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Nanometrics Reports Third Quarter 2012 Financial Results

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MILPITAS, Calif., Oct. 30, 2012 (GLOBE NEWSWIRE) -- Nanometrics Incorporated (Nasdaq:NANO), a leading provider of advanced process control metrology and inspection systems, today announced financial results for its third quarter ended September 29, 2012.

Third Quarter Highlights

  • Revenues of $43.9 million; with improved gross and operating margins compared to the first and second quarters of 2012;
  • Revenue recognized on the company's first 450mm Atlas® metrology system, which was shipped mid-year; and
  • Additional penetration of major foundry customers, across several product lines, including front-end-of-line applications for the UniFire®, Atlas II, and IMPULSE® integrated metrology.
GAAP Results
Q3 2012 Q2 2012 Q3 2011
Revenues $ 43,938 $ 53,181 $ 58,269
Gross Profit $ 22,152 $ 24,759 $ 30,596
Income from Operations $ 3,614 $ 4,296 $ 11,746
Net Income $ 1,903 $ 4,506 $ 7,619
Earnings per Diluted Share $ 0.08 $ 0.19 $ 0.32
Non-GAAP Results
Q3 2012 Q2 2012 (1) Q3 2011 (2)
Gross Profit $ 22,781 $ 25,396 $ 30,799
Income from Operations $ 4,436 $ 5,128 $ 12,757
Net Income $ 2,425 $ 3,079 $ 8,266
Earnings per Diluted Share $ 0.10 $ 0.13 $ 0.35
A reconciliation between GAAP operating results and non-GAAP operating results is provided following the financial statements that are part of this release and on the investor page of our website. Non-GAAP results for all periods presented exclude the impact of amortization of acquired intangible assets.
(1) Non-GAAP results for Q2 2012 exclude the tax benefit of $0.7 million related to certain foreign losses, which were recorded in the non-GAAP results for Q1 2012 but not recorded for GAAP purposes until Q2 2012, because company elections that enabled recognition of these benefits were not approved by the IRS until Q2. GAAP results for Q2 2012 include both Q1 2012 and Q2 2012 benefits associated with these certain foreign losses. See also footnote (a) to the Reconciliation of GAAP to Non-GAAP financial results.
(2) Non-GAAP results for Q3 2011 exclude certain acquisition-related charges.

Commenting on the company's results, president and chief executive officer Dr. Timothy J. Stultz said, "We are pleased to report a second quarter of sequential improvement in both gross margin and operating margin against the headwind of reduced levels of industry spending and the associated decline in our revenues. During the current industry downturn we intend to continue to strengthen our position within key customer accounts, expand our penetration into the foundry segment, and drive further adoption of our UniFire and SPARK platforms within the growth markets of Inspection and Advanced Packaging. As we witnessed in 2009, industry slowdowns and technological inflection points create unique opportunities to expand our market position and served markets – setting the stage for growth and outperformance when industry spending resumes. We see similar opportunities at this time, and are further encouraged by the fact that we have a larger product and platform portfolio, and a greater number of key customer engagements, than ever before."

Third Quarter 2012 Summary

Revenues for the third quarter of 2012 were $43.9 million, down 17% from $53.2 million in the second quarter and down 25% from $58.3 million in the third quarter of 2011. GAAP gross margin was 50.4%, compared to 46.6% in the prior quarter and 52.5% in the year-ago period. Non-GAAP gross margin, which excludes amortization of acquired intangible assets, was 51.8%, compared to 47.8% in the prior quarter and 52.9% in the year-ago period. The improvement in gross margin compared to the second quarter of 2012 was primarily driven by higher product gross margin, as a result of an increase in standard tool margin as well as a decrease in warranty, obsolescence and other manufacturing costs.

GAAP operating income was $3.6 million, compared to $4.3 million in the prior quarter and $11.7 million in the year-ago period. Non-GAAP operating income was $4.4 million, compared to $5.1 million in the prior quarter and $12.8 million in the third quarter of 2011.

GAAP net income was $1.9 million or $0.08 per diluted share, compared to $4.5 million or $0.19 per diluted share in the prior quarter and $7.6 million or $0.32 per diluted share in the third quarter of 2011. Non-GAAP net income was $2.4 million or $0.10 per diluted share, compared to $3.1 million or $0.13 per diluted share in the prior quarter and $8.3 million or $0.35 per diluted share in the third quarter of 2011.

At September 29, 2012, Nanometrics had $104.8 million in cash, cash equivalents and marketable securities and $165.1 million in working capital. Stockholders' equity, excluding intangible assets, was $199.6 million, or $8.54 per share based on 23.4 million shares outstanding at quarter end.

Business Outlook

Management forecasts continued declines in industry spending in the fourth quarter, with total revenues expected to be in the range of $28 to $32 million. Management expects GAAP gross margin in the range of 40% to 44%, non-GAAP gross margin in the range of 42% to 46%, and operating expenses to increase between $0.4 to $0.9 million from the third quarter. Management expects the fourth quarter GAAP net loss to be in the range of $0.14 to $0.21 per share and the non-GAAP net loss to be in the range of $0.12 to $0.19 per share.

Conference Call Details

A conference call to discuss third quarter 2012 results will be held today at 4:30 p.m. EDT (1:30 p.m. PDT). To participate in the conference call, the dial-in numbers are (877) 374-4041 for domestic callers and (253) 237-1156 for international callers. A live and recorded webcast will be made available on the investor page of the Nanometrics website at www.nanometrics.com.

Use of Non-GAAP Financial Information

Financial results such as non-GAAP gross profit, operating income, net income and net income per share, which exclude certain expenses, charges and special items, were not prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP). Management uses non-GAAP financial results, which exclude acquisition-related expenses such as amortization of acquired intangibles and transaction costs, asset impairments, restructuring charges, legal settlements, certain discrete tax items and the impact of the timing of the approval of elections related to tax treatment of certain foreign subsidiaries, and other unusual and infrequent items to evaluate the company's ongoing performance and to enable comparison to other periods that did not include these unusual and infrequent items. The company believes the presentation of non-GAAP results is useful to investors for analyzing ongoing business trends, comparing performance to prior periods, and enhancing the investor's ability to view the company's results from management's perspective. A table presenting a reconciliation of GAAP results to non-GAAP results is included at the end of this press release and is available on the investor page of the Nanometrics website at www.nanometrics.com.

About Nanometrics

Nanometrics is a leading provider of advanced, high-performance process control metrology and inspection systems used primarily in the fabrication of semiconductors, high-brightness LEDs, data storage devices and solar photovoltaics. Nanometrics' automated and integrated systems address numerous process control applications, including critical dimension and film thickness measurement, device topography, defect inspection, overlay registration, and analysis of various other film properties such as optical, electrical and material characteristics. The company's process control solutions are deployed throughout the fabrication process, from front-end-of-line substrate manufacturing, to high-volume production of semiconductors and other devices, to advanced wafer-scale packaging applications. Nanometrics' systems enable device manufacturers to improve yields, increase productivity and lower their manufacturing costs. The company maintains its headquarters in Milpitas, California, with sales and service offices worldwide. Nanometrics is traded on NASDAQ Global Select Market under the symbol NANO. Nanometrics' website is http://www.nanometrics.com.

The Nanometrics Incorporated logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=14865

Forward Looking Statements

This press release contains forward-looking statements including, but not limited to, statements included in the quotation from management and statements included in the business outlook section, such as the statements regarding future revenue, margins, profitability, opportunities, areas of market growth and product adoption. These forward-looking statements may also be identified by words such as "expect," "anticipate," "believe," "estimate," "forecasts," "plan," "predict," "view," and similar terms. Although Nanometrics believes that the expectations reflected in the forward-looking statements are reasonable, actual results could differ materially from these expectations due to a variety of factors, including economic conditions, levels of industry spending, shifts in the timing of customer orders and product shipments, market adoption rates, changes in product mix, our ability to implement supply cost reductions, and increased operating expenses. For additional information and considerations regarding the risks faced by Nanometrics, see its annual report on Form 10-K for the year ended December 31, 2011 as filed with the Securities and Exchange Commission, as well as other periodic reports filed with the SEC from time to time. Nanometrics disclaims any obligation to update information contained in any forward-looking statement.

NANOMETRICS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(Unaudited)
As of Sep 29,
2012
As of Dec 31,
2011
ASSETS
Current assets:
Cash and cash equivalents $ 67,464 $ 97,699
Marketable securities 37,335 --
Accounts receivable, net of allowances of $51 and $117, respectively 30,099 29,289
Inventories 43,054 52,260
Inventories-delivered systems 1,674 1,637
Prepaid expenses and other 10,116 8,119
Deferred income tax assets 7,736 12,406
Total current assets 197,478 201,410
Property, plant and equipment, net 43,080 35,521
Goodwill 11,079 11,990
Intangible assets, net 11,614 14,394
Deferred income tax assets, non-current 4,512 2,864
Other assets 885 1,042
Total assets $ 268,648 $ 267,221
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,329 $ 7,975
Accrued payroll and related expenses 7,247 8,837
Deferred revenue 9,730 5,788
Other current liabilities 9,107 16,709
Income taxes payable 32 707
Current portion of debt obligations 911 765
Total current liabilities 32,356 40,781
Deferred revenue, non-current 5,020 4,547
Income taxes payable, non-current 2,430 2,401
Other non - current liabilities 1,978 2,813
Debt obligations, net of current portion 4,613 6,687
Total liabilities 46,397 57,229
Stockholders' equity:
Common stock, $0.001 par value, 47,000,000 shares authorized; 23,379,827 and 23,182,771, respectively, issued and outstanding 23 23
Additional paid-in capital 240,695 236,735
Accumulated deficit (20,203) (28,315)
Accumulated other comprehensive income 1,736 1,549
Total stockholders' equity 222,251 209,992
Total liabilities and stockholders' equity $ 268,648 $ 267,221
NANOMETRICS INCORPORATED
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Year to Date
Sep 29,
2012
Oct 1,
2011
Sep 29,
2012
Oct 1,
2011
Net revenues:
Products $ 32,314 $ 49,839 $ 121,728 $ 158,049
Service 11,624 8,430 30,883 26,735
Total net revenues 43,938 58,269 152,611 184,784
Costs of net revenues:
Cost of products 15,778 22,881 63,224 68,862
Cost of service 5,379 4,589 15,507 13,864
Amortization of intangible assets 629 203 1,903 667
Total costs of net revenues 21,786 27,673 80,634 83,393
Gross profit 22,152 30,596 71,977 101,391
Operating expenses:
Research and development 7,176 6,045 22,296 17,312
Selling 6,308 6,862 20,560 20,558
General and administrative 4,861 5,817 16,525 16,758
Amortization of intangible assets 193 126 580 469
Total operating expenses 18,538 18,850 59,961 55,097
Income from operations 3,614 11,746 12,016 46,294
Other income (expense):
Interest income 28 57 113 162
Interest expense (262) (324) (795) (1,002)
Other, net (121) 834 (345) (149)
Total other expense, net (355) 567 (1,027) (989)
Income before income taxes 3,259 12,313 10,989 45,305
Provision for income taxes 1,356 4,694 2,877 16,089
Net income $ 1,903 $ 7,619 $ 8,112 $ 29,216
Net income per share:
Basic $ 0.08 $ 0.33 $ 0.35 $ 1.29
Diluted $ 0.08 $ 0.32 $ 0.34 $ 1.24
Shares used in per share calculation:
Basic 23,310 22,875 23,351 22,715
Diluted 23,760 23,526 23,874 23,489
NANOMETRICS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine-month period ended
Sep 29,
2012
Oct 1,
2011
Cash flows from operating activities:
Net income $ 8,112 $ 29,216
Reconciliation of net income to net cash provided by operating activities:
Depreciation and amortization 7,143 4,722
Stock-based compensation 4,535 2,746
Excess tax benefit from equity awards (939) (1,925)
Loss on disposal of fixed assets 246 19
Inventory write down 1,450 1,294
Deferred taxes 2,948 2,386
Change in the fair value of contingent payments to Zygo Corporation 307 434
Changes in assets and liabilities:
Accounts receivable (831) (259)
Inventories (429) (11,209)
Inventories-delivered systems (571) (477)
Prepaid expenses and other (1,655) 130
Accounts payable, accrued and other liabilities (12,242) 2,889
Deferred revenue 4,418 3,313
Income taxes payable 283 2,131
Net cash provided by operations 12,775 35,410
Cash flows from investing activities:
Escrow payment received related to acquisition of Nanda 508 --
Sales of marketable securities 3,000 --
Maturities of marketable securities 500 --
Purchases of marketable securities (40,929) --
Purchase of property, plant and equipment (3,705) (2,082)
Net cash used in investing activities (40,626) (2,082)
Cash flows from financing activities:
Payments to Zygo Corporation related to acquisition (232) (301)
Repayments of debt obligations (1,989) (2,389)
Proceeds from sale of shares under the employee stock option and purchase plans 3,463 5,291
Excess tax benefit from equity awards 939 1,925
Taxes paid on net issuance of stock awards (16) (46)
Repurchase of common stock (4,960) (4,257)
Net cash provided by (used in) financing activities (2,795) 223
Effect of exchange rate changes on cash and cash equivalents 411 138
Net increase (decrease) in cash and cash equivalents (30,235) 33,689
Cash and cash equivalents, beginning of period 97,699 66,460
Cash and cash equivalents, end of period $ 67,464 $ 100,149
NANOMETRICS INCORPORATED
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Year to Date
Sep 29,
2012
Jun 30,
2012
Oct 1,
2011
Sep 29,
2012
Oct 1,
2011
Reconciliation of GAAP gross profit to non-GAAP gross profit
GAAP gross profit $ 22,152 $ 24,759 $ 30,596 $ 71,977 $ 101,391
Non-GAAP adjustments:
Amortization of intangible assets 629 637 203 1,903 667
Non-GAAP gross profit $ 22,781 $ 25,396 $ 30,799 $ 73,880 $ 102,058
Reconciliation of GAAP operating income to non-GAAP operating income
GAAP operating income $ 3,614 $ 4,296 $ 11,746 $ 12,016 $ 46,294
Non-GAAP adjustments:
Amortization of intangible assets included in cost of revenues 629 637 203 1,903 667
Amortization of intangible assets included in operating expenses 193 195 126 580 469
Acquisition-related charges -- -- 682 -- 682
Total non-GAAP adjustments to operating income 822 832 1,011 2,483 1,818
Non-GAAP operating income $ 4,436 $ 5,128 $ 12,757 $ 14,499 $ 48,112
Reconciliation of GAAP net income to non-GAAP net income
GAAP net income $ 1,903 $ 4,506 $ 7,619 $ 8,112 $ 29,216
Non-GAAP adjustments:
Total non-GAAP adjustments to non-GAAP operating income 822 832 1,011 2,483 1,818
Income tax effect of non-GAAP adjustments (300) (304) (364) (907) (654)
Discrete tax adjustment -- (1,955) (a) -- (1,300) --
Non-GAAP net income $ 2,425 $ 3,079 $ 8,266 $ 8,388 $ 30,380
GAAP net income per diluted share $ 0.08 $ 0.19 $ 0.32 $ 0.34 $ 1.24
Non-GAAP net income per diluted share $ 0.10 $ 0.13 $ 0.35 $ 0.35 $ 1.29
Shares used in diluted income per share calculation 23,760 23,877 23,526 23,924 23,526
(a) Reflects the tax benefit for certain first quarter foreign losses related to entity classification elections that were approved by the IRS in the second quarter. The tax benefit of these first quarter losses was recorded as a decrease to the second quarter tax provision on a GAAP basis. The discrete tax adjustment for the second quarter also excludes the one-time benefit associated with the recognition of deferred tax assets related to the entity classification elections, resulting in a combined first and second quarter Non-GAAP tax rate of approximately 36.5%.
CONTACT: Investor Relations Contact: Claire McAdams Headgate Partners LLC 530.265.9899, 530.265.9699 fax email: claire@headgatepartners.com Company Contact: Ronald Kisling, CFO Nanometrics Incorporated 408.545.6143, 408.521.9490 fax email: rkisling@nanometrics.com

Source:Nanometrics Incorporated