Filed by Nanometrics Incorporated Pursuant to Rule 425
Under the Securities Act of 1933
And Deemed Filed Pursuant to Rule 14a-12
Under the Securities Exchange Act of 1934
Subject Company: August Technology Corporation
Commission File No.: 000-30637
This filing relates to a planned merger (the "Merger") between Nanometrics
Incorporated ("Nanometrics") and August Technology Corporation ("August")
pursuant to the Agreement and Plan of Merger and Reorganization, dated January
21, 2005, by and among Nanometrics, Major League Merger Corporation (a
wholly-owned subsidiary of Nanometrics), Minor League Merger Corporation (also a
wholly-owned subsidiary of Nanometrics) and August (the "Merger Agreement"). The
Merger Agreement is on file with the Securities and Exchange Commission as an
exhibit to the Current Report on Form 8-K filed by Nanometrics on January 21,
2005, and is incorporated by reference into this filing.
Nanometrics Incorporated held a conference call on February 23, 2005 to discuss
its financial results for the fourth quarter of 2004 and the fiscal year ended
January 1, 2005. Below are excerpts from the conference call related to the
discussion of the Merger and the Merger Agreement. Three asterisks (* * *)
indicate where discussion unrelated to the Merger and the Merger Agreement has
been omitted.
--------------------------------------------------------------------------------
Operator
Good morning and welcome to the Nanometrics Q4 and fiscal year 2004 financial
results conference call. Please note that the following discussion may include
forward-looking statements regarding, among other things, Nanometrics' future
financial results, business performance and market conditions. These
forward-looking statements are subject to risks and uncertainties that could
cause actual results to differ materially from these statements. Factors that
could cause such differences include but are not limited to changes in demand
for the Company's products, changes in the Company's ability to ship its
products in a timely manner, changes in business or economic conditions, and the
additional risks and uncertainties set forth in our press release of this
morning and in the Management's Discussion and Analysis section of the Company's
annual report on Form 10-K for the fiscal year ended January 3, 2004 filed with
the Securities and Exchange Commission. Our earnings release was issued this
morning before the opening of The NASDAQ National Market. If you haven't
received a copy, you can view it on our Web site, www.nanometrics.com. Please
note that we are webcasting this call and will have a replay of it available on
our Web site shortly after the conclusion of this call.
Thank you for joining the conference call. This morning's speakers include John
Heaton, President and CEO, and Paul Nolan, Vice President and CFO of
Nanometrics. A question-and-answer session will be held at the end of this call.
Until that time, all participants will be in a listen-only mode. We will begin
the conference call with Mr. John Heaton. Please proceed, sir.
John Heaton - Nanometrics - President, CEO
Hello and welcome to our Q4 2004 and 2004 year-end conference call.
* * *
Please note that since our company is currently engaging in a transaction with
August Technology Incorporated and the transcript of our conference call must be
filed with the SEC, this will result in a slight delay for those investors
wishing to listen to a replay of the conference call.
In today's call, I'd like to take the opportunity to review the quarter and then
highlight some of our achievements for 2004, followed by an update on our
pending transaction with August Technology. After that, we will open up to
questions.
* * *
As we prepare for our potential merger and SOX 404 certification, we've taken
steps to refine our corporate inventory policy, which resulted in larger
reserves.
* * *
Nanometrics is in the best competitive shape ever, and we are looking for paths
to further growth. As you may have read, last month, we announced our intentions
to merge with August Technology. The Company and the Board have long believed
that the complementary merger would be one of the ways to expand our product
line and global service footprint. For its part, August presents an ideal merger
opportunity to bring 2 strong companies together to form a substantially
stronger provider of world-class metrology and inspection solutions.
Notwithstanding recent announcements regarding alternative proposed
transactions, August Technology and Nanometrics remain fully committed to our
merger plan and are proceeding forward. The Hart-Scott-Rodino regulatory filings
have been filed, and the clock is ticking. We believe the initial shareholder
proxy in the form of an S-4 will be delivered to the SEC in early March. After
the S-4 is filed, we will need to wait for SEC comments before proceeding. There
is no way of estimating whether the SEC will make comments or how long the
process might take, if they do. The best case estimate on the deal closing is
early May. We remain hopeful that we can quickly execute on a transaction that
is in the interests of both companies' shareholders. Getting this process
completed as quickly as possible and minimizing disruption to our business is a
top priority.
Why is this merger so important? We believe the August/Nanometrics merger will
be good for the semiconductor industry, our customers and our investors. We
expect the combined August/Nanometrics to provide a broad array of front-end and
final manufacturing inspection and metrology equipment that will offer better
alternatives for its customer base. That means more choices. We believe that
keeping alive a competitive environment in metrology inspection is good for the
industry and good for our investors.
Both companies believe that the challenges to small, innovative providers in our
industry have never been greater. While often producing the best new ideas,
small and mid-sized companies in the capital equipment industry today work very
hard to serve the increasing global needs to meet their financial responsibility
as public companies, particularly in this era of Sarbanes-Oxley, and to reinvest
in leading-edge R&D that can move technology forward. In these times, smart
combinations like the August/Nanometrics merger can produce the technical,
financial and infrastructure critical mass needed to serve our customers and
shareholders better without sacrificing our innovative cultures.
As we move forward on this transaction, there has certainly been disruption and
confusion created by some of our competitors. We can't really speak to specifics
on those issues other than to say that we believe our deal provides great
opportunity for both companies and August management will continue to evaluate
all potential options. We can't give you guidance into what others may do and
repeat that we have a deal in place today that we are -- that we fully intend to
execute.
These are certainly heady times for us. Coming off a year of record performance
and bolstered by the continued success of our highly differentiated products,
Nanometrics is positioned for further growth and success.
* * *
Having gone through all those key highlights and comments, I will now open it up
to questions. Operator?
QUESTION AND ANSWER
* * *
Stephen Dan (ph) of HMC (ph) New York.
Good morning. I have a question. I am a large shareholder, both of August and
also of Nanometrics, and your offer to us right now is worth about $7.30. I
understand it's going to be a great combination but how can I justify this to
myself and to my fiduciaries that I have a responsibility to -- to vote for your
deal?
John Heaton - Nanometrics - President, CEO
Well, there is no single answer to that question I can give you. We are not
looking at a trade on the market; what we're looking about is creating future
earnings for the 2 sets of shareholders that we think having those 2 companies
together will provide a better long-term investment for our shareholders than
you might be indicating today. I mean, if you wanted to have a price today for
your shares, you could certainly sell your August shares at quite a premium to
what our offer is today.
On the other hand, if you're looking to a much better picture for the share
price in the future, we think that the potential remains for our company
combined to provide that to you. That has been our philosophy from the very
beginning. It's not about where the stock prices are at today; it's about
putting 2 companies together and creating a really compelling company that
provides great shareholder value and earnings into the future.
Stephen Dan - HMC (ph) New York - Analyst
Well, I just don't believe that you're going to be able to get a positive vote,
going forward, when you put out the proxy. I think you're going to just have to
justify a higher price and when you're dealing against a much larger
organizations such as KLA, who is a huge organization versus yourself, I don't
see how you can get around that. Can you explain that to me?
John Heaton - Nanometrics - President, CEO
Well, number one, you'd have to really take that up with the August management
and not the Nanometrics management. I mean, they are the ones that have a KLA
offer, not us. So we have a deal with August. We maintain that it was a fair
deal for both sets of shareholders, and we will make our presentation to the
shareholders and hope that they believe that the combined company will provide
the kinds of performance in the future that we expect.
Stephen Dan - HMC (ph) New York - Analyst
Well, as a shareholder, as I told you, of both companies, and I am a large
shareholder of both, I feel that KLA has made a much better offer than you have
for August.
John Heaton - Nanometrics - President, CEO
Like I said, that's not for Nanometrics to decide and --.
Stephen Dan - HMC (ph) New York - Analyst
Well, if Nanometrics wants to buy this company and go forward and get the
synergies out of it, I think it is something for you to consider.
John Heaton - Nanometrics - President, CEO
Well, I think it's very clear and I think the August folks have made it clear as
well that August is not for sale. August has placed a strategic merger on the
table with Nanometrics. The company has not been for sale. They've maintained
that over and over again, and nobody seems to understand that concept. These are
2 companies that operate independently that want to join together, that will
create a more significant entity to provide greater shareholder value. That's
the direction that we're going. Now, if August is for sale, then that would
change, but --.
Stephen Dan - HMC (ph) New York - Analyst
Well, I understand that, but you are using the word "not for sale" in a very
nebulous way. However, it sure looks like it's up for sale for me as a
shareholder.
John Heaton - Nanometrics - President, CEO
Like I said, if you have issues relative to your shares of August, that's for
you to take up with them, not with us.
Stephen Dan - HMC (ph) New York - Analyst
Why don't you just offer us a better ratio if you really want to acquire the
company?
John Heaton - Nanometrics - President, CEO
We have a deal on the table, sir, and I think that's all we can say about it. So
I would proceed to the next question, operator.
Operator
* * *
Alexander Nockman - Montauk Financial Services - Analyst
* * *
Also, I've been aware that you don't really give forward-looking guidance and
you don't really give guidance to the Street. It seems to me that you guys are
coming in with your best numbers ever, with substantial top-line as well as
bottom-line growth and an enormous turnaround as well. You are to be applauded
for that but to some extent, it's being viewed as a negative, maybe somewhat
explained away by the write-down that might have been unexpected but by a much
higher Street number. Do you plan on trying to work more cohesively with the
Street, going forward, in terms of, you know, better guidance and so everybody
is more online? Because I would've thought that, given these type of numbers,
that the news this morning would have been hey great rather than disappointment
per se, which I view the Company as a whole as going forward and everything
across the board to be positive, especially some of the things you're sharing
today. But what's your thoughts on that in terms of sharing with the Street
going forward?
John Heaton - Nanometrics - President, CEO
So, I want to speak to that because I think there's a couple of issues that need
to be taken into consideration. You are absolutely right that we have not given
EPS guidance to the Street. We've always had a certain amount of complexity in
trying to do that because of all of these other factors that usually come into
play. On the other hand, I think one of things you have to take into
consideration, even though we gave and met our guidance and as you said, we feel
very positive about 18 cents per share and (indiscernible) if you look at one or
the other competitors for August, we are a 50 percent higher EPS basis than them
and our stock is trading at a huge discount to theirs and you've got to say to
yourself wow, Nano is growing at 70 percent, they are producing better earnings
at the bottom line, yet we are getting heavily discounted in the market. I don't
know whether it's an arbitrage issue or not but it certainly is probably related
somewhat at least to the perceived myth on the EPS.
You know, one of things you have to take into consideration is that we did go
through an auditor change this year and as we go through that complication, you
have to go back and re-examine the things that you do, bringing up to speed and
trying to educate both sides on what it best (indiscernible) policies and
procedures are. There's no way that we could have forecasted, in the beginning
of Q4, that we did have issues relative to inventory. As I said also in the
prepared remarks, we now have a 2-year window on our ERP system and we're
getting tremendous visibility now into the inventory parts that are moving, how
they are moving, when they move. These are the kind of metrics that we never
really had at our disposal in the past. So what we're using this is an
opportunity to go back and refine our policy, which has not changed; it's just a
refinement -- saying we've got more information now, we can do a better job of
monitoring and maintaining our process for looking at the inventory, and we kind
of view that as a major positive going forward. So, we shouldn't see these kinds
of issues come up again because we are going to have a much better handle on it.
Having said all of that, you know, I don't know that we will change our EPS
policy at this point. We potentially can do a better job if we get maybe even
the critical mass associated with being with August, if we have a larger, more
stable revenue base and I think an overall better picture on where the costs
are. I think small incremental changes in the quarter would be more easy to
predict if we were of a larger financial critical mass.
So, if we do get together, I think that will probably be in the cards. If we
don't, then obviously any one of these events that occur in a quarter can have a
substantial impact on our EPS and can cause misses. So I'm not really sure, at
this moment, that we can tell you that things are going to improve from a
forecasting standpoint, other than we've done a pretty good job of maintaining
our guidance on revenues and we hope to continue that and hope that the EPS
follow more in line with expectations into the future.
Alexander Nockman - Montauk Financial Services - Analyst
Okay, great. One last question -- with regards to the August Technology's
merger, can you comment on whether or not you feel that this situation, if it
does close let's say in the second quarter of '05, will be accretive this year
versus any type of expenses you may bear with it across the board?
John Heaton - Nanometrics - President, CEO
It's almost impossible to know. I would say that, within a year, that would be
the goal for the combined company. Whether it can happen within calendar '05 is
a major question mark because the longer this thing gets delayed, the less
opportunity you have to resolve the 2 companies. So until we get to the close,
it's impossible to predict, but we certainly intend to get this thing on a very
positive note as quickly as possible.
* * *
Operator
* * *
Ben Stoller - Hibernia Southcoast Capital - Analyst
Most of the business questions have been asked and actually, since you opened
the door on the Nano/August, as a shareholder of Nano, how much money have we
spent on this process and how much do we intend to spend on this process? It is
obvious the market doesn't think it's going to happen. If there's such a great
disparity in the multiples between where we are trading and where August is
trading, why doesn't it make sense for August to buy us? (LAUGHTER). Really, it
doesn't make sense. Our stock continually -- you know, we're under pressure
here. Where is the focus with the upper management? We have to spend time
running the business, not running after an asset that it's obvious we can't get
or that is trading at $4 through the price?
John Heaton - Nanometrics - President, CEO
Yes. We don't have -- we don't accumulate the costs associated with doing the
deal because obviously there's lots of people working on it at this point. That
would be done at the end of the process, as opposed to kind of -- (multiple
speakers) -- process.
Ben Stoller - Hibernia Southcoast Capital - Analyst
Right, and you would capitalize those, right?
John Heaton - Nanometrics - President, CEO
Sure. We will take a one-time write-off, so we are not going to be incorporating
them in the Q4 or Q1 numbers or any along those lines. So, what are we going to
do? You know, obviously, as you say, we are trading at quite a discount to both
August and to KLA and to Rudolph. I think the best thing that we can do is go
out and tell people about the story and highlight the issue that we -- you see
obviously and we see, which is that we are trading at a much lower multiple for
some unknown reason. We are providing the growth, we are providing the earnings
and we're not being rewarded for it.
Ben Stoller - Hibernia Southcoast Capital - Analyst
Well, I think the reason is obvious -- that August is for sale. You say they are
not, but they are. They agreed to sell themselves to us, so that's the disparate
in the multiples. Just looking or -- (indiscernible) that's what's built into
their price. So I don't know if it's a fair one-on-one multiple comparison, but
you know -- and before you said, you know, the shareholders will get the vote
for the transaction, correct?
John Heaton - Nanometrics - President, CEO
That's correct.
Ben Stoller - Hibernia Southcoast Capital - Analyst
Okay, so basically the shareholders run the company, so we will decide if we
want to buy them or not through a vote. You know, just strategy or not but if
the multiples are just so disparate, maybe it doesn't make sense to do it.
John Heaton - Nanometrics - President, CEO
Right, I mean, that's going to be up to the shareholders ultimately, and we
can't -- you know, like I said, our objective in the Company is to provide our
shareholders with the best growth going forward. We believe that this is the
best thing for our shareholders. We maintain that. We believe August also
maintains that. We're going to try to take it to a vote unless something happens
between now and that vote. We maintain that it's the best thing for both
companies and that we will proceed down this path in a very positive way.
Ben Stoller - Hibernia Southcoast Capital - Analyst
Well obviously we're going to vote for it. I mean if we can buy them at a $4
discount to where it is trading in the marketplace, we will do it all day long,
so I don't think that's the issue. The issue is do we take our eye off the ball
and try to pursue this, or do we get back on track, on point and make sure we
run the Company the way we want it run?
John Heaton - Nanometrics - President, CEO
Well, we are running the Company the way we want it run. Actually, now that
we've gone through the negotiation process, we are --.
Ben Stoller - Hibernia Southcoast Capital - Analyst
While incurring significant costs as well.
John Heaton - Nanometrics - President, CEO
But if the deal does not go through, if you read the proposed merger agreement,
then you'll find that those costs are recoverable.
Ben Stoller - Hibernia Southcoast Capital - Analyst
Okay.
John Heaton - Nanometrics - President, CEO
So going forward, it's a great situation, I think, for our shareholders. No
matter what happens, I think we're going to go forward in a very positive way,
and we are totally hopeful that we can merge with August and that, like I said
before, that we provide our customers and our shareholders and employees with a
great future and a great company. I think there's a tremendous demand on the
customer side to make that happen. You know, if I look at -- if you go beyond
Wall Street and what people are saying about the stocks and the trade and you
listen to what the customers are saying, you are going to get a completely
different picture on this merger for them. Many of our major customers and
August customers absolutely want to see this merger going forward because they
want to see a stronger metrology company out there; they don't like to have so
much of only one large company and a lot of small ones. They want to see a
consolidation; they want to see strong alternatives with good technology and
cultures. They don't necessarily have that today. In fact, when they have to
make choices about metrology, they are to some extent stuck with go with the
guerrilla or go with a smaller company that induces some risk in their company.
They don't like that in general. So there's been a tremendous support from our
customers. We'd like to see that play out in the stock, which it has not up
until this point. We think that, if this thing does go forward, that they will
support the new company even stronger than they would had it not happened. So I
think there's all kinds of major positives going forward if we can get this deal
done.
Ben Stoller - Hibernia Southcoast Capital - Analyst
I concur and I look forward to it. I just don't know if we can get it done at
this price. It seems impossible the way it's trading. But no, I agree, if we can
buy it at this price, we will buy it all day long. That's why we support it.
John Heaton - Nanometrics - President, CEO
The vote is not today. I think everyone has to kind of wait. It's very early in
the process still. We still have a long way to go.
Ben Stoller - Hibernia Southcoast Capital - Analyst
Right. I mean, earlier, I was on listening on the call and some shareholder - a
shareholder got on and said he owned August Technologies and said basically why
would he take this $4 discount towards trading on the market? I would have to
agree with him, if I owned August. I just wouldn't do the deal.
John Heaton - Nanometrics - President, CEO
Yes, I understand everyone's perspective and I appreciate and respect all
opinions. Again, we go back and we maintain that this is a fair deal for both
sides, regardless of where the stocks are trading at today. When we did the
deal, they were trading in a certain range. All of the understandings of EPS and
revenue and growth were all taken into consideration, and here we are now.
Ben Stoller - Hibernia Southcoast Capital - Analyst
Sure, sure. Also too, as you said, let's make sure we get our fee if the deal
breaks too. Maybe it's more prudent just to take our fee and move on and focus
in on our business if we can't get it at the price that we want. It's very
difficult toe-to-toe, as you say, with the guerrilla in the space.
John Heaton - Nanometrics - President, CEO
I can't really speak to those things, as I said in my comments. It is what it
is. We're doing our deal.
Ben Stoller - Hibernia Southcoast Capital - Analyst
How much per share is the breakup fee?
John Heaton - Nanometrics - President, CEO
I don't know what it is per share. If you look at the document, I think it's
$8.3 million for us.
* * *
John Heaton - Nanometrics - President, CEO
Okay, with that, I will wrap it up and thank everybody for listening to the call
today and look forward to reporting to you on the first-quarter results. Thanks
very much.
Operator
Ladies and gentlemen, thank you for your participation in today's conference.
This concludes the presentation. Have a good day.
Cautionary Statement for the Purpose of the Safe Harbor Provisions of the
Private Securities Litigation Reform Act of 1995
The transcript contains forward-looking statements within the meaning of the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
In some cases, forward-looking statements can be identified by words such as
"believe," "expect," "anticipate," "plan," "potential," "continue" or similar
expressions. Forward-looking statements also include the assumptions underlying
or relating to any of the foregoing statements. Such forward-looking statements
are based upon current expectations and beliefs and are subject to a number of
factors and uncertainties that could cause actual results to differ materially
from those described in the forward-looking statements. The forward-looking
statements contained in this transcript include statements about future
financial and operating results and the proposed Nanometrics/August merger.
These statements are not guarantees of future performance, involve certain
risks, uncertainties and assumptions that are difficult to predict, and are
based upon assumptions as to future events that may not prove accurate.
Therefore, actual outcomes and results may differ materially from what is
expressed herein. For example, if either of the companies does not receive
required shareholder or governmental approvals or fails to satisfy other
conditions to closing, the transaction will not be consummated. In any
forward-looking statement in which Nanometrics expresses an expectation or
belief as to future results, such expectation or belief is expressed in good
faith and believed to have a reasonable basis, but there can be no assurance
that the statement or expectation or belief will result or be achieved or
accomplished. The following factors, among others, could cause actual results to
differ materially from those described in the forward-looking statements: the
risk that the Nanometrics and August businesses will not be integrated
successfully; costs related to the proposed merger; failure of the Nanometrics
or August shareholders to approve the proposed merger; and other economic,
business, competitive and/or regulatory factors affecting Nanometrics' and
August's businesses generally, including those set forth in Nanometrics' and
August's filings with the SEC, including their Annual Reports on Form 10-K for
their respective most recent fiscal years, especially in the Management's
Discussion and Analysis section, their most recent Quarterly Reports on Form
10-Q and their Current Reports on Form 8-K. All forward-looking statements
included in this transcript are based on information available to Nanometrics on
the date hereof. Nanometrics undertakes no obligation (and expressly disclaims
any such obligation) to update forward-looking statements made in this
transcript to reflect events or circumstances after the date of this transcript
or to update reasons why actual results could differ from those anticipated in
such forward-looking statements.
Additional Information and Where to Find It
Nanometrics Incorporated, August Technology Corporation and Minor League Merger
Corporation (which will be renamed by Nanometrics Incorporated and August
Technology Corporation in connection with the proposed merger) intend to file a
joint proxy statement/prospectus in connection with the merger transaction
involving Nanometrics Incorporated, Major League Merger Corporation (a
subsidiary of Nanometrics formed in connection with the proposed merger), Minor
League Merger Corporation and August Technology Corporation. Investors and
security holders are urged to read the joint proxy statement/prospectus
regarding the proposed merger when it becomes available because it will contain
important information about the transaction. The joint proxy
statement/prospectus will be filed with the Securities and Exchange Commission
by Nanometrics Incorporated and August Technology Corporation and security
holders may obtain a free copy of the joint proxy statement/prospectus (when it
is available) and other documents filed by Nanometrics Incorporated and August
Technology Corporation with the Securities and Exchange Commission at the
Securities and Exchange Commission's web site at http://www.sec/gov. The joint
proxy statement/prospectus and these other documents may also be obtained for
free from Nanometrics Incorporated or August Technology Corporation investor
relations at investors@nanometrics.com and invest@augusttech.com, respectively.
August Technology Corporation and its executive officers and directors may be
deemed to be participants in the solicitation of proxies from the stockholders
of August Technology Corporation and Nanometrics Incorporated with respect to
the transactions contemplated by the merger agreement. Information regarding
such officers and directors is included in August Technology Corporation's Proxy
Statement for its 2003 Annual Meeting of Stockholders filed with the Securities
and Exchange Commission on March 11, 2004. This document is available free of
charge at the Securities and Exchange Commission's web site at
http://www.sec.gov and from August Technology Corporation investor relations at
invest@augusttech.com.
Nanometrics Incorporated and its executive officers and directors may be deemed
to be participants in the solicitation of proxies from the stockholders of
August Technology Corporation and Nanometrics Incorporated with respect to the
transactions contemplated by the merger agreement. Information regarding such
officers and directors is included in Nanometrics Incorporated's Proxy Statement
for its 2003 Annual Meeting of Stockholders filed with the Securities and
Exchange Commission on April 23, 2004. This document is available free of charge
at the Securities and Exchange Commission's web site at http://www.sec.gov and
from Nanometrics Incorporated investor relations at investors@nanometrics.com.