Good afternoon, and welcome to the Nanometrics fourth quarter and full year 2011 financial results conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. Please note that this conference call is being recorded today, February the 8th, 2012. At this time, I would like to turn the call over to Claire McAdams, Investor Relations/Council for Nanometrics. Please go ahead.

Thank you and good afternoon everyone. Welcome to the Nanometrics fourth quarter and full year 2011 financial results conference call. On today’s call are, Dr. Timothy Stutlz, President and Chief Executive Officer, and Ronald Kisling, Chief Financial Officer. Shortly, Tim will provide a recap of 2011 and our perspective looking forward. Then, Ron will discuss our financial results for the fourth quarter and full year before turning the call back over to Tim for Q1 guidance. After which we will open up the call for Q&A. The press release detailing our financial results, was distributed over the wire services shortly after 1:00 PM Pacific this afternoon and it’s also available on our website at nanometrics.com. Before providing our comments regarding forward-looking statements, I would like to inform each of you of our 2012 Investor and Analyst Meeting scheduled for March 15 in New York. For more information regarding the event, please contact me at the email address provided on our earnings release. Today’s conference call contains certain forward-looking statements including but not limited to statements regarding financial results for the company’s most recently completed fiscal quarter and year, which remains subject to adjustment in preparation of our periodic report on Form 10-K, future revenues, margins, earnings per share, financial performance and expansion of our served markets. 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 changes in industry spending, the continued adoption and competitiveness of our new and existing products, our ability to successfully integrate acquisitions, to realize operating efficiencies, and to achieve reduced tax rates, our ability to identify strategic acquisition targets and complete acquisitions, changes in product mix, and the additional risk factors and cautionary statements set forth in the company’s Form 10-K on file for fiscal year 2010, 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 statements. I will now turn the call over to Tim Stultz. Tim?

Thank you, Claire and thank you everyone for joining us today. 2011 was another strong year for Nanometrics. In the first half of the year, we delivered our two highest revenue quarters on record and despite the industry slowdown in the second half, we finished the year with record revenues of $230 million, up 22% over 2010’s prior record. Importantly, our revenue growth was more than double the year-on-year increase in Wafer Fab Equipment or WFE spending, giving clear evidence of our success in outgrowing the industry in general. Solid operating income also helped drive positive cash flows throughout the year with free cash flow increasing more than 100% versus 2010. 2011 performance however was not only about financial results, but also about the continued strengthening of our business and business outlook, resulting from our strong positions in growth markets, our progress in expanding our market share through critical competitive wins, and expansion of our served markets through strategic acquisitions. I would like to briefly expand on each of those areas, as they represent the foundation and basis for our ability to continue to outperform the overall industry. Let’s start with our primary served markets where capital investments are expected to outgrow spending in general. First and foremost, there is Optical Critical Dimension or OCD, our flagship technology and primary revenue driver. OCD has and is continuing to play an ever increasing role in the development and manufacturing of all types of solid-state devices including logic, memory and even thin film heads for disk drives. Last quarter, we announced the release of our 1000th OCD recipe into production. A significant milestone for us, as well as OCD technology. OCD recipes are a key indicator of the proliferation of our OCD solutions within our customers’ fabs. Notably, whereas the overall deployment…

Thank you, Tim and good afternoon. In the fourth quarter, revenues were $45.3 million above our guidance of $40 million to $44 million reflecting the improvement in semiconductor business conditions, which occurred after our third quarter conference call in late October. However consistent with the overall decline in industry spending, Q4 revenues were down 22% from Q3 and were 2% below Q4 of last year. Total product revenues of $36.7 million were down 26% from the third quarter 2011 and down 4% from the fourth quarter of 2010. Service and upgrade revenues of $8.6 million were up 1% from the prior quarter and up 8% year-over-year, primarily due to increases in core services on our growing installed base. In total, service revenues comprised 19% of sales in the fourth quarter, compared to 14% in Q3. Sales of our automated metrology systems comprised 61% of total revenues in the quarter, down about 18% from Q3 due to softening conditions in semiconductor equipment spending, also affected by the slowdown in capital spending where our integrated metrology sales, which comprised 11% of total revenues in the quarter declining 33% from Q3. And our Materials Characterization business which comprised 9% of total revenues in the quarter and declined 51%, compared to the third quarter, primarily due to weak spending conditions in both the silicon substrate and LED industries. By end-markets, we saw a significant increase in our product sales into the Foundry segment, which increased 25% of product revenues in the fourth quarter from 10% in Q3. Product revenue into the Logic, IDM, and hard drive segments were 24% of total product sales in the fourth quarter, compared to 27% in the third quarter. In the memory market, our sales into the NAND flash market declined by approximately 46% to comprise 26% of product…

Thank you, Ron. Last quarter we reported on softness going into the fourth quarter and guided revenues down accordingly. We also commented that by mid-quarter we were experiencing a stabilization of our business outlook and order rates which was expected to play out favorably entering into the New Year. That has in fact turned out to be the case. As we have seen some improvement in our business and business outlook entering 2012. With that our guidance for Q1 is as follows. Revenues of $52 million to $55 million. Gross margin of 47% to 50%, operating margin of 5% to 10%, EPS of $0.06 to $0.13 per share and non-GAAP EPS of $0.09 to $0.16. With that, we would now like to open the line for questions.

Tom Diffele – DA Davidson: Yeah, good afternoon. Maybe first couple questions on the margins, for the outlook is it, kind of a combination of the mix in volume again or does NANDA have a play in?

Yeah, Tom, this is Ron. Most of the impact in Q1 really is the mix and the launch of new products that we are seeing. We are seeing a little bit of sequential increase, but it continues to be the global mix. It’s not really a significant impact from NANDA in Q1. Tom Diffele – DA Davidson: And for the new products, just because you are just starting the learning curve and is this something you expect to come up over time?

Yes. Tom Diffele – DA Davidson: Okay. And then, I guess looking at your long-term model, has that changed at all, as far as what you think operationally you are going to achieve at different revenue levels?

I think, by and large, this is Tim, I think by and large the model is still a valid one, where we are driving to get back on to that model. We lost a little ground as we reported. But we think that that is a robust and viable one and we are going to do our best to get back on to it. Tom Diffele – DA Davidson: Okay. Great. And then in the quarter, you sound like you had some pretty strong foundry business, was this a one-time item there or do you think foundry remains a pretty big part of your business going forward?

I think that we have benefited from increased foundry spending and I think our positions in a couple of areas are strong and I would expect foundry just to continue to play an important role in our revenue reports. Tom Diffele – DA Davidson: Okay. Great. And we look at the foundry that looks like, when you move to 20-nanometers and below there is a big increase in OCD demand, just wanted if you could quantify that somehow going from node-to-node?

Tom Diffele – DA Davidson: Okay. Great. And then finally, when some of the leading edge customers go from 20 down to 14-nanometers, is there a big impact on the tools or is there a shift of tools as it refers to OCD?

I am not sure how to answer that. I think that OCD continues to play a very key role. I don’t think that there is a step function or discontinuity in the role. I think one of the areas that we’ll be all be looking at is, the changing of the role of OCD as we potentially enter into the EUV world. But at this time, with the double patterning, quadruple patterning and pushing down to the 1X nodes I see a continuing strong demand for the OCD technology and our products. Tom Diffele – DA Davidson: Okay. Great. Thanks for your time.

You bet.

Thank you, our next question is from Mahesh Sanganeria of RBC Capital Markets. Your line is open. Mahesh Sanganeria – RBC Capital Markets: Thank you very much. Tim, just to follow-up on the gross margin comment again. If we – how should we be thinking about gross margin in terms of these items that the projects you are working on to improve, if the revenues were to stay flat, I’m hoping they won’t find it stable to stay flat, when do we start to see a pick up in the gross margins?

Mahesh, yeah that’s a good question. I don’t have an absolute answer, but I – clearly, even in the phase of flat revenues, we see an ability to improve the margins and the different programs that we are working on kind of stays in at different rates. I would hope that as we get more mature on the launch of our new platform, which as Ron mentioned in his comments, we received a much higher demand for than we planned on in the Q4 timeframe. As the volume of that pick up that we should see some improvements to our supply chain and our factory efficiency and then the other programs will take a little longer. But these are all 2012 objectives for us. Mahesh Sanganeria – RBC Capital Markets: Okay, so at least the first half look towards the second half sometime to start to see some improvement, that’s how I deal it. But just one more thing that I want to follow, most of the companies guided so far in semi cap lend, most of them have guided 200 basis points lower than what I would expected. And so it looks like there is an – something industry-wide phenomena going on here. Would you agree to that or do you think there is something specific in this case, you are designing to specific Nanometrics, but I’m just trying to figure out if there is something industry-wide here which also is impacting your gross margins?

Well I don’t think it is an industry-wide issue. There are always the normal elements that come into play such as the creeping cost of materials in the supply chain, increases in salaries that go inside of the manufacturing environment. So there are those normal creep factors. But I don’t think there is anything industry-wide. We look at our own margins and we’ve been proud to post very strong margins historically and we are going to get back on that curve. Mahesh Sanganeria – RBC Capital Markets: Okay, and just one last one question on the revenue. Assuming that most semiconductor companies spend what they have guided. What’s your expectation in terms of the linearity of spend and it is – or if you don’t go by quarterly first half or second half, how do you expect the – how do you see that playing out?

And so that’s a great question and I think the question I ask is, there is some speculation that the year might be front-end loaded. There may be some softness in the second half. We actually are seeing that in our activities, but I really want to emphasize the fact that the high levels of volatility and the visibility be so short that I don’t think any of us have a strong certainty either way. I would be no more surprised if the second half was stronger than it was little bit weaker. I just – we just don’t have visibility beyond that. Mahesh Sanganeria – RBC Capital Markets: Okay, that’s fair. Thanks a lot.

Thank you. Our next question is from Weston Twigg of Pacific Crest. Your line is open. Weston Twigg – Pacific Crest Securities: Hi, thanks for taking my question. Just a couple of quick ones. Can you give us an idea of what you think the full year revenue contribution might be from UniFire and maybe even NANDA this year?

West, the simple answer to that is no. We are not going to break out that granularity, we do believe that, as we said, there are couple things that we are looking forward to in the year and that is that our contributions from foundry and our contributions from the overall packaging inspection areas start to become material in the year. We’ve got some traction as you know about the UniFire. There is some nice product placement activities have gone on with the NANDA and we see those all are helping us. But other than that, I can’t give you anymore granularity. Weston Twigg – Pacific Crest Securities: Okay, and just, I guess the other maybe want to dig into little bit, is KLA on their call talks about winning market share in OCD and, s I’m just wondering if you can give us any idea or give us a feeling on how current head-to-head competitions are going on with, if you feel like you are winning more than losing in OCD and maybe part of KLA’s bullishness is related to some foundry business that you haven’t been able to announce?

Weston Twigg – Pacific Crest Securities: Okay, you are not necessarily losing any significant head-to-head competition, significant numbers of head-to-head competition I should say?

Not at all. Weston Twigg – Pacific Crest Securities: Okay, and on the foundry side, just to wrap it up, have you or do you expect to have - to be able to announce any additional wins in addition to the one you announced last fall?

Weston Twigg – Pacific Crest Securities: Okay, great. Thanks a lot.

Srinivasan Sundararajan – Oppenheimer & Co: Hi guys, congratulations on a good quarter, actually better than my expectations. And going forward, would it be fair to say that even the second quarter, you would be expecting something similar to the first quarter, meaning you are not seeing a slowdown in second quarter as far as visibility is concerned?

Couple points that are interesting is that, of the top three spenders in the industry, with their new plans they represent more, about 56% of the total spending and if you look at our three 10% customers, it represents almost 46% on the spending. So they spend where they say and there is some linearity to that than we should enjoy this a year. But it is volatile, the visibility is low and these guys do change their minds pretty quickly. Srinivasan Sundararajan – Oppenheimer & Co:

I’ll let Ron address that one. He is under the pressure to fix my (inaudible).

Yeah, Srini, we’ve looked at a number of structures. I think the best way to do it and the way that gives long term benefit and also is a restructuring of our supply chain is aligned closely with actually how we are doing business. We think that can give us some benefit. I think as we move through the first half we’ll be able to share more details about exactly what we are planning and what our expectations are. But that’s generally where we focus most of our attention right now in terms of improving our tax rate. Srinivasan Sundararajan – Oppenheimer & Co: And my last question is, would it be fair to say that a certain US logic manufacturer might probably account for the biggest level of your revenues this year?

I don’t want to respond to that directly. You know our top customers and we expect them all to be continuing to contribute to our success in 2012. But we are not going to speculate on how that sorts out. Srinivasan Sundararajan – Oppenheimer & Co: Okay, thank you very much.

Thank you. (Operator instructions) I’m showing no further questions at this time. I’ll turn the call back over to Dr. Stultz.

Thank you and thank you once again for participating in our call. I continue to be optimistic about the future for Nanometrics. I have justifiable confidence in the terrific team of employees who make it happen each and every day and I look forward to reporting on the results of our operational and financial performance for the first quarter of 2012 in April.

Ladies and gentlemen, this concludes today’s conference. You may now disconnect. Good day.