<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997 OR
--------------
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______________ TO
_______________
COMMISSION FILE NUMBER 0-13470
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NANOMETRICS INCORPORATED
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 94-2276314
- ----------------------------------- ---------------------------------
(STATE OR OTHER JURISDICTION OF (I. R. S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
310 DEGUIGNE DRIVE, SUNNYVALE, CA 94086
- ----------------------------------- ---------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (408) 746-1600
--------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
------- -------
At April 14, 1997 there were 8,277,107 shares of common stock, no par value,
issued and outstanding.
<PAGE>
NANOMETRICS INCORPORATED
INDEX
<TABLE>
<CAPTION>
Part I. Financial Information Page
----
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets -
March 31, 1997 (unaudited) and December 31, 1996....................................... 3
Consolidated Statements of Income -
Three months ended March 31, 1997
and 1996 (unaudited).................................................................... 4
Consolidated Statements of Cash Flows -
Three months ended March 31, 1997
and 1996 (unaudited).................................................................... 5
Notes to Consolidated Financial
Statements.............................................................................. 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations .......................................... 7
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K ........................................................... 9
Signatures ........................................................................................... 10
</TABLE>
2
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
NANOMETRICS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
March 31,
1997 December 31,
ASSETS (unaudited) 1996
----------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 1,969 $ 1,725
Short-term investments 7,639 6,657
Accounts receivable, less allowance for
doubtful accounts of $415 and $419 9,919 11,100
Inventories 5,556 5,078
Deferred income taxes 1,731 1,648
Prepaid expenses and other 614 882
------- -------
Total current assets 27,428 27,090
PROPERTY, PLANT AND EQUIPMENT, Net 2,406 2,600
OTHER ASSETS 265 274
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TOTAL $30,099 $29,964
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,576 $ 1,563
Accrued payroll and related expenses 616 533
Other current liabilities 864 763
Income taxes payable 548 1,271
Current portion of long-term debt 322 347
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Total current liabilities 3,926 4,477
LONG-TERM DEBT, Net of current portion 2,978 3,296
DEFERRED INCOME TAXES 30 131
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Total liabilities 6,934 7,904
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SHAREHOLDERS' EQUITY:
Common stock, no par value; 25,000,000 shares
authorized; 8,262,558 and 8,258,061 outstanding 11,844 11,833
Retained earnings 11,661 10,387
Accumulated translation adjustment (340) (160)
------- -------
Total shareholders' equity 23,165 22,060
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TOTAL $30,099 $29,964
======= =======
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE>
NANOMETRICS INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
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<S> <C> <C>
NET REVENUES:
Product sales $7,301 $5,554
Service 958 1,514
------ ------
Total net revenues 8,259 7,068
------ ------
COSTS AND EXPENSES:
Cost of product sales 2,737 2,369
Cost of service 863 1,003
Research and development 674 670
Selling 1,263 1,011
General and administrative 636 570
------ ------
Total costs and expenses 6,173 5,623
------ ------
OPERATING INCOME 2,086 1,445
OTHER INCOME, NET 79 72
------ ------
INCOME BEFORE PROVISION FOR INCOME TAXES 2,165 1,517
PROVISION FOR INCOME TAXES 892 683
------ ------
NET INCOME $1,274 $ 834
====== ======
NET INCOME PER COMMON AND EQUIVALENT SHARE $ 0.15 $ 0.10
====== ======
COMMON AND EQUIVALENT SHARES USED IN
PER SHARE COMPUTATION 8,673 8,551
====== ======
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
NANOMETRICS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,274 $ 834
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 77 72
Deferred taxes (460) 495
Changes in assets and liabilities:
Accounts receivable 90 (468)
Other receivables (48) (64)
Inventories (274) (387)
Prepaid expenses and other (25) (245)
Accounts payable and other liabilities 254 119
Income taxes payable (724) (278)
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Net cash provided by operating activities 164 78
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INVESTING ACTIVITIES:
Purchase of short-term investments (2,940) (1,185)
Sales/maturities of short-term investments 1,958 890
Capital expenditures (47) (18)
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Net cash used in investing activities (1,029) (313)
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FINANCING ACTIVITIES:
Repayments of long-term debt (81) (492)
Issuance of common stock 11 70
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Net cash used in financing activities (70) (422)
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EFFECT OF EXCHANGE RATE CHANGES ON CASH 1,179 (25)
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NET CHANGE IN CASH AND EQUIVALENTS 244 (682)
CASH AND EQUIVALENTS, at beginning of period 1,725 3,625
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CASH AND EQUIVALENTS, at end of period $ 1,969 $ 2,943
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest $ 25 $ 31
======= =======
Cash paid for income taxes $ 1,622 $ 392
======= =======
</TABLE>
See Notes to Consolidated Financial Statements
5
<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 1996 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 (in
thousands):
March 31, December 31,
1997 1996
------- --------
Raw materials and subassemblies $3,173 $1,855
Work in process 1,786 1,414
Finished goods 597 1,809
------ ------
$5,556 $5,078
====== ======
Note 4. Recently Issued Accounting Standard
In February 1997, the Financial Accounting Standards Board issued a
Statement of Financial Accounting Standards No. 128, "Earning per Share" (SFAS
128). The Company is required to adopt SFAS 128 in the first quarter of fiscal
1997 and will restate at that time earnings per share (EPS) data for prior
periods to conform with SFAS 128. Earlier application is not permitted.
SFAS 128 replaces current EPS reporting requirements and requires a dual
presentation of basic and diluted EPS. Basic EPS excludes dilution and is
computed by dividing net income by the weighted average of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock.
If SFAS 128 had been in effect during the current and prior year periods,
basic EPS would have been $ 0.15 and $ 0.11 for the quarters ended March 31,
1997 and 1996, respectively, and $ 0.15 and $ 0.11 for the year to date periods,
respectively. Diluted EPS under SFAS 128 would not have been significantly
different than primary EPS currently reported for the periods.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Total net revenues for the first quarter of 1997 were $8,259,000, an
increase of $1,191,000 or 17% from the same quarter in 1996. Product sales of
$7,301,000 increased $1,747,000 or 31% for the first quarter of 1997 compared to
the same period in 1996 resulting from increased demand for the Company's
automated products especially from customers in the U.S. and Taiwan. Service
revenue of $958,000 decreased $556,000 or 37% for the first quarter of 1997
compared to the same period in 1996. This decrease in service revenue is
primarily attributable to decreased sales of accessories in the U.S. and the Far
East in 1997. The Company believes that its revenue growth for the three months
ended March 31, 1997 is not necessarily indicative of future results.
Cost of product sales as a percentage of product sales decreased to 37% in
the first quarter of 1997 from 43% in the first quarter of 1996. This improved
cost of product sales ratio resulted primarily from higher sales volumes
resulting in lower per unit manufacturing costs. Cost of service as a percentage
of service revenue increased to 90% in the first quarter of 1997 from 66% in the
first quarter of 1996. This increase was primarily attributable to the decline
in the sales of accessories while fixed service costs were relatively constant
in the first quarter of 1997.
Research and development expenses for the first quarter of 1997 increased
$4,000 or 1% compared to the same period in 1996. This increase was mainly due
to higher costs associated with new product development which was partially
offset by the impact of the strengthening of the U.S. dollar against the
Japanese yen on engineering expenditures in Japan.
Selling expenses for the first quarter of 1997 increased by $252,000 or 25%
compared to the same period in 1996 primarily because of the addition of sales
and marketing staff in the second half of 1996.
General and administrative expenses for the first quarter of 1997 increased
by $66,000 or 12% primarily as a result of spending associated with increased
operating activity.
Other income increased $7,000 or 10% during the first quarter of 1997
compared to the same period in 1996 due primarily to higher interest income in
1997, resulting from higher average levels of cash and short-term investments.
The Company's effective tax rate decreased to 41.2% in the first quarter of
1997 from 45.0% in the first quarter of 1996 primarily due to proportionately
higher income in lower tax jurisdictions.
The Company reported an operating income of $2,086,000 and net income of
$1,274,000 for the first quarter of 1997 compared to an operating income of
$1,445,000 and net income of $834,000 for the same period in 1996.
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
is often dependent on obtaining orders for systems to be shipped 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.
7
<PAGE>
Liquidity and Capital Resources
- -------------------------------
At March 31, 1997, the Company had working capital of $23,502,000 compared
to $22,613,000 at December 31, 1996. The current ratio at March 31, 1997 was 7.0
to 1. The Company believes working capital including cash and short-term
investments of $9,608,000 will be sufficient to meet its needs at least through
the next twelve months. Operating activities for the first three months of 1997
provided cash of $164,000 primarily from net income offset to some extent by the
payment of income taxes, while the purchase of short-term investments net of
sales/maturities used $982,000, capital expenditures used $47,000, debt
repayment used $81,000 and issuance of common stock provided $11,000.
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 1996 Annual Report on Form 10-K.
The Company's actual results could differ materially from the results
anticipated in such forward-looking statements.
8
<PAGE>
NANOMETRICS INCORPORATED
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
EX27 - Financial Data Schedule
B. Reports on Form 8-K.
None.
9
<PAGE>
NANOMETRICS INCORPORATED
SIGNATURES
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: May 9, 1997
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,969
<SECURITIES> 7,639
<RECEIVABLES> 10,334
<ALLOWANCES> 415
<INVENTORY> 5,556
<CURRENT-ASSETS> 27,428
<PP&E> 2,406
<DEPRECIATION> 0
<TOTAL-ASSETS> 30,099
<CURRENT-LIABILITIES> 3,926
<BONDS> 2,978
0
0
<COMMON> 11,844
<OTHER-SE> 11,321
<TOTAL-LIABILITY-AND-EQUITY> 30,099
<SALES> 7,301
<TOTAL-REVENUES> 8,259
<CGS> 2,737
<TOTAL-COSTS> 3,600
<OTHER-EXPENSES> 2,573
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,165
<INCOME-TAX> 892
<INCOME-CONTINUING> 1,274
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,274
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
