Good afternoon and welcome to the Nanometrics Second Quarter 2012 Financial Results Conference Call. A Q&A session will be held at the end of the conference call. Until that time, all participants will be in a listen-only mode. Please note that this conference is being recorded today, July 26, 2012. At this time, I would like to turn the call over to your host, Claire McAdams. Please begin. Claire McAdams – Investor Relations: Thank you and good afternoon everyone. Welcome to the Nanometrics second quarter 2012 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 the second quarter and our perspective looking forward. Then, Ron will discuss our financial results for the second quarter and third quarter outlook. 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 www.nanometrics.com. Today’s conference call contains certain forward-looking statements including, but not limited to financial performance and results including revenue, margins, profitability, and earnings per share, customer concentration, tax rates, and product adoption. Although Nanometrics believes that the expectations reflected in the forward-looking statements are reasonable, actual results could differ materially from expectations due to a variety of factors including economic conditions, changes in levels of industry spending, the adoption and competitiveness of our products, shift and timing of orders or product shipments, changes in product mix, our ability to successfully identify, complete, and integrate acquisitions to realize operating efficiencies and to achieve reduced tax, and the additional risk factors and cautionary statements set forth in the company’s Form 10-K on file for fiscal year…

(Operator Instructions) Our first question comes from Mahesh Sanganeria with RBC Capital Markets. Mahesh Sanganeria – RBC Capital Markets: Thank you very much. Tim, just looking into the September quarter I am assuming that the decline is primarily coming from that upgrade business and the system, the metrology OCD business?

Hi Mahesh. Actually the decline we are looking at is a result of a pretty well publicized decreases in spending by the two largest spenders in the industry, which happened to also be the two largest customers that we have. Mahesh Sanganeria – RBC Capital Markets: Right, so that’s – but the upgrade business was unusually high I mean by looking at the gross margin number I’m estimating the upgrade business was in $5 million range. And I would assume that that would revert back to a $1 million kind of $1 million-$1.5 million range, is that a good estimate?

No, I am not going to give you specific guidance on the upgrades, Mahesh. But the upgrade business as you know has periodic fluctuations based on the customers buying large groups different times. It’s been rather low in the previous quarters. We’ve seen some nice outlooks on it. We got a very nice contribution this quarter, but the real swing factor for us is the spending by our two largest customers. Mahesh Sanganeria – RBC Capital Markets: Alright and you also said that you expect this to continue for a couple of quarters that means you don’t see the pickup in the December quarter yet, but is it safe to say that you from what your discussion with the customer you would start seeing the pickup in the March quarter?

Right now, as you now, there has been an awful lot of near-term volatility in the spending patterns of our two largest customers. And we are trying to be cautiously optimistic about what their spending is going to be. We do know that there are some pretty significant capacity adds, fan-outs, and new technology buys are recurring in 2013 that we’ll benefit from. And we just see ourselves weathering through this uncertainty for the next couple of quarters. Mahesh Sanganeria – RBC Capital Markets: Okay. So - in terms of the Atlas II gross margin, what’s the timeline, has there been change in the timeline to get it to the 55% kind of gross margin?

So, actually we’re really pleased, the team has really executed quite well on bringing the margins of that tool up by bringing the cost down. We are on track we’ve given previous guidance that suggest we will reach our goal by the end of the calendar year. And I expect us to be there at that timeframe. Mahesh Sanganeria – RBC Capital Markets: Okay, thank you very much.

You bet.

Our next question comes from Patrick Ho with Stifel. Patrick Ho – Stifel: Thank you very much. Tim, just looking forward in terms of the industry trends and the potential pickup in shipments in the December quarter, given the concentration you have with those specific customers is the possibility that some of the pushups that are occurring now come back into the December quarter or do you feel right now that that’s more of a early 2013 story?

That’s a good question. I would like to have a good clear answer for you on that. As you know, as we get into this timeframe, especially in the summer quarter and then we move into the fourth quarter we always experience I mean the industry experienced a fair amount of volatility. I think it’s really too early for us to give you that kind of definitive answer for the fourth quarter. We are getting confident on long-term spending and programs in place. But our customers have notoriously changed their spending patterns under a short notice and if it happens in the fourth quarter, we’ll be ready to respond to it, but right now we are not guiding to that. Patrick Ho – Stifel: Okay, fair enough. Maybe a different take on the Atlas II gross margin progress that you’ve made, where would you say the – I guess the next incremental steps are. Is it now just getting it to volume, do you believe you have the supply chain and the manufacturing aspects now set or it’s not just getting it to volume to get the margins to your I guess normal corporate average?

It’s really we are on track for the improvements. It’s not really tied directly to volume, but it’s really tied to the negotiation of the key components within the supply chain and the volume purchase agreement. And then when we receive them against the orders and when they worked away through the P&L. So, it’s really, the linkage is much more to the bill of materials and the cost of goods than it is to any volume metric on that. The guys are on track and doing a terrific job. They laid out a plan almost a year ago, well six months ago, but a one-year plan and there has been a stride on it. So, we’ll see quarter-by-quarter improvement in that margin. Patrick Ho – Stifel: Final question for me, obviously there was a lot of noise at SEMICON West regarding the 450 millimeter investment Intel made into ASML. I know you guys have been early to the forefront with 458 millimeter in the past in your previous calls does that agreement either accelerate change any of your plans and how can we look at the investment profile for 450 millimeter on a going forward basis for you?

The linkage to our plan probably isn’t terribly strong, but I think what that investment did do was gave more clarity and definition to the 450 millimeter roadmaps, we’re early on with our tools, they use our tools for early product assessment, early technology development, early tool development. And by clarifying the roadmap through that investment I think it brings the other tool developers in line and gives us all a lot more confidence in the timing, which I think ultimately plays out that 450 millimeter is going to be pulled in a little earlier than it was previously believed. Patrick Ho – Stifel: Does it change any of your investment plans because of that?

No, because our investment plans were to bring our tool to market rather early as I’ve said we’ve got our plans on across our product platforms and will be there at the early stages of all this because of our customer requirements. Patrick Ho – Stifel: Great, thank you.

(Operator Instructions) Our next question comes from Tom Diffely with D.A. Davidson. Tom Diffely – D.A. Davidson: Good afternoon. So Tim, quick question for you on seasonality, I realized that the last many December quarters business has been down, but is there really any seasonality or is it just kind of the way the cycles have fallen over the last 4 or 5 years?

Sure, that’s a good question Tom and we are all trying to figure that out. I think that the spending patterns historically in the last several years haven’t fall what one would call normal seasonal trend. We as a company have – certainly had declines in our fourth quarter revenues over the last several years. A lot of that was driven more by customer negotiations and last minute pricing negotiations for delivery that we held fast on. I think at least some of the pundits believe that this spending pattern now is more reflective of seasonality. I think it’s tied to what’s going on in the capacity for NAND. The heavy investment in NAND capacity in the early part of the year, a bit of recovery in the DRAM area and the ultimate timing on the investments in logic which has been pushed out just a little bit. Tom Diffely – D.A. Davidson: Okay and when you see some of your larger customers that have multiple product lines be a little weaker going forward, are they weak across the board or is there relative strength between DRAM, NAND, and logic inside of a single customer.

Well, we’re seeing shift in the spending patterns, last quarter we had very, very low, one of the lowest contributions from DRAM towards overall memory revenues. We’ve seen a pickup in spending on DRAM across multiple customers. We’ve seen a slowdown in the NAND capacity. Again I think part of it had to do with the aggressive spending that was early on the year and also just some softness in the NAND devices. And then I think there were some yield issues that drove some timing of investments in some other sectors as well as all kind of compounded to give us the kind of spending patterns we are now seeing. Tom Diffely – D.A. Davidson: Okay. And then you guided to a margin range between 46 and 49, is it biggest factor there, just mix or is it how the product comes down, the improvement plan as well or what’s really going to put you at either end of that scale?

So, what we are going to see, I mean, we are going to see continued improvement in Atlas II margins, which are going to drive things up, but the overall mix will still have an impact on where we come out. And so I think those are going to be the drivers that put us somewhere in that range. Tom Diffely – D.A. Davidson: Okay. Go ahead, sorry.

And then the other thing is just looking at the volume, it’s going to have an impact as well on where we come out. Tom Diffely – D.A. Davidson: Okay. Where you are in your revenue range is kind of?

Where we are in the revenue range, yes. Tom Diffely – D.A. Davidson: Okay. And then Ron, when you look at your taxes on a long-term basis, what can be done over, I guess, maybe a multiple year period to bring that down and what reason could we expect over that period of time? A lot of equipment guys now because they are overseas, they can produce with taxes in the 20s, but what’s your long-term goal?

Yeah. So, our long-term goal would be to bring our rate into the 20s and we’ve done the research and we know what we would need to do structurally to get to that rate. It’s a multi-year process to get to that as you transitioned from bringing all of the profits into U.S., which is how Nano is structured today to leaving some of the profits in foreign countries with the lower tax rates. We’ve indicated that we have identified exactly what we need to do. We are going to wait and see. There is lots of discussions in the government about whether or not to either lower the U.S. rate or alternatively eliminate the benefit that most companies take advantage of. And it’s a multi-year project to get there. So, we are waiting to kind of see how things play out this year before we embark on this multi-year project. Once we kick it off, I would expect to see 1% to 2% decreases in the first couple of years and that we ultimately end up in the 20s with rates that are comfortable. Really, the differentiation between companies is really driven by the mix of international to U.S. in terms of where in the 20s you end up. Tom Diffely – D.A. Davidson: Okay, alright. And then finally, you talked a little about the OpEx going up just a hair in the next quarter. With revenues coming down, well, our thoughts have been kind of a natural pushdown on the operating expenses, so what’s driving the uptick?

So, as I mentioned, we did a couple of activities to consolidate and reorganize during the current quarter, Q3 and the cost associated with that or about $700,000. And so we’ve guided up $400,000 to $700,000. So, the core spending is actually down to flat if you exclude the impact of some of these changes. And then further, these changes are going to favorably impact our spending as we go in to Q4 next year, by at least $0.5 million per year. Tom Diffely – D.A. Davidson: Okay, great. Thank you.

Our next question comes from Gus Richard with Piper. Gus Richard – Piper: Yes, thanks for taking my question. I got a couple. First of all, just thinking about FinFET and as the foundries adopt that, I know you’ve got some demo tools out and some of the foundries for that activity. Do you have an expectation as to when that kind of structure would ramp in some of the foundries?

Yeah, I guess, the FinFET technology, we believe helps us a lot in our efforts to penetrate some accounts, well we don’t have a strong division. Based on the experience we have with our tools in the high-volume manufacturing for FinFET, it’s the timing is more about, I think it’s more of a technology node question than it is about where I can call the month. And right now, based on the announcements and engagements, we think its 20-nanometer nodes are the places, where at least two of the major – two of the foundries we are talking of bringing FinFET in and that would be our opportunity to gain some tracks in there. Gus Richard – Piper: Okay. And that would be the second generation of 20, not necessarily the first?

In at least one account, that’s what we have heard, I don’t know about the other account, but it’s certainly what they have said publicly on one account is that they will go first generation 20-nanometer with planar and they will do second – they will bring FinFET into the second generation 20-nanometer. Gus Richard – Piper: Right. And then on FD-SOI, the IBM fan club is looking like they're moving forward a number of people made announcements. Have you had a chance of looking to opportunities for OCD area, the tools if people go with that gate structure?

Well basically, we've – we have looked at wafers whether they’d be bare silicon or SOI. We were kind of – we’re right now seeing as what the core wafer technology is. We are measuring terms and structures on top of it. Our tools do work whether or not they're bare silicon or they’re SOI wafers and we expect to able to benefit accordingly in which ever way they go we’ll be there. Gus Richard – Piper: Let me try it this way if someone decides go FD-SOI and it doesn’t use a Fin, is there a need to go OCD?

Yes, absolutely. Gus Richard – Piper: Okay. But the intensity might be a bit lower?

No I don’t think so I think it’s just – it’s a different use case, but well… Gus Richard – Piper: Sorry. And then Tim just in terms of – you said there are other growth opportunities next year when you think of technology transitions maybe through silicon via or what have you – outside of OCD what do you see as a big driver potentially for you in ’13?

That’s a good question, so when we look at OCD business we are happy it’s a strong area, there is continued investment. But what else do we do to grow the business. So we’ve got three areas that I think are going play out to give us incremental opportunity. The first one is penetration – significant penetration of the third large spender of the industry, which we still don’t have the kind of position I think we just came out. And that would be incremental to our overall business model. Second one is the growth in the advanced packaging. We've got a couple of tools down that space both in the spark and the UniFire platforms and that’s an emerging market that really hasn’t come closer to hitting its stride, its still at the bottom of the S-Curve. And third one will be same gains in inspection market, both in the established areas of macro inspection, as well as some of the emerging areas that we're getting somewhat interested in. So, I think those are the three areas with the largest opportunity for growth incremental to our core business. Gus Richard – Piper: Got it and then just on going back to SG&A, the increase – the incremental increase sequentially is going to be mostly in the SG&A line and then the decline going into the fourth quarter the savings is that going come out of R&D and SG&A am I thinking about that wrong?

You’re thinking about it correctly. The incremental costs associated with the activity in the reorganization largely mirrors where the savings will come in the future quarters. So, if you look at kind what you're seeing in the savings that’s where you’ll – where you’re seeing the ramp that’s where you'll see the savings going into the Q4 and beyond. Gus Richard – Piper: It makes sense to me, perfect. I appreciated it. Thanks.

Thanks Gus.

And I’m not showing any further questions at this time. I'd like to turn the call back over to Mr. Stultz for closing remarks. Dr. Timothy Stultz – President and Chief Executive Officer: Well, thank you once again for participating in our call. We appreciate the continued support and commitments of all our stakeholders, our customers, our shareholders and our employees. The latter of which truly make it all happen on day-to-day basis. I look forward to reporting on the results of our operational and financial performance for the third quarter of 2012 in October.

Ladies and gentlemen, this does conclude today’s presentation. You may now disconnect and have a wonderful day.