<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
___ Act of 1934
For the quarterly period ended June 30, 1997
______________
Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______________ to _______________
Commission file number 0-13470
__________________________________
NANOMETRICS INCORPORATED
________________________________________________________________________________
(Exact name of registrant as specified in its charter)
California 94-2276314
_________________________________ ___________________
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
310 DeGuigne Drive, Sunnyvale, CA 94086
________________________________________ _____________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (408) 746-1600
____________________
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
______ _________
At July 14, 1997 there were 8,294,456 shares of common stock, no par value,
issued and outstanding.
1
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NANOMETRICS INCORPORATED
INDEX
Part I. Financial Information Page
----
Item 1. Financial Statements
Consolidated Balance Sheets -
June 30, 1997 and December 31, 1996........................ 3
Consolidated Statements of Income -
Three months and six months ended
June 30, 1997 and 1996..................................... 4
Consolidated Statements of Cash Flows -
Six months ended June 30, 1997
and 1996................................................... 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 4. Submission of Matters to a Vote of Security Holders..... 9
Item 6. Exhibits and Reports on Form 8-K........................ 9
Signatures........................................................ 10
2
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
NANOMETRICS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1997 1996
(Unaudited)
----------- ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 2,764 $ 1,725
Short-term investments 8,639 6,657
Accounts receivable, less allowance for
doubtful accounts of $419 and $419 8,392 11,100
Inventories 6,316 5,078
Prepaid and deferred income taxes 2,413 1,648
Prepaid expenses and other 504 882
------- -------
Total current assets 29,028 27,090
------- -------
PROPERTY, PLANT AND EQUIPMENT, NET 2,546 2,600
OTHER ASSETS 284 274
------- -------
TOTAL $31,858 $29,964
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,563 $ 1,563
Accrued payroll and related expenses 575 533
Other current liabilities 1,228 763
Income taxes payable -- 1,271
Current portion of long-term debt 349 347
------- -------
Total current liabilities 3,715 4,477
------- -------
LONG-TERM DEBT 3,143 3,296
DEFERRED INCOME TAXES 106 131
------- -------
Total liabilities 6,964 7,904
------- -------
SHAREHOLDERS' EQUITY:
Common stock, no par value; 25,000,000 shares
authorized; 8,294,456 and 8,258,061 outstanding 11,990 11,833
Retained earnings 13,033 10,387
Accumulated translation adjustment (129) (160)
------- -------
Total shareholders' equity 24,894 22,060
------- -------
TOTAL $31,858 $29,964
======= =======
</TABLE>
See Notes to Consolidated Financial Statements
3
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NANOMETRICS INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
--------- ------- -------- -------
<S> <C> <C> <C> <C>
NET REVENUES:
Product sales $7,741 $5,991 $15,042 $11,545
Service 958 1,566 1,916 3,080
------ ------ ------- -------
Total net revenues 8,699 7,557 16,958 14,625
------ ------ ------- -------
COSTS AND EXPENSES:
Cost of product sales 2,902 2,533 5,639 4,902
Cost of service 874 1,045 1,737 2,048
Research and development 665 665 1,339 1,335
Selling 1,626 1,255 2,889 2,266
General and administrative 613 582 1,249 1,152
------ ------ ------- -------
Total costs and expenses 6,680 6,080 12,853 11,703
------ ------ ------- -------
OPERATING INCOME 2,019 1,477 4,105 2,922
OTHER INCOME, NET 107 117 186 189
------ ------ ------- -------
INCOME BEFORE PROVISION
FOR INCOME TAXES 2,126 1,594 4,291 3,111
PROVISION FOR INCOME TAXES 753 633 1,645 1,316
------ ------ ------- -------
NET INCOME $1,373 $ 961 $ 2,646 $ 1,795
====== ====== ======= =======
NET INCOME PER COMMON
AND EQUIVALENT SHARE $.16 $.11 $.31 $.21
====== ====== ======= =======
COMMON AND EQUIVALENT
SHARES OUTSTANDING 8,665 8,583 8,669 8,567
====== ====== ======= =======
</TABLE>
See Notes to Consolidated Financial Statements
4
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NANOMETRICS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1997 1996
----------------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,646 $ 1,795
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 148 143
Deferred income taxes (58) 500
Changes in assets and liabilities:
Accounts receivable 2,227 (3,249)
Other receivables (135) 85
Inventories (1,208) (1,077)
Prepaid expenses and other (354) (333)
Accounts payable and other liabilities 506 1,291
Income taxes payable (1,272) (409)
-------- -------
Net cash provided by operating activities 2,500 (1,254)
-------- -------
INVESTING ACTIVITIES:
Purchase of short-term investments 10,608 (7,603)
Sales/maturities of short-term investments (12,590) 5,989
Capital expenditures (81) (32)
-------- -------
Net cash used in investing activities (2,063) (1,646)
-------- -------
FINANCING ACTIVITIES:
Proceeds from long-term borrowings - 762
Repayments of long-term debt (167) (594)
Issuance of common stock 157 786
-------- -------
Net cash in financing activities (10) 954
-------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 611 1
-------- -------
NET CHANGE IN CASH AND EQUIVALENTS 1,038 (1,945)
CASH AND EQUIVALENTS, at beginning of period 1,725 3,625
-------- -------
CASH AND EQUIVALENTS, at end of period $ 2,763 $ 1,680
======== =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 49 $ 61
======== =======
Cash paid for income taxes $ 3,679 $ 87
======== =======
</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 inter-company
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 Form 10-K for the year ended December 31, 1996 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 issuable 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):
June 30, December 31,
1997 1996
-------- ------------
Raw materials and subassemblies $3,483 $1,855
Work in process 2,039 1,414
Finished goods 794 1,809
------ ------
$6,316 $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, "Earnings per Share" (SFAS
128). The Company is required to adopt SFAS 128 in the fourth 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 $ 0.17 and $ 0.12 for the quarters ended June 30, 1997
and 1996, respectively, and $ 0.32 and $ 0.23 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
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
Total revenues for the three months ended June 30, 1997 were $8,699,000, an
increase of $1,142,000 or 15% from the comparable period in 1996. For the six
months ended June 30, 1997, total revenues of $16,958,000 increased by
$2,333,000 or 16% from the comparable period in 1996. Product sales of
$7,741,000 and $15,042,000 for the three months and six months ended June 30,
1997, respectively, increased $1,750,000 or 29% and $3,497,000 or 30%,
respectively, as compared with the same periods during 1996. The increases in
product sales resulted from stronger demand for, and increased shipments of, the
Company's products, especially its automated products, particularly from
customers in the Far East. Service revenue of $958,000 and $1,916,000 for the
three months and six months ended June 30, 1997, respectively, decreased
$608,000 or 39% and $1,164,000 or 38%, respectively, as compared to the same
periods in 1996. These decreases in service revenue are primarily attributable
to a lower sales of accessories and upgrades in the U.S. and the Far East in
1997.
Cost of product sales as a percentage of product sales decreased from 42% in
both the second quarter and in the first six months of 1996 to 37% in both the
second quarter and in the first six months of 1997 primarily because of higher
sales volume resulting in lower per unit manufacturing costs. Cost of service
as a percentage of service revenue increased from 67% in the second quarter of
1996 to 91% in the second quarter of 1997. Cost of service as a percentage of
service revenue for the six months ended June 30, 1997 increased to 91% from 66%
a year ago. These increases were primarily attributable to the decline in the
sales of accessories and upgrades while fixed service costs increased to support
the Company's growing installed base of systems at customer locations in 1997.
Research and development expenses for the three months ended June 30, 1997
were unchanged from the same period in 1996 and increased by $4,000 for the six
months ended June 30, 1997 compared to the same period in 1996.
Selling expenses for the three month and six month periods ended June 30,
1997 increased by $371,000 or 30% and $623,000 or 27%, respectively, compared to
the same periods in 1996 primarily because of higher commission expenses
resulting from higher sales and the addition of sales and marketing staff in the
second half of 1996.
General and administrative expenses for the three month and six month
periods ended June 30, 1997 increased by $31,000 or 5% and $97,000 or 8%,
respectively, compared to the same periods in 1996 as a result of spending
associated with increased operating activity.
Other income for the three month and six month periods ended June 30, 1997
decreased $10,000 and $3,000, respectively, from the comparable periods in 1996.
The Company reported an operating income of $2,019,000 and net income of
$1,373,000 for the second quarter of 1997 compared to an operating income of
$1,477,000 and net income of $961,000 for the same period in 1996. For the
first six months of 1997, the Company reported an operating income of $4,105,000
and net income of $2,646,000 which compared to an operating income of $2,922,000
and net income of $1,795,000 for the same period in 1996.
7
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LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At June 30, 1997, the Company had working capital of $25,313,000 compared to
$22,613,000 at December 31, 1996. The current ratio at June 30, 1997 was 7.8 to
1. The Company believes working capital including cash and short-term
investments of $11,403,000 will be sufficient to meet its needs at least through
the next twelve months. Operating activities for the first six months of 1997
provided cash of $2,500,000 primarily from profits and decreased accounts
receivable, which were offset to some extent by increased inventories and income
tax payments, while the net purchases of short-term investments used $1,982,000,
capital expenditures used $81,000, debt repayment used $167,000 and issuance of
common stock provided $157,000.
The foregoing Management's 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, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Company's actual results could
differ materially from the results anticipated in such forward-looking
statements as a result of a number of factors. Such factors include, but are
not limited to, the cyclicality of the semiconductor industry and the markets
served by the Company's customers, the size and timing of orders, the proportion
of direct sales and sales through distributors and representatives, changes in
pricing by the Company, its competitors, customers or suppliers, market
acceptance of new and enhanced products by the Company or its competitors and
the other factors described in the Company's most recent Annual Report on Form
10-K filed with the Securities and Exchange Commission.
8
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NANOMETRICS INCORPORATED
PART II
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A. The annual meeting of shareholders was held on May 15, 1997.
B. The following directors were elected to the board of directors:
Vincent J. Coates
Nathaniel Brenner
Norman V. Coates
John D. Heaton
Clifford F. Smedley
Kanegi Nagai
C. The following matters were voted upon at the annual meeting:
<TABLE>
<CAPTION>
For Against Abstain
------------ ------- -------
<S> <C> <C> <C>
1. To elect the following directors
to serve for the ensuing year:
Vincent J. Coates, Chairman 6,345,043 0 7,200
Nathaniel Brenner, Director 6,345,043 0 7,200
Norman V. Coates, Director 6,344,926 0 7,317
John D. Heaton, Director 6,345,043 0 7,200
Clifford F. Smedley, Director 6,345,043 0 7,200
Kanegi Nagai, Director 6,345,043 0 7,200
2. To approve amendments to the
Company's 1991 Stock Option Plan. 6,028,434 246,793 14,960
3. To ratify the appointment of
Deloitte & Touche LLP as independent
auditors for the fiscal
year ending December 31, 1997. 6,346,028 5,700 515
</TABLE>
ITEM 6. EXHIBIT AND REPORTS ON FORM 8-K
A. Exhibits
27 Financial Data Schedule.
B. Reports on Form 8-K.
None.
9
<PAGE>
NANOMETRICS INCORPORATED
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NANOMETRICS INCORPORATED
(Registrant)
/s/ Vincent J. Coates
- ---------------------
Vincent J. Coates
Chairman and Chief Executive Officer
/s/ Paul B. Nolan
- -----------------
Paul B. Nolan
Chief Financial Officer
Dated: August 7, 1997
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,764
<SECURITIES> 8,639
<RECEIVABLES> 8,811
<ALLOWANCES> 419
<INVENTORY> 6,316
<CURRENT-ASSETS> 29,028
<PP&E> 2,546
<DEPRECIATION> 0
<TOTAL-ASSETS> 31,858
<CURRENT-LIABILITIES> 3,715
<BONDS> 3,143
0
0
<COMMON> 11,990
<OTHER-SE> 12,904
<TOTAL-LIABILITY-AND-EQUITY> 31,858
<SALES> 15,042
<TOTAL-REVENUES> 16,958
<CGS> 5,639
<TOTAL-COSTS> 7,376
<OTHER-EXPENSES> 5,477
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,291
<INCOME-TAX> 1,645
<INCOME-CONTINUING> 2,646
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,646
<EPS-PRIMARY> .31
<EPS-DILUTED> .31
</TABLE>
