February 4, 2014

Nanometrics Reports Fourth Quarter and Full Year 2013 Financial Results

MILPITAS, Calif., Feb. 4, 2014 (GLOBE NEWSWIRE) -- Nanometrics Incorporated (Nasdaq:NANO), a leading provider of advanced process control metrology and inspection systems, today announced financial results for its fourth quarter and full year ended December 28, 2013.

Highlights and Tailwinds Exiting 2013

  • Substantial increase in foundry penetration, supported by adoption of multiple Atlas®, UniFire® and IMPULSE® systems by multiple pure-play foundry customers
  • Significant new optical critical dimension (OCD) account penetrations for FinFET process control, expanding from one to three key logic device manufacturers
  • Atlas OCD selected by three leading 3D memory (V-NAND) manufacturers, one of which also selected the IMPULSE integrated metrology platform for V-NAND thin film measurement
  • Incremental customer adoption of the company's advanced 3D packaging solutions, expanding penetration to seven accounts for the UniFire system and two accounts for the SPARK™ platform
  • Strong rebound in business levels through the year, with sequential quarterly revenue growth averaging 24% from the first quarter through the fourth quarter
 
GAAP Results
  Q4 2013 Q3 2013 Q4 2012 FY 2013 FY 2012
Revenues  $ 46,159  $ 39,044  $ 30,270  $ 144,307  $ 182,881
Gross Profit  $ 21,909  $ 15,801  $ 11,951  $ 62,676  $ 83,928
Income (Loss) from Operations  $ 1,292  $ (7,242)  $ (6,538)  $ (21,709)  $ 5,478
Net Income (Loss)  $ 556  $ (4,554)  $ (3,647)  $ (14,146)  $ 4,465
Earnings (Loss) per Diluted Share  $ 0.02  $ (0.20)  $ (0.16)  $ (0.61)  $ 0.19
           
 
Non-GAAP Results
  Q4 2013 Q3 2013 Q4 2012 FY 2013 FY 2012
Gross Profit  $ 22,579  $ 18,898  $ 12,597  $ 67,748  $ 86,477
Income (Loss) from Operations  $ 2,075  $ (2,210)  $ (5,696)  $ (14,196)  $ 8,803
Net Income (Loss)  $ 1,022  $ (1,307)  $ (3,112)  $ (9,339)  $ 5,276
Earnings (Loss) per Diluted Share  $ 0.04  $ (0.06)  $ (0.13)  $ (0.40)  $ 0.22

A reconciliation between GAAP operating results and non-GAAP operating results is provided following the financial statements that are part of this release and on the investor page of our website. Non-GAAP results for all periods presented exclude the impact of amortization of acquired intangible assets and certain discrete tax items.

Commenting on the company's results, president and chief executive officer Dr. Timothy J. Stultz said, "2013 was a year of tremendous progress and achievement toward our key initiatives, with significant new account penetrations in FinFET, 3D NAND, advanced 3D packaging, and pure-play foundry. As expected, we saw continued strong revenue growth in the fourth quarter, and we expect the momentum to continue into 2014 as the benefit of a number of new tool selections and customer wins play out. This is expected to be a strong year for the industry as a whole, and for Nanometrics in particular we believe we can outperform the industry due to a greater contribution from the key semiconductor capex spenders, a broad product portfolio of industry-leading technologies, and a larger global footprint than we have had at any time in our history. With these tailwinds in place, we look forward to delivering a strong growth year in 2014."

Fourth Quarter 2013 Summary

Revenues for the fourth quarter of 2013 were $46.2 million, up 18% from $39.0 million in the third quarter of 2013 and up 52% from $30.3 million in the fourth quarter of 2012.  On a GAAP basis, gross margin was 47.5%, compared to 40.5% in the prior quarter and 39.5% in the year-ago period. Operating income was $1.3 million, compared to an operating loss of $7.2 million in the prior quarter and an operating loss of $6.5 million in the year-ago period. Net income was $0.6 million or $0.02 per diluted share, compared to a net loss of $4.6 million or $0.20 per share in the prior quarter and a net loss of $3.6 million or $0.16 per share in the fourth quarter of 2012.

On a non-GAAP basis, which excludes amortization of acquired intangible assets, gross margin was 48.9% compared to 48.4% in the prior quarter and 41.6% in the year-ago period. Non-GAAP gross margin in the third quarter of 2013 also excludes a $2.4 million inventory write-off recorded for the discontinued Mosaic™ product line. Non-GAAP operating income for the fourth quarter was $2.1 million, compared to an operating loss of $2.2 million in the prior quarter and an operating loss of $5.7 million in the fourth quarter of 2012. Non-GAAP operating income in the third quarter of 2013 excludes the amortization and inventory charges above, as well as a $1.7 million restructuring charge related to the consolidation of operations and facilities for the SPARK™ product line. Non-GAAP net income, which also adjusts for the income tax effect of non-GAAP adjustments, was $1.0 million or $0.04 per diluted share, compared to a net loss of $1.3 million or $0.06 per share in the prior quarter and a net loss of $3.1 million or $0.13 per share in the fourth quarter of 2012.

Full Year 2013 Summary

Revenues were $144.3 million, down 21% from $182.9 million in 2012. On a GAAP basis, gross margin was 43.4%, compared to 45.9% in 2012, and the operating loss was $21.7 million, compared to operating income of $5.5 million in 2012. The net loss was $14.1 million or $0.61 per share, compared to net income of $4.5 million or $0.19 per diluted share in 2012.

On a non-GAAP basis, which excludes amortization of acquired intangible assets and the impact of a $2.4 million inventory write-off recorded in 2013 for the discontinued Mosaic product line, gross margin was 46.9% compared to 47.3% in 2012. The non-GAAP operating loss for 2013 also excludes a $1.7 million restructuring charge related to the consolidation of operations and facilities for the SPARK product line and was $14.2 million, compared to operating income of $8.8 million in 2012. The non-GAAP net loss, which also adjusts for the income tax effect of non-GAAP adjustments, was $9.3 million or $0.40 per share, compared to net income of $5.3 million or $0.22 per diluted share in 2012.

Balance Sheet Strength

At December 28, 2013, Nanometrics had $92.9 million in cash, cash equivalents and marketable securities and $141.8 million in working capital.  Stockholders' equity, excluding intangible assets, was $187.8 million, or $7.98 per share based on 23.5 million shares outstanding at year-end.

Business Outlook

Management expects total revenues for the first quarter of 2014 to be in the range of $48 to $54 million, with GAAP gross margin in the range of 47% to 49% and non-GAAP gross margin in the range of 48% to 50%. Due to the shift in timing of certain R&D program spending from the fourth quarter into the first quarter, as well as a normal seasonal increase in payroll and other expenses, management expects first quarter operating expenses to increase between $1.4 and $2.0 million from the fourth quarter, with GAAP earnings to range from ($0.01) to $0.11 per share and non-GAAP earnings to range from $0.01 to $0.13 per share.

Conference Call Details

A conference call to discuss fourth quarter and fiscal year 2013 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 and supplemental financial information 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, gross margin, 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 including certain excess and obsolete inventory charges related to a discontinued product line, 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. Non-GAAP financial measures for the third quarter of fiscal 2013 exclude a $1.7 million restructuring charge related to the consolidation of operations and facilities for the SPARK™ product line and $2.4 million of inventory write-downs recorded in connection with the final discontinuation of the Mosaic product line. Prior period non-GAAP financial measures do not exclude excess inventory reserves recorded for the Mosaic product line in the ordinary course of business.  Excess inventory reserve charges recorded for the Mosaic product line in the second quarter of 2013 were $470,000 and none were recorded in the prior year period. 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 and other solid-state devices, such as data storage components and discretes including high-brightness LEDs and power management components. Nanometrics' automated and integrated metrology systems measure critical dimensions, device structures, overlay registration, topography and various thin film properties, including film thickness as well as optical, electrical and material properties. 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 advanced process control for device manufacturers, providing improved device yield at reduced manufacturing cycle time, supporting the accelerated product life cycles in the semiconductor market. 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.

Forward Looking Statements

The statements in this press release under the caption "Business Outlook," and in Dr. Stultz's quote regarding the company's expectations as to revenue, performance and financial results, are forward-looking statements. 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 timing of product acceptance, economic conditions, levels of industry spending, shifts in the timing of customer orders and product shipments, market adoption rates, changes in product mix, and changes in 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 29, 2012, as filed with the Securities and Exchange Commission on March 12, 2013, including under the caption "Risk Factors," 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)
     
   December 28,   December 29, 
     
  2013 2012
     
ASSETS    
Current assets:    
Cash and cash equivalents   $ 44,765  $ 62,915
Marketable securities  48,097  46,993
Accounts receivable, net of allowances of $293 and $82, respectively  31,436  21,388
Inventories   34,520  39,659
Inventories-delivered systems   6,901  2,274
Prepaid expenses and other   10,519  7,492
Deferred income tax assets   14,516  8,593
     
Total current assets   190,754  189,314
     
Property, plant and equipment, net   47,439  43,213
Goodwill  11,743  11,352
Intangible assets, net   7,864  10,980
Deferred income tax assets  4,338  3,671
Other assets   696  924
     
Total assets   $ 262,834  $ 259,454
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current liabilities:    
Accounts payable   $ 10,661  $ 6,398
Accrued payroll and related expenses   7,853  6,670
Deferred revenue   21,749  8,485
Other current liabilities   7,936  7,822
Income taxes payable   758  424
Current portion of debt obligations   --   928
     
Total current liabilities   48,957  30,727
     
Deferred revenue  3,718  4,307
Income taxes payable  1,171  2,135
Other long-term liabilities   1,615  2,140
Debt obligations  --   4,374
     
Total liabilities   55,461  43,683
     
Stockholders' equity:    
Common stock, $0.001 par value, 47,000,000 shares authorized; 23,537,275 and 23,250,429, respectively, issued and outstanding   24  23
Additional paid-in capital   244,733  238,326
Accumulated deficit   (37,996)  (23,850)
Accumulated other comprehensive income  612  1,272
     
Total stockholders' equity   207,373  215,771
     
Total liabilities and stockholders' equity   $ 262,834  $ 259,454
     
NANOMETRICS INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)
(Unaudited)
         
  Three Months Ended Twelve Months Ended
  December 28, December 29, December 28, December 29,
  2013 2012 2013 2012
         
Net revenues:        
Products   $ 37,626  $ 22,099  $ 107,402  $ 143,827
Service   8,533  8,171  36,905  39,054
Total net revenues   46,159  30,270  144,307  182,881
         
Costs of net revenues:        
Cost of products   18,601  12,654  59,509  75,878
Cost of service   4,979  5,019  19,489  20,526
Amortization of intangible assets  670  646  2,633  2,549
Total costs of net revenues   24,250  18,319  81,631  98,953
Gross profit   21,909  11,951  62,676  83,928
         
Operating expenses:        
Research and development   8,019  7,289  32,714  29,585
Selling   6,826  5,897  27,129  26,457
General and administrative   5,659  5,107  22,101  21,632
Amortization of intangible assets   113  196  701  776
Restructuring  --   --   1,740  -- 
Total operating expenses  20,617  18,489  84,385  78,450
Income (loss) from operations   1,292  (6,538)  (21,709)  5,478
         
Other income (expense):        
Interest income   11  20  62  133
Interest expense   (102)  (245)  (651)  (1,040)
Other expense, net   (337)  393  (1,267)  48
Total other expense, net   (428)  168  (1,856)  (859)
         
Income (loss) before income taxes   864  (6,370)  (23,565)  4,619
Provision for (benefit from) income taxes   308  (2,723)  (9,419)  154
Net income (loss)  $ 556  $ (3,647)  $ (14,146)  $ 4,465
         
Net income (loss) per share:        
Basic   $ 0.02  $ (0.16)  $ (0.61)  $ 0.19
Diluted   $ 0.02  $ (0.16)  $ (0.61)  $ 0.19
         
Shares used in per share calculation:        
Basic   23,420  23,408  23,290  23,358
Diluted   23,913  23,408  23,290  23,845
         
NANOMETRICS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
     
  Twelve Months Ended
  December 28, December 29,
  2013 2012
Cash flows from operating activities:    
Net income (loss)  $ (14,146)  $ 4,465
Reconciliation of net income (loss) to net cash provided by (used in) operating activities:    
Depreciation and amortization  8,787  9,811
Stock-based compensation  7,674  5,890
Excess tax benefit from equity awards  53  (910)
Loss on disposal of fixed assets  177  303
Inventory write down  7,579  1,845
Deferred income taxes  (6,889)  2,752
Changes in fair value of contingent consideration  1,325  327
Changes in assets and liabilities:    
Accounts receivable  (10,376)  7,733
Inventories  (7,024)  1,383
Inventories-delivered systems  (4,627)  (758)
Prepaid expenses and other  (1,855)  1,114
Accounts payable, accrued and other liabilities  4,840  (13,538)
Deferred revenue  12,717  2,472
Income taxes payable  (666)  346
Net cash provided by (used in) operations  (2,431)  23,235
     
Cash flows from investing activities:    
Sales of marketable securities  --   3,000
Maturities of marketable securities  47,089  8,336
Escrow payment received related to acquisition of Nanda  --   508
Purchases of marketable securities  (49,182)  (58,647)
Purchase of property, plant and equipment  (5,689)  (4,990)
Net cash used in investing activities  (7,782)  (51,793)
     
Cash flows from financing activities:    
Payments of contingent consideration  (1,004)  (300)
Repayments of debt obligations  (5,224)  (2,211)
Proceeds from sale of shares under employee stock option and purchase plans  4,967  4,686
Excess tax benefit from equity awards  (53)  910
Taxes paid on net issuance of stock awards  (1,181)  (617)
Repurchases of common stock  (5,000)  (8,504)
Net cash used in financing activities  (7,495)  (6,036)
Effect of exchange rate changes on cash and cash equivalents  (442)  (190)
Net decrease in cash and cash equivalents  (18,150)  (34,784)
Cash and cash equivalents, beginning of period  62,915  97,699
Cash and cash equivalents, end of period  $ 44,765  $ 62,915
     
NANOMETRICS INCORPORATED
RECONCILIATION OF GAAP TO NON-GAAP RESULTS 
(In thousands, except per share amounts)
(Unaudited)
                 
  Three Months Ended Twelve Months Ended  
  December 28, September 28,   December 29, December 28,   December 29,  
  2013 2013   2012 2013   2012  
Reconciliation of GAAP gross profit to non-GAAP gross profit                
GAAP gross profit  $ 21,909  $ 15,801    $ 11,951  $ 62,676    $ 83,928  
Non-GAAP adjustments:                
 Inventory write-down  --   2,439 (a)  --   2,439 (a)  --   
 Amortization of intangible assets   670  658    646  2,633    2,549  
 Non-GAAP gross profit   $ 22,579  $ 18,898    $ 12,597  $ 67,748    $ 86,477  
                 
Reconciliation of GAAP operating income (loss) to non-GAAP operating income (loss)                
GAAP operating income (loss)  $ 1,292  $ (7,242)    $ (6,538)  $ (21,709)    $ 5,478  
Non-GAAP adjustments:                
 Inventory write-down  --   2,439 (a)  --   2,439 (a)  --   
 Amortization of intangible assets included in cost of revenues   670  658    646  2,633    2,549  
 Amortization of intangible assets included in operating expenses   113  195    196  701    776  
 Restructuring included in operating expenses   --   1,740    --   1,740 (b)  --   
 Total non-GAAP adjustments to operating income (loss)   783  5,032    842  7,513    3,325  
 Non-GAAP operating income (loss)   $ 2,075  $ (2,210)    $ (5,696)  $ (14,196)    $ 8,803  
                 
Reconciliation of GAAP net income (loss) to non-GAAP net income (loss)                
GAAP net income (loss)  $ 556  $ (4,554)    $ (3,647)  $ (14,146)    $ 4,465  
Non-GAAP adjustments:                
Total non-GAAP adjustments to non-GAAP operating income (loss)   783  5,032    842  7,513    3,325  
Income tax effect of non-GAAP adjustments   (317)  (1,785)    (307)  (2,706)    (1,214)  
Discrete tax adjustment   --   --     --   --     (1,300) (c)
Non-GAAP net income (loss)   $ 1,022  $ (1,307)    $ (3,112)  $ (9,339)    $ 5,276  
                 
GAAP net income (loss) per diluted share  $ 0.02  $ (0.20)    $ (0.16)  $ (0.61)    $ 0.19  
                 
Non-GAAP net income (loss) per diluted share  $ 0.04  $ (0.06)    $ (0.13)  $ (0.40)    $ 0.22  
                 
Shares used in diluted income per share calculation  23,913  23,261    23,408  23,290    23,845  
                 
                 
(a) Represents charges associated with the inventory write-off associated with the discontinuation of the Mosaic product line.
                 
(b) Includes severance charges accrued in connection with the consolidation of our inspection product line activities and notification and initiation of the closure of our Nanda Technologies Germany office.
                 
(c) 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. 
                 
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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Source: Nanometrics Incorporated

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