Company. Nanometrics' future success will depend in large part upon its ability
to attract and retain highly skilled technical, managerial, financial and
marketing personnel, who are in great demand in the industry. Nanometrics
considers its employee relations to be good.
I-7
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ITEM 2. PROPERTIES
----------
The Company's principal manufacturing and administrative facility is
located in Sunnyvale, California in a leased building with approximately 35,000
square feet. The lease on this building began in May 1992 and expires in April
1997. See Note 7 of Notes to Consolidated Financial Statements. During 1995, the
Company's Japanese subsidiary also leased some sales and service facilities.
Rent expenses for the Company's facilities was approximately $420,000 in 1995.
The Company owns a 15,000 square foot facility near Narita International
Airport in Japan. This facility is utilized by the Company's Japanese subsidiary
for sales, service, engineering and manufacturing processes which are specific
to the Japanese market.
ITEM 3. LEGAL PROCEEDINGS
----- -----------
Some customers using certain products of the Company have received notices
of infringement from Technivision Corporation/Jerome Lemelson alleging that
equipment used in the manufacture of semiconductor products infringes his
patents. Certain of these customers have notified the Company that they may seek
indemnification from the Company for any damages and expenses resulting from
this matter. Certain of the Company's customers are engaged in litigation with
Mr. Lemelson involving a number of his patents, and are challenging the validity
of these patents and whether these patents are infringed. At this time, the
litigation is still in the pre-trial stage. Although the ultimate outcome of
these matters is not presently determinable, management believes that the
resolution of all such pending matters will not have a material adverse affect
on the Company's financial position or results of operations although there can
be no assurance of such.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------- -- ------- -- - ---- -- -------- -------
No matters were submitted to a vote of security holders during the quarter
ended December 31, 1995.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
------ --- --- ------------ ------ ------ --- -------
SHAREHOLDER MATTERS
----------- -------
The Company's Common Stock had been traded on The Nasdaq National Stock
Market under the symbol "NANO" since the Company's initial public offering in
1984, until February 24, 1995 when the Nasdaq Stock Market Inc. began listing
the Company's Common Stock on the Nasdaq SmallCap Market using the symbol
"NANOC" under a temporary exception which required that the Company maintain a
minimum market value of $1 million on its public float. On August 9, 1995 the
Company's common stock began trading again on the Nasdaq National Stock Market
under the symbol "NANO". The following table sets forth, for the periods
indicated, the range of high and low sale prices as reported on the Nasdaq
National Market System. December 31 was the last trading day of the 1995 and
1994 fiscal years.
<TABLE>
<CAPTION>
Year ended December 31, 1995 1994
- ----------------------- ------ ------
High Low High Low
<S> <C> <C> <C> <C>
First Quarter $ 2.19 $0.44 $1.38 $0.94
Second Quarter 6.50 1.44 1.31 0.53
Third Quarter 10.50 5.00 0.88 0.50
Fourth Quarter 9.25 4.25 0.88 0.44
</TABLE>
As of March 11, 1996, there were approximately 135 shareholders of record
and approximately 450 beneficial shareholders. The last sale price reported on
the NASDAQ National Market System on March 11, 1996 was $7.00 per share.
The Company has never paid cash dividends. It is the present policy of the
Company's Board of Directors to retain earnings to finance expansion of the
Company's operations, and the Company does not expect to pay dividends in the
foreseeable future.
II-1
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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
-------- ------------ --------- ----
The following table summarizes certain selected consolidated financial
data. See Consolidated Financial Statements included herein.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------------------
1995 1994 1993 1992 1991
------- ------ ------ ------- -------
( In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of
- --------- --
Operations Data
- ---------- ----
Total revenues $22,759 $13,579 $16,570 $15,213 $18,047
======= ======= ======= ======= =======
Operating income(loss) $ 2,641 $(2,231) $ 216 $ (838) $ (902)
======= ======= ======= ======= =======
Income (loss) before
cumulative effect of
accounting change $ 4,277 $(2,074) $ 555 $ (416) $ (434)
Cumulative effect of
accounting change (1) - - (200) - -
------- ------- ------- ------- -------
Net Income (loss) $ 4,277 $(2,074) $ 355 $ (416) $ (434)
======= ======= ======= ======= =======
Income (loss) per
common and
equivalent share:
Income (loss) before
cumulative effect of
accounting change $ .52 $ (.28) $ .08 $ (.06) $ (.06)
Cumulative effect of
accounting change - - (.03) - -
------- ------- ------- ------- -------
Net income (loss) $ .52 $ (.28) $ .05 $ (.06) $ (.06)
======= ======= ======= ======= =======
Weighted average
common and
equivalent shares
outstanding 8,280 7,304 7,016 6,949 6,926
======= ======= ======= ======= =======
Balance Sheet Data:
- -------------------------
Working Capital $18,338 $10,205 $11,809 $11,308 $11,632
Total Assets 25,167 15,786 18,414 17,404 19,573
Long-term Debt 3,528 421 578 961 1,392
Shareholders' Equity 17,574 12,995 14,427 13,533 14,032
</TABLE>
(1) Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes", and recognized the
cumulative effect of adoption of the change in accounting for income taxes of
$200,000 ($0.03 per share). See Notes 1 and 5 of Notes to Consolidated Financial
Statements.
II-2
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
------------ ---------- --- -------- -- --------- ---------
AND RESULTS OF OPERATIONS
--- ------- -- ----------
RESULTS OF OPERATIONS
Total revenues for 1995 were $22.8 million, a 68% increase from 1994. The
increase in total revenues resulted primarily from increased market acceptance
and sales of the Company's flagship NanoSpec 8000 product family, continued
strength in sales of tabletop metrology systems and sales from markets outside
the U.S. including Korea and Japan. Total revenues for 1994 were $13.6 million,
an 18% decrease from 1993 total revenues of $16.6 million which resulted from
increased competition that reduced the unit sales of higher priced, automated
systems.
Cost of sales as a percentage of net sales decreased to 45% in 1995 from
53% in 1994 primarily because of a shift in product mix and a decline in fixed
operating costs as a percent of higher sales volume. Cost of sales as a
percentage of net sales increased to 53% in 1994 from 48% in 1993 as a result of
lower sales volume resulting in higher per unit manufacturing costs. The Company
may experience fluctuations in gross margins as a result of competitive
pressures, changes in product mix, product introductions and transitions,
varying production levels, and fluctuations in material and labor costs among
other factors.
Service revenues increased to $4.6 million in 1995 from $3.9 million in
1994 and $3.4 million in 1993. The increase in 1995 resulted from higher levels
of repairs and accessory sales in the U.S. and Japan. Cost of service as a
percentage of service revenue was 73% in 1995, unchanged from 73% in 1994 and
slightly higher than 71% in 1993.
Research and development expenses for 1995 were higher than 1994 levels by
$226,000 or 9%. Research and development expenses for 1994 were higher than 1993
levels by $228,000 or 10%. These increases were primarily due to additional
personnel hired to develop new products and features. The Company continues to
be committed to the development of new and enhanced products and believes that
new product introductions will play an important and necessary role in obtaining
future revenues. The Company expects that spending for research and development
in 1996 will be comparable to 1995 levels.
Selling expenses increased $766,000 in 1995 or 26% when compared to 1994 as
a result of both higher sales commission expenses from increased sales and
startup costs in establishing new sales offices in Korea, Taiwan, Texas and
Oregon in 1995. Selling expenses during 1994 decreased $519,000 or 15% when
compared to 1993 as a result of lower sales commission expenses due to lower
revenue levels. During 1995 selling expenses represented 16% of total
consolidated revenues, compared to 22% and 21% in 1994 and 1993, respectively.
This decrease was due primarily to fixed selling expenses growing at a slower
rate than revenues in 1995.
II-3
<PAGE>
General and administrative expenses in 1995 decreased by $289,000 or 12%
compared to 1994. General and administrative expenses during 1994 increased by
$559,000 or 29% when compared to 1993. The general and administrative expenses
in 1994 were higher than in 1995 and 1993 primarily because of a $517,000
writeoff of a doubtful receivable in 1994. During 1995 general and
administrative expenses represented 10% of total consolidated revenues, compared
to 18% and 12% in 1994 and 1993, respectively.
Other income increased $639,000 or 345% in 1995 compared to 1994 as a
result of higher interest income and more favorable exchange rate results. Other
income decreased $183,000 or 50% in 1994 compared to 1993 levels. The larger
amount of other income received in 1993 resulted primarily from an insurance
settlement for some damaged property and from more favorable exchange rate
results.
The Company's effective income tax rate differed from the U.S. statutory
rate in 1995 because the results for 1995 included a $1.3 million favorable
income tax adjustment to reverse the valuation allowance for certain deferred
tax assets in accordance with SFAS 109. The effective income tax rate differed
from the U.S. statutory rate during 1994 as a result of non-deductible expenses
and an increase in the valuation allowance for deferred tax assets. The
effective income tax rate for 1993 differed from the U.S. statutory rate
primarily as a result of losses without current benefit and other nondeductible
expenses partially offset by a reduction in the valuation allowance for deferred
tax assets. See Note 5 of Notes to Consolidated Financial Statements.
The Company adopted Statement of Financial Accounting Standard No. 109
(SFAS 109), "Accounting for Income Taxes", effective January 1, 1993. The
cumulative effect of adopting SFAS 109 on the Company's consolidated statement
of operations was to decrease net income by $200,000 ($.03 per share) for the
year ended December 31, 1993.
The Company reported an operating profit of $2,641,000 and net income of
$4,277,000 or $.52 per share in 1995 compared to an operating loss of $2,231,000
and a net loss of $2,074,000 or $.28 in 1994 and an operating profit of $216,000
and net income of $355,000 or $.05 per share in 1993. The impact of inflation on
the Company's results of operations has not been significant.
During each quarter, the Company sells a relatively small number of
systems, and therefore a slight change in the timing of shipments can have a
significant impact on quarterly results of operations. The Company's backlog at
the beginning of each quarter generally does not include all systems sales
needed to achieve expected revenues for that quarter. Consequently, the Company
will often be dependent on obtaining orders for shipments in the same quarter
that the order is received. Moreover, customers may reschedule shipments, and
production difficulties could delay shipments. Accordingly, the Company's
results of operations are subject to significant variability from quarter to
quarter and could be adversely affected for a particular quarter if shipments
for that quarter were lower than anticipated. Because a relatively small group
of customers may account for a significant percentage of the Company's sales in
any given period, the loss of any single customer could have a short-term
adverse effect on the Company's results of operations.
II-4
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
During 1995, operating activities provided cash of $2.2 million primarily
from higher net income partially offset by higher working capital requirements.
Financing activities provided cash of $4.2 million primarily from a loan of $4.7
million from a bank in Japan using the Company's building and adjacent land in
Japan as collateral. Investing activities used cash of $4.1 million, primarily
from the proceeds of the bank financing, for short-term investments in the U.S.
During 1994, operating activities used cash of $2.0 million and financing
activities used cash of $385,000. The Company reduced its short-term investments
by $3.4 million in 1994 to meet these cash flow requirements. During 1993, the
Company's operating activities provided cash of $1.4 million primarily from
reductions in working capital requirements and net income. Investing activities
used cash of $1.0 million in 1993, primarily for the purchase of short-term
investments. Financing activities used cash of $406,000 in 1993, primarily for
long-term debt repayments.
The Company believes that its working capital, including cash and short-
term investments of approximately $8.1 million, will be sufficient to meet its
needs at least through the end of 1996. At December 31, 1995, the Company had
$18.3 million in working capital and its current ratio was 5.9 to 1.
Total cash and short-term investments increased by approximately $5.4
million in 1995, primarily as a result of amounts provided by operating
activities including net income and from the $4.7 million bank financing taken
in Japan.
Outstanding borrowings at December 31, 1995 totalled approximately $4.1
million of which $553,000 is due within one year. See Note 6 of Notes to
Consolidated Financial Statements.
The Company has evaluated in the past and will continue to evaluate the
acquisition of products, technologies or businesses that are complementary to
the Company's business. These activities may result in product and business
investments.
RISK FACTORS
The Company makes no projections as to its future operating results or
financial condition. The following risk factors should be considered by
shareholders of and by potential investors in the Company in evaluating the
Company, its business, financial condition and business prospects.
II-5
<PAGE>
Significant Fluctuations in Operating Results. The Company's operating
results have fluctuated significantly in the past and may fluctuate
significantly in the future. The Company anticipates that factors affecting its
future operating results will include the cyclicality of the semiconductor
industry and the markets served by the Company's customers, the timing of
significant orders, patterns of capital spending by customers, the proportion of
direct sales and sales through distributors and representatives, the proportion
of international sales to net sales, changes in pricing by the Company, its
competitors, customers or suppliers, market acceptance of new and enhanced
versions of the Company's products, the timing of new product announcements and
releases of products by the Company or its competitors, delays, cancellations or
rescheduling of orders due to customer financial difficulties or otherwise and
lengthy sales cycles. Gross margins may vary materially based on a variety
factors including the mix and average selling prices of product sales and the
cost associated with new product introductions.
Limited Systems Sales; Backlog. The Company derives a substantial portion
of its sales from the sale of a relatively small number of systems which
typically range in purchase price from approximately $40,000 to $350,000. As a
result, the timing of recognition of revenue for a single transaction could have
a material adverse affect on the Company's sales and operating results. The
Company's backlog at the beginning of a quarter typically does not include all
sales required to achieve the Company's sales objective for that quarter.
Moreover, all customer purchase orders are subject to cancellation or
rescheduling by the customer with limited or no penalties. Therefore, backlog at
any particular date is not necessarily representative of actual sales for any
succeeding period. The Company's net sales and operating results for a quarter
may depend upon the Company obtaining orders for systems to be shipped in the
same quarter that the order is received. The Company's business and financial
results for a particular period could be materially adversely affected if an
anticipated order for even one system is not received in time to permit shipment
during such period.
Highly Competitive Industry. The semiconductor capital equipment industry
is intensely competitive. A substantial investment is required by customers to
install and integrate capital equipment into a semiconductor production line. As
a result, once a semiconductor manufacturer has selected a particular vendor's
capital equipment, the Company believes that the manufacturer generally relies
upon that equipment for the specific production line application and frequently
will attempt to consolidate its other capital equipment requirements with the
same vendor. Accordingly, the Company expects to experience difficulty in
selling a particular customer for a significant period of time if that customer
selects a competitor's capital equipment. The Company currently experiences
intense competition worldwide from a number of foreign and domestic
manufacturers, including Tencor Instruments and Therma-Wave, some of which have
substantially stronger financial resources than the Company. The Company expects
its competitors to continue to develop enhancements to and future generations of
competitive products that may offer improved price or performance features.
II-6
<PAGE>
New product introductions and enhancements by the Company's competitors could
cause a significant decline in sales or loss of market acceptance of the
Company's systems in addition to intense price competition or otherwise make the
Company's systems or technology obsolete or noncompetitive. Increased
competitive pressure could lead to reduced demand and lower prices for the
Company's products, thereby materially adversely affecting the Company's
operating results. There can be no assurance that the Company will be able to
compete successfully in the future.
Rapid Technological Change; Importance of Timely Product Introduction. The
semiconductor manufacturing industry is subject to rapid technological change
and new production introductions and enhancements. The Company's ability to
remain competitive will depend in part upon its ability to develop new and
enhanced systems and to introduce these systems at competitive prices and in a
timely and cost effective manner to enable customers to integrate the systems
into their operations either prior to or upon commencement of volume product
manufacturing. In addition, new product introductions or enhancements by the
Company's competitors could cause a decline in sales or loss of market
acceptance of the Company's existing products. Increased competitive pressure
could also lead to intensified price-based competition resulting in lower prices
and margins, which would materially adversely affect the Company's business,
financial conditions and results of operations. The success of the Company in
developing, introducing and selling new and enhanced systems depends upon a
variety of factors, including product selections, timely and efficient
completion of product design and development, timely and efficient
implementation of manufacturing and assembly processes, effective sales and
marketing and product performance in the field. Because new product development
commitments must be made well in advance of sales, new product decisions must
anticipate both the future demand for the products under development and the
equipment required to produce such products. There can be no assurance that the
Company will be successful in selecting, developing, manufacturing and marketing
new products or in enhancing existing products.
Intellectual Property Rights. Although the Company attempts to protect its
intellectual property rights through patents, copyrights, trade secrets and
other measures, it believes that its financial performance will depend more upon
the innovation, technological expertise and marketing abilities of its employees
than upon such protection. There can be no assurance that any of the Company's
pending patent applications will be issued or that foreign intellectual property
laws will protect the Company's intellectual property rights. There can be no
assurance that any patent issued to the Company will not be challenged,
invalidated or circumvented or that the rights granted thereunder will provide
competitive advantages to the Company. Furthermore, there can be no assurance
that others will not independently develop similar products, duplicate the
Company's product, or, if patents are issued to the Company, design around the
patents issued to the Company. Although there are currently no pending claims or
lawsuits against the Company regarding any possible infringement claims, there
can be no assurance that infringement claims by third parties or claims for
indemnification resulting from infringement claims will not be asserted in the
future or that such assertions, if proven to have merit, will not materially
adversely affect the Company's business, financial condition and results of
operations. If any such claims are asserted against the Company, the Company may
seek to obtain a license under the third party's intellectual property rights.
There can
II-7
<PAGE>
be no assurance that a license will be available on reasonable terms or at all.
The Company could decide, in the alternative, to resort to litigation to
challenge such claim. Such challenges could be extremely expensive and time
consuming and could materially adversely affect the Company's business,
financial condition and results of operations. In addition, some customers of
the Company have received notices of infringement from Technivision
Corporation/Jerome Lemelson alleging that equipment used in the manufacture of
semiconductor products infringes his patents. A number of these customers have
notified the Company that they may seek indemnification from the Company for any
damages and expenses resulting from this matter. Certain of the Company's
customers have engaged in litigation with Mr. Lemelson involving a number of his
patents. Some of these cases have settled. Although the ultimate outcome of
these matters is not presently determinable, the Company believes that the
resolution of all such pending matters will not have a material adverse effect
on the Company's financial position or results of operations.
Sole or Limited Sources of Supply; Reliance on Subcontractors; Complexity
in Manufacturing Processes. Certain components, subassemblies and services
necessary for the manufacture of the Company's systems are obtained from a sole
supplier or limited group of suppliers. The Company does not maintain any long-
term supply agreements with any of its suppliers. The Company is relying
increasingly on outside vendors to manufacture many components and
subassemblies. The Company's reliance on sole or a limited group of suppliers
and the Company's increasing reliance on subcontractors involve several risks,
including a potential inability to obtain an adequate supply of required
components and reduced control of pricing and timely delivery of components and
subassemblies. Because the manufacture of certain of these components and
subassemblies is an extremely complex process and requires long lead times,
there can be no assurance that delays or shortages caused by suppliers will not
occur in the future. Certain of the Company's suppliers have relatively limited
financial and other resources. Any inability to obtain adequate deliveries or
any other circumstance that would restrict the Company's ability to ship its
products, could damage relationships with current and prospective customers and
could have a material adverse effect on the Company's business and results of
operations.
Cyclicality of Semiconductor Industry. The semiconductor industry has been
characterized by cyclicality. The industry has experienced significant economic
downturns at various times in the last decade, characterized by diminished
product demand, accelerated erosion of average selling prices and production
over-capacity. Recently, the semiconductor industry in general and its
suppliers, including the Company, have experienced a period of increased demand
and production capacity constraints. There is no assurance how long this period
will last or when a downturn in the semiconductor industry will occur, which
could adversely affect the Company. The Company may experience substantial
period-to-period fluctuations in future operating results due to general
industry conditions or events occurring in the general economy.
II-8
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
--------- ---------- --- ------------- ----
The financial statements filed herewith are listed in the index in Item 14.
II-9
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
of Nanometrics Incorporated:
We have audited the accompanying consolidated balance sheets of Nanometrics
Incorporated and subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1995. Our audits also
included the consolidated financial statement schedule listed in the Index at
Item 14.(a)2. These financial statements and the financial statement schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on the financial statements and the financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Nanometrics Incorporated and
subsidiaries at December 31, 1995 and 1994, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1995 in conformity with generally accepted accounting principles. Also, in
our opinion, the financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
As discussed in Note 5, in 1993 the Company changed its method of accounting for
income taxes to conform with Statement of Financial Accounting Standards
No. 109.
DELOITTE & TOUCHE LLP
San Jose, California
February 12, 1996
II-10
<PAGE>
NANOMETRICS INCORPORATED
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994 (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS 1995 1994
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 3,625 $ 2,135
Short-term investments 4,458 493
Accounts receivable, less allowance
for doubtful accounts of $380 and $270
in 1995 and 1994, respectively 7,567 4,881
Inventories 3,955 4,752
Deferred income taxes 2,069 -
Prepaid expenses and other 428 227
------- -------
Total current assets 22,102 12,488
PROPERTY, PLANT AND EQUIPMENT, Net 2,900 3,179
OTHER ASSETS 165 119
------- -------
TOTAL $25,167 $15,786
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,111 $ 696
Accrued payroll and related expenses 486 236
Other current liabilities 1,216 1,117
Income taxes payable 398 7
Current portion of long-term debt 553 227
------- -------
Total current liabilities 3,764 2,283
LONG-TERM DEBT 3,528 421
DEFERRED INCOME TAXES 301 87
------- -------
Total liabilities 7,593 2,791
------- -------
COMMITMENTS AND CONTINGENCIES (Note 7)
SHAREHOLDERS' EQUITY:
Common stock, no par value; 25,000,000
shares authorized; 7,883,910 and
7,370,978 outstanding 10,983 10,018
Retained earnings 6,394 2,117
Accumulated translation adjustment 197 860
------- -------
Total shareholders' equity 17,574 12,995
------- -------
TOTAL $25,167 $15,786
======= =======
</TABLE>
See notes to consolidated financial statements.
II-11
<PAGE>
NANOMETRICS INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1994 AND
1993
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
REVENUES:
Net sales $18,117 $ 9,655 $13,126
Service 4,642 3,924 3,444
------- ------- -------
Total revenues 22,759 13,579 16,570
------- ------- -------
COSTS AND EXPENSES:
Cost of sales 8,189 5,128 6,365
Cost of service 3,406 2,862 2,437
Research and development 2,631 2,405 2,177
Selling 3,712 2,946 3,465
General and administrative 2,180 2,469 1,910
------- ------- -------
Total costs and expenses 20,118 15,810 16,354
------- ------- -------
OPERATING INCOME (LOSS) 2,641 (2,231) 216
------- ------- -------
OTHER INCOME (EXPENSE):
Interest income 302 93 129
Interest expense (152) (49) (76)
Other, net 674 141 315
------- ------- -------
Total other income, net 824 185 368
------- ------- -------
INCOME (LOSS) BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 3,465 (2,046) 584
PROVISION (BENEFIT) FOR INCOME TAXES (812) 28 29
------- ------- -------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE 4,277 (2,074) 555
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR INCOME TAXES - - (200)
------- ------- -------
NET INCOME (LOSS) $ 4,277 $(2,074) $ 355
======= ======= =======
COMMON AND EQUIVALENT PER SHARE DATA:
Income (loss) before cumulative
effect of change in
accounting principle $0.52 $(0.28) $0.08
======= ======= =======
Net income (loss) $0.52 $(0.28) $0.05
======= ======= =======
COMMON AND EQUIVALENT SHARES USED IN
PER SHARE COMPUTATIONS 8,280 7,304 7,016
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
II-12
<PAGE>
NANOMETRICS INCORPORATED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (IN THOUSANDS)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCK ACCUMULATED TOTAL
--------------------- RETAINED TRANSLATION SHAREHOLDERS'
SHARES AMOUNT EARNINGS ADJUSTMENT EQUITY
<S> <C> <C> <C> <C> <C>
BALANCES, January 1, 1993 6,966 $ 9,768 $ 3,836 $ (71) $13,533
Issuance of common stock under
employee stock purchase plan 5 4 - - 4
Issuance of common stock under
stock option plan 148 87 - - 87
Accumulated translation adjustment - - - 448 448
Net income - - 355 - 355
----- ------- -------- -------- -------
BALANCES, December 31, 1993 7,119 9,859 4,191 377 14,427
Issuance of common stock under
employee stock purchase plan 12 8 - - 8
Issuance of common stock under
stock option plan 240 151 - - 151
Accumulated translation adjustment - - - 483 483
Net loss - - (2,074) - (2,074)
----- ------- -------- -------- -------
BALANCES, December 31, 1994 7,371 10,018 2,117 860 12,995
Issuance of common stock under
employee stock purchase plan 27 29 - - 29
Issuance of common stock under
stock option plan 486 322 - - 322
Tax benefit of stock option
transactions - 614 - - 614
Accumulated translation adjustment - - - (663) (663)
Net income - - 4,277 - 4,277
----- ------- -------- -------- -------
BALANCES, December 31, 1995 7,884 $10,983 $ 6,394 $ 197 $17,574
===== ======= ======== ======== =======
</TABLE>
See notes to consolidated financial statements.
II-13
<PAGE>
NANOMETRICS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (IN THOUSANDS)
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 4,277 $(2,074) $ 355
Reconciliation of net income (loss)
to net cash provided
by (used in) operating activities:
Depreciation and amortization 318 332 379
Deferred income taxes (1,826) 306 (89)
Changes in assets and liabilities:
Accounts receivable (2,886) 811 (938)
Inventories 766 (494) 1,167
Prepaid expenses and other (202) (125) 141
Other assets (60) 11 14
Accounts payable, accruals and
other current liabilities 782 (526) 162
Income taxes payable 1,050 (285) 172
------- ------- -------
Net cash provided by (used
in) operating activities 2,219 (2,044) 1,363
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments (8,786) (3,250) (8,362)
Sales/maturities of short-term 4,821 6,688 7,385
investments
Purchases of property and equipment (117) (31) (40)
------- ------- -------
Net cash provided by (used
in) investing activities (4,082) 3,407 (1,017)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings 4,700 - -
Repayments of long-term borrowings (822) (544) (497)
Sale of shares under employee stock
option and purchase plans 351 159 91
------- ------- -------
Net cash provided by (used
in) financing activities 4,229 (385) (406)
------- ------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (876) (53) (44)
------- ------- -------
NET CHANGE IN CASH AND EQUIVALENTS 1,490 925 (104)
CASH AND EQUIVALENTS AT BEGINNING
OF YEAR 2,135 1,210 1,314
------- ------- -------
CASH AND EQUIVALENTS AT END OF YEAR $ 3,625 $ 2,135 $ 1,210
======= ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest $ 135 $ 50 $ 76
======= ======= =======
Cash paid for income taxes $ 157 $ 161 $ -
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
II-14
<PAGE>
NANOMETRICS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS - Nanometrics Incorporated (the "Company") designs,
manufactures, markets and services optical microscope-based measurement and
inspection systems used primarily for manufacturing process control during
the fabrication of wafers used to make integrated circuits and flat panel
displays. In addition, the Company produces analytical instruments for
general use in biological and industrial research. The Company's products
are primarily sold to semiconductor and flat panel display manufacturers in
the United States, Asia and Europe, and its business is dependent on the
demand for semiconductors and electronic products using flat panel displays
(such as portable computers).
BASIS OF PRESENTATION - The consolidated financial statements include the
Company and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions are eliminated.
Although for presentation purposes the Company has indicated its year end
as December 31, its fiscal year actually ends on the Saturday nearest to
December 31. The Company's fiscal years for 1995, 1994 and 1993 ended on
December 30, 1995, December 31, 1994, and January 2, 1993. Fiscal 1995,
1994 and 1993 each contained 52 weeks.
FINANCIAL STATEMENT ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
CASH AND EQUIVALENTS - Cash and equivalents include cash and highly liquid
debt instruments with original maturities of three months or less when
purchased.
SHORT-TERM INVESTMENTS - The Company's short-term investments consist of
United States Treasury bills with maturities at the date of acquisition of
more than three months.
While the Company's intent is to hold debt securities to maturity, they are
classified as available-for-sale because the sale of such securities may be
required prior to maturity. Available-for-sale securities at December 31,
1995 are stated at cost which approximates fair market value.
CONCENTRATION OF CREDIT RISK - Financial instruments which potentially
subject the Company to concentrations of credit risk consist primarily of
accounts receivable and cash and equivalents and short-term investments.
The Company performs ongoing credit evaluations of its customers and
generally does not require collateral for sales on credit. The Company
maintains reserves for potential credit losses and such losses have
historically been within management's expectations. The Company invests its
cash and short-term investments generally in United States Treasury bills
that are primarily held by one broker.
INVENTORIES - Inventories are stated at the lower of cost (first-in, first-
out) or market.
II-15
<PAGE>
PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are stated at
cost. Depreciation is computed using straight line and accelerated methods
over the estimated useful lives of the assets ranging from three to 45
years. Leasehold improvements are amortized over the shorter of the
estimated useful lives of the improvements or the lease term.
REVENUE RECOGNITION - Revenues from product sales are recognized at the
time of shipment. Revenue from service contracts is recognized ratably over
the period of the contract. The Company sells the majority of its products
with a one-year repair or replacement warranty and records a provision for
estimated claims at the time of sale.
FAIR VALUE OF FINANCIAL INSTRUMENTS - Financial instruments include cash
equivalents, short-term investments, and long-term obligations. Cash
equivalents are stated at fair market value based on quoted market prices.
The short-term investments are stated at cost which approximates fair
market value. The recorded carrying amount of the Company's long-term
obligations approximates fair market value.
FOREIGN CURRENCY - The functional currency of the Company's Japanese
subsidiary is the yen. Accordingly, translation adjustments for the
Japanese subsidiary have been included in shareholders' equity. Gains and
losses from transactions denominated in currencies other than the
functional currency of the Company or its Japanese subsidiary are included
in other income and consist of gains of $623,000, $65,000 and $103,000 for
1995, 1994 and 1993, respectively.
INCOME TAXES - Effective January 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income
Taxes," which requires an asset and liability approach for financial
accounting and reporting of income taxes. Deferred income taxes reflect the
net tax effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts
used for income tax purposes, and net operating loss and tax credit
carryforwards.
COMMON AND EQUIVALENT PER SHARE DATA - Common and equivalent per share data
is computed using the weighted average number of common and dilutive common
equivalent shares outstanding. Common equivalent shares include dilutive
common stock options (using the treasury stock method) and are excluded in
loss periods as they are antidilutive.
RECLASSIFICATIONS - Certain prior year amounts in the accompanying
financial statements have been reclassified to conform to the current year
presentation.
2. INVENTORIES
Inventories at December 31 consist of the following:
<TABLE>
<CAPTION>
1995 1994
(IN THOUSANDS)
<S> <C> <C>
Raw materials and subassemblies $1,727 $1,225
Work in process 830 735
Finished goods 1,398 2,792
------ ------
$3,955 $4,752
====== ======
</TABLE>
II-16
<PAGE>
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31 consist of the following:
<TABLE>
<CAPTION>
1995 1994
(IN THOUSANDS)
<S> <C> <C>
Land $ 1,014 $ 1,048
Building 3,000 3,095
Machinery and equipment 1,667 1,733
Furniture and fixtures 251 247
Leasehold improvements 392 392
------- -------
6,324 6,515
Accumulated depreciation and amortization (3,424) (3,336)
------- -------
$ 2,900 $ 3,179
======= =======
</TABLE>
4. OTHER CURRENT LIABILITIES
Other current liabilities at December 31 consist of the following:
<TABLE>
<CAPTION>
1995 1994
(IN THOUSANDS)
<S> <C> <C>
Commissions payable $ 317 $ 584
Accrued warranty 198 132
Trade-in allowances 293 -
Other accrued liabilities 408 401
------ ------
$1,216 $1,117
====== ======
</TABLE>
5. INCOME TAXES
Income (loss) before income taxes and cumulative effect of the change in
accounting principle for the years ended December 31 consists of the
following:
<TABLE>
<CAPTION>
1995 1994 1993
(IN THOUSANDS)
<S> <C> <C> <C>
Domestic $1,964 $(2,331) $1,243
Foreign 1,501 285 (659)
------ ------- ------
Total $3,465 $(2,046) $ 584
====== ======= ======
</TABLE>
II-17
<PAGE>
The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
1995 1994 1993
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal $ - $(304) $ 313
State - 5 -
Foreign 461 21 5
------- ----- -----
461 (278) 318
------- ----- -----
Deferred income taxes (benefit):
Federal (825) 304 (218)
State (420) - (72)
Foreign (28) 2 1
------- ----- -----
(1,273) 306 (289)
------- ----- -----
Provision (benefit) for income taxes $ (812) $ 28 $ 29
======= ===== =====
</TABLE>
The Company adopted SFAS 109 effective January 1, 1993. The principal
impact to the Company was a change in the recognition criteria for deferred
tax assets. The cumulative effect of adopting SFAS 109 was to decrease net
income for the year ended December 31, 1993 by $200,000 ($0.03 per share).
Significant components of the Company's net deferred tax asset (liability)
at December 31 are as follows:
<TABLE>
<CAPTION>
1995 1994
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Reserves and accruals not currently $1,234 $ 1,504
deductible
Capitalized inventory costs 244 233
Net operating loss carryforwards 230 540
Tax credit carryforwards 561 262
------ -------
Total deferred tax assets 2,269 2,539
Valuation allowance (200) (2,539)
------ -------
2,069 -
------ -------
Deferred tax liabilities:
Depreciation (50) (54)
Other (251) (33)
------ -------
Total deferred tax (301) (87)
liabilities ------ -------
Net deferred tax asset (liability) $1,768 $ (87)
====== =======
</TABLE>
The valuation allowance for deferred tax assets as of December 31, 1994 was
$2.5 million. The net change in the valuation allowance for the year ended
December 31, 1995 was a decrease of $2.3 million. Of this amount, $1.0
million resulted from the realization of temporary differences and loss
carryforwards during the year. The remaining $1.3 million decrease resulted
from the Company's reevaluation during the fourth quarter of 1995 that it
is more likely than not that it will generate taxable income sufficient to
realize a portion of the tax benefit associated with future deductible
temporary differences and related loss and credit carryforwards prior to
their expiration. A valuation allowance of $200,000 remains at December 31,
1995, and is attributable to foreign tax credit carryforwards.
II-18
<PAGE>
Following is a summary of differences between income taxes computed by
applying the statutory federal income tax rate to income (loss) before
income taxes and the provision for income taxes:
<TABLE>
<CAPTION>
1995 1994 1993
(IN THOUSANDS)
<S> <C> <C> <C>
Income taxes (benefit) computed at 35%
U.S. statutory rate $ 1,213 $(716) $ 204
Nondeductible expenses 84 82 80
Losses without current benefit - - 231
Change in valuation allowance (2,339) 662 (505)
Foreign taxes higher than U.S. taxes 225 - -
Other, net 5 - 19
------- ----- -----
Provision (benefit) for income taxes $ (812) $ 28 $ 29
======= ===== =====
</TABLE>
The Company has $129,000 of available tax credits and $337,000 of net
operating loss carryforwards for California income tax purposes which are
available through 1999. The Company also has $432,000 of available tax
credits and $584,000 of net operating loss carryforwards for federal income
tax purposes which are available through 2009.
6. LONG-TERM DEBT
Long-term debt at December 31 consists of the following:
<TABLE>
<CAPTION>
BANK LOAN DESCRIPTION 1995 1994
(IN THOUSANDS)
<S> <C> <C>
Real estate bank loan $ 232 $ 293
Building construction bank loan 174 300
Working capital bank loan 3,675 55
------ ----
Total 4,081 648
Current portion (553) (227)
------ ----
Long-term debt $3,528 $421
====== ====
</TABLE>
. The real estate bank loan is collateralized by the related land held by
the Company's Japanese subsidiary and used for its assembly plant. The
loan is denominated in Japanese yen ((Yen)18,800,000 at December 31,
1995) and bears interest at the rate of 6.2% per annum. The loan is
guaranteed by the United States parent, Nanometrics Incorporated and is
payable in quarterly installments with unpaid principal and interest due
June 2000.
. The building construction bank loan was obtained in connection with the
construction of an assembly plant by the Company's Japanese subsidiary.
The loan is secured by the related land and building and is guaranteed
by the United States parent, Nanometrics Incorporated. The loan is
denominated in Japanese yen ((Yen)6,000,000 at December 31, 1995) and
bears interest at the rate of 5.2% per annum. The loan is payable in
semiannual installments through March 1997.
II-19
<PAGE>
. In 1995, a new working capital bank loan was obtained for the Company's
Japanese subsidiary. A portion of the borrowing proceeds were used to
repay the remaining balance of the prior working capital bank loan. The
loan is secured by land and building and is guaranteed by the United
States parent, Nanometrics Incorporated. The loan is denominated in
Japanese yen ((Yen)340,000,000 at December 31, 1995) and bears interest
at the rate of 3.3% per annum. The loan is payable in quarterly
installments with unpaid principal and interest due May 2005.
At December 31, 1995, future annual maturities of long-term debt are as
follows (in thousands):
<TABLE>
<S> <C>
1996 $ 553
1997 495
1998 437
1999 437
2000 418
Thereafter 1,741
------
$4,081
======
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
The Company leases manufacturing and administrative facilities and certain
equipment under noncancellable operating leases. The Company's current
primary facility lease expires in April 1997 and includes a renewal option
for a five year extension. Rent expense for 1995, 1994 and 1993, was
approximately $420,000, $500,000 and $429,000, respectively. Future minimum
lease payments for each of the years ending December 31 are as follows (in
thousands):
<TABLE>
<S> <C>
1996 $412
1997 147
1998 13
1999 13
2000 4
----
$589
====
</TABLE>
The Company is party to various claims, legal actions and complaints in the
normal course of business. Although the ultimate outcome of these matters
is not presently determinable, management believes that the resolution of
all such pending matters will not have a material adverse effect on the
Company's financial position or results of operations.
8. SHAREHOLDERS' EQUITY
COMMON STOCK
The authorized capital stock of the Company consists of 25,000,000 common
shares, of which 22,500,000 shares have been designated "Common Stock" and
2,500,000 shares have been allocated to all other series of common shares,
collectively designated "Junior Common."
II-20
<PAGE>
STOCK OPTION PLANS
The Company is authorized to grant options to purchase shares of common
stock under the Directors' Stock Option Plan and the 1991 Incentive Stock
Option Plan (the Plans). These plans provide for the granting of either
incentive stock options or nonqualified stock options. Nonqualified stock
options are granted at a price not less than 50% of fair market value on
the date of grant. Incentive stock options are granted at a price not less
than fair market value on the date of grant. Options vest over a period of
one to three years and are exercisable for five years as set forth in the
stock option agreements.
Option activity for the Plans is summarized as follows:
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
-----------------------------
SHARES NUMBER OF PRICE
AVAILABLE SHARES PER SHARE
<S> <C> <C> <C>
Balances, January 1, 1993 1,240,000 1,751,300 $.375 - $2.25
Exercised - (148,300) $.375 - $.625
Granted (82,000) 82,000 $.875
Cancelled 40,000 (249,300) $.375 - $2.25
--------- ---------
Balances, December 31, 1993 1,198,000 1,435,700 $.375 - $2.25
Exercised - (239,700) $.625 - $.75
Granted (468,500) 468,500 $.5625 - $.9375
Cancelled 212,000 (380,800) $.5625 - $2.25
--------- ---------
Balances, December 31, 1994 941,500 1,283,700 $.375 - $1.625
Exercised - (486,428) $.375 - $.9375
Granted (636,700) 636,700 $.5625 - $10.00
Cancelled 122,500 (204,400) $.5625 - $2.06
--------- ---------
Balances, December 31, 1995 427,300 1,229,572 $.5625 - $10.00
========= =========
</TABLE>
Options to purchase 372,312 common shares were exercisable at December 31,
1995.
EMPLOYEE STOCK PURCHASE PLAN
The Company's 1986 Employee Stock Purchase Plan (the Plan) allows employees
to contribute up to 10% of their base compensation toward the purchase of
the Company's common stock at a price equal to 85% of the lower of the fair
market value on the day on which the participant enters the Plan, or the
fair market value on the day the stock is purchased. Purchases occur every
six months. The Board of Directors has reserved 250,000 shares of the
Company's common stock for issuance under the Plan. Under this Plan 127,054
shares of the Company's common stock has been issued through December 31,
1995.
II-21
<PAGE>
RECENTLY ISSUED ACCOUNTING STANDARD
In October 1995, the Financial Accounting Standards Board issued Statement
No. 123, "Accounting for Stock-Based Compensation." The new standard
defines a fair value method of accounting for stock options and other
equity instruments, such as stock purchase plans. Under this method,
compensation cost is measured based on the fair value of the stock award
when granted and is recognized as an expense over the service period, which
is usually the vesting period. This standard will be effective for the
Company beginning in 1996, and requires measurement of awards made
beginning in 1995.
The new standard permits companies to continue to account for equity
transactions with employees under existing accounting rules, but requires
disclosure in a note to the financial statements of the pro forma net
income and earnings per share as if the Company had applied the new method
of accounting. The Company intends to follow these disclosure requirements
for its employee stock plans. As a result, adoption of the new standard
will not impact reported earnings or earnings per share, and will have no
effect on the Company's cash flows.
9. PROFIT-SHARING AND RETIREMENT AND BONUS PLANS
No contributions were made by the Company in 1995, 1994 and 1993 to the
Company's discretionary profit-sharing and retirement plan. The Company
paid $188,000 and $53,000 in 1995 and 1993, respectively, under formal
discretionary cash bonus plans which cover all eligible employees. No such
cash bonuses were paid in 1994.
10. MAJOR CUSTOMER AND GEOGRAPHIC INFORMATION
Sales to one customer represented approximately 10% of total revenues in
1995 and 11% of total revenues in 1994. Sales to another customer
represented approximately 15% of total revenues in 1993. At December 31,
1995, one customer's accounts receivable balance accounted for 11% of
accounts receivable. At December 31, 1994 and 1993, no single customer's
accounts receivable balance accounted for 10% or more of accounts
receivable.
II-22
<PAGE>
Export sales constituted approximately 25%, 30% and 30% of total revenues
for 1995, 1994 and 1993, respectively. The majority of these export sales
have been to Asia and Europe. Transfers between geographic areas are
recorded at amounts generally above cost. Identifiable assets of geographic
areas represent those assets used in the Company's operations in each area.
The following table summarizes selected geographic financial information of
the Company at December 31.
<TABLE>
<CAPTION>
1995 1994 1993
(IN THOUSANDS)
<S> <C> <C> <C>
Total revenues:
United States $13,876 $ 7,770 $12,286
Japan 8,883 5,809 4,284
------- ------- -------
$22,759 $13,579 $16,570
======= ======= =======
Export sales:
Asia $ 3,020 $ 1,847 $ 3,950
Europe 2,326 1,493 913
Other 370 708 55
------- ------- -------
$ 5,716 $ 4,048 $ 4,918
======= ======= =======
Transfers between United States and
Japan eliminated in consolidation $ 2,564 $ 1,529 $ 1,408
======= ======= =======
Operating income (loss):
United States $ 741 $(3,013) $ 749
Japan 1,900 782 (533)
------- ------- -------
$ 2,641 $(2,231) $ 216
======= ======= =======
Identifiable assets:
United States $15,799 $ 8,391 $12,551
Japan 9,368 7,395 5,863
------- ------- -------
$25,167 $15,786 $18,414
======= ======= =======
</TABLE>
* * * * *
II-23
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
------- -- --- ------------- ---- ----------- -- ---------- ---
FINANCIAL DISCLOSURE
--------- ----------
None
II-24
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------- --- --------- -------- -- --- ----------
The section entitled "Election of Directors" appearing in the Registrant's
proxy statement for the annual meeting of shareholders to be held on May 22,
1996 sets forth certain information with respect to the directors of the
Registrant and is incorporated herein by reference. Certain information with
respect to persons who are or may be deemed to be executive officers of the
Registrant is set forth under the caption "Executive Officers" in Part I of this
report.
ITEM 11. EXECUTIVE COMPENSATION
--------- ------------
The section entitled "Executive Compensation" appearing in the Registrant's
proxy statement for the annual meeting of shareholders to be held on May 22,
1996, sets forth certain information with respect to the compensation of
management of the Registrant and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
-------- --------- -- ------- ---------- ------ --- ----------
The section entitled "Election of Directors" appearing in the Registrant's
proxy statement for the annual meeting of shareholders to be held on May 22,
1996, sets forth certain information with respect to the ownership of the
Registrant's Common Stock and are incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
------- ------------- --- ------- ------------
The section entitled "Transactions with Management" appearing in the
Registrant's proxy statement for the annual meeting of shareholders to be held
on May 22, 1996, sets forth certain information with respect to certain business
relationships and transactions between the Registrant and its directors and
officers and is incorporated herein by reference.
III-1
<PAGE>
SCHEDULE II
NANOMETRICS INCORPORATED
VALUATION AND QUALIFYING ACCOUNTS
Allowance for Doubtful Accounts
<TABLE>
<CAPTION>
Balance at Charged To Deductions- Balance
beginning costs and writeoffs at end
Year Ended of period expenses of accounts* of period
---------- ----------- ------------ ---------
<S> <C> <C> <C> <C>
December 31, 1995... $270,000 $110,000 $ 0 $380,000
========== =========== ============ =========
December 31, 1994... $260,000 $527,000 $517,000 $270,000
========== =========== ============ =========
December 31, 1993... $195,000 $ 82,000 $ 17,000 $260,000
========== =========== ============ =========
</TABLE>
* Includes recoveries of past due accounts previously written off.
S-1
<PAGE>
PART IV
ITEM 14. EXHIBITS FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
-------- --------- --------- --------- --- ------- -- ---- ---
(a) The following documents are filed as part of this Report:
1. Financial Statements. The following Consolidated Financial Statements
--------- ----------
of Nanometrics Incorporated and Independent Auditors' Report are filed
as part of this Annual Report.
Independent Auditors' Report
Consolidated Balance Sheets, at December 31, 1995 and 1994
For the years ended December 31, 1995, 1994 and 1993:
Consolidated Statements of Operations
Consolidated Statements of Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
2. Financial Statements Schedules. The following consolidated
--------- ---------- ---------
financial statement schedules of Nanometrics Incorporated are filed as
part of this Report and should be read in conjunction with the
Consolidated Financial Statements of Nanometrics Incorporated.
Financial Statement Schedules for the years ended December 31, 1995, 1994
and 1993.
Schedule Page
-------- ----
II - Valuation and Qualifying Accounts .......................... S-1
Schedules not filed herein are omitted because of the absence of
conditions under which they are required or because the information
called for is shown in the consolidated financial statements or notes
hereto.
(b) Reports on Form 8-K:
None
IV-1
<PAGE>
3. Exhibits.
--------
3.1.(1) Restated and Amended Articles of Incorporation of
Registrant filed July 7, 1982.
3.2.(1) Certificate of Amendment of Articles of Incorporation
filed January 31, 1983.
3.3.(1) Certificate of Amendment of Articles of Incorporation
filed July 28, 1983.
3.4.(1) Certificate of Amendment of Certificate of Determination of
Preferences of Series B Common Stock filed September 13,
1983.
3.5.(1) Certificate of Amendment of Articles of Incorporation filed
September 13, 1983.
10.1(1) 1981 Incentive Stock Option Plan, with form of Stock Option
Agreement.
10.2(1) Employee's Profit Sharing Plan, as amended.
10.3(1) Purchase Agreement dated November 9, 1982 between
Registrant and Warner-Lambert Technologies, Inc. and letter
Agreement dated November 9, 1982 between Registrant,
Warner-Lambert Technologies, Inc., Vincent J. Coates and
Leonard Welter.
10.4(2) Amendment to and Restatement of Redemption Agreement dated
March 4, 1993 between Vincent J. Coates and Registrant.
10.6(3) 1991 Stock Option Plan.
10.7(4) 1991 Director Option Plan.
21 Subsidiaries of Registrant.
23 Independent Auditors' Consent.
24 Power of Attorney (see page V-1).
27 Financial Data Schedule
IV-2
<PAGE>
1) Incorporated by reference to exhibits filed with Registrant's Registration
Statement on Form S-1 (File No. 2-93949), which became effective November
28, 1984.
2) Incorporated by reference to exhibit 10.10 filed with Registrant's
Form 10-K dated March 29, 1993.
3) Incorporated by reference to exhibit 4.1 filed with Registrant's
Registration Statement on Form S-8 (file number 33-43913) filed on November
14, 1991.
4) Incorporated by reference to exhibit 4.2 filed with Registrant's
Registration Statement on Form S-8 (file number 33-43913) filed on November
14, 1991.
IV-3
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos. 33-
8518, 33-8519 and 33-43913 of Nanometrics Incorporated on Form S-8 of our report
dated February 12, 1996, appearing in this Annual Report on Form 10-K of
Nanometrics Incorporated for the year ended December 31, 1995.
DELOITTE & TOUCHE LLP
San Jose, California
March 25, 1996
IV-4
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
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
Date: March 29, 1996 By: /s/ VINCENT J. COATES
-------------------------------
Vincent J. Coates, Chairman and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Vincent J. Coates, jointly and severally,
his attorneys-in-fact, each with full power of substitution, for him in any and
all capacities, to sign any amendments to this Report on Form 10-K, and to file
the same with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities and Exchange Act of
1934, this report has been signed by the following persons on behalf of the
registrant in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- -------------------------------------------- ------------------------- --------------
<S> <C> <C>
/s/ VINCENT J. COATES Chairman of the Board and March 29, 1996
- -------------------------------------------- Chief Executive Officer
(Vincent J. Coates) (Principal Executive Officer)
/s/ PAUL B. NOLAN Chief Financial Officer March 29, 1996
- -------------------------------------------- (Principal Accounting and
(Paul B. Nolan) Financial Officer)
/s/ JOHN D. HEATON Director, General Manager March 29, 1996
- --------------------------------------------
(John D. Heaton)
/s/ NORMAN V. COATES Director March 29, 1996
- --------------------------------------------
(Norman V. Coates)
/s/ NATHANIEL BRENNER Director March 29, 1996
- --------------------------------------------
(Nathaniel Brenner)
/s/ ROGER G. NOVESKY Director March 29, 1996
- --------------------------------------------
(Roger G. Novesky)
/s/ CLIFFORD F. SMEDLEY Director March 29, 1996
- --------------------------------------------
(Clifford F. Smedley)
</TABLE>
V-1
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> OCT-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 3,625
<SECURITIES> 4,458
<RECEIVABLES> 7,947
<ALLOWANCES> 380
<INVENTORY> 3,955
<CURRENT-ASSETS> 22,102
<PP&E> 2,900
<DEPRECIATION> 0
<TOTAL-ASSETS> 25,167
<CURRENT-LIABILITIES> 3,764
<BONDS> 3,528
0
0
<COMMON> 10,983
<OTHER-SE> 6,591
<TOTAL-LIABILITY-AND-EQUITY> 25,167
<SALES> 18,117
<TOTAL-REVENUES> 22,759
<CGS> 8,189
<TOTAL-COSTS> 11,595
<OTHER-EXPENSES> 8,523
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,465
<INCOME-TAX> (812)
<INCOME-CONTINUING> 4,277
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,277
<EPS-PRIMARY> .52
<EPS-DILUTED> .52
</TABLE>
