10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________

FORM 10-Q

(Mark One)

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 28, 2015

OR

o 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)

Delaware	94-2276314
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
1550 Buckeye Drive Milpitas, California	95035
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (408) 545-6000

___________________________________

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  ý    No   £

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No   £

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	o	Accelerated filer	ý
Non-accelerated filer	o	Smaller reporting company	o

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act)    Yes  £ No  ý

As of April 23, 2015, there were 23,984,375 shares of common stock, $0.001 par value, issued and outstanding.

NANOMETRICS INCORPORATED

INDEX TO QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED MARCH 28, 2015

PART I. FINANCIAL INFORMATION			3
	Item 1.	Financial Statements	3
		Condensed Consolidated Balance Sheets at March 28, 2015 and December 27, 2014 (Unaudited)	3
		Condensed Consolidated Statements of Operations for the Three Month Periods Ended March 28, 2015 and March 29, 2014 (Unaudited)	4
		Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Month Periods Ended March 28, 2015 and March 29, 2014 (Unaudited)	5
		Condensed Consolidated Statements of Cash Flows for the Three Month Periods Ended March 28, 2015 and March 29, 2014 (Unaudited)	6
		Notes to Condensed Consolidated Financial Statements (Unaudited)	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	28
	Item 4.	Controls and Procedures	29
PART II. OTHER INFORMATION			30
	Item 1A.	Risk Factors	30
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
	Item 6.	Exhibits	31
Signatures			31

2

PART I — FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

NANOMETRICS INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands except share and per share amounts)

(Unaudited)

	March 28, 2015			December 27, 2014
ASSETS
Current assets:
Cash and cash equivalents	$	27,935		$	34,676
Marketable securities	49,114			49,286
Accounts receivable, net of allowances of $212 and $253, respectively	39,072			26,121
Inventories	37,487			35,105
Inventories-delivered systems	749			1,912
Prepaid expenses and other	9,493			9,289
Deferred income tax assets	1,455			1,457
Total current assets	165,305			157,846
Property, plant and equipment, net	47,800			49,633
Goodwill	9,391			10,494
Intangible assets, net	3,326			4,294
Deferred income tax assets	393			410
Other assets	554			559
Total assets	$	226,769		$	223,236
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	11,913		$	10,199
Accrued payroll and related expenses	10,807			8,700
Deferred revenue	8,054			10,021
Other current liabilities	8,110			8,265
Income taxes payable	924			1,017
Total current liabilities	39,808			38,202
Deferred revenue	2,090			2,591
Income taxes payable	723			701
Deferred tax liabilities	962			926
Other long-term liabilities	1,348			1,279
Total liabilities	44,931			43,699
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock, $0.001 par value; 3,000,000 shares authorized; no shares issued or outstanding	—			—
Common stock, $0.001 par value, 47,000,000 shares authorized: 23,973,819 and 23,813,729, respectively, issued and outstanding	24			24
Additional paid-in capital	252,839			251,396
Accumulated deficit	(66,558		)	(69,114		)
Accumulated other comprehensive income (loss)	(4,467		)	(2,769		)
Total stockholders’ equity	181,838			179,537
Total liabilities and stockholders’ equity	$	226,769		$	223,236

See Notes to Condensed Consolidated Financial Statements

3

NANOMETRICS INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands except per share amounts)

(Unaudited)

	Three Months Ended
	March 28, 2015			March 29, 2014
Net revenues:
Products	$	38,339		$	43,280
Service	12,037			8,296
Total net revenues	50,376			51,576
Costs of net revenues:
Cost of products	19,992			21,639
Cost of service	6,373			5,114
Amortization of intangible assets	632			674
Total costs of net revenues	26,997			27,427
Gross profit	23,379			24,149
Operating expenses:
Research and development	8,159			8,314
Selling	7,116			7,373
General and administrative	5,767			6,338
Amortization of intangible assets	38			108
Restructuring charge	58			—
Total operating expenses	21,138			22,133
Income from operations	2,241			2,016
Other (income) expense:
Interest income	10			14
Interest expense	(82		)	(100		)
Other income, net	704			252
Total other income, net	632			166
Income before income taxes	2,873			2,182
Provision for income taxes	317			587
Net income	$	2,556		$	1,595
Net income per share:
Basic	$	0.11		$	0.07
Diluted	$	0.11		$	0.07
Weighted average shares used in per share calculation:
Basic	23,866			23,711
Diluted	24,257			24,159

See Notes to Condensed Consolidated Financial Statements

4

NANOMETRICS INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

	Three Months Ended
	March 28, 2015			March 29, 2014
Net income	$	2,556		$	1,595
Other comprehensive income (loss):
Change in foreign currency translation adjustment	(1,727		)	104
Net change on unrealized gains on available-for-sale investments	29			107
Other comprehensive income (loss)	(1,698		)	211
Comprehensive income	$	858		$	1,806

See Notes to Condensed Consolidated Financial Statements

5

NANOMETRICS INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Three Months Ended
	March 28, 2015			March 29, 2014
Cash flows from operating activities:
Net income	$	2,556		$	1,595
Reconciliation of net income to net cash provided by (used in) operating activities:
Depreciation and amortization	2,324			2,429
Stock-based compensation	1,571			1,634
Loss on disposal of fixed assets	485			—
Inventory write-down	403			669
Deferred income taxes	55			519
Changes in fair value of contingent payments to Zygo Corporation	35			(5		)
Changes in assets and liabilities:
Accounts receivable	(13,340		)	(967		)
Inventories	(2,442		)	(3,142		)
Inventories-delivered systems	1,164			4,652
Prepaid expenses and other	(94		)	1,845
Accounts payable, accrued and other liabilities	3,947			(2,536		)
Deferred revenue	(2,468		)	(10,619		)
Income taxes payable	(70		)	(766		)
Net cash used in operating activities	(5,874		)	(4,692		)
Cash flows from investing activities:
Sales of marketable securities	1,082			—
Maturities of marketable securities	9,592			7,000
Purchases of marketable securities	(10,613		)	(8,410		)
Purchases of property, plant and equipment	(502		)	(2,193		)
Net cash used in investing activities	(441		)	(3,603		)
Cash flows from financing activities:
Payments to Zygo Corporation related to acquisition	(224		)	(100		)
Proceeds from sale of shares under employee stock option plans and purchase plan	2,357			3,115
Taxes paid on net issuance of stock awards	(764		)	(659		)
Repurchases of common stock	(1,721		)	—
Net cash (used in) provided by financing activities	(352		)	2,356
Effect of exchange rate changes on cash and cash equivalents	(74		)	7
Net decrease in cash and cash equivalents	(6,741		)	(5,932		)
Cash and cash equivalents, beginning of period	34,676			44,765
Cash and cash equivalents, end of period	$	27,935		$	38,833
Supplemental disclosure of non-cash investing activities:
Transfer of inventory to property, plant and equipment, net	$	435		$	—

See Notes to Consolidated Financial Statements

6

NANOMETRICS INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Nature of Business and Basis of Presentation

Description of Business – Nanometrics Incorporated (“Nanometrics” or the “Company”) and its wholly-owned subsidiaries design, manufacture, market, sell and support optical critical dimension (“OCD”), thin film and overlay dimension metrology and inspection systems used primarily in the manufacturing of semiconductors, solar photovoltaics (“solar PV”) and high-brightness LEDs (“HB-LED”), as well as by customers in the silicon wafer and data storage industries. Nanometrics’ metrology systems precisely measure a wide range of film types deposited on substrates during manufacturing to control manufacturing processes and increase production yields in the fabrication of integrated circuits. The Company’s OCD technology is a patented critical dimension measurement technology that is used to precisely determine the dimensions on the semiconductor wafer that directly control the resulting performance of the integrated circuit devices. The thin film metrology systems use a broad spectrum of wavelengths, high-sensitivity optics, proprietary software, and patented technology to measure the thickness and uniformity of films deposited on silicon and other substrates as well as their chemical composition. The overlay metrology systems are used to measure the overlay accuracy of successive layers of semiconductor patterns on wafers in the photolithography process. Nanometrics’ inspection systems are used to find defects on patterned and unpatterned wafers at nearly every stage of the semiconductor production flow. The corporate headquarters of Nanometrics is located in Milpitas, California.

Basis of Presentation – The accompanying condensed consolidated financial statements (“financial statements”) have been prepared on a consistent basis with the audited consolidated financial statements as of December 27, 2014, and include all normal recurring adjustments necessary to fairly state the information set forth therein. All significant intercompany accounts and transactions have been eliminated in consolidation.

The financial statements have been prepared in accordance with the regulations of the United States Securities and Exchange Commission (“SEC”) for interim periods in accordance with S-X Article 10, and, therefore, omit certain information and footnote disclosure necessary to present the statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The operating results for interim periods are not necessarily indicative of the operating results that may be expected for the entire year. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the fiscal year ended December 27, 2014, which were included in the Company’s Annual Report on Form 10-K filed with the SEC on February 25, 2015.

Fiscal Period – The Company uses a 52/53 week fiscal year ending on the last Saturday of the calendar year. All references to the quarter refer to Nanometrics’ fiscal quarter. The fiscal quarters presented herein include 13 weeks.

Reclassifications – Certain prior year amounts have been reclassified to conform to the current year presentation.

Use of Estimates – The preparation of financial statements in conformity with U.S. GAAP 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 reported period. Actual results could differ materially from those estimates. Estimates are used for, but not limited to, revenue recognition, the provision for doubtful accounts, the provision for excess, obsolete, or slow moving inventories, valuation of intangible and long-lived assets, warranty accruals, income taxes, valuation of stock-based compensation, and contingencies.

Revenue Recognition – The Company derives revenue from the sale of process control metrology and inspection systems (“product revenue”) as well as spare part sales, billable service, service contracts, and upgrades (together “service revenue”). Upgrades are a group of parts and/or software that change the existing configuration of a product and are included in service revenue. They are distinguished from product revenue, which consists of complete, advanced process control metrology and inspection systems (the “system(s)”). Nanometrics’ systems consist of hardware and software components that function together to deliver the essential functionality of the system. Arrangements for sales of systems often include defined customer-specified acceptance criteria.

In summary, the Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the seller's price is fixed or determinable, and collectability is reasonably assured.

7

NANOMETRICS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

For product sales to existing customers, revenue recognition occurs at the time title and risk of loss transfer to the customer, which usually occurs upon shipment from the Company's manufacturing location, if it can be reliably demonstrated that the product has successfully met the defined customer specified acceptance criteria and all other recognition criteria have been met. For initial sales where the product has not previously met the defined customer specified acceptance criteria, product revenues are recognized upon the earlier of receipt of written customer acceptance or expiration of the contractual acceptance period. In Japan, where contractual terms with the customer specify risk of loss and title transfers upon customer acceptance, revenue is recognized upon receipt of written customer acceptance, provided that all other recognition criteria have been met.

The Company warrants its products against defects in manufacturing. Upon recognition of product revenue, a liability is recorded for anticipated warranty costs. On occasion, customers request a warranty period longer than the Company's standard warranty. In those instances where extended warranty services are separately quoted to the customer, the associated revenue is deferred and recognized as service revenue ratably over the term of the contract. The portion of service contracts and extended warranty services agreements that are uncompleted at the end of any reporting period are included in deferred revenue.

As part of its customer services, the Company sells software that is considered to be an upgrade to a customer's existing systems. These standalone software upgrades are not essential to the tangible product's functionality and are accounted for under software revenue recognition rules which require vendor specific objective evidence (“VSOE”) of fair value to allocate revenue in a multiple element arrangement. Revenue from upgrades is recognized when the upgrades are delivered to the customer, provided that all other recognition criteria have been met.

Revenue related to spare parts is recognized upon shipment. Revenue related to billable services is recognized as the services are performed. Service contracts may be purchased by the customer during or after the warranty period and revenue is recognized ratably over the service contract period.

Frequently, the Company delivers products and various services in a single transaction. The Company's deliverables consist of tools, installation, upgrades, billable services, spare parts, and service contracts. The Company's typical multi-element arrangements include a sale of one or multiple tools that include installation and standard warranty. Other arrangements consist of a sale of tools bundled with service elements or delivery of different types of services. The Company's tools, upgrades, and spare parts are generally delivered to customers within a period of up to six months from order date. Installation is usually performed soon after delivery of the tool. The portion of revenue associated with installation is deferred based on relative selling price and that revenue is recognized upon completion of the installation. Billable services are billed on a time and materials basis and performed as requested by customers. Under service contract arrangements, services are provided as needed over the fixed arrangement term, which terms can be up to twelve months. The Company does not grant its customers a general right of return or any refund terms and imposes a penalty on orders cancelled prior to the scheduled shipment date.

The Company regularly evaluates its revenue arrangements to identify deliverables and to determine whether these deliverables are separable into multiple units of accounting. The Company allocates the arrangement consideration among the deliverables based on relative selling prices. The Company has established VSOE for some of its products and services when a substantial majority of selling prices falls within a narrow range when sold separately. For deliverables with no established VSOE, the Company uses best estimate of selling price to determine standalone selling price for such deliverable. The Company does not use third party evidence to determine standalone selling price since this information is not widely available in the market as the Company's products contain a significant element of proprietary technology and the solutions offered differ substantially from competitors. The Company has established a process for developing estimated selling prices, which incorporates historical selling prices, the effect of market conditions, gross margin objectives, pricing practices, as well as entity-specific factors. The Company monitors and evaluates estimated selling price on a regular basis to ensure that changes in circumstances are accounted for in a timely manner.

When certain elements in multiple-element arrangements are not delivered or accepted at the end of a reporting period, the relative selling prices of undelivered elements are deferred until these elements are delivered and/or accepted. If deliverables cannot be accounted for as separate units of accounting, the entire arrangement is accounted for as a single unit of accounting and revenue is deferred until all elements are delivered and all revenue recognition requirements are met.

8

NANOMETRICS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Note 2. Recent Accounting Pronouncements

In January 2015, the Financial Accounting Standards Board ("FASB") issued an accounting standard update which simplifies income statement classification by removing the concept of extraordinary items from the U.S. GAAP. As a result, items that are both unusual and infrequent will no longer be separately reported net of tax after continuing operations. The new standard is effective for the fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The Company does not expect any impact on the adoption of this standard on its consolidated financial statements.

In May 2014, the FASB issued an accounting standards update which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In April 2015, the FASB tentatively decided to defer for one year the effective date of the new revenue standard as well as tentatively permit early adoption. If deferred, the new standard will be effective for the Company on January 1, 2018. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that the standard will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

In July 2013, the FASB issued an accounting standards update which provides that a liability related to an unrecognized tax benefit would be offset against a deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward if such settlement is required or expected in the event the uncertain tax position is disallowed. In situations in which a net operating loss carryforward, a similar tax loss or a tax credit carryforward is not available at the reporting date under the tax law of the jurisdiction or the tax law of the jurisdiction does not require, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit will be presented in the financial statements as a liability and will not be combined with deferred tax assets. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The new standard is effective for fiscal years and interim periods beginning after December 15, 2013. The Company adopted this standard during the three months ended March 29, 2014, resulting in a one-time tax benefit of $0.3 million, a reduction in deferred tax assets of $0.3 million, and a reduction in long-term income taxes payable of $0.6 million.

Note 3. Fair Value Measurements and Disclosures

Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard assumes that the transaction to sell the asset or transfer the liability occurs in the principal or most advantageous market for the asset or liability and establishes that the fair value of an asset or liability shall be determined based on the assumptions that market participants would use in pricing the asset or liability.

The Company determines the fair values of its financial instruments based on the fair value hierarchy established in FASB Accounting Standards Codification (“ASC”) 820, Fair Value Measurement, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The classification of a financial asset or liability within the hierarchy is based upon the lowest level input that is significant to the fair value measurement. The fair value hierarchy prioritizes the inputs into the following three levels that may be used to measure fair value:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.

Level 3 — Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. Such unobservable inputs include an estimated discount rate used in the Company’s discounted present value analysis of future cash flows, which reflects the Company’s estimate of debt with similar terms in the current credit markets. As there is currently minimal activity in such markets, the actual rate could be materially different.

9

NANOMETRICS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

The following tables present the Company’s assets and liabilities measured at estimated fair value on a recurring basis, excluding accrued interest components, categorized in accordance with the fair value hierarchy (in thousands), as of the following dates:

	March 28, 2015								December 27, 2014
	Fair Value Measurements Using Input Types								Fair Value Measurements Using Input Types
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	909	$	—	$	—	$	909	$	610	$	—	$	—	$	610
Total cash equivalents	909		—		—		909		610		—		—		610
Marketable securities:
U.S. Treasury, U.S. Government and U.S. Government agency debt securities	2,499		21,554		—		24,053		2,497		20,537		—		23,034
Commercial paper, municipal securities and corporate debt securities	—		25,061		—		25,061		—		26,252		—		26,252
Total marketable securities	2,499		46,615		—		49,114		2,497		46,789		—		49,286
Total(1)	$	3,408	$	46,615	$	—	$	50,023	$	3,107	$	46,789	$	—	$	49,896
Liabilities:
Contingent consideration payable	$	—	$	—	$	2,208	$	2,208	$	—	$	—	$	2,397	$	2,397

⁽¹⁾ Excludes $27.0 million and $34.1 million held in operating accounts as of March 28, 2015 and December 27, 2014, respectively.

The fair values of the marketable securities that are classified as Level 1 in the table above were derived from quoted market prices for identical assets or liabilities in active markets that the Company has the ability to access. The fair value of marketable securities that are classified as Level 2 in the table above were derived from non-binding market consensus prices that were corroborated by observable market data, quoted market prices for similar instruments, or pricing models, such as discounted cash flow techniques with all significant inputs derived from or corroborated by observable market data. There were no transfers of instruments between Level 1, Level 2 and Level 3 during the financial periods presented.

Changes in Level 3 liabilities (in thousands)
Fair value at December 27, 2014	2,397
Payments made to Zygo Corporation	(224		)
Change in fair value included in earnings	35
Fair value at March 28, 2015	$	2,208

As of March 28, 2015, the Company had liabilities of $2.2 million resulting from the acquisition of certain assets from Zygo Corporation (“Zygo”), which are measured at fair value on a recurring basis, and changes in fair value recorded in Other income (expense), net. Of the $2.2 million of Zygo liabilities at March 28, 2015, $1.1 million was a current liability and $1.1 million was a long-term liability. As of December 27, 2014, the liabilities totaled $2.4 million of which $1.4 million was a current liability and $1.0 million was a long-term liability. The fair values of these liabilities were determined using Level 3 inputs applying a discounted cash flow model incorporating assumptions that market participants would use in their estimates of fair value. Some of these assumptions included estimates for discount rate, and timing and the amount of cash flows.

10

NANOMETRICS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Note 4. Cash and Investments

The following tables present cash, cash equivalents, and available-for-sale investments as of the following dates (in thousands):

	March 28, 2015
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Market Value
Cash	$	27,026	—		$	—		$	27,026
Cash equivalents:
Money market funds	909		—		—			909
Marketable securities:
Commercial paper	1,398		—		—			1,398
U.S. Treasury securities	2,499		—		—			2,499
U.S. Government agency securities	21,553		6		(5		)	21,554
Municipal securities	3,020		1		(2		)	3,019
Corporate debt securities	20,647		4		(7		)	20,644
Total cash, cash equivalents, and marketable securities	$	77,052	$	11	$	(14	)	$	77,049
	December 27, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Market Value
Cash	$	34,066	$	—	$	—		$	34,066
Cash equivalents:
Money market funds	610		—		—			610
Marketable securities:
Commercial paper	805		—		—			805
U.S. Treasury Securities	2,498		—		(1		)	2,497
U.S. Government agency securities	20,556		1		(19		)	20,538
Municipal securities	3,755		1		(7		)	3,749
Corporate debt securities	21,722		1		(26		)	21,697
Total cash, cash equivalents, and marketable securities	$	84,012	$	3	$	(53	)	$	83,962

11

NANOMETRICS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Available-for-sale marketable securities, readily convertible to cash, with maturity dates of 90 days or less are classified as cash equivalents, while those with maturity dates greater than 90 days are classified as marketable securities within short-term assets. All marketable securities as of March 28, 2015 and December 27, 2014, were available-for-sale and reported at fair value based on the estimated or quoted market prices as of the balance sheet date. Unrealized gains or losses, net of tax effect, are recorded in accumulated other comprehensive income (loss) within stockholders’ equity. Both the gross unrealized gains and gross unrealized losses for the three months ended March 28, 2015 and March 29, 2014 were insignificant and no marketable securities had other than temporary impairment. All marketable securities as of March 28, 2015 and December 27, 2014, had maturity dates of less than two years and were not invested in foreign entities.

Note 5. Accounts Receivable

The Company maintains arrangements under which eligible accounts receivable in Japan are sold without recourse to unrelated third-party financial institutions. These receivables were not included in the consolidated balance sheets as the criteria for sale treatment had been met. The Company pays administrative fees as well as interest ranging from 1.15% to 1.68% based on the anticipated length of time between the date the sale is consummated and the expected collection date of the receivables sold. The Company sold $1.1 million and $0.6 million of receivables during three months ended March 28, 2015 and March 29, 2014, respectively. There were no material gains or losses on the sale of such receivables. There were no amounts due from such third party financial institutions at March 28, 2015 and December 27, 2014.

12

NANOMETRICS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Note 6. Financial Statement Components

The following tables provide details of selected financial statement components as of the following dates (in thousands):

Condensed Consolidated Balance Sheets Details	At
	March 28, 2015			December 27, 2014
Inventories:
Raw materials and sub-assemblies	$	20,455		$	19,463
Work in process	11,523			7,723
Finished goods	5,509			7,919
Inventories	37,487			35,105
Inventories-delivered systems	749			1,912
Total inventories	$	38,236		$	37,017
Property, plant and equipment, net(1):
Land	$	15,572		$	15,572
Building and improvements	19,679			19,641
Machinery and equipment	30,400			29,456
Furniture and fixtures	2,241			2,225
Software	7,942			7,942
Capital in progress	2,770			3,512
Total property, plant and equipment, gross	78,604			78,348
Accumulated depreciation and amortization	(30,804		)	(28,715		)
Total property, plant and equipment, net	$	47,800		$	49,633
(1)Total depreciation and amortization expense for the three months ended March 28, 2015 and March 29, 2014 was $1.7 million and $1.6 million, respectively.
Other current liabilities:
Accrued warranty	$	3,440		$	2,953
Accrued restructuring	606			997
Accrued professional services	875			778
Fair value of current portion of contingent payments to Zygo Corporation related to acquisition	1,128			1,385
Other	2,061			2,152
Total other current liabilities	$	8,110		$	8,265

Components of Accumulated Other Comprehensive Income (Loss)

	Foreign Currency Translations			Defined Benefit Pension Plans			Unrealized Income (Loss) on Investment			Accumulated Other Comprehensive Income
Balance as of December 27, 2014	$	(2,604	)	$	(134	)	$	(31	)	$	(2,769	)
Current period change	(1,727		)	—			29			(1,698		)
Balance as of March 28, 2015	$	(4,331	)	$	(134	)	$	(2	)	$	(4,467	)

The items above, except for unrealized income (loss) on investment, did not impact the Company’s income tax provision. The amounts reclassified from each component of accumulated other comprehensive income into income statement line items were insignificant.

13

NANOMETRICS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Note 7. Goodwill and Intangible Assets

The following table summarizes the activity in the Company’s goodwill during the three months ended March 28, 2015 (in thousands):

Balance as of December 27, 2014	$	10,494
Foreign currency movements	(1,103		)
Balance as of March 28, 2015	$	9,391

Finite-lived intangible assets are recorded at cost, less accumulated amortization. Finite-lived intangible assets as of March 28, 2015 and December 27, 2014 consisted of the following (in thousands):

	March 28, 2015
	Adjusted cost		Accumulated amortization			Net carrying amount
Developed technology	$	16,063	$	(13,018	)	$	3,045
Customer relationships	9,362		(9,362		)	—
Brand names	1,927		(1,827		)	100
Patented technology	2,252		(2,071		)	181
Trademark	80		(80		)	—
Total	$	29,684	$	(26,358	)	$	3,326

	December 27, 2014
	Adjusted cost		Accumulated amortization			Net carrying amount
Developed technology	$	16,950	$	(12,991	)	$	3,959
Customer relationships	9,461		(9,449		)	12
Brand names	1,927		(1,802		)	125
Patented technology	2,252		(2,054		)	198
Trademark	80		(80		)	—
Total	$	30,670	$	(26,376	)	$	4,294

The amortization of finite-lived intangibles is computed using the straight-line method. Estimated lives of finite-lived intangibles range from two to ten years. Total amortization expense for the three months ended March 28, 2015 and March 29, 2014 was $0.7 million and $0.8 million, respectively.

There were no impairment charges related to intangible assets recorded during the three months ended March 28, 2015 and March 29, 2014.

The estimated future amortization expense of finite intangible assets as of March 28, 2015 is as follows (in thousands):

Fiscal Years	Amounts
2015 (remaining nine months)	$	1,258
2016	1,656
2017	206
2018	140
2019	66
Total future amortization expense	$	3,326

14

NANOMETRICS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Note 8. Warranties

The Company sells the majority of its products with a 12 months repair or replacement warranty from the date of acceptance or shipment date. The Company provides an accrual for estimated future warranty costs based upon the historical relationship of warranty costs to the cost of products sold. The estimated future warranty obligations related to product sales are recorded in the period in which the related revenue is recognized. The estimated future warranty obligations are affected by the warranty periods, sales volumes, product failure rates, material usage, and labor and replacement costs incurred in correcting a product failure. If actual product failure rates, material usage, labor or replacement costs were to differ from the Company’s estimates, revisions to the estimated warranty obligations would be required. For new product introductions where limited or no historical information exists, the Company may use warranty information from other previous product introductions to guide it in estimating its warranty accrual.

Components of the warranty accrual, which were included in the accompanying condensed consolidated balance sheets with other current liabilities, were as follows (in thousands):

	Three Months Ended
	March 28, 2015			March 29, 2014
Balance as of beginning of period	$	2,953		$	3,426
Accruals for warranties issued during period	1,702			1,317
Settlements during the period	(1,215		)	(1,168		)
Balance as of end of period	$	3,440		$	3,575

Note. 9. Restructuring

The Company recorded a restructuring charge of approximately $0.1 million during the three months ended March 28, 2015 as a result of its decision to consolidate and reorganize certain of its operations, primarily in the U.K. The Company completed this restructuring plan in March 2015. Other related costs will be recognized as incurred.

As of March 28, 2015, the components of the Company’s restructuring reserves were included in other current liabilities and were as follows (in thousands):

	Employee severance and benefits			Facility termination costs			Other			Total
Balance as of December 27, 2014	$	383		$	583		$	31		$	997
Charges	45			—			13			58
Cash Payments	(308		)	(106		)	(35		)	(449		)
Balance as of March 28, 2015	$	120		$	477		$	9		$	606

As of March 29, 2014, the balance of the Company’s restructuring reserves was zero.

Note 10. Line of Credit and Debt Obligations

Line of Credit - On May 30, 2014, the Company amended its revolving line of credit facility (i) to extend the maturity date of such facility by two years to May 30, 2016, and (ii) to increase the minimum amount available to borrow to $12.0 million. The instrument governing the line of credit facility includes certain financial covenants regarding tangible net worth. The revolving line of credit agreement includes a provision for the issuance of commercial or standby letters of credit by the bank on behalf of the Company. The value of all letters of credit outstanding reduces the total line of credit available. The revolving line of credit is collateralized by a blanket lien on all of the Company’s domestic assets excluding intellectual property and real estate. The minimum borrowing interest rate is 3.00% per annum. Borrowing is limited to the lesser of (a) $12.0 million plus the borrowing base, or (b) $20.0 million. The total borrowing base available as of March 28, 2015 was $16.0 million. As of March 28, 2015, the Company was not in breach of any restrictive covenants in connection with this line

15

NANOMETRICS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

of credit. There were no outstanding amounts drawn on this facility as of March 28, 2015. Although management has no current plans to request advances under this credit facility, the Company may use the proceeds of any future borrowing for general corporate purposes, future acquisitions or expansion of the Company’s business.

Note 11. Commitments and Contingencies

Intellectual Property Indemnification Obligations – The Company will, from time to time, in the normal course of business, agree to indemnify certain customers, vendors or others against third party claims that the Company’s products, when used for their intended purpose(s), or the Company’s intellectual property, infringe the intellectual property rights of such third parties or other claims made against parties with whom it enters into contractual relationships. It is not possible to determine the maximum potential amount of liability under these indemnification obligations due to the limited history of prior indemnification claims and the unique facts and circumstances that are likely to be involved in each particular claim. Historically, the Company has not made payments under these obligations and believes that the estimated fair value of these agreements is immaterial. Accordingly, no liabilities have been recorded for these obligations in the accompanying condensed consolidated balance sheets as of March 28, 2015 and December 27, 2014.

Note 12. Net Income Per Share

The Company presents both basic and diluted net income per share on the face of its condensed consolidated statements of operations. Basic net income per share excludes the effect of potentially dilutive shares and is computed by dividing net income by the weighted-average number of shares of common stock outstanding for the period. Diluted net income per share is computed using the weighted-average number of shares of common stock outstanding for the period plus the effect of all dilutive securities representing potential shares of common stock outstanding during the period.

A reconciliation of the share denominator of the basic and diluted net income per share computations for three months ended March 28, 2015 and March 29, 2014 is as follows (in thousands):

	Three Months Ended
	March 28, 2015	March 29, 2014
Weighted average common shares outstanding used in basic net income (loss) per share calculation	23,866	23,711
Potential dilutive common stock equivalents, using treasury stock method	391	448
Weighted average shares used in diluted net income per share calculation	24,257	24,159

16

NANOMETRICS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Note 13. Stockholders’ Equity and Stock-Based Compensation

Options and ESPP Awards

The fair value of each option award is estimated on the grant date using the Black-Scholes valuation model and the assumptions noted in the following table. The expected lives of options granted were calculated using the simplified method allowed by the SAB 107. The risk-free rates were based on the U.S Treasury rates in effect during the corresponding period of grant. The expected volatility was based on the historical volatility of the Company’s stock price. The dividend yield reflects that the Company has not paid any cash dividends since inception and does not intend to pay any cash dividends in the foreseeable future.

	March 28, 2015	March 29, 2014
Stock Options:
Expected life	—	4.6 years
Volatility	—	56.8%
Risk free interest rate	—	1.53%
Dividends	—	—
Employee Stock Purchase Plan:
Expected life	0.5 years	0.5 years
Volatility	37.2%	32.6%
Risk free interest rate	0.11%	1.00%
Dividends	—	—

No stock options were awardedduring the three monthsended March 28, 2015. The weighted average fair value per share of the stock options awarded in three month period ended March 29, 2014 was $8.69.

A summary of activity of stock options during the three months ended March 28, 2015 is as follows:

	Number of Shares Outstanding (Options)		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in Thousands)
Options
Outstanding at December 27, 2014	1,382,993		$	13.92	3.41	$	4,108
Exercised	(127,814	)	11.82
Granted	—		—
Cancelled	(3,263	)	15.57
Outstanding at March 28, 2015	1,251,916		$	14.14	3.17	$	4,069
Exercisable at March 28, 2015	992,179		$	13.57	2.72	$	3,757

The aggregate intrinsic value in the above table represents the total pretax intrinsic value, based on the Company’s closing stock price of $17.19 as of March 27, 2015, the last trading day of the quarter, which would have been received by the option holders had all option holders exercised their options as of that date. The total intrinsic value of options exercised during the three months ended March 28, 2015 and March 29, 2014 was $0.8 million and $1.7 million, respectively. 

17

NANOMETRICS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Restricted Stock Units (“RSUs”)

Time-based RSUs are valued using the market value of the Company’s common stock on the date of grant, assuming no expectation of dividends paid.

A summary of activity for RSUs is as follows:

RSUs	Number of RSUs		Weighted Average Fair Value
Outstanding RSUs as of December 27, 2014	563,337		$	17.90
Granted	71,533		17.92
Released	(127,096	)	17.78
Cancelled	(8,399	)	16.56
Outstanding RSUs as of March 28, 2015	499,375		$	17.96

Market-Based Performance Stock Units (“PSUs”)

During the three months ended March 28, 2015, in addition to granting RSUs that vest on the passage of time only, the Company granted PSUs to an executive. The PSUs will vest in three equal tranches over one, two and three years based on the relative performance of the Company’s stock during those periods, compared to a peer group over the same period. If target stock price performance is achieved, 40,000 shares of the Company’s common stock will vest, and up to a maximum of 60,000 shares will vest if the maximum stock price performance is achieved for each tranche.

Valuation of PSUs

On the date of grant, the Company estimated the fair value of PSUs using a Monte Carlo simulation model. The assumptions for the valuation of PSUs are summarized as follows:

PSUs	2015 Awards
Number of PSUs granted and outstanding as of March 28, 2015	40,000
Weighted-average assumptions/inputs:
Expected Dividend	—
Range of risk-free interest rates	0.25%-1.1%
Range of expected volatilities for peer group	23%-65%

Stock-based Compensation Expense

Stock-based compensation expense for all share-based payment awards made to the Company’s employees and directors pursuant to the employee stock option and employee stock purchase plans by function were as follows (in thousands):

	March 28, 2015		March 29, 2014
Cost of products	$	73	$	61
Cost of service	46		84
Research and development	280		340
Selling	500		427
General and administrative	672		722
Total stock-based compensation expense related to employee stock options and employee stock purchases	$	1,571	$	1,634

18

NANOMETRICS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Note 14. Income Taxes

The Company accounts for income taxes under the provisions of ASC 740, Accounting for Income Taxes. The Company adjusts its effective tax rate each quarter to be consistent with the estimated annual effective tax rate. The Company also records the tax effect of unusual or infrequently occurring discrete items, including changes in judgment about valuation allowances and effects of changes in tax laws or tax rates, in the interim period in which they occur. The Company's effective tax rate reflects the impact of a portion of its earnings being taxed in foreign jurisdictions as well as a valuation allowance maintained on certain deferred tax assets.

The provision for income taxes consists of the following (in thousands):

	Three Months Ended
	March 28, 2015		March 29, 2014
Provision for income taxes	$	317	$	587

The Company recorded a tax provision of $0.3 million and $0.6 million for the three months ended March 28, 2015 and March 29, 2014, respectively. The decrease in the tax provision for 2015 from 2014 was primarily related to no tax being provided on U.S. income as the Company has a full valuation allowance against its U.S. deferred tax assets for the three months ended March 28, 2015.

The change during the three months ended March 28, 2015 compared to the corresponding period in 2014, was primarily related to a change in the geographical mix of income of the Company during the three months ended March 28, 2015.

As of March 28, 2015, the Company continues to maintain a valuation allowance against its U.S. and certain foreign deferred tax assets as a result of uncertainties regarding the realization of the asset due to cumulative losses and uncertainty of future taxable income. The Company will continue to assess the realizability of the deferred tax assets in each of the applicable jurisdictions and maintain the valuation allowances until sufficient positive evidence exists to support a reversal. In the event the Company determines that the deferred tax assets are realizable, an adjustment to the valuation allowance will be reflected in the tax provision for the period such determination is made.

The Company is subject to taxation in the U.S. and various states including California, and foreign jurisdictions including Korea, Japan, Taiwan, and China. Due to tax attribute carry-forwards, the Company is subject to examination for tax years 2003 forward for U.S. tax purposes. The Company is also subject to examination in various states for tax years 2002 forward. The Company is subject to examination for tax years 2007 forward for various foreign jurisdictions.

The Company accrues interest and penalties related to unrecognized tax benefits in its provision for income taxes. The total amount of penalties and interest were not material as of March 28, 2015 and March 29, 2014. During the next twelve months, the Company anticipates increases in its unrecognized tax benefits of approximately $0.1 million.

Note 15. Segment, Geographic, Product and Significant Customer Information

The Company has one operating segment, which is the sale, design, manufacture, marketing and support of optical critical dimension and thin film systems. The following tables summarize total net revenues and long-lived assets (excluding intangible assets) attributed to significant countries (in thousands):

19

NANOMETRICS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

	Three Months Ended
	March 28, 2015		March 29, 2014
Total net revenues:
United States	$	9,078	6,741
South Korea	14,643		15,889
China	4,001		15,488
Taiwan	14,428		4,416
Other	8,226		9,042
Total net revenues	$	50,376	$	51,576

Long-lived tangible assets:	March 28, 2015		December 27, 2014
United States	$	46,011	$	47,729
Japan	65		71
South Korea	249		284
All Other	1,475		1,549
Total long-lived tangible assets	$	47,800	$	49,633

The following customers accounted for 10% or more of total accounts receivable, net:

	At
	March 28, 2015		December 27, 2014
Samsung Electronics Co. Ltd.	17.3	%	10.0	%
Taiwan Semiconductor Manufacturing Company Limited	27.8	%	20.2	%
SK Hynix	17.5	%	***
Micron	***		23.7	%
GLOBALFOUNDRIES	***		10.2	%

*** The customer accounted for less than 10% of total accounts receivable, net, as of that period end.

The following customers accounted for 10% or more of total net revenues:

	March 28, 2015		March 29, 2014
Samsung Electronics Co. Ltd.	30.3	%	51.7	%
Intel Corporation	***		13.1	%
SK Hynix	13.4	%	***
Taiwan Semiconductor Manufacturing Company Limited	22.3	%	***

*** The customer accounted for less than 10% of total net revenues during the period.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. The statements contained in this document that are not purely historical are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, including, without limitation, statements regarding future periods, financial results, revenues, margins, growth, customers, tax rates, product performance, and the impact of accounting rules on our business and the future implications of our statements regarding goals, strategy, and similar terms. We may identify these statements by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “may,” “might,” “plan,” “project,” “will,” and other similar expressions. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements, except as may otherwise be required by law.

Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain risks, uncertainties and changes in circumstances, many of which may be difficult to predict or beyond our control, including those factors referenced in Part II, Item 1A, Risk Factors, and elsewhere in this document, and in Part I, Item 1A, Risk Factors, in our Annual Report on Form 10-K for the fiscal year ended December 27, 2014. In particular our results could vary significantly based on: changes in customer and industry spending; rate and extent of changes in product mix; adoption of new products; timing of orders, shipments, and acceptance of products; our ability to secure volume supply agreements; and general economic conditions. In evaluating our business, investors should carefully consider these factors in addition to any other risks and uncertainties set forth elsewhere. The occurrence of the events described in the risk factors and elsewhere in this report as well as other risks and uncertainties could materially and adversely affect our business, operating results and financial condition. While management believes that the discussion and analysis in this report is adequate for a fair presentation of the information presented, we recommend that you read this discussion and analysis in conjunction with (i) our audited consolidated financial statements and notes thereto for the fiscal year ended December 27, 2014, which were included in our 2014 Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 25, 2015, and (ii) our other filings with the SEC.

We are an innovator in the field of metrology and inspection systems for semiconductor manufacturing and other industries. Our systems are designed to precisely monitor optical critical dimensions and film thickness that are necessary to control the manufacturing process and to identify defects that can affect production yields and performance.

Principal factors that impact our revenue growth include capital expenditures by manufacturers of semiconductors to increase capacity and to enable their development of new technologies, and our ability to improve market share. The increasing complexity of the manufacturing processes for semiconductors is an important factor in the demand for our innovative metrology systems, as are the adoption of optical critical dimension (“OCD”) metrology across fabrication processes, immersion lithography and multiple patterning, new types of thin film materials, advanced packaging strategies and wafer backside inspection, and the need for improved process control to drive process efficiencies. Our strategy is to continue to innovate organically as well as to evaluate strategic acquisitions to address business challenges and opportunities.

Our revenues are primarily derived from product sales but are also derived from customer service and system upgrades for the installed base of our products. For the three months ended March 28, 2015, we derived 76% of our total net revenues from product sales and 24% of our total net revenues from services and upgrades.

Overview

Together with our subsidiaries, we are a leading provider of advanced, high-performance process control metrology and inspection systems used primarily in the fabrication of integrated circuits, high-brightness LEDs (“HB-LED”), discrete components and hard disk drive components. Our automated and integrated systems address numerous process control applications, including critical dimension and film thickness measurement, device topography, defect inspection, and analysis of various other film properties such as optical, electrical and material characteristics. Our 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. Our systems enable device manufacturers to improve yields, increase productivity and lower their manufacturing costs.

21

Nanometrics Products

We offer a diverse line of systems to address the broad range of process control requirements of the semiconductor manufacturing industry. In addition, we believe that our engineering expertise, strategic acquisitions, supplier alliances and short-cycle production strategies enable us to develop and offer advanced process control solutions that, in the future, should address industry advancement and trends.

Automated Systems

Our automated systems primarily consist of fully automated metrology systems that are employed in high-volume semiconductor production environments, as well as in research and development ("R&D") and pilot production. The Atlas^® II, Atlas II+, Atlas XP/Atlas XP⁺and Atlas-M represent our line of high-performance metrology systems providing optical critical dimension (“OCD”), thin film metrology and wafer stress for transistor and interconnect metrology applications. The OCD technology is supported by our NanoCD^® suite of solutions including our NanoDiffract^® software and NanoGen^TMscalable computing engine that enables visualization, modeling, and analysis of complex structures. The UniFire^TM system enables users to measure multiple parameters at any given process step in the advanced packaging process flow for critical dimension, overlay, and topography applications. Our SPARK^TMdefect inspection system, offers ultra-fast inspection of patterned and unpatterned semiconductor wafers.

Integrated Systems

Our integrated metrology (“IM”) systems are installed directly onto wafer processing equipment to provide near real-time measurements for improved process control and maximum throughput. Our IM systems are sold directly to end customers and through OEM channels. The IMPULSE^®system is our latest metrology platform for OCD, and thin film metrology, and has been successfully qualified on numerous OEM platforms. Our 90x0 system is qualified for OEM and direct sales supporting thin film and OCD applications. Our NanoCD suite of solutions is sold in conjunction with our IMPULSE^® and legacy 90x0 systems. Our Trajectory® system provides in-line measurement of layers in thin film thickness and composition in semiconductor applications.

System Platform

The Lynx^® platform enables cluster metrology factory automation for improved cost of ownership to our customers by combining our Atlas^® II+ and IMPULSE^®, UniFire metrology and SPARK inspectionsystems in configurations to provide high throughput, reduced footprint systems for leading 300mm wafer metrology applications including OCD and thin film process control.

Materials Characterization

Our materials characterization products include systems that are used to monitor the physical, optical, electrical and material characteristics of discrete electronic industry, HB-LED, solar PV, compound semiconductor, strained silicon and silicon-on-insulator (“SOI”) devices, including composition, crystal structure, layer thickness, dopant concentration, contamination and electron mobility.

Our Imperia™ is a photoluminescence (“PL”) full wafer imaging and mapping system designed for high-volume compound semiconductor metrology applications including power control and photonics applications adding significant inspection and substrate metrology capability to the established PL fleet. The RPMBlue™ is our latest PL mapping system designed specifically for the HB-LED market, and is complemented by the RPMBlue-FS, enabling a breadth of research and development configurability. We sell Fourier-Transform Infrared (“FTIR”) automated and manual systems in the QS2200/3300 and QS1200 respectively. The FTIR systems are spectrometers designed for non-destructive wafer analysis for various applications. The NanoSpec^®line, including the NanoSpec II, supports thin film measurement across all applications in both low volume production and research applications.

We are continually working to strengthen our competitive position by developing new technologies and products in our market segment. We have expanded our product offerings to address growing applications within the semiconductor manufacturing and adjacent industries. In continuance of our goals, we have:

• Introduced new products, applications, and upgrades in every core product line and primary market served;

• Diversified our product line and served markets through acquisitions, such as: the 2006 acquisition of Accent Optical Technologies, Inc., a supplier of overlay and thin film metrology and process control systems; the 2008 acquisition of Tevet Process Control Technologies (“Tevet”), an integrated metrology supplier; the 2009 acquisition of the UniFire™

22

product line from Zygo Corporation; and the 2011 acquisition of Nanda Technologies GmbH, a supplier of high sensitivity, high throughput defect inspection systems;

• Continued development of new measurement and inspection technologies for advanced fabrication processes; and

• Researched and developed innovative applications of existing technology to new market opportunities within the solar PV, HB-LED, discrete device, and data storage industries.

Important Themes and Significant Trends

The semiconductor equipment industry is characterized by cyclical growth. Changing trends in the semiconductor industry continue to drive the need for metrology as a major component of device manufacturing. These trends include:

• Proliferation of Optical Critical Dimension Metrology across Fabrication Processes. Our customers use photolithographic processes to create patterns on wafers. Critical dimensions must be carefully controlled during this process. In advanced node device definition, additional monitoring of thickness and profile dimensions on these patterned structures at CMP, Etch, and Thin Film processing is driving broader OCD adoption. Our proprietary OCD systems can provide the critical process control of these circuit dimensions that is necessary for successful manufacturing of these state-of-the-art devices. Nanometrics OCD technology is broadly adopted across NAND, DRAM, and logic semiconductor manufacturing processes.

• Development of 3D Transistor Architectures. Our end customers continue to improve device density and performance by scaling front-end-of-line transistor architectures. Many of these designs, including FinFET transistors and 3D-NAND, have buried features and high aspect ratio stacked features that enable improved performance and density. The advanced designs require additional process control to manage the complex shapes and materials properties, driving additional applications for both OCD and our UniFire systems.

• Adoption of Advanced Packaging Processes. Our customers use photolithography, etching, metallization and wafer thinning to enable next generation advanced packaging solutions for semiconductor devices. These new packaging techniques lead to increased functionality in smaller, less expensive form factors.  Advanced packages can be broken down into high density flip chip or bump packages that increase pin density allowing for more complex I/O on advanced CPU parts. Similar or different devices can be stacked at the wafer level using a Through Silicon Via (“TSV”) process. The TSV process enables high density small form factor parts, being primarily driven by mobile consumer products (e.g. cellular telephones with integrated CMOS camera sensors). Increasingly advanced packaging technologies are being adopted by our end customers.

• Adoption of New Types of Thin Film Materials. The need for ever increasing device circuit speed coupled with lower power consumption has pushed semiconductor device manufacturers to begin the replacement of traditional aluminum etch back interconnect flows, as well as conventional gate dielectric materials, with new materials and processes that are driving broader adoption of thin film and OCD metrology systems. To achieve greater semiconductor device speed, manufacturers have adopted copper in Logic/IDM and it is now proliferating in next generation DRAM and Flash nodes. Additionally, to achieve improved transistor performance in logic devices and higher cell densities in memory devices, new materials including high dielectric constant (or high-k) gate materials are increasingly being substituted for traditional silicon-oxide gate dielectric materials. High-k materials comprise complex thin films including layers of hafnium oxide and a bi-layer of thin film metals. Our advanced metrology and inspection solutions are required for control of process steps, which are critical to enable the device performance improvements that these new materials allow.

• Need for Improved Process Control to Drive Process Efficiencies. Competitive forces influencing semiconductor device manufacturers, such as price-cutting and shorter product life cycles, place pressure on manufacturers to rapidly achieve production efficiency. Device manufacturers are using our integrated and automated systems throughout the fabrication process to ensure that manufacturing processes scale rapidly, are accurate and can be repeated on a consistent basis.

• Increased Customer Concentration. Our market is characterized by continued consolidation in the customer base. Our largest customer accounted for 30% and 52% of our total net revenues in the three months ended March 28, 2015 and March 29, 2014, respectively.

Critical Accounting Policies

The preparation of our financial statements conforms to accounting principles generally accepted in the United States of America, which requires management to make estimates and judgments in applying our accounting policies that have an important impact on our reported amounts of assets, liabilities, revenue, expenses and related disclosures at the date of our financial statements. On an ongoing basis, management evaluates its estimates including those related to bad debts, inventory valuations, warranty obligations, impairment and income taxes. Management bases its estimates and judgments on historical

23

experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from management’s estimates. There were no significant changes in our critical accounting policies during the three months ended March 28, 2015. Please refer to Please refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the fiscal year ended December 27, 2014 for a complete discussion of our critical accounting policies.

Recent Accounting Pronouncements

See Note 2 of the Unaudited Condensed Consolidated Financial Statements for a description of recent accounting pronouncements, including the respective dates of adoption and effects or anticipated effects on our results of operations and financial condition.

Results of Operations

Net Revenues

Our net revenues comprised the following product lines (in thousands, except percentages):

	Three Months Ended
	March 28, 2015		March 29, 2014		Change
Automated systems	$	30,506	$	33,883	$	(3,377	)	(10.0	)%
Integrated systems	4,725		6,922		(2,197		)	(31.7	)%
Materials characterization systems	3,108		2,475		633			25.6	%
Total product revenue	38,339		43,280		(4,941		)	(11.4	)%
Service	12,037		8,296		3,741			45.1	%
Total net revenues	$	50,376	$	51,576	$	(1,200	)	(2.3	)%

For the three months ended March 28, 2015, total netrevenues decreased by $1.2 million relative to the comparable 2014 period.

The decrease was due to an 11.4% decline in product revenue. Approximately $4.9 million of the decrease in product revenues was attributable to sales of our Automated Systems (principally UniFire™) which declined by $3.4 million. Integrated Systems accounted for $2.2 million of the decrease (principally IMPULSE^®) and was partially offset by Materials Characterization sales which increased by $0.6 million. Service revenue increased by $3.7 million in the three months ended March 28, 2015 principally due to an increase in upgrade revenue as a result of higher demand for upgrades of installed tools during the first quarter of 2015. Upgrades tend to fluctuate from quarter to quarter based on availability of new functionality from upgrades and customer production cycles, which determine when customers purchase available upgrades.

With a significant portion of the world’s semiconductor manufacturing capacity located in Asia, a substantial portion of our revenues continue to be generated in that region. Although sales to customers within individual countries of that region will vary from time to time, we expect that a substantial portion of our revenues will continue to be generated in Asia.

Gross margin

Our gross margin breakdown was as follows:

	Three Months Ended
	March 28, 2015		March 29, 2014
Products	46.2	%	48.4	%
Service	47.1	%	38.4	%

The calculation of product gross margin includes both cost of products and amortization of intangibles. The gross margin on product revenue decreased to 46.2% in the three months ended March 28, 2015 from 48.4% in the three months ended March 29, 2014, reflecting a decrease of 2.2 percentage points from the comparable 2014 period. The decrease was due primarily to lower factory overhead absorption and a change in product mix to lower margin products during the three months

24

ended March 28, 2015. The gross margin on our services business increased to 47.1% in the three months ended March 28, 2015 from 38.4% in the three months ended March 29, 2014, reflecting an increase of 8.7 percentage points, due principally to an increase in upgrade revenues, which typically have higher margins than core service revenue.

Operating expenses.

Our operating expenses comprised the following categories (in thousands, except percentages):

	Three Months Ended
	March 28, 2015		March 29, 2014		Change
Research and development	$	8,159	$	8,314	$	(155	)	(1.9	)%
Selling	7,116		7,373		(257		)	(3.5	)%
General and administrative	5,767		6,338		(571		)	(9.0	)%
Amortization of intangible assets	38		108		(70		)	(64.8	)%
Restructuring charge	58		—		58			NM*
Total operating expenses	$	21,138	$	22,133	$	(995	)	(4.5	)%

* NM = not meaningful

Research and development.

Research and development costs decreased by $0.2 million or 1.9% in the three months ended March 28, 2015 compared to the three months ended March 29, 2014 related primarily to the decrease in headcount resulting from the shutdown of Nanda and UK operations partially offset by increased R&D headcount in the U.S, and reduced outside service costs. Together these expenses were partially offset by increased material expenses associated with R&D investments associated with our next generation Automated and Integrated systems.

Investments in research and development personnel and associated projects are part of our strategy to ensure our products remain competitive and meet customers’ needs.

Selling.

Selling expenses decreased by $0.3 million in the three months ended March 28, 2015 compared to the three months ended March 29, 2014 due to an increased utilization of sales application personnel for installation and warranty, which is included in cost of net revenues, partially offset by increased labor and benefits expenses due to headcount additions year over year.

General and administrative.

General and administrative expenses decreased by $0.6 million or 9.0% in the three months ended March 28, 2015 compared to the three months ended March 29, 2014. The decrease was primarily due to the decrease in consulting expenditures from the comparable 2014 period when our new ERP system had just been implemented.

Amortization of intangible assets.

Amortization of intangible assets included in operating expenses in the three months ended March 28, 2015 compared to the three months ended March 29, 2014 decreased as a result of the reduction in amortization due to intangible assets that became fully amortized in the prior year.

Restructuring charge.

We recorded a restructuring charge of $0.1 million in the three months ended March 28, 2015 related to our efforts to improve operating efficiencies. We completed the restructuring plan in March 2015. Other related costs are expected to be recognized as incurred.

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Other income (expense), net.

Our other income (expense), net, consisted of the following items (in thousands, except percentages):

	Three Months Ended
	March 28, 2015			March 29, 2014			Change
Interest income	$	10		$	14		$	(4	)	(28.6	)%
Interest expense	(82		)	(100		)	18			(18.0	)%
Other income (expense)	704			252			452			179.4	%
Total other income (expense), net	$	632		$	166		$	466		280.7	%

Interest income declined minimally in the three months ended March 28, 2015 relative to the comparable 2014 period as the average balances of cash, cash equivalents, and marketable securities remained relatively flat. Other income increased by $0.5 million principally due to fluctuations in foreign exchange rates, primarily the Euro, which were favorable relative to the U.S. dollar.

Provision for income taxes.

We recorded a tax provision of $0.3 million and $0.6 million in three months ended March 28, 2015 and March 29, 2014, respectively. The decrease in the tax provision for 2015 from 2014 was primarily related to no tax being provided on our U.S. income as we maintain a full valuation allowance against our U.S. deferred tax assets for the three months ended March 28, 2015.

Our provision for income taxes for 2015 of $0.3 million reflects an effective tax rate of 11.0%. This rate differs from the Federal statutory rate of 35.0% primarily due to all our foreign income being subject to tax at lower rates and valuation allowances against any expense (benefit) that would be recorded at the U.S. statutory rates.

As of March 28, 2015, we continue to maintain a valuation allowance against our U.S. and certain foreign deferred tax assets as a result of uncertainties regarding the realization of the asset due to cumulative losses and uncertainty of future taxable income. We will continue to assess the realizability of the deferred tax assets in each of the applicable jurisdictions and maintain the valuation allowances until sufficient positive evidence exists to support a reversal. In the event we determine that the deferred tax assets are realizable, an adjustment to the valuation allowance will be reflected in the tax provision for the period such determination is made.

We are subject to taxation in the U.S. and various states including California, and foreign jurisdictions including Korea, Japan, Taiwan, and China. Due to tax attribute carry-forwards, we are subject to examination for tax years 2003 forward for U.S. tax purposes. We are also subject to examination in various states for tax years 2002 forward. We are subject to examination for tax years 2007 forward for various foreign jurisdictions.

We accrue interest and penalties related to unrecognized tax benefits in our provision for income taxes. The total amount of penalties and interest were not material as of March 28, 2015 and March 29, 2014. During the next twelve months, we anticipate increases in its unrecognized tax benefits of approximately $0.1 million.

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Liquidity and Capital Resources

The following tables present selected financial information and statistics as of March 28, 2015 and December 27, 2014 and for the three months ended March 28, 2015 and March 29, 2014 (in millions):

	As of
	March 28, 2015		December 27, 2014
Cash, cash equivalents and marketable securities	$	77.0	$	84.0
Working capital	$	125.5	$	119.6

	Three Months Ended
	March 28, 2015			March 29, 2014
Cash used in operating activities	$	(5.9	)	$	(4.7	)
Cash used in investing activities	$	(0.4	)	$	(3.6	)
Cash (used in) provided by financing activities	$	(0.4	)	$	2.4

We believe our existing balances of cash, cash equivalents and marketable securities will be sufficient to satisfy our working capital needs, capital asset purchases, outstanding commitments and other liquidity requirements associated with our existing operations over the next twelve months.

During the three months ended March 28, 2015, cash used in operating activities of $5.9 million was a result of $2.6 million of net income, non-cash adjustments to net income of $4.9 million and a net change in operating assets and liabilities of $13.3 million. Cash used in investing activities of $0.4 million during the three months ended March 28, 2015 consisted primarily of cash used to acquire property, plant and equipment of $0.5 million, partially offset by cash provided by maturities of marketable securities, net of purchases, of $0.1 million. Cash used in financing activities of $0.4 million during the three months ended March 28, 2015 consisted primarily of cash used to repurchase common stock of $1.7 million, royalty and other payments to Zygo of $0.2 million, and cash paid for taxes on net issuance of stock awards of $0.8 million, partially offset by $2.4 million in proceeds from the issuance of common stock from the employee stock purchase program and the exercise of stock options.

During the three months ended March 29, 2014, cash used in operating activities of $4.7 million was a result of $1.6 million of net income, non-cash adjustments to net income of $5.2 million and a net change in operating assets and liabilities of $11.5 million. Cash used in investing activities of $3.6 million during the three months ended March 29, 2014 consisted primarily of cash used for purchases of marketable securities, net of maturities, of $1.4 million, and cash used to acquire property, plant and equipment of $2.2 million. Cash provided by financing activities of $2.4 million during the three months ended March 29, 2014 consisted primarily of $3.1 million in proceeds from the issuance of common stock from the employee stock purchase program and the exercise of stock options, partially offset by cash paid for taxes on net issuance of stock awards of $0.7 million, and other payments to Zygo of $0.1 million.

Debt and Repurchases of Common Stock

Line of Credit - On May 30, 2014, we amended our revolving line of credit facility with Comerica Bank principally (i) to extend the maturity date of such facility by two years to May 30, 2016, and (ii) to increase the minimum amount available to borrow to $12.0 million.

The instrument governing the line of credit facility includes certain financial covenants regarding tangible net worth. The revolving line of credit agreement includes a provision for the issuance of commercial or standby letters of credit by the bank on our behalf. The value of all letters of credit outstanding reduces the total line of credit available. The revolving line of credit is collateralized by a blanket lien on all of our domestic assets excluding intellectual property and real estate. The minimum borrowing interest rate is 3.00% per annum. Borrowing is limited to the lesser of (a) $12.0 million plus the borrowing base, or (b) $20.0 million. The total borrowing available as of March 28, 2015 was $16.0 million. As of March 28, 2015, we were not in breach of any restrictive covenants in connection with this line of credit. There were no borrowings against the line of credit during the three months ended March 28, 2015 and March 29, 2014 and there were no outstanding

27

amounts drawn on this facility as of March 28, 2015. Although we have no current plans to request advances under this credit facility, we may use the proceeds of any future borrowing for general corporate purposes, future acquisitions or expansion of our business.

Repurchases of Common Stock - On May 29, 2012, our Board of Directors approved a program to repurchase up to $20.0 million of our common stock, referred to as the 2012 program.

Stock repurchases under this program may be made through open market and privately negotiated transactions, at times and in such amounts as management deems appropriate. The timing and actual number of shares repurchased is dependent on a variety of factors including price, corporate and regulatory requirements and other market conditions.

Shares repurchased and retired for the indicated periods of the applicable repurchase programs with the associated cost of repurchase and amount available for repurchase at the end of the respective periods are as follows (in thousands, except number of shares and weighted average price per share):

	Three Months Ended
	March 28, 2015
Number of shares of common stock repurchased	111,050
Weighted average price per share	$	15.49
Total cost of repurchase	$	1,721
Amount available for repurchase at end of period	$	4,397

During the three months ended March 28, 2015 we repurchased 111,050 shares at an average purchase price of $15.49 per share for a total of $1.7 million. After these purchases, $4.4 million remained available for the future repurchase of our common stock under the 2012 program.

Business Partnership - On June 17, 2009, we announced a strategic business partnership with Zygo Corporation whereby we have purchased inventory and certain other assets from Zygo Corporation, and the two companies entered into a supply agreement. We will make payments to Zygo Corporation (with an estimated present value of $2.2 million as of March 28, 2015 and $2.4 million as of December 27, 2014) over a period of time as acquired inventory is sold and other aspects of the supply agreement are executed. We made royalty and sustaining engineering payments of $0.2 million and $0.1 million to Zygo in three months ended March 28, 2015 and March 29, 2014, respectively.

We have evaluated and will continue to evaluate the acquisitions of products, technologies or businesses that are complementary to our business. These activities may result in product and business investments, which may affect our cash position and working capital balances. Some of these activities might require significant cash outlays.

Our principal sources of liquidity are cash and cash equivalents, and marketable securities, cash flow generated from our operations, and, to a lesser extent, borrowings from a line of credit. Our liquidity is affected by many factors, including those that relate to our specific operations and those that relate to the uncertainties of global and regional economies and the sectors of the semiconductor industry which we operate in. Although our cash requirements will fluctuate based on the timing and extent of these factors, we believe our existing cash, cash equivalents and marketable securities and borrowing availability, combined with cash currently projected to be generated from our operations, will be sufficient to meet our liquidity needs through at least the next twelve months.

Off-Balance Sheet Arrangements

As of March 28, 2015, we had no off-balance sheet arrangements or obligations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our exposure to market risk does not differ materially from that discussed in our Annual Report on Form 10-K for the fiscal year ended December 27, 2014, filed with the SEC on February 25, 2015. However, we cannot give any assurance as to the effect that future changes in interest rates or foreign currency rates will have on our consolidated financial position, results of operations or cash flows.

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management evaluated, with the participation of our Chief Executive Officer, Timothy J. Stultz, and our Chief Financial Officer, Jeffrey Andreson, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of March 28, 2015, our disclosure controls and procedures were effective to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 were (i) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms; and (ii) accumulated and reported to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely discussions regarding required disclosures.

Changes in Internal Control over Financial Reporting

During the quarter ended March 28, 2015, there were no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, has designed our disclosure controls and procedures and our internal control over financial reporting to provide reasonable assurances that the controls’ objectives will be met. However, management does not expect that disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within Nanometrics have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any system’s design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of a system’s control effectiveness into future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

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PART II — OTHER INFORMATION

ITEM 1A. RISK FACTORS

Investing in our securities involves a high degree of risk. In assessing these risks, you should carefully consider the information included in or incorporated by reference into this report, including our financial statements and the related notes thereto. You should carefully review and consider all of the risk factors set forth in Part l, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 27, 2014, filed with the SEC on February 25, 2015. The risks described in our Annual Report on Form 10-K are not the only ones we face. Additional risks and uncertainties that are not presently known to us or that we currently believe are immaterial may also impair our business operations. Our business, operating results and financial conditions could be materially harmed by any of these risks. The trading price of our common stock could decline due to any of these risks and investors may lose all or part of their investment. There have been no material changes in our risk factors from those discussed in our Annual Report on Form 10-K for the fiscal year ended December 27, 2014.

ITEM 2. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Recent Sales of Unregistered Securities

None.

Issuer Purchases of Equity Securities

Pursuant to repurchase programs approved by the Board of Directors and described below, we repurchased shares of our common stock in the three months ended March 28, 2015 as follows (in thousands, except shares and per share data):

Plan	Period(a)	Number of shares repurchased	Average price paid per share		Total shares repurchased under the plan	Amount remaining for repurchase
May 2012	Dec. 28, 2014 - Jan. 24, 2015	96,807	$	15.49	96,807	$	4,618
May 2012	Jan. 25, 2014 - Feb. 21, 2015	14,243	$	15.50	14,243	$	4,397
May 2012	Feb. 22, 2015 - Mar. 28, 2015	—	$	—	—	$	4,397

On May 29, 2012, our Board of Directors approved a program to repurchase up to $20.0 million of our common stock, referred to as the 2012 program. Stock repurchases under this program may be made through open market and privately negotiated transactions, at times and in such amounts as management deems appropriate. The timing and actual number of shares repurchased is dependent on a variety of factors including price, corporate and regulatory requirements and other market conditions. During three months ended March 28, 2015, we repurchased and retired 111,050 shares of our common stock under this approved plan at the weighted average price of $15.49 per share.

ITEM 6. EXHIBITS

The following exhibits are filed, furnished or incorporated by reference with this Quarterly Report on Form 10-Q:

30

Exhibit No.	Description
3.(i)	Certificate of Incorporation
3.1(1)	Certificate of Incorporation of the Registrant
3.(ii)	Bylaws
3.2(2)	Bylaws of the Registrant
10	Material Contracts
10.1(5)	Compensation Arrangements with Principal Executive Officer and Principal Financial Officer
10.2(6)	Form of Performance-Based Restricted Stock Unit Agreement
31	Rule 13a-14(a)/15d-14(a) Certifications
31.1(3)	Certification of Timothy J. Stultz, principal executive officer of the Registrant, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2(3)	Certification of Jeffrey Andreson, principal financial officer and principal accounting officer of the Registrant, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Section 1350 Certifications
32.1(3)	Certification of Timothy J. Stultz, principal executive officer of the Registrant, and Jeffrey Andreson, principal financial officer and principal accounting officer of the Registrant pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101(4)	The following financial statements, formatted in XBRL: (i) Condensed Consolidated Balance Sheets at March 28, 2015, and December 27, 2014, (ii) Condensed Consolidated Statements of Operations for the three months ended March 28, 2015 and March 29, 2014, (iii) Condensed Consolidated Statements of Cash Flows for the three months March 28, 2015 and March 29, 2014, and (v) Notes to Unaudited Condensed Consolidated Financial Statements, tagged as blocks of text. The information is Exhibit 101 is “furnished” and not “filed”, as provided in Rule 402 of Regulation S-T.
101.INS**	XBRL Instance Document
101.SCH**	XBRL Taxonomy Extension Schema Document
101.CAL**	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF**	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB**	XBRL Taxonomy Extension Label Linkbase Document
101.PRE**	XBRL Taxonomy Extension Presentation Linkbase Document

(1) Incorporated by reference to Exhibit 3.1 filed with the Registrant’s Current Report on Form 8-K (File

No. 000-13470) filed on October 5, 2006.

(2) Incorporated by reference to Exhibit 3.1 filed with the Registrant’s Current Report on Form 8-K (File

No. 000-13470) filed on April 12, 2012.

(3) Filed herewith.

(4) Furnished herewith.

(5) Incorporated by reference to Item 5.02 in the Registrant’s Current Report on Form 8-K (File No. 000-13470) filed on March 2, 2015.

(6) Incorporated by reference to Exhibit 99.1 filed with the Registrant’s Current Report on Form 8-K (File No. 000-13470) filed on March 24, 2015.

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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)
By:	/S/    JEFFREY ANDRESON
	Jeffrey Andreson
	Chief Financial Officer
	(Duly Authorized and Principal Financial Officer)

Dated: April 29, 2015

32

EXHIBIT INDEX

Exhibit No.	Description
3.(i)	Certificate of Incorporation
3.1(1)	Certificate of Incorporation of the Registrant
3.(ii)	Bylaws
3.2(2)	Bylaws of the Registrant
10	Material Contracts
10.1(5)	Compensation Arrangements with Principal Executive Officer and Principal Financial Officer
10.2(6)	Form of Performance-Based Restricted Stock Unit Agreement
31	Rule 13a-14(a)/15d-14(a) Certifications
31.1(3)	Certification of Timothy J. Stultz, principal executive officer of the Registrant, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2(3)	Certification of Jeffrey Andreson, principal financial officer and principal accounting officer of the Registrant, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Section 1350 Certifications
32.1(3)	Certification of Timothy J. Stultz, principal executive officer of the Registrant, and Jeffrey Andreson, principal financial officer and principal accounting officer of the Registrant pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101(4)	The following financial statements, formatted in XBRL: (i) Condensed Consolidated Balance Sheets at March 28, 2015, and December 27, 2014, (ii) Condensed Consolidated Statements of Operations for the three months ended March 28, 2015 and March 29, 2014, (iii) Condensed Consolidated Statements of Cash Flows for the three months March 28, 2015 and March 29, 2014, and (v) Notes to Unaudited Condensed Consolidated Financial Statements, tagged as blocks of text. The information is Exhibit 101 is “furnished” and not “filed”, as provided in Rule 402 of Regulation S-T.
101.INS**	XBRL Instance Document
101.SCH**	XBRL Taxonomy Extension Schema Document
101.CAL**	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF**	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB**	XBRL Taxonomy Extension Label Linkbase Document
101.PRE**	XBRL Taxonomy Extension Presentation Linkbase Document

(1) Incorporated by reference to Exhibit 3.1 filed with the Registrant’s Current Report on Form 8-K (File

No. 000-13470) filed on October 5, 2006.

(2) Incorporated by reference to Exhibit 3.1 filed with the Registrant’s Current Report on Form 8-K (File

No. 000-13470) filed on April 12, 2012.

(3) Filed herewith.

(4) Furnished herewith.

(5) Incorporated by reference to Item 5.02 in the Registrant’s Current Report on Form 8-K (File No. 000-13470) filed on March 2, 2015.

(6) Incorporated by reference to Exhibit 99.1 filed with the Registrant’s Current Report on Form 8-K (File No. 000-13470) filed on March 24, 2015.

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EX-31.1

Exhibit 31.1

I, Timothy J. Stultz, the Chief Executive Officer of Nanometrics Incorporated, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Nanometrics Incorporated;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an quarterly report) that has materially affected or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	April 29, 2015
By:	/s/ Timothy J. Stultz
	Timothy J. Stultz
	Chief Executive Officer

EX-31.2

Exhibit 31.2

I, Jeffrey Andreson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Nanometrics Incorporated;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	April 29, 2015
By:	/s/ Jeffrey Andreson
	Jeffrey Andreson
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Timothy J. Stultz, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge, the Quarterly Report of Nanometrics Incorporated on Form 10-Q for the quarterly period ended March 28, 2015 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Nanometrics Incorporated.

April 29, 2015	/s/ Timothy J. Stultz
	Timothy J. Stultz
	Chief Executive Officer

I, Jeffrey Andreson, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge, the Quarterly Report of Nanometrics Incorporated on Form 10-Q for the quarterly period ended March 28, 2015 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Nanometrics Incorporated.

April 29, 2015	/s/ Jeffrey Andreson
	Jeffrey Andreson
	Chief Financial Officer

This certification accompanies the Quarterly Report on Form 10-Q for the period ended March 28, 2015 of Nanometrics Incorporated (the “Company”) pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed “filed” by the Company or incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, made before or after the date of this Quarterly Report and irrespective of any general incorporation language contained in such filing.

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Accounts Receivable - Textual (Details) (USD $)	3 Months Ended
	Mar. 28, 2015	Mar. 29, 2014	Dec. 27, 2014
Accounts Receivable (Additional Textual) [Abstract]
Sold receivables amount	$ 1,100,000	$ 600,000
Due from unrelated third parties	$ 0		$ 0
Minimum [Member]
Accounts Receivable (Textual) [Abstract]
Administrative fees as well as interest percent	1.15%
Maximum [Member]
Accounts Receivable (Textual) [Abstract]
Administrative fees as well as interest percent	1.68%

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Stockholders' Equity and Stock-Based Compensation - Stock Options and Employee Stock Purchase Plan Valuation Assumptions (Details)	3 Months Ended
	Mar. 28, 2015	Mar. 29, 2014
Stock Options [Member]
Assumption of stock option's fair value
Expected life		4 years 7 months 6 days
Volatility		56.80%
Risk free interest rate		1.53%
Dividends		0.00%
Employee Stock Purchase Plan [Member]
Assumption of stock option's fair value
Expected life	6 months 1 day	6 months
Volatility	37.20%	32.60%
Risk free interest rate	0.11%	1.00%
Dividends	0.00%	0.00%

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Restructuring - Textual (Details) (USD $)	3 Months Ended
	Mar. 28, 2015	Mar. 29, 2014	Dec. 27, 2014
Restructuring and Related Activities [Abstract]
Restructuring charge	$ 58,000	$ 0
Restructuring reserves	$ 606,000	$ 0	$ 997,000

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Stockholders' Equity and Stock-Based Compensation - Summary of Activity of Stock Options (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 28, 2015	Dec. 27, 2014
Activity of stock option plans [Roll Forward]
Number of Shares Outstanding (Options), Beginning Balance (in shares)	1,382,993
Number of Shares Outstanding (Options), Exercised (in shares)	(127,814)
Number of Shares Outstanding (Options), Granted (in shares)	0
Number of Shares Outstanding (Options), Cancelled (in shares)	(3,263)
Number of Shares Outstanding (Options), Ending Balance (in shares)	1,251,916	1,382,993
Number of Shares Outstanding (Options), Exercisable	992,179
Weighted average exercise price for stock option plans [Roll Forward]
Weighted Average Exercise Price, Beginning Balance (in dollars per share)	$ 13.92
Weighted Average Exercise Price, Exercised (in dollars per share)	$ 11.82
Weighted Average Exercise Price, Granted (in dollars per share)	$ 0.00
Weighted Average Exercise Price, Cancelled (in dollars per share)	$ 15.57
Weighted Average Exercise Price, Ending Balance (in dollars per share)	$ 14.14	$ 13.92
Weighted Average Exercise Price, Exercisable (in dollars per share)	$ 13.57
Weighed Average Remaining Contractual Term, Opening	3 years 2 months 1 day	3 years 4 months 28 days
Weighed Average Remaining Contractual Term, Closing	3 years 2 months 1 day	3 years 4 months 28 days
Weighed Average Remaining Contractual Term, Exercisable	2 years 8 months 19 days
Aggregate Intrinsic Value, Opening	$ 4,108
Aggregate Intrinsic Value, Closing	4,069	4,108
Aggregate Intrinsic Value, Exercisable	$ 3,757

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Warranties (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 28, 2015	Mar. 29, 2014
Components of the warranty accrual [Roll Forward]
Balance as of beginning of period	$ 2,953	$ 3,426
Accruals for warranties issued during period	1,702	1,317
Settlements during the period	(1,215)	(1,168)
Balance as of end of period	$ 3,440	$ 3,575

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Nature of Business and Basis of Presentation - Textual (Details)	3 Months Ended
	Mar. 28, 2015	Mar. 29, 2014
Nature of Business and Basis of Presentation (Textual) [Abstract]
Fiscal year/fiscal quarter duration	91 days	91 days
Maximum period of delivery to customers	6 months
Maximum period services are provided over the fixed arrangement term	12 months
Minimum [Member]
Nature of Business and Basis of Presentation (Textual) [Abstract]
Fiscal year/fiscal quarter duration	364 days
Maximum [Member]
Nature of Business and Basis of Presentation (Textual) [Abstract]
Fiscal year/fiscal quarter duration	371 days

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Stockholders' Equity and Stock-Based Compensation - PSU Valuation Assumptions (Details) (Performance-Based Restricted Stock Units (PSUs) [Member])	3 Months Ended
	Mar. 28, 2015
Performance-Based Restricted Stock Units (PSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of PSUs granted and outstanding (in shares)	40,000
Expected Dividend	0.00%
Range of risk-free interest rates, minimum	0.25%
Range of risk-free interest rates, maximum	1.10%
Range of expected volatilities for peer group, minimum	23.00%
Range of expected volatilities for peer group, maximum	65.00%

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Financial Statement Components (Tables)

3 Months Ended

Mar. 28, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Components of condensed consolidated balance sheets

Condensed Consolidated Balance Sheets Details	At
	March 28, 2015			December 27, 2014
Inventories:
Raw materials and sub-assemblies	$	20,455		$	19,463
Work in process	11,523			7,723
Finished goods	5,509			7,919
Inventories	37,487			35,105
Inventories-delivered systems	749			1,912
Total inventories	$	38,236		$	37,017
Property, plant and equipment, net(1):
Land	$	15,572		$	15,572
Building and improvements	19,679			19,641
Machinery and equipment	30,400			29,456
Furniture and fixtures	2,241			2,225
Software	7,942			7,942
Capital in progress	2,770			3,512
Total property, plant and equipment, gross	78,604			78,348
Accumulated depreciation and amortization	(30,804		)	(28,715		)
Total property, plant and equipment, net	$	47,800		$	49,633
(1)Total depreciation and amortization expense for the three months ended March 28, 2015 and March 29, 2014 was $1.7 million and $1.6 million, respectively.
Other current liabilities:
Accrued warranty	$	3,440		$	2,953
Accrued restructuring	606			997
Accrued professional services	875			778
Fair value of current portion of contingent payments to Zygo Corporation related to acquisition	1,128			1,385
Other	2,061			2,152
Total other current liabilities	$	8,110		$	8,265

Components of accumulated other comprehensive income (loss)

Components of Accumulated Other Comprehensive Income (Loss)

	Foreign Currency Translations			Defined Benefit Pension Plans			Unrealized Income (Loss) on Investment			Accumulated Other Comprehensive Income
Balance as of December 27, 2014	$	(2,604	)	$	(134	)	$	(31	)	$	(2,769	)
Current period change	(1,727		)	—			29			(1,698		)
Balance as of March 28, 2015	$	(4,331	)	$	(134	)	$	(2	)	$	(4,467	)

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Line of Credit and Debt Obligations - Textual (Details) (USD $)	0 Months Ended
	May 30, 2014	Mar. 28, 2015	May 30, 2014
Line of Credit and Debt Obligations (Textual) [Abstract]
Maturity date	May 30, 2016
Line of Credit Facility, Maximum Borrowing Capacity	$ 12,000,000		$ 12,000,000
Borrowing interest rate	3.00%		3.00%
Borrowing, minimum of lesser amount, before addition of borrowing base	12,000,000		12,000,000
Borrowing, maximum of lesser amount	20,000,000		20,000,000
Total borrowing available		16,000,000
Revolving line of credit facility [Member]
Line of Credit and Debt Obligations (Textual) [Abstract]
Extension of maturity period on amendment of existing credit facility	2 years
Revolving line of credit facility [Member] | Line of Credit [Member]
Line of Credit and Debt Obligations (Textual) [Abstract]
Amount outstanding		$ 0

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Goodwill and Intangible Assets - Goodwill (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 28, 2015
Goodwill [Roll Forward]
Beginning balance	$ 10,494
Foreign currency movements	(1,103)
Ending balance	$ 9,391

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Fair Value Measurements and Disclosures - Textual (Details) (Fair Value, Measurements, Recurring [Member], Zygo Corporation [Member], USD $) In Millions, unless otherwise specified	Mar. 28, 2015	Dec. 27, 2014
Fair Value, Measurements, Recurring [Member] | Zygo Corporation [Member]
Fair Value Measurements and Disclosures (Textual) [Abstract]
Liabilities resulting from the acquisition of certain assets from acquisitions, measured at fair value	$ 2.2	$ 2.4
Current liability at fair value	1.1	1.4
Long-term liability at fair value	$ 1.1	$ 1.0

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Net Income Per Share (Details) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 28, 2015	Mar. 29, 2014
Reconciliation of the basic and diluted net income per share computations
Weighted average common shares outstanding used in basic net income (loss) per share calculation	23,866	23,711
Potential dilutive common stock equivalents, using treasury stock method	391	448
Weighted average shares used in diluted net income per share calculation	24,257	24,159

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Segment, Geographic, Product and Significant Customer Information - Net Revenue (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 28, 2015 segment	Mar. 29, 2014
Revenues from External Customers and Long-Lived Assets [Line Items]
Number of operating segments	1
Total net revenues:
Total net revenues	$ 50,376	$ 51,576
United States [Member]
Total net revenues:
Total net revenues	9,078	6,741
South Korea [Member]
Total net revenues:
Total net revenues	14,643	15,889
China [Member]
Total net revenues:
Total net revenues	4,001	15,488
Taiwan [Member]
Total net revenues:
Total net revenues	14,428	4,416
Other [Member]
Total net revenues:
Total net revenues	$ 8,226	$ 9,042

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Warranties - Textual (Details)	3 Months Ended
	Mar. 28, 2015
Product Warranties Disclosures [Abstract]
Product warranty period	12 months

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Fair Value Measurements and Disclosures

3 Months Ended

Mar. 28, 2015

Fair Value Disclosures [Abstract]

Fair Value Measurements and Disclosures

Fair Value Measurements and Disclosures

Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard assumes that the transaction to sell the asset or transfer the liability occurs in the principal or most advantageous market for the asset or liability and establishes that the fair value of an asset or liability shall be determined based on the assumptions that market participants would use in pricing the asset or liability.

The Company determines the fair values of its financial instruments based on the fair value hierarchy established in FASB Accounting Standards Codification (“ASC”) 820, Fair Value Measurement, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The classification of a financial asset or liability within the hierarchy is based upon the lowest level input that is significant to the fair value measurement. The fair value hierarchy prioritizes the inputs into the following three levels that may be used to measure fair value:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.

Level 3 — Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. Such unobservable inputs include an estimated discount rate used in the Company’s discounted present value analysis of future cash flows, which reflects the Company’s estimate of debt with similar terms in the current credit markets. As there is currently minimal activity in such markets, the actual rate could be materially different.

The following tables present the Company’s assets and liabilities measured at estimated fair value on a recurring basis, excluding accrued interest components, categorized in accordance with the fair value hierarchy (in thousands), as of the following dates:

	March 28, 2015								December 27, 2014
	Fair Value Measurements Using Input Types								Fair Value Measurements Using Input Types
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	909	$	—	$	—	$	909	$	610	$	—	$	—	$	610
Total cash equivalents	909		—		—		909		610		—		—		610
Marketable securities:
U.S. Treasury, U.S. Government and U.S. Government agency debt securities	2,499		21,554		—		24,053		2,497		20,537		—		23,034
Commercial paper, municipal securities and corporate debt securities	—		25,061		—		25,061		—		26,252		—		26,252
Total marketable securities	2,499		46,615		—		49,114		2,497		46,789		—		49,286
Total(1)	$	3,408	$	46,615	$	—	$	50,023	$	3,107	$	46,789	$	—	$	49,896
Liabilities:
Contingent consideration payable	$	—	$	—	$	2,208	$	2,208	$	—	$	—	$	2,397	$	2,397

⁽¹⁾ Excludes $27.0 million and $34.1 million held in operating accounts as of March 28, 2015 and December 27, 2014, respectively.

The fair values of the marketable securities that are classified as Level 1 in the table above were derived from quoted market prices for identical assets or liabilities in active markets that the Company has the ability to access. The fair value of marketable securities that are classified as Level 2 in the table above were derived from non-binding market consensus prices that were corroborated by observable market data, quoted market prices for similar instruments, or pricing models, such as discounted cash flow techniques with all significant inputs derived from or corroborated by observable market data. There were no transfers of instruments between Level 1, Level 2 and Level 3 during the financial periods presented.

Changes in Level 3 liabilities (in thousands)
Fair value at December 27, 2014	2,397
Payments made to Zygo Corporation	(224		)
Change in fair value included in earnings	35
Fair value at March 28, 2015	$	2,208

As of March 28, 2015, the Company had liabilities of $2.2 million resulting from the acquisition of certain assets from Zygo Corporation (“Zygo”), which are measured at fair value on a recurring basis, and changes in fair value recorded in Other income (expense), net. Of the $2.2 million of Zygo liabilities at March 28, 2015, $1.1 million was a current liability and $1.1 million was a long-term liability. As of December 27, 2014, the liabilities totaled $2.4 million of which $1.4 million was a current liability and $1.0 million was a long-term liability. The fair values of these liabilities were determined using Level 3 inputs applying a discounted cash flow model incorporating assumptions that market participants would use in their estimates of fair value. Some of these assumptions included estimates for discount rate, and timing and the amount of cash flows.

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Segment, Geographic, Product and Significant Customer Information - Long-lived Tangible Assets (Details) (USD $) In Thousands, unless otherwise specified	Mar. 28, 2015	Dec. 27, 2014
Long-lived tangible assets:
Total long-lived tangible assets	$ 47,800	$ 49,633
United States [Member]
Long-lived tangible assets:
Total long-lived tangible assets	46,011	47,729
Japan [Member]
Long-lived tangible assets:
Total long-lived tangible assets	65	71
South Korea [Member]
Long-lived tangible assets:
Total long-lived tangible assets	249	284
All other [Member]
Long-lived tangible assets:
Total long-lived tangible assets	$ 1,475	$ 1,549

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Goodwill and Intangible Assets - Intangible Assets (Details) (USD $) In Thousands, unless otherwise specified	Mar. 28, 2015	Dec. 27, 2014
Summary of Finite-lived intangible assets
Adjusted cost	$ 29,684	$ 30,670
Accumulated amortization	(26,358)	(26,376)
Net carrying amount	3,326	4,294
Developed technology [Member]
Summary of Finite-lived intangible assets
Adjusted cost	16,063	16,950
Accumulated amortization	(13,018)	(12,991)
Net carrying amount	3,045	3,959
Customer relationships [Member]
Summary of Finite-lived intangible assets
Adjusted cost	9,362	9,461
Accumulated amortization	(9,362)	(9,449)
Net carrying amount	0	12
Brand names [Member]
Summary of Finite-lived intangible assets
Adjusted cost	1,927	1,927
Accumulated amortization	(1,827)	(1,802)
Net carrying amount	100	125
Patented technology [Member]
Summary of Finite-lived intangible assets
Adjusted cost	2,252	2,252
Accumulated amortization	(2,071)	(2,054)
Net carrying amount	181	198
Trademark [Member]
Summary of Finite-lived intangible assets
Adjusted cost	80	80
Accumulated amortization	(80)	(80)
Net carrying amount	$ 0	$ 0

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Net Income Per Share (Tables)

3 Months Ended

Mar. 28, 2015

Earnings Per Share [Abstract]

Reconciliation of the basic and diluted net income per share computations

A reconciliation of the share denominator of the basic and diluted net income per share computations for three months ended March 28, 2015 and March 29, 2014 is as follows (in thousands):

	Three Months Ended
	March 28, 2015	March 29, 2014
Weighted average common shares outstanding used in basic net income (loss) per share calculation	23,866	23,711
Potential dilutive common stock equivalents, using treasury stock method	391	448
Weighted average shares used in diluted net income per share calculation	24,257	24,159

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Restructuring (Tables)

3 Months Ended

Mar. 28, 2015

Restructuring and Related Activities [Abstract]

Components of the restructuring reserve

As of March 28, 2015, the components of the Company’s restructuring reserves were included in other current liabilities and were as follows (in thousands):

	Employee severance and benefits			Facility termination costs			Other			Total
Balance as of December 27, 2014	$	383		$	583		$	31		$	997
Charges	45			—			13			58
Cash Payments	(308		)	(106		)	(35		)	(449		)
Balance as of March 28, 2015	$	120		$	477		$	9		$	606

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Stockholders' Equity and Stock-Based Compensation - RSU Activity (Details) (Restricted Stock Units (RSUs) [Member], USD $)	3 Months Ended
	Mar. 28, 2015
Restricted Stock Units (RSUs) [Member]
Activity for RSUs [Roll Forward]
Number of RSU, Beginng balance (in shares)	563,337
Number of RSU, Granted (in shares)	71,533
Number of RSU, Released (in shares)	(127,096)
Number of RSU, Cancelled (in shares)	(8,399)
Number of RSU, Ending balance (in shares)	499,375
Weighted Average Fair Value for RSUs [Roll Forward]
Weighted Average Fair Value, Beginng balance (in dollars per share)	$ 17.90
Weighted Average Fair Value, Granted (in dollars per share)	$ 17.92
Weighted Average Fair Value, Released (in dollars per share)	$ 17.78
Weighted Average Fair Value, Cancelled (in dollars per share)	$ 16.56
Weighted Average Fair Value, Ending balance (in dollars per share)	$ 17.96

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Goodwill and Intangible Assets - Future Amortization (Details) (USD $) In Thousands, unless otherwise specified	Mar. 28, 2015
Estimated future amortization expense
2015 (remaining nine months)	$ 1,258
2016	1,656
2017	206
2018	140
2019	66
Total future amortization expense	$ 3,326

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Stockholders' Equity and Stock-Based Compensation (Tables)

3 Months Ended

Mar. 28, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock options valuation assumptions

	March 28, 2015	March 29, 2014
Stock Options:
Expected life	—	4.6 years
Volatility	—	56.8%
Risk free interest rate	—	1.53%
Dividends	—	—
Employee Stock Purchase Plan:
Expected life	0.5 years	0.5 years
Volatility	37.2%	32.6%
Risk free interest rate	0.11%	1.00%
Dividends	—	—

Employee stock purchase plan valuation assumptions

	March 28, 2015	March 29, 2014
Stock Options:
Expected life	—	4.6 years
Volatility	—	56.8%
Risk free interest rate	—	1.53%
Dividends	—	—
Employee Stock Purchase Plan:
Expected life	0.5 years	0.5 years
Volatility	37.2%	32.6%
Risk free interest rate	0.11%	1.00%
Dividends	—	—

Stock option plans activity

A summary of activity of stock options during the three months ended March 28, 2015 is as follows:

	Number of Shares Outstanding (Options)		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in Thousands)
Options
Outstanding at December 27, 2014	1,382,993		$	13.92	3.41	$	4,108
Exercised	(127,814	)	11.82
Granted	—		—
Cancelled	(3,263	)	15.57
Outstanding at March 28, 2015	1,251,916		$	14.14	3.17	$	4,069
Exercisable at March 28, 2015	992,179		$	13.57	2.72	$	3,757

Summary of activity for RSUs

A summary of activity for RSUs is as follows:

RSUs	Number of RSUs		Weighted Average Fair Value
Outstanding RSUs as of December 27, 2014	563,337		$	17.90
Granted	71,533		17.92
Released	(127,096	)	17.78
Cancelled	(8,399	)	16.56
Outstanding RSUs as of March 28, 2015	499,375		$	17.96

PSUs valuation assumptions

The assumptions for the valuation of PSUs are summarized as follows:

PSUs	2015 Awards
Number of PSUs granted and outstanding as of March 28, 2015	40,000
Weighted-average assumptions/inputs:
Expected Dividend	—
Range of risk-free interest rates	0.25%-1.1%
Range of expected volatilities for peer group	23%-65%

Stock-based compensation expense for all share-based payment awards

Stock-based compensation expense for all share-based payment awards made to the Company’s employees and directors pursuant to the employee stock option and employee stock purchase plans by function were as follows (in thousands):

	March 28, 2015		March 29, 2014
Cost of products	$	73	$	61
Cost of service	46		84
Research and development	280		340
Selling	500		427
General and administrative	672		722
Total stock-based compensation expense related to employee stock options and employee stock purchases	$	1,571	$	1,634

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Income Taxes (Tables)

3 Months Ended

Mar. 28, 2015

Income Tax Disclosure [Abstract]

Provision for income taxes

The provision for income taxes consists of the following (in thousands):

	Three Months Ended
	March 28, 2015		March 29, 2014
Provision for income taxes	$	317	$	587

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Recent Accounting Pronouncements

3 Months Ended

Mar. 28, 2015

Accounting Changes and Error Corrections [Abstract]

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In January 2015, the Financial Accounting Standards Board ("FASB") issued an accounting standard update which simplifies income statement classification by removing the concept of extraordinary items from the U.S. GAAP. As a result, items that are both unusual and infrequent will no longer be separately reported net of tax after continuing operations. The new standard is effective for the fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The Company does not expect any impact on the adoption of this standard on its consolidated financial statements.

In May 2014, the FASB issued an accounting standards update which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In April 2015, the FASB tentatively decided to defer for one year the effective date of the new revenue standard as well as tentatively permit early adoption. If deferred, the new standard will be effective for the Company on January 1, 2018. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that the standard will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

In July 2013, the FASB issued an accounting standards update which provides that a liability related to an unrecognized tax benefit would be offset against a deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward if such settlement is required or expected in the event the uncertain tax position is disallowed. In situations in which a net operating loss carryforward, a similar tax loss or a tax credit carryforward is not available at the reporting date under the tax law of the jurisdiction or the tax law of the jurisdiction does not require, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit will be presented in the financial statements as a liability and will not be combined with deferred tax assets. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The new standard is effective for fiscal years and interim periods beginning after December 15, 2013. The Company adopted this standard during the three months ended March 29, 2014, resulting in a one-time tax benefit of $0.3 million, a reduction in deferred tax assets of $0.3 million, and a reduction in long-term income taxes payable of $0.6 million.

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Segment, Geographic, Product and Significant Customer Information (Tables)

3 Months Ended

Mar. 28, 2015

Segment Reporting [Abstract]

Total net revenue

	Three Months Ended
	March 28, 2015		March 29, 2014
Total net revenues:
United States	$	9,078	6,741
South Korea	14,643		15,889
China	4,001		15,488
Taiwan	14,428		4,416
Other	8,226		9,042
Total net revenues	$	50,376	$	51,576

Long-lived tangible assets

Long-lived tangible assets:	March 28, 2015		December 27, 2014
United States	$	46,011	$	47,729
Japan	65		71
South Korea	249		284
All Other	1,475		1,549
Total long-lived tangible assets	$	47,800	$	49,633

Customers accounted for 10% or more of total accounts receivable

The following customers accounted for 10% or more of total accounts receivable, net:

	At
	March 28, 2015		December 27, 2014
Samsung Electronics Co. Ltd.	17.3	%	10.0	%
Taiwan Semiconductor Manufacturing Company Limited	27.8	%	20.2	%
SK Hynix	17.5	%	***
Micron	***		23.7	%
GLOBALFOUNDRIES	***		10.2	%

*** The customer accounted for less than 10% of total accounts receivable, net, as of that period end.

Customers accounted for 10% or more of total revenue

The following customers accounted for 10% or more of total net revenues:

	March 28, 2015		March 29, 2014
Samsung Electronics Co. Ltd.	30.3	%	51.7	%
Intel Corporation	***		13.1	%
SK Hynix	13.4	%	***
Taiwan Semiconductor Manufacturing Company Limited	22.3	%	***

*** The customer accounted for less than 10% of total net revenues during the period.

XML

Financial Statement Components - Selected Financial Statement Components (Details) (USD $)	3 Months Ended
	Mar. 28, 2015	Mar. 29, 2014	Dec. 27, 2014
Inventories:
Raw materials and sub-assemblies	$ 20,455,000		$ 19,463,000
Work in process	11,523,000		7,723,000
Finished goods	5,509,000		7,919,000
Inventories	37,487,000		35,105,000
Inventories-delivered systems	749,000		1,912,000
Total inventories	38,236,000		37,017,000
Property, Plant and Equipment [Line Items]
Total property, plant and equipment, gross	78,604,000		78,348,000
Accumulated depreciation and amortization	(30,804,000)		(28,715,000)
Total property, plant and equipment, net	47,800,000		49,633,000
Depreciation and amortization expense	1,700,000	1,600,000
Accrued warranty	3,440,000		2,953,000
Accrued restructuring	606,000		997,000
Accrued professional services	875,000		778,000
Fair value of current portion of contingent payments to Zygo Corporation related to acquisition	1,128,000		1,385,000
Other	2,061,000		2,152,000
Total other current liabilities	8,110,000		8,265,000
Land [Member]
Property, Plant and Equipment [Line Items]
Total property, plant and equipment, gross	15,572,000		15,572,000
Building and improvements [Member]
Property, Plant and Equipment [Line Items]
Total property, plant and equipment, gross	19,679,000		19,641,000
Machinery and equipment [Member]
Property, Plant and Equipment [Line Items]
Total property, plant and equipment, gross	30,400,000		29,456,000
Furniture and fixtures [Member]
Property, Plant and Equipment [Line Items]
Total property, plant and equipment, gross	2,241,000		2,225,000
Software [Member]
Property, Plant and Equipment [Line Items]
Total property, plant and equipment, gross	7,942,000		7,942,000
Capital in progress [Member]
Property, Plant and Equipment [Line Items]
Total property, plant and equipment, gross	$ 2,770,000		$ 3,512,000

XML

Stockholders' Equity and Stock-Based Compensation - Textual (Details) (USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended
	Mar. 28, 2015	Mar. 29, 2014	Mar. 27, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options awarded (in shares)	0
Weighted average fair value per share of stock options (in dollars per share)		$ 8.69
Closing stock price (in dollars per share)			$ 17.19
Intrinsic value of options exercised	$ 0.8	$ 1.7
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected dividends	0.00%
Performance-Based Restricted Stock Units (PSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected dividends	0.00%
Number of shares that will vest if target stock price performance is achieved	40,000
Number of shares that will vest if maximum stock price performance is achieved	60,000
Performance-Based Restricted Stock Units (PSUs) [Member] | Tranche One [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	1 year
Performance-Based Restricted Stock Units (PSUs) [Member] | Tranche Two [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	2 years
Performance-Based Restricted Stock Units (PSUs) [Member] | Tranche Three [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	3 years

XML

Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Mar. 28, 2015	Dec. 27, 2014
Current assets:
Cash and cash equivalents	$ 27,935	$ 34,676
Marketable securities	49,114	49,286
Accounts receivable, net of allowances of $212 and $253, respectively	39,072	26,121
Inventories	37,487	35,105
Inventories-delivered systems	749	1,912
Prepaid expenses and other	9,493	9,289
Deferred income tax assets	1,455	1,457
Total current assets	165,305	157,846
Property, plant and equipment, net	47,800	49,633
Goodwill	9,391	10,494
Intangible assets, net	3,326	4,294
Deferred income tax assets	393	410
Other assets	554	559
Total assets	226,769	223,236
Current liabilities:
Accounts payable	11,913	10,199
Accrued payroll and related expenses	10,807	8,700
Deferred revenue	8,054	10,021
Other current liabilities	8,110	8,265
Income taxes payable	924	1,017
Total current liabilities	39,808	38,202
Deferred revenue	2,090	2,591
Income taxes payable	723	701
Deferred tax liabilities	962	926
Other long-term liabilities	1,348	1,279
Total liabilities	44,931	43,699
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock, $0.001 par value; 3,000,000 shares authorized; no shares issued or outstanding	0	0
Common stock, $0.001 par value, 47,000,000 shares authorized: 23,973,819 and 23,813,729, respectively, issued and outstanding	24	24
Additional paid-in capital	252,839	251,396
Accumulated deficit	(66,558)	(69,114)
Accumulated other comprehensive income (loss)	(4,467)	(2,769)
Total stockholders’ equity	181,838	179,537
Total liabilities and stockholders’ equity	$ 226,769	$ 223,236

XML

Goodwill and Intangible Assets - Textual (Details) (USD $)	3 Months Ended
	Mar. 28, 2015	Mar. 29, 2014
Finite-Lived Intangible Assets [Line Items]
Total amortization expense	$ 700,000	$ 800,000
Impairment charges	$ 0	$ 0
Minimum [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangibles estimated lives	2 years
Maximum [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangibles estimated lives	10 years

XML

Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 28, 2015	Mar. 29, 2014
Cash flows from operating activities:
Net income	$ 2,556	$ 1,595
Reconciliation of net income to net cash provided by (used in) operating activities:
Depreciation and amortization	2,324	2,429
Stock-based compensation	1,571	1,634
Loss on disposal of fixed assets	485	0
Inventory write-down	403	669
Deferred income taxes	55	519
Changes in fair value of contingent payments to Zygo Corporation	35	(5)
Changes in assets and liabilities:
Accounts receivable	(13,340)	(967)
Inventories	(2,442)	(3,142)
Inventories-delivered systems	1,164	4,652
Prepaid expenses and other	(94)	1,845
Accounts payable, accrued and other liabilities	3,947	(2,536)
Deferred revenue	(2,468)	(10,619)
Income taxes payable	(70)	(766)
Net cash used in operating activities	(5,874)	(4,692)
Cash flows from investing activities:
Sales of marketable securities	1,082	0
Maturities of marketable securities	9,592	7,000
Purchases of marketable securities	(10,613)	(8,410)
Purchases of property, plant and equipment	(502)	(2,193)
Net cash used in investing activities	(441)	(3,603)
Cash flows from financing activities:
Payments to Zygo Corporation related to acquisition	(224)	(100)
Proceeds from sale of shares under employee stock option plans and purchase plan	2,357	3,115
Taxes paid on net issuance of stock awards	(764)	(659)
Repurchases of common stock	(1,721)	0
Net cash (used in) provided by financing activities	(352)	2,356
Effect of exchange rate changes on cash and cash equivalents	(74)	7
Net decrease in cash and cash equivalents	(6,741)	(5,932)
Cash and cash equivalents, beginning of period	34,676	44,765
Cash and cash equivalents, end of period	27,935	38,833
Supplemental disclosure of non-cash investing activities:
Transfer of inventory to property, plant and equipment, net	$ 435	$ 0

XML

Income Taxes - Provision for Income Taxes (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 28, 2015	Mar. 29, 2014
Income Tax Disclosure [Abstract]
Provision for income taxes	$ 317	$ 587

XML

Fair Value Measurements and Disclosures - Measured at Fair Value on Recurring Basis (Details) (USD $) In Thousands, unless otherwise specified	Mar. 28, 2015	Dec. 27, 2014
Assets:
Total marketable securities	$ 77,049	$ 83,962
Fair Value, Measurements, Recurring [Member]
Assets:
Total cash equivalents	909	610
Total marketable securities	49,114	49,286
Total	50,023	49,896
Liabilities:
Contingent consideration payable	2,208	2,397
Fair Value, Measurements, Recurring [Member] | Money market funds [Member]
Assets:
Total cash equivalents	909	610
Fair Value, Measurements, Recurring [Member] | U.S. Treasury, U.S. Government and U.S. Government agency debt securities [Member]
Assets:
Total marketable securities	24,053	23,034
Fair Value, Measurements, Recurring [Member] | Commercial paper and corporate debt securities [Member]
Assets:
Total marketable securities	25,061	26,252
Fair Value, Measurements, Recurring [Member] | Cash [Member]
Assets:
Total cash equivalents	27,000	34,100
Fair Value, Measurements, Recurring [Member] | Level 1 [Member]
Assets:
Total cash equivalents	909	610
Total marketable securities	2,499	2,497
Total	3,408	3,107
Liabilities:
Contingent consideration payable	0	0
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Money market funds [Member]
Assets:
Total cash equivalents	909	610
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | U.S. Treasury, U.S. Government and U.S. Government agency debt securities [Member]
Assets:
Total marketable securities	2,499	2,497
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Commercial paper and corporate debt securities [Member]
Assets:
Total marketable securities	0	0
Fair Value, Measurements, Recurring [Member] | Level 2 [Member]
Assets:
Total cash equivalents	0	0
Total marketable securities	46,615	46,789
Total	46,615	46,789
Liabilities:
Contingent consideration payable	0	0
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | Money market funds [Member]
Assets:
Total cash equivalents	0	0
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | U.S. Treasury, U.S. Government and U.S. Government agency debt securities [Member]
Assets:
Total marketable securities	21,554	20,537
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | Commercial paper and corporate debt securities [Member]
Assets:
Total marketable securities	25,061	26,252
Fair Value, Measurements, Recurring [Member] | Level 3 [Member]
Assets:
Total cash equivalents	0	0
Total marketable securities	0	0
Total	0	0
Liabilities:
Contingent consideration payable	2,208	2,397
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | Money market funds [Member]
Assets:
Total cash equivalents	0	0
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | U.S. Treasury, U.S. Government and U.S. Government agency debt securities [Member]
Assets:
Total marketable securities	0	0
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | Commercial paper and corporate debt securities [Member]
Assets:
Total marketable securities	$ 0	$ 0

XML

Nature of Business and Basis of Presentation (Policies)

3 Months Ended

Mar. 28, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Description of Business

Description of Business – Nanometrics Incorporated (“Nanometrics” or the “Company”) and its wholly-owned subsidiaries design, manufacture, market, sell and support optical critical dimension (“OCD”), thin film and overlay dimension metrology and inspection systems used primarily in the manufacturing of semiconductors, solar photovoltaics (“solar PV”) and high-brightness LEDs (“HB-LED”), as well as by customers in the silicon wafer and data storage industries. Nanometrics’ metrology systems precisely measure a wide range of film types deposited on substrates during manufacturing to control manufacturing processes and increase production yields in the fabrication of integrated circuits. The Company’s OCD technology is a patented critical dimension measurement technology that is used to precisely determine the dimensions on the semiconductor wafer that directly control the resulting performance of the integrated circuit devices. The thin film metrology systems use a broad spectrum of wavelengths, high-sensitivity optics, proprietary software, and patented technology to measure the thickness and uniformity of films deposited on silicon and other substrates as well as their chemical composition. The overlay metrology systems are used to measure the overlay accuracy of successive layers of semiconductor patterns on wafers in the photolithography process. Nanometrics’ inspection systems are used to find defects on patterned and unpatterned wafers at nearly every stage of the semiconductor production flow. The corporate headquarters of Nanometrics is located in Milpitas, California.

Basis of Presentation

Basis of Presentation – The accompanying condensed consolidated financial statements (“financial statements”) have been prepared on a consistent basis with the audited consolidated financial statements as of December 27, 2014, and include all normal recurring adjustments necessary to fairly state the information set forth therein. All significant intercompany accounts and transactions have been eliminated in consolidation.

The financial statements have been prepared in accordance with the regulations of the United States Securities and Exchange Commission (“SEC”) for interim periods in accordance with S-X Article 10, and, therefore, omit certain information and footnote disclosure necessary to present the statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The operating results for interim periods are not necessarily indicative of the operating results that may be expected for the entire year. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the fiscal year ended December 27, 2014, which were included in the Company’s Annual Report on Form 10-K filed with the SEC on February 25, 2015.

Fiscal Period

Fiscal Period – The Company uses a 52/53 week fiscal year ending on the last Saturday of the calendar year. All references to the quarter refer to Nanometrics’ fiscal quarter. The fiscal quarters presented herein include 13 weeks.

Reclassifications

Reclassifications – Certain prior year amounts have been reclassified to conform to the current year presentation.

Use of Estimates

Use of Estimates – The preparation of financial statements in conformity with U.S. GAAP 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 reported period. Actual results could differ materially from those estimates. Estimates are used for, but not limited to, revenue recognition, the provision for doubtful accounts, the provision for excess, obsolete, or slow moving inventories, valuation of intangible and long-lived assets, warranty accruals, income taxes, valuation of stock-based compensation, and contingencies.

Revenue Recognition

Revenue Recognition – The Company derives revenue from the sale of process control metrology and inspection systems (“product revenue”) as well as spare part sales, billable service, service contracts, and upgrades (together “service revenue”). Upgrades are a group of parts and/or software that change the existing configuration of a product and are included in service revenue. They are distinguished from product revenue, which consists of complete, advanced process control metrology and inspection systems (the “system(s)”). Nanometrics’ systems consist of hardware and software components that function together to deliver the essential functionality of the system. Arrangements for sales of systems often include defined customer-specified acceptance criteria.

In summary, the Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the seller's price is fixed or determinable, and collectability is reasonably assured.

For product sales to existing customers, revenue recognition occurs at the time title and risk of loss transfer to the customer, which usually occurs upon shipment from the Company's manufacturing location, if it can be reliably demonstrated that the product has successfully met the defined customer specified acceptance criteria and all other recognition criteria have been met. For initial sales where the product has not previously met the defined customer specified acceptance criteria, product revenues are recognized upon the earlier of receipt of written customer acceptance or expiration of the contractual acceptance period. In Japan, where contractual terms with the customer specify risk of loss and title transfers upon customer acceptance, revenue is recognized upon receipt of written customer acceptance, provided that all other recognition criteria have been met.

The Company warrants its products against defects in manufacturing. Upon recognition of product revenue, a liability is recorded for anticipated warranty costs. On occasion, customers request a warranty period longer than the Company's standard warranty. In those instances where extended warranty services are separately quoted to the customer, the associated revenue is deferred and recognized as service revenue ratably over the term of the contract. The portion of service contracts and extended warranty services agreements that are uncompleted at the end of any reporting period are included in deferred revenue.

As part of its customer services, the Company sells software that is considered to be an upgrade to a customer's existing systems. These standalone software upgrades are not essential to the tangible product's functionality and are accounted for under software revenue recognition rules which require vendor specific objective evidence (“VSOE”) of fair value to allocate revenue in a multiple element arrangement. Revenue from upgrades is recognized when the upgrades are delivered to the customer, provided that all other recognition criteria have been met.

Revenue related to spare parts is recognized upon shipment. Revenue related to billable services is recognized as the services are performed. Service contracts may be purchased by the customer during or after the warranty period and revenue is recognized ratably over the service contract period.

Frequently, the Company delivers products and various services in a single transaction. The Company's deliverables consist of tools, installation, upgrades, billable services, spare parts, and service contracts. The Company's typical multi-element arrangements include a sale of one or multiple tools that include installation and standard warranty. Other arrangements consist of a sale of tools bundled with service elements or delivery of different types of services. The Company's tools, upgrades, and spare parts are generally delivered to customers within a period of up to six months from order date. Installation is usually performed soon after delivery of the tool. The portion of revenue associated with installation is deferred based on relative selling price and that revenue is recognized upon completion of the installation. Billable services are billed on a time and materials basis and performed as requested by customers. Under service contract arrangements, services are provided as needed over the fixed arrangement term, which terms can be up to twelve months. The Company does not grant its customers a general right of return or any refund terms and imposes a penalty on orders cancelled prior to the scheduled shipment date.

The Company regularly evaluates its revenue arrangements to identify deliverables and to determine whether these deliverables are separable into multiple units of accounting. The Company allocates the arrangement consideration among the deliverables based on relative selling prices. The Company has established VSOE for some of its products and services when a substantial majority of selling prices falls within a narrow range when sold separately. For deliverables with no established VSOE, the Company uses best estimate of selling price to determine standalone selling price for such deliverable. The Company does not use third party evidence to determine standalone selling price since this information is not widely available in the market as the Company's products contain a significant element of proprietary technology and the solutions offered differ substantially from competitors. The Company has established a process for developing estimated selling prices, which incorporates historical selling prices, the effect of market conditions, gross margin objectives, pricing practices, as well as entity-specific factors. The Company monitors and evaluates estimated selling price on a regular basis to ensure that changes in circumstances are accounted for in a timely manner.

When certain elements in multiple-element arrangements are not delivered or accepted at the end of a reporting period, the relative selling prices of undelivered elements are deferred until these elements are delivered and/or accepted. If deliverables cannot be accounted for as separate units of accounting, the entire arrangement is accounted for as a single unit of accounting and revenue is deferred until all elements are delivered and all revenue recognition requirements are met.

Recently Issued Accounting Pronouncements

In January 2015, the Financial Accounting Standards Board ("FASB") issued an accounting standard update which simplifies income statement classification by removing the concept of extraordinary items from the U.S. GAAP. As a result, items that are both unusual and infrequent will no longer be separately reported net of tax after continuing operations. The new standard is effective for the fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The Company does not expect any impact on the adoption of this standard on its consolidated financial statements.

In May 2014, the FASB issued an accounting standards update which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In April 2015, the FASB tentatively decided to defer for one year the effective date of the new revenue standard as well as tentatively permit early adoption. If deferred, the new standard will be effective for the Company on January 1, 2018. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that the standard will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

In July 2013, the FASB issued an accounting standards update which provides that a liability related to an unrecognized tax benefit would be offset against a deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward if such settlement is required or expected in the event the uncertain tax position is disallowed. In situations in which a net operating loss carryforward, a similar tax loss or a tax credit carryforward is not available at the reporting date under the tax law of the jurisdiction or the tax law of the jurisdiction does not require, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit will be presented in the financial statements as a liability and will not be combined with deferred tax assets. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The new standard is effective for fiscal years and interim periods beginning after December 15, 2013. The Company adopted this standard during the three months ended March 29, 2014, resulting in a one-time tax benefit of $0.3 million, a reduction in deferred tax assets of $0.3 million, and a reduction in long-term income taxes payable of $0.6 million.

XML

Fair Value Measurements and Disclosures - Unobservable Input Reconciliation (Details) (Level 3 [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 28, 2015
Fair value measurement on recurring basis, unobservable input reconciliation [Roll Forward]
Fair value, beginning balance	$ 2,397
Change in fair value included in earnings	35
Fair Value, ending balance	2,208
Zygo Corporation [Member]
Fair value measurement on recurring basis, unobservable input reconciliation [Roll Forward]
Payments made to Zygo Corporation	$ (224)

XML

Cash and Investments (Tables)

3 Months Ended

Mar. 28, 2015

Investments, Debt and Equity Securities [Abstract]

Cash, cash equivalents and available-for-sale investments

The following tables present cash, cash equivalents, and available-for-sale investments as of the following dates (in thousands):

	March 28, 2015
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Market Value
Cash	$	27,026	—		$	—		$	27,026
Cash equivalents:
Money market funds	909		—		—			909
Marketable securities:
Commercial paper	1,398		—		—			1,398
U.S. Treasury securities	2,499		—		—			2,499
U.S. Government agency securities	21,553		6		(5		)	21,554
Municipal securities	3,020		1		(2		)	3,019
Corporate debt securities	20,647		4		(7		)	20,644
Total cash, cash equivalents, and marketable securities	$	77,052	$	11	$	(14	)	$	77,049
	December 27, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Market Value
Cash	$	34,066	$	—	$	—		$	34,066
Cash equivalents:
Money market funds	610		—		—			610
Marketable securities:
Commercial paper	805		—		—			805
U.S. Treasury Securities	2,498		—		(1		)	2,497
U.S. Government agency securities	20,556		1		(19		)	20,538
Municipal securities	3,755		1		(7		)	3,749
Corporate debt securities	21,722		1		(26		)	21,697
Total cash, cash equivalents, and marketable securities	$	84,012	$	3	$	(53	)	$	83,962

XML

Nature of Business and Basis of Presentation

3 Months Ended

Mar. 28, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Business and Basis of Presentation

Nature of Business and Basis of Presentation

Description of Business – Nanometrics Incorporated (“Nanometrics” or the “Company”) and its wholly-owned subsidiaries design, manufacture, market, sell and support optical critical dimension (“OCD”), thin film and overlay dimension metrology and inspection systems used primarily in the manufacturing of semiconductors, solar photovoltaics (“solar PV”) and high-brightness LEDs (“HB-LED”), as well as by customers in the silicon wafer and data storage industries. Nanometrics’ metrology systems precisely measure a wide range of film types deposited on substrates during manufacturing to control manufacturing processes and increase production yields in the fabrication of integrated circuits. The Company’s OCD technology is a patented critical dimension measurement technology that is used to precisely determine the dimensions on the semiconductor wafer that directly control the resulting performance of the integrated circuit devices. The thin film metrology systems use a broad spectrum of wavelengths, high-sensitivity optics, proprietary software, and patented technology to measure the thickness and uniformity of films deposited on silicon and other substrates as well as their chemical composition. The overlay metrology systems are used to measure the overlay accuracy of successive layers of semiconductor patterns on wafers in the photolithography process. Nanometrics’ inspection systems are used to find defects on patterned and unpatterned wafers at nearly every stage of the semiconductor production flow. The corporate headquarters of Nanometrics is located in Milpitas, California.

Basis of Presentation – The accompanying condensed consolidated financial statements (“financial statements”) have been prepared on a consistent basis with the audited consolidated financial statements as of December 27, 2014, and include all normal recurring adjustments necessary to fairly state the information set forth therein. All significant intercompany accounts and transactions have been eliminated in consolidation.

The financial statements have been prepared in accordance with the regulations of the United States Securities and Exchange Commission (“SEC”) for interim periods in accordance with S-X Article 10, and, therefore, omit certain information and footnote disclosure necessary to present the statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The operating results for interim periods are not necessarily indicative of the operating results that may be expected for the entire year. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the fiscal year ended December 27, 2014, which were included in the Company’s Annual Report on Form 10-K filed with the SEC on February 25, 2015.

Fiscal Period – The Company uses a 52/53 week fiscal year ending on the last Saturday of the calendar year. All references to the quarter refer to Nanometrics’ fiscal quarter. The fiscal quarters presented herein include 13 weeks.

Reclassifications – Certain prior year amounts have been reclassified to conform to the current year presentation.

Use of Estimates – The preparation of financial statements in conformity with U.S. GAAP 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 reported period. Actual results could differ materially from those estimates. Estimates are used for, but not limited to, revenue recognition, the provision for doubtful accounts, the provision for excess, obsolete, or slow moving inventories, valuation of intangible and long-lived assets, warranty accruals, income taxes, valuation of stock-based compensation, and contingencies.

Revenue Recognition – The Company derives revenue from the sale of process control metrology and inspection systems (“product revenue”) as well as spare part sales, billable service, service contracts, and upgrades (together “service revenue”). Upgrades are a group of parts and/or software that change the existing configuration of a product and are included in service revenue. They are distinguished from product revenue, which consists of complete, advanced process control metrology and inspection systems (the “system(s)”). Nanometrics’ systems consist of hardware and software components that function together to deliver the essential functionality of the system. Arrangements for sales of systems often include defined customer-specified acceptance criteria.

In summary, the Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the seller's price is fixed or determinable, and collectability is reasonably assured.

For product sales to existing customers, revenue recognition occurs at the time title and risk of loss transfer to the customer, which usually occurs upon shipment from the Company's manufacturing location, if it can be reliably demonstrated that the product has successfully met the defined customer specified acceptance criteria and all other recognition criteria have been met. For initial sales where the product has not previously met the defined customer specified acceptance criteria, product revenues are recognized upon the earlier of receipt of written customer acceptance or expiration of the contractual acceptance period. In Japan, where contractual terms with the customer specify risk of loss and title transfers upon customer acceptance, revenue is recognized upon receipt of written customer acceptance, provided that all other recognition criteria have been met.

The Company warrants its products against defects in manufacturing. Upon recognition of product revenue, a liability is recorded for anticipated warranty costs. On occasion, customers request a warranty period longer than the Company's standard warranty. In those instances where extended warranty services are separately quoted to the customer, the associated revenue is deferred and recognized as service revenue ratably over the term of the contract. The portion of service contracts and extended warranty services agreements that are uncompleted at the end of any reporting period are included in deferred revenue.

As part of its customer services, the Company sells software that is considered to be an upgrade to a customer's existing systems. These standalone software upgrades are not essential to the tangible product's functionality and are accounted for under software revenue recognition rules which require vendor specific objective evidence (“VSOE”) of fair value to allocate revenue in a multiple element arrangement. Revenue from upgrades is recognized when the upgrades are delivered to the customer, provided that all other recognition criteria have been met.

Revenue related to spare parts is recognized upon shipment. Revenue related to billable services is recognized as the services are performed. Service contracts may be purchased by the customer during or after the warranty period and revenue is recognized ratably over the service contract period.

Frequently, the Company delivers products and various services in a single transaction. The Company's deliverables consist of tools, installation, upgrades, billable services, spare parts, and service contracts. The Company's typical multi-element arrangements include a sale of one or multiple tools that include installation and standard warranty. Other arrangements consist of a sale of tools bundled with service elements or delivery of different types of services. The Company's tools, upgrades, and spare parts are generally delivered to customers within a period of up to six months from order date. Installation is usually performed soon after delivery of the tool. The portion of revenue associated with installation is deferred based on relative selling price and that revenue is recognized upon completion of the installation. Billable services are billed on a time and materials basis and performed as requested by customers. Under service contract arrangements, services are provided as needed over the fixed arrangement term, which terms can be up to twelve months. The Company does not grant its customers a general right of return or any refund terms and imposes a penalty on orders cancelled prior to the scheduled shipment date.

The Company regularly evaluates its revenue arrangements to identify deliverables and to determine whether these deliverables are separable into multiple units of accounting. The Company allocates the arrangement consideration among the deliverables based on relative selling prices. The Company has established VSOE for some of its products and services when a substantial majority of selling prices falls within a narrow range when sold separately. For deliverables with no established VSOE, the Company uses best estimate of selling price to determine standalone selling price for such deliverable. The Company does not use third party evidence to determine standalone selling price since this information is not widely available in the market as the Company's products contain a significant element of proprietary technology and the solutions offered differ substantially from competitors. The Company has established a process for developing estimated selling prices, which incorporates historical selling prices, the effect of market conditions, gross margin objectives, pricing practices, as well as entity-specific factors. The Company monitors and evaluates estimated selling price on a regular basis to ensure that changes in circumstances are accounted for in a timely manner.

When certain elements in multiple-element arrangements are not delivered or accepted at the end of a reporting period, the relative selling prices of undelivered elements are deferred until these elements are delivered and/or accepted. If deliverables cannot be accounted for as separate units of accounting, the entire arrangement is accounted for as a single unit of accounting and revenue is deferred until all elements are delivered and all revenue recognition requirements are met.

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Mar. 28, 2015	Dec. 27, 2014
Statement of Financial Position [Abstract]
Allowances for doubtful accounts	$ 212	$ 253
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	3,000,000	3,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	47,000,000	47,000,000
Common stock, shares issued	23,973,819	23,813,729
Common stock, shares outstanding	23,973,819	23,813,729

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Commitments and Contingencies

3 Months Ended

Mar. 28, 2015

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Intellectual Property Indemnification Obligations – The Company will, from time to time, in the normal course of business, agree to indemnify certain customers, vendors or others against third party claims that the Company’s products, when used for their intended purpose(s), or the Company’s intellectual property, infringe the intellectual property rights of such third parties or other claims made against parties with whom it enters into contractual relationships. It is not possible to determine the maximum potential amount of liability under these indemnification obligations due to the limited history of prior indemnification claims and the unique facts and circumstances that are likely to be involved in each particular claim. Historically, the Company has not made payments under these obligations and believes that the estimated fair value of these agreements is immaterial. Accordingly, no liabilities have been recorded for these obligations in the accompanying condensed consolidated balance sheets as of March 28, 2015 and December 27, 2014.

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Document and Entity Information	3 Months Ended
	Mar. 28, 2015	Apr. 23, 2015
Document and Entity Information [Abstract]
Entity Registrant Name	NANOMETRICS INC
Entity Central Index Key	0000704532
Document Type	10-Q
Document Period End Date	Mar. 28, 2015
Amendment Flag	false
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q1
Current Fiscal Year End Date	--12-26
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		23,984,375
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes

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Net Income Per Share

3 Months Ended

Mar. 28, 2015

Earnings Per Share [Abstract]

Net Income Per Share

Net Income Per Share

The Company presents both basic and diluted net income per share on the face of its condensed consolidated statements of operations. Basic net income per share excludes the effect of potentially dilutive shares and is computed by dividing net income by the weighted-average number of shares of common stock outstanding for the period. Diluted net income per share is computed using the weighted-average number of shares of common stock outstanding for the period plus the effect of all dilutive securities representing potential shares of common stock outstanding during the period.

A reconciliation of the share denominator of the basic and diluted net income per share computations for three months ended March 28, 2015 and March 29, 2014 is as follows (in thousands):

	Three Months Ended
	March 28, 2015	March 29, 2014
Weighted average common shares outstanding used in basic net income (loss) per share calculation	23,866	23,711
Potential dilutive common stock equivalents, using treasury stock method	391	448
Weighted average shares used in diluted net income per share calculation	24,257	24,159

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Condensed Consolidated Statements of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 28, 2015	Mar. 29, 2014
Net revenues:
Products	$ 38,339	$ 43,280
Service	12,037	8,296
Total net revenues	50,376	51,576
Costs of net revenues:
Cost of products	19,992	21,639
Cost of service	6,373	5,114
Amortization of intangible assets	632	674
Total costs of net revenues	26,997	27,427
Gross profit	23,379	24,149
Operating expenses:
Research and development	8,159	8,314
Selling	7,116	7,373
General and administrative	5,767	6,338
Amortization of intangible assets	38	108
Restructuring charge	58	0
Total operating expenses	21,138	22,133
Income from operations	2,241	2,016
Other (income) expense:
Interest income	10	14
Interest expense	(82)	(100)
Other income, net	704	252
Total other income, net	632	166
Income before income taxes	2,873	2,182
Provision for income taxes	317	587
Net income	$ 2,556	$ 1,595
Net income per share:
Basic (in dollars per share)	$ 0.11	$ 0.07
Diluted (in dollars per share)	$ 0.11	$ 0.07
Weighted average shares used in per share calculation:
Basic (in shares)	23,866	23,711
Diluted (in shares)	24,257	24,159

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Financial Statement Components

3 Months Ended

Mar. 28, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Financial Statement Components

Financial Statement Components

The following tables provide details of selected financial statement components as of the following dates (in thousands):

Condensed Consolidated Balance Sheets Details	At
	March 28, 2015			December 27, 2014
Inventories:
Raw materials and sub-assemblies	$	20,455		$	19,463
Work in process	11,523			7,723
Finished goods	5,509			7,919
Inventories	37,487			35,105
Inventories-delivered systems	749			1,912
Total inventories	$	38,236		$	37,017
Property, plant and equipment, net(1):
Land	$	15,572		$	15,572
Building and improvements	19,679			19,641
Machinery and equipment	30,400			29,456
Furniture and fixtures	2,241			2,225
Software	7,942			7,942
Capital in progress	2,770			3,512
Total property, plant and equipment, gross	78,604			78,348
Accumulated depreciation and amortization	(30,804		)	(28,715		)
Total property, plant and equipment, net	$	47,800		$	49,633
(1)Total depreciation and amortization expense for the three months ended March 28, 2015 and March 29, 2014 was $1.7 million and $1.6 million, respectively.
Other current liabilities:
Accrued warranty	$	3,440		$	2,953
Accrued restructuring	606			997
Accrued professional services	875			778
Fair value of current portion of contingent payments to Zygo Corporation related to acquisition	1,128			1,385
Other	2,061			2,152
Total other current liabilities	$	8,110		$	8,265

Components of Accumulated Other Comprehensive Income (Loss)

	Foreign Currency Translations			Defined Benefit Pension Plans			Unrealized Income (Loss) on Investment			Accumulated Other Comprehensive Income
Balance as of December 27, 2014	$	(2,604	)	$	(134	)	$	(31	)	$	(2,769	)
Current period change	(1,727		)	—			29			(1,698		)
Balance as of March 28, 2015	$	(4,331	)	$	(134	)	$	(2	)	$	(4,467	)

The items above, except for unrealized income (loss) on investment, did not impact the Company’s income tax provision. The amounts reclassified from each component of accumulated other comprehensive income into income statement line items were insignificant.

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Accounts Receivable

3 Months Ended

Mar. 28, 2015

Receivables [Abstract]

Accounts Receivable

Accounts Receivable

The Company maintains arrangements under which eligible accounts receivable in Japan are sold without recourse to unrelated third-party financial institutions. These receivables were not included in the consolidated balance sheets as the criteria for sale treatment had been met. The Company pays administrative fees as well as interest ranging from 1.15% to 1.68% based on the anticipated length of time between the date the sale is consummated and the expected collection date of the receivables sold. The Company sold $1.1 million and $0.6 million of receivables during three months ended March 28, 2015 and March 29, 2014, respectively. There were no material gains or losses on the sale of such receivables. There were no amounts due from such third party financial institutions at March 28, 2015 and December 27, 2014.

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Fair Value Measurements and Disclosures (Tables)

3 Months Ended

Mar. 28, 2015

Fair Value Disclosures [Abstract]

Assets and liabilities measurements at estimated fair value on recurring basis excluding accrued interest components

The following tables present the Company’s assets and liabilities measured at estimated fair value on a recurring basis, excluding accrued interest components, categorized in accordance with the fair value hierarchy (in thousands), as of the following dates:

	March 28, 2015								December 27, 2014
	Fair Value Measurements Using Input Types								Fair Value Measurements Using Input Types
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	909	$	—	$	—	$	909	$	610	$	—	$	—	$	610
Total cash equivalents	909		—		—		909		610		—		—		610
Marketable securities:
U.S. Treasury, U.S. Government and U.S. Government agency debt securities	2,499		21,554		—		24,053		2,497		20,537		—		23,034
Commercial paper, municipal securities and corporate debt securities	—		25,061		—		25,061		—		26,252		—		26,252
Total marketable securities	2,499		46,615		—		49,114		2,497		46,789		—		49,286
Total(1)	$	3,408	$	46,615	$	—	$	50,023	$	3,107	$	46,789	$	—	$	49,896
Liabilities:
Contingent consideration payable	$	—	$	—	$	2,208	$	2,208	$	—	$	—	$	2,397	$	2,397

⁽¹⁾ Excludes $27.0 million and $34.1 million held in operating accounts as of March 28, 2015 and December 27, 2014, respectively.

Fair value measurement on recurring basis, unobservable input reconciliation

Changes in Level 3 liabilities (in thousands)
Fair value at December 27, 2014	2,397
Payments made to Zygo Corporation	(224		)
Change in fair value included in earnings	35
Fair value at March 28, 2015	$	2,208

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Stockholders' Equity and Stock-Based Compensation

3 Months Ended

Mar. 28, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stockholders' Equity and Stock-Based Compensation

Stockholders’ Equity and Stock-Based Compensation

Options and ESPP Awards

The fair value of each option award is estimated on the grant date using the Black-Scholes valuation model and the assumptions noted in the following table. The expected lives of options granted were calculated using the simplified method allowed by the SAB 107. The risk-free rates were based on the U.S Treasury rates in effect during the corresponding period of grant. The expected volatility was based on the historical volatility of the Company’s stock price. The dividend yield reflects that the Company has not paid any cash dividends since inception and does not intend to pay any cash dividends in the foreseeable future.

	March 28, 2015	March 29, 2014
Stock Options:
Expected life	—	4.6 years
Volatility	—	56.8%
Risk free interest rate	—	1.53%
Dividends	—	—
Employee Stock Purchase Plan:
Expected life	0.5 years	0.5 years
Volatility	37.2%	32.6%
Risk free interest rate	0.11%	1.00%
Dividends	—	—

No stock options were awardedduring the three monthsended March 28, 2015. The weighted average fair value per share of the stock options awarded in three month period ended March 29, 2014 was $8.69.

A summary of activity of stock options during the three months ended March 28, 2015 is as follows:

	Number of Shares Outstanding (Options)		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in Thousands)
Options
Outstanding at December 27, 2014	1,382,993		$	13.92	3.41	$	4,108
Exercised	(127,814	)	11.82
Granted	—		—
Cancelled	(3,263	)	15.57
Outstanding at March 28, 2015	1,251,916		$	14.14	3.17	$	4,069
Exercisable at March 28, 2015	992,179		$	13.57	2.72	$	3,757

The aggregate intrinsic value in the above table represents the total pretax intrinsic value, based on the Company’s closing stock price of $17.19 as of March 27, 2015, the last trading day of the quarter, which would have been received by the option holders had all option holders exercised their options as of that date. The total intrinsic value of options exercised during the three months ended March 28, 2015 and March 29, 2014 was $0.8 million and $1.7 million, respectively. 

Restricted Stock Units (“RSUs”)

Time-based RSUs are valued using the market value of the Company’s common stock on the date of grant, assuming no expectation of dividends paid.

A summary of activity for RSUs is as follows:

RSUs	Number of RSUs		Weighted Average Fair Value
Outstanding RSUs as of December 27, 2014	563,337		$	17.90
Granted	71,533		17.92
Released	(127,096	)	17.78
Cancelled	(8,399	)	16.56
Outstanding RSUs as of March 28, 2015	499,375		$	17.96

Market-Based Performance Stock Units (“PSUs”)

During the three months ended March 28, 2015, in addition to granting RSUs that vest on the passage of time only, the Company granted PSUs to an executive. The PSUs will vest in three equal tranches over one, two and three years based on the relative performance of the Company’s stock during those periods, compared to a peer group over the same period. If target stock price performance is achieved, 40,000 shares of the Company’s common stock will vest, and up to a maximum of 60,000 shares will vest if the maximum stock price performance is achieved for each tranche.

Valuation of PSUs

On the date of grant, the Company estimated the fair value of PSUs using a Monte Carlo simulation model. The assumptions for the valuation of PSUs are summarized as follows:

PSUs	2015 Awards
Number of PSUs granted and outstanding as of March 28, 2015	40,000
Weighted-average assumptions/inputs:
Expected Dividend	—
Range of risk-free interest rates	0.25%-1.1%
Range of expected volatilities for peer group	23%-65%

Stock-based Compensation Expense

Stock-based compensation expense for all share-based payment awards made to the Company’s employees and directors pursuant to the employee stock option and employee stock purchase plans by function were as follows (in thousands):

	March 28, 2015		March 29, 2014
Cost of products	$	73	$	61
Cost of service	46		84
Research and development	280		340
Selling	500		427
General and administrative	672		722
Total stock-based compensation expense related to employee stock options and employee stock purchases	$	1,571	$	1,634

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Restructuring

3 Months Ended

Mar. 28, 2015

Restructuring and Related Activities [Abstract]

Restructuring

Restructuring

The Company recorded a restructuring charge of approximately $0.1 million during the three months ended March 28, 2015 as a result of its decision to consolidate and reorganize certain of its operations, primarily in the U.K. The Company completed this restructuring plan in March 2015. Other related costs will be recognized as incurred.

As of March 28, 2015, the components of the Company’s restructuring reserves were included in other current liabilities and were as follows (in thousands):

	Employee severance and benefits			Facility termination costs			Other			Total
Balance as of December 27, 2014	$	383		$	583		$	31		$	997
Charges	45			—			13			58
Cash Payments	(308		)	(106		)	(35		)	(449		)
Balance as of March 28, 2015	$	120		$	477		$	9		$	606

As of March 29, 2014, the balance of the Company’s restructuring reserves was zero.

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Income Taxes - Textual (Details) (USD $)	3 Months Ended
	Mar. 28, 2015	Mar. 29, 2014
Income Tax Disclosure [Abstract]
Income tax expense (benefit)	$ 317,000	$ 587,000
Anticipated increase in unrecognized tax benefits during next twelve months	$ 100,000

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Goodwill and Intangible Assets

3 Months Ended

Mar. 28, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

Goodwill and Intangible Assets

The following table summarizes the activity in the Company’s goodwill during the three months ended March 28, 2015 (in thousands):

Balance as of December 27, 2014	$	10,494
Foreign currency movements	(1,103		)
Balance as of March 28, 2015	$	9,391

Finite-lived intangible assets are recorded at cost, less accumulated amortization. Finite-lived intangible assets as of March 28, 2015 and December 27, 2014 consisted of the following (in thousands):

	March 28, 2015
	Adjusted cost		Accumulated amortization			Net carrying amount
Developed technology	$	16,063	$	(13,018	)	$	3,045
Customer relationships	9,362		(9,362		)	—
Brand names	1,927		(1,827		)	100
Patented technology	2,252		(2,071		)	181
Trademark	80		(80		)	—
Total	$	29,684	$	(26,358	)	$	3,326

	December 27, 2014
	Adjusted cost		Accumulated amortization			Net carrying amount
Developed technology	$	16,950	$	(12,991	)	$	3,959
Customer relationships	9,461		(9,449		)	12
Brand names	1,927		(1,802		)	125
Patented technology	2,252		(2,054		)	198
Trademark	80		(80		)	—
Total	$	30,670	$	(26,376	)	$	4,294

The amortization of finite-lived intangibles is computed using the straight-line method. Estimated lives of finite-lived intangibles range from two to ten years. Total amortization expense for the three months ended March 28, 2015 and March 29, 2014 was $0.7 million and $0.8 million, respectively.

There were no impairment charges related to intangible assets recorded during the three months ended March 28, 2015 and March 29, 2014.

The estimated future amortization expense of finite intangible assets as of March 28, 2015 is as follows (in thousands):

Fiscal Years	Amounts
2015 (remaining nine months)	$	1,258
2016	1,656
2017	206
2018	140
2019	66
Total future amortization expense	$	3,326

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Warranties

3 Months Ended

Mar. 28, 2015

Product Warranties Disclosures [Abstract]

Warranties

Warranties

The Company sells the majority of its products with a 12 months repair or replacement warranty from the date of acceptance or shipment date. The Company provides an accrual for estimated future warranty costs based upon the historical relationship of warranty costs to the cost of products sold. The estimated future warranty obligations related to product sales are recorded in the period in which the related revenue is recognized. The estimated future warranty obligations are affected by the warranty periods, sales volumes, product failure rates, material usage, and labor and replacement costs incurred in correcting a product failure. If actual product failure rates, material usage, labor or replacement costs were to differ from the Company’s estimates, revisions to the estimated warranty obligations would be required. For new product introductions where limited or no historical information exists, the Company may use warranty information from other previous product introductions to guide it in estimating its warranty accrual.

Components of the warranty accrual, which were included in the accompanying condensed consolidated balance sheets with other current liabilities, were as follows (in thousands):

	Three Months Ended
	March 28, 2015			March 29, 2014
Balance as of beginning of period	$	2,953		$	3,426
Accruals for warranties issued during period	1,702			1,317
Settlements during the period	(1,215		)	(1,168		)
Balance as of end of period	$	3,440		$	3,575

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Line of Credit and Debt Obligations

3 Months Ended

Mar. 28, 2015

Debt Disclosure [Abstract]

Line of Credit and Debt Obligations

Line of Credit and Debt Obligations

Line of Credit - On May 30, 2014, the Company amended its revolving line of credit facility (i) to extend the maturity date of such facility by two years to May 30, 2016, and (ii) to increase the minimum amount available to borrow to $12.0 million. The instrument governing the line of credit facility includes certain financial covenants regarding tangible net worth. The revolving line of credit agreement includes a provision for the issuance of commercial or standby letters of credit by the bank on behalf of the Company. The value of all letters of credit outstanding reduces the total line of credit available. The revolving line of credit is collateralized by a blanket lien on all of the Company’s domestic assets excluding intellectual property and real estate. The minimum borrowing interest rate is 3.00% per annum. Borrowing is limited to the lesser of (a) $12.0 million plus the borrowing base, or (b) $20.0 million. The total borrowing base available as of March 28, 2015 was $16.0 million. As of March 28, 2015, the Company was not in breach of any restrictive covenants in connection with this line of credit. There were no outstanding amounts drawn on this facility as of March 28, 2015. Although management has no current plans to request advances under this credit facility, the Company may use the proceeds of any future borrowing for general corporate purposes, future acquisitions or expansion of the Company’s business.

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Segment, Geographic, Product and Significant Customer Information - Customers More Than 10% of Revenues (Details)	3 Months Ended
	Mar. 28, 2015	Mar. 29, 2014
Samsung Electronics Co. Ltd. [Member]
Net revenues:
Customers accounted for 10% or more of total revenue	30.30%	51.70%
Intel Corporation [Member]
Net revenues:
Customers accounted for 10% or more of total revenue		13.10%
SK Hynix [Member]
Net revenues:
Customers accounted for 10% or more of total revenue	13.40%
Taiwan Semiconductor Manufacturing Company Limited [Member]
Net revenues:
Customers accounted for 10% or more of total revenue	22.30%

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Segment, Geographic, Product and Significant Customer Information - Customers More Than 10% of Accounts Receivable (Details)	Mar. 28, 2015	Dec. 27, 2014
Samsung Electronics Co. Ltd. [Member]
Customers accounted for 10% or more of total accounts receivable
Customers accounted for 10% or more of total accounts receivable	17.30%	10.00%
Taiwan Semiconductor Manufacturing Company Limited [Member]
Customers accounted for 10% or more of total accounts receivable
Customers accounted for 10% or more of total accounts receivable	27.80%	20.20%
SK Hynix [Member]
Customers accounted for 10% or more of total accounts receivable
Customers accounted for 10% or more of total accounts receivable	17.50%
Micron [Member]
Customers accounted for 10% or more of total accounts receivable
Customers accounted for 10% or more of total accounts receivable		23.70%
GLOBAL FOUNDRIES [Member]
Customers accounted for 10% or more of total accounts receivable
Customers accounted for 10% or more of total accounts receivable		10.20%

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Recent Accounting Pronouncements (Details) (USD $)	3 Months Ended
	Mar. 28, 2015	Mar. 29, 2014
Income tax expense (benefit)	$ 317,000	$ 587,000
Increase (decrease) in long-term income taxes payable	(70,000)	(766,000)
Restatement Adjustment [Member]
Income tax expense (benefit)		(300,000)
Increase (decrease) in deferred tax assets		(300,000)
Increase (decrease) in long-term income taxes payable		$ (600,000)

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Commitments and Contingencies - Textual (Details) (USD $)	Mar. 28, 2015	Dec. 27, 2014
Commitments and Contingencies Disclosure [Abstract]
Liabilities recorded for obligations	$ 0	$ 0

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Segment, Geographic, Product and Significant Customer Information

3 Months Ended

Mar. 28, 2015

Segment Reporting [Abstract]

Segment, Geographic, Product and Significant Customer Information

Segment, Geographic, Product and Significant Customer Information

The Company has one operating segment, which is the sale, design, manufacture, marketing and support of optical critical dimension and thin film systems. The following tables summarize total net revenues and long-lived assets (excluding intangible assets) attributed to significant countries (in thousands):

	Three Months Ended
	March 28, 2015		March 29, 2014
Total net revenues:
United States	$	9,078	6,741
South Korea	14,643		15,889
China	4,001		15,488
Taiwan	14,428		4,416
Other	8,226		9,042
Total net revenues	$	50,376	$	51,576

Long-lived tangible assets:	March 28, 2015		December 27, 2014
United States	$	46,011	$	47,729
Japan	65		71
South Korea	249		284
All Other	1,475		1,549
Total long-lived tangible assets	$	47,800	$	49,633

The following customers accounted for 10% or more of total accounts receivable, net:

	At
	March 28, 2015		December 27, 2014
Samsung Electronics Co. Ltd.	17.3	%	10.0	%
Taiwan Semiconductor Manufacturing Company Limited	27.8	%	20.2	%
SK Hynix	17.5	%	***
Micron	***		23.7	%
GLOBALFOUNDRIES	***		10.2	%

*** The customer accounted for less than 10% of total accounts receivable, net, as of that period end.

The following customers accounted for 10% or more of total net revenues:

	March 28, 2015		March 29, 2014
Samsung Electronics Co. Ltd.	30.3	%	51.7	%
Intel Corporation	***		13.1	%
SK Hynix	13.4	%	***
Taiwan Semiconductor Manufacturing Company Limited	22.3	%	***

*** The customer accounted for less than 10% of total net revenues during the period.

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Goodwill and Intangible Assets (Tables)

3 Months Ended

Mar. 28, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of goodwill

The following table summarizes the activity in the Company’s goodwill during the three months ended March 28, 2015 (in thousands):

Balance as of December 27, 2014	$	10,494
Foreign currency movements	(1,103		)
Balance as of March 28, 2015	$	9,391

Summary of finite-lived intangible assets

Finite-lived intangible assets as of March 28, 2015 and December 27, 2014 consisted of the following (in thousands):

	March 28, 2015
	Adjusted cost		Accumulated amortization			Net carrying amount
Developed technology	$	16,063	$	(13,018	)	$	3,045
Customer relationships	9,362		(9,362		)	—
Brand names	1,927		(1,827		)	100
Patented technology	2,252		(2,071		)	181
Trademark	80		(80		)	—
Total	$	29,684	$	(26,358	)	$	3,326

	December 27, 2014
	Adjusted cost		Accumulated amortization			Net carrying amount
Developed technology	$	16,950	$	(12,991	)	$	3,959
Customer relationships	9,461		(9,449		)	12
Brand names	1,927		(1,802		)	125
Patented technology	2,252		(2,054		)	198
Trademark	80		(80		)	—
Total	$	30,670	$	(26,376	)	$	4,294

Estimated future amortization expense

The estimated future amortization expense of finite intangible assets as of March 28, 2015 is as follows (in thousands):

Fiscal Years	Amounts
2015 (remaining nine months)	$	1,258
2016	1,656
2017	206
2018	140
2019	66
Total future amortization expense	$	3,326

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Restructuring (Details) (USD $)	3 Months Ended
	Mar. 28, 2015	Mar. 29, 2014
Restructuring Reserve [Roll Forward]
Beginning Balance	$ 997,000
Charges	58,000	0
Cash Payments	(449,000)
Ending Balance	606,000	0
Employee severance and benefits [Member]
Restructuring Reserve [Roll Forward]
Beginning Balance	383,000
Charges	45,000
Cash Payments	(308,000)
Ending Balance	120,000
Facility termination costs [Member]
Restructuring Reserve [Roll Forward]
Beginning Balance	583,000
Charges	0
Cash Payments	(106,000)
Ending Balance	477,000
Other [Member]
Restructuring Reserve [Roll Forward]
Beginning Balance	31,000
Charges	13,000
Cash Payments	(35,000)
Ending Balance	$ 9,000

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Financial Statement Components - Components of Accumulated Other Comprehensive Income (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 28, 2015
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Beginning of period	$ (2,769)
Current period change	(1,698)
End of period	(4,467)
Foreign Currency Translations [Member]
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Beginning of period	(2,604)
Current period change	(1,727)
End of period	(4,331)
Defined Benefit Pension Plans [Member]
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Beginning of period	(134)
Current period change	0
End of period	(134)
Unrealized Income (Loss) on Investment [Member]
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Beginning of period	(31)
Current period change	29
End of period	$ (2)

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Condensed Consolidated Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 28, 2015	Mar. 29, 2014
Statement of Comprehensive Income [Abstract]
Net income	$ 2,556	$ 1,595
Other comprehensive income (loss):
Change in foreign currency translation adjustment	(1,727)	104
Net change on unrealized gains on available-for-sale investments	29	107
Other comprehensive income (loss)	(1,698)	211
Comprehensive income	$ 858	$ 1,806

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Cash and Investments

3 Months Ended

Mar. 28, 2015

Investments, Debt and Equity Securities [Abstract]

Cash and Investments

Cash and Investments

The following tables present cash, cash equivalents, and available-for-sale investments as of the following dates (in thousands):

	March 28, 2015
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Market Value
Cash	$	27,026	—		$	—		$	27,026
Cash equivalents:
Money market funds	909		—		—			909
Marketable securities:
Commercial paper	1,398		—		—			1,398
U.S. Treasury securities	2,499		—		—			2,499
U.S. Government agency securities	21,553		6		(5		)	21,554
Municipal securities	3,020		1		(2		)	3,019
Corporate debt securities	20,647		4		(7		)	20,644
Total cash, cash equivalents, and marketable securities	$	77,052	$	11	$	(14	)	$	77,049
	December 27, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Market Value
Cash	$	34,066	$	—	$	—		$	34,066
Cash equivalents:
Money market funds	610		—		—			610
Marketable securities:
Commercial paper	805		—		—			805
U.S. Treasury Securities	2,498		—		(1		)	2,497
U.S. Government agency securities	20,556		1		(19		)	20,538
Municipal securities	3,755		1		(7		)	3,749
Corporate debt securities	21,722		1		(26		)	21,697
Total cash, cash equivalents, and marketable securities	$	84,012	$	3	$	(53	)	$	83,962

Available-for-sale marketable securities, readily convertible to cash, with maturity dates of 90 days or less are classified as cash equivalents, while those with maturity dates greater than 90 days are classified as marketable securities within short-term assets. All marketable securities as of March 28, 2015 and December 27, 2014, were available-for-sale and reported at fair value based on the estimated or quoted market prices as of the balance sheet date. Unrealized gains or losses, net of tax effect, are recorded in accumulated other comprehensive income (loss) within stockholders’ equity. Both the gross unrealized gains and gross unrealized losses for the three months ended March 28, 2015 and March 29, 2014 were insignificant and no marketable securities had other than temporary impairment. All marketable securities as of March 28, 2015 and December 27, 2014, had maturity dates of less than two years and were not invested in foreign entities.

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Stockholders' Equity and Stock-Based Compensation - Stock-based Compensation Expense (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 28, 2015	Mar. 29, 2014
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense related to employee stock options and employee stock purchases	$ 1,571	$ 1,634
Cost of products [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense related to employee stock options and employee stock purchases	73	61
Cost of service [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense related to employee stock options and employee stock purchases	46	84
Research and development [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense related to employee stock options and employee stock purchases	280	340
Selling [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense related to employee stock options and employee stock purchases	500	427
General and administrative [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense related to employee stock options and employee stock purchases	$ 672	$ 722

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Warranties (Tables)

3 Months Ended

Mar. 28, 2015

Product Warranties Disclosures [Abstract]

Components of the warranty accrual

Components of the warranty accrual, which were included in the accompanying condensed consolidated balance sheets with other current liabilities, were as follows (in thousands):

	Three Months Ended
	March 28, 2015			March 29, 2014
Balance as of beginning of period	$	2,953		$	3,426
Accruals for warranties issued during period	1,702			1,317
Settlements during the period	(1,215		)	(1,168		)
Balance as of end of period	$	3,440		$	3,575

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Cash and Investments (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 28, 2015	Dec. 27, 2014
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 77,052	$ 84,012
Gross Unrealized Gains	11	3
Gross Unrealized Losses	(14)	(53)
Estimated Fair Market Value	77,049	83,962
Investment maturity period, less than	2 years	2 years
Cash [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	27,026	34,066
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Estimated Fair Market Value	27,026	34,066
Money market funds [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	909	610
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Estimated Fair Market Value	909	610
Commercial paper [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	1,398	805
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Estimated Fair Market Value	1,398	805
U.S. Treasury securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	2,499	2,498
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	(1)
Estimated Fair Market Value	2,499	2,497
U.S. Government agency securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	21,553	20,556
Gross Unrealized Gains	6	1
Gross Unrealized Losses	(5)	(19)
Estimated Fair Market Value	21,554	20,538
Municipal securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	3,020	3,755
Gross Unrealized Gains	1	1
Gross Unrealized Losses	(2)	(7)
Estimated Fair Market Value	3,019	3,749
Corporate debt securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	20,647	21,722
Gross Unrealized Gains	4	1
Gross Unrealized Losses	(7)	(26)
Estimated Fair Market Value	$ 20,644	$ 21,697

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Income Taxes

3 Months Ended

Mar. 28, 2015

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company accounts for income taxes under the provisions of ASC 740, Accounting for Income Taxes. The Company adjusts its effective tax rate each quarter to be consistent with the estimated annual effective tax rate. The Company also records the tax effect of unusual or infrequently occurring discrete items, including changes in judgment about valuation allowances and effects of changes in tax laws or tax rates, in the interim period in which they occur. The Company's effective tax rate reflects the impact of a portion of its earnings being taxed in foreign jurisdictions as well as a valuation allowance maintained on certain deferred tax assets.

The provision for income taxes consists of the following (in thousands):

	Three Months Ended
	March 28, 2015		March 29, 2014
Provision for income taxes	$	317	$	587

The Company recorded a tax provision of $0.3 million and $0.6 million for the three months ended March 28, 2015 and March 29, 2014, respectively. The decrease in the tax provision for 2015 from 2014 was primarily related to no tax being provided on U.S. income as the Company has a full valuation allowance against its U.S. deferred tax assets for the three months ended March 28, 2015.

The change during the three months ended March 28, 2015 compared to the corresponding period in 2014, was primarily related to a change in the geographical mix of income of the Company during the three months ended March 28, 2015.

As of March 28, 2015, the Company continues to maintain a valuation allowance against its U.S. and certain foreign deferred tax assets as a result of uncertainties regarding the realization of the asset due to cumulative losses and uncertainty of future taxable income. The Company will continue to assess the realizability of the deferred tax assets in each of the applicable jurisdictions and maintain the valuation allowances until sufficient positive evidence exists to support a reversal. In the event the Company determines that the deferred tax assets are realizable, an adjustment to the valuation allowance will be reflected in the tax provision for the period such determination is made.

The Company is subject to taxation in the U.S. and various states including California, and foreign jurisdictions including Korea, Japan, Taiwan, and China. Due to tax attribute carry-forwards, the Company is subject to examination for tax years 2003 forward for U.S. tax purposes. The Company is also subject to examination in various states for tax years 2002 forward. The Company is subject to examination for tax years 2007 forward for various foreign jurisdictions.

The Company accrues interest and penalties related to unrecognized tax benefits in its provision for income taxes. The total amount of penalties and interest were not material as of March 28, 2015 and March 29, 2014. During the next twelve months, the Company anticipates increases in its unrecognized tax benefits of approximately $0.1 million.