-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WHI7UJEJKU+JO9co3YjSY5uF3puZHaT0LC37bNIwPJvXI+Y15oiemvehD3QWn5md TU6RWVeieXYoaQb39CMupQ== 0001012870-98-002037.txt : 19980812 0001012870-98-002037.hdr.sgml : 19980812 ACCESSION NUMBER: 0001012870-98-002037 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980811 SROS: NASD 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: SEC FILE NUMBER: 000-13470 FILM NUMBER: 98681718 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 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 June 30, 1998 -------------- [_] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _______________ to _______________ Commission file number 0-13470 ---------------- NANOMETRICS INCORPORATED ------------------------------------------------------ (Exact name of registrant as specified in its charter) California 94-2276314 ------------------------------- ------------------- (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) 310 DeGuigne Drive, Sunnyvale, CA 94086 ------------------------------------- -------------- (Address of principal executive offices) (Zip Code) (Registrant's telephone number, including area code) (408)746-1600 ------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [_] At July 14, 1998 there were 8,663,998 shares of common stock, no par value, issued and outstanding. 1 NANOMETRICS INCORPORATED INDEX Page ---- Part I. Financial Information Item 1. Financial Statements Consolidated Balance Sheets - June 30, 1998 and December 31, 1997................3 Consolidated Statements of Income - Three months and six months ended June 30, 1998 and 1997.............................4 Consolidated Statements of Cash Flows - Six months ended June 30, 1998 and 1997...........................................5 Notes to Consolidated Financial Statements.........................................6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations......8 Part II. Other Information Item 4. Submission of Matters to a Vote of Security Holders............................................10 Item 6. Exhibits and Reports on Form 8-K...................10 Signatures.......................................................11 2 PART I: FINANCIAL INFORMATION ITEM 1: FINANCIAL STATEMENTS NANOMETRICS INCORPORATED CONSOLIDATED BALANCE SHEETS (AMOUNTS IN THOUSANDS EXCEPT SHARE AMOUNTS) June 30, December 31, 1998 1997 ASSETS (Unaudited) ----------- ------------ CURRENT ASSETS: Cash and equivalents $ 933 $ 3,656 Short-term investments 9,872 9,595 Accounts receivable, less allowance for doubtful accounts of $410 and $413 11,379 10,225 Inventories 10,746 7,138 Prepaid and deferred income taxes 2,115 2,094 Prepaid expenses and other 760 1,075 ------- ------- Total current assets 35,805 33,783 PROPERTY, PLANT AND EQUIPMENT, NET 2,112 2,187 OTHER ASSETS 1,098 273 ------- ------- TOTAL $39,015 $36,243 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 2,062 $ 1,889 Accrued payroll and related expenses 618 596 Other current liabilities 2,447 1,493 Income taxes payable 359 565 Current portion of long-term debt 600 604 ------- ------- Total current liabilities 6,086 5,147 LONG-TERM DEBT 2,185 2,568 ------- ------- Total liabilities 8,271 7,715 ------- ------- SHAREHOLDERS' EQUITY: Common stock, no par value; 25,000,000 shares authorized; 8,663,998 and 8,521,484 outstanding 13,726 13,151 Retained earnings 17,913 16,144 Accumulated translation adjustment (895) (767) ------- ------- Total shareholders' equity 30,744 28,528 ------- ------- TOTAL $39,015 $36,243 ======= ======= See Notes to Consolidated Financial Statements 3 NANOMETRICS INCORPORATED CONSOLIDATED STATEMENTS OF INCOME (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, 1998 1997 1998 1997 -------- -------- ------- ------- NET REVENUES: Product sales $ 9,705 $7,741 $19,323 $15,042 Service 1,023 958 1,943 1,916 ------- ------ ------- ------- Total net revenues 10,728 8,699 21,266 16,958 ------- ------ ------- ------- COSTS AND EXPENSES: Cost of product sales 3,998 2,902 7,627 5,639 Cost of service 967 874 1,952 1,737 Research and development 1,063 665 2,294 1,339 Acquired in-process research and development - - 2,036 - Selling 1,529 1,626 3,101 2,889 General and administrative 694 613 1,479 1,249 ------- ------ ------- ------- Total costs and expenses 8,251 6,680 18,489 12,853 ------- ------ ------- ------- OPERATING INCOME 2,477 2,019 2,777 4,105 OTHER INCOME (EXPENSE): Interest income 156 126 317 241 Interest expense (20) (24) (46) (49) Other, net (139) 5 (148) (6) ------- ------ ------- ------- Total other income (expense), net (3) 107 123 186 ------- ------ ------- ------- INCOME BEFORE PROVISION FOR INCOME TAXES 2,474 2,126 2,900 4,291 PROVISION FOR INCOME TAXES 960 753 1,131 1,644 ------- ------ ------- ------- NET INCOME $ 1,514 $1,373 $ 1,769 $ 2,647 ======= ====== ======= ======= NET INCOME PER SHARE: Basic $ .18 $ .17 $ .21 $ .32 ======= ====== ======= ======= Diluted $ .17 $ .16 $ .20 $ .31 ======= ====== ======= ======= SHARES USED IN PER SHARE COMPUTATION: Basic 8,641 8,282 8,593 8,282 ======= ====== ======= ======= Diluted 9,003 8,665 8,991 8,669 ======= ====== ======= =======
See Notes to Consolidated Financial Statements 4 NANOMETRICS INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) (UNAUDITED)
Six Months Ended June 30, 1998 1997 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,769 $ 2,646 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 100 148 Purchase of in-process technology 2,036 - Deferred taxes (902) (58) Changes in assets and liabilities: Accounts receivable (3,038) 2,227 Other receivables (3) (135) Inventories (2,081) (1,208) Prepaid expenses and other 255 (354) Accounts payable and other liabilities 265 506 Income taxes payable (101) (1,272) -------- -------- Net cash provided by (used in) operating activities (1,700) 2,500 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of short-term investments (11,126) (12,590) Sales/maturities of short-term investments 10,849 10,608 Capital expenditures (123) (81) Product line acquisition (3,038) - -------- -------- Net cash used in investing activities (3,438) (2,063) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayments of long-term debt (204) (167) Issuance of common stock 575 157 -------- -------- Net cash provided by financing activities 371 (10) -------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH 2,044 611 -------- -------- NET CHANGE IN CASH AND EQUIVALENTS (2,723) 1,038 CASH AND EQUIVALENTS, beginning of period 3,656 1,725 -------- -------- CASH AND EQUIVALENTS, end of period $ 933 $ 2,763 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest $ 49 $ 49 ======== ======== Cash paid for income taxes $ 2,122 $ 3,679 ======== ========
See Notes to Consolidated Financial Statements 5 NANOMETRICS INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1. Consolidated Financial Statements The consolidated financial statements include the accounts of Nanometrics Incorporated and its wholly owned subsidiaries. All significant inter-company accounts and transactions have been eliminated. While the quarterly financial information is unaudited, the financial statements included in this report reflect all adjustments (consisting only of normal recurring adjustments) which the Company considers necessary for a fair presentation of the results of operations for the interim periods covered and of the financial condition of the Company at the date of the interim balance sheet. The operating results for interim periods are not necessarily indicative of the operating results that may be expected for the entire year. The information included in this report should be read in conjunction with the information included in the Company's 1997 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): June 30, December 31, 1998 1997 -------- ------------ Raw materials and subassemblies $ 6,667 $2,934 Work in process 2,428 1,528 Finished goods 1,651 2,676 ------- ------ $10,746 $7,138 ======= ====== Note 3. Product Line Acquisition On March 30, 1998 the Company entered into an agreement with Optical Specialties, Inc. ("OSI") to purchase a metrology system product line and related assets used to measure the critical dimensions and overlay registration errors observed in submicron lithography. Under the agreement, the Company paid approximately $3.2 million in cash for the assets and in-process technology. The purchase price was allocated on the basis of the estimated fair value of the assets acquired and liabilities assumed as follows (in thousands): Fair value of tangible assets acquired $1,923 In-process research and development 2,036 Liabilities assumed (734) ------ Purchase consideration $3,225 ====== In addition, during the three months ended March 31, 1998, the Company hired certain former employees of OSI and incurred approximately $350,000 in related, non-recurring hiring expenses (such expenses are classified in the statement of income according to the employees' function). Note 4. Other Current Liabilities Other current liabilities consist of the following (in thousands): June 30, 1998 December 31, 1997 ------------- ----------------- Commissions payable $ 528 $ 564 Accrued warranty 1,026 479 Other 893 450 ------- ------- $2,447 $1,493 ======= ======= 6 Note 5. Net Income 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 Six Months Ended June 30 June 30 1998 1997 1998 1997 ------ ------ ------ ------ Weighted average common shares outstanding-shares used in basic net income per share computation 8,641 8,282 8,593 8,282 Dilutive effect of common stock equivalents, using the treasury stock method 362 383 398 387 ------- ------- ------- ------- Shares used in dilutive net income per share computation 9,003 8,665 8,991 8,669 ======= ======= ======= =======
During the three and six month periods ended June 30, 1998 and 1997, the Company 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 June 30, 1998, 380,500 such common stock options with a weighted average exercise price of $10.20 per share were excluded from the diluted net income per share computations. Note 6. Comprehensive Income In the first quarter of 1998, the Company adopted Statement of Financial Accounting Standard No. 130, "Reporting Comprehensive Income," which requires an enterprise to report the change in net assets during the period from nonowner sources ("comprehensive income") . For the three months ended June 30, 1998 and 1997, comprehensive income, which consisted of net income for the periods and changes in accumulated translation adjustments, was $1,420,000 and $1,584,000, respectively. For the six months ended June 30, 1998 and 1997, comprehensive income was $1,641,000 and $2,678,000, respectively. Note 7. Recently Issued Accounting Standard In June 1997, the Financial Accounting Standards Board issued SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information," which establishes annual and interim reporting standards for an enterprise's business segments and related disclosures about its products, services, geographic areas and major customers. This statement is effective for fiscal year 1998 and adoption will not affect the Company's financial position, results of operations or cashflows. Note 8. New Accounting Pronouncements In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which defines derivatives, requires that all derivatives be carried at fair value, and provides for hedging accounting when certain conditions are met. This statement is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. Although the Company has not fully assessed the implications of this new statement, the Company does not believe adoption of this statement will have a material impact on the Company's financial position or results of operations. 7 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 June 30, 1998 were $10,728,000, an increase of $2,029,000 or 23% from the comparable period in 1997. For the six months ended June 30, 1998, total revenues of $21,266,000 increased by $4,308,000 or 25% from the comparable period in 1997. Product sales of $9,705,000 and $19,323,000 for the three months and six months ended June 30, 1998, respectively, increased $1,964,000 or 25% and $4,281,000 or 28%, respectively, as compared with the same periods during 1997. The increases in product sales resulted from stronger demand for, and increased shipments of, the Company's products, especially its automated products, particularly from customers in the Far East and Europe. In addition, sales of the recently acquired Metra product contributed $1,400,000 to revenues in the second quarter of 1998. Service revenue of $1,023,000 and $1,943,000 for the three months and six months ended June 30, 1998, respectively, increased $65,000 or 7% and $27,000 or 1%, respectively, as compared to the same periods in 1997. These increases in service revenue are primarily attributable to higher sales of accessories in the U.S. Cost of product sales as a percentage of product sales increased to 41% in the second quarter of 1998 from 37% in the second quarter of 1997 and increased to 39% in the six months ended June 30, 1998 from 37% for the same period in 1997 primarily because of Metra sales which had a lower gross margin than the Company's other products and underabsorbed manufacturing costs related to the start up of production on the Metra product line. Cost of service as a percentage of service revenue increased to 95% in the second quarter of 1998 from 91% in the second quarter of 1997 and increased to 100% in the six months ended June 30, 1998 from 91% for the same period in 1997 as a result of the increased cost of additional headcount associated with servicing the Company's new Metra product line. Research and development expenses for the three month and six month periods ended June 30, 1998 increased $398,000 or 60% and $955,000 or 71% respectively, compared to the same periods in 1997 due primarily to the increased cost of additional headcount associated with research and development for the Company's new Metra product line. In the first quarter of 1998, the Company paid approximately $3.2 million for the assets and in-process technology related to OSI's Metra product line. Of this purchase price, $2,036,000 related to the value of in-process technology that had no alternative future use and was charged to expense in the accompanying statement of income for the six months ended June 30, 1998. Selling expenses in the second quarter of 1998 decreased by $97,000 or 6% compared to the second quarter of 1997 when the mix of products sold included more sales by outside sales representatives which resulted in higher commissions. Selling expenses for the six months ended June 30, 1998 increased $212,000 or 7% compared to the same period in 1997 primarily because of the increased cost of additional headcount associated with the sales and marketing of the Company's new Metra product line. General and administrative expenses for the three month and six month periods ended June 30, 1998 increased by $81,000 or 13% and $230,000 or 18%, respectively, compared to the same periods in 1997 primarily as a result of spending associated with the increased level of operations. Other income (expense), net for the three month and six month periods ended June 30, 1998 decreased $110,000 or 103% and $63,000 or 34% respectively, from the comparable periods in 1997 due primarily to royalty costs and exchange rate losses. 8 The Company reported an operating income of $2,477,000 and net income of $1,514,000 for the second quarter of 1998 compared to an operating income of $2,019,000 and net income of $1,373,000 for the same period in 1997. For the first six months of 1998, the Company reported an operating income of $2,777,000 and net income of $1,769,000 which compared to an operating income of $4,105,000 and net income of $2,647,000 for the same period in 1997. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- At June 30, 1998, the Company had working capital of $29,719,000 compared to $28,636,000 at December 31, 1997. The current ratio at June 30, 1998 was 5.9 to 1. The Company believes working capital including cash and short-term investments of $10,805,000 will be sufficient to meet its needs at least through the next twelve months. Operating activities for the first six months of 1998 used cash of $1,700,000 primarily from increased accounts receivable and inventory which were offset to some extent by net income adjusted for the in- process technology purchase of the Metra product line, while the net purchases of short-term investments used $277,000, capital expenditures used $123,000, purchase of the Metra product line used $3,038,000, debt repayment used $204,000 and issuance of common stock provided $575,000. The foregoing Management Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These statements involve risks and uncertainties and actual results could differ materially as a result of a number of factors including demand for the company's products, which is affected by factors including the cyclicality of the semiconductor, magnetic recording head and flat panel display industries served by the Company, patterns of capital spending by customers, technological changes in the markets served by the Company and its customers, market acceptance of products of both the Company and its customers, the timing, cancellation of delay of customer orders and shipments, competition, including competitive pressure on product prices and changes in pricing by the Company's customers or suppliers, fluctuation in foreign currency exchange rates particularly the Japanese yen, the proportion of direct sales versus sales through distributors and representatives, market acceptance of new and enhanced versions of the Company's products, the timing of new product announcements and releases of products by the Company or its competitors, including the Company's ability to design, introduce and manufacture new products on a timely and cost effective basis, the size and timing acquisitions of business, products or technologies and fluctuations in the availability and cost of components and subassemblies and the factors set forth under "Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Factors" in the 1997 Annual Report. on form 10-K. The Company 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. 9 NANOMETRICS INCORPORATED PART II OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS A. The annual meeting of shareholders was held on June 18, 1998. B. The following directors were elected to the board of directors: Vincent J. Coates Nathaniel Brenner Norman V. Coates John D. Heaton Clifford F. Smedley Kanegi Nagai C. The following matters were voted upon at the annual meeting: For Against Abstain --------- --------- ------- 1. To elect the following directors to serve for the ensuing year: Vincent J. Coates, Chairman 7,318,208 0 3,500 Nathaniel Brenner, Director 7,320,208 0 1,500 Norman V. Coates, Director 7,305,008 0 16,700 John D. Heaton, Director 7,318,167 0 3,541 Clifford F. Smedley, Director 7,320,208 0 1,500 Kanegi Nagai, Director 7,320,208 0 1,500 2. To ratify the appointment of Deloitte & Touche LLP as independent auditors for the fiscal year ending December 31, 1998. 7,319,438 0 2,270 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K A. Exhibits Ex. 27 - Financial Data Schedule B. Reports on Form 8-K. None. 10 NANOMETRICS INCORPORATED SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NANOMETRICS INCORPORATED (Registrant) /s/ Vincent J. Coates - --------------------- Vincent J. Coates Chairman of the Board /s/ John Heaton - --------------- John Heaton Chief Executive Officer /s/ Paul B. Nolan - ----------------- Paul B. Nolan Chief Financial Officer Dated: August 11, 1998 11 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 933 9,872 11,789 410 10,746 35,805 5,115 3,003 39,015 6,086 2,185 0 0 13,726 17,018 39,015 19,323 21,266 7,627 9,579 8,910 0 46 2,900 1,131 1,769 0 0 0 1,769 .21 .20
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