Nanometrics Reports Second Quarter Financial Results

Revenues Up 44% Sequentially; Gross Margin 41%; Ongoing Operating Expenses Down
9%;
Expanded Market Opportunity with Unifire Acquisition

MILPITAS, Calif.--(Business Wire)--
Nanometrics Incorporated (Nasdaq: NANO), a leading supplier of advanced process
control metrology systems used primarily in the manufacturing of semiconductors,
solar photovoltaics, high-brightness LEDs and now advanced wafer-scale
packaging, today announced financial results for its second quarter and six
months ended June 27, 2009.

Highlights for the second quarter include:

* Revenues of $14.5 million were up 44% from the first quarter of 2009
* Gross margin increased 13.1% sequentially, from 28.3% to 41.4%
* Total R&D and SG&A expenses decreased 9%, to $9.8 million compared to $10.8
million in the first quarter
* The expansion of Nanometrics` served markets through the acquisition of the
UniFire product line, which firmly positions the company in the emerging and
rapidly-growing market for advanced wafer-scale packaging metrology

Commenting on the second quarter results, president and chief executive officer
Dr. Timothy J. Stultz said, "We were pleased to see an increased level of
spending from our customers in the semiconductor and related sectors during the
second quarter. Throughout this economic downturn, we have strengthened our
market position through new product introductions and strategic acquisitions,
which have expanded our served markets and increased our penetration within our
customers` fabs. Notably, we are very excited about our recent acquisition of
the Unifire product line, which has already been adopted for high-volume
manufacturing in advanced wafer-scale packaging applications. We continue to see
increasing traction with new products such as the LynxTM and in high-growth
segments including high-brightness LEDs."

"Our improving gross margin and reduced expense level demonstrate the
significant operating leverage in our current business structure," continued Dr.
Stultz. "With improving fundamentals and provided continued increases in capital
spending in our served markets, we are well-positioned to return to
profitability and generate cash from operations."

Second Quarter 2009 Summary

Revenues were $14.5 million, up 44% from $10.1 million in the first quarter of
2009 and down 39% from $23.8 million in the second quarter of 2008. Gross margin
increased to 41.4%, compared to 28.3% in the prior quarter, as a result of
improved factory absorption and higher sales volume. Gross margin decreased
slightly compared to 42.4% in the year-ago period as a result of decreased sales
volume being largely offset by improvements to our cost structure.

On a comparable basis, ongoing operating expenses were $10.1 million, decreasing
9% sequentially and 36% year-over year, compared to $11.2 million in the first
quarter of 2009 and $15.9 million in the second quarter of 2008. Total operating
expenses were $12.5 million, and included a $1.9 million charge related to the
closure of our Korean manufacturing facility and a $0.4 million restructuring
charge related to workforce reductions during the quarter. Total operating
expenses in the first quarter of 2009 were $11.9 million, which included a $0.7
million restructuring charge and a $0.4 million bad debt expense. Total
operating expenses in the year-ago period were $29.1 million, which included a
$13.2 million impairment charge.

The net loss was $7.0 million, or $0.38 per share. This compares to a net loss
of $10.6 million, or $0.58 per share, in the first quarter of 2009 and a net
loss of $18.9 million, or $1.02 per share, in the second quarter of 2008. The
non-GAAP operating loss was $2.3 million, compared to $6.6 million in the first
quarter of 2009 and $2.2 million in the year-ago period.

Summary for the Six Months Ended June 27, 2009

Revenues were $24.6 million, down 58% from revenues of $58.5 million in the
year-ago period. Gross margin for the first six months of fiscal 2009 was 36.0%
compared to 44.3% for the first six months of 2008, reflecting decreased sales
volume and lower factory utilization, partially offset by improvements to our
cost structure. Excluding restructuring and asset impairment charges, operating
expenses of $21.3 million decreased 33% from $31.8 million for the first six
months of 2008. The net loss was $17.6 million, or $0.95 per share, compared to
a net loss of $19.6 million, or $1.06 per share, for the first six months of
2008. The non-GAAP operating loss was $8.9 million, compared to non-GAAP
operating income of $1.2 million in the year-ago period.

Conference Call Details

A conference call to discuss the second quarter 2009 results will be held today
at 4:45 p.m. EDT (1:45 p.m. PDT). To participate in the conference call, the
dial-in numbers are (866) 713-8564 for domestic callers and (617) 597-5312 for
international callers. The passcode is 69992908. 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 operating income, which exclude certain
charges and special items, are not in accordance with U.S. Generally Accepted
Accounting Principles (GAAP). Management uses non-GAAP operating income, which
excludes non-cash expenses including stock-based compensation, depreciation and
amortization, asset impairments, restructuring and other special items, to
evaluate the company`s ongoing cash-based operating results. The company
believes the presentation of non-GAAP operating income 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 operating income is included at the end of this press release.

About Nanometrics

Nanometrics is a leader in the design, manufacture and marketing of
high-performance process control metrology systems used primarily in the
manufacturing of semiconductors, advanced wafer-scale packaging, solar
photovoltaics and high-brightness LEDs, as well as by customers in the silicon
wafer and data storage industries. Nanometrics standalone and integrated
metrology systems measure various thin film properties, critical dimensions,
overlay control, topography, and optical, electrical and material properties,
including the structural composition of silicon, compound semiconductor and
photovoltaic devices, during various steps of the manufacturing process, from
front end of line substrate manufacturing through die preparation for advanced
packaging. These 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 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 27, 2009, the expansion
of the company`s served markets and future profitability and cash flow. Although
Nanometrics believes that the expectations reflected in the forward-looking
statements are reasonable, actual results could differ materially from the
expectations due to a variety of factors including slower-than-anticipated
market adoption and a contraction in current levels of industry spending. For
additional information and considerations regarding the risks faced by
Nanometrics, see its annual report on Form 10-K for the year ended December 27,
2008 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 per share amounts)

June 27, December 27,
ASSETS 2009 2008
(Unaudited) (Unaudited)

Current assets:
Cash and cash equivalents $ 14,482 $ 23,980
Accounts receivable, net of allowances of $735 and $309 14,912 17,143
Inventories 34,209 31,583
Inventories - delivered systems 69 205
Assets held for sale 203 -
Prepaid expenses and other 1,789 1,838
Deferred income tax assets 573 350
Total current assets 66,237 75,099
Property, plant and equipment, net 38,119 40,136
Intangible assets, net 7,895 6,901
Other assets 1,580 1,718
Total assets $ 113,831 $ 123,854

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving line of credit $ 3,500 $ -
Accounts payable 5,009 4,824
Accrued payroll and related expenses 2,842 3,435
Deferred revenue 1,036 1,701
Other current liabilities 6,720 5,800
Income taxes payable 897 1,187
Current portion of debt obligations 373 413
Total current liabilities 20,377 17,360

Deferred revenue 265 -
Other long-term liabilities 2,514 644
Debt obligations due after one year 12,912 13,083
Total liabilities 36,068 31,087
Stockholders' equity
Common stock, $0.001 par value; 47,000,000 shares
authorized; 18,587,645 and 18,413,054, respectively, outstanding 18 18
Additional paid-in capital 190,824 189,927
Accumulated deficit (114,240) (96,643)
Accumulated other comprehensive income / (loss) 1,161 (535)
Total stockholders` equity 77,763 92,767
Total liabilities and stockholders' equity $ 113,831 $ 123,854

NANOMETRICS INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

Three-Months Ended Six-Months Ended
June 27, June 28, June 27, June 28,
2009 2008 2009 2008

Net revenues:
Products $ 7,897 $ 18,504 $ 12,837 $ 46,433
Service 6,620 5,257 11,737 12,056
Total net revenues 14,517 23,761 24,574 58,489

Costs of net revenues:
Cost of products 5,206 9,162 8,901 22,824
Cost of service 3,304 4,532 6,820 9,770
Total costs of net revenues 8,510 13,694 15,721 32,594

Gross profit 6,007 10,067 8,853 25,895
Operating expenses:
Research and development 3,055 4,422 6,294 8,677
Selling 3,258 4,844 6,873 9,683
General and administrative 3,488 5,302 7,460 10,826
Amortization of intangible assets 337 1,330 706 2,615
Asset impairment 1,899 13,213 1,899 13,213
Restructuring charge 445 - 1,134 870
Total operating expenses 12,482 29,111 24,366 45,884

Loss from operations (6,475 ) (19,044 ) (15,513 ) (19,989 )

Other income (expense):
Interest income 12 34 27 132
Interest expense (281 ) (26 ) (547 ) (103 )
Other, net (582 ) (32 ) (1,941 ) 422
Total other income (expense), net (851 ) (24 ) (2,461 ) 451

Loss before provision (benefit) for income taxes (7,326 ) (19,068 ) (17,974 ) (19,538 )

Provision (benefit) for income taxes (361 ) (154 ) (380 ) 100

Net loss $ (6,965 ) $ (18,914 ) $ (17,594 ) $ (19,638 )

Net loss per share:
Basic $ (0.38 ) $ (1.02 ) $ (0.95 ) $ (1.06 )
Diluted $ (0.38 ) $ (1.02 ) $ (0.95 ) $ (1.06 )

Shares used in per share calculation:
Basic 18,526 18,632 18,470 18,611
Diluted 18,526 18,632 18,470 18,611

NANOMETRICS INCORPORATED

RECONCILIATION OF GAAP TO NON-GAAP RESULTS

(In thousands, except per share amounts)

(Unaudited)

Three-Months Ended Six-Months Ended
June 27, June 28, June 27, June 28,
2009 2008 2009 2008

Loss from operations $ (6,475 ) $ (19,044 ) $ (15,513 ) $ (19,989 )

Non-GAAP Adjustments:
Amortization of intangible assets 337 1,330 706 2,615
Depreciation 663 981 1,426 1,970
Amortization of demonstration systems 418 259 703 544
Asset impairment 1,899 13,213 1,899 13,213
Stock-based compensation 403 1,081 721 1,999
Restructuring charge 445 - 1,134 870

Non-GAAP Operating Income (Loss) $ (2,310 ) $ (2,180 ) $ (8,924 ) $ 1,222

Headgate Partners LLC
Investor Relations:
Claire McAdams, 530-265-9899
530-265-9699 fax
email: claire@headgatepartners.com
or
Nanometrics Incorporated
James Moniz, CFO, 408-545-6145
408-521-9370 fax
email: jmoniz@nanometrics.com

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