Nanometrics Reports Second Quarter 2008 Financial Results

Nanometrics Incorporated (Nasdaq:NANO), a leading supplier of advanced process control metrology equipment, today announced financial results for its second quarter ended June 28, 2008.

Revenues for the second quarter were $23.8 million, representing a 32% decrease from first quarter 2008 revenues of $34.7 million and a 36% decrease from second quarter 2007 revenues of $37.3 million. Net loss for the second quarter was $18.9 million, or $1.02 per share. This compares to a net loss of $0.7 million, or $0.04 per share, for the first quarter of 2008 and a net loss of $0.1 million, or $0.01 per share, for the second quarter of 2007.

The second quarter net loss includes non-cash expenses of $16.6 million. We took a FAS 144 asset impairment charge of $13.2 million, primarily consisting of intangible assets related to the 2006 acquisitions of Accent Optical and Soluris. Other non-cash charges include $1.3 million for amortization of acquired intangible assets, $1.1 million for stock-based compensation expenses and $1.0 million for depreciation.

Operating expenses include $0.3 million in severance charges related to a 3% workforce reduction during the second quarter.

"In a difficult market environment, we are gratified to see the benefit of our restructuring efforts evidenced in part by achieving 42% gross margins in spite of the sharp decline in revenues," commented Tim Stultz, president and chief executive officer. "So far this year, we have also strengthened our product portfolio by launching new solutions in every one of our primary served markets as well as completing the acquisition of Tevet, which has already led to new customer wins in the solar photovoltaics industry."

"We took an impairment charge in the second quarter that will reduce our amortization of acquired intangible assets expense by approximately $700,000 per quarter," continued Dr. Stultz. "We recently completed a $13.5 million real estate loan transaction on our Milpitas headquarters that will improve our cash position. Going forward we will continue to aggressively seek ways to improve both our operational and capital efficiencies."

Selected Revenue Segment Information

Revenues by Product

Revenues by Region

Automated Metrology

42%

Japan

38%

Integrated Metrology

13%

South Korea

19%

Materials Characterization

23%

United States

17%

Service

22% 

ROW

26%

Conference Call Details

A conference call to discuss the second quarter results will be held later today at 4:30 p.m. Eastern Daylight Time (1:30 p.m. PDT). To participate in the conference call, the dial-in numbers are 800-659-1966 for domestic callers and 617-614-2711 for international callers. The passcode is 13506760. A live and recorded webcast will be made available on the investor page of the Nanometrics website at www.nanometrics.com .

About Nanometrics

Nanometrics is a leader in the design, manufacture and marketing of high-performance process control metrology systems used primarily in semiconductor manufacturing. Nanometrics standalone and integrated metrology systems measure various thin film properties, critical dimensions, overlay control and optical, electrical and material properties, including the structural composition of silicon and compound semiconductor devices, during various steps of the manufacturing process. These systems enable semiconductor 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 Market under the symbol NANO. Nanometrics' website is http://www.nanometrics.com .

Forward Looking Statements

This press release contains forward-looking statements including, but not limited to, statements regarding Nanometrics' expected results for its most recently completed fiscal quarter, which remain subject to adjustment in connection with the preparation of Nanometrics' financial statements and periodic report on Form 10-Q for the quarter ended June 28, 2008. For additional information and considerations regarding the risks faced by Nanometrics, see its annual report on Form 10-K, as amended, for the year ended December 29, 2007 as filed with the Securities and Exchange Commission, as well as other periodic reports filed with the SEC from time to time. Although Nanometrics believes that the expectations reflected in the forward-looking statements are reasonable, Nanometrics cannot guarantee future results, levels of activity, performance or achievements. Nanometrics disclaims any obligation to update information contained in any forward-looking statement.

NANOMETRICS INCORPORATED CONSOLIDATED BALANCE SHEETS (In thousands except share amounts) (Unaudited)

June 28,

December 30,

ASSETS

2008

2007

Current assets: 

Cash and cash equivalents

$

9,653

$

14,919

Accounts receivable, net of allowances of $320 and $323

28,663

34,855

Inventories

33,962

33,343

Inventories - delivered systems

230

785

Prepaid expenses and other

3,453

2,598

Total current assets

75,961

86,500

Property, plant and equipment, net

42,631

44,419

Goodwill and indefinite lived intangible assets

54,018

52,532

Intangible assets, net

9,244

21,820

Other assets

1,555

1,805

Total assets

$

183,409

$

207,076

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Revolving line of credit

$

-

$

-

Accounts payable

10,642

13,931

Accrued payroll and related expenses

4,484

4,514

Deferred revenue

1,134

2,501

Other current liabilities

7,911

7,243

Income taxes payable

110

1,101

Current portion of debt obligations

151

148

Total current liabilities

24,432

29,438

Deferred income taxes

382

382

Debt obligations and other long term liabilities

610

1,412

Total liabilities

25,424

31,232

Stockholders' equity

Common stock, $0.001 par value; 47,000,000 shares authorized; 18,648,250 and 18,620,682, respectively, outstanding

19 

19

Additional paid-in capital

189,281

187,180 

Accumulated deficit

(33,555

)

(13,917

)

Accumulated other comprehensive income

2,240

2,562

Total stockholders' equity

157,985

175,844

Total liabilities and stockholders' equity

$

183,409

$

207,076

NANOMETRICS INCORPORATED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited)

Three Months Ended

Six Months Ended

June 28,

June 30,

June 28,

June 30, 

2008

2007

2008

2007

Net revenues:

Products

$ 

18,504

$

32,732

$

46,433

$

65,258

Service

5,257

4,603

12,056

9,192

Total net revenues

23,761

37,335

58,489

74,450

Costs of net revenues:

Cost of products

9,162

16,372

22,824

33,855

Cost of service

4,532

4,839

9,770

10,668

Total costs of net revenues

13,694

21,211

32,594

44,523

Gross profit

10,067

16,124

25,895

29,927

Operating expenses:

Research and development

4,422

4,739

8,677

9,325

Selling

4,844

4,668

9,683

10,033

General and administrative

5,302 

4,762

10,826

11,755

Amortization of intangible assets

1,330

1,663

2,615

3,212

Asset impairment

13,213

-

13,213

-

Restructuring charge

-

-

870

-

Total operating expenses

29,111

15,832

45,884

34,325

Income (loss) from operations

(19,044

)

292

(19,989

)

(4,398

)

Other income (expense):

Interest income

34

29

132

52

Interest expense

(26

)

(46

)

(103

)

(85

)

Other, net

(32

)

(541

)

422

(422

)

Total other income (expense), net

(24

)

(558

)

451

(455

)

Loss before income tax provision (benefit)

(19,068

)

(266

)

(19,538

)

(4,853

)

Income tax provision (benefit)

(154

)

(136

)

100

(112

)

Net loss

$

(18,914

)

$

(130

)

$

(19,638 

)

$

(4,741

)

Net loss per share:

Basic

$

(1.02

)

$

(0.01

)

$

(1.06

)

$

(0.27

)

Diluted

$

(1.02 

)

$

(0.01

)

$

(1.06

)

$

(0.27

)

Shares used in per share computation:

Basic

18,632

17,857

18,611

17,758

Diluted

18,632

17,857 

18,611

17,758