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Nanometrics Reports Fourth Quarter And Full Year 2012 Financial Results

Full Year 2012 Summary

Revenues were $182.9 million, down 21% from a record $230.1 million in 2011. Gross margin declined to 45.9% from 53.1%, and operating income was $5.5 million compared to $45.8 million in 2011. Net income was $4.5 million or $0.19 per share, compared to $28.7 million or $1.22 per diluted share in 2011. 

On a non-GAAP basis, gross margin declined to 47.3% from 53.5%, and operating income was $8.8 million compared to $51.9 million in 2011. Non-GAAP net income was $5.3 million or $0.22 per diluted share, compared to $32.7 million or $1.39 per diluted share in 2011.

Balance Sheet Strength

At December 29, 2012, Nanometrics had $109.9 million in cash, cash equivalents and marketable securities and $159.4 million in working capital.  Stockholders' equity, excluding intangible assets, was $194.2 million, or $8.35 per share based on 23.3 million shares outstanding at year end.

Business Outlook

Management forecasts continued declines in spending by its largest customers in the first quarter of 2013, with total revenues expected to be in the range of $24 to $28 million.  Management expects GAAP gross margin in the range of 34% to 41%, non-GAAP gross margin in the range of 35% to 42%, and operating expenses to increase between $2.0 and $3.1 million from the fourth quarter.  The expected increase in operating expenses is primarily due to incremental R&D and applications investments in support of customer engagements at leading edge device nodes. Management expects the first quarter GAAP net loss to be in the range of $0.27 to $0.35 per share and the non-GAAP net loss to be in the range of $0.25 to $0.33 per share.

Conference Call Details

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

Use of Non-GAAP Financial Information

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

About Nanometrics

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

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

Forward Looking Statements

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

NANOMETRICS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(Unaudited)
     
   As of Dec 29,  As of Dec 31, 
  2012 2011
     
ASSETS    
Current assets:  
Cash and cash equivalents   $ 62,915  $ 97,699
Marketable securities  46,993  -- 
Accounts receivable, net of allowances of $82 and $117, respectively  21,388  29,289
Inventories   39,659  52,260
Inventories-delivered systems   2,274  1,637
Prepaid expenses and other   7,492  8,119
Deferred income tax assets   8,593  12,406
Total current assets   189,314  201,410
     
Property, plant and equipment, net   43,213  35,521
Goodwill  11,352  11,990
Intangible assets, net   10,980  14,394
Deferred income tax assets, non-current   3,671  2,864
Other assets   924  1,042
Total assets   $ 259,454  $ 267,221
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current liabilities:  
Accounts payable   $ 6,398  $ 7,975
Accrued payroll and related expenses   5,897  8,837
Deferred revenue   8,485  5,788
Other current liabilities   7,822  16,709
Income taxes payable   424  707
Current portion of debt obligations   928  765
Total current liabilities   29,954  40,781
     
Deferred revenue, non-current   4,307  4,547
Income taxes payable, non-current  2,135  2,401
Other non-current liabilities   2,140  2,813
Debt obligations, net of current portion   4,374  6,687
Total liabilities   42,910  57,229
     
Stockholders' equity:  
Common stock, $0.001 par value, 47,000,000 shares authorized; 23,250,429 and 23,182,771, respectively, issued and outstanding   23  23
Additional paid-in capital   239,099  236,735
Accumulated deficit   (23,850)  (28,315)
Accumulated other comprehensive income  1,272  1,549
Total stockholders' equity   216,544  209,992
Total liabilities and stockholders' equity   $ 259,454  $ 267,221
     
NANOMETRICS INCORPORATED
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
         
  Three Months Ended Twelve Months Ended
  Dec 29, Dec 31, Dec 29, Dec 31,
  2012 2011 2012 2011
         
Net revenues:      
Products   $ 22,099  $ 36,725  $ 143,827  $ 194,774
Service   8,171  8,552  39,054  35,287
Total net revenues   30,270  45,277  182,881  230,061
         
Costs of net revenues:    
Cost of products   12,654  19,717  75,878  88,579
Cost of service   5,019  4,440  20,526  18,304
Amortization of intangible assets  646  410  2,549  1,077
Total costs of net revenues   18,319  24,567  98,953  107,960
Gross profit   11,951  20,710  83,928  122,101
         
Operating expenses:    
Research and development   7,289  5,978  29,585  23,290
Selling   5,897  6,461  26,457  27,019
General and administrative   5,107  6,143  21,632  22,901
Amortization of intangible assets   196  156  776  625
Legal settlement  --   2,500  --   2,500
Total operating expenses  18,489  21,238  78,450  76,335
Income (loss) from operations   (6,538)  (528)  5,478  45,766
         
Other income (expense):    
Interest income   20  49  133  220
Interest expense   (245)  (326)  (1,040)  (1,336)
Other, net   393  83  48  (66)
Total other income (expense), net   168  (194)  (859)  (1,182)
         
Income (loss) before income taxes   (6,370)  (722)  4,619  44,584
Provision (benefit) for income taxes   (2,723)  (190)  154  15,899
Net income (loss)  $ (3,647)  $ (532)  $ 4,465  $ 28,685
         
Net income (loss) per share:    
Basic   $ (0.16)  $ (0.02)  $ 0.19  $ 1.26
Diluted   $ (0.16)  $ (0.02)  $ 0.19  $ 1.22
         
Shares used in per share calculation:  
Basic   23,408  23,074  23,358  22,743
Diluted   23,408  23,074  23,845  23,480
 
NANOMETRICS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 (Unaudited)
     
     
  Twelve Months Ended
  Dec 29, Dec 31,
  2012 2011
Cash flows from operating activities:    
Net income  $ 4,465  $ 28,685
Reconciliation of net income to net cash provided by operating activities:    
Depreciation and amortization 9,811 6,488
Stock-based compensation 5,890 4,473
Excess tax benefit from equity awards (910) (3,915)
Loss on disposal of fixed assets 303  113
Inventory write down 1,845 1,916
Deferred taxes 2,752 3,770
Change in the fair value of contingent payments to Zygo Corporation 327 413
Changes in assets and liabilities:    
Accounts receivable 7,733 16,172
Inventories 1,383 (12,169)
Inventories-delivered systems (758) 446
Prepaid expenses and other 1,114 (4,747)
Accounts payable, accrued and other liabilities (13,538) 4,241
Deferred revenue 2,472 3,088
Income taxes payable 346 5,054
Net cash provided by operations 23,235 54,028
     
Cash flows from investing activities:    
Purchase of Nanda's net assets, net of cash received  --  (23,912)
Escrow payment received related to acquisition of Nanda  508  -- 
Sales of marketable securities  3,000  -- 
Maturities of marketable securities  8,336  -- 
Purchases of marketable securities  (58,647)  -- 
Purchase of property, plant and equipment  (4,990) (2,755)
Net cash used in investing activities (51,793) (26,667)
     
Cash flows from financing activities:    
Payments to Zygo Corporation related to acquisition  (300) (432)
Repayments of debt obligations  (2,211) (2,571)
Proceeds from sale of shares under the employee stock option and purchase plans  4,686 7,186
Excess tax benefit from equity awards  910 3,915
Taxes paid on net issuance of stock awards  (617) (126)
Repurchase of common stock  (8,504) (4,257)
Net cash provided by (used in) financing activities (6,036) 3,715
Effect of exchange rate changes on cash and cash equivalents (190) 163
Net increase (decrease) in cash and cash equivalents (34,784) 31,239
Cash and cash equivalents, beginning of period 97,699 66,460
Cash and cash equivalents, end of period  $ 62,915  $ 97,699
 
NANOMETRICS INCORPORATED
RECONCILIATION OF GAAP TO NON-GAAP RESULTS 
(In thousands, except per share amounts)
(Unaudited)
           
  Three Months Ended Twelve Months Ended
  Dec 29, Sep 29, Dec 31, Dec 29, Dec 31,
  2012 2012 2011 2012 2011
Reconciliation of GAAP gross profit to non-GAAP gross profit
GAAP gross profit  $ 11,951  $ 22,152  $ 20,710  $ 83,928  $ 122,101
Non-GAAP adjustments:          
 Amortization of intangible assets   646  629  410  2,549  1,077
 Non-GAAP gross profit   $ 12,597  $ 22,781  $ 21,120  $ 86,477  $ 123,178
           
Reconciliation of GAAP operating income (loss) to non-GAAP operating income (loss)
GAAP operating income (loss)  $ (6,538)  $ 3,614  $ (528)  $ 5,478  $ 45,766
Non-GAAP adjustments          
 Amortization of intangible assets included in cost of revenues   646  629  410  2,549  1,077
 Amortization of intangible assets included in operating expenses   196  193  156  776  625
 Acquisition-related charges   --   --   1,277  --   1,959
 Legal settlement   --   --   2,500  --   2,500
 Total non-GAAP adjustments to operating income   842  822  4,343  3,325  6,161
 Non-GAAP operating income (loss)   $ (5,696)  $ 4,436  $ 3,815  $ 8,803  $ 51,927
           
Reconciliation of GAAP net income (loss) to non-GAAP net income (loss)
GAAP net income (loss)  $ (3,647)  $ 1,903  $ (532)  $ 4,465  $ 28,685
Non-GAAP adjustments:          
 Total non-GAAP adjustments to non-GAAP operating income   842  822  4,343  3,325  6,161
 Income tax effect of non-GAAP adjustments   (307)  (300)  (1,496)  (1,214)  (2,151)
 Discrete tax adjustment   --   --   --   (1,300) (a)  -- 
 Non-GAAP net income (loss)   $ (3,112)  $ 2,425  $ 2,315  $ 5,276  $ 32,695
           
GAAP net income (loss) per diluted share  $ (0.16)  $ 0.08  $ (0.02)  $ 0.19  $ 1.22
           
Non-GAAP net income (loss) per diluted share  $ (0.13)  $ 0.10  $ 0.10  $ 0.22  $ 1.39
           
Shares used in diluted income per share calculation  23,408  23,760  23,687  23,845  23,480
           
           
(a) Reflects the tax benefit for certain first quarter foreign losses related to entity classification elections that were approved by the IRS in the second quarter. The tax benefit of these first quarter losses was recorded as a decrease to the second quarter tax provision on a GAAP basis. The discrete tax adjustment for the second quarter also excludes the one-time benefit associated with the recognition of deferred tax assets related to the entity classification elections, resulting in a combined first and second quarter Non-GAAP tax rate of approximately 36.5%.
           
CONTACT:  Investor Relations Contact:
          Claire McAdams
          Headgate Partners LLC
          530.265.9899, 530.265.9699 fax
          email: claire@headgatepartners.com

          Company Contact:
          Ronald Kisling, CFO
          Nanometrics Incorporated
          408.545.6143, 408.521.9490 fax
          email: rkisling@nanometrics.com

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