0000950005-01-500575.txt : 20011107
0000950005-01-500575.hdr.sgml : 20011107
ACCESSION NUMBER: 0000950005-01-500575
CONFORMED SUBMISSION TYPE: 10-Q
PUBLIC DOCUMENT COUNT: 1
CONFORMED PERIOD OF REPORT: 20010930
FILED AS OF DATE: 20011102
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: NANOMETRICS INC
CENTRAL INDEX KEY: 0000704532
STANDARD INDUSTRIAL CLASSIFICATION: MEASURING & CONTROLLING DEVICES, NEC [3829]
IRS NUMBER: 942276314
STATE OF INCORPORATION: CA
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-Q
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-13470
FILM NUMBER: 1773830
BUSINESS ADDRESS:
STREET 1: 310 DEGUIGNE DR
CITY: SUNNYVALE
STATE: CA
ZIP: 94086
BUSINESS PHONE: 4087461600
MAIL ADDRESS:
STREET 1: 310 DEGUIGNE DRIVE
CITY: SUNNYVALE
STATE: CA
ZIP: 94086
10-Q
1
p14533_10q.txt
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
--- Exchange Act of 1934
For the quarterly period ended September 30, 2001
Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______________ to _______________
Commission file number 0-13470
------------------------------
NANOMETRICS INCORPORATED
-------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 94-2276314
------------------------------- -------------------
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
1550 Buckeye Drive, Milpitas, CA 95035
------------------------------------ -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (408) 435-9600
--------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
------- --------
At October 15, 2001 there were 11,782,400 shares of common stock, no par value,
issued and outstanding.
1
NANOMETRICS INCORPORATED
INDEX
Part I. Financial Information Page
----
Item 1. Financial Statements
Consolidated Balance Sheets -
September 30, 2001 and December 31, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Consolidated Statements of Operations -
Three months and nine months ended
September 30, 2001 and 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Consolidated Statements of Cash Flows -
Nine months ended September 30, 2001 and 2000 . . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial
Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 3. Quantitative and Qualitative Disclosures
About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
NANOMETRICS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share amounts)
(Unaudited)
September 30, December 31,
2001 2000
ASSETS --------- ---------
CURRENT ASSETS:
Cash and cash equivalents $ 12,625 $ 16,934
Short-term investments 43,681 52,854
Accounts receivable, net of
allowances of $417 and $418 11,974 14,319
Inventories 24,414 15,753
Deferred income taxes 3,874 2,760
Prepaid expenses and other 1,625 3,351
--------- ---------
Total current assets 98,193 105,971
PROPERTY, PLANT AND EQUIPMENT, Net 46,227 37,223
DEFERRED INCOME TAXES 236 227
OTHER ASSETS 4,605 1,375
--------- ---------
TOTAL ASSETS $ 149,261 $ 144,796
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 4,800 $ 4,625
Accrued payroll and related expenses 1,649 1,610
Deferred revenue 4,168 3,015
Other current liabilities 2,674 3,049
Income taxes payable 722 331
Current portion of debt obligations 415 921
--------- ---------
Total current liabilities 14,428 13,551
DEBT OBLIGATIONS 3,741 4,236
--------- ---------
Total liabilities 18,169 17,787
--------- ---------
SHAREHOLDERS' EQUITY:
Common stock, no par value; 25,000,000 shares
authorized; 11,725,351 and 11,607,839 outstanding 97,480 95,929
Retained earnings 34,493 31,783
Accumulated other comprehensive loss (881) (703)
--------- ---------
Total shareholders' equity 131,092 127,009
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 149,261 $ 144,796
========= =========
See Notes to Consolidated Financial Statements
3
NANOMETRICS INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
-------- -------- -------- --------
NET REVENUES:
Product sales $ 9,080 $ 17,761 $ 35,550 $ 47,892
Service 1,019 1,539 3,767 4,414
-------- -------- -------- --------
Total net revenues 10,099 19,300 39,317 52,306
-------- -------- -------- --------
COSTS AND EXPENSES:
Cost of product sales 3,676 6,449 14,628 18,761
Cost of service 1,133 1,474 3,944 4,496
Research and development 2,676 2,438 7,995 6,557
Selling 2,675 2,544 6,893 7,299
General and administrative 1,105 983 3,109 2,989
-------- -------- -------- --------
Total costs and expenses 11,265 13,888 36,569 40,102
-------- -------- -------- --------
INCOME (LOSS) FROM OPERATIONS (1,166) 5,412 2,748 12,204
-------- -------- -------- --------
OTHER INCOME (EXPENSE):
Interest income 582 1,137 2,279 3,028
Interest expense (17) (19) (57) (60)
Other, net 16 (102) (394) (45)
-------- -------- -------- --------
Total other income, net 581 1,016 1,828 2,923
-------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES (585) 6,428 4,576 15,127
PROVISION (BENEFIT) FOR INCOME TAXES (135) 2,404 1,866 5,888
-------- -------- -------- --------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRICIPLE (450) 4,024 2,710 9,239
CUMULATIVE EFFECT OF CHANGE IN REVE-
NUE RECOGNITION PRINCIPLE (SAB 101) -- -- -- (1,364)
-------- -------- -------- --------
NET INCOME (LOSS) $ (450) $ 4,024 $ 2,710 $ 7,875
======== ======== ======== ========
BASIC NET INCOME (LOSS) PER SHARE:
Income (loss) before cumulative effect of change
in accounting principle $ (0.04) $ 0.35 $ 0.23 $ 0.86
Cumulative effect of change in revenue
recognition principle (SAB 101) -- -- -- (0.13)
-------- -------- -------- --------
Net income (loss) $ (0.04) $ 0.35 $ 0.23 $ 0.73
======== ======== ======== ========
4
DILUTED NET INCOME (LOSS) PER SHARE:
Income (loss) before cumulative effect of change
in accounting principle $ (0.04) $ 0.33 $ 0.22 $ 0.78
Cumulative effect of change in revenue
recognition principle (SAB 101) -- -- -- (0.11)
-------- -------- -------- --------
Net income (loss) $ (0.04) $ 0.33 $ 0.22 $ 0.67
======== ======== ======== ========
SHARES USED IN PER SHARE
COMPUTATION:
Basic 11,707 11,393 11,660 10,794
======== ======== ======== ========
Diluted 11,707 12,100 12,142 11,798
======== ======== ======== ========
See Notes to Consolidated Financial Statements
5
NANOMETRICS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Nine Months Ended
September 30,
2001 2000
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,710 $ 7,875
Reconciliation of net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 996 422
Deferred rent -- (20)
Deferred income taxes (1,144) (246)
Changes in assets and liabilities
Accounts receivable 2,250 (8,706)
Inventories (9,040) (3,536)
Prepaid expenses and other current assets 1,158 (1,693)
Accounts payable accrued and other current liabilities 701 7,156
Income taxes payable 839 3,960
--------- ---------
Net cash provided by (used in) operating activities (1,530) 5,212
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments (120,546) (109,127)
Sales/maturities of short-term investments 129,719 64,282
Purchases of property, plant and equipment (9,883) (23,734)
Other assets (2,289) --
--------- ---------
Net cash used in investing activities (2,999) (68,579)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowing -- 576
Repayments of long-term debt (768) (347)
Issuance of common stock 876 74,143
--------- ---------
Net cash provided by financing activities 108 74,372
--------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 113 (36)
--------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS (4,308) 10,969
CASH AND CASH EQUIVALENTS, beginning of period 16,933 3,442
--------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 12,625 $ 14,411
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest $ 157 $ 57
========= =========
Cash paid for income taxes $ 2,682 $ 3,352
========= =========
See Notes to Consolidated Financial Statements
6
NANOMETRICS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Consolidated Financial Statements
The consolidated financial statements include the accounts of Nanometrics
Incorporated and its wholly owned subsidiaries. All significant inter-company
accounts and transactions have been eliminated.
While the quarterly financial statements are unaudited, the financial
statements included in this report reflect all adjustments (consisting only of
normal recurring adjustments) which the Company considers necessary for a fair
presentation of the results of operations for the interim periods covered and of
the financial condition of the Company at the date of the interim balance sheet.
The operating results for interim periods are not necessarily indicative of the
operating results that may be expected for the entire year. The information
included in this report should be read in conjunction with the information
included in Nanometrics' 2000 Annual Report on Form 10-K filed with the
Securities and Exchange Commission.
Note 2. Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market and consist of the following (in thousands):
September 30, December 31,
2001 2000
------------- --------------
Raw materials and subassemblies $ 15,281 $ 8,126
Work in process 5,313 1,434
Finished goods 3,820 6,193
------------- --------------
$ 24,414 $ 15,753
============= ==============
Note 3. Other Current Liabilities
Other current liabilities consist of the following (in thousands):
September 30, December 31,
2001 2000
------------- --------------
Commissions payable $ 321 $ 1,249
Accrued warranty 501 809
Other 1,852 991
------------- --------------
$ 2,674 $ 3,049
============= ==============
Note 4. Shareholders' Equity
Net Income (Loss) Per Share - The reconciliation of the share denominator used
in the basic and diluted net income per share computations are as follows (in
thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
---------- ---------- ---------- -----------
Weighted average common shares
outstanding-shares used in basic
net income (loss) per share computation 11,707 11,393 11,660 10,794
Dilutive effect of common stock equivalents,
using the treasury stock method - 707 482 1,004
---------- ---------- ---------- -----------
Shares used in dilutive net income (loss)
per share computation 11,707 12,100 12,142 11,798
========== ========== ========== ============
7
During the three month period ended September 30, 2001, diluted net loss
per share was the same as basic net loss per share since the effect of any
potentially dilutive stock is excluded as they are anti-dilutive. During the
nine month period ended September 30, 2001 and 2000, Nanometrics had common
stock options outstanding which could potentially dilute basic net income per
share in the future, but were excluded from the computation of diluted net
income per share as the common stock options' exercise prices were greater than
the average market price of the common shares for the period. At September 30,
2001, 646,501 such common stock options with a weighted average exercise price
of $35.28 per share were excluded from the diluted net income per share
computations as their exercise prices were greater than the average market price
of the common shares for the period.
Note 5. Comprehensive Income (Loss)
For the three months ended September 30, 2001 and 2000, comprehensive
income (loss), which consisted of net income (loss) for the periods and changes
in accumulated other comprehensive income, was a loss of $212,000 and income of
$3,916,000, respectively. For the nine months ended September 30, 2001 and 2000,
comprehensive income was $2,532,000 and $7,606,000, respectively.
Note 6. Recently Issued Accounting Standards
In June 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard (SFAS) No. 141, Business Combinations and SFAS
No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 requires that all
business combinations initiated after June 30, 2001 be accounted for under the
purchase method and addresses the initial recognition and measurement of
goodwill and other intangible assets acquired in a business combination. SFAS
No. 142 addresses the initial recognition and measurement of intangible assets
acquired outside of a business combination and the accounting for goodwill and
other intangible assets subsequent to their acquisition. SFAS No. 142 provides
that intangible assets with finite useful lives be amortized and that goodwill
and intangible assets with indefinite lives will not be amortized, but will
rather be tested at least annually for impairment. Nanometrics will adopt SFAS
No. 142 for its fiscal year beginning January 1, 2002. Upon adoption of SFAS No.
142, Nanometrics will stop the amortization of goodwill with an expected net
carrying value of $1,077,000 at the date of adoption and annual amortization of
$204,000 that resulted from business combinations completed prior to the
adoption of SFAS No. 141. Goodwill acquired subsequent to June 30, 2001 will not
be amortized.
In August 2001, the Financial Accounting Standards Board issued SFAS
No. 144, Accounting for the impairment or Disposal of Long-Lived Assets. This
statement retains a majority of the requirements of SFAS No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,
and addresses certain implementation issues. SFAS No. 144 is effective for
Nanometrics' fiscal year beginning January 1, 2002. Although Nanometrics has not
fully assessed the implications of SFAS NO. 144, Nanometrics does not believe
the adoption of this statement will have a significant impact on the
consolidated financial position, results of operations or cash flows.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Total net revenues for the three months ended September 30, 2001 were
$10,099,000, a decrease of $9,201,000 or 48% from the comparable period in 2000.
For the nine months ended September 30, 2001, total net revenues of $39,317,000
decreased by $12,989,000 or 25% from the comparable period in 2000. Product
sales of $9,080,000 for the three months ended September 30, 2001, decreased
$8,681,000 or 49% as compared with the same period in 2000. Product sales of
$35,550,000 for the nine months ended September 30, 2001, decreased $12,342,000
or 26% as compared with the same period in 2000. The lower levels of product
sales resulted from weaker demand for semiconductor process control equipment,
particularly in the U.S. and Far East. Service revenue of $1,019,000 and
$3,767,000 for the three months and nine months ended September 30, 2001,
respectively, decreased $520,000 or 34% and $647,000 or 15%, respectively, as
compared to the same periods in 2000 primarily as a result of lower service
sales, particularly in the U.S. and the Far East.
Cost of product sales as a percentage of product sales increased to 40%
in the third quarter of 2001 from 36% in the third quarter of 2000 and increased
to 41% in the nine months ended September 30, 2001 from 39% for the same period
in 2000 primarily because of lower sales volume in 2001 resulting in higher per
unit manufacturing costs. Cost of service as a percentage of service revenue
increased to 111% in the third quarter of 2001 from 96% in the third quarter of
2000 and increased to 105% in the nine months ended September 30, 2001 from 102%
for the same period in 2000 primarily as a result of lower service sales in the
U.S. and the Far East.
Research and development expenses for the three month and nine month
periods ended September 30, 2001 increased $238,000 or 10% and $1,438,000 or
22%, respectively, compared to the same periods in 2000 resulting primarily from
increased headcount and related expenses for the development of new and enhanced
products.
Selling expenses for the three months ended September 30, 2001
increased by $131,000 or 5% compared to the same period in 2000, resulting
primarily from increased headcount. Selling expenses for the nine months ended
September 30, 2001 decreased by $406,000 or 6% compared to the same period in
2000 primarily because of lower expenses associated with decreased sales levels.
General and administrative expenses for the three month and nine month
periods ended September 30, 2001 increased $122,000 or 12% and $120,000 or 4%,
respectively, compared to the same periods in 2000 primarily as a result of
higher administrative costs.
Total other income, net for the three month and nine month periods
ended September 30, 2001 decreased $435,000 or 43% and $1,095,000 or 37%,
respectively, from the comparable periods in 2000 due primarily to lower
interest income.
The cumulative effect of change in revenue recognition principle (SAB
101) of $1.4 million in the first quarter of 2000 is the net result of recording
$2.5 million in net revenues, which were previously recorded in 1999, offset by
$1.1 million in related costs and expenses.
Nanometrics' loss from operations was $1,166,000 and net loss was
$450,000 for the third quarter of 2001 compared to income from operations of
$5,412,000 and net income of $4,024,000 for the same period in 2000. For the
first nine months of 2001, Nanometrics' income from operations was $2,748,000
and net income was $2,710,000 which compared to income from operations of
$12,204,000 and net income of $7,875,000 for the same period in 2000.
9
Liquidity and Capital Resources
At September 30, 2001, Nanometrics had working capital of $83,765,000
compared to $92,420,000 at December 31, 2000. The current ratio at September 30,
2001 was 6.8 to 1. We believe working capital including cash and short-term
investments of $56,306,000 will be sufficient to meet our needs at least through
the next twelve months. Operating activities for the first nine months of 2001
used cash of $1,530,000 primarily from increased inventory offset to some extent
by net income and lower accounts receivable, while the net purchases of
short-term investments provided $9,173,000, capital expenditures used
$9,883,000, debt repayment used $768,000 and issuance of common stock provided
$876,000.
Forward Looking Statements
The foregoing Management's Discussion and Analysis of Financial
Condition and Results of Operations contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These statements
involve risks and uncertainties and actual results could differ materially as a
result of a number of variables, such as (i) customer demand for Nanometrics'
products, which may be affected by several factors including the cyclicality of
the semiconductor, magnetic recording head and flat panel display industries
served by Nanometrics, patterns of capital spending by its customers,
technological changes in the markets served by Nanometrics and its customers,
and market acceptance of products of both Nanometrics and its customers, (ii)
the timing, cancellation or delay of Nanometrics' customer orders and shipments,
(iii) competition, including competitive pressure on product prices and changes
in pricing by Nanometrics' customers or suppliers, (iv) fluctuation in foreign
currency exchange rates particularly the Japanese yen, (v) the proportion of
sales Nanometrics makes directly to its customers versus sales through
distributors and representatives, (vi) market acceptance of new and enhanced
versions of Nanometrics' products, (vii) the timing of new product announcements
and releases of products by Nanometrics or its competitors, including our
ability to design, introduce and manufacture new products on a timely and cost
effective basis, (viii) the size and timing of acquisitions of business,
products or technologies, and fluctuations in the availability and cost of
components and subassemblies of Nanometrics' products, and (ix) the factors set
forth under "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Risk Factors" in Nanometrics' 2000 Annual Report on Form
10-K. Nanometrics undertakes no obligation to update forward looking statements
made in this report to reflect events or circumstances after the date of this
report or to update reasons why actual results could differ from those
anticipated in such forward-looking statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to financial market risks, which include changes in
foreign currency exchange rates and interest rates. We do not use derivative
financial instruments. Instead, we actively manage the balances of current
assets and liabilities denominated in foreign currencies to minimize currency
fluctuation risk. As a result, a hypothetical 10% change in the foreign currency
exchange rates at September 30, 2001 would not have a material impact on our
results of operations. Our investments in marketable securities are subject to
interest rate risk but due to the short-term nature of these investments,
interest rate changes would not have a material impact on their value at
September 30, 2001. We also have fixed rate yen denominated debt obligations in
Japan that have no interest rate risk. At September 30, 2001, our total debt
obligation was $4,156,000 with a long-term portion of $3,741,000. A hypothetical
10% change in interest rates at September 30, 2001 would not have a material
impact on our results of operations.
10
NANOMETRICS INCORPORATED
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits.
None
B. Reports on Form 8-K.
None
11
NANOMETRICS INCORPORATED
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NANOMETRICS INCORPORATED
(Registrant)
/s/ Vincent J. Coates
-----------------------------
Vincent J. Coates
Chairman of the Board
/s/ John Heaton
-----------------------------
John Heaton
Chief Executive Officer
/s/ Paul B. Nolan
-----------------------------
Paul B. Nolan
Chief Financial Officer
Dated: November 2, 2001
12