Nanometrics Reports Third Quarter Financial Results

http://www.businesswire.com/news/home/20091029006415/en

Revenues Up 78% Sequentially; Gross Margin 54%; EPS $0.08
MILPITAS, Calif.--(Business Wire)--
Nanometrics Incorporated (Nasdaq:NANO), a leading supplier of advanced process
control metrology systems used primarily in the manufacturing and packaging of
semiconductors, solar photovoltaics and high-brightness LEDs, today announced
financial results for its fiscal third quarter and nine months ended September
26, 2009.

Highlights for the third quarter include:

* Revenues of $25.8 million were up 78% quarter-on-quarter and 12% year-on-year
* Gross margin improved by more than twelve percentage points sequentially, from
41.4% to 54.0%
* Non-GAAP operating income of $4.0 million
* Net profit margin of 6.1% and net earnings of 8 cents per share
* A $2.7 million increase in cash and cash equivalents
* Continued adoption of Nanometrics` thin-film, optical critical dimension (OCD)
and overlay metrology solutions by leading semiconductor companies worldwide

Commenting on the third quarter results, president and chief executive officer
Dr. Timothy J. Stultz said, "We are very pleased to announce Nanometrics` return
to profitability in the third quarter of 2009. Improvements in our served
markets together with our well-positioned product offerings translated into
significant revenue growth, further improvements to our gross margin and, most
importantly, positive cash flow and profits.

"During the economic and industry downturn, we have continued to invest in
developing advanced, highly-differentiated, cost-effective and extendable
product solutions for our customers. We have expanded our served markets through
both internal product development and strategic acquisitions that were
non-dilutive to our shareholders. At the same time, we completed a turnaround
and restructuring of our business that resulted in a leaner, more efficient and
volume-adaptable manufacturing and operating infrastructure. Our third quarter
results are evidence that we have grown into our business model at this very
early stage of our industry`s recovery.

"The growth we achieved in the third quarter was largely driven by multi-system
orders and technology upgrades from leading worldwide semiconductor companies in
both the memory and logic sectors. We continue to see strong sales of our
thin-film and OCD systems, increasing traction with our CaliperTM overlay
product and LynxTM platform, and further penetration into high-growth segments
such as high-brightness LEDs. We are also excited about the emerging market
opportunity for metrology in wafer-scale packaging, which represents an
expansion of our served markets through the second-quarter acquisition of the
UnifireTM product line.

"Looking ahead, we see continued improvements in our served markets and further
growth in revenues, albeit at a slower rate than what we have achieved in the
last two quarters. Our business is on a positive trajectory, with momentum
building for continued success in our served markets and improved operational
and financial performance."

Third Quarter 2009 Summary

Revenues were $25.8 million, up 78% from $14.5 million in the second quarter of
2009 and up 12% from $23.1 million in the third quarter of 2008. Gross margin
increased to 54.0%, compared to 41.4% in the prior quarter and 44.1% in the
year-ago period, as a result of higher sales volume, improved factory absorption
and an increased contribution of upgrades to service revenue.

Operating expenses were $12.4 million, compared to $12.5 million in the second
quarter of 2009 and $70.2 million in the year-ago period. Total operating
expenses in the comparative periods included asset impairment and restructuring
charges of $2.3 million and $56.0 million, respectively, for the second quarter
of 2009 and the third quarter of 2008.

Net income was $1.6 million, or $0.08 per diluted share, compared to a net loss
of $7.0 million, or $0.38 per share in the second quarter of 2009 and a net loss
of $60.4 million, or $3.25 per share, in the third quarter of 2008. Non-GAAP
operating income was $4.0 million, compared to non-GAAP operating losses of $2.3
million and $1.1 million, respectively, in the second quarter of 2009 and the
year-ago period.

Summary for the Nine Months Ended September 26, 2009

Revenues were $50.4 million, down 38% from $81.6 million in the year-ago period.
Despite the decline in revenues over the comparable period, gross margin
increased by 100 basis points, from 44.2% to 45.2%, reflecting improvements to
our cost structure. Excluding restructuring and asset impairment charges,
operating expenses of $33.8 million decreased 27% from $46.0 million for the
first nine months of 2008, as a result of company-wide cost reductions. Net loss
was $16.0 million, or $0.87 per share, compared to net loss of $80.1 million, or
$4.31 per share, for the first nine months of 2008. Non-GAAP operating loss was
$4.9 million, compared to non-GAAP operating income of $0.1 million in the
year-ago period.

Conference Call Details

A conference call to discuss the third quarter 2009 results will be held today
at 4:30 p.m. EDT (1:30 p.m. PDT). To participate in the conference call, the
dial-in numbers are (866) 543-6405 for domestic callers and (617) 213-8897 for
international callers. The passcode is 32099789. 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 September 26, 2009, the
continued adoption and competitiveness of its products, the expansion of the
company`s served markets and future revenue growth, 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, changes in product mix, a contraction
in current levels of industry spending 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 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)
(Unaudited)

September 26, December 27,
ASSETS 2009 2008

Current assets:
Cash and cash equivalents $ 17,207 $ 23,980
Accounts receivable, net of allowances of $311 and $309, respectively 21,035 17,143
Inventories 31,126 31,583
Inventories - delivered systems 1,290 205
Assets held for sale 220 -
Prepaid expenses and other 1,826 1,838
Deferred income tax assets 693 350
Total current assets 73,397 75,099
Property, plant and equipment, net 37,380 40,136
Intangible assets, net 7,477 6,901
Other assets 1,693 1,718
Total assets $ 119,947 $ 123,854

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving line of credit $ 3,500 $ -
Accounts payable 5,713 4,824
Accrued payroll and related expenses 3,326 3,435
Deferred revenue 3,435 1,539
Other current liabilities 6,808 5,800
Income taxes payable 845 1,187
Current portion of debt obligations 347 413
Total current liabilities 23,974 17,198

Deferred revenue 436 162
Other long-term liabilities 2,629 644
Debt obligations due after one year 12,828 13,083
Total liabilities 39,867 31,087
Stockholders' equity
Common stock, $0.001 par value; 47,000,000 shares
authorized; 18,629,915 and 18,413,054, respectively, outstanding 19 18
Additional paid-in capital 191,765 189,927
Accumulated deficit (112,666 ) (96,643 )
Accumulated other comprehensive income (loss) 962 (535 )
Total stockholders` equity 80,080 92,767
Total liabilities and stockholders' equity $ 119,947 $ 123,854

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

Three-Months Ended Nine-Months Ended
September 26, September 27, September 26, September 27,
2009 2008 2009 2008

Net revenues:
Products $ 16,303 $ 16,311 $ 29,140 $ 62,744
Service 9,511 6,826 21,248 18,882
Total net revenues 25,814 23,137 50,388 81,626

Costs of net revenues:
Cost of products 8,348 8,150 17,249 30,974
Cost of service 3,533 4,778 10,353 14,548
Total costs of net revenues 11,881 12,928 27,602 45,522

Gross profit 13,933 10,209 22,786 36,104
Operating expenses:

Three Months Ended September 30, Nine Months Ended September 30,
Constant Constant
Reported Currency Reported Currency
2009 2008 Growth Growth 2009 2008 Growth Growth

Spine
Stimulation $ 39.6 $ 35.5 12 % 12 % $ 117.1 $ 104.4 12 % 12 %
Implants and Biologics 28.5 25.8 10 % 11 % 87.9 82.1 7 % 7 %
Total Spine 68.1 61.3 11 % 11 % 205.0 186.5 10 % 10 %

Orthopedic 33.3 33.8 -2 % 6 % 95.4 96.9 -1 % 8 %

Sports Medicine 24.7 23.7 4 % 5 % 73.4 70.2 4 % 5 %

Vascular 3.9 4.3 -9 % -5 % 12.6 13.4 -6 % -1 %

Other Products 5.1 6.2 -17 % -5 % 15.2 20.4 -25 % -9 %

Total $ 135.1 $ 129.3 4 % 7 % $ 401.6 $ 387.4 4 % 7 %

Regulation G Supplemental Information Schedule

The information in this schedule is set up in three sections intended to address
different aspects of Regulation G.

Section 1 includes a Reconciliation of a Non-GAAP Performance Measure for each
non-GAAP metric included in the release to which this supplemental information
is attached, except for the reconciliations pertaining to Adjusted Net Income
and Adjusted Operating Income for the third quarter of 2009, which are included
in the body of the release to which this supplemental information is attached.

Section 2 contains explanations of each of the specified items listed in each
Reconciliation of a Non-GAAP Performance Measure included in Section 1 of this
Supplemental Information Schedule or in the text of the press release to which
the schedule is attached.

Section 3 provides detailed disclosures indicating the reasons management
believes our non-GAAP measures are useful.

Section 1

Consolidated EBITDA
Orthofix International NV

(In thousands)

Q3 2009 TTM 9/30/09
Orthofix:
Net Income/(loss) $ 6,188 $ 14,295

Depreciation and Amortization 5,451 21,321
Interest 6,475 24,541
Unrealized non-cash loss on interest rate swap 230 6,929
Tax Expense 4,208 3,211
123R expense 2,547 10,610
Product Commercialization Investments - 10,500
Other Non-Cash Charges 1,021 2,616

Consolidated EBITDA $ 26,120 $ 94,023

NOTE: For the definition of Consolidated EBITDA please refer to a copy of the
credit agreement, dated September 22, 2006, which was filed as Exhibit 10.1 to
Orthofix's current report on Form 8-K filed on September 27, 2006, and a copy of
the first amendment to the credit agreement, dated September 29, 2008, which was
filed as Exhibit 10.1 to Orthofix's current report on Form 8-K filed on
September 29, 2008. These documents can be found at the SEC's website at
www.sec.gov.

Section 2

Description of Third Quarter Specified Items (earnings reconciliation)

* Unrealized, non-cash loss on interest rate swap- resulted from changes in the
fair value of the Company`s interest rate swap. Mark-to-market adjustments are
required to be reported in quarterly earnings through the expiration of the swap
in June 2011.
* Strategic investments- costs related to the Company`s strategic investment in
the development and commercialization of a new stem cell-based allograft with
MTF, and the agreement with IIS related to the development of a pedicle screw
system.
* Foreign exchange loss- due to unrealized, non-cash translation adjustments
resulting from a weakening of the U.S. dollar against various foreign
currencies. A number of Orthofix`s foreign subsidiaries have intercompany and
trade accounts payable that are held in currencies, most notably the U.S.
Dollar, other than their local currency, and movements in the relative values of
those currencies result in foreign exchange gains and losses.
* Reorganization/consolidation costs- costs associated with reorganization and
facility consolidation plans within various areas of the Company, primarily
related to the spinal implants division.
* Asset impairment & inventory reserve- an impairment charge related to
certainintangible assets recorded in connection with the acquisition of
Blackstone Medical, Inc., and reserves taken on the inventory of products at
Blackstone Medical.
* Credit agreement amendment costs- fees and the write-off of previously
capitalized debt placement costs associated with the completion of an amendment
to the Company`s credit agreement.

Net Income to Consolidated EBITDA

* Depreciation and Amortization- non-cash depreciation and amortization
expenses.
* Interest- interest expense related to outstanding debt.
* Unrealized non-cash loss on interest rate swap- from changes in the fair value
of the Company`s interest rate swap. Mark-to-market adjustments are required to
be reported in quarterly earnings through the expiration of the swap in June
2011.
* Tax expense- income tax expenses incurred by the Company.
* 123R expense- non-cashequity compensation expenses.
* Product commercialization investments- costs associated with the Development
and Commercialization Agreements with MTF, and the acquisition and development
of IP from IIS.
* Other non-cash charges- certainnon-cash charges including foreign exchange
losses, an inventory step up related to an acquisition and the amortization of a
prepaid royalty.

Section 3

Management use of, and economic substance behind, Non-GAAP Performance Measures

Management uses non-GAAP measures, referred to as "adjusted net income",
"adjusted operating income" and "Consolidated EBITDA" (earnings before interest,
taxes, depreciation and amortization) to evaluate performance period over
period, to analyze the underlying trends in the Company's business, to assess
its performance relative to its competitors, and to establish operational goals
and forecasts that are used in allocating resources. In addition, following the
Company's acquisition of Blackstone, and the related increase in Orthofix`s
debt, management has increased its focus on cash generation and debt reduction.
Management uses these non-GAAP measures as the basis for assessing the ability
of the underlying operations to generate cash for use in paying down debt. In
addition, management uses these non-GAAP measures to further its understanding
of the performance of the Company's business segments. The items excluded from
Orthofix`s non-GAAP measures are also excluded from the profit or loss reported
by the Company`s business segments for the purpose of analyzing their
performance.

Material Limitations Associated with the Use of Non-GAAP Measures

The non-GAAP measures used in this release may have limitations as analytical
tools, and should not be considered in isolation or as a replacement for GAAP
performance measures. Some of the limitations associated with the use of these
non-GAAP performance measures are that they exclude items that reflect an
economic cost to the Company and can have a material effect on cash flows.
Similarly, equity compensation expense does not directly impact cash flows, but
is part of total compensation costs accounted for under GAAP.

Compensation for Limitations Associated with Use of Non-GAAP Measures

Orthofix compensates for the limitations of its non-GAAP performance measures by
relying upon its GAAP results to gain a complete picture of the Company's
performance. The GAAP results provide the ability to understand the Company`s
performance based on a defined set of criteria. The non-GAAP measures reflect
the underlying operating results of the Company`s businesses, excluding non-cash
items, which management believes is an important measure of the Company's
overall performance.

The Company provides a detailed reconciliation of the non-GAAP performance
measures to their most directly comparable GAAP measures, and encourages
investors to review this reconciliation.

Usefulness of Non-GAAP Measures to Investors

Orthofix believes that providing non-GAAP measures that exclude certain items
provides investors with greater transparency to the information used by the
Company`s senior management in its financial and operational decision-making.
Management believes that providing this information enables investors to better
understand the performance of the Company's ongoing operations and to understand
the methodology used by management to evaluate and measure such performance.
Disclosure of these non-GAAP performance measures also facilitates comparisons
of Orthofix`s underlying operating performance with other companies in its
industry that also supplement their GAAP results with non-GAAP performance
measures.

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

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