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, 2000 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 12, 2000 there were 11,284,754 shares of common stock, no par value,
issued and outstanding.
<PAGE>
NANOMETRICS INCORPORATED
INDEX
Part I. Financial Information Page
----
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
March 31, 2000 and December 31, 1999 ....................... 3
Condensed Consolidated Statements of Operations -
Three months ended March 31, 2000 and 1999 ............... 4
Condensed Consolidated Statements of Cash Flows -
Three months ended March 31, 2000 and 1999 ............... 5
Notes to Consolidated Financial Statements ................ 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ............. 8
Item 3. Quantitative and Qualitative Disclosures
about Market Risk .......................................... 9
Part II. Other Information
Item 2. Changes in Securities and Use of Proceeds .................. 10
Item 6. Exhibits and Reports on Form 8-K ............................. 10
Signatures ................................................................ 11
2
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
<TABLE>
NANOMETRICS INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except share amounts)
(Unaudited)
<CAPTION>
March 31, December 31,
ASSETS 2000 1999
-------- --------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 26,587 $ 3,442
Short-term investments 66,197 14,698
Accounts receivable, net of
allowances of $424 and $425 12,749 11,435
Inventories 10,492 9,460
Deferred income taxes 1,726 1,722
Prepaid expenses and other 1,787 1,196
-------- --------
Total current assets 119,538 41,953
PROPERTY, PLANT AND EQUIPMENT, Net 3,023 2,998
DEFERRED INCOME TAXES 125 135
OTHER ASSETS 1,573 1,324
-------- --------
TOTAL $124,259 $ 46,410
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,213 $ 2,412
Accrued payroll and related expenses 1,365 751
Other current liabilities 1,976 1,721
Income taxes payable 1,032 464
Current portion of debt obligations 482 584
-------- --------
Total current liabilities 8,068 5,932
DEFERRED RENT 28 35
DEBT OBLIGATIONS 2,148 2,288
-------- --------
Total liabilities 10,244 8,255
-------- --------
SHAREHOLDERS' EQUITY:
Common stock, no par value; 25,000,000 shares
authorized; 11,271,743 and 9,163,998 outstanding 90,851 17,277
Retained earnings 22,861 20,608
Accumulated other comprehensive income 303 270
-------- --------
Total shareholders' equity 114,015 38,155
-------- --------
TOTAL $124,259 $ 46,410
======== ========
<FN>
See Notes to Condensed Consolidated Financial Statements
</FN>
</TABLE>
3
<PAGE>
NANOMETRICS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share amounts)
(Unaudited)
Three Months Ended
March 31,
2000 1999
-------- --------
NET REVENUES:
Product sales $ 14,945 $ 5,265
Service 1,111 924
-------- --------
Total net revenues 16,056 6,189
-------- --------
COSTS AND EXPENSES:
Cost of product sales 6,178 2,552
Cost of service 1,395 1,104
Research and development 1,745 1,016
Selling 2,360 1,277
General and administrative 999 641
-------- --------
Total costs and expenses 12,677 6,590
-------- --------
INCOME (LOSS) FROM OPERATIONS 3,379 (401)
-------- --------
OTHER INCOME (EXPENSE):
Interest income 476 138
Interest expense (21) (21)
Other, net (140) (51)
-------- --------
Total other income, net 315 66
-------- --------
INCOME (LOSS) BEFORE INCOME TAXES 3,694 (335)
PROVISION (BENEFIT) FOR INCOME TAXES 1,441 (134)
-------- --------
NET INCOME (LOSS) $ 2,253 $ (201)
======== ========
NET INCOME (LOSS) PER SHARE:
Basic $ 0.23 $ (0.02)
======== ========
Diluted $ 0.21 $ (0.02)
======== ========
SHARES USED IN PER SHARE COMPUTATION:
Basic 9,693 8,701
======== ========
Diluted 10,880 8,701
======== ========
See Notes to Condensed Consolidated Financial Statements
4
<PAGE>
<TABLE>
NANOMETRICS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
2000 1999
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 2,253 $ (201)
Reconciliation of net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 117 51
Deferred rent (7) 7
Deferred income taxes 29 10
Changes in assets and liabilities:
Accounts receivable (1,308) 1,582
Inventories (1,005) 881
Prepaid income taxes -- 745
Prepaid expenses and other (900) (237)
Accounts payable accrued and other current liabilities 1,652 (322)
Income taxes payable 1,390 --
-------- --------
Net cash provided by operating activities 2,221 2,516
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments (54,395) (2,984)
Sales/maturities of short-term investments 2,865 3,000
Purchases of property, plant and equipment (101) (23)
Other assets -- 53
-------- --------
Net cash provided by (used in) investing activities (51,631) 46
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of debt obligations (209) (364)
Issuance of common stock 72,752 139
-------- --------
Net cash provided by (used in) financing activities 72,543 (225)
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 12 141
-------- --------
NET CHANGE IN CASH AND EQUIVALENTS 23,145 2,478
CASH AND EQUIVALENTS, beginning of period 3,442 1,518
-------- --------
CASH AND EQUIVALENTS, end of period $ 26,587 $ 3,996
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest $ 17 $ 56
======== ========
Cash paid for income taxes $ -- $ --
======== ========
<FN>
See Notes to Condensed Consolidated Financial Statements
</FN>
</TABLE>
5
<PAGE>
NANOMETRICS INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Condensed Consolidated Financial Statements
The condensed 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 consolidated financial statements are unaudited,
the financial statements included in this report reflect all adjustments
(consisting only of normal recurring adjustments) which Nanometrics considers
necessary for a fair presentation of the results of operations for the interim
periods covered and of our financial condition 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 Nanometrics' 1999 Annual Report on Form 10-K filed with
the Securities and Exchange Commission.
Note 2. 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,
2000 1999
------- -------
Raw materials and subassemblies $ 6,986 $ 3,775
Work in process 1,914 1,092
Finished goods 1,592 4,593
------- -------
Total inventories $10,492 $ 9,460
======= =======
Note 3. Other Current Liabilities
Other current liabilities consist of the following (in thousands):
March 31, December 31,
2000 1999
------ ------
Commissions payable $ 295 $ 247
Accrued warranty 521 482
Other 1,160 992
------ ------
Total other current liabilities $1,976 $1,721
====== ======
6
<PAGE>
Note 4. Shareholder' Equity
Secondary Offering - In March 1999, Nanometrics completed a public stock
offering and issued 2,012,500 shares of its Common Stock to the public at a
price of $38.50 per share. Nanometrics received net proceeds of approximately
$72.4 million in cash.
Net Income (Loss) Per Share - The reconciliation of the share denominator used
in the basic and diluted net income (loss) per share computations for the three
months ended March 31 are as follows (in thousands):
2000 1999
------ ------
Weighted average common shares outstanding-shares
used in basic net income per share computations 9,693 8,701
Dilutive effect of common stock equivalents,
using the treasury stock method 1,187 --
------ ------
Shares used in diluted net income per share computation 10,880 8,701
====== ======
During the three months ended March 31, 2000 and 1999, Nanometrics had
common stock options outstanding which could potentially dilute basic net income
(loss) per share in the future, but were excluded from the computation of
diluted net income (loss) per share as the inclusion of such common stock
options would be antidilutive. At March 31, 2000, 289,000 common stock options
with a weighted average exercise price of $41.45 per share were excluded from
the diluted net loss per share computation as their exercise prices were greater
than the average market price of the common shares for the period.
Note 5. Comprehensive Income (Loss)
Comprehensive income (loss), which consisted of net income (loss) and changes in
accumulated translation adjustments, was $2,286,000 for the three months ended
March 31, 2000 compared to $(321,000) for the same period in 1999.
7
<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 2000 were $16,056,000, an
increase of $9,867,000 or 159% from the same quarter in 1999. Product sales of
$14,945,000 increased $9,680,000 or 184% for the first quarter of 2000 compared
to the same period in 1999 resulting from increased shipments of Nanometrics'
products, particularly in the U.S. and Far East. Service revenue of $1,111,000
increased $187,000 or 20% in the first quarter of 2000 compared to the same
period in 1999 primarily due to higher spare parts sales in the Far East.
Cost of product sales as a percentage of product sales decreased to 41%
in the first quarter of 2000 from 48% in the first quarter of 1999 primarily
because of higher sales volume in 2000 resulting in lower per unit manufacturing
costs. Cost of service as a percentage of service revenue increased to 126% in
the first quarter of 2000 from 119% in the first quarter of 1999. This increase
was primarily attributable to higher fixed service costs needed to support our
growing installed base of systems at customer locations.
Research and development expenses for the first quarter of 2000
increased $729,000 or 72% compared to the same period in 1999 resulting
primarily from increased headcount and related expenses for the development of
new and enhanced products.
Selling expenses for the first quarter of 2000 increased by $1,083,000
or 85% compared to the same period in 1999 primarily because of increased
headcount, commission expenses and other expenses associated with higher sales
levels.
General and administrative expenses for the first quarter of 2000
increased by $358,000 or 56% compared to the same period in 1999 primarily as a
result of higher spending associated with the increased level of operations.
Total other income, net increased $249,000 or 377% during the first
quarter of 2000 compared to the same period in 1999 due primarily to higher
interest income resulting from a higher average cash basis from the net proceeds
of the offering.
Nanometrics' income from operations was $3,379,000 and net income was
$2,253,000 or $0.21 per diluted share in the first quarter of 2000 compared to a
loss from operations of $401,000 and a net loss of $201,000 or $0.02 per diluted
share in the first quarter of 1999.
Liquidity and Capital Resources
At March 31, 2000, Nanometrics had working capital of $111,470,000
compared to $36,021,000 at December 31, 1999 an increase of $75,449,000. This
increase is primarily a result of cash generated from financing activities of
$72,543,000 million during the quarter resulting from the $72,752,000 million in
net proceeds received from the public offering of Common Stock in March 2000 and
option exercises during the quarter. Operating activities for the first three
months of 2000 provided cash of $2,222,000 primarily from net income and higher
accounts payable, other current liabilities and income taxes payable, while the
sales/maturities of short-term investments net of purchases used $51,530,000,
capital expenditures used $101,000 and debt repayment used $209,000. We believe
working capital including cash, cash equivalents and short-term investments of
$92,784,000 will be sufficient to meet our needs at least through the next
twelve months. The current ratio at March 31, 2000 was 14.8 to 1.
8
<PAGE>
Forward Looking Statements
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, and Section 21E of the Securities
Exchange Act of 1934. These statements involve risks and uncertainties and
actual results could differ materially as a result of a number of factors
including customer demand for Nanometrics' products, which is affected by
factors including the cyclicality of the semiconductor, magnetic recording head
and flat panel display industries served by Nanometrics, patterns of capital
spending by customers, technological changes in the markets served by
Nanometrics and its customers, market acceptance of products of both Nanometrics
and its customers, the timing, cancellation or delay of customer orders and
shipments, competition, including competitive pressures on product prices and
changes in pricing by Nanometrics' customers or suppliers, fluctuations in
foreign currency exchange rates, particularly the Japanese yen, the proportion
of direct sales versus sales through distributors and representatives, market
acceptance of new and enhanced versions of Nanometrics' products, the timing of
new product announcements and releases of products by Nanometrics or its
competitors, including our ability to design, introduce and manufacture new
products on a timely and cost effective basis, the size and timing acquisitions
of businesses, products or technologies and fluctuations in the availability and
cost of components and subassemblies and the factors set forth under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Risk Factors" in the 1999 Annual Report on Form 10-K. Nanometrics
undertakes no obligation to update forward looking statements made in this
report to reflect events or circumstances after the date of this report or to
update reasons why actual results could differ from those anticipated in such
forward-looking statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to financial market risks, which include changes in
foreign currency exchange rates and interest rates. We do not use derivative
financial instruments. Instead, we actively manage the balances of current
assets and liabilities denominated in foreign currencies to minimize currency
fluctuation risk. As a result, a hypothetical 10% change in the foreign currency
exchange rates at March 31, 2000 would not have a material impact on our results
of operations. Our investments in marketable securities are subject to interest
rate risk but due to the short-term nature of these investments, interest rate
changes would not have a material impact on their value at March 31, 2000. We
also have fixed rate yen denominated debt obligations in Japan that have no
interest rate risk. At March 31, 2000, our total debt obligation was $2,630,000
with a long-term portion of $2,148,000. A hypothetical 10% change in interest
rates at March 31, 2000 would not have a material impact on our results of
operations.
9
<PAGE>
NANOMETRICS INCORPORATED
PART II
OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
D. Use of Proceeds from Sales of registered Securities. In March 2000,
Nanometrics completed a public offering of its Common Stock. The
managing underwriters in the Offering were Salomon Smith Barney, Wit
SoundView, Tucker Anthony Cleary Gull and Needham & Company, Inc. (the
"Underwriters"). The shares of Common Stock sold in the Offering were
registered under the Securities Act of 1933, as amended, on a
Registration Statement of Form S-2. A total of 4,025,000 shares of
Common Stock (of which 2,012,500 were offered by Nanometrics and
2,012,500 were offered by a selling shareholder) were registered under
the Registration Statement and were sold at a price of $38.50 per
share. In connection with the Offering, Nanometrics paid $4,447,625 in
underwriting discounts and commissions to the Underwriters. In
addition, the following table sets forth an estimate of all expenses
incurred in connection with the Offering:
Legal fees and expenses $277,732
Auditing fees and expenses 173,250
Printing expenses 157,026
SEC Registration fee 22,880
NASD filing fee 9,167
Miscellaneous 26,515
--------
Total $666,570
========
After deducting the underwriting discounts and commission and the
Offering expenses listed above, Nanometrics received net proceeds from
the Offering of approximately $72,367,054. Nanometrics has used the net
proceeds from its public offering of Common Stock to invest in
short-term treasury bills and has used its existing cash balances to
fund its general operations. The proceeds from the Offering will be
used for general corporate purposes, including facilities expansion.
None of Nanometrics' net proceeds from the Offering were paid directly
or indirectly to any director or officer of Nanometrics.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
Ex. 27 - Financial Data Schedule
B. Reports on Form 8-K.
None.
10
<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 of the Board
/s/ John Heaton
- -----------------------
John Heaton
Chief Executive Officer
/s/ Paul B. Nolan
- -----------------------
Paul B. Nolan
Chief Financial Officer
Dated: May 5, 2000
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 26,587
<SECURITIES> 66,197
<RECEIVABLES> 13,173
<ALLOWANCES> 424
<INVENTORY> 10,492
<CURRENT-ASSETS> 119,538
<PP&E> 6,673
<DEPRECIATION> 3,650
<TOTAL-ASSETS> 124,259
<CURRENT-LIABILITIES> 8,068
<BONDS> 2,148
0
0
<COMMON> 90,851
<OTHER-SE> 23,164
<TOTAL-LIABILITY-AND-EQUITY> 124,259
<SALES> 14,945
<TOTAL-REVENUES> 16,056
<CGS> 6,178
<TOTAL-COSTS> 7,573
<OTHER-EXPENSES> 5,104
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21
<INCOME-PRETAX> 3,694
<INCOME-TAX> 1,441
<INCOME-CONTINUING> 2,253
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,253
<EPS-BASIC> .23
<EPS-DILUTED> .21
</TABLE>
