10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 30, 2017

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 000-13470

NANOMETRICS INCORPORATED

(Exact name of registrant as specified in its charter)

Delaware	94-2276314
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

1550 Buckeye Drive Milpitas, California	95035
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (408) 545-6000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, $0.001 par value per share	The Nasdaq Stock Market LLC (Nasdaq Global Select Market)

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act. Yes  ☐    No  ☒.

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  ☐    No  ☒.

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ☒    No  ☐.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  ☒    No  ☐.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined by Rule 12b-2 of the Act) Yes  ☐    No  ☒.

As of June 30, 2017, the last business day of the Registrant’s most recently completed second fiscal quarter, the aggregate market value of the common stock of Registrant held by non-affiliates, based upon the closing sales price for the Registrant’s common stock for such date, as quoted on the Nasdaq Global Select Market, was approximately $468.3 million. Shares of common stock held by each officer and director and by each person who owned 5% or more of the outstanding common stock have been excluded because such persons may be deemed to be “affiliates” as that term is defined under the rules and regulations of the Exchange Act. This determination of affiliate status is not necessarily a conclusive determination for any other purpose.

The number of shares of the Registrant’s common stock outstanding as of February 20, 2018 was 23,761,304.

DOCUMENTS INCORPORATED BY REFERENCE

The Registrant has incorporated by reference into Part III of this Annual Report on Form 10-K portions of its Proxy Statement for its 2018 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A. The Proxy Statement will be filed within 120 days of Registrant’s fiscal year ended December 30, 2017.

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NANOMETRICS INCORPORATED

FORM 10-K

FOR THE FISCAL YEAR ENDED DECEMBER 30, 2017

TABLE OF CONTENTS

PART I			4
	ITEM 1.	BUSINESS	4
	ITEM 1A.	RISK FACTORS	11
	ITEM 1B.	UNRESOLVED STAFF COMMENTS	22
	ITEM 2.	PROPERTIES	23
	ITEM 3.	LEGAL PROCEEDINGS	23
	ITEM 4.	MINE SAFETY DISCLOSURES	23
PART II			24
	ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	24
	ITEM 6.	SELECTED FINANCIAL DATA	27
	ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	28
	ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	38
	ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	39
	ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	72
	ITEM 9A.	CONTROLS AND PROCEDURES	72
	ITEM 9B.	OTHER INFORMATION	73
PART III			74
	ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	74
	ITEM 11.	EXECUTIVE COMPENSATION	74
	ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	74
	ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	75
	ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	75
PART IV			76
	ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES	76
	ITEM 16	FORM 10-K SUMMARY	78
SIGNATURES			79

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CAUTIONARY INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K for the year ended December 30, 2017, or “Form 10-K,” contains forward-looking statements concerning our business, operations, and financial performance and condition as well as our plans, objectives, and expectations for business operations and financial performance and condition. Any statements contained herein that are not of historical facts may be deemed to be forward-looking statements. You can identify these statements by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “should,” “will,” “would,” and other similar expressions that are predictions of or indicate future events and future trends. These forward-looking statements are based on current expectations, estimates, forecasts, and projections about our business and the industry in which we operate and management's beliefs and assumptions and are not guarantees of future performance or development and involve known and unknown risks, uncertainties, and other factors that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this Form 10-K may turn out to be inaccurate. Factors that could materially affect our business operations and financial performance and condition include, but are not limited to, those risks and uncertainties described herein under “Item 1A - Risk Factors.” You are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on the forward-looking statements. The forward-looking statements are based on information available to us as of the filing date of this Form 10-K. Unless required by law, we do not intend to publicly update or revise any forward-looking statements to reflect new information or future events or otherwise. You should, however, review the factors and risks we describe in the reports we will file from time to time with the Securities and Exchange Commission, or SEC, after the date of this Form 10-K.

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PART I

ITEM 1. BUSINESS

Overview

Nanometrics Incorporated and its subsidiaries (“Nanometrics”, the “Company”, or “we”) is a leading provider of advanced, high-performance process control metrology and inspection systems used primarily in the fabrication of semiconductors and other solid-state devices, including sensors, optoelectronic devices, high-brightness LEDs, discretes, and data storages components. Our automated and integrated metrology systems measure critical dimensions, device structures, topography and various thin film properties, including three-dimensional features and film thickness, as well as optical, electrical and material properties. Our process control solutions are deployed throughout the fabrication process, from front-end-of-line substrate manufacturing, to high-volume production of semiconductors and other devices, to advanced three-dimensional wafer-level packaging applications. Our systems enable advanced process control for device manufacturers, providing improved device yield at reduced manufacturing cycle time, supporting the accelerated product life cycles in the semiconductor and other device markets.

We were incorporated in California in 1975, and reincorporated in Delaware in 2006. We have been publicly traded since 1984 (Nasdaq: NANO). We have an extensive installed base of thousands of systems in the majority of advanced semiconductor device production factories worldwide. Our major customers include Samsung Electronics Co. Ltd., SK Hynix Semiconductor, Inc., Micron Technology, Inc., Intel Corporation, Toshiba Corporation and Taiwan Semiconductor Manufacturing Company Limited.

Additional information about us is available on our website at http://www.nanometrics.com. The information that can be accessed through our website, however, is not part of this Annual Report. The investor relations section of our website is located at http://www.nanometrics.com/investor.html. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports are available on the investor relations section of our website free of charge as soon as reasonably practicable after we electronically file or furnish such materials to the United States Securities and Exchange Commission (“SEC”). In addition, the reports and materials that we file with the SEC are available at the SEC's website (http://www.sec.gov) and at the SEC's Public Reference Room at 100 F Street, NE, Washington DC 20549. Interested parties may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

Industry Background

We participate in the sale, design, manufacture, marketing and support of process control systems for optical critical dimension metrology, thin film metrology, wafer defect inspection, and advanced analytics used for semiconductor manufacturing. Semiconductors, primarily packaged as integrated circuits within electronic devices, include consumer electronics, server and enterprise systems, mobile computing (including smart phones and tablets), data storage devices, and embedded automotive and control systems. Integrated circuits are made up of semiconductor material layers integrating millions or billions of transistors and other electronic components, connected through a complex wiring scheme of small copper wires, ultimately packaged into thin form factors to be mounted on circuit boards or other substrates. Our core focus is the measurement and control of the structure, composition, and geometry of the devices from the transistor layer through advanced wafer-level packaging to improve device performance and manufacturing yields. Our end customers manufacture many types of integrated circuits for a multitude of applications, each having unique manufacturing challenges. This includes integrated circuits to enable information processing and management (logic integrated circuits), memory storage (NAND, 3D-NAND, NOR, and DRAM), analog devices (e.g., Wi-Fi and 4G radio integrated circuits, power devices) MEMS sensor devices (accelerometers, pressure sensors, microphones), image sensors, thin film head components for hard disk drives and alternative energy devices such as LEDs, power inverters and solar cells.

Demand for our products continues to be driven by our customers' desire for higher overall chip performance, including improvements in power efficiency, logic processing capability, data storage volume and manufacturing yield. To achieve these goals, our customers have increased their use of more complex materials and processing methods in their manufacturing flow. The majority of our chip customers manufacture devices in production runs defined by the smallest printed feature and the associated circuit manufacturing methods, known as a technology node, which are measured in nanometers ("nm"), or one-billionth of a meter. Current volume production is running from 28nm down to the 10nm nodes across foundry and logic devices, transitioning from 20nm to 1Xnm for DRAM memory (where X is IDM dependent and may be as low as 17nm), and third generation 3D-NAND with up to 64 layers of storage transistors. Our customers continue to develop next generation devices such as 7nm and 5nm devices in logic and foundry, shrink DRAM below the 17nm node, and scale 3D-NAND devices to 96 layers and beyond. In some cases, our customers are implementing new materials and methods in high volume manufacturing, including materials and device architectures to reduce power consumption, stacked memory devices including 3D-NAND, and advanced interconnect wiring schemes. To shrink features, new methods, including multiple patterning lithography and extreme ultra-violet lithography (EUV), have been developed. Additional innovation continues in Data Storage, Power Devices, MEMS, and Image Sensors. We believe the use of these new materials and manufacturing methods has increased demand for our products.

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Our Business

We offer a diverse line of process control products and technologies to address the manufacturing requirements of the semiconductor (and other solid-state device) manufacturing industry. Our metrology systems measure and characterize the physical dimensions, material composition, optical and electrical characteristics and other critical parameters of solid state devices, from initial wafer substrate manufacturing through final packaging.

We are continually working to strengthen our competitive position by developing innovative technologies and products in our market segment. We have expanded our product offerings to address growing applications within the semiconductor manufacturing and adjacent industries. In pursuit of our goals, we have:

• Introduced new products, applications, and upgrades in every core product line and primary market served;

• Diversified our product line and strengthened our position with our top customers securing tool of record positions of one or more products in each of the top six customers (as defined by capital expenditures for wafer fab equipment), who combined represent more than 80% of all wafer fab equipment expenditures; and

• Continued development of new measurement and inspection technologies for advanced fabrication processes.

Nanometrics Products

We offer a diverse line of systems to address the broad range of process control requirements of the semiconductor manufacturing industry. In addition, we believe that our product development and engineering expertise and strategic acquisitions will enable us to develop and offer advanced process control solutions that, in the future, should address industry advancement and trends.

Automated Systems

Our automated systems primarily consist of fully automated metrology systems that are employed in semiconductor production environments. The Atlas^® III, Atlas II+, and Atlas XP+ represent our line of high-performance metrology systems providing optical critical dimension (“OCD”^®), thin film metrology and wafer stress for transistor and interconnect metrology applications. The thin film and OCD technology is supported by our suite of solutions including our NanoDiffract® software SpectraProbe™ software and NanoGen™ scalable computing engine that enables visualization, modeling, and analysis of complex structures. The UniFire™ system measures multiple parameters at any given process step in the advanced packaging process flow for critical dimension, overlay, and topography applications and has recently added inspection capabilities for both front-end of line patterned wafer and advanced packaging related applications.

Integrated Systems

Our integrated metrology (“IM”) systems are installed directly onto wafer processing equipment to provide near real-time measurements for improved process control and maximum throughput. Our IM systems are sold directly to end user customers. The IMPULSE^®+ and IMPULSE represent our latest metrology platform for OCD, and thin film metrology, and have been successfully qualified on numerous independent Wafer Fabrication Equipment Suppliers’ platforms. Our NanoCD suite of solutions is sold in conjunction with our IMPULSE systems. Our Trajectory^® system provides in-line measurement of layers in thin film thickness and composition in semiconductor applications and is qualified in production with major device makers.

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Software

NanoDiffract^® is a modeling, visualization and analysis software that takes signals from the automated and integrated metrology systems providing critical dimension, thickness, and optical properties from in line measurements. The software has an intuitive three-dimensional modeling interface to provide visualization of today’s advanced and complex semiconductor devices. There are proprietary fitting algorithms in NanoDiffract that enable very accurate and very fast calculations for signal processing for high fidelity model based measurements.

SpectraProbe™ is a model-less fitting engine that enables fast time to solution for in-line excursion detection and control. SpectraProbe complements the high-fidelity modeling of NanoDiffract with a simple machine learning interface for rapid recipe deployment. SpectraProbe expands the types of structures that can be used for metrology and control including in-die and on-device areas. Both analysis packages are supported by the automated and integrated systems, can be deployed in run-time environments and support off-line processing as part of a factory control solution when deployed on NanoCentral and NanoGen servers.

NanoGen is an enterprise scale computing hardware system that is deployed to run the computing intensive analysis software. NanoGen leverages commercial server chips and networking architecture and is optimized to support the workload of NanoDiffract analysis. NanoCentral is a fab based networking and server system providing connectivity and compute support to SpectraProbe and connected measurement systems including Atlas and Impulse products

Materials Characterization

Our materials characterization products include systems that are used to monitor the physical, optical, electrical and material characteristics of discrete electronic industry, opto-electronic, HB-LED (high brightness LEDs), solar PV (solar photovoltaics), compound semiconductor, strained silicon and silicon-on-insulator (“SOI”) devices, including composition, crystal structure, layer thickness, dopant concentration, contamination and electron mobility.

The RPMBlue™ is our photoluminescence mapping system designed specifically for the HB-LED market, and is complemented by the RPMBlue-FS, enabling a breadth of research and development configurability. We sell Fourier-Transform Infrared (“FTIR”) automated and manual systems in the QS2200/3300 and QS1200 respectively for substitute quality and epitaxial thickness metrology. The NanoSpec^® line, including the NanoSpec II, supports thin film measurement across all applications in both low volume production and research applications.

Our process control systems can be categorized as follows:

System	Market	Applications
Automated Systems
Atlas III, Atlas II+/Atlas XP+	Semiconductor	Film Thickness, Film Stress, CD
UniFire	Semiconductor	Film Thickness, Overlay, CD, and Advanced Packaging Applications, Inspection
Integrated Systems
IMPULSE/IMPULSE+	Semiconductor	Film Thickness, CD
Trajectory	Semiconductor, Solar PV	Film Thickness, Composition
Analysis Software and Computing Systems
NanoDiffract	Semiconductor	OCD
SpectraProbe	Semiconductor	Excursion Control Film Thickness & OCD
NanoGen/NanoCentral	Semiconductor	Compute Hardware for NanoDiffract & SpectraProbe

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Materials Characterization Systems
ECVPro	Compound Semiconductor, Solar PV, HB-LED	Electrical Properties
HL5500	Compound Semiconductor, Solar PV, HB-LED	Electrical Properties
QS1200	Substrate Semiconductor, Solar PV	Substrate Properties, Film Composition and Thickness
QS2200/3300	Substrate Semiconductor	Substrate Properties, Film Composition
NanoSpec® II	Semiconductor	Film Thickness (Tabletop)
RPMBlueTM	HB-LED	Epitaxial Layer Properties
Stratus	Semiconductor	Substrate Properties, Film Composition and Thickness (Tabletop)

See Note 14 of our consolidated financial statements in Item 8, "Financial Statements and Supplementary Data," for revenues by product type, which information is incorporated by reference here.

Customers

We sell our metrology and inspection systems worldwide to semiconductor manufacturers, and producers of solid state devices. The majority of our systems are sold to customers located in Asia and the United States.

The following customers accounted for 10% or more of our total net revenues:

	Years Ended
	December 30, 2017		December 31, 2016		December 26, 2015
Samsung Electronics Co. Ltd.		26%	***			13%
SK Hynix		13%		15%		11%
Micron Technology, Inc.		12%		20%		16%
Intel Corporation		11%		18%	***
Toshiba Corporation		11%	***			10%
Taiwan Semiconductor Manufacturing Company Limited	***			10%		19%

^*** The customer accounted for less than 10% of total net revenues during the period.

Sales and Marketing

We believe that the capability for direct sales and support is beneficial for developing and maintaining close customer relationships and for rapidly responding to changing customer requirements. We provide local direct sales, service and application support through our worldwide offices located in the United States, South Korea, Japan, Taiwan, China, Singapore and France, and work with selected dealers and sales representatives in Asia, in the United States and other countries. Our applications team is composed of technically experienced sales engineers who are knowledgeable in the use of metrology systems generally and the unique features and advantages of our specific products. Supported by our technical applications team, our sales and support teams work closely with our customers to offer cost-effective solutions to complex measurement and process problems.

Net revenues from customers located in the United States and in foreign countries, as a percentage of total net revenues were as follows:

	2017	2016	2015
United States	13%	14%	20%
China	12%	20%	9%
South Korea	36%	20%	16%
Singapore	8%	17%	9%
Japan	16%	12%	17%
Taiwan	8%	12%	25%
All other countries	7%	5%	4%

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See Note 14 of our consolidated financial statements in Item 8, "Financial Statements and Supplementary Data," for segment and geographical financial information, including revenues and long-lived assets by geographic region, and our consolidated financial statements for net revenue information, which is incorporated by reference here.

Customer Service and Support

We believe that customer service and technical support for our systems are crucial factors that distinguish us from our competitors and are essential to building and maintaining close, long-term relationships with our customers. We provide a standard one-year warranty on parts and labor for most of our products. We provide system support to our customers through factory technical support and globally deployed field service personnel. The factory technical support operations provide customers with telephonic technical support access, direct training programs, operating manuals and other technical support information to enable effective use of our metrology and measurement instruments and systems. We have field service operations based in various locations throughout the United States, South Korea, Taiwan, China, Japan, Singapore, Israel, France, Italy, and Germany.

Service revenues, including sales of replacement parts, represented 17%, 16%, and 22% of total net revenues in 2017, 2016 and 2015, respectively.

Backlog

As of December 30, 2017, and December 31, 2016, our backlog was $34.0 million and $28.5 million, respectively. Backlog includes orders received and booked, both shipped and not yet recognized as revenue, and not shipped, for products, services and upgrades where written customer requests have been received and we expect to ship and/or recognize revenue within 12 months. Orders are subject to cancellation or delay by the customer subject to possible penalties. However, historically, order cancellations have not been significant. Because orders presently in backlog could be cancelled or rescheduled and some orders can be received and shipped within the same quarter, we do not believe that current backlog is an accurate indication of our future revenues or financial performance.

With the adoption of the new revenue guidance, ASC Topic 606, Revenue From Contracts With Customers in the first quarter of fiscal 2018, we expect backlog will be reduced as discussed in Note 2 to the Consolidated Financial Statements in Item 8.

Competition

We offer various products for various semiconductor manufacturing process steps, and several of our products extend across the same process flow. However, for process control of each of these process steps, we have multiple competitors. In every market in which we participate, the global semiconductor equipment industry is intensely competitive, and driven by rapid technological adoption cycles. Our ability to effectively compete depends upon our ability to continually improve our products, applications and services, and our ability to develop new products, applications and services that meet constantly evolving customer requirements.

We believe that our competitive position in each of our markets is based on the ability of our products and services to address customer requirements related to numerous competitive factors. Competitive selections are based on many factors involving technological innovation, productivity, total cost of ownership of the system, including impact on end of line yield, price, product performance and throughput capability, quality, reliability and customer support.

In automated systems for the semiconductor industry, our principal competitors are KLA-Tencor Corporation (“KLA-Tencor”) and Nova Measuring Instruments Ltd. ("Nova") for thin film and critical dimension OCD metrology, and other suppliers for advanced packaging. Our primary competitor in integrated systems is Nova. The opto-electronics and discrete device markets are addressed primarily by our material characterization systems, served by numerous competitors and no single competitor or group of competitors has established a majority position.

Manufacturing

Our manufacturing operations are in Milpitas, California and at various contract manufacturers around the world. It is our strategy to outsource all assemblies that do not contain elements that we believe lead to a direct competitive advantage. The majority of our automated and integrated products are currently manufactured at our Milpitas facility. We also use contract manufacturers in other locations in the United States, China, Israel and Japan. We currently do not expect our manufacturing operations to require additional major investments in capital equipment.

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We produce key parts and components and make reasonable efforts to ensure that any externally purchased parts or raw materials are available from multiple suppliers, but this is not always possible. Certain components, subassemblies and services necessary for the manufacture of our systems are obtained either from a sole supplier or limited group of suppliers. We also have an established long-term supply agreement for supply of our spectroscopic ellipsometers and interferometers for use in our products. Although we seek to reduce our dependence on sole and limited source suppliers, partial or complete loss of these sources could disrupt production, delay scheduled deliveries to customers and have a material adverse effect on our revenues and results of operations.

Research and Development

We continue to invest in research and development (“R&D”) to provide our customers with products that add value to their manufacturing processes and that provide a better and differentiated solution than our competitors so that our products stay in the forefront of current and future market demands. Whether it is for an advancement of current technology, yield and manufacturing improvement, enabling new end device technology, or the development of a new application in our core or emerging markets, we are committed to product excellence and longevity.

In our automated markets, our R&D efforts resulted in the successful product launch of the Atlas III product in the marketplace, our flagship product for OCD. The Atlas III product provides enhanced OCD capability with a significantly lower cost of ownership model. In our integrated markets, the IMPULSE system has been further developed for inline lithography track configuration to extend our tool of record position for lithography OCD. The IMPULSE+ system, which incorporates performance and productivity enhancements to the IMPULSE was introduced in 2015 and has been qualified across numerous OEM platforms.

Modeling and analysis software including NanoDiffract and systems software has a regular refresh and release cadence.  NanoDiffract 4.0 was released in 2017.  NanoDiffract 4.0 includes improvements in the user interface, compute engine, and analysis leading to an overall faster time to solution while enabling more complex measurements. SpectraProbe, launched in 2016, is gaining rapid acceptance by our OCD and films metrology customers as it expands the types of structures and applications that can be measured, while reducing time to solution in the factory. SpectraProbe has enabled new process tool monitoring strategies that extend our process control capabilities to process tool and chamber control. The model-less approach reduces the applications time and effort to develop a monitoring recipe, while providing rapid insight into shifting and changing factory conditions.

The Materials Characterization suite of products including the FTIR, Photoluminescence (RPM and Imperia), and NanoSpec families have had significant refresh and customization for customer needs.  The RPM Blue FS, Imperia, and NanoSpec family have all had improvements released in 2017 to improve productivity and measurement performance.

Our research and development expenses for fiscal 2017, 2016 and 2015 were $36.7 million, $31.4 million and $32.7 million, respectively. 

Patents and Intellectual Property

Our success depends in large part on the technical innovation of our products and protecting such innovations through a variety of methods. We actively pursue a program of filing patent applications to seek protection of technologically sensitive features of our metrology and inspection systems.

As of December 30, 2017, we had 192 patents, including foreign patents, with expiration dates ranging from 2018-2036. We believe that our success will depend to a great degree upon innovation, technological expertise and our ability to adapt our products to new technology. While we attempt to establish our intellectual property rights through patents and trademarks and protect intellectual property rights through non-disclosure agreements, we may not be able to fully protect our technology, and competitors may be able to develop similar technology independently. Others may obtain patents and assert them against us. In addition, the laws of certain foreign countries may not protect our intellectual property to the same extent as do the laws of the United States. From time to time we receive communications from third parties asserting that our metrology systems may contain design features that the third parties claim may infringe upon their proprietary rights.

Employees

At December 30, 2017, we employed 592 persons worldwide with sales, applications and service support in key geographic areas aligned with our customer locations. None of our employees are represented by a union and we have never experienced a work stoppage as a result of union actions. We consider our employee relations to be good. Many of our employees have specialized skills that are of value to us. Our future success will depend in large part upon our ability to attract, retain and motivate highly skilled scientific, technical and managerial personnel, who are in great demand in our industry.

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Environmental Matters

Our operations are subject to various federal, state and local environmental protection regulations governing the use, storage, handling and disposal of hazardous materials, chemicals, and certain waste products. We believe that compliance with federal, state and local environmental protection regulations will not have a material adverse effect on our capital expenditures, earnings and competitive and financial position.

In the event that we fail to comply with such laws and regulations, we could be liable for damages, penalties and fines. We further discuss the impact of environmental regulation under “Risk Factors- We are subject to various environmental laws and regulations that could impose substantial costs upon us and may harm our business, operating results and financial condition.” in Item 1A.

Executive Officers of the Registrant

The names of our executive officers and their ages, titles and biographies as of February 20, 2018, are set forth below:

Name	Age		Position
Dr. Pierre-Yves Lesaicherre		54	President, Chief Executive Officer and Director
Greg Swyt		57	Vice President, Finance (Principal Financial Officer)
Rollin Kocher		52	Sr. Vice President, Commercial Operations
Kevin Heidrich		47	Sr. Vice President, Strategic Marketing and Business Development
Janet Taylor		60	General Counsel

Dr. Pierre-Yves Lesaicherre joined Nanometrics as President and Chief Executive Officer in November 2017. From January 2012 to February 2017, Dr. Lesaicherre was Chief Executive Officer of Lumileds, an integrated manufacturer of LED components and Automotive Lighting Lamps, where he was responsible for all aspects of the company’s business. Prior to being named Chief Executive Officer, Dr. Lesaicherre also held other management positions at Lumileds from 2006 to 2012. Before Lumileds, Dr. Lesaicherre was Senior Vice President and general manager of the business lines Microcontrollers & Logic at NXP Semiconductors, formerly Philips Semiconductors. He holds an MBA with a focus on international business and strategy from INSEAD, and has MS and Ph.D. degrees in Material Science from the National Polytechnic Institute of Grenoble.

Greg Swyt assumed the role of principal financial officer of Nanometrics in November 2017. Mr. Swyt has served as the Vice President, Finance of Nanometrics from August 2016. Prior to joining Nanometrics, Mr. Swyt was Managing Director, Finance, at Intevac Corporation, a company delivering thin film solutions, from May 2008 to July 2016, where he managed the Global Financial Planning and Analysis Organization, which also included Manufacturing Finance, Government Finance and Regional Finance. Mr. Swyt received a MBA and a BS in Finance from San Jose State University.

Rollin Kocher joined Nanometrics in March 2013 as Vice President of Worldwide Sales and Service. In September 2016, Mr. Kocher was promoted to Senior Vice President, Commercial Operations. Prior to joining Nanometrics, Mr. Kocher held several senior management positions over 17 years at KLA-Tencor, including Global Sales for Films and Scatterometry, Sales for Taiwan, North America and Europe, and Sr. Director of Sales for the Samsung Business Unit. His last position at KLA-Tencor was General Manager of the Samsung Business Unit, and in that capacity, was responsible for Sales, Marketing, Applications, and Service. Mr. Kocher holds a B.S. degree in Electrical Engineering Technology from the University of North Texas.

Kevin Heidrich, Sr. Vice President, Strategic Marketing and Business Development, joined Nanometrics in 2006. Mr. Heidrich has participated in many functions, expanding his scope to include new product development, corporate marketing, product marketing and business development. Mr. Heidrich is now responsible for both corporate strategy and marketing, as Nanometrics expands its overall solution space within process control metrology. Prior to Nanometrics, Mr. Heidrich spent a decade at Intel Corporation in a variety of roles including process research and development at Intel’s Technology Development facility. Mr. Heidrich received B.S. and M.S. degrees from the Colorado School of Mines in Chemical Engineering.

Janet Taylor joined Nanometrics as General Counsel in July 2015. Ms. Taylor served as Senior Vice President, General Counsel and Company Secretary of STATS ChipPAC Ltd., from June 2005 to June 2015, where she was responsible for all legal matters, including corporate governance, intellectual property, litigation and securities compliance. Prior to joining STATS ChipPAC Ltd, Ms. Taylor was engaged in transactional practices at international law firms in New York, Singapore and London. Ms. Taylor was admitted to the Bar in New York in 1990 and in Singapore in 2010. Ms. Taylor holds a J.D. from the Harvard Law School and a B.A. in History from the University of Texas at Austin.

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ITEM 1A. RISK FACTORS

In addition to the other information contained in this Annual Report on Form 10-K, we have identified the following risks and uncertainties that may have a material adverse effect on our business, financial condition or results of operations. Investors should carefully consider the risks described below before making an investment decision. The risks described below are not the only ones we face. Additional risks not currently known to us or that we currently believe are immaterial may also impair our business operations. Our business could be harmed by any of these risks. The trading price of our common stock could decline due to any of these risks and investors may lose all or part of their investment. This section should be read in conjunction with the Consolidated Financial Statements and Notes thereto, and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this Annual Report on Form 10-K.

The Global economic conditions and the cyclical nature of the semiconductor industry can reduce demand for our products which in turn may cause us to operate unprofitably and may cause reductions in available cash, and may negatively impact our financial performance.

Global economic conditions, the gradual recovery of the global economy and the cyclical nature of the semiconductor industry have impacted and could impact future customer demand for our products and our financial performance. Demand for our products is largely dependent on our customers' capital spending on semiconductor equipment, which depends, in large part, on consumer spending, required manufacturing capacity, and customer access to capital. Economic uncertainty, unemployment, higher interest rates, higher tax rates, fluctuations in foreign currency exchange rates, and other economic factors may lead to a decrease in consumer spending and may cause certain customers to cancel existing orders or delay placing orders. If we are unable to timely and appropriately adapt to changes resulting from unfavorable economic conditions, it may cause volatility in our operating results, business, and financial condition, and results of operations may be adversely affected.

In addition, demand for our products is highly inelastic which means we have little ability to control product revenues created by customer demand for more capacity. The market for our products is characterized by constant and rapid technological change, price erosion, product obsolescence, evolving standards, short product life cycles and significant volatility in supply and demand. Due to the inelastic nature of demand in the semiconductor industry, we may need to take actions to reduce costs in the future, which could reduce our ability to significantly invest in research and development at levels we believe are necessary. If we are unable to effectively align our cost structure with prevailing market conditions, our business, financial condition and results of operations may be materially and adversely affected.

We may also experience supplier or customer issues as a result of adverse macroeconomic conditions. If our customers have difficulties in obtaining capital or financing, this could result in lower sales. Customers with liquidity issues could also result in an increase in bad debt expense. These conditions could also affect our key suppliers, which could affect their ability to supply parts and result in delays of our customer shipments.

Our largest customers account for a substantial portion of our net revenues, and our net revenues would materially decline if one or more of these customers were to purchase significantly fewer of our systems.

Historically, a significant portion of our net revenues in each quarter and each year has been derived from sales to relatively few customers, and we expect this trend to continue. In fiscal year 2017, five customers represented 73% of our total net revenues. There are only a limited number of large companies operating in the semiconductor manufacturing industry and our market is characterized by continued consolidation in the customer base. Accordingly, we expect that we will continue to depend on a small number of large customers for a significant portion of our net revenues for the foreseeable future. If our current relationships with our large customers are impaired, or if we are unable to develop similar collaborative relationships with important customers in the future, our net revenues could decline significantly. In addition, because there are a limited number of customers, customers may seek concessions related to price, terms and conditions and intellectual property. Any of these changes could negatively impact our financial performance and results of operations.

We rely on a limited number of outside suppliers and subcontractors to supply certain components and subassemblies, and on a single or a limited group of outside suppliers for certain materials for our products, which could result in a potential inability to obtain an adequate supply of required components due to the suppliers' failure or inability to provide such components in a timely manner, or at all, and reduced control over pricing and timely delivery of components and materials, any of which could adversely affect our results of operations.

Our manufacturing activities consist of integrating, assembling and testing components and subassemblies. We rely on a limited number of outside suppliers and subcontractors to manufacture certain components and subassemblies. We order one of the most critical components of our technology, the spectroscopic ellipsometer component incorporated into our advanced measurement systems, from external suppliers.

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We procure some of our other critical systems' components, subassemblies and services from single suppliers or a limited group of outside suppliers in order to ensure overall quality and timeliness of delivery. Many of these components and subassemblies have significant production lead times. To date, we have been able to obtain adequate supplies of components and subassemblies for our systems in a timely manner. However, disruption or termination of certain of these sources could have a significant adverse impact on our ability to manufacture our systems. In addition, our failure to timely use components in our manufacturing processes due to delays or cancellation of orders may lead to write-downs of inventory. A disruption in supply or inventory window would, in turn, have a material adverse effect on our business, financial condition and results of operations. Our reliance on a sole supplier or a limited group of suppliers and our reliance on subcontractors involve several risks, including:

• a potential inability to obtain an adequate supply of required components due to the suppliers' failure or inability to provide such components in a timely manner, or at all; and

• reduced control over pricing and timely delivery of components.

Although the timeliness, yield and quality of deliveries to date from our subcontractors have been acceptable, manufacture of certain of these components and subassemblies is an extremely complex process, and long lead times are required. Any inability to obtain adequate deliveries or any other circumstance that would require us to seek alternative sources of supply or to manufacture such components internally could delay our ability to ship our products, which could damage relationships with current and prospective customers and have a material adverse effect on our business, financial condition and results of operations.

Some of our current and potential competitors have significantly greater resources than we do, and increased competition could impair sales of our products.

We operate in the highly competitive semiconductor industry and face competition from a number of companies, some of which have greater financial, engineering, manufacturing, research and development, marketing and customer support resources than we do. As a result, our competitors may be able to respond more quickly to new or emerging technologies or market developments by devoting greater resources to the development, promotion and sale of products, which could impair sales of our products. Moreover, there has been merger and acquisition activity among our competitors and potential competitors. These transactions by our competitors and potential competitors may provide them with a competitive advantage over us by enabling them to rapidly expand their product offerings and service capabilities to meet a broader range of customer needs. Many of our customers and potential customers in the semiconductor industry are large companies that require global support and service for their metrology systems. Some of our larger or more geographically diverse competitors might be better equipped to provide this global support and service.

Because of the high cost of switching equipment vendors in our markets, it may be difficult for us to attract customers from our competitors even if our metrology systems are superior to theirs.

We believe that once a semiconductor customer has selected one vendor's metrology system, the customer generally relies upon that system and, to the extent possible, subsequent generations of the same vendor's system, for the life of the application. Once a vendor's metrology system has been installed, a customer must often make substantial technical modifications and may experience downtime to switch to another vendor's metrology system. Accordingly, unless our systems offer performance or cost advantages that outweigh a customer's expense of switching to our systems; it will be difficult for us to achieve significant sales from that customer once it has selected another vendor's system for an application.

Our integrated metrology systems are integrated onto systems sold independently by Wafer Fabrication Equipment Suppliers, and a decrease in sales by these suppliers, or the development of competing systems by these suppliers, could harm our business.

We believe that sales of integrated metrology systems will continue to be an important source of our net revenues. Sales of our integrated metrology systems depend upon the ability of a small number of Wafer Fabrication Equipment Suppliers to sell semiconductor manufacturing equipment products that are compatible with our metrology systems as components. If these suppliers, such as Applied Materials, Inc., Ebara Corporation, Lam Research Corporation and Tokyo Electron, are unable to sell such products, if they choose to focus their attention on products that do not integrate our systems, or if they choose to develop competing systems, our business could suffer.

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We are subject to order and shipment uncertainties. Our profitability will decline if we fail to accurately forecast customer demand when managing inventory.

We typically plan production and inventory levels based on internal forecasts of customer demand, which can be highly unpredictable and can fluctuate substantially, which could lead to excess inventory write-downs and resulting negative impacts on gross margin and net income. We have limited visibility into our customers' inventories, future customer demand and the product mix that our customers will require, which could adversely affect our production forecasts and operating margins. In addition, innovation in our industry could render significant portions of our inventory obsolete. If we overestimate our customers' requirements, we may have excess inventory, which could lead to obsolete inventory and unexpected costs. Conversely, if we underestimate our customers' requirements, we may have inadequate inventory, which could lead to foregone revenue opportunities, loss of potential market share and damage to customer relationships as product deliveries may not be made on a timely basis, disrupting our customers' production schedules. In response to anticipated long lead times to obtain inventory and materials from outside suppliers and foundries, we periodically order materials in advance of customer demand. This advance ordering has in the past and may in the future result in excess inventory levels or unanticipated inventory write-downs if expected orders fail to materialize, or other factors make our products less saleable. In addition, any significant future cancellation or deferral of product orders could adversely affect our revenue and margins, increase inventory write-downs due to obsolete inventory, and adversely affect our operating results and stock price.

If we do not manage our supply chain effectively, our operating results may be adversely affected.

We need to continually evaluate our global supply chains and assess opportunities to reduce costs. We must also enhance quality, speed and flexibility to meet changing demand for our products and product mix and uncertain market conditions. Our success also depends in part on refining our cost structure and supply chains so that we have flexibility and can maintain and improve profitability. To improve our margins on a product, we will need to establish high volume supply agreements with our vendors. We cannot be certain that we will be able to timely negotiate vendor supply agreements on improved terms and conditions, or at all. Failure to achieve the desired level of cost reductions could adversely affect our financial results. Despite our efforts to control costs and increase efficiency in our facilities, changes in demand could still cause us to realize lower operating margins and profitability.

If we choose to acquire new and complementary businesses, or products or technologies instead of developing them ourselves, we may be unable to complete these acquisitions or may not be able to successfully integrate an acquired business in a cost-effective and non-disruptive manner.

Our success depends on our ability to continually enhance and broaden our product offerings in response to changing technologies, customer demands and competitive pressures. To achieve this, from time to time we have acquired complementary businesses, products, or technologies instead of developing them ourselves and may choose to do so in the future. If we do identify suitable transactions in the future, we may not be able to complete them on commercially acceptable terms, or at all. We also face intense competition for acquisitions from other acquirers in our industry. These competing acquirers may have significantly greater financial and other resources than us, which may prevent us from successfully pursuing a transaction.

Potential risks associated with acquisitions could include, among other things:

• our inability to realize the benefits or cost savings that we expect to realize as a result of the acquisition;

• diversion of management's attention;

• our inability to successfully integrate our businesses with the business of the acquired company;

• motivating, recruiting and retaining executives and key employees; conforming standards, controls, procedures and policies, business cultures and compensation structures among our company and the acquired company;

• consolidating and streamlining sales, marketing and corporate operations;

• potential exposure to unknown liabilities of acquired companies;

• loss of key employees and customers of the acquired business; and

• managing tax costs or inefficiencies associated with integrating our operations following completion of the acquisitions.

If an acquisition is not successfully completed or integrated into our existing operations, our business, financial condition and results of operations could be adversely impacted.

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In addition, to finance any acquisitions we may be required to raise additional funds through public or private equity or debt financings; however:

• to obtain such financing we may be forced to obtain financing on terms that are not favorable to us and, in the case of equity or convertible debt financing, the financing may result in dilution to our stockholders; or

• such financing may not be available to us at all, which could prevent us from entering or completing the acquisition.

Our success depends on the performance of key personnel, including our senior management and on our ability to identify, hire and retain key management personnel.

We believe our continued ability to recruit, hire, retain and motivate highly-skilled engineering, operations, sales, administrative and managerial personnel is key to our future success. Competition for these employees is intense, particularly with respect to attracting and retaining qualified technical and senior management personnel. We do not have employment agreements with key members of our technical staff and all of our senior management team. Further, we do not have key person life insurance on any of our executives and these individuals or other key employees may leave us. We have experienced turnover in our senior management team in the past. Our business may be harmed if we are unable to recruit, retain and effectively integrate our senior management into our business operations and our ability to implement our strategy could be compromised.

If we deliver systems with defects, our credibility will be harmed, revenue from, and market acceptance of, our systems will decrease and we could expend significant capital and resources as a result of such defects.

Our products are complex and frequently operate in high-performance, challenging environments. Notwithstanding our internal quality specifications, our systems have sometimes contained errors, defects and bugs, when introduced. If we deliver systems with errors, defects or bugs, our credibility and the market acceptance and sales of our systems would be harmed. Further, if our systems contain errors, defects or bugs, we may be required to expend significant capital and resources to alleviate such problems and incur significant costs for product recalls and inventory write-offs. Defects could also lead to product liability lawsuits against us or against our customers. We have agreed to indemnify our customers in some circumstances against liability arising from defects in our systems. In the event of a successful product liability claim, we could be obligated to pay damages significantly in excess of our product liability insurance limits.

If we experience significant delays in shipping our products to our customers, our business and reputation may suffer.

Our products are complex and require technical expertise to design and manufacture properly. Various problems occasionally arise during the manufacturing process that may cause delays and/or impair product quality. Any significant delays stemming from the failure of our products to meet or exceed our internal quality specifications, or for any other reasons, would delay our shipments. Shipment delays could harm our business and reputation in the industry.

Net average selling prices of our products may decrease over time, which could have a material adverse effect on our revenues and profitability.

It is common in our industry for the average selling price of a given product to decrease over time as production volumes increase, competing products are developed or latest technologies featuring higher performance or lower cost emerge. To combat the negative effects that erosion of average selling prices have had in the past and may in the future have on our net revenues, we attempt to actively manage the prices of our existing products and regularly introduce new process technologies and products in the market that exhibit higher performance, that are in demand, or that lower manufacturing cost. Failure to maintain our current prices or to successfully execute on our new product development strategy will cause our net revenues and gross margin to decline, which adversely affect our operating results and stock price.

Third party infringement claims could be costly to defend, and successful infringement claims by third parties could result in substantial damages, lost product sales and the loss of important intellectual property rights by us.

The semiconductor industry is generally subject to frequent litigation regarding patents and other intellectual property rights. Our commercial success depends, in part, on our ability to avoid infringing or misappropriating patents or other proprietary rights owned by third parties. From time to time we may receive communications from third parties asserting that our metrology systems may contain design features which are claimed to infringe on their proprietary rights. Our new or current products may infringe valid intellectual property rights, but even if our products do not infringe, we may be required to expend significant sums of money to defend against infringement claims, or to actively protect our intellectual property rights through litigation. In the event that a claim is made and there is an adverse result of any intellectual property rights litigation, we could be required to pay substantial damages for

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infringement, expend significant resources to develop non-infringing technology, incur material liability for royalty payments or fees to obtain licenses to the technology covered by the litigation, or be subjected to an injunction, which could prevent us from selling our products and materially and adversely affect our net revenues and results of operations. We cannot be sure that we will be successful in any such non-infringing development or that any such license would be available on commercially reasonable terms, if at all. Any claims relating to the infringement of third-party proprietary rights, even if not meritorious, could result in costly litigation, lost sales or damaged customer relationships, and diversion of management's attention and resources.

Our intellectual property may be infringed by third parties despite our efforts to protect it, which could threaten our future success and competitive position and harm our operating results.

Our future success and competitive position depend in part upon our ability to obtain and maintain proprietary technology for our principal product families, and we rely, in part, on patent, trade secret and trademark law to protect that technology. If we fail to adequately protect our intellectual property, it will be easier for our competitors to sell competing products. We own or may license patents relating to our systems, and have filed applications for additional patents. Any of our pending patent applications may be rejected, and we may not in the future be able to develop additional proprietary technology that is patentable. In addition, the patents we own, have been issued or licensed, may not provide us with competitive advantages and may be challenged by third parties. Third parties may also design around these patents.

In addition to patent protection, we rely upon trade secret protection for our confidential and proprietary information and technology. We routinely enter into confidentiality agreements with our employees. However, in the event that these agreements may be breached, we may not have adequate remedies. Our confidential and proprietary information and technology might also be independently developed by or become otherwise known to third parties.

We may be required to initiate litigation to enforce patents issued to or licensed by us, or to determine the scope or validity of a third party's patent or to enforce trade secret, confidentiality or other proprietary rights. Any such litigation, regardless of outcome, could be expensive and time consuming, and could subject us to significant liabilities or require us to re-engineer our product or obtain expensive licenses from third parties, any of which would adversely affect our business and operating results.

Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain or use our products or technology. Our ability to enforce our patents and other intellectual property is limited by our financial resources and is subject to general litigation risks. If we seek to enforce our rights, we may be subject to claims that the intellectual property rights are invalid, are otherwise not enforceable or are licensed to the party against whom we assert a claim. In addition, our assertion of intellectual property rights could result in the other party seeking to assert alleged intellectual property rights of its own against us, which is a frequent occurrence in such litigation.

Our efforts to protect our intellectual property may be less effective in some foreign countries where intellectual property rights are not as well protected as in the United States.

In 2017, 2016, and 2015, 87%, 86% and 80%, respectively, of our total net revenues were derived from sales to customers in foreign countries, including certain countries in Asia, such as Japan, South Korea, China, Singapore and Taiwan. The laws of some foreign countries do not protect our proprietary rights to as great an extent as do the laws of the United States, and many U.S. companies have encountered substantial problems in protecting their proprietary rights against infringement in these countries. If we fail to adequately protect our intellectual property in these countries, it would be easier for our competitors to sell competing products and our business would suffer.

Variations in the amount of time it takes for us to sell our systems may cause volatility in our operating results, which could cause our stock price to decline.

Variations in the length of our sales and product acceptance cycles could cause our revenues to fluctuate widely from period to period. Our customers generally take long periods of time to evaluate our metrology systems. We expend significant resources educating and providing information to our prospective customers regarding the uses and benefits of our systems. The length of time that it takes for us to complete a sale depends upon many factors, including:

• the efforts of our sales force and our independent sales representatives;

• the complexity of the customer’s metrology needs;

• the internal technical capabilities and sophistication of the customer;

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• the customer’s budgetary constraints; and

• the quality and sophistication of the customer’s current processing equipment.

Because of the number of factors influencing the sales process, the period between our initial contact with a customer and the time at which we recognize revenue from that customer, if at all, varies widely. Our sales cycles, including the time it takes for us to build a product to customer specifications after receiving an order, typically range from three to nine months. Occasionally our sales cycles can be much longer, particularly with customers in Asia who may require longer evaluation and acceptance periods. During the sales cycles, we commit substantial resources to our sales efforts in advance of receiving any revenue, and we may never receive any revenue from a customer despite our sales efforts.

If we do complete a sale, customers often purchase only one of our systems and then evaluate its performance for a lengthy period of time before purchasing additional systems. The purchases are generally made through purchase orders rather than through long-term contracts. The number of additional products that a customer purchases, if any, depends on many factors, including a customer’s capacity requirements, and/or shifting to more and advanced manufacturing processes that require more or different products to control. If they change their rate of capacity or have technological change, we cannot compensate for this fluctuation in demand by adjusting the price of our products. The period between a customer’s initial purchase and any subsequent purchases and acceptance is unpredictable and can vary from three months to a year or longer. Variations in the length of this period could cause fluctuations in our operating results, which could adversely affect our stock price.

Relatively small fluctuations in our system sales volume may cause our operating results to vary significantly each quarter.

During any quarter, a significant portion of our revenue is derived from the sale of a relatively small number of systems. Our automated metrology systems can be priced from $800,000 to $2,400,000 per system, and our integrated metrology systems can be priced up to $500,000 per system. Accordingly, a slight change in the number or mix of systems that we sell could cause significant changes in our operating results.

Lack of market acceptance for our products may affect our ability to generate revenue and may harm our business.

We have invested substantial time and resources into the development of new products, services and technologies. However, we cannot accurately predict the future level of acceptance of our products and services by our customers. As a result, we may not be able to generate anticipated revenue from sales of these products and services, or future new products, services and improvements.

We depend on new products and processes for our success. Consequently, we are subject to risks associated with rapid technological change.

Rapid technological changes in semiconductor manufacturing processes subject us to increased pressure to develop technological advances enabling such processes. We believe that our future success depends in part upon our ability to develop and offer new products with improved capabilities and to continue to enhance our existing products. We cannot make assurances if or when the products and solutions where we have focused our research and development expenditures will become commercially successful. If new products have reliability or quality problems, our performance could be impacted by reduced orders, higher manufacturing costs, and delays in acceptance or payment for new products, and additional service and warranty expenses. We might not be able to develop and manufacture new products successfully, or new products that we introduce may fail in the marketplace. Our failure to complete commercialization of these new products in a timely manner could result in unanticipated costs and inventory obsolescence, which would adversely affect our financial results. Any significant delay in releasing new systems could adversely affect our reputation, give a competitor a first-to-market advantage or allow a competitor to achieve greater market share.

To develop new products and processes, we expect to continue to make significant investments in research and development and to pursue joint development relationships with customers, suppliers or other members of the industry. We must manage product transitions and joint development relationships successfully, as introduction of new products could adversely affect our sale of existing products.

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We are subject to risks associated with our competitors’ strategic relationships and their introduction of new products, and we may lack the financial resources or technological capabilities of certain of our competitors needed to capture increased market share.

We expect to face significant competition from multiple current and future competitors. We believe that other companies are developing systems and products that are competitive to our products and are planning to introduce new products, which may affect our ability to sell our existing or future products. We face a greater risk if our competitors enter into strategic relationships with leading semiconductor manufacturers covering products similar to those we sell or may develop, as this could adversely affect our ability to sell products to those manufacturers.

Some of our competitors have substantially greater financial resources and more extensive engineering, manufacturing, marketing and customer service and support resources than we do and therefore have the potential to increasingly dominate the semiconductor equipment industry. These competitors may deeply discount products similar to those that we sell, challenging or even exceeding our ability to make similar accommodations and threatening our ability to sell those products. As a result, we may fail to continue to compete successfully worldwide.

In addition, our competitors may provide innovative technology that may have performance advantages over systems we currently offer or may offer in the future. They may be able to develop products comparable or superior to those that we offer or may adapt more quickly to new technologies or evolving customer requirements. In particular, while we currently are developing additional product enhancements that we believe will address future customer requirements, we may fail in a timely manner to complete the development or introduction of these additional product enhancements successfully, or these product enhancements may not achieve market acceptance or be competitive. Accordingly, we may be unable to continue to compete in our markets and competition may intensify, or future competition, operating results, financial condition, and/or cash flows could suffer.

If we are unable to adjust the scale of our business in response to rapid changes in demand in the semiconductor equipment industry, our operating results and our ability to compete successfully may be impaired.

The business cycle in the semiconductor equipment industry has historically been characterized by frequent periods of rapid change in demand that challenge our management to adjust spending and resources allocated to operating activities. During periods of growth or decline in demand for our products and services, we face significant challenges in maintaining adequate financial and business controls, management processes, information systems and procedures and in training, managing, and appropriately sizing our supply chain, our work force, and other components of our business on a timely basis. Our success will depend, to a significant extent, on the ability of our executive officers and other members of our senior management to identify and respond to these challenges, our gross margins and earnings may be impaired during periods of demand decline, and we may lack the infrastructure and resources to scale up our business to meet customer expectations and compete successfully during periods of demand growth.

We manufacture all of our systems at a limited number of facilities, and any prolonged disruption in the operations of those facilities could reduce our revenues.

We produce all of our systems in our manufacturing facilities located in Milpitas, California. We use contract manufacturers in China, Israel, Japan and the United States. Our manufacturing processes are highly complex and require sophisticated, costly equipment and specially designed facilities. As a result, any prolonged disruption in the operations of our manufacturing facilities, such as those resulting from acts of war, terrorism, political instability, health epidemics, fire, earthquake, flooding or other natural disaster could seriously harm our ability to satisfy our customer order deadlines.

We may outsource select manufacturing activities to third-party service providers, which decreases our control over the performance of these functions and quality of our products.

We may outsource product manufacturing to third-party service providers. Outsourcing reduces our control over the performance of the outsourced functions. Dependence on outsourcing may also adversely affect our ability to bring new products to market. If we do not effectively manage our outsourcing strategy or if third party service providers do not perform as anticipated, we may experience operational difficulties, increased costs, manufacturing interruptions or inefficiencies in the operation of our supply chain, any or all of which could delay our delivery of products to our customers, and materially and adversely affect our business, financial condition, and results of operations.

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If our network security measures are breached and unauthorized access is obtained to a customer's data, to our data, or to our information technology systems, we may incur significant legal and financial exposure and liabilities.

As part of our business, we store our data and certain data about our customers in our information technology system. While our system is designed with access security, if a third party gains unauthorized access to our data, including any data regarding our customers, the security breach could expose us to a risk of loss of this information, loss of business, litigation and possible liability. These security measures may be breached because of cyber-attacks, data breaches, malicious code such as viruses and worms, phishing attempts, employee error, malfeasance or otherwise. Additionally, third parties may attempt to fraudulently induce employees or customers into disclosing sensitive information such as user names, passwords or other information to gain access to our customers' data or our data, including our intellectual property and other confidential business information, or our information technology systems. Because the techniques used to obtain unauthorized access, or to sabotage systems, change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures despite our efforts to create security barriers to such threats. Any security breach could result in a loss of confidence by our customers, damage our reputation, disrupt our business, lead to legal liability and negatively impact our future sales.

Our results of operations could vary as a result of the methods, estimates and judgments we use in applying our accounting policies.

The methods, estimates and judgments we use in applying our accounting policies have a significant impact on our results of operations. See “Note 1. Nature of Business, Basis of Presentation and Significant Accounting Policies” in Part II, Item 8 of our consolidated financial statements. These methods, estimates and judgments are, by their nature, subject to substantial risks, uncertainties and assumptions, and factors may arise over time that leads us to change our methods, estimates and judgments. Changes in these methods, estimates and judgments could significantly affect our results of operations. In particular, our operating results have been affected by changes in our valuation allowance against our deferred tax assets, the calculation of share-based compensation expense and by the testing and potential impairment of long-lived assets such as goodwill and other intangible assets. For example, during the year ended December 31, 2016, we recorded a $27.4 million release of valuation allowance against our U.S, certain state and certain foreign deferred tax assets as we determined, based upon an evaluation of all available objectively verifiable evidence, including but not limited to our operations, current earnings and anticipated future earnings that a release is required. The valuation allowance release had a significant impact to our operating results. The process of evaluating the valuation allowance is highly subjective and requires significant judgment, and our results of operations could vary significantly from estimates. To the extent that we believe it is more likely that we will not realize our deferred tax assets, our financial statements will reflect another significant change to our tax provision and operating results.

Changes in our effective income tax rate could affect our results of operations.

We are subject to taxation in numerous U.S. states and territories. As a result, our effective tax rate is derived from a combination of applicable tax rates in the various places that we operate. In preparing our financial statements, we estimate the amount of tax that will become payable in each of such places. Our effective tax rate, however, may be different than experienced in the past due to numerous factors, including the passage of the Tax Cuts and Jobs Act, changes in the jurisdictions in which our profits are determined to be earned and taxed, increases in expenses not deductible for tax purposes, the results of examinations and audits of our tax filings, our inability to secure or sustain acceptable agreements with tax authorities, our utilization of net operating losses, changes in available tax credits, changes in accounting for income taxes, and changes in tax laws. Any of these factors could cause us to experience an effective tax rate significantly different from previous periods or our current expectations and may result in tax obligations in excess of amounts accrued in our financial statements.

The recently passed comprehensive tax reform bill could adversely affect our business and financial condition.

On December 22, 2017, the President signed into law the Tax Cuts and Jobs Act that significantly reforms the Internal Revenue Code of 1986, as amended, or the Code. The Tax Cuts and Jobs Act, among other things, contains significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, limitation of the tax deduction for interest expense to 30% of adjusted earnings (except for certain small businesses), limitation of the deduction of future net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks, one-time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, elimination of U.S. tax on foreign earnings (subject to certain important exceptions), immediate deductions for certain new capital investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits, including the deductibility of executive compensation. Notwithstanding the reduction in the corporate income tax rate, the overall impact of the Tax Cuts and Jobs Act is uncertain and our business and financial condition could be adversely affected. The impact of this tax reform on holders of our common stock is also uncertain and could be adverse. We urge our stockholders to consult with their legal and tax advisors with respect to this legislation and the potential tax consequences of investing in or holding our common stock.

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We may incur impairments to goodwill or long-lived assets.

We review our long-lived assets, including goodwill and other intangible assets, for impairment annually or more frequently when events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable or it becomes more likely than not that the fair value is reduced below the carrying value of the reporting unit. Our valuation methodology for assessing impairment requires management to make judgments and assumptions based on historical experience and to rely heavily on projections of future operating performance.

Our recently announced share repurchase program may increase the volatility of our stock and impact our cash position and working capital balances.

In November 2017, our Board of Directors approved a program to repurchase up to $50 million of our common stock. Stock repurchases under the program may be made through open market and privately negotiated transactions, at times and in such amounts as management deems appropriate. Although our share repurchase program is intended to enhance long-term stockholder value, we are unable to ensure the repurchase program’s effectiveness. In addition, the repurchase program could affect the price and increase the volatility of our stock. The program may also diminish our cash reserves that may be needed for business investments, acquisitions of products and technologies or any other purposes.

Our investment portfolio may suffer losses from changes in market interest rates and changes in market conditions, which could materially and adversely affect our financial condition and liquidity.

Our investment portfolio primarily comprises corporate debt securities, commercial paper, debt securities issued by U.S. governmental agencies and certificates of deposits. These investments are subject to general credit, liquidity, and market and interest rate risks. Substantially all of these securities are subject to interest rate and credit risk and will decline in value if interest rates increase or one or more of the issuers’ credit ratings is reduced. As a result of any of the foregoing, we may experience a reduction in value or loss of liquidity of our investments, which may have a negative adverse effect on our results of operations, liquidity and financial condition. We follow an established investment policy and set of guidelines to monitor, manage and limit our exposure to interest rate and credit risk. The policy sets forth credit quality standards and limits our exposure to any one issuer, as well as our maximum exposure to various asset classes.

Our operating results have varied in the past and probably will continue to vary significantly in the future, which will cause volatility in our stock price.

Our quarterly and annual operating results have varied significantly in the past and are likely to vary in the future, which volatility could cause our stock price to decline. Some of the factors that may influence our operating results and subject our stock to extreme price and volume fluctuations include:

• general economic growth or decline in the U.S. or foreign markets;

• changes in customer demand for our systems;

• the gain or loss of a key customer or significant changes in the financial condition or one or more key customers;

• economic conditions in the semiconductor industries;

• the timing, cancellation or delay of customer orders and shipments;

• the timing of customer acceptance due to delays or failure to meet required specifications;

• market acceptance of our products and our customers' products;

• our ability to recover the higher costs associated with meeting our customers' increasing service demands;

• competitive pressures on product prices and changes in pricing by our customers or suppliers;

• the timing of new product announcements and product releases by us or our competitors and our ability to design, introduce and manufacture new products on a timely and cost-effective basis;

• fluctuations in foreign currency exchange rates, particularly the Japanese yen, the Korean won, European euro and the British pound sterling;

• the occurrence of trade wars or barriers, or the perception that trade wars or barriers will occur;

• the occurrence of tax valuation allowances;

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• the occurrence of potential impairments of long-lived assets;

• the timing of acquisitions of businesses, products or technologies;

• the effects of war, natural disasters, acts of terrorism or political unrest;

• the loss of key personnel; and

• the levels of our fixed expenses, relative to our revenue level.

The foregoing factors are difficult to forecast, and these, as well as other factors, could materially and adversely affect our quarterly and annual operating results. If our operating results in any period fall below the expectations of securities analysts and investors, the market price of our common stock would likely decline.

We are highly dependent on international sales and operations, which exposes us to foreign political and economic risks.

A majority of our sales and operations are outside of the United States. As a result, we are subject to regulatory, geopolitical and other risks associated with doing business in foreign countries. We anticipate that international sales will continue to account for a significant portion of our revenues. International sales and operations carry inherent risks such as:

• regulatory limitations imposed by foreign governments;

• obstacles to the protection of our intellectual property, political, military and terrorism risks;

• foreign currency controls and currency exchange rate fluctuations;

• periodic local or international economic downturns;

• political instability, natural disasters, acts of war or terrorism in regions where we have operations;

• repatriation of cash earned in foreign countries;

• longer payment cycles and difficulties in collecting accounts receivable outside of the U.S.;

• disruptions or delays in shipments caused by customs brokers or other government agencies;

• uncertainty regarding liability under foreign laws;

• changes in regulatory requirements (including import and export requirements), tariffs, customs, duties and other trade barriers;

• difficulties in staffing and managing foreign operations;

• potentially adverse tax consequences resulting from changes in tax laws; and

• other challenges caused by distance, language and cultural differences.

If any of these risks materialize and we are unable to manage them, our international sales and operations would suffer.

We are exposed to fluctuations in the foreign currency exchange rates.

As a global concern, we face exposure to adverse movements in foreign currency exchange rates. Our exposure to foreign currency exchange rate fluctuations arise in part from current intercompany accounts in which costs are charged between our U.S. headquarters and foreign subsidiaries. These exposures may change over time as business practices evolve and could have a material adverse impact on our financial results and cash flow.

We are exposed to risks related to our banking arrangements and accounts receivable factoring.

We maintain bank accounts with both domestic and foreign financial institutions, any one of the institutions may prove to not be financially viable. If any of these financial institutions experiences financial difficulties or otherwise are unable to honor our deposit arrangements, we may experience material financial losses due to lack of access to our funds which could have an adverse impact on our operating results, financial condition and cash flows. In addition, we enter into factoring arrangements with certain financial institutions to sell a certain portion of our trade receivables. If we were to stop entering into these factoring arrangements, our operating results, financial condition and cash flows could be adversely impacted by delays or failure to collect the trade receivables.

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Anti-takeover provisions in our charter documents and Delaware law could discourage, delay or prevent a change in control of our company and may affect the trading price of our common stock.

The anti-takeover provisions of the Delaware General Corporation Law may discourage, delay or prevent a change in control of our company by limiting our ability to engage in a business combination with an interested stockholder, even if a change of control would be beneficial to our existing stockholders. In addition, our certificate of incorporation and bylaws may discourage, delay or prevent a change in our management or control over us that stockholders may consider favorable. Our certificate of incorporation and bylaws:

• authorize the issuance of “blank check” preferred stock that could be issued by our board of directors to thwart a takeover attempt;

• limit who may call special meetings of stockholders; and

• prohibit stockholder action by written consent, requiring all actions to be taken at a meeting of the stockholders.

We are exposed to various risks related to legal proceedings that could result in substantial costs and disruption to normal business operations.

From time to time, and in the future, we may be, involved in legal proceedings or claims that involve breach of contract, product liability, employment, possible infringement of patents and intellectual property rights of third parties or by third parties. It is difficult to predict the outcome of litigation matters, and there can be no assurance that we will prevail in any litigation. Adverse determinations in such litigation could result in loss of our property rights, subject us to significant liabilities, any of which could significantly and adversely affect our business, financial condition and results of operations.

Ifwe are unable to maintain our internalcontrolover financialreporting free of material weaknesses,it could adversely affect our business and results of operations.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, our management is required to perform evaluations of our internal control over financial reporting and our independent auditors are required to publicly attest to the effectiveness of our internal control over financial reporting.

In our Annual Report on Form 10-K for our fiscal year ended December 31, 2016, management has concluded that, due to a material weakness in internal control surrounding our inventory accounts, our internal control over financial reporting was not effective as of December 31, 2016. In response to the material weakness, we have implemented additional reporting and monitoring controls over additions to or changes to our master records. Also, we have designed an automated methodology for determining and assigning the frequency levels of counting each inventory item. As of December 30, 2017, our management believe our remediation efforts resulted in the elimination of the previously identified material weakness, and has concluded that it has been remediated. While this material weakness has been remediated, we cannot be certain that we will not, in the future, have additional material weaknesses. We will continue to evaluate the effectiveness of our internal controls to ensure that our financial statements continue to be fairly stated in all material respects.

We are subject to various environmental laws and regulations that could impose substantial costs upon us and may harm our business, operating results and financial condition.

Some of our operations use substances regulated under various federal, state, local, and international laws governing the environment, including those relating to the storage, use, discharge, disposal, labeling, and human exposure to hazardous and toxic materials. We could incur costs, fines and civil or criminal sanctions, third-party property damage or personal injury claims, or could be required to incur substantial investigation or remediation costs, if we were to violate or become liable under environmental laws. Liability under environmental laws can be joint and several and without regard to comparative fault. Compliance with current or future environmental laws and regulations could restrict our ability to expand our facilities or require us to acquire additional expensive equipment, modify our manufacturing processes, or incur other significant expenses. We may unintentionally violate environmental laws or regulations in the future as a result of human error, equipment failure or other causes.

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Compliance with federal securities laws, rules and regulations, as well as Nasdaq requirements, is becoming increasingly complex, and the significant attention and expense we must devote to those areas may have an adverse impact on our business.

Federal securities laws, rules and regulations, as well as Nasdaq rules and regulations, require companies to maintain extensive corporate governance measures, impose comprehensive reporting and disclosure requirements, set strict independence and financial expertise standards for audit and other committee members and impose civil and criminal penalties for companies and their chief executive officers, chief financial officers and directors for securities law violations. These laws, rules and regulations have increased, and in the future, are expected to continue to increase, the scope, complexity and cost of our corporate governance, reporting and disclosure practices, which could harm our results of operations and divert management's attention from business operations.

We may be exposed to liabilities under the FCPA and other anti-corruption laws, and any determination that we violated these laws could have a material adverse effect on our business.

We are subject to the Foreign Corrupt Practice Act of 1977 ("FCPA"), and other laws that prohibit improper payments or offers of payments to foreign governments and their officials and political parties by U.S. persons and issuers as defined by the statute, for the purpose of obtaining or retaining business. Also, similar worldwide anti-bribery laws, such as the U.K. Bribery Act and Chinese anti-corruption laws, generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. Some of our distribution partners are located in parts of the world that have experienced governmental corruption to some degree and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices. Although we have implemented policies and procedures to discourage these practices by our employees, our existing safeguards and any future improvements may prove to be less than effective, and our employees, consultants, sales agents or distributors may engage in conduct for which we might be held responsible. Violations of the FCPA or international anti-corruption laws may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating results and financial condition. In addition, the U.S. government may seek to hold us liable for successor liability FCPA violations committed by companies in which we invest or that we acquire. We cannot assure you that our internal control policies and procedures will protect us from reckless or negligent acts committed by our employees, distributors, partners, consultants or agents.

Regulations related to conflict minerals could adversely impact our business.

The Dodd-Frank Wall Street Reform and Consumer Protection Act contains provisions to improve transparency and accountability concerning the supply of tin, tantalum, tungsten and gold, known as conflict minerals, originating from the Democratic Republic of Congo, or DRC, and adjoining countries. As a result, in August 2012 the United States Securities and Exchange Commission, or SEC, adopted annual disclosure and reporting requirements for public companies that use conflict minerals mined from the DRC and adjoining countries in their products. We have determined that we use at least one of these conflict minerals in the manufacture of our products, although we have not yet determined the source of the minerals that we use. These disclosure requirements require us to use diligent efforts to determine which conflict minerals we use and the source of those conflict minerals, and disclose the results of our findings. There have been and will continue to be costs associated with complying with these disclosure requirements, including those costs incurred in conducting diligent efforts to determine which conflict minerals we use and the sources of conflict minerals used in our products. Further, the implementation of these rules could adversely affect the sourcing, supply and pricing of materials used in our products. As there may be only a limited number of suppliers offering conflict free minerals, we cannot be sure that we will be able to obtain necessary conflict free conflict minerals in sufficient quantities or at competitive prices. In addition, we may face reputational challenges if we determine that our products contain minerals not determined to be conflict free or if we are unable to sufficiently verify the origins for all conflict minerals used in our products through the procedures we implement. If we determine it is necessary to redesign our products to not use conflict minerals, we would incur costs associated with doing so.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

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ITEM 2. PROPERTIES

At December 30, 2017, our owned or leased facilities included those described below:

Type	Location	Square Footage		Use
Owned	Milpitas, California		135,692	Corporate headquarters, manufacturing and corporate housing
Leased	Taiwan		23,339	Sales and service
Leased	South Korea		21,312	Sales, service and corporate housing
Leased	United States		19,551	Engineering, sales and service
Leased	Japan		16,628	Sales, service and corporate housing
Leased	China		10,486	Sales and service
Leased	Singapore		4,528	Sales and service
Leased	France		828	Sales and service
	Total		232,364

We believe that our existing facilities are suitable for their respective uses and adequate for our current needs and anticipated growth.

ITEM 3. LEGAL PROCEEDINGS

The information set forth under Note 9, Commitments and Contingencies, in the Notes to Consolidated Financial Statements is incorporated herein by reference.

ITEM 4. MINE SAFETY DISCLOSURES

N/A.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information for Common Stock

Our common stock is quoted on the Nasdaq Global Select Market under the symbol “NANO.” The following table sets forth, for the fiscal periods indicated, the high and low closing sales prices per share of our common stock on a quarterly basis as reported on the Nasdaq Global Select Market.

Fiscal Year 2017	High		Low
First quarter	$	30.46	$	24.84
Second quarter	$	32.20	$	24.89
Third quarter	$	28.80	$	24.64
Fourth quarter	$	29.14	$	23.98

Fiscal Year 2016	High		Low
First quarter	$	15.86	$	12.63
Second quarter	$	20.62	$	13.82
Third quarter	$	22.66	$	19.65
Fourth quarter	$	25.83	$	19.65

Stockholders

On February 20, 2018, there were approximately 133 holders of record of our common stock. Because brokers and the institutions on behalf of stockholders hold many of our shares of common stock, we are unable to estimate the total number of stockholders represented by these record holders.

Dividend Policy

We have never declared or paid any cash dividends on our capital stock. We currently expect to retain future earnings, if any, for use in the operation, expansion of our business and repurchase of shares and do not anticipate paying any cash dividends in the foreseeable future.

Issuer Purchases of Equity Securities

On May 29, 2012, our Board of Directors authorized the repurchase of up to $20.0 million of our common stock of which $4.4 million remained as of December 31, 2016. On November 15, 2017 our Board of Directors authorized the repurchase of up to $50.0 million of our common stock, which superseded the 2012 repurchase program. This new plan is referred to as the Stock Repurchase Plan. Stock repurchases under the Stock Repurchase Plan may be made through open market and privately negotiated transactions at times and in such amounts as management deems appropriate. The timing and actual number of shares repurchased is dependent on a variety of factors including price, corporate and regulatory requirements and other market conditions.

During fiscal year 2017, we repurchased and retired 1,065,848 shares of our common stock at the weighted average price of $25.33 per share under the Stock Repurchase Plan, all of which were purchased in the fourth quarter of fiscal year 2017.

The following table summarizes repurchases of our common stock during the fourth quarter of fiscal 2017:

Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares that May Yet to be Repurchase Under the Plans or Program (in thousands)
October 1, 2017, to October 28, 2017		—		—		—	$	4,400
October 29, 2017, to November 25, 2017		—		—		—	$	50,000
November 26, 2017, to December 30, 2017		1,065,848	$	25.33		1,065,848	$	23,001

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The Stock Repurchase Plan was completed in February 2018, with purchases since December 30, 2017 of 896,187 shares of our common stock at the weighted average price of $25.65 for a cost of $23.0 million. No shares were repurchased in fiscal 2016.

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Stock Performance Graph

The following graph presentation compares cumulative five-year stockholder returns on an indexed basis, assuming a $100 initial investment and reinvestment of dividends, of Nanometrics Incorporated, a broad-based equity market index and an industry-specific index. The broad-based equity market index used is the Nasdaq Composite Index and the industry-specific index used is the PHLX Semiconductor Index.

This performance graph shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act of 1933, as amended or the Exchange Act.

	12/12		12/13		12/14		12/15		12/16		12/17
Nanometrics Incorporated		100.00		132.11		116.64		104.99		173.79		172.82
NASDAQ Composite		100.00		141.63		162.09		173.33		187.19		242.29
PHLX Semiconductor		100.00		130.15		167.68		156.67		208.23		292.66

Recent Sales of Unregistered Securities

None.

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ITEM 6. SELECTED FINANCIAL DATA

The selected consolidated financial data set forth below is not necessarily indicative of results of future operations and should not be relied upon as an indicator of our future performance. This data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. Our fiscal years 2017, 2016, 2015, 2014, and 2013, as referred to below, refer to our fiscal years ended December 30, 2017, December 31, 2016, December 26, 2015, December 27, 2014 and December 28, 2013, respectively.

	Fiscal Year
	2017(1)		2016(2)		2015		2014(3)			2013
	(in thousands, except per share data)
Consolidated Statement of Operations Data:
Total net revenues	$	258,621	$	221,129	$	187,367	$	166,443		$	144,307
Gross profit	$	136,701	$	114,124	$	89,667	$	75,822		$	62,676
Income (loss) from operations	$	42,806	$	29,095	$	4,973	$	(11,653	)	$	(21,709	)
Net income (loss)	$	30,202	$	44,035	$	2,905	$	(31,118	)	$	(14,146	)
Basic net income (loss) per share	$	1.19	$	1.79	$	0.12	$	(1.30	)	$	(0.61	)
Diluted net income (loss) per share	$	1.17	$	1.75	$	0.12	$	(1.30	)	$	(0.61	)

⁽¹⁾ Our net income included a $2.9 million additional tax expense from the remeasurement of deferred tax assets relating to the Tax Cuts and Jobs Act that was signed into law on December 22, 2017.

⁽²⁾ Our net income included a release of non-cash valuation allowance of $27.4 million against a significant portion of our U.S. and foreign deferred tax assets.

⁽³⁾ Our net loss included a non-cash valuation allowance of $21.1 million on certain U.S. deferred tax assets.

	Fiscal Year
	2017		2016		2015		2014		2013
	(in thousands)
Consolidated Balance Sheet Data:
Cash, cash equivalents and marketable securities	$	117,029	$	129,961	$	83,085	$	83,962	$	92,862
Working capital	$	196,019	$	174,353	$	132,903	$	119,797	$	141,797
Total assets	$	309,699	$	287,830	$	235,540	$	223,236	$	262,834
Long-term liabilities including current portion of debt    obligation	$	3,221	$	2,030	$	3,001	$	5,497	$	6,504
Total stockholders’ equity	$	262,383	$	243,774	$	187,328	$	179,537	$	207,373

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

You should read the following discussion and analysis of our financial condition and results of operations together with “Selected Financial Data” and our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. The actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those presented under “Risk Factors” in Item 1A and elsewhere in this Annual Report on Form 10-K. Please see “Cautionary Information Regarding Forward-Looking Statements” at the beginning of this Form 10-K for additional information you should consider regarding forward-looking statements.

We are an innovator in the field of metrology systems, inspection systems and advanced analytics for semiconductor manufacturing and other industries. Our systems and solutions are designed to precisely monitor optical critical dimensions, film thickness, and other parameters that are necessary to control the manufacturing process, identify defects, and detect manufacturing equipment anomalies that can affect production yields and device performance.

Principal factors that impact our revenue growth include capital expenditures by manufacturers of semiconductors to increase capacity and to enable their development of new technologies, and our ability to improve market share. The increasing complexity of the manufacturing processes for semiconductors is an important factor in the demand for our innovative metrology systems. Our strategy is to continue to innovate organically as well as to evaluate strategic acquisitions to address business challenges and opportunities.

Our revenues are primarily derived from product sales but are also derived from customer service and system upgrades for the installed base of our products. In 2017, we derived 83% of our total net revenues from product sales and 17% of our total net revenues from services.

Important Themes and Significant Trends

The semiconductor equipment industry is characterized by new manufacturing processes (node) coming to market every two to three years. At every new node, in the semiconductor industry our customers drive the need for metrology as a major component of device manufacturing. These trends include:

• Proliferation of Optical Critical Dimension Metrology across Fabrication Processes. Device dimensions must be carefully controlled during each step of processing. These patterned structures are measured at many subsequent production steps including Chemical Mechanical Polishing, Etch, and Thin Film processing, all driving broader OCD adoption. Our proprietary OCD systems can provide the critical process control of these circuit dimensions that is necessary for successful manufacturing of these state-of-the-art devices. Nanometrics OCD technology is broadly adopted across 3D-NAND, DRAM, and logic semiconductor manufacturing processes.

• Proliferation of 3D Transistor Architectures. Our end customers continue to improve device density and performance by scaling front-end-of-line transistor architectures. Many of these designs, including FinFET transistors, have buried features and high aspect ratio stacked features that enable improved performance and density. The advanced designs require additional process control to manage the complex shapes and materials properties, driving additional applications of our systems.

• Proliferation of High-Density 3D-NAND. Our end customers have migrated to multi (many) layered high aspect ratio 3D-NAND devices. Many stacks of NAND cells are formed in parallel. This 3D-NAND architecture enables cost effective density scaling, removing the burden of density from lithography to deposition and etch processes. These devices require additional process control of deposition stacks, planarization processes, and critical high aspect ratio etch processes. Nanometrics thin films and OCD technologies are adopted across the 3D-NAND process including the periphery CMOS processing, NAND cell formation, and Interconnect of the devices.

• Adoption of New Types of Thin Film Materials. The need for ever increasing device circuit speed coupled with lower power consumption has pushed semiconductor device manufacturers to new materials and processing methods with single atom/sub nanometer control over these processes.

• Need for Improved Process Control to Drive Process Efficiencies. Competitive forces influencing semiconductor device manufacturers, such as price-cutting, shorter product life cycles and time to market, place pressure on manufacturers to rapidly achieve production efficiency. Device manufacturers are using our integrated and automated systems, as well as advanced metrology algorithms and analytics throughout the fabrication process to ensure that manufacturing processes scale rapidly, are accurate and can be repeated on a consistent basis.

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Critical Accounting Policies

The preparation of our financial statements conforms to accounting principles generally accepted in the United States of America, which requires management to make estimates and judgments in applying our accounting policies that have an important impact on our reported amounts of assets, liabilities, revenue, expenses and related disclosures at the date of our financial statements. On an ongoing basis, management evaluates its estimates including those related to bad debts, inventory valuations, warranty obligations, impairment and income taxes. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from management’s estimates. We believe that the application of the following accounting policies requires significant judgments and estimates on the part of management. For a summary of all of our accounting policies, including those discussed below, see Note 1 to our consolidated financial statements.

Revenue Recognition - We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the seller's price is fixed or determinable, and collectability is reasonably assured. We derive revenue from the sale of process control metrology and inspection systems and related upgrades (“product revenue”) as well as spare part sales, billable services and service contracts (together “service revenue”). Upgrades are system software and hardware performance upgrades that extend the features and functionality of a product. Beginning in the first quarter of 2016, we include upgrades in product revenue, which consists of sales of complete, advance process control metrology and inspection systems (the “system(s)”). This change was due to the types of upgrades currently being sold, which are primarily system software and hardware performance upgrades to extend the features and functionality of a product. Previously, upgrades consisted of a group of parts and/or software that change the existing configuration of the products.

Nanometrics’ systems consist of hardware and software components that function together to deliver the essential functionality of the system. Arrangements for sales of systems often include defined customer-specified acceptance criteria.

For repeat product sales to existing customers, revenue recognition occurs at the time title and risk of loss transfer to the customer, which usually occurs upon shipment from our manufacturing location, if it can be reliably demonstrated that the product has successfully met the defined customer specified acceptance criteria and all other recognition criteria have been met. For initial sales where we have not previously met the defined customer specified acceptance criteria, we recognize product revenues upon the earlier of receipt of written customer acceptance or expiration of the contractual acceptance period. In Japan, where contractual terms with the customer specify risk of loss and title transfers upon customer acceptance, we recognize revenue upon receipt of written customer acceptance, provided that all other recognition criteria have been met.

We warrant our products against defects in manufacturing. Upon recognition of product revenue, we record a liability for anticipated warranty costs. On occasion, customers request a warranty period longer than our standard warranty. In those instances, where extended warranty services are separately quoted to the customer, we defer and recognize the associated revenue as service revenue ratably over the term of the contract. We include the portion of service contracts and extended warranty services agreements that are uncompleted at the end of any reporting period in deferred revenue.

We also sell software that is considered to be an upgrade to a customer's existing systems. These standalone software sales are not essential to the tangible product's functionality and are accounted for under software revenue recognition rules which require vendor specific objective evidence ("VSOE") of fair value to allocate revenue in a multiple element arrangement. We recognize revenue from standalone software sales when the software is delivered to the customer, provided that all other recognition criteria have been met.

The majority of other upgrades are sold based on published specifications. For simple upgrades that do not require major configuration, revenue is recognized at the time title and risk of loss transfer to the customer, which is usually upon shipment. For complex and extensive upgrades, specific acceptance or prior acceptance for a similar upgrade is required in order to recognize revenue.

We recognize revenue related to spare parts upon shipment. We recognize revenue related to billable services when the services are completed. Service contracts may be purchased by the customer during or after the warranty period and we recognize revenue ratably over the service contract period.

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Frequently, we deliver products and various services in a single transaction. Our deliverables consist of tools, installation, upgrades, billable services, spare parts, and service contracts. Our typical multi-element arrangements include a sale of one or multiple tools that include installation and standard warranty. Other arrangements may consist of a sale of tools bundled with service elements or delivery of different types of services. Our tools, upgrades, and spare parts are generally delivered to customers within a period of up to six months from order date. Installation is usually performed soon after delivery of the tool. We defer the portion of revenue associated with installation based on relative selling price and we recognize that revenue upon completion of the installation and receipt of final acceptance. Billable services are billed on a time and materials basis and performed as requested by customers. Under service contract arrangements, services are provided as needed over the fixed arrangement term, and such terms can be up to twelve months. We do not generally grant customers a general right of return or refund and may impose a penalty on orders cancelled prior to the scheduled shipment date.

We evaluate our revenue arrangements to identify deliverables and to determine whether these deliverables are separable into multiple units of accounting. We allocate the arrangement consideration among the deliverables based on relative selling price. We have established VSOE for some of our products and services when a substantial majority of selling prices falls within a narrow range when sold separately. For deliverables with no established VSOE, we use best estimate of selling price to determine standalone selling price for such deliverable. We do not use third party evidence to determine standalone selling price since this information is not widely available in the market as our products contain a significant element of proprietary technology and the solutions offered differ substantially from our competitors. We have established a process for developing best estimated selling price ("BESP"), which incorporates historical selling prices, the effect of market conditions, gross margin objectives, pricing practices, as well as entity-specific factors. We monitor and evaluate BESP on a regular basis to ensure that changes in circumstances are accounted for in a timely manner.

When certain elements in multiple-element arrangements are not delivered or accepted at the end of a reporting period, the relative selling prices of undelivered elements are deferred until these elements are delivered and/or accepted. If deliverables cannot be accounted for as separate units of accounting, the entire arrangement is accounted for as a single unit of accounting and we defer revenue until all elements are delivered and all revenue recognition requirements are met.

We plan to adopt the new revenue standard, ASC Topic 606, Revenue from Contracts with Customers, in the first quarter of fiscal 2018 by using the modified retrospective method of transition. See “Note 2. Recent Accounting Pronouncements” in Part II, Item 8 of our consolidated financial statements for further discussion on the impact of adopting the new standard.

Allowance for Doubtful Accounts – We maintain allowances for estimated losses resulting from the inability of our customers to make their required payments. We establish credit limits through a process of reviewing the financial history and stability of our customers. Where appropriate and available, we obtain credit rating reports and financial statements of customers when determining or modifying their credit limits. We regularly evaluate the collectability of our trade receivable balances based on a combination of factors such as the length of time the receivables are past due, customary payment practices in the respective geographies and our historical collection experience with customers. We believe that our allowance for doubtful accounts adequately reflects our risk associated with our receivables. If the financial condition of a customer were to deteriorate, resulting in their inability to make payments, we would assess the necessity of recording additional allowances. This would result in additional general and administrative expenses being recorded for the period in which such determination was made

Inventories – Inventories are stated at the lower of cost, which approximates actual cost on a first-in, first-out basis, or net realizable value. We have established inventory reserves when conditions exist that suggest that our inventory may be in excess of anticipated demand or is obsolete based upon our assumptions about future demand for our products and market conditions. Once a reserve has been established, it is maintained until the part to which it relates is sold or is otherwise disposed of. Therefore, a sale of reserved inventory has a higher gross profit margin. We regularly evaluate our ability to realize the value of our inventory based on a combination of factors including the following: historical usage rates, forecasted sales of usage, product end-of-life dates, estimated current and future market values and new product introductions. Inventory includes evaluation tools placed at customer sites. For demonstration inventory, we also consider the age of the inventory and potential cost to refurbish the inventory prior to sale. We amortize demonstration inventory over its useful life and the amortization expense is included in total inventory write down on our statements of cash flows. When recorded, our reserves are intended to reduce the carrying value of our inventory to its net realizable value. If actual demand for our products deteriorates, or market conditions are less favorable than those that we project, additional reserves may be required, which would adversely affect gross margin and net income.

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Product Warranties – We sell the majority of our products with a standard twelve-month repair or replacement warranty from the date of acceptance or shipment date. We provide an accrual for estimated future warranty costs based upon the historical relationship of warranty costs to the cost of products sold. The estimated future warranty obligations related to product sales are reported in the period in which the related revenue is recognized. The estimated future warranty obligations are affected by the warranty periods, sales volumes, product failure rates, material usage and labor and replacement costs incurred in correcting a product failure. If actual product failure rates, material usage, labor or replacement costs differ from our estimates, revisions to the estimated warranty obligations would be required. For new product introductions where limited or no historical information exists, we may use warranty information from other previous product introductions to guide us in estimating our warranty accrual. The warranty accrual represents the best estimate of the amount necessary to settle future and existing claims on products sold as of the balance sheet date. We periodically assess the adequacy of our recorded warranty reserve and adjust the amounts in accordance with changes in these factors.

Goodwill and Intangible Assets - Intangible assets with finite lives are amortized over their useful lives and are subject to an impairment assessment, as well as an evaluation of the appropriateness of their estimated useful lives, whenever events or changes in circumstances indicate that the carrying amount(s) may not be recoverable. Goodwill and indefinite lived assets are not amortized but tested annually for impairment. The goodwill impairment assessment involves three tests, Step 0, Step 1 and Step 2. The Step 0 test involves performing an initial qualitative assessment to determine whether it is more likely than not that the asset is impaired and thus whether it is necessary to proceed to Step 1 and calculate the fair value of the reporting unit. We may proceed directly to the Step 1 test without performing the Step 0 test. The Step 1 test involves measuring the recoverability of goodwill at the reporting unit level by comparing the reporting unit's carrying amount, including goodwill, to the fair value of the reporting unit.

We perform a Step 0 assessment of the goodwill during the fourth quarter of each fiscal year, or whenever events or circumstances occur which indicate that an impairment may have occurred. As part of this assessment, we consider the trading value of our stock, the industry trends, and our sales forecast and products plans to determine if it is more likely than not that the fair value is higher than the carrying values of our reporting unit. If, after assessing the qualitative factors, we determine that it is not likely that the fair value of a reporting unit is less than its carrying value, then performing the two-step impairment test is unnecessary. However, if we conclude otherwise, then we are required to perform the Step 1 of the two-step goodwill impairment test. The Step 1 test requires a comparison of the fair value of our reporting unit to its net book value. If the fair value of the reporting unit is greater than its net book value, then no impairment is deemed to have occurred. If the fair value is less, then the Step 2 must be performed to determine the amount, if any, of actual impairment.

The process of evaluating the potential impairment of goodwill is highly subjective and requires significant judgment. In estimating the fair value of goodwill at the reporting unit level, we make estimates and judgments about future revenues and cash flows for the reporting unit. To determine the fair value, our review process includes the income method and is based on a discounted future cash flow approach that uses estimates including the following for the reporting unit: estimated revenue, market segment growth rates and market share assumptions; estimated costs; and appropriate discount rates based on the particular reporting unit's weighted average cost of capital. Our estimates of market segment growth, our market segment share and costs are based on historical data, various internal estimates and certain external sources, and are based on assumptions that are consistent with the plans and estimates we are using to manage the underlying businesses. Our business consists of both established and emerging technologies and our forecasts for emerging technologies are based upon internal estimates and external sources rather than historical information. We also consider our market capitalization on the dates of our impairment tests in determining the fair value of the respective businesses. As part of this assessment, we consider the trading value of our stock and our implied value, as compared to our net assets, as well as the valuation of our acquired businesses. If the carrying amount of the reporting unit exceeds its fair value as determined by these assessments, goodwill is considered impaired, and the Step 2 test is performed to measure the amount of impairment loss. As part of the Step 2 test to determine the amount of goodwill impairment, if any, we allocate the fair value of the reporting unit to all of its assets and liabilities as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the price paid to acquire the reporting unit. The excess of the fair value of the reporting unit over the amount assigned to its assets and liabilities is the implied fair value of goodwill. When impairment is deemed to have occurred, we will recognize an impairment charge to reduce the carrying amount of our goodwill to its implied fair value.

Income Tax Assets and Liabilities - We account for income taxes such that deferred tax assets and liabilities are recognized using enacted tax rates for the effect of temporary differences between the book and tax accounting for assets and liabilities. Also, deferred tax assets are reduced by a valuation allowance to the extent we cannot conclude that it is more likely than not that a portion of the deferred tax asset will be realized in the future. We evaluate the deferred tax assets on a continuous basis throughout the year to determine whether or not a valuation allowance is appropriate. Factors used in this determination include future expected income and the underlying asset or liability which generated the temporary tax difference. Our income tax provision is primarily impacted by federal statutory rates, state and foreign income taxes and changes in our valuation allowance.

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Recent Accounting Pronouncements

See Note 2 of our consolidated financial statements for a description of recent accounting pronouncements, including the respective dates of adoption and effects on our results of operations and financial condition.

Upgrade Revenue and Related Cost

Beginning the first quarter of 2016, we now include revenues associated with upgrade sales under Products Revenues, and the related costs in Cost of Products Revenue. This change was due to the types of upgrades currently being sold, which are primarily system software and hardware performance upgrades to extend the features and functionality of a product. Previously, upgrades consisted of a group of parts and/or software that change the existing configuration of a product. For the twelve months ended December 30, 2017, and December 31, 2016, we included $12.1 million and $11.0 million, respectively of upgrade sales and $2.7 million and $2.4 million, respectively, of costs in Products Revenues and Cost of Products Revenues, respectively. For the twelve months ended December 26, 2015, we included $7.9 million related to upgrade sales, and $3.0 million of costs, in Service Revenues and Costs of Service Revenues, respectively. In our discussion below comparing revenues and gross margin in 2016 to 2015, we compare as if upgrade sales and related costs have been included in Product Revenue and Cost of Revenues in 2015 to give a more meaningful comparison

Results of Operations

Total net revenues

Our net revenues comprised the following (in thousands, except percentages):

	Fiscal Year
	2017		2016		Change
Automated systems	$	151,401	$	127,378	$	24,023		18.9	%
Integrated systems		42,183		43,846		(1,663	)	(3.8	)%
Materials characterization systems		21,293		13,842		7,451		53.8	%
Total product revenue		214,877		185,066		29,811		16.1	%
Service		43,744		36,063		7,681		21.3	%
Total net revenues	$	258,621	$	221,129	$	37,492		17.0	%

	Fiscal Year
	2016		2015		Change
Automated systems	$	127,378	$	102,386	$	24,992		24.4	%
Integrated systems		43,846		31,579		12,267		38.8	%
Materials characterization systems		13,842		12,980		862		6.6	%
Total product revenue		185,066		146,945		38,121		25.9	%
Service		36,063		40,422		(4,359	)	(10.8	)%
Total net revenues	$	221,129	$	187,367	$	33,762		18.0	%

In 2017, total net revenues increased by $37.5 million from 2016. Customer spending trends for 3D-NAND, DRAM and Foundry primarily contributed to our year over year revenue growth. In 2017, the increase in product revenues of approximately $29.8 million was primarily attributable to increased sales of our Automated systems of $24.0 million, primarily comprised of our newest flagship system, the Atlas III. In 2017, we recognized revenues on Atlas III systems into high-volume manufacturing at multiple leading company fabs and regions, across every key device type in the industry. Materials Characterization accounted for $7.5 million of the increase and was partially offset by a slight decrease of $1.7 million in Integrated Systems sales. Service revenue increased by $7.7 million in 2017 principally due to an increase in sales of spare parts and service contracts as a result of our increasing installed base.

In 2016, total net revenues increased by $33.8 million from 2015. During 2016, we included upgrade sales of $11.0 million, in Product Revenues. For the twelve months ended December 26, 2015, Product Revenues do not include $7.9 million related to upgrade sales, which we included in Service Revenues. For the twelve months ended December 31, 2016, had upgrade sales been included in Product Revenue in 2015, Product Revenues would have increased by $30.2 million. The increase was primarily attributable to an industry-wide improvement in 3D NAND-related semiconductor capital spending. Approximately $17.8 million of the increase related to Automated systems sales and $11.7 million of the increase related to our sales of Integrated Systems (principally IMPULSE®), primarily with 3D-NAND-related customers. Materials Characterization also accounted for $0.7 million of the increased systems sales. Service revenue decreased by $4.4 million in 2016. For the twelve months ended December 31, 2016, had upgrade sales been excluded in Service Revenue in 2015, Service Revenue would have increased by $3.5 million principally due to an increase of $3.9 million in sales of spares and services revenue, offset by $0.4 million decline in extended warranty sales.

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With a significant portion of the world's semiconductor manufacturing capacity located in Asia, a substantial portion of our revenues continue to be generated in that region. Although sales to customers within individual countries of that region will vary from time to time, we expect that a substantial portion of our revenues will continue to be generated in Asia.

Gross margin

Our gross margin breakdown was as follows:

	Fiscal Year
	2017			2016			2015
Products		52.9	%		53.1	%		46.7	%
Service		52.4	%		44.1	%		51.9	%

The calculation of product gross margin includes cost of products including related upgrades and amortization of intangibles. The gross margin on product revenue remained relatively flat in 2017 compared to 2016. However, the gross margin of our services business improved to 52.4% in 2017 from 44.1% in 2016, reflecting an increase of 8.3 percentage points. The increase in gross margin is due to the increases in margin of service parts, a more favorable product mix and higher utilization of our service personnel.

The gross margin on product revenue increased to 53.1% in 2016 from 46.7% in 2015. In 2015 and prior, sales and related cost for upgrades have been included as part of service revenues. Had upgrade sales and related cost been included in Product Revenue and Cost of Revenues in 2015, Product Gross Margin for 2015 would have been 47.5%. The increase in 2016 of 5.6 percentage points was due to a change in product mix, improved installation and warranty related costs and reduced amortization of intangibles as a result of full amortization of the intangible asset. The gross margin of our services business decreased to 44.1% from 51.9% in 2015, reflecting a decrease of 7.8 percentage points. Had upgrade sales and related cost been excluded from Service Revenues and Cost of Service Revenues, Service Gross Margin for 2015 would have been 49.5%, a decrease of 5.4 percentage points, due to the mix of services provided during the year in comparison to the prior year period, and lower labor utilization of service personnel.

Operating expenses

Our operating expenses comprise the following categories (in thousands, except percentages):

	Fiscal Year
	2017		2016		Change
Research and development	$	36,716	$	31,443	$	5,273		16.8	%
Selling		30,839		30,181		658		2.2	%
General and administrative		26,340		23,381		2,959		12.7	%
Amortization of intangible assets		—		24		(24	)	(100.0	)%
Total operating expenses	$	93,895	$	85,029	$	8,866		10.4	%

	Fiscal Year
	2016		2015		Change
Research and development	$	31,443	$	32,701	$	(1,258	)	(3.8	)%
Selling		30,181		28,055		2,126		7.6	%
General and administrative		23,381		22,444		937		4.2	%
Amortization of intangible assets		24		114		(90	)	(78.9	)%
Restructuring charge		—		1,380		(1,380	)	(100.0	)%
Total operating expenses	$	85,029	$	84,694	$	335		0.4	%

Research and development

Investments in research and development personnel and associated projects are part of our strategy to ensure our products remain competitive and meet customer’s needs. In 2017, research and development costs increased by $5.3 million or 16.8% compared to 2016 primarily due to additional headcount and higher material spending in program related expenses to support our research and development efforts.

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Research and development costs decreased by $1.3 million or 3.8% in 2016 compared to 2015 related primarily due to lower spending for material expenses and related costs associated with research and development investments for our next generation systems.

Selling

Selling expenses increased slightly by $0.7 million or 2.2% in fiscal year 2017 compared to fiscal year 2016. The slight increase is due to higher variable compensation, commission expense, and sales related costs, which is consistent with higher revenues in 2017 compared to 2016.

Selling expenses increased by $2.1 million or 7.6% in fiscal year 2016 compared to fiscal year 2015. The increase is due to higher variable compensation, commission expense, and sales related costs, which is consistent with higher revenues in 2016 compared to 2015. In addition, during fiscal year 2016, there was a decrease in utilization of our sales application personnel for installation and warranty effort, which is included in cost of net revenues.

General and administrative

General and administrative expenses increased by $3.0 million or 12.7% in fiscal year 2017 compared to 2016. The increase was primarily due to higher variable compensation costs, recruiting costs associated with our CEO search and higher professional services fees.

General and administrative expenses increased by $0.9 million or 4.2% in fiscal year 2016 compared to 2015. The increase was primarily due to higher variable compensation costs.

Amortization of intangible assets

We recorded no amortization of intangible assets in operating expenses in fiscal 2017 as the related intangible assets became fully amortized in 2016.

Amortization of intangible assets included in operating expenses in fiscal year 2016 decreased slightly compared to 2015, as a result of the reduction in amortization due to intangible assets that became fully amortized in 2016.

Restructuring charge

There were no restructuring charges recorded in 2017 and 2016 fiscal year. We recorded a restructuring charge of $1.4 million in 2015 as a result of our decision to maximize operating effectiveness. This amount includes charges primarily related to employee severance and related costs. As of December 26, 2015, we had completed and settled in full all cash payments related to employee severance.

Other income (expense), net

Our other income (expense), net, consisted of the following items (in thousands, except percentages):

	Fiscal Year
	2017			2016			Change
Interest income	$	8		$	35		$	(27	)	(77.1	)%
Interest expense		(92	)		(285	)		193		(67.7	)%
Interest expense, net	$	(84	)	$	(250	)	$	166		(66.4	)%
Net gains on investments		1,311			520			791		152.1	%
Other losses, net		(735	)		(230	)		(505	)	219.6	%
Other income, net	$	576		$	290		$	286		98.6	%
Total other income, net	$	492		$	40		$	452		1130.0	%

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	Fiscal Year
	2016			2015			Change
Interest income	$	35		$	71		$	(36	)	(50.7	)%
Interest expense		(285	)		(289	)		4		(1.4	)%
Interest expense, net	$	(250	)	$	(218	)	$	(32	)	14.7	%
Net gains on investments		520			220			300		136.4	%
Other gains (losses), net		(230	)		593			(823	)	(138.8	)%
Other income, net		290			813			(523	)	(64.3	)%
Total other income, net	$	40		$	595		$	(555	)	(93.3	)%

Total other income, net increased by $0.5 million in 2017 compared to 2016 period, primarily due to higher net realized investment gains which is in line with the higher cash and cash equivalents balance in fiscal year 2017, partially offset by unfavorable net revaluation of intercompany balances based on foreign currency fluctuations relative to the U.S. dollar, netted against hedging gains and losses.

Total other income, net decreased by $0.6 million in 2016 compared to 2015 period, due to unfavorable impact of fluctuations of foreign currency rates relative to the U.S. dollar, offset in part against the increase of net realized investment gains. In 2015, the impact of fluctuations of foreign currency rates relative to the U.S. dollar was favorable compared to 2016 period.

Provision for (benefit from) income taxes

We recorded an income tax provision of $13.1 million in 2017, an income tax benefit of $14.9 in 2016, and an income tax provision of $2.7 million in 2015. The increase in the provision for 2017 from 2016 was primarily related to the tax effects of the Tax Cuts and Jobs Act of 2017 and increased profitability for the year ended 2017 offset by the release of a valuation allowance against a significant portion of our U.S. deferred tax assets for the year ended 2016. The decrease in the tax provision for 2016 from 2015 was primarily related to the releasing of the same valuation allowance for the year ended 2016.

Our provision for income taxes for 2017 of $13.1 million reflects an effective tax rate of 30.2%. This rate differs from the Federal statutory rate of 35.0% primarily due to foreign income taxed at lower rates, and tax credits generated in the current year, tax benefits associated with the settlement of equity options/awards, and a one-time benefit related to an entity classification change, offset by an additional provision for the tax effects of the Tax Cuts and Job Act of 2017. Our benefit for income taxes for 2016 of $14.9 million reflects an effective tax rate of negative 51.1%. This rate differs from the Federal statutory rate of 35.0% primarily due to the release of a valuation allowance against a significant portion of our U.S. deferred tax assets which represented a $23.9 million benefit, as well as foreign income taxed at lower rates, and tax credits generated in the current year, offset by equity compensation expenses for which no current tax deduction is available. Our provision for income taxes for 2015 of $2.7 million reflects an effective tax rate of 47.8 %. This rate differs from the Federal statutory rate of 35.0% primarily due to losses incurred in foreign jurisdictions where no benefit is currently recorded, as well as equity compensation expenses for which no current tax deduction is available.

We maintain valuation allowances when it is likely that all or a portion of a deferred tax asset will not be realized. Changes in valuation allowances from period to period are included in our income tax provision in the period of change. In determining whether a valuation allowance is warranted, we take into account such factors as prior earnings history, expected future earnings, unsettled circumstances that, if unfavorably resolved, would adversely affect utilization of a deferred tax asset, carry-back and carry-forward periods, and tax strategies that could potentially enhance the likelihood of realization of a deferred tax asset. As such, in 2017, we released a valuation allowance against our Singapore deferred tax assets of $0.3 million. We currently maintain a valuation allowance against our deferred tax assets in California, Germany, and Switzerland.

Liquidity and Capital Resources

Our principal sources of liquidity are cash and cash equivalents, marketable securities and cash flow generated from our operations. Our liquidity is affected by many factors, including those that relate to our specific operations and those that relate to the uncertainties of global and regional economies and the sectors of the semiconductor industry which we operate in. Although our cash requirements will fluctuate based on the timing and extent of these factors, we believe our existing cash, cash equivalents and marketable securities, combined with cash currently projected to be generated from our operations, will be sufficient to meet our liquidity needs through at least the next twelve months.

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The following table presents selected financial information and statistics as of and for the years ended December 30, 2017, December 31, 2016 and December 26, 2015 (in millions):

	December 30, 2017			December 31, 2016			December 26, 2015
Cash, cash equivalents and marketable securities	$	117.0		$	130.0		$	83.1
Working capital	$	196.0		$	174.4		$	132.9
Cash provided by (used in) operating activities	$	20.6		$	45.7		$	1.6
Cash provided by (used in) investing activities	$	(6.7	)	$	(42.1	)	$	2.0
Cash provided by (used in) financing activities	$	(25.6	)	$	5.3		$	0.2

During 2017, the $20.6 million cash provided by operating activities was a result of $30.2 million of net income plus $25.3 million net effect of non-cash adjustments to net income, offset by $34.5 million net change in operating assets and liabilities. The change in operating assets and liabilities is generally driven by the timing of our customer payments for account receivable and timing of our vendor payments for accounts payable. We expect that cash provided by operating activities may fluctuate due to several factors, including variations in our operating results, accounts receivable collections performance, inventory and supply chain management, vendor payment initiatives, tax benefits or charges from stock-based compensation, and the timing and amount of compensation and other payments. The $25.1 million decrease in cash from operating activities in fiscal 2017 compared to fiscal 2016 was primarily due to higher inventory levels at the end of the fiscal year and higher accounts receivable balance as a result of the record high revenue level in the fourth quarter of the 2017 fiscal year. Cash used in investing activities of $6.7 million during 2017, consisted primarily of cash used to acquire certain assets and property, plant and equipment of $7.2 million, as sales and maturities of marketable securities were almost entirely offset by purchases of marketable securities. Cash used in financing activities of $25.6 million during 2017 consisted primarily of $27.0 million of common stock repurchases and $4.2 million of cash paid for taxes on net issuance of stock awards, partially offset by proceeds from issuance of common stock from the employee stock purchase program and the exercise of stock options of $5.6 million.

During 2016, cash provided by operating activities was a result of $44.0 million of net income plus the net effect of non-cash adjustments to net income and net change in operating assets and liabilities. The increase in cash from operating activities in fiscal 2016 compared to fiscal 2015 was primarily due to improved working capital, higher revenue levels and higher net income. Cash used in investing activities of $42.1 million during 2016, consisted primarily of $82.9 million net purchases of marketable securities and cash used to acquire $4.0 million of property, plant and equipment, partially offset by cash provided by maturities of marketable securities of $38.8 million and cash received from sales of marketable securities of $6.0 million. Cash provided by financing activities of $5.3 million during 2016 consisted primarily of $8.4 million in proceeds from issuance of common stock from the employee stock purchase program and the exercise of stock options, partially offset by cash paid for taxes on net issuance of stock awards of $1.8 million, $1.0 million of excess tax benefit from equity awards and royalty payments to Zygo of $0.3 million.

During 2015, cash provided by operating activities was a result of $2.9 million of net income, non-cash adjustments to net income of $19.4 million and a decrease in net change in operating assets and liabilities of $20.7 million. Cash from operating activities in fiscal 2015 was a result of improved working capital and an increase in sales. Cash provided by investing activities of $2.0 million during 2015, consisted primarily of cash provided by maturities of marketable securities, net of purchases of $0.4 million, and cash received from sales of marketable securities of $3.4 million, partially offset by cash used to acquire property, plant and equipment of $1.8 million. Cash provided by financing activities of $0.2 million during 2015 consisted primarily of $4.0 million in proceeds from issuance of common stock from the employee stock purchase program and the exercise of stock options, partially offset by cash used to repurchase common stock of $1.7 million, royalty and other payments to Zygo of $0.9 million, and cash paid for taxes on net issuance of stock awards of $1.2 million.

We have evaluated and will continue to evaluate the acquisitions of products, technologies or businesses that are complementary to our business. These activities may result in product and business investments, which may affect our cash position and working capital balances. Some of these activities might require significant cash outlays.

We earn a portion of our operating income outside the United States, which is deemed to be indefinitely reinvested in foreign jurisdictions. As a result, $13.4 million of our cash is held by foreign subsidiaries, a portion of which, would have to be repatriated to the United States. We are currently evaluating whether there is a need to repatriate these funds. We believe our existing balances of cash, cash equivalents and marketable securities will be sufficient to satisfy our working capital needs, capital asset purchases, outstanding commitments and other liquidity requirements associated with our existing operations over the next twelve months.

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Should we require more capital in the United States than is generated by our domestic operations, for example to fund significant discretionary activities such as business acquisitions and share repurchases, we could elect to repatriate future earnings from foreign jurisdictions or raise capital in the United States through debt or equity issuances. These alternatives could result in higher effective tax rates, increased interest expense, or dilution of our earnings.

Repurchases of Common Stock

On May 29, 2012, our Board of Directors authorized the repurchase of up to $20.0 million of our common stock, of which $4.4 million remained as of December 31, 2016.

On November 15, 2017 our Board of Directors authorized the repurchase of up to $50.0 million of our common stock, which superseded the 2012 repurchase program. This new plan is referred to as the Stock Repurchase Plan. Stock repurchases under the Stock Repurchase Plan may be made through open market and privately negotiated transactions at times and in such amounts as management deems appropriate. The timing and actual number of shares repurchased is dependent on a variety of factors including price, corporate and regulatory requirements and other market conditions.

Shares repurchased and retired in the fourth quarter of fiscal year 2017 under the Stock Repurchase Plan, with the associated cost of repurchase and amount available for repurchase are as follows (in thousands, except number of shares and weighted average price per share):

	Fiscal Year 2017
Number of shares of common stock repurchased		1,065,848
Weighted average price per share	$	25.33
Total cost of repurchase	$	26,999
Amount available for repurchase at end of period	$	23,001

The Stock Repurchase Plan was completed in February 2018, with purchases since December 30, 2017 of 896,187 shares of our common stock at the weighted average price of $25.65 for a cost of $23.0 million.

There were no shares repurchased during fiscal year 2016. During fiscal year 2015, we repurchased and retired 111,050 shares of our common stock at the weighted average price of $15.49 per share under a previously approved repurchase plan, all of which were purchased in the first quarter of fiscal year 2015.

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements or obligations as of December 30, 2017, and December 31, 2016.

Contractual Obligations

The following table summarizes our contractual cash obligations as of December 30, 2017, and the effect of such obligations.

			Payments due by period
	Total		Less than 1 year		1-3 years		4-5 years		More than 5 years
Purchase commitments - inventory (1)	$	50,654	$	50,654	$	—	$	—	$	—
Other long-term liabilities		521		1		36		37		447
Operating lease obligations		2,968		1,664		1,248		56		—
Total	$	54,143	$	52,319	$	1,284	$	93	$	447

⁽¹⁾ We maintain certain open inventory purchase agreements with our suppliers to ensure a smooth and continuous supply availability for key components. Our liability under these purchase commitments is generally restricted to a forecasted time-horizon as mutually agreed upon between the parties. This forecasted time-horizon can vary among different suppliers. We estimate our open inventory purchase commitment as of December 30, 2017, was approximately $50.7 million. Actual expenditures will vary based upon the volume of the transactions and length of contractual service provided. In addition, the amounts paid under these arrangements may be less in the event that the arrangements are renegotiated or cancelled.

Excluded from the contractual obligation table above are $4.0 million of future payments related to uncertain tax positions because we cannot reliably estimate the timing of the settlements with the respective tax authorities.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Risk

A substantial part of our business consists of sales made to customers outside the United States: 87%, 86%, and 80% of sales in 2017, 2016, and 2015, respectively; and 22%, 18%, and 22% of net revenues in 2017, 2016, and 2015, respectively, were denominated in currencies other than the U.S. dollar. Additionally, portions of our costs of net revenues and our operating expenses are incurred by our international operations and denominated in local currencies.

Our exposure to foreign currency exchange rate fluctuations arises in part from intercompany balances in which costs are charged between our U.S. headquarters and our foreign subsidiaries. On our consolidated balance sheet these intercompany balances are eliminated and thus no consolidated balances are associated with these intercompany balances; however, since each foreign entity's functional currency is generally its respective local currency, there is exposure to foreign exchange risk on a consolidated basis. Intercompany balances are denominated primarily in U.S. dollars and, to a lesser extent, other local currencies. The net intercompany balance, exposed to foreign currency risk, at December 30, 2017, was approximately $0.4 million. A hypothetical change of 10% in the relative value of the US dollar versus local functional currencies could result in an increase or decrease of approximately $44,000 in transaction gains or losses which would be included in our statement of operations.

To manage the level of exposure to the risk of foreign currency exchange rate fluctuations, we enter into foreign currency forward exchange contracts to protect against currency exchange risks associated with existing assets and liabilities. A foreign currency forward exchange contract acts as a hedge by increasing in value when underlying assets decrease in value or underlying liabilities increase in value due to changes in foreign exchange rates. Conversely, a foreign currency forward exchange contract decreases in value when underlying assets increase in value or underlying liabilities decrease in value due to changes in foreign exchange rates. These forward contracts are not designated as accounting hedges, so the unrealized gains and losses are recognized in other income, net, in advance of the actual foreign currency cash flows with the fair value of these forward contracts being recorded as accrued liabilities or other current assets.

We do not use forward contracts for trading purposes. Our forward contracts generally have maturities of 30 days or less. We enter into foreign currency forward exchange contracts based on estimated future asset and liability exposures, and the effectiveness of our hedging program depends on our ability to estimate these future asset and liability exposures. Recognized gains and losses with respect to our current hedging activities will ultimately depend on how accurately we are able to match the amount of foreign currency forward exchange contracts with actual underlying asset and liability exposures.

For 2017, 2016 and 2015, foreign currency transactions resulted in a loss of $0.6 million, loss of $0.4 million and a gain of $0.5 million, respectively.

We actively monitor our foreign currency risks, but there is no guarantee that our foreign currency hedging activities will substantially offset the impact of fluctuations in currency exchange rates on our results of operations, cash flows and financial position. See “Note 3, Fair Value Measurement and Disclosures” in the Notes to Consolidated Financial Statements for more information regarding our derivatives and hedging activities.

Interest Rate Risk

Our exposure to market risk resulting from changes in interest rates relates primarily to our investment portfolio. At December 30, 2017, and December 31, 2016, we held $82.1 million and $82.9 million, respectively, in marketable securities. The fair value of our marketable securities could be adversely impacted due to a rise in interest rates. A hypothetical immediate and consistent increase in interest rates by 100 basis points from levels as of December 30, 2017, the fair value of our marketable securities would have declined by $0.5 million. Securities with longer maturities are subject to a greater interest rate risk than those with shorter maturities and as of December 30, 2017, and December 31, 2016, the average duration of our portfolio was less than nine months. We do not hold securities for trading purposes.

38

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by Item 8 of Form 10-K is presented here in the following order:

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Financial Statements:
Report of Independent Registered Public Accounting Firm	40
Consolidated Balance Sheets	42
Consolidated Statements of Operations	43
Consolidated Statements of Comprehensive Income	44
Consolidated Statements of Stockholders’ Equity	45
Consolidated Statements of Cash Flows	46
Notes to Consolidated Financial Statements	47
Supplementary Data:
Selected Quarterly Financial Results (Unaudited)	71

39

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Nanometrics Incorporated

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Nanometrics Incorporated and its subsidiaries as of December 30, 2017 and December 31, 2016, and the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 30, 2017, including the related notes and financial statement schedule listed in the index appearing under item 15(a)(2) (collectively referred to as the “consolidated financial statements”).  We also have audited the Company's internal control over financial reporting as of December 30, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 30, 2017 and December 31, 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 30, 2017 in conformity with accounting principles generally accepted in the United States of America.  Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 30, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the Report of Management on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits.  We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.  

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.  Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.  Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.  Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.  Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

40

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/PricewaterhouseCoopers LLP

San Jose, California

February 26, 2018

We have served as the Company’s auditor since 2010.

41

NANOMETRICS INCORPORATED

CONSOLIDATED BALANCE SHEETS

(In thousands except share and per share amounts)

	December 30, 2017			December 31, 2016
ASSETS
Current assets:
Cash and cash equivalents	$	34,899		$	47,062
Marketable securities		82,130			82,899
Accounts receivable, net of allowances of $126 and $73, respectively		62,457			39,457
Inventories		52,860			38,837
Inventories-delivered systems		1,534			2,457
Prepaid expenses and other		6,234			5,667
Total current assets		240,114			216,379
Property, plant and equipment, net		44,810			44,226
Goodwill		10,232			8,940
Intangible assets, net		2,206			412
Deferred income tax assets		11,924			17,399
Other assets		413			474
Total assets	$	309,699		$	287,830
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	13,857		$	11,342
Accrued payroll and related expenses		12,901			12,656
Deferred revenue		7,408			9,168
Other current liabilities		7,249			8,047
Income taxes payable		2,680			813
Total current liabilities		44,095			42,026
Deferred revenue		1,661			816
Income taxes payable		860			841
Deferred tax liability		179			20
Other long-term liabilities		521			353
Total liabilities		47,316			44,056
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock, $0.001 par value; 3,000,000 shares authorized;    no shares issued or outstanding		—			—
Common stock, $0.001 par value, 47,000,000 shares authorized: 24,628,722    and 25,070,889, respectively, issued and outstanding		26			25
Additional paid-in capital		255,368			271,969
Retained earnings (deficit)		9,113			(22,174	)
Accumulated other comprehensive income (loss)		(2,124	)		(6,046	)
Total stockholders’ equity		262,383			243,774
Total liabilities and stockholders’ equity	$	309,699		$	287,830

See Notes to Consolidated Financial Statements

42

NANOMETRICS INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands except per share amounts)

	Years Ended
	December 30, 2017			December 31, 2016			December 26, 2015
Net revenues:
Products	$	214,877		$	185,066		$	146,945
Service		43,744			36,063			40,422
Total net revenues		258,621			221,129			187,367
Costs of net revenues:
Cost of products		100,910			85,391			76,224
Cost of service		20,804			20,160			19,450
Amortization of intangible assets		206			1,454			2,026
Total costs of net revenues		121,920			107,005			97,700
Gross profit		136,701			114,124			89,667
Operating expenses:
Research and development		36,716			31,443			32,701
Selling		30,839			30,181			28,055
General and administrative		26,340			23,381			22,444
Amortization of intangible assets		—			24			114
Restructuring charge		—			—			1,380
Total operating expenses		93,895			85,029			84,694
Income from operations		42,806			29,095			4,973
Other (income) expense:
Interest income		8			35			71
Interest expense		(92	)		(285	)		(289	)
Other income, net		576			290			813
Total other income, net		492			40			595
Income before income taxes		43,298			29,135			5,568
Provision for (benefit from) income taxes		13,096			(14,900	)		2,663
Net income	$	30,202		$	44,035		$	2,905
Net income per share:
Basic	$	1.19		$	1.79		$	0.12
Diluted	$	1.17		$	1.75		$	0.12
Weighted average shares used in per share calculation:
Basic		25,334			24,655			24,059
Diluted		25,919			25,153			24,375

See Notes to Consolidated Financial Statements

43

NANOMETRICS INCORPORATED

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

	Year Ended
	December 30, 2017			December 31, 2016			December 26, 2015
Net income	$	30,202		$	44,035		$	2,905
Other comprehensive income (loss):
Change in foreign currency translation adjustment		4,170			(869	)		(2,344	)
Employee benefit plan adjustment		(160	)		(17	)		(76	)
Net change on unrealized (losses) gains on available-for-sale investments		(88	)		42			(13	)
Other comprehensive income (loss)		3,922			(844	)		(2,433	)
Comprehensive income	$	34,124		$	43,191		$	472

See Notes to Consolidated Financial Statements

44

NANOMETRICS INCORPORATED

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share amounts)

	Common Stock					Additional Paid-In			Accumulated			Accumulated Other Comprehensive			Total Stockholders’
	Shares			Amount		Capital			Deficit			Income			Equity
Balance as of December 27, 2014		23,813,729			24		251,396			(69,114	)		(2,769	)		179,537
Net income		—			—		—			2,905						2,905
Employee benefit plan adjustment		—			—		—			—			(76	)		(76	)
Foreign currency translation adjustments		—			—		—			—			(2,344	)		(2,344	)
Unrealized loss on investments, net of tax		—			—		—			—			(13	)		(13	)
Issuance of common stock under stock-based    compensation plans		521,607			—		2,792			—			—			2,792
Stock-based compensation expense		—			—		6,248			—			—			6,248
Repurchases and retirement of common stock under    share repurchase plans		(111,050	)		—		(1,721	)		—			—			(1,721	)
Balance as of December 26, 2015		24,224,286			24		258,715			(66,209	)		(5,202	)		187,328
Net income		—			—		—			44,035						44,035
Employee benefit plan adjustment		—			—		—			—			(17	)		(17	)
Foreign currency translation adjustments		—			—		—			—			(869	)		(869	)
Unrealized gain on investments, net of tax		—			—		—			—			42			42
Issuance of common stock under stock-based    compensation plans		846,603			1		6,624			—			—			6,625
Stock-based compensation expense		—			—		7,666			—			—			7,666
Excess tax benefit related to stock options		-			—		(1,036	)		—			—			(1,036	)
Balance as of December 31, 2016		25,070,889			25		271,969			(22,174	)		(6,046	)		243,774
Net income		—			—		—			30,202						30,202
Adjustment due to adoption of ASU 2016-09 Improvements to Employee Share-Based Payment Accounting							139			1,085						1,224
Employee benefit plan adjustment		—			—		—			—			(160	)		(160	)
Foreign currency translation adjustments		—			—		-			—			4,170			4,170
Unrealized loss on investments, net of tax		—			—		—			—			(88	)		(88	)
Issuance of common stock under stock-based    compensation plans		623,681			1		1,440			—			—			1,441
Stock-based compensation expense		—			—		8,819			—			—			8,819
Repurchases and retirement of common stock under    share repurchase plans		(1,065,848	)		—		(26,999	)		—			—			(26,999	)
Balance as of December 30, 2017		24,628,722		$	26	$	255,368		$	9,113		$	(2,124	)	$	262,383

See Notes to Consolidated Financial Statements

45

NANOMETRICS INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Years Ended
	December 30, 2017			December 31, 2016			December 26, 2015
Cash flows from operating activities:
Net income	$	30,202		$	44,035		$	2,905
Reconciliation of net income to net cash provided    by operating activities:
Depreciation and amortization		6,920			8,295			9,075
Stock-based compensation		8,819			7,666			6,248
Excess tax benefit from equity awards		—			1,036			—
Disposal of fixed assets		631			478			1,121
Inventory write-down		2,020			2,110			2,645
Deferred income taxes		6,858			(16,783	)		345
Changes in fair value of contingent payments to Zygo Corporation		—			(1,175	)		(56	)
Changes in assets and liabilities:
Accounts receivable		(19,523	)		(2,707	)		(12,610	)
Inventories		(18,037	)		4,526			(16,431	)
Inventories-delivered systems		923			399			(943	)
Prepaid expenses and other		(230	)		905			3,271
Accounts payable, accrued and other liabilities		1,049			2,462			4,167
Deferred revenue		(915	)		(3,634	)		1,006
Income taxes payable		1,886			(1,928	)		828
Net cash provided by operating activities		20,603			45,685			1,571
Cash flows from investing activities:
Payment for acquisition of certain assets		(2,000	)		—			—
Sales of marketable securities		53,030			5,955			3,383
Maturities of marketable securities		77,250			38,775			41,863
Purchases of marketable securities		(129,766	)		(82,864	)		(41,449	)
Purchases of property, plant and equipment		(5,204	)		(3,999	)		(1,846	)
Net cash (used in) provided by investing activities		(6,690	)		(42,133	)		1,951
Cash flows from financing activities:
Payments to Zygo Corporation related to acquisition		—			(315	)		(851	)
Proceeds from sale of shares under employee stock option    plans and purchase plan		5,576			8,447			3,974
Excess tax benefit from equity awards		—			(1,036	)		—
Taxes paid on net issuance of stock awards		(4,135	)		(1,822	)		(1,182	)
Repurchases of common stock under share repurchase plans		(26,999	)		-			(1,721	)
Net cash (used in) provided by financing activities		(25,558	)		5,274			220
Effect of exchange rate changes on cash and cash equivalents		(518	)		82			(264	)
Net (decrease) increase in cash and cash equivalents		(12,163	)		8,908			3,478
Cash and cash equivalents, beginning of period		47,062			38,154			34,676
Cash and cash equivalents, end of period	$	34,899		$	47,062		$	38,154
Supplemental disclosure of cash flow information:
Cash paid (refund) for income taxes, net	$	3,040		$	3,767		$	(826	)
Supplemental disclosure of non-cash investing activities:
Transfer of inventory to property, plant and equipment, net	$	2,451		$	2,345		$	1,469
Property, plant and equipment included in accounts payable	$	957		$	683		$	36

See Notes to Consolidated Financial Statements

46

NANOMETRICS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Nature of Business, Basis of Presentation and Significant Accounting Policies

Description of Business – Nanometrics Incorporated (“Nanometrics” or the “Company”) and its wholly-owned subsidiaries design, manufacture, market, sell and support optical critical dimension ("OCD"), thin film and overlay dimension metrology and inspection systems used primarily in the manufacturing of semiconductors, solar photovoltaics (“solar PV”) and high-brightness LEDs (“HB-LED”), as well as by customers in the silicon wafer and data storage industries. Nanometrics' metrology systems precisely measure a wide range of film types deposited on substrates during manufacturing to control manufacturing processes and increase production yields in the fabrication of integrated circuits. The Company’s OCD technology is a patented critical dimension measurement technology that is used to precisely determine the dimensions on the semiconductor wafer that directly control the resulting performance of the integrated circuit devices. The thin film metrology systems use a broad spectrum of wavelengths, high-sensitivity optics, proprietary software, and patented technology to measure the thickness and uniformity of films deposited on silicon and other substrates as well as their chemical composition. The overlay metrology systems are used to measure the overlay accuracy of successive layers of semiconductor patterns on wafers in the photolithography process. Nanometrics' inspection systems are used to find defects on patterned and unpatterned wafers at nearly every stage of the semiconductor production flow. The corporate headquarters of Nanometrics is located in Milpitas, California.

Basis of Presentation – The consolidated financial statements include Nanometrics Incorporated and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Fiscal Year – The Company utilizes a 52/53 week fiscal year ending on the last Saturday of the calendar year. For each of fiscal years ended December 30, 2017, December 31, 2016, and December 26, 2015, the period presented consisted of a 52-week year, 53-week year and 52-week year, respectively.

Upgrade Revenue and Related Cost - Beginning the first quarter of 2016, revenues associated with upgrade sales are now included under Products Revenues, and the related costs in Cost of Products Revenue. This change was due to the types of upgrades currently being sold, which are primarily system software and hardware performance upgrades to extend the features and functionality of a product. Previously upgrades consisted of a group of parts and/or software that change the existing configuration of a product. For the twelve months ended December 30, 2017, and December 31, 2016, $12.1 million and $11.0 million, respectively, of upgrade sales and $2.7 million and $2.4 million of costs, respectively, are included in Products Revenues and Cost of Products Revenues. For the year ended December 26, 2015, $7.9 million related to upgrade sales, and $3.0 million of costs, are included in Service Revenues and Costs of Service Revenues, respectively, in the accompanying Condensed Consolidated Statement of Operations.

Use of Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ materially from those estimates. Estimates are used for, but not limited to, revenue recognition, the provision for doubtful accounts, the provision for excess, obsolete, or slow-moving inventories, valuation of intangible and long-lived assets, warranty accruals, income taxes, valuation of stock-based compensation, and contingencies.

Foreign Currency Translation – The assets and liabilities of foreign subsidiaries are translated from their respective local functional currencies at exchange rates in effect at the balance sheet date and income and expense accounts are translated at average exchange rates during the reporting period. Resulting translation adjustments are reflected in “Accumulated other comprehensive income,” a component of stockholders’ equity. Foreign currency transaction gains and losses, as well as remeasurement of assets and liabilities denominated in a currency other than the functional currency are reflected in “Other income (expense)” in the consolidated statements of operations in the period incurred, and consists of a $0.6 million loss, a $0.4 million loss and a $0.5 million gain for the years ended December 30, 2017, December 31, 2016, and December 26, 2015, respectively.

Revenue Recognition –  The Company derives revenue from the sale of process control metrology and inspection systems and related upgrades (“product revenue”) as well as spare part sales, billable service and service contracts (together “service revenue”). Upgrades are system software and hardware performance upgrades that extend the features and functionality of a product. As discussed above, commencing in the first quarter of 2016, upgrades are included in product revenue, which consists of sales of complete, advanced process control metrology and inspection systems (the “system(s)”). Nanometrics’ systems consist of hardware and software components that function together to deliver the essential functionality of the system. Arrangements for sales of systems and upgrades often include defined customer-specified acceptance criteria.

47

NANOMETRICS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

In summary, the Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the seller's price is fixed or determinable, and collectability is reasonably assured.

For repeat product sales to existing customers, revenue recognition occurs at the time title and risk of loss transfer to the customer, which usually occurs upon shipment from the Company's manufacturing location, if it can be reliably demonstrated that the product has successfully met the defined customer specified acceptance criteria and all other recognition criteria have been met. For initial sales where the product has not previously met the defined customer specified acceptance criteria, product revenues are recognized upon the earlier of receipt of written customer acceptance or expiration of the contractual acceptance period. In Japan, where contractual terms with the customer specify risk of loss and title transfers upon customer acceptance, revenue is recognized upon receipt of written customer acceptance, provided that all other recognition criteria have been met.

The Company warrants its products against defects in manufacturing. Upon recognition of product revenue, a liability is recorded for anticipated warranty costs. On occasion, customers request a warranty period longer than the Company's standard warranty. In those instances, where extended warranty services are separately quoted to the customer, the associated revenue is deferred and recognized as service revenue ratably over the term of the extended warranty period. The portion of service contracts and extended warranty services agreements that are uncompleted at the end of any reporting period are included in deferred revenue.

As part of its customer services, the Company sells software that is considered to be an upgrade to a customer's existing systems. These standalone software sales are not essential to the tangible product's functionality and are accounted for under software revenue recognition rules which require vendor specific objective evidence (“VSOE”) of fair value to allocate revenue in a multiple element arrangement. Revenue from software sales is recognized when the software is delivered to the customer, provided that all other recognition criteria have been met.

The majority of other upgrades are sold based on published specifications. For simple upgrades that do not require major configuration, revenue is recognized at the time title and risk of loss transfer to the customer, which is usually upon shipment. For complex and extensive upgrades, specific acceptance or prior acceptance for a similar upgrade is required in order to recognize revenue.

Revenue related to spare parts is recognized upon shipment. Revenue related to billable services is recognized as the services are performed. Service contracts may be purchased by the customer during or after the warranty period and revenue is recognized ratably over the service contract period.

Frequently, the Company delivers products and various services in a single transaction. The Company's deliverables consist of tools, installation, upgrades, billable services, spare parts, and service contracts. The Company's typical multi-element arrangements include a sale of one or multiple tools that include installation and standard warranty. Other arrangements consist of a sale of tools bundled with service elements or delivery of different types of services. The Company's tools, upgrades, and spare parts are generally delivered to customers within a period of up to six months from order date. Installation is usually performed soon after delivery of the tool. The portion of revenue associated with installation is deferred based on relative selling price and that revenue is recognized upon completion of the installation and receipt of final acceptance. Billable services are billed on a time and materials basis and performed as requested by customers. Under service contract arrangements, services are provided as needed over the fixed arrangement term, which terms can be up to twelve months. The Company does not grant its customers a general right of return or any refund terms and imposes a penalty on orders cancelled prior to the scheduled shipment date.

The Company regularly evaluates its revenue arrangements to identify deliverables and to determine whether these deliverables are separable into multiple units of accounting. The Company allocates the arrangement consideration among the deliverables based on relative selling prices. The Company has established VSOE for some of its products and services when a substantial majority of selling prices falls within a narrow range when sold separately. For deliverables with no established VSOE, the Company uses best estimate of selling price to determine standalone selling price for such deliverable. The Company does not use third party evidence to determine standalone selling price since this information is not widely available in the market as the Company's products contain a significant element of proprietary technology and the solutions offered differ substantially from competitors. The Company has established a process for developing estimated selling prices, which incorporates historical selling prices, the effect of market conditions, gross margin objectives, pricing practices, as well as entity-specific factors. The Company monitors and evaluates estimated selling price on a regular basis to ensure that changes in circumstances are accounted for in a timely manner.

48

NANOMETRICS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

When certain elements in multiple-element arrangements are not delivered or accepted at the end of a reporting period, the relative selling prices of undelivered elements are deferred until these elements are delivered and/or accepted. If deliverables cannot be accounted for as separate units of accounting, the entire arrangement is accounted for as a single unit of accounting and revenue is deferred until all elements are delivered and all revenue recognition requirements are met.

Cash, Cash Equivalents and Marketable Securities – The Company considers all highly liquid investments with original maturities of three months or less, when purchased, to be cash equivalents. Marketable securities are classified as “available-for-sale” and are reported at fair value with unrealized gains and losses reported in stockholders' equity as a component of other comprehensive income. The cost of securities sold is based on the specific identification method. The Company classifies its investments as current based on the nature of the investment and their availability for use in current operations. The Company reviews its investment portfolio quarterly to determine if any securities may be other-than-temporarily impaired due to increased credit risk, changes in industry or sector of a certain instrument or ratings downgrades.

Fair Value of Financial Instruments – Financial instruments include cash and cash equivalents, accounts receivable and accounts payable. Cash equivalents are stated at fair market value based on quoted market prices. The carrying values of accounts receivable and accounts payable approximate their fair values because of the short-term maturity of these financial instruments.

Derivatives – The Company enters into foreign currency forward exchange contracts to protect against currency exchange risks associated with existing assets and liabilities. A foreign currency forward exchange contract acts as a hedge by increasing in value when underlying assets decrease in value or underlying liabilities increase in value due to changes in foreign exchange rates. Conversely, a foreign currency forward exchange contract decreases in value when underlying assets increase in value or underlying liabilities decrease in value due to changes in foreign exchange rates. These forward contracts are not designated as accounting hedges, so the unrealized gains and losses are recognized in other income, net, in advance of the actual foreign currency cash flows with the fair value of these forward contracts being recorded as accrued liabilities or other current assets. The Company does not use forward contracts for trading purposes.

Allowance for Doubtful Accounts – The Company maintains allowances for estimated losses resulting from the inability of its customers to make required payments. Credit limits are established through a process of reviewing the financial history and stability of its customers. Where appropriate and available, the Company obtains credit rating reports and financial statements of customers when determining or modifying their credit limits. The Company regularly evaluates the collectability of its trade receivable balances based on a combination of factors such as the length of time the receivables are past due, customary payment practices in the respective geographies and historical collection experience with customers. The Company believes that its allowance for doubtful accounts adequately reflects the risk associated with its receivables. If the financial conditions of a customer were to deteriorate, resulting in their inability to make payments, the Company may need to record additional allowances, which would result in additional general and administrative expenses being recorded for the period in which such determination was made.

Inventories – Inventories are stated at the lower of cost, which approximates actual cost on a first-in, first-out basis, or net realizable value. The Company is exposed to a number of economic and industry factors that could result in portions of inventory becoming either obsolete or in excess of anticipated usage, or saleable only for amounts that are less than their carrying amounts. These factors include, but are not limited to, technological changes in the market, the Company’s ability to meet changing customer requirements, competitive pressures in products and prices, and the availability of key components from suppliers. The Company has established inventory reserves when conditions exist that suggest that inventory may be in excess of anticipated demand or is obsolete based upon assumptions about future demand for the Company’s products and market conditions. Once a reserve has been established, it is maintained until the part to which it relates is sold or is otherwise disposed of. The Company regularly evaluates its ability to realize the value of inventory based on a combination of factors including the following: historical usage rates, forecasted sales of usage, product end-of-life dates, estimated current and future market values and new product introductions. For demonstration inventory, the Company also considers the age of the inventory and potential cost to refurbish the inventory prior to sale. Demonstration inventory is amortized over its useful life and the amortization expense is included in total inventory write down on the statements of cash flows. When recorded, reserves are intended to reduce the carrying value of the Company’s inventory to its net realizable value. If actual demand for the Company’s products deteriorates, or market conditions are less favorable than those that the Company projects, additional reserves may be required.

Inventories – delivered systems – The Company reflects the cost of systems that were invoiced upon shipment but deferred for revenue recognition purposes separate from its inventory held for sale as “Inventories – delivered systems.”

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Property, Plant and Equipment – Property, plant and equipment are stated at cost. Depreciation and amortization is computed using the straight–line method over the following estimated useful lives of the assets:

Building and Improvements	5-40 years
Machinery and equipment	3-10 years
Furniture and fixtures	3-10 years
Software	3-7 years

Goodwill and Intangible Assets – Goodwill is initially recorded when the purchase price paid for an acquisition exceeds the estimated fair value of the net identified tangible and intangible assets acquired. Intangible assets with finite lives are amortized over their respective useful lives on a straight-line basis and are also evaluated annually for impairment or whenever events or circumstances occur which indicate that those assets might be impaired. Goodwill and indefinite lived assets are not amortized but tested annually for impairment. The Company’s impairment review process is completed during the fourth quarter of each year or whenever events, or circumstances occur which indicate that an impairment may have occurred. The Company assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If, after assessing the qualitative factors, the Company determines that it is not likely that the fair value of a reporting unit is less than its carrying value, then performing the two-step impairment test is unnecessary. However, if the Company concludes otherwise, then it is required to perform the first step of the two-step goodwill impairment test. The first step requires a comparison of the fair value of Nanometrics’ reporting unit to its net book value. If the fair value of the reporting unit is greater than its carrying value, then no impairment is deemed to have occurred. If the fair value is less, then the second step must be performed to determine the amount, if any, of actual impairment. Amortization of intangible assets with finite lives is computed using the straight-line method over the following estimated useful lives of the assets:

Developed technology	5-10 years
Customer relationships	2-10 years
Brand name	5-10 years
Patented technology	7-10 years
Trademark	5 years

Long-Lived Assets – The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When the sum of the undiscounted future net cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount, impairment may exist. To determine the amount of impairment, the Company compares the fair value of the asset to its carrying value. If the carrying value of the asset exceeds its fair value, an impairment loss equal to the difference is recognized. See Note 7, "Goodwill and Intangible Assets" for further details.

Income Tax Assets and Liabilities – The Company accounts for income taxes such that deferred tax assets and liabilities must be recognized using enacted tax rates for the effect of temporary differences between the book and tax accounting for assets and liabilities. Also, deferred tax assets are reduced by a valuation allowance to the extent that management cannot conclude that it is more likely than not that a portion of the deferred tax asset will be realized in the future. The Company evaluates the deferred tax assets on a continuous basis throughout the year to determine whether or not a valuation allowance is appropriate. Factors used in this determination include future expected income and the underlying asset or liability which generated the temporary tax difference. The income tax provision is primarily impacted by federal statutory rates, state and foreign income taxes and changes in the valuation allowance.

Product Warranties – The Company sells the majority of its products with a twelve-month repair or replacement warranty from the date of acceptance, which generally represents the date of shipment. The Company provides an accrual for estimated future warranty costs based upon the historical relationship of warranty costs to the cost of products sold. The estimated future warranty obligations related to product sales are reported in the period in which the related revenue is recognized. The estimated future warranty obligations are affected by the warranty periods, sales volumes, product failure rates, material usage and labor and replacement costs incurred in correcting a product failure. If actual product failure rates, material usage, labor or replacement costs differ from the Company’s estimates, revisions to the estimated warranty obligations would be required. For new product introductions where limited or no historical information exists, the Company may use warranty information from other previous product introductions to guide it in estimating the warranty accrual. The warranty accrual represents the best estimate of the amount necessary to settle future and existing claims on products sold as of the balance sheet date. The Company periodically assesses the adequacy of its recorded warranty reserve and adjusts the amounts in accordance with changes in these factors.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Shipping and Handling Costs – Shipping and handling costs are included as a component of cost of net revenues.

Advertising Costs – The Company expenses advertising costs as incurred. Advertising costs were $0.2 million in 2017, $0.2 million in 2016, and $0.3 million in 2015.

Defined Employee Benefit Plans – The Company maintains a defined benefit pension plan in Taiwan for which current service costs are charged to operations as they accrue based on services rendered by employees during the year. Pension benefit obligations are determined by using management’s actuarial assumptions, including discount rates, assumed asset rates of return, compensation increases and employee turnover rates.

Net Income Per Share - Basic net income per share excludes dilution and is computed by dividing net income by the number of weighted average common shares outstanding for the period. Diluted net income per share reflects the potential dilution from outstanding dilutive stock options (using the treasury stock method), restricted stock units subject to vesting and shares issuable under the employee stock purchase plan. In applying the treasury stock method 0.6 million, 0.5 million and 0.3 million stock option shares for fiscal year 2017, 2016 and 2015, respectively, were included in the calculation of diluted shares.  

Certain Significant Risks and Uncertainties – Financial instruments that potentially subject us to a concentration of credit risk consist of cash, cash equivalents, marketable securities, and accounts receivable. The Company's cash and cash equivalents are primarily invested in deposit accounts and money market accounts with large financial institutions. At times, these deposits and securities may exceed federally insured limits; however, the Company has not experienced any losses on such accounts. The Company invests its cash not required for use in operations in high credit quality securities based on the Company's investment policy. The Company's investment policy provides guidelines and limits regarding credit quality, investment concentration, investment type, and maturity that the Company believes will provide liquidity while reducing risk of loss of capital. Investments are of a short-term nature and include investments in commercial paper, corporate debt securities, U.S. Treasury, U.S. Government, and U.S. Agency debt.

The Company sells its products primarily to end users in the United States, Asia and Europe and, generally, does not require its customers to provide collateral or other security to support accounts receivable. Management performs ongoing credit evaluations of its customers’ financial condition and maintains an allowance for estimated potential bad debt losses. The Company’s customer base is highly concentrated and historically, a relatively small number of customers have accounted for a significant portion of its revenues. Aggregate revenue from the Company's top five largest customers in 2017, 2016 and 2015 consisted of 73%, 73% and 69%, respectively, of its total net revenues. The Company participates in a dynamic high technology industry and believes that changes in any of the following areas could have a material adverse effect on its future financial position, results of operations or cash flows: advances and trends in new technologies and industry standards; competitive pressures in the form of new products or price reductions on current products; changes in product mix; changes in the overall demand for products offered; changes in third-party manufacturers; changes in key suppliers; changes in certain strategic relationships or customer relationships; litigation or claims against the Company based on intellectual property, patent, product, regulatory or other factors; fluctuations in foreign currency exchange rates; risk associated with changes in domestic and international economic and/or political regulations; availability of necessary components or sub-assemblies; disruption of manufacturing facilities; and its ability to attract and retain employees necessary to support its growth.

Certain components and sub-assemblies used in the Company’s products are purchased from a sole supplier or a limited group of suppliers. In particular, the Company currently purchases its spectroscopic ellipsometer and robotics used in its advanced measurement systems from a sole supplier or a limited group of suppliers located in the United States. Any shortage or interruption in the supply of any of the components or sub-assemblies used in its products or its inability to procure these components or sub-assemblies from alternate sources on acceptable terms could have a material adverse effect on its business, financial condition and results of operations.

Note 2. Recent Accounting Pronouncements

Accounting Standards Adopted

In March 2016, the FASB issued an accounting standard update that simplifies several aspects of the accounting for share-based payment award transactions, including income tax consequences, classification of awards as equity or liability, and classification on the statement of cash flows. The new standard requires adoption of certain amendments relevant to the Company to be applied using a modified retrospective transition method by means of cumulative effect adjustment to retained earnings as of the beginning of the fiscal year 2017.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The new standard permits entities to make an accounting policy election related to how forfeitures will impact the recognition of compensation cost for stock-based compensation. The Company has elected to account for forfeitures as they occur and adopted this change on a modified retrospective basis. The cumulative effect of this change resulted in a $0.1 million increase to accumulated deficit as of January 1, 2017.

Furthermore, the standard requires excess tax benefits and tax deficiencies to be recorded in the income statement when the awards vest or are settled rather than paid-in capital. The Company recorded the cumulative effect of this change as a $1.2 million reduction to accumulated deficit in the first quarter of fiscal 2017 to reflect the recognition of excess tax benefits in prior years, with a corresponding adjustment to deferred tax assets and long-term tax liabilities. The Company adopted the guidance related to the recognition of excess tax benefits and deficiencies as income tax expense or benefit on a modified retrospective basis. In addition, the Company elected to report cash flows related to excess tax benefits on a prospective basis. The presentation requirements for cash flows related to employee taxes paid for withheld shares had no impact to the Company’s statement of cash flows since such cash flows have historically been presented as a financing activity. 

In July 2015, the FASB issued an accounting standard update which simplifies the measurement of inventory by requiring inventory to be measured at the lower of cost and net realizable value. The new standard applies only to inventories for which cost is determined by methods other than last-in-first-out and the retail inventory method. Effective in the first quarter of fiscal 2017, the Company adopted this guidance. The adoption of this guidance did not have a significant impact on the Company’s consolidated financial condition and results of operation.

Accounting Standards Not Yet Adopted

In January 2017, the Financial Accounting Standards Board (the "FASB") issued an accounting standard update which simplifies the subsequent measurement of goodwill and removes step 2 from the goodwill impairment test. Instead, an entity should record an impairment charge based on excess of a reporting unit’s carrying amount over its fair value. The standard is effective for public companies for fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The adoption of this guidance is not expected to have a significant impact on the Company’s consolidated financial condition and results of operations.

In October 2016, the FASB issued an accounting standard update which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. This standard will be effective for annual reporting periods beginning after December 15, 2017, including interim reporting period within those annual periods. Early adoption is permitted. This standard update is required to be adopted using the modified retrospective approach, with a cumulative catch-up adjustment to retained earnings in the period of adoption. The Company is currently evaluating the impact of adopting this standard on its consolidated financial condition and results of operations.

In August 2016, the FASB issued an accounting standard which addresses eight specific cash flow classification issues. This update is effective for public companies for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. Early adoption is permitted, including in an interim period. If early adopted in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period, and all the amendments must be adopted in the same period. The standard is to be applied through a retrospective transition method to each period presented. If it is impracticable to apply retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date practicable. The adoption of this guidance is not expected to have a significant impact on the Company’s consolidated statement of cash flows.

In June 2016, the FASB issued an accounting standard which requires measurement and timely recognition of expected credit losses for financial assets. The update is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The standard is to be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company is currently evaluating the effect of this update on its consolidated financial condition and results of operations.

52

NANOMETRICS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

In February 2016, the FASB issued an accounting standard update which requires lessees to record a right-of-use asset and a corresponding lease liability on the balance sheet (with the exception of short-term leases). For lessees, leases will continue to be classified as either operating or financing in the income statement. The standard is effective for public companies for annual reporting periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. This standard is required to be applied with a modified retrospective transition approach. The Company generally does not finance purchases of equipment or other capital, but does lease some equipment and facilities. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures but anticipates most its existing operating lease commitments will be recognized as operating lease liabilities and right-of-use assets.

In May 2014, the FASB issued an accounting standard update which requires an entity to recognize the amount of revenue to which it expects to be entitled to for transferring promised goods or services to customers. The updated standard replaces most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either the retrospective or cumulative effect transition method (“modified retrospective” method). In August 2015, the FASB deferred for one year the effective date of the new revenue standard, with early adoption permitted but not earlier than the original effective date. Consequently, the new standard will be effective for the Company on December 31, 2017 and the Company has determined it will not adopt early.

Based on the Company’s assessment, the Company will adopt the new guidance in the first quarter of fiscal 2018 by using the modified retrospective method of transition. While the Company is concluding its assessment of the impact of the new standard, the Company believes that the timing of revenue recognition for certain systems and performance obligations, will generally occur earlier than under current revenue recognition guidance. Under current U.S. GAAP, revenue for certain systems or performance obligations is delayed until formal customer sign-off has occurred and/or contractual obligations have been met, whereas under the new standard, revenue should be recorded when transfer of control has occurred, which is normally upon shipment. While the Company expects revenue related to these arrangements to remain unchanged in total, the nature of when control transfers may change the timing of revenue recognition. Nanometrics expects the full-year positive impact to the opening balance of retained earnings related to the adoption of the new standard to be in the range of $0.7 million to $1.2 million. This amount reflects the margin related to revenue deferred as of December 30, 2017, that will not be reported as revenue in fiscal 2018. The amount of this revenue is estimated to be between $1.5 million and $2.5 million. This amount will also be reflected as a reduction to the beginning backlog of the first quarter of fiscal 2018. This amount is comprised of goods shipped in fiscal 2017 but deferred due to either lack of customer acceptance or failure of the customer to meet certain contractual commitments. Under the new standard, the Company has determined that transfer of control occurs at the time of shipment for these items and that the deferral of revenue associated with the unbilled amount is no longer appropriate per the new standard. Additionally, the Company believes the adoption of the new standard will not result in a different set of performance obligations, when compared to current GAAP. The Company further believes that required changes to its current business processes and IT systems, to comply with the new standard, will be minor in nature. Other aspects of the standard, including the capitalization of costs related to the acquisition and/or fulfillment of the Company’s contracts are still being evaluated, but the Company believes impacts are immaterial. The Company is concluding its evaluation of the impact of the new standard on the Company’s contracts with customers and will continue to monitor industry activities and other guidance provided by the accounting profession and regulators and adjust its approach and implementation plans as required.

Note 3. Fair Value Measurements and Disclosures

The Company determines the fair values of its financial instruments based on the fair value hierarchy established in FASB Accounting Standards Codification ("ASC") 820, Fair Value Measurement, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The classification of a financial asset or liability within the hierarchy is based upon the lowest level input that is significant to the fair value measurement. The fair value hierarchy prioritizes the inputs into the following three levels that may be used to measure fair value:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.

Level 3 — Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. Such unobservable inputs include an estimated discount rate used in the Company's discounted present value analysis of future cash flows, which reflects the Company's estimate of debt with similar terms in the current credit markets. As there is currently minimal activity in such markets, the actual rate could be materially different.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard assumes that the transaction to sell the asset or transfer the liability occurs in the principal or most advantageous market for the asset or liability and establishes that the fair value of an asset or liability shall be determined based on the assumptions that market participants would use in pricing the asset or liability.

The following tables present the Company’s assets and liabilities measured at estimated fair value on a recurring basis, excluding accrued interest components, categorized in accordance with the fair value hierarchy (in thousands), as of the following dates:

	December 30, 2017								December 31, 2016
	Fair Value Measurements Using Input Types								Fair Value Measurements Using Input Types
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	256	$	—	$	—	$	256	$	959	$	—	$	—	$	959
Commercial paper    and corporate debt    securities		—		—		—		—		—		2,499		—		2,499
Total cash equivalents	$	256	$	—	$	—	$	256	$	959	$	2,499	$	—	$	3,458
Marketable securities:
U.S. Treasury,    U.S. Government    and U.S. Government    agency debt securities		—		1,495		—		1,495		—		17,072		—		17,072
Certificate of deposits		—		14,497		—		14,497		—		23,019		—		23,019
Commercial paper		—		7,949		—		7,949		—		22,402		—		22,402
Municipal securities and    corporate debt securities		—		47,968		—		47,968		—		14,943		—		14,943
Asset backed securities		—		10,221		—		10,221		—		5,463		—		5,463
Total marketable securities	$	—	$	82,130	$	—	$	82,130	$	—	$	82,899	$	—	$	82,899
Total(1)	$	256	$	82,130	$	—	$	82,386	$	959	$	85,398	$	—	$	86,357

⁽¹⁾ Excludes $34.6 million and $43.6 million held in operating accounts as of December 30, 2017, and December 31, 2016, respectively.

The fair values of the marketable securities that are classified as Level 1 in the table above were derived from quoted market prices for identical assets or liabilities in active markets that the Company has the ability to access. The fair value of marketable securities that are classified as Level 2 in the table above were derived from non-binding market consensus prices that were corroborated by observable market data, quoted market prices for similar instruments, or pricing models, such as discounted cash flow techniques with all significant inputs derived from or corroborated by observable market data. There were no transfers of instruments between Level 1, Level 2 and Level 3 during the financial periods presented. 

Derivatives

The Company uses foreign currency forward contracts to mitigate variability in gains and losses generated from the re-measurement of certain monetary assets and liabilities denominated in foreign currencies. These derivatives are carried at fair value with changes recorded in other income, net in the consolidated statements of operations. Changes in the fair value of these derivatives are largely offset by re-measurement of the underlying assets and liabilities. The derivatives have maturities of approximately 30 days.

The settlement result of forward foreign currency contracts included in the fiscal year ended December 30, 2017 and December 31, 2016, was a gain of $1.4 million and a loss of $1.7 million, respectively, and these balances are included in other income, net, in the consolidated statements of operations.

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NANOMETRICS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The following table summarizes the Company’s outstanding derivative instruments on a gross basis:

	As of December 30, 2017						As of December 31, 2016
	Notional Amount		Fair Value				Notional Amount		Fair Value
	(in millions)		Asset		Liability		(in millions)		Asset		Liability
Undesignated Hedges:
Forward Foreign Currency Contracts
Purchase	$	27.5		—	$	0.1	$	12.6		—		—
Sell	$	16.8		0.1		—	$	1.3		—		—

Note 4. Cash and Investments

The following table presents cash, cash equivalents, and available-for-sale investments as of the following dates (in thousands):

	December 30, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Market Value
Cash	$	34,643	$	—	$	—		$	34,643
Cash equivalents:
Money market funds		256		—		—			256
Marketable securities:
U.S. Government agency securities		1,500		—		(5	)		1,495
Certificates of deposits		14,498		—		(1	)		14,497
Commercial paper		7,952		—		(3	)		7,949
Corporate debt securities		48,073		—		(105	)		47,968
Asset-backed securities		10,240		—		(19	)		10,221
Total cash, cash equivalents, and marketable    securities	$	117,162	$	—	$	(133	)	$	117,029
	December 31, 2016
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Market Value
Cash	$	43,604	$	—	$	—		$	43,604
Cash equivalents:
Money market funds		959		—		—			959
Commercial paper and corporate debt securities		2,499		—		—			2,499
Marketable securities:
U.S. Treasury securities		5,667		—		—			5,667
U.S. Government agency securities		11,412		—		(7	)		11,405
Certificates of deposits		23,000		19		—			23,019
Commercial paper		22,402		—		—			22,402
Corporate debt securities		14,194		—		(6	)		14,188
Municipal securities		756		—		(1	)		755
Asset-backed securities		5,466		—		(3	)		5,463
Total cash, cash equivalents, and marketable    securities	$	129,959	$	19	$	(17	)	$	129,961

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NANOMETRICS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Available-for-sale marketable securities, readily convertible to cash, with maturity dates of 90 days or less are classified as cash equivalents, while those with maturity dates greater than 90 days are classified as marketable securities within short-term assets. All marketable securities as of December 30, 2017, and December 31, 2016, were available-for-sale and reported at fair value based on the estimated or quoted market prices as of the balance sheet date. Gross realized gains and losses on sale of securities are recorded in other income, net, in the Company’s statement of operations. Net realized gains and losses for fiscal 2017, 2016, and 2015 was $1.3 million, $0.5 million and $0.2 million, respectively.

Unrealized gains or losses, net of tax effect, are recorded in accumulated other comprehensive income (loss) within stockholders' equity. Both the gross unrealized gains and gross unrealized losses for the fiscal years ended December 30, 2017, and December 31, 2016 were insignificant and no marketable securities had other than temporary impairment. All marketable securities as of December 30, 2017, and December 31, 2016, had maturity dates of less than two years.

Note 5. Accounts Receivable

The Company maintains arrangements under which eligible accounts receivable in Japan are sold without recourse to unrelated third-party financial institutions. These receivables were not included in the consolidated balance sheets as the criteria for sale treatment had been met. After a transfer of financial assets, an entity stops recognizing the financial assets when control has been surrendered. The agreement met the criteria of a true sale of these assets since the acquiring party retained the title to these receivables and had assumed the risk that the receivables will be collectible. The Company pays administrative fees as well as interest ranging from 0.61% to 1.68% based on the anticipated length of time between the date the sale is consummated and the expected collection date of the receivables sold. The Company sold $18.6 million and $31.5 million of receivables during fiscal years ended December 30, 2017, and December 31, 2016, respectively. There were no material gains or losses on the sale of such receivables. There were no amounts due from such third party financial institutions at December 30, 2017, and December 31, 2016.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Note 6. Financial Statement Components

The following tables provide details of selected financial statement components as of the following dates (in thousands):

	At
	December 30, 2017			December 31, 2016
Inventories:
Raw materials and sub-assemblies	$	32,187		$	23,506
Work in process		13,498			10,347
Finished goods		7,175			4,984
Inventories		52,860			38,837
Inventories-delivered systems		1,534			2,457
Total inventories	$	54,394		$	41,294
Property, plant and equipment, net:(1)
Land	$	15,573		$	15,568
Building and improvements		20,880			20,532
Machinery and equipment		36,380			35,659
Furniture and fixtures		2,420			2,282
Software		9,558			9,756
Capital in progress		4,418			2,748
Total property, plant and equipment, gross		89,229			86,545
Accumulated depreciation and amortization		(44,419	)		(42,319	)
Total property, plant and equipment, net	$	44,810		$	44,226
(1) Total depreciation and amortization expense for the years ended December 30, 2017, December 31, 2016 and December 26, 2015 was $6.7 million, $6.8 million, and $6.9 million, respectively.
Other Current Liabilities:
Accrued warranty	$	4,863		$	3,838
Accrued taxes		813			706
Customer deposits		—			581
Accrued professional services		534			424
Accrued royalties		—			1,233
Other		1,039			1,265
Total other current liabilities	$	7,249		$	8,047

Components of Accumulated Other Comprehensive Income (Loss)

	Foreign Currency Translations			Defined Benefit Pension Plans			Unrealized Income (Loss) on Investment			Accumulated Other Comprehensive Income
Balance as of December 26, 2015	$	(4,948	)	$	(210	)	$	(44	)	$	(5,202	)
Current period change		(869	)		(17	)		42			(844	)
Balance as of December 31, 2016		(5,817	)		(227	)		(2	)		(6,046	)
Current period change		4,170			(160	)		(88	)		3,922
Balance as of December 30, 2017	$	(1,647	)	$	(387	)	$	(90	)	$	(2,124	)

The items above, except for unrealized income (loss) on investment, did not impact the Company’s income tax provision. The amounts reclassified from each component of accumulated other comprehensive income into income statement line items were insignificant.

57

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Note 7. Goodwill and Intangible Assets

The following table summarizes the activity in the Company’s goodwill during the years ended December 30, 2017 and December 31, 2016, respectively (in thousands):

	Amounts
Balance as of December 26, 2015	$	9,415
Foreign currency movements		(475	)
Balance as of December 31, 2016		8,940
Foreign currency movements		1,292
Balance as of December 30, 2017	$	10,232

There were no business acquisitions made by the Company during fiscal years 2017, 2016 and 2015.

Goodwill Impairment and Long-lived Asset Impairment

The Company’s impairment review process is completed during the fourth quarter of each year, or whenever events or circumstances occur that indicate that an impairment may have occurred. The goodwill impairment assessment involves three tests, Step 0, Step 1 and Step 2. The Company performs a Step 0 test, which involves an initial qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If, after assessing the qualitative factors, the Company determines that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then performing the two-step impairment test is necessary. Otherwise, no further testing is necessary.

The Company completed its annual goodwill impairment assessment during the fourth quarter of 2017 by first performing a Step 0 qualitative assessment. As part of this assessment, the Company considered the trading value of the Company's stock, the industry trends, and the Company's sales forecast and products plans. The Company concluded that it was more likely than not that the fair value was more than the carrying values of the Company's reporting unit and therefore did not proceed to the Step 1 goodwill impairment test.

The process of evaluating the potential impairment of long-lived assets is highly subjective and requires significant judgment. In estimating the fair value of these assets, the Company made estimates and judgments about future revenues and cash flows. The Company’s forecasts were based on assumptions that are consistent with the plans and estimates the Company is using to manage its business. Changes in these estimates could change the Company’s conclusion regarding impairment of the long-lived assets and potentially result in future impairment charges for all or a portion of their balance at December 30, 2017. The Company did not record any impairment charges related to goodwill in fiscal year 2017.

The Company assesses if there have been triggers that may require it to evaluate the reasonableness of the remaining estimated useful lives of its intangible assets. No such triggers were identified during fiscal year 2017.

Finite-lived intangible assets are recorded at cost, less accumulated amortization. Finite-lived intangible assets as of December 30, 2017, and December 31, 2016 consisted of the following (in thousands):

	December 30, 2017
	Adjusted cost		Accumulated amortization			Net carrying amount
Developed technology	$	18,887	$	(16,681	)	$	2,206
Customer relationships		9,438		(9,438	)		—
Brand names		1,927		(1,927	)		—
Patented technology		2,252		(2,252	)		—
Trademark		80		(80	)		—
Total	$	32,584	$	(30,378	)	$	2,206

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

	December 31, 2016
	Adjusted cost		Accumulated amortization			Net carrying amount
Developed technology	$	15,726	$	(15,380	)	$	346
Customer relationships		9,322		(9,322	)		—
Brand names		1,927		(1,927	)		—
Patented technology		2,252		(2,186	)		66
Trademark		80		(80	)		—
Total	$	29,307	$	(28,895	)	$	412

The amortization of finite-lived intangibles is computed using the straight-line method. Estimated lives of finite-lived intangibles range from two to ten years. Total amortization expense for the fiscal years ended December 30, 2017, December 31, 2016 and December 26, 2015, was $0.2 million, $1.5 million and $2.1 million, respectively.

There were no impairment charges related to intangible assets recorded during the year ended December 30, 2017.

The estimated future amortization expense of finite intangible assets as of December 30, 2017, is as follows (in thousands):

Fiscal Years	Amounts
2018		283
2019		352
2020		286
2021		286
2022		286
Thereafter		713
Total future amortization expense		2,206

Note 8. Warranties

Product Warranty – The Company sells the majority of its products with a 12 months repair or replacement warranty from the date of acceptance or shipment date. The Company provides an accrual for estimated future warranty costs based upon the historical relationship of warranty costs to the cost of products sold. The estimated future warranty obligations related to product sales are recorded in the period in which the related revenue is recognized. The estimated future warranty obligations are affected by the warranty periods, sales volumes, product failure rates, material usage, and labor and replacement costs incurred in correcting a product failure. If actual product failure rates, material usage, labor or replacement costs were to differ from the Company’s estimates, revisions to the estimated warranty obligations would be required. For new product introductions where limited or no historical information exists, the Company may use warranty information from other previous product introductions to guide it in estimating its warranty accrual. The warranty accrual represents the best estimate of the amount necessary to settle future and existing claims on products sold as of the balance sheet date. The Company periodically assesses the adequacy of its reported warranty reserve and adjusts such amounts in accordance with changes in these factors.

Components of the warranty accrual, which were included in the accompanying consolidated balance sheets with other current liabilities, were as follows (in thousands):

	Years Ended
	December 30, 2017			December 31, 2016
Balance as of beginning of period	$	3,838		$	4,504
Accruals for warranties issued during period		5,247			4,509
Settlements during the period		(4,222	)		(5,175	)
Balance as of end of period	$	4,863		$	3,838

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Note 9. Commitments and Contingencies

Intellectual Property Indemnification Obligations – The Company will, from time to time, in the normal course of business, agree to indemnify certain customers, vendors or others against third party claims that Nanometrics’ products, when used for their intended purpose(s), or the Company’s intellectual property, infringe the intellectual property rights of such third parties or other claims made against parties with whom it enters into contractual relationships. It is not possible to determine the maximum potential amount of liability under these indemnification obligations due to the limited history of prior indemnification claims and the unique facts and circumstances that are likely to be involved in each particular claim. Historically, the Company has not made payments under these obligations and believes that the estimated fair value of these agreements is immaterial. Accordingly, no liabilities have been recorded for these obligations in the accompanying consolidated balance sheets as of December 30, 2017, and December 31, 2016.

Contractual Obligations – The Company maintains certain open inventory purchase agreements with its suppliers to ensure a smooth and continuous supply availability for key components. The Company’s liability under these purchase commitments is generally restricted to a forecasted time-horizon as mutually agreed upon between the parties. This forecasted time-horizon can vary among different suppliers. The Company estimates its open inventory purchase commitment as of December 30, 2017, was approximately $50.7 million. Actual expenditures will vary based upon the volume of the transactions and length of contractual service provided. In addition, the amounts paid under these arrangements may be less in the event that the arrangements are renegotiated or cancelled.

The Company leases facilities and certain equipment under non-cancelable operating leases. Rent expense, which is recorded on a straight-line basis over the term of the respective lease, for 2017, 2016 and 2015 was approximately $1.8 million, $1.8 million and $1.7 million, respectively. Future minimum lease payments under its operating leases are as follows (in thousands):

	Operating Leases
2018		1,664
2019		935
2020		313
2021		54
2022		2
Thereafter		—
Total	$	2,968

Legal Proceedings – From time to time, the Company is subject to various legal proceedings or claims arising in the ordinary course of business.

On August 2, 2017, the Company was named as defendant in a complaint filed in New Hampshire Superior Court (“Complaint”). The Complaint, brought by Optical Solutions, Inc. (“OSI”), alleges claims arising from a purported exclusive purchase contract between OSI and the Company pertaining to certain product. On September 18, 2017, the Company removed the action to the United States District Court for the District of New Hampshire. On September 25, 2017, the Company moved to transfer the Complaint to the Northern District of California and to dismiss all claims in the Complaint for lack of personal jurisdiction and for failure to state a claim. On September 27, 2017, OSI filed a motion to remand. On January 31, 2018, the District Court of New Hampshire denied OSI’s motion to remand. OSI has not yet responded to the Company’s motions to transfer or dismiss, but is scheduled to on February 19, 2018.

The Company records a provision for a loss when it believes that it is both probable that a loss has been incurred and the amount can be reasonably estimated. Based on current information, the Company believes it does not have any probable and reasonably estimable losses related to any current legal proceedings and claims. Although it is difficult to predict the outcome of legal proceedings, the Company believes that any liability that may ultimately arise from the resolution of these ordinary course matters will not have a material adverse effect on the business, financial condition and results of operations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Note 10. Net Income Per Share

The Company presents both basic and diluted net income per share on the face of its consolidated statements of operations. Basic net income per share excludes the effect of potentially dilutive shares and is computed by dividing net income by the weighted-average number of shares of common stock outstanding for the period. Diluted net income per share is computed using the weighted-average number of shares of common stock outstanding for the period plus the effect to all potentially dilutive common shares outstanding during the period, including contingently issuable shares and certain stock options, calculated using the treasury stock method. A reconciliation of the share denominator of the basic and diluted net income per share computations is as follows (in thousands):

	Years Ended
	December 30, 2017		December 31, 2016		December 26, 2015
Weighted average common shares outstanding used in    basic net income per share calculation		25,334		24,655		24,059
Potential dilutive common stock equivalents,    using treasury stock method		585		498		316
Weighted average shares used in diluted net income    per share calculation		25,919		25,153		24,375

For the year ended December 30, 2017, December 31, 2016, and December 26, 2015, the Company had securities outstanding which could potentially dilute basic earnings per share in the future. For the years ended December 30, 2017, December 31, 2016 and December 26, 2015, the weighted average common share equivalents consisting of stock options and restricted stock units included in the calculation of diluted net income per share were 0.6 million, 0.5 million and 0.3 million shares, respectively.

Note 11. Stockholders' Equity and Stock-Based Compensation

Stockholders' Equity

Preferred and Common Stock

The authorized capital stock of Nanometrics consists of 47,000,000 shares of common stock, par value $0.001 per share, and 3,000,000 shares of preferred stock, par value $0.001 per share.

Stock Repurchase

On May 29, 2012, our Board of Directors authorized the repurchase of up to $20.0 million of our common stock of which $4.4 million remained as of December 31, 2016.

On November 15, 2017, the Company's Board of Directors approved a program to repurchase up to $50.0 million of its common stock which superseded the 2012 repurchase program. This new plan is referred to as the Stock Repurchase Plan with an effective date of November 20, 2017. Stock repurchases under this plan may be made through open market and privately negotiated transactions, at times and in such amounts as management deems appropriate. The timing and actual number of shares repurchased is dependent on a variety of factors including price, corporate and regulatory requirements and other market conditions.

Shares repurchased and retired for fiscal year 2017, 2016 and 2015, with the associated cost of repurchase and amount available for repurchase at the end of the respective periods are as follows (in thousands, except number of shares and weighted average price per share):

	Fiscal Year 2017		Fiscal Year 2016		Fiscal Year 2015
Number of shares of common stock repurchased		1,065,848	—			111,050
Weighted average price per share	$	25.33		—	$	15.49
Total cost of repurchase	$	26,999	—		$	1,721
Amount available for repurchase at end of period	$	23,001		—	$	4,397

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The Stock Repurchase Plan was completed in February 2018, with purchases since December 30, 2017 of 896,187 shares of our common stock at the weighted average price of $25.65 for a cost of $23.0 million.

Stock Option Plans

The Nanometrics option plans are as follows:

Plan Name	Participants	Shares Authorized
2005 Equity Incentive Plan	Employees, consultants and directors		8,292,594
2000 Employee Stock Option Plan	Employees and consultants		2,450,000
2000 Director Stock Option Plan	Non-employee directors		250,000
Accent Optical Technologies, Inc. Stock Incentive Plan	Employees and consultants		205,003

Employee Stock Purchase Plan

Under the 2003 Employee Stock Purchase Plan (“ESPP”), eligible employees are allowed to have salary withholdings of up to 10% of their base compensation to purchase shares of common stock at a price equal to 85% of the lower of the market value of the stock at the beginning or end of each six-month offering period, subject to an annual statutory limitation. At the end of the fiscal year ended December 30, 2017, the Company had 0.5 million shares remaining for issuance under the ESPP. Shares purchased under the ESPP were 122,298 shares, 212,619 shares and 125,504 shares in 2017, 2016 and 2015 at a weighted average price of $21.19, $14.29 and $13.98, respectively.

Stock-based Compensation

The Company measures and recognizes compensation expense for all share-based payment awards made to employees and directors including employee stock options, restricted stock units and employee stock purchases related to the Employee Stock Purchase Plan (collectively “Employee Stock Purchases”) based on estimated fair values. The fair value of share-based payment awards is estimated on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the Company's consolidated statement of operations.

Valuation and Expense Information

The fair value of stock-based awards to employees is calculated using the Black-Scholes option pricing model, which requires subjective assumptions, including future stock price volatility and expected time to exercise. The expected life was calculated using the simplified method allowed by the SAB 107. The risk-free rates were based on the U.S Treasury rates in effect during the corresponding period. The expected volatility was based on the historical volatility of the Company's stock price. These factors could change in the future, which would affect the stock-based compensation expense in future periods.

The weighted-average fair value of stock-based compensation to employees is based on the single option valuation approach. Forfeitures are estimated and it is assumed no dividends will be declared. The estimated fair value of stock-based compensation awards to employees is amortized over the vesting period. The weighted-average fair value calculations are based on the following average assumptions:

	Fiscal Year 2017	Fiscal Year 2016	Fiscal Year 2015
Employee Stock Purchase Plan:
Expected life	0.5 years	0.5 years	0.5 years
Volatility	37.2%	38.7%	36.9%
Risk free interest rate	0.91%	0.44%	0.12%
Dividends	—	—	—

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Stock Options and Restricted Stock Units (“RSUs”)

On May 23, 2017, the Company approved further amendments to the 2005 Equity Incentive Plan including: increasing the number of shares of common stock authorized by 1.0 million shares and extending the term of the 2005 Equity Incentive Plan through 2027. All other terms remained the same.

Stock Options

No stock options were granted in fiscal years 2017, 2016 and 2015. A summary of activity of stock options is as follows:

	Number of Shares Outstanding (Options)			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (in Thousands)
Options
Outstanding at December 26, 2015		1,059,471		$	14.61		2.47	$	1,920
Exercised		(442,339	)		13.66
Cancelled/Forfeited		(176,587	)		15.83
Outstanding at December 31, 2016		440,545			15.06		2.12	$	4,405
Exercised		(223,364	)		13.35
Cancelled/Forfeited		(855	)		16.63
Outstanding at December 30, 2017		216,326		$	16.82		1.76	$	1,752
Exercisable at December 30, 2017		215,620		$	16.81		1.76	$	1,748

The aggregate intrinsic value in the above table represents the total pretax intrinsic value, based on the Company’s closing stock price of $24.92 as of December 30, 2017, which would have been received by the option holders had all option holders exercised their options as of that date. The total intrinsic value of options exercised during 2017, 2016 and 2015 was $3.1 million, $2.7 million and $1.6 million, respectively. The fair value of options vested during 2017, 2016 and 2015 was $0.3 million, $0.7 million and $1.5 million, respectively.

The following table summarizes ranges of outstanding and exercisable options as of December 30, 2017.

	Options Outstanding						Options Exercisable
Exercise Prices	Number Outstanding		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$12.98-$15.00		23,383		1.83	$	14.64		23,383	$	14.64
$15.08-$15.65		27,697		1.37		15.62		27,697		15.62
$15.74-$15.74		3,333		0.40		15.74		3,333		15.74
$15.85-$15.85		60,000		2.20		15.85		60,000		15.85
$16.00-$17.33		31,700		1.82		17.00		31,700		17.00
$17.70-$18.08		6,613		1.55		17.92		6,588		17.92
$18.22-$18.22		3,600		3.16		18.22		3,449		18.22
$18.51-$18.51		9,000		3.14		18.51		8,583		18.51
$18.79-$18.79		1,000		3.23		18.79		887		18.79
$19.03-$19.03		50,000		1.13	$	19.03		50,000	$	19.03
$12.98-$19.03		216,326						215,620

As of December 30, 2017, the total unrecognized compensation costs related to unvested stock options was less than $0.1 million and is expected to be recognized as an expense over a weighted average remaining amortization period of 0.10 years.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Restricted Stock Units (“RSUs”)

Each RSU counts against the Company’s “2005 Equity Incentive Plan” at a ratio of one and seven tenths shares for each unit granted but represents an amount equal to the fair value of one share of the Company’s common stock. The Company granted 454,600 and 476,667 RSUs during the years ended December 30, 2017, and December 31, 2016, respectively, to key employees with vesting periods up to three years.

A summary of activity for RSUs is as follows:

Summary of activity for RSUs	Number of RSUs			Weighted Average Fair Value
Outstanding RSUs as of December 26, 2015		713,243		$	15.99
Granted		476,667			17.45
Released		(315,872	)		16.05
Cancelled		(54,253	)		16.29
Outstanding RSUs as of December 31, 2016		819,785			16.79
Granted		454,600			27.12
Released		(387,592	)		16.81
Cancelled		(96,494	)		19.01
Outstanding RSUs as of December 30, 2017		790,299		$	22.46

As of December 30, 2017, the total unrecognized compensation costs related to RSU's was $12.5 million and is expected to be recognized as an expense over a weighted average remaining amortization period of 1.75 years.

Market-Based Performance Stock Units (“PSUs”)

In addition to granting RSUs that vest on the passage of time only, the Company granted PSUs to certain executives. The PSUs will vest in tranches over one, two, and three years based on the relative performance of the Company’s stock during those periods, compared to a peer group over the same period. If target stock price performance is achieved, 66.7% of the shares of the Company’s stock subject to the PSUs will vest, and up to a maximum of 100% of the shares subject to the PSUs will vest if the maximum stock price performance is achieved for each tranche. For certain shares granted in fiscal 2017, 62,500 shares are the cumulative maximum number of shares that may vest for all measurement periods.

A summary of activity for PSUs is as follows:

Summary of activity for PSUs	Number of PSUs			Weighted Average Fair Value
Outstanding PSUs as of December 26, 2015		60,000		$	12.23
Granted		67,500			8.52
Released		(13,333	)		12.03
Cancelled		(6,667	)		12.03
Outstanding PSUs as of December 31, 2016		107,500			9.94
Granted		122,050			20.51
Released		(38,500	)		10.41
Cancelled		(61,100	)		19.41
Outstanding PSUs as of December 30, 2017		129,950		$	15.60

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Valuation of PSUs

On the date of grant, the Company estimated the fair value of PSUs using a Monte Carlo simulation model. The assumptions for the valuation of PSUs are summarized as follows:

	2017 Award	2016 Award		2015 Award
Grant Date Fair Values Per Share	$14.57-$26.75	$	8.52	$	12.23
Weighted-average assumptions/inputs:
Expected Dividend	—	—		—
Range of risk-free interest rates	1.74%-1.84%	0.92%		0.25%-1.1%
Range of expected volatilities for peer group	22%-66%	22%-93%		23%-65%

The number of RSUs granted during fiscal year 2017 was 454,600, which counted as 772,820 shares, and PSUs granted during fiscal year 2017 was 122,050, which counted as 207,485 against the 2005 Equity Incentive Plan. The number of RSUs cancelled during fiscal year 2017 was 96,494, which counted as 164,040 shares, and PSUs cancelled during fiscal year 2017 was 61,100, which counted as 103,870, against the 2005 Equity Incentive Plan. Each RSU represents an amount equal to the fair value of one share of the Company's common stock.

A summary of activity under the Company’s stock option plans including options, RSUs and PSUs during fiscal year 2017, 2016 and 2015 and shares available for grant as of the respective period end dates, is as follows:

	Fiscal Year 2017			Fiscal Year 2016			Fiscal Year 2015
Shares available for grant at beginning of fiscal year		1,334,581			1,916,589			2,464,082
Additional Shares Authorized		1,000,000			—			—
Options – cancelled		855			176,587			94,012
Options - expired plan shares					(116,192	)		(1,800	)
RSUs – granted		(772,820	)		(810,334	)		(860,980	)
RSUs – cancelled		164,040			92,230			202,356
RSUs - shares issued to satisfy tax    withholding obligations		251,724			179,117			120,919
PSUs – granted		(207,485	)		(114,750	)		(102,000	)
PSUs – cancelled		103,870			11,334			—
Shares available for grant at end of fiscal year		1,874,765			1,334,581			1,916,589

Stock-based Compensation Expense

Stock-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. Effective January 1, 2017, as a result of the adoption of ASU No. 2016-09 “Improvements to Employee Share-Based Payment Accounting”, the Company has elected to account for forfeitures as they occur. Refer to Note 2. Recent Accounting Pronouncements for further discussion on the adoption. As such, for fiscal year ended December 30, 2017, stock-based compensation expense is recognized in the consolidated statement of operations, net of actual forfeitures during the period. Prior to the adoption of ASU No. 2016-09, the Company estimated forfeitures at the time of grant, based on historical forfeiture experience, and revised if necessary, in subsequent periods, if actual forfeitures differ from estimates. Stock-based compensation expense recognized in the consolidated statement of operations for the years ended December 31, 2016, and December 26, 2015, has been reduced for estimated forfeitures.

Tax benefits resulting from tax deductions in excess of the compensation cost recognized for those options are required to be separately classified in the consolidated statements of cash flows. The Company recognized $1.0 million of excess tax benefit in fiscal year 2016, and none in both fiscal years 2017 and 2015, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Stock-based compensation expense for all share-based payment awards made to the Company’s employees and directors pursuant to the employee stock option and employee stock purchase plans by function were as follows (in thousands):

	Fiscal Year 2017		Fiscal Year 2016		Fiscal Year 2015
Cost of products	$	842	$	403	$	274
Cost of service		616		509		309
Research and development		1,720		1,408		1,036
Selling		2,323		2,046		1,881
General and administrative		3,318		3,300		2,748
Total stock-based compensation expense related to employee    stock options and employee stock purchases	$	8,819	$	7,666	$	6,248

Note 12. Defined Benefit Pension Plan

Nanometrics sponsors a statutory government mandated defined benefit pension plan (the “Benefit Plan”) in Taiwan for its local employees. The fair value of plan assets was $0.3 million for fiscal year ended 2017, and $0.2 million for each of fiscal years 2016 and 2015, respectively; and the net funding deficiency of the Benefit Plan was $0.5 million, $0.4 million, and $0.3 million for the fiscal years ended December 30, 2017, December 31, 2016, and December 26, 2015, respectively. Based on the nature and limited extent of the pension plan, we determined this pension plan was not material for separate disclosure.

Note 13. Income Taxes

Income Tax Assets and Liabilities - The Company accounts for income taxes whereby deferred tax assets and liabilities are recognized using enacted tax rates for the effect of temporary differences between the book and tax accounting for assets and liabilities. Also, deferred tax assets are reduced by a valuation allowance to the extent that management cannot conclude that it is more likely than not that a portion of the deferred tax asset will be realized in the future. The Company evaluates the deferred tax assets on a continuous basis throughout the year to determine whether or not a valuation allowance is appropriate. Factors used in this determination include future expected income and the underlying asset or liability which generated the temporary tax difference. The income tax provision is primarily impacted by federal statutory rates, state and foreign income taxes, and changes in the valuation allowance.

Income (loss) before provision for income taxes consists of the following (in thousands):

	Years Ended
	December 30, 2017		December 31, 2016		December 26, 2015
Domestic	$	34,238	$	25,372	$	178
Foreign		9,060		3,763		5,390
Income (loss) before income taxes	$	43,298	$	29,135	$	5,568

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The provision (benefit) for income taxes consists of the following (in thousands):

	Years Ended
	December 30, 2017		December 31, 2016			December 26, 2015
Current:
Federal	$	3,250	$	697		$	148
State		9		85			3
Foreign		2,998		2,111			2,266
		6,257		2,893			2,417
Deferred:
Federal		6,314		(16,641	)		190
State		53		(320	)		3
Foreign		472		(832	)		53
		6,839		(17,793	)		246
Provision (benefit) for income taxes	$	13,096	$	(14,900	)	$	2,663

Significant components of the Company's deferred tax assets and liabilities are as follows (in thousands):

	At
	December 30, 2017			December 31, 2016
Deferred tax assets:
Reserves and accruals	$	5,797		$	11,043
Deferred revenue		240			349
Shared based compensation		1,483			2,590
Tax credit carry-forwards		9,669			10,112
Net operating losses		9,755			8,434
Depreciation & amortization		(1,525	)		(2,898	)
Other		207			(1,252	)
Total deferred tax assets		25,626			28,378
Less: Valuation allowance		(13,702	)		(10,980	)
Total deferred tax assets net of valuation allowance		11,924			17,398
Deferred tax liabilities:
Depreciation & amortization		(12	)		(6	)
Other		(167	)		(14	)
Total deferred tax liabilities		(179	)		(20	)
Net deferred tax assets	$	11,745		$	17,378

As of December 30, 2017, the Company had net operating loss carryforwards of $25.6 million in California, $3.0 million in other states, and $35.0 million in foreign countries, which begin to expire in 2018.

As of December 30, 2017, the Company had available carryforward Federal and California R&D tax credits of $7.0 million and $8.9 million, respectively. Federal R&D tax credit carryforwards begin to expire in 2032. State R&D tax credits carryforward indefinitely.

During the years ended December 30, 2017, and December 31, 2016, the change in valuation allowances was $1.5 million and $(25.8) million, respectively. The valuation allowance increase in 2017 was primarily related to the increase net benefit of the California deferred tax assets from lower federal rates, offset by a valuation allowance release against a portion of the Company’s foreign deferred tax assets. The realization of deferred tax assets is primarily dependent on the Company generating sufficient U.S. and foreign taxable income in future fiscal years. The Company regularly assesses the need for a valuation allowance against its deferred tax assets. In making that assessment, the Company considers both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more-likely-than-not that some or all of the deferred tax assets will not be realized. For the year ended December 30, 2017, the Company possessed enough positive evidence to determine that is was more-likely-than-not that the Company would utilize a significant portion of its Singapore deferred tax assets.

67

NANOMETRICS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Therefore, the Company released $0.3 million of valuation allowance in that jurisdiction. The Company continues to maintain valuation allowances against its California and certain foreign deferred tax assets as a result of uncertainties regarding the realization of the asset due to cumulative losses and uncertainty of future taxable income. The Company will continue to assess the realizability of the deferred tax assets in each of the applicable jurisdictions and maintain the valuation allowances until sufficient positive evidence exists to support a reversal. In the event the Company determines that the deferred tax assets are realizable, an adjustment to the valuation allowances will be reflected in the tax provision for the period such determination is made.

Changes in tax laws and tax rates could affect the Company's recorded deferred tax assets and liabilities in the future. The Company's tax liabilities involve dealing with uncertainties in the application of complex tax laws and regulations in a multitude of jurisdictions across its global operations. Management will account for any such changes or factors in the period in which such law changes are enacted. On December 22, 2017, H.R.1, formerly known as the Tax Cuts and Jobs Act (“The Act”), was signed into law. Among other items, H.R.1 reduces the federal corporate tax rate from 35% to 21% effective January 1, 2018. As a result, the Company revalued its net deferred tax asset to the lower enacted rate. The Company's net deferred tax asset represents differences between the carrying amounts and tax bases of assets and liabilities carried on the Company's balance sheet.

In addition to the revaluation of deferred tax assets and liabilities in reflecting the lower tax rates, the Act also imposes a deemed repatriation tax on the Company’s total post-1986 deferred foreign income.  During the year ended December 30, 2017, the company recognized $0.6 million as a provisional estimate for income taxes under the U.S. Securities and Exchange Commission Accounting Bulletin No. 118. The provisional estimate is subject to revisions as we complete our analysis of the Act, collect and prepare necessary data, and interpret any additional guidance issued by the U.S. Treasury Department, Internal Revenue Service (“IRS”), FASB, and other standard-setting and regulatory bodies.  Our accounting for the tax effects of the Act will be completed during the measurement period, which should not extend beyond one year from the enactment date.

Differences between income taxes computed by applying the statutory federal income tax rate to income (loss) before income taxes and the provision (benefit) for income taxes consist of the following (in thousands):

	Years Ended
	December 30, 2017			December 31, 2016			December 26, 2015
Income taxes computed at U.S. statutory rate	$	15,153		$	10,197		$	1,949
State income taxes		227			223			28
Foreign tax rate differential		794			3,502			342
Change in valuation allowance		1,490			(25,738	)		1,648
Equity compensation		(1,803	)		380			311
Tax credits		(2,336	)		(3,191	)		(1,834	)
Domestic production activities deduction		(608	)		(354	)		—
Liabilities for uncertain tax positions		18			67			74
Other, net		161			14			145
Provision (benefit) for income taxes	$	13,096		$	(14,900	)	$	2,663

As of December 30, 2017, The Company has provided U.S income taxes on all its foreign earnings. The Company still continues to permanently reinvest the cash held offshore to support its working capital needs.   Accordingly, no additional foreign withholding taxes that may be required from certain jurisdictions in the event of a cash distribution have been provided thereon.

The Company recognizes tax liabilities for uncertain tax positions and adjusts these liabilities when its judgment changes as a result of the evaluation of new information not previously available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the Company's current estimate of the tax liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which they are determined.

The accounting for uncertainty in income taxes recognized in an enterprise's financial statements prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken on a tax return, and the derecognition of tax benefits, classification on the balance sheet, interest and penalties, accounting in interim periods, disclosure, and transition.

68

NANOMETRICS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

	Rollforward Table (at Gross): As of
	December 30, 2017			December 31, 2016			December 26, 2015
Unrecognized tax benefits - beginning of the period	$	6,477		$	6,961		$	6,442
Gross increases-tax positions in prior period		32			23			127
Gross decreases-tax positions in prior period		—			(1,193	)		(306	)
Gross increases-current-period tax positions		723			686			698
Lapse of statute of limitations		(81	)		—			—
Unrecognized tax benefits - end of the period	$	7,151		$	6,477		$	6,961

The unrecognized tax benefit at December 30, 2017, was $7.2 million, of which $4.0 million would impact the effective tax rate if recognized. The Company accrues interest and penalties related to unrecognized tax benefits in its provision for income taxes. The total amount of penalties and interest were not material as of December 30, 2017, December 31, 2016, and December 26, 2015. The Company does not expect a material change in its unrecognized tax benefits within the next 12 months.

The Company is subject to taxation in the U.S. and various states including California, and foreign jurisdictions including Korea, Japan, Taiwan, and China. Due to tax attribute carry-forwards, the Company is subject to examination for tax years 2003 forward for U.S. tax purposes. The Company was also subject to examination in various states for tax years 2002 forward. The Company is subject to examination for tax years 2009 forward for various foreign jurisdictions.

Note 14. Segment, Geographic, Product and Significant Customer Information

The Company has one operating segment, which is the sale, design, manufacture, marketing and support of thin film and optical critical dimension systems. The Chief Executive Officer has been identified as the Chief Operating Decision Maker (“CODM”) because he has the final authority over resource allocation decisions and performance assessment. The CODM does not receive discrete financial information about individual components of the Company's business. For the years ended December 30, 2017, December 31, 2016, and December 26, 2015, the Company recorded revenue from customers primarily in the United States, Asia and Europe. The following tables summarize total net revenues and long-lived assets (excluding intangible assets) attributed to significant countries (in thousands):

	Years Ended
	December 30, 2017		December 31, 2016		December 26, 2015
Total net revenues (1):
South Korea	$	94,082	$	44,735	$	30,572
China		29,826		43,460		17,373
Singapore		21,810		37,096		17,395
United States		33,983		29,887		36,720
Taiwan		20,147		27,189		46,715
Japan		41,979		26,604		31,140
Other		16,794		12,158		7,452
Total net revenues	$	258,621	$	221,129	$	187,367

⁽¹⁾ Net revenues are attributed to countries based on the customer's deployment and service locations of systems.

69

NANOMETRICS INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

	December 30, 2017		December 31, 2016
Long-lived tangible assets:
United States	$	43,427	$	42,688
Taiwan		510		818
South Korea		576		554
Japan		60		57
All Other		237		109
Total long-lived tangible assets	$	44,810	$	44,226

The Company’s product lines differ primarily based on the environment in which the systems will be used. Automated systems are used primarily in high-volume production environments. Materials characterization products are primarily used to measure the composition, band gap, structure, and other physical and electrical properties of semiconducting materials for discrete electronic industry, high brightness LED and solar/photovoltaic structures in both development and high-volume environments. Integrated systems are installed inside wafer processing equipment to provide near real-time measurements for improving process control and increasing throughput. Revenues by product type were as follows (in thousands): 

	Years Ended
	December 30, 2017		December 31, 2016		December 26, 2015
Automated Systems	$	151,401	$	127,378	$	102,386
Integrated Systems		42,183		43,846		31,579
Materials Characterization Systems		21,293		13,842		12,980
Total product revenues	$	214,877	$	185,066	$	146,945

The following customers accounted for 10% or more of total accounts receivable, net:

	Years Ended
	December 30, 2017			December 31, 2016			December 26, 2015
Taiwan Semiconductor Manufacturing Company Limited	***				20	%		26	%
Samsung Electronics Co. Ltd.		13	%		14	%	***
Micron Technology, Inc.		18	%		12	%	***
Intel Corporation	***				11	%	***
Toshiba Corporation		31	%		10	%		27	%

*** The customer accounted for less than 10% of total accounts receivable, net, as of that period end.

The following customers accounted for 10% or more of total net revenue:

	Years Ended
	December 30, 2017			December 31, 2016			December 26, 2015
Samsung Electronics Co. Ltd.		26	%	***				13	%
SK Hynix		13	%		15	%		11	%
Micron Technology, Inc.		12	%		20	%		16	%
Intel Corporation		11	%		18	%	***
Toshiba Corporation		11	%	***				10	%
Taiwan Semiconductor Manufacturing Company Limited	***				10	%		19	%

*** The customer accounted for less than 10% of total net revenue during the period.

70

SUPPLEMENTAL FINANCIAL INFORMATION

Selected Quarterly Financial Results (Unaudited)

The following table sets forth selected consolidated quarterly results of operations for the years ended December 30, 2017, and December 31, 2016 (in thousands, except per share amounts):

	Quarters Ended
	December 30, 2017		September 30, 2017		July 1, 2017		April 1, 2017
Total net revenues	$	78,205	$	56,675	$	64,427	$	59,314
Gross profit	$	43,973	$	30,660	$	33,621	$	28,447
Income from operations	$	19,162	$	7,484	$	10,652	$	5,508
Net income(1)	$	10,798	$	5,764	$	8,288	$	5,352
Net income per share:
Basic	$	0.43	$	0.23	$	0.33	$	0.21
Diluted	$	0.42	$	0.22	$	0.32	$	0.21
Shares used in per share computations:
Basic		25,378		25,494		25,307		25,133
Diluted		25,819		25,932		25,906		25,833

	Quarters Ended
	December 31, 2016		September 24, 2016		June 25, 2016		March 26, 2016
Total net revenues	$	59,159	$	58,714	$	55,767	$	47,489
Gross profit	$	30,804	$	30,404	$	28,425	$	24,491
Income from operations	$	8,963	$	9,066	$	7,336	$	3,730
Net income(2)	$	26,654	$	7,883	$	6,031	$	3,467
Net income per share:
Basic	$	1.07	$	0.32	$	0.25	$	0.14
Diluted	$	1.04	$	0.31	$	0.24	$	0.14
Shares used in per share computations:
Basic		24,949		24,826		24,524		24,308
Diluted		25,514		25,282		24,927		24,597

⁽¹⁾ Our net income included a $2.9 million additional tax expense from the remeasurement of deferred tax assets relating to the Tax Cuts and Jobs Act that was signed into law on December 22, 2017

⁽²⁾ Net Income included a release of non-cash valuation allowance of $27.4 million on the Company’s U.S., and foreign deferred tax assets.

71

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports that we file or submit under the Securities Exchange Act of 1934 (“Exchange Act”), as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure. Our management, with participation by our CEO and CFO, has evaluated the effectiveness of our disclosure controls and procedures as of December 30, 2017, the end of the period covered by this Annual Report on Form 10-K.

Based on the evaluation of our disclosure controls and procedures, our CEO and CFO have concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective as of such date.

Remediation of material weakness

As disclosed in Part II. Item 9A. Controls and Procedures in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, we identified a material weakness in internal control over financial reporting related to the existence of inventories subject to our cycle counting program.

During fiscal 2017, we implemented the following remedial actions:

• Implemented an additional reporting and monitoring controls over additions or changes to our inventory item master records; and

• Designed an automated methodology for determining and assigning the frequency levels each inventory item should be counted

We believe that the remediation steps completed during fiscal 2017 significantly improved our internal control over financial reporting and the material weakness reported as of December 31, 2016, had been fully remediated as of December 30, 2017.

Report of Management on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13(a)-15(f) and 15d-15(f) under the Exchange Act, as amended. Our internal control over financial reporting was designed to provide reasonable, not absolute, assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of our management, including our CEO and CFO, we assessed the effectiveness of our internal control over financial reporting as of December 30, 2017. In making this assessment, we used the criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

72

Based on our assessment, which was conducted based on the COSO criteria, our management, including our CEO and CFO have concludedour internal control over financial reporting was effective, as of December 30, 2017.

The effectiveness of our internal control over financial reporting as of December 30, 2017, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears under Item 8.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting that occurred during the fourth quarter ended December 30, 2017, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

73

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this Item is incorporated by reference to our Proxy Statement for our 2017 Annual Meeting of Stockholders (the “Proxy Statement”) to be filed with the SEC not later than 120 days after the end of our fiscal year ended December 30, 2017, specifically:

• Information regarding our directors and any persons nominated to become a director, as well as with respect to some other required board matters, is set forth under Proposal 1 entitled “Election of Directors” and under “Corporate Governance.”

• Information regarding our audit committee and our designated “audit committee financial expert” is set forth under the caption “Corporate Governance.”

• Information on our code of business conduct and ethics for directors, officers and employees is set forth under the caption “Code of Ethics” under “Corporate Governance.”

• Information regarding Section 16(a) beneficial ownership reporting compliance is set forth under the caption “Section 16(a) Beneficial Ownership Reporting Compliance.”

• Information regarding procedures by which stockholders may recommend nominees to our board of directors is set forth under the caption “Nominating and Governance Committee” under “Corporate Governance.”

Information regarding our executive officers is set forth at the end of Item I, Part 1 of this Annual Report on Form 10-K under the caption “Executive Officers of the Registrant."

ITEM 11. EXECUTIVE COMPENSATION

Information regarding compensation of our named executive officers is set forth under the caption “Executive Compensation” in the Proxy Statement, which information is incorporated herein by reference.

Information regarding compensation of our directors is set forth under the caption "Compensation of Directors" in the Proxy Statement, which information is incorporated herein by reference.

Information regarding compensation committee interlocks is set forth under the caption "Compensation Committee Interlocks and Insider Participation" in the Proxy Statement, which information is incorporated herein by reference.

The Compensation Committee Report is set forth under the caption "Compensation Committee Report" in the Proxy Statement, which report is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Information regarding security ownership of certain beneficial owners, directors and executive officers is set forth under the caption "Security Ownership of Certain Beneficial Owners and Management" in the Proxy Statement, which information is incorporated herein by reference.

74

Equity Compensation Plan Information

The following table gives information about the common stock that may be issued under all of our existing equity compensation plans as of December 30, 2017.

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights (1)		Number of securities  remaining available for future issuance under equity compensation plans (excluding securities reflected in first column)
Equity compensation plans approved by security holders		216,326	$	16.82		1,981,016
Equity compensation plans not approved by    security holders		—	$	—		—
Total		216,326	$	16.82		1,981,016

⁽¹⁾ The weighted-average exercise price does not take into account the shares issuable upon vesting of outstanding awards of restricted stock units and performance-based shares, as they have no exercise price.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

Information regarding certain relationships and related transactions is set forth under the caption "Related Person Transaction Policy" under the caption "Corporate Governance" in the Proxy Statement, which information is incorporated herein by reference.

Information regarding director independence is set forth under the caption “Board of Directors Meetings and Committees” under “Corporate Governance” in the Proxy Statement, which information is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Information regarding principal auditor fees and services is set forth under the proposal entitled “Ratification of Appointment of Independent Registered Public Accounting Firm” in the Proxy Statement, which information is incorporated herein by reference.

75

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) The following documents are filed as part of this report on Form 10-K:

(1) Consolidated Financial Statements.

See Index to Consolidated Financial Statements in Item 8 on page 39 of this Annual Report on Form 10-K.

(2) Consolidated Financial Statement Schedule.

The following consolidated financial statement schedule of Nanometrics Incorporated is filed as part of this Annual Report on Form 10-K and should be read in conjunction with the Consolidated Financial Statements:

Schedule

II - Valuation and Qualifying Accounts as of and for the years ended December 30, 2017, December 31, 2016 and December 26, 2015

Our allowance for doubtful accounts receivable consists of the following (in thousands):

Year Ended	Balance at beginning of period		Additions to Allowance		Charges Utilized/Write-offs			Balance at end of period
December 30, 2017	$	73	$	78	$	(25	)	$	126
December 31, 2016	$	150	$	—	$	(77	)	$	73
December 26, 2015	$	253	$	10	$	(113	)	$	150

Our valuation allowance for deferred tax assets consists of the following (in thousands):

Year Ended	Balance at beginning of period		Additions to Allowance		Charges Utilized/Write-offs			Balance at end of period
December 30, 2017	$	10,980	$	2,984	$	(262	)	$	13,702
December 31, 2016	$	36,786	$	1,643	$	(27,449	)	$	10,980
December 26, 2015	$	35,835	$	951	$	—		$	36,786

Schedules not listed above have been omitted because they are not applicable or are not required or the information required to be set forth therein is included in the Consolidated Financial Statements or notes thereto.

(3) Exhibits.

See Exhibit Index under part (b) below.

(b) Exhibit Index

76

Exhibit No.	Exhibit Description	Form	File Number	Date of First Filing	Exhibit Number/Appendix Reference
3.(i)	Certificate of Incorporation
3.1	Certificate of Incorporation of the Registrant	8-K	000-13470	10/5/2006	3.1
3.(ii)	Bylaws
3.2	Bylaws of the Registrant	8-K	000-13470	4/12/2012	3.1
4	Instruments Defining the Rights of Security Holders, Including Indentures
4.1	Form of Common Stock Certificate	10-Q	000-13470	11/9/2016	4.1
10	Material Contracts
	Management Contracts, Compensatory Plans, Contracts or Arrangements
10.1	Form of Indemnification Agreement between the Registrant and each of its directors and executive officers	8-K	000-13470	2/20/2013	10.1
10.2	Registrant’s 2000 Employee Stock Option Plan and form of Stock Option Agreement	S-8	333-40866	7/6/2000	4.2
10.3	Registrant’s 2000 Director Stock Option Plan and form of Stock Option Agreement	10-K	000-13470	3/13/2008	10.2
10.4	Registrant’s Amended and Restated 2003 Employee Stock Purchase Plan	Schedule 14A	000-13470	4/4/2016	Appendix 1
10.5	Form of Subscription Agreement Under the Registrant’s Amended and Restated 2003 Employee Stock Purchase Plan	S-8	333-40866	9/3/2003	4.1
10.6	Registrant’s Amended and Restated 2005 Equity Incentive Plan	Schedule 14A	000-13470	4/4/2017	Appendix B
10.7	Registrant’s Amended and Restated 2005 Equity Incentive Plan forms of Stock Option and Restricted Stock Unit Agreements	10-K	000-13470	3/13/2008	10.8
10.8	Transition and Consulting Agreement, dated as of August 9, 2017, between Nanometrics Incorporated and Timothy J. Stultz.	8-K	000-13470	8/11/2017	10.1
10.9	Nanometrics Incorporated 2017 Executive Performance Bonus Plan	Schedule 14A	000-13470	4/4/2017	Appendix A
10.10	Compensation Arrangements with Named Executive Officers	8-K	000-13470	11/8/2017	Item 5.02
10.11	Form of Performance-Based Restricted Stock Unit Agreement	8-K	000-13470	3/24/2015	99.1
10.12	General Severance Benefits and Change in Control Severance Benefits Agreement between Registrant and Timothy J. Stultz, Ph.D., dated May 19, 2015	8-K	000-13470	5/22/2015	10.1
10.13	General Severance Benefits and Change in Control Severance Benefits Agreement between Registrant and Jeffrey Andreson, dated May 19, 2015	8-K	000-13470	5/22/2015	10.2
10.14	General Severance Benefits and Change in Control Severance Benefits Agreement between Registrant and S. Mark Borowicz, dated May 19, 2015	8-K	000-13470	5/22/2015	10.3
10.15	General Severance Benefits and Change in Control Severance Benefits Agreement between Registrant and Kevin Heidrich, dated May 19, 2015	8-K	000-13470	5/22/2015	10.4

77

10.16	General Severance Benefits and Change in Control Severance Benefits Agreement between Registrant and Janet Taylor, dated August 27, 2015	10-Q		000-13470		10/30/2015		10.1
10.17	Compensation Arrangement with Non-Employee Directors	10-Q		000-13470		7/28/2016		10.3
10.18	General Severance Benefits and Change in Control Severance Benefits Agreement between Registrant and Rollin Kocher, dated November 10, 2016	10-K		000-13470		3/3/2017		10.22
10.19	Employment Agreement between the Registrant and Jeffrey Andreson, dated September 22, 2014	10-Q		000-13470		10/31/2014		10.1
10.20	Employment Agreement between the Registrant and Pierre-Yves Lesaicherre, dated November 27, 2017		-		-		-		-
10.21	Separation Agreement between Registrant and S. Mark Borowicz, dated January 8, 2018		-		-		-		-
10.22	Independent Contractor Agreement between Registrant and S. Mark Borowicz, dated January 8, 2018		-		-		-		-
10.23	Retention Bonus Agreement between Registrant and Greg Swyt, dated December 18, 2017		-		-		-		-
10.24	Relocation Agreement between Registrant and Rollin Kocher, dated December 16, 2016		-		-		-		-
10.25	Form of Offer Letter to Timothy J. Stultz	8-K		000-13470		8/8/2007		10.1
	All Other Material Contracts
21	Subsidiaries
21.1	Subsidiaries of the Registrant		-		-		-		-
23	Consents of Experts and Counsel
23.1	Consent of PricewaterhouseCoopers LLP Independent Registered Public Accounting Firm		-		-		-		-
31	Rule 13a-14(a)/15d-14(a) Certifications
31.1	Certification of Pierre-Yves Lesaicherre, principal executive officer of the Registrant, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002		-		-		-		-
31.2	Certification of Greg Swyt, principal financial officer and controller of the Registrant, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002		-		-		-		-
32	Section 1350 Certifications
32.1*	Certification of Pierre-Yves Lesaicherre, principal executive officer of the Registrant, and Greg Swyt, principal financial officer of the Registrant pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. This Certification accompanies this report and shall, not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed for purposes of §18 of the Securities Exchange Act of 1934, as amended.		-		-		-		-
100.INS	XBRL Instance Document
100.SCH	XBRL Taxonomy Extension Schema Document
100.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
100.DEF	XBRL Taxonomy Extension Definition Linkbase Document
100.LAB	XBRL Taxonomy Extension Label Linkbase Document
100.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

Document previously filed in the table above are incorporated by reference.

ITEM 16. FORM 10-K SUMMARY

None.

78

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: February 26, 2018

NANOMETRICS INCORPORATED
By:	/S/ Pierre-Yves Lesaicherre
	Pierre-Yves Lesaicherre
	President and Chief Executive Officer
	(Duly Authorized Officer and Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report on Form 10-K has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/S/ Pierre-Yves Lesaicherre	President, Chief Executive Officer and Director	February 26, 2018
Pierre-Yves Lesaicherre	(Principal Executive Officer)
/S/ Greg Swyt	Vice President, Finance	February 26, 2018
Greg Swyt	(Principal Financial Officer and Controller)
/S/ Bruce C. Rhine	Chairman of the Board of Directors	February 26, 2018
Bruce C. Rhine
/S/ J. Thomas Bentley	Director	February 26, 2018
J. Thomas Bentley
/S/ Edward J. Brown Jr.	Director	February 26, 2018
Edward J. Brown Jr.
/S/ Robert G. deuster	Director	February 26, 2018
Robert G. Deuster
/S/ Christopher A. Seams	Director	February 26, 2018
Christopher A. Seams
/S/ Timothy J. Stultz	Director	February 26, 2018
Timothy J. Stultz
/S/ Christine Tsingos
Christine Tsingos	Director	February 26, 2018

79

EX-10.20

Exhibit 10.20

NANOMETRICS INCORPORATED

PIERRE-YVES LESAICHERRE EMPLOYMENT AGREEMENT

This Employment Agreement (this “Agreement”) is entered into as of November 27, 2017 by and between Nanometrics Incorporated (the “Company”) and Pierre-Yves Lesaicherre (“Executive”), effective as of November 27, 2017 the date hereof (the “Effective Date”).

WHEREAS, the Company desires for Executive to provide services to the Company, and wishes to provide Executive with certain compensation and benefits in return for such employment services, and Executive wishes to be employed by the Company and to provide personal services to the Company in return for certain compensation and benefits;

WHEREAS, the Compensation Committee (the “Compensation Committee”) of the Board of Directors of the Company (the “Board”) recognizes that the possibility of Executive’s involuntary termination without Cause (as defined herein) or Resignation for Good Reason (as defined herein), including in connection with a Change of Control (as defined herein), can result in significant distractions to the Executive;

WHEREAS, the Compensation Committee considers the service of Executive to be in the best interest of the Company and its stockholders and desires to assure the services of the Executive on behalf of the Company on an objective and impartial basis and without distraction or conflict of interest, and to provide the Executive with reasonable compensation and benefit arrangements upon Executive’s involuntary termination without Cause or resignation for Good Reason, including in connection with a Change of Control;

NOW, THEREFORE, the parties hereby agree as follows:

1.Duties and Scope of Employment.

(a)Position and Duties. Executive will serve as Chief Executive Officer and President, reporting to the Board. Executive will render such business and professional services in the performance of their duties, consistent with Executive’s position within the Company, as will reasonably be assigned to by the Board. The period Executive is employed by the Company under this Agreement is referred to herein as the “Employment Term.”

(b)Board of Directors.  During Executive’s service as Chief Executive Officer and President, Executive shall serve as a member of the Board, so long as Executive is so nominated and elected to so serve and subject to the Company’s corporate governing documents.  Executive will not be an independent Board member, and will not serve on any Board committees.

(c)Obligation. During the Employment Term, Executive will devote Executive’s full business efforts and time to the Company and will use good faith efforts to discharge Executive’s obligations under this Agreement to the best of Executive’s ability and in accordance with each of the Company’s corporate governance and ethics guidelines, conflict of interests policies and code of conduct. For the duration of the Employment Term, Executive agrees not to actively engage in any other employment, occupation, or consulting activity for any direct or indirect remuneration without the prior approval of the Board. Executive hereby represents and warrants to the Company that Executive is not party to any contract, understanding, agreement or policy, written or otherwise, that would be breached by Executive’s entering into, or performing services under, this Agreement.

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2.At-Will Employment. Executive and the Company agree that Executive’s employment with the Company constitutes “at-will” employment. Executive and the Company acknowledge that this employment relationship may be terminated at any time, with or without Cause or advance notice, by either of the Company or Executive. However, as described in this Agreement, Executive may be eligible for severance benefits depending upon the circumstances of Executive’s termination of employment.

3.Compensation.

(a)Base Salary. As of the Effective Date, the Company will pay Executive salary at the annual rate of $550,000.00 as compensation for services (such annual salary, as is then effective, to be referred to herein as “Base Salary”). The Base Salary will be paid periodically in accordance with the Company’s normal payroll practices and be subject to the usual, required withholdings.

(b)Sign-On Advance.  Executive will receive a sign-on advance in the amount of $100,000, subject to standard payroll deductions and withholdings, payable within thirty (30) days after Executive’s employment start date (the “Sign-On Advance”).  The Sign-On Advance will be considered earned only if Executive successfully completes one (1) year of continuous employment with the Company.  If within Executive’s first year of employment with the Company: (i) Executive resigns his employment without Good Reason, or (ii) the Company terminates Executive’s employment for Cause, then Executive agrees to pay back the entire amount of the Sign-on Advance within ten (10) days after Executive’s employment termination date.

(c)Annual Incentive.  Beginning in 2018, Executive shall be eligible to earn an annual bonus (the “Performance Bonus”) pursuant to the Company’s annual Executive Performance Bonus Plan (or a successor plan) with a target annual bonus equal to one hundred percent (100%) of Base Salary.  The actual earned cash incentive payable to Executive for any performance period will depend on the extent to which applicable performance goals set by the Compensation Committee are achieved, as determined by the Compensation Committee in its sole discretion.  No amount of Performance Bonus is guaranteed, and Executive must be an employee on the Performance Bonus payment date to be eligible to receive a Performance Bonus for such bonus period; no partial or prorated bonuses will be provided.  The Performance Bonus, if earned, will be paid no later than March 15 of the calendar year after the applicable bonus year.  For fiscal year 2017, Executive shall be eligible for a Performance Bonus in the target amount of $550,000, prorated for Executive’s dates of employment during 2017, and determined in the sole discretion of the Board or the Compensation Committee of the Board based on Executive’s performance in 2017.

(d)Equity Incentives. Subject to the approval of the Compensation Committee and the terms of the 2005 Equity Plan, as amended, and subject to Executive being employed by the Company as of the date of grant, Executive will receive the following grants of equity awards:

i. RSUs with a grant date value of $1,625,000 (but which shall in no event result in Executive receiving more than 62,500 shares) (the “Initial RSUs”), which shall vest annually in three equal installments on each of the first three anniversaries of the grant date, assuming Executive’s continued employment with the Company through each such date;

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ii. PRSUs with a grant date target value of $1,625,000 (but which shall in no event result in Executive receiving more than 62,500 shares), which shall vest based on the satisfaction of both time- and performance-based conditions as follows: (A) satisfaction of the time-based vesting condition shall require Executive’s continued employment with the Company through the second anniversary of the grant date (with respect to 2/3 of the PRSUs) and the third anniversary of the grant date (with respect to 1/3 of the PRSUs); and (B) satisfaction of the performance-based vesting condition shall be based on Company stock performance relative to a group of peer companies over the performance periods ending prior to each such vesting date, as specified in the PRSU agreement;

iii. in 2018, grants as part of the annual grant process for all executives as follows: (A) RSUs with a grant date value of $695,000 (but which shall in no event result in Executive receiving more than 125,000 shares), vesting annually in three equal installments on each of the first three anniversaries of the grant date, assuming Executive’s continued employment with the Company through each such date; (B) PRSUs with a grant date target value of $695,000 (but which shall in no event result in Executive receiving more than 125,000 shares), vesting annually in three equal target installments, assuming Executive’s continued employment with the Company through each such date, and subject to adjustment based on the extent to which the performance metrics are achieved as of each vesting date, as specified in the PRSU agreement.  Such performance metrics shall be established at the time of grant.

The equity awards described above shall be granted pursuant to the relevant forms of award agreement used by the Company, and the number of shares shall in each case be determined by dividing the dollar value set forth above with respect to such award by the 30-day trailing average Company stock price as of the date of grant.

(e)Employee Benefits. During the Employment Term, Executive will be eligible to participate in all Company employee benefit plans, policies and arrangements that are applicable to other executive officers and employees of the Company, including basic health coverage and the Executive Health Care Plan (so long as such is available to senior executives), as such plans, policies and arrangements may exist or be amended from time to time and in accordance with their terms. The Company reserves the right to cancel or change the benefit plans and programs it offers to its employees at any time.

(f)Car Allowance.  Executive will be eligible to receive a car allowance in the amount of $1,200 per month (prorated for any partial months of employment service), subject to any applicable taxes.

(g)401(k) Match.  Executive will be eligible for a 401(k) match pursuant to the Company’s 401(k) policy as applicable to executive employees.  

4.Expenses. The Company will reimburse Executive for reasonable travel, entertainment and other expenses incurred by Executive in the furtherance of the performance of Executive’s duties hereunder, in accordance with applicable law and the Company’s expense reimbursement policy as in effect from time to time.

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5.Severance.

(a)Covered Termination Severance Benefits (Not in connection with Change in Control).

i.Covered Termination Severance Benefits.  Upon a Covered Termination, and subject to the limitations and conditions set forth in this Agreement, including Executive’s timely provision of an effective Release and satisfaction of all other conditions set forth in Section 6, Executive shall be eligible to receive the benefits set forth in this Section 5(a) (in addition to the Accrued Obligations).

ii.Salary Continuance.  Executive shall receive, as severance, an amount equal to twelve (12) months of Executive’s monthly Base Salary rate, payable in equal installments over twelve (12) month period following the Termination Date in accordance with the Company’s payroll schedule then in effect, provided that (i) the payments shall commence on the first regularly scheduled payroll pay date following the effective date of the Release, (ii) the first payment shall be a “catch up” payment to include the total amount that Executive would have received as of such date if these payments had commenced with the first payroll pay date following the Termination Date, and (iii) such payment schedule is subject to any delay in payment required by Section 7(e).

iii.Bonus Severance Payment.  Executive shall receive an additional severance payment in an amount equal to 100% of Executive’s target annual bonus in effect for the fiscal year in which the Termination Date occurs, paid on the first regular payroll date following the effective date of the Release subject to any delay in payment required by Section 7(e).

iv.Health Continuation Coverage.  

1.Provided that Executive is eligible and has made the necessary elections for continuation coverage pursuant to COBRA under a health, dental, or vision plan sponsored by the Company, the Company shall pay the applicable premiums (inclusive of premiums for Executive’s dependents for such health, dental, or vision plan coverage as in effect immediately prior to the date of the Covered Termination) for such continued health, dental, or vision plan coverage following the date of the Covered Termination for up to twelve (12) months (such period, the “COBRA Payment Period”) but in no event after such time as Executive and Executive’s dependents are no longer eligible for COBRA coverage.  Such coverage shall be counted as coverage pursuant to COBRA.  If Executive and Executive’s dependents continue coverage pursuant to COBRA following the conclusion of the period that the Company makes premium payments hereunder, Executive will be responsible for the entire payment of such premiums required under COBRA for the remainder of the applicable COBRA period.  

2.For purposes of this Section 5(a)(iv) references to COBRA shall be deemed to refer also to analogous provisions of state law, and (ii) any applicable insurance premiums that are paid by the Company shall not include any amounts payable by Executive under a Code Section 125 health care reimbursement plan, which amounts, if any, are the sole responsibility of Executive.

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3.Notwithstanding the foregoing, if the Company determines, in its sole discretion, that the Company cannot provide the COBRA premium benefits without potentially incurring financial costs or penalties under applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company shall in lieu thereof pay Executive a taxable cash amount, which payment shall be made regardless of whether the Executive or his qualifying family members elect or are eligible for COBRA continuation coverage (the “Health Care Benefit Payment”).  The Health Care Benefit Payment shall be paid in monthly or bi-weekly installments on the same schedule that the COBRA premiums would otherwise have been paid to the insurer.  The Health Care Benefit Payment shall be equal to the amount that the Company otherwise would have paid for COBRA insurance premiums (which amount shall be calculated based on the premium for the first month of coverage), and shall be paid until the expiration of the COBRA Payment Period.

v.Initial RSU Vesting Acceleration.  In the event that the Covered Termination occurs prior to the second (2^nd) anniversary of the grant date of the Initial RSUs, then the Initial RSUs shall accelerate vesting in full, effective as of the Covered Termination date.

(b) Change in Control Severance Benefits.

i.Change in Control Severance Benefits.  Upon a Change in Control Termination, and subject to the limitations and conditions set forth in this Agreement, including Executive’s timely provision of an effective Release and satisfaction of all conditions set forth in Section 6, Executive shall be eligible to receive the benefits set forth in this Section 5(b) (in addition to the Accrued Obligations).

ii.Salary Continuance.  Executive shall receive, as severance, an amount equal to eighteen (18) months of Executive’s monthly Base Salary rate, payable in equal installments over the eighteen (18) month period following the Termination Date in accordance with the Company’s payroll schedule then in effect, provided that (i) the payments shall commence on the first regularly scheduled payroll pay date following the effective date of the Release, (ii)the first payment shall be a “catch up” payment to include the total amount that Executive would have received as of such date if these payments had commenced with the first payroll pay date following the Termination Date, and (iii) such payment schedule is subject to any delay in payment required by Section 7(e).   

iii.Bonus Severance Payment.  Executive shall receive an additional severance payment in an amount equal to 100% of Executive’s target annual bonus in effect for the fiscal year in which the Termination Date occurs, paid on the first regular payroll date following the effective date of the Release, subject to any delay in payment required by Section 7(e).

iv.Health Continuation Coverage.  

1.Provided that Executive is eligible and has made the necessary elections for continuation coverage pursuant to COBRA under a health, dental, or vision plan sponsored by the Company, the Company shall pay the applicable premiums

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(inclusive of premiums for Executive’s dependents for such health, dental, or vision plan coverage as in effect immediately prior to the Termination Date) for such continued health, dental, or vision plan coverage following the Termination Date for up to eighteen (18) months (such period, the “CIC COBRA Payment Period”) but in no event after such time as Executive and Executive’s dependents are no longer eligible for COBRA coverage.  Such coverage shall be counted as coverage pursuant to COBRA.  If Executive and Executive’s dependents continue coverage pursuant to COBRA following the conclusion of the period that the Company makes premium payments hereunder, Executive will be responsible for the entire payment of such premiums required under COBRA for the remainder of the applicable COBRA period.  

2.For purposes of this Section 5(b)(iv), (i) references to COBRA shall be deemed to refer also to analogous provisions of state law, and (ii) any applicable insurance premiums that are paid by the Company shall not include any amounts payable by Executive under a Code Section 125 health care reimbursement plan, which amounts, if any, are the sole responsibility of Executive.

3.Notwithstanding the foregoing, if the Company determines, in its sole discretion, that the Company cannot provide the COBRA premium benefits without potentially incurring financial costs or penalties under applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company shall in lieu thereof pay Executive a taxable cash amount, which payment shall be made regardless of whether the Executive or his qualifying family members elect or are eligible for COBRA continuation coverage (the “CIC Health Care Benefit Payment”).  The CIC Health Care Benefit Payment shall be paid in monthly or bi-weekly installments on the same schedule that the COBRA premiums would otherwise have been paid to the insurer.  The CIC Health Care Benefit Payment shall be equal to the amount that the Company otherwise would have paid for COBRA insurance premiums (which amount shall be calculated based on the premium for the first month of coverage), and shall be paid until the expiration of the CIC COBRA Payment Period.).

v.Equity Awards.  Executive shall receive the following benefits with respect to the Executive’s equity awards.

1.The vesting and exercisability of all outstanding options to purchase the Company’s common stock, stock appreciation rights, stock units or other equity rights with respect to the Company granted to Executive pursuant to any equity incentive plan of the Company which would otherwise have vested conditioned solely upon Executive’s continued services with the Company shall accelerate vesting in full.

2.Any reacquisition or repurchase rights held by the Company with respect to common stock issued or issuable pursuant to any equity award granted to Executive pursuant to any equity incentive plan of the Company which would otherwise have lapsed conditioned solely upon Executive’s continued services with the Company shall lapse in full.  

3.Any equity awards granted to Executive pursuant to any equity incentive plan of the Company which would otherwise vest based on attainment of performance criteria (“Performance Awards”) will either: (i) not be subject to acceleration of vesting pursuant to this Agreement if the terms of such Performance Awards supersede this

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Agreement, or (ii) if the terms of such Performance Awards do not supersede this Agreement, such Performance Awards will accelerate vesting in full; provided however, that if such Performance Awards have multiple vesting levels depending on the level of performance, such Performance Awards will accelerate vesting at the “target level.”  

4.If Executive is unable to exercise all or a portion of any exercisable equity awards granted to Executive pursuant to any equity incentive plan of the Company during the applicable post Termination Date exercise period due to a contractual, legal or regulatory restriction that prohibits the exercise of such Company’s equity awards, the exercise period of such equity awards shall be automatically extended for an additional ninety (90) days following the termination of such contractual, legal or regulatory restriction; provided, however that in no event will such exercise period be extended beyond the maximum permitted contractual term for such equity awards and nothing herein is intended to prohibit earlier cancellation or termination of such equity awards in connection with a Change in Control in which such exercisable awards are not assumed, substituted or continued.

6. Limitations and Conditions on Benefits.

(a)Rights Conditioned on Compliance.  Executive’s rights to receive any or all severance benefits described in Section 5 (other than the Accrued Obligations) shall be conditioned upon and subject to Executive’s compliance with all the limitations and conditions on benefits as described in this Section 6.  Executive acknowledges and agrees that Executive’s obligations under this Section 6 are an essential part of the consideration Executive is providing hereunder in exchange for which and in reliance upon which the Company has agreed to provide the payments and benefits under this Agreement.  Accordingly, Executive agrees that Executive will forfeit, effective as of the date of any breach or failure to comply with any of Executive’s continuing obligations under this Section 6, any right, entitlement, claim or interest in or to any then unpaid portion of the severance payments or benefits provided in Section 5.

(b)Resignation of all Company Positions on Termination Date.  No later than the Termination Date, and prior to the provision or payment of any benefits under this Agreement on account of such Covered Termination or Change in Control Termination, as applicable, Executive must resign from all positions that Executive holds with the Company, including any Board position, unless otherwise requested by the other Board members.

(c)Release Prior to Payment of Benefits.  Prior to the provision or payment of any benefits under this Agreement on account of a Covered Termination or Change in Control Termination, as applicable, Executive must execute a general waiver and release of all known and unknown claims in substantially the form attached hereto as Exhibit A (or in such other form as may later be specified by the Company) (the “Release”), and such release must become effective in accordance with its terms, but in no event later than sixty (60) days following the Termination Date (the “Release Deadline”).  No amount shall be paid under this Agreement prior to the effective date of the Release.  The Company may modify the Release in its discretion to comply with changes in applicable law at any time prior to Executive’s execution of such Release.  Such Release shall specifically relate to all of Executive’s rights and claims in existence at the time of such execution and shall confirm Executive’s obligations under Executive’s written confidentiality or proprietary information agreement (or any successor agreement thereto) and any similar obligations under applicable law.  It is understood that, as

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specified in the applicable Release, Executive has a certain number of calendar days to consider whether to execute such Release.  If Executive does not execute such Release within the applicable period, Executive shall have no further rights, title or interests in or to any severance benefits or payments pursuant to, this Agreement.  It is further understood that if Executive is aged 40 years old or older at the time of a Change in Control Termination or a Covered Termination, as applicable, Executive may revoke the applicable Release in writing within seven (7) calendar days after its execution by Executive.  If Executive revokes such Release within such subsequent seven (7) day period, no benefits shall be provided or payable under this Agreement pursuant to such Covered Termination or Change in Control Termination, as applicable.

(d)Return of Company Property.  Not later than the Termination Date (unless earlier requested or otherwise agreed by the Company in writing), Executive shall return to the Company all documents (and all copies thereof) and other property and information belonging to the Company that Executive has in his or her possession or control.  The documents and property to be returned include, but are not limited to, all files, correspondence, email, memoranda, notes, notebooks, records, plans, forecasts, reports, studies, analyses, compilations of data, proposals, agreements, financial information, research and development information, marketing information, operational and personnel information, databases, computer-recorded information, tangible property and equipment (including, but not limited to, computers, facsimile machines, mobile telephones, and servers), credit cards, entry cards, identification badges and keys; and any materials of any kind which contain or embody any proprietary or confidential information of the Company (and all reproductions thereof in whole or in part).  Executive agrees to make a diligent search to locate any such documents, property and information.  If Executive has used any personally owned computer, server, or e-mail system to receive, store, review, prepare or transmit any Company confidential or proprietary data, materials or information, then within ten (10) business days after the Termination Date (or within such other timing as provided in writing by the Company), Executive shall provide the Company with a computer-useable copy of all such information and then permanently delete and expunge such confidential or proprietary information from those systems without retention of any reproductions.  Executive agrees to provide the Company access to Executive’s personally owned computer, server or e-mail systems as requested to verify that the necessary copying and/or deletion is done.  

(e)Cooperation and Continued Compliance with Proprietary Information Obligations.

i.From and after the Termination Date, Executive shall cooperate fully with the Company in connection with its actual or contemplated defense, prosecution, or investigation of any existing or future litigation, arbitrations, mediations, claims, demands, audits, government or regulatory inquiries, or other matters arising from events, acts, or failures to act that occurred during the time period in which Executive was employed by the Company (including any period of employment with an entity acquired by the Company).  Such cooperation includes, without limitation, being available upon reasonable notice, without subpoena, to provide accurate and complete advice, assistance and information to the Company, including offering and explaining evidence, providing truthful and accurate sworn statements, and participating in discovery and trial preparation and testimony.  Executive also agrees to promptly send the Company copies of all correspondence (for example, but not limited to,

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subpoenas) received by Executive in connection with any such legal proceedings, unless Executive is expressly prohibited by law from so doing.  The Company will reimburse Executive for reasonable out-of-pocket expenses incurred in connection with any such cooperation (excluding foregone wages, salary, or other compensation) within thirty (30) days of Executive’s timely presentation of appropriate documentation thereof, in accordance with the Company’s standard reimbursement policies and procedures, and will make reasonable efforts to accommodate Executive’s scheduling needs.  

ii.From and after the Termination Date, Executive shall continue to abide by all of the terms and provisions of Executive’s written confidentiality or proprietary information agreement (and any other comparable agreement signed by Executive), in accordance with its terms.

(f)Survival.  The provisions of this Section 6 shall survive the termination of this Agreement.

7. Tax Treatment, Reductions and Offsets

(a) Parachute Payments.  

i.If any payment or benefit (including payments and benefits pursuant to this Agreement) Executive would receive in connection with a Change in Control from the Company or otherwise (“Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such Payment will be equal to the Reduced Amount. The “Reduced Amount” will be either (x) the largest portion of the Payment that would result in no portion of the Payment being subject to the Excise Tax, or (y) the largest portion, up to and including the total, of the Payment, whichever amount set forth in clause (x) or (y), after taking into account all applicable federal, state, provincial, foreign, and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in such Participant's receipt, on an after-tax basis, of the greater economic benefit notwithstanding that all or some portion of the Payment may be subject to the Excise Tax.  If a reduction in a Payment is required pursuant to the preceding sentence and the Reduced Amount is determined pursuant to clause (x) of the preceding sentence, the reduction shall occur in the manner (the "Reduction Method") that results in the greatest economic benefit for Participant.  If more than one method of reduction will result in the same economic benefit, the items so reduced will be reduced pro rata (the "Pro Rata Reduction Method").

ii.Notwithstanding any provision of this Section 5.1 to the contrary, if the Reduction Method or the Pro Rata Reduction Method would result in any portion of the Payment being subject to taxes pursuant to Section 409A of the Code that would not otherwise be subject to taxes pursuant to Section 409A of the Code, then the Reduction Method and/or the Pro Rata Reduction Method, as the case may be, shall be modified so as to avoid the imposition of taxes pursuant to Section 409A of the Code as follows:  (i) as a first priority, the modification shall preserve to the greatest extent possible, the greatest economic benefit for the Executive as determined on an after-tax basis; (ii) as a second priority, Payments that are contingent on future events (e.g., being terminated without Cause), shall be eliminated before Payments that are not contingent on future events; and (iii) as a third priority, Payments that are "deferred compensation" within the meaning of Section 409A of the Code shall be reduced before Payments that are not "deferred compensation" within the meaning of Section 409A of the Code.

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iii.The professional firm engaged by the Company for general tax purposes as of the day prior to the effective date of the Change in Control shall make all determinations required to be made under this Section 5.1.  If the professional firm so engaged by the Company is serving as an accountant or auditor for the individual, entity or group effecting the Change in Control, the Company shall appoint a nationally recognized independent registered public accounting firm to make the determinations required hereunder.  The Company shall bear all expenses with respect to the determinations by such professional firm required to be made hereunder.  Any good faith determinations of the professional firm made hereunder shall be final, binding and conclusive upon the Company and Executive.

iv.If Executive receives a Payment for which the Reduced Amount was determined pursuant to clause (x) of Section 5.1(a) and the Internal Revenue Service determines thereafter that some portion of the Payment (after reduction pursuant to clause (x) of Section 5.1(a)) is subject to the Excise Tax, Executive shall promptly return to the Company a sufficient amount of the Payment so that no portion of the remaining Payment is subject to the Excise Tax.  For the avoidance of doubt, if the Reduced Amount was determined pursuant to clause (y) of Section 5.1(a), Executive shall have no obligation to return any portion of the Payment pursuant to the preceding sentence.

(b)Certain Reductions and Offsets.  To the extent that any federal, state or local laws, including, without limitation, the federal Worker Adjustment and Retraining Notification Act (the “WARN Act”) or any other so-called “plant closing” laws (including but not limited to California Labor Code Section 1400 et seq.), require the Company to give advance notice or make a payment of any kind to Executive because of Executive’s involuntary termination due to a layoff, reduction in force, plant or facility closing, sale of business, change in control, or any other similar event or reason, the benefits payable under this Agreement shall be correspondingly reduced.  The benefits provided under this Agreement are intended to satisfy any and all statutory obligations that may arise out of Executive’s involuntary termination of employment for the foregoing reasons, and the parties shall construe and enforce the terms of this Agreement accordingly.

(c)Mitigation.  Executive shall not be required to mitigate damages or the amount of any payment provided under this Agreement by seeking other employment or otherwise, nor shall the amount of any payment provided for under this Agreement be reduced by any compensation earned by Executive as a result of employment by another employer or by any retirement benefits received by Executive after the date of a Covered Termination or Change in Control Termination.

(d)Indebtedness of Executive. If Executive is indebted to the Company on the effective date of a Covered Termination or Change in Control Termination, the Company reserves the right to offset any severance payments and benefits under this Agreement by the amount of such indebtedness; provided, however, that any such offset does not violate or result in the imposition of tax under Section 409A of the Code.

(e) Section 409A.  

i.Notwithstanding anything to the contrary herein, the following provisions apply to the extent severance and other payments and benefits provided herein are subject to Section 409A of the Code and the regulations and other guidance thereunder and any

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state law of similar effect (collectively “Section 409A”).  Severance payments and benefits shall not commence until Executive has a “separation from service” for purposes of Section 409A.  Each installment of  payments and benefits under this Agreement is a separate “payment” for purposes of Treas. Reg. Section 1.409A-2(b)(2)(i), and the severance benefits are intended to satisfy the exemptions from application of Section 409A provided under Treasury Regulations Sections 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9).  However, if such exemptions are not available and Executive is, upon separation from service, a “specified employee” for purposes of Section 409A, then, solely to the extent necessary to avoid adverse personal tax consequences under Section 409A, the timing of the severance benefits payments shall be delayed until the earlier of (i) six (6) months and one day after Executive’s separation from service, or (ii) Executive’s death.

ii.If the severance benefits are not covered by one or more exemptions from the application of Section 409A and the Release could become effective in the calendar year following the calendar year in which Executive separates from service, the separation agreement will not be deemed effective any earlier than the Release Deadline.  None of the severance benefits will be paid or otherwise delivered prior to the effective date of the Release.  

iii.All expenses or other reimbursements as provided herein shall be payable in accordance with the Company’s policies in effect from time to time, provided that such reimbursements (i) shall be made on or prior to the last day of the taxable year following the taxable year in which such expenses were incurred by Executive; (ii) no such reimbursement or expenses eligible for reimbursement in any taxable year shall in any way affect the expenses eligible for reimbursement in any other taxable year; and (iii) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchanged for another benefit.

iv.The severance and other payments and benefits provided herein are intended to qualify for an exemption from application of Section 409A or comply with its requirements to the extent necessary to avoid adverse personal tax consequences under Section 409A, and any ambiguities herein shall be interpreted accordingly.  

(f)Tax Withholding.  All payments made and benefits provided under this Agreement shall be subject to applicable withholding for federal, state and local income and employment taxes.  

8.Definitions.  Unless otherwise provided, for purposes of this Agreement, the following definitions shall apply:

(a)“Accrued Obligations” means (i) any portion of Executive’s annual base salary or incentive compensation earned through Executive’s termination date not theretofore paid, (ii) any unreimbursed business expenses which are eligible for reimbursement in accordance with the Company’s policies, (iii) any accrued but unused vacation pay or paid time off owed to Executive, and (iv) any amount arising from Executive’s participation in, or benefits under, any employee benefit plans, programs or arrangements, which amounts shall be payable in accordance with the terms and conditions of such employee benefit plans, programs or arrangements.  Accrued Obligations also includes any rights to indemnification Executive many have under the Company’s Certificate of Incorporation, Bylaws, or separate indemnification agreement, as applicable, and as each may be amended from time to time.

11.

(b)“Cause” means (i) Executive’s willful gross misconduct; (ii) Executive’s unjustifiable neglect of his duties (as determined in the good faith judgment of the Board); (iii) Executive’s acting in any manner that has a direct, substantial and adverse effect on the Company or its reputation; (iv) Executive’s repeated material failure or repeated refusal to comply with reasonable written policies, standards and regulations established by the Company from time to time which failure, if curable, is not cured to the reasonable satisfaction of the Board during the thirty (30) day period following written notice of such failure from the Company; (v) any tortious act, unlawful act or malfeasance which causes or reasonably could cause (for example, if it became publicly known) material harm to the Company’s standing, condition or reputation; (vi) any material breach by Executive of the provisions of any confidential information agreement with the Company or other material improper disclosure of the Company’s confidential or proprietary information; (vii) Executive’s theft, dishonesty, or falsification of any Company records; (viii) Executive’s being found liable in any Securities and Exchange Commission or other civil or criminal securities law action or entering any cease and desist order with respect to such action (regardless of whether or not Executive admits or denies liability); or (ix) Executive (A) obstructing or impeding; (B) endeavoring to influence, obstruct or impede, or (C) failing to materially cooperate with, any investigation authorized by the Board or any governmental or self-regulatory entity (an “Investigation”).  However, Executive’s failure to waive attorney-client privilege relating to communications with Executive’s own attorney in connection with an Investigation will not constitute “Cause.”

(c)“Change in Control” means the occurrence of any of the following: (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing 50% or more of the total voting power represented by, or 50% or more of the fair value of, the Company’s then outstanding voting power represented by, or 50% or more of the fair value of, the Company’s then outstanding voting securities; (ii) any action or event occurring within a two-year period, as a result of which less than a majority of the directors are Incumbent Directors.  “Incumbent Directors” will mean directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to the Board with the affirmative votes of a majority of the Incumbent Directors at the time of such election or nomination (but will not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); (iii) the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted in to voting securities of the surviving or resulting entity, including any parent holding company) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving or resulting entity outstanding immediately after such merger or consolidation; or (iv) the consummation of the sale, lease or other disposition by the Company of all or substantially all the Company’s assets.  In addition, to the extent required for compliance with Section 409A of the Code, in no event will a Change in Control be deemed to have occurred if such transaction is not also a “change in the ownership or effective control of” the Company or a “change in the ownership of a substantial portion of the assets of” the Company, as determined under Treasury Regulations Section 1.409A-3(i)(5).

12.

(d)“Change in Control Termination” means an “Involuntary Termination Without Cause” or “Resignation for Good Reason,” either of which occurs on or within twelve (12) months following the effective date of a Change in Control, provided that any such termination is a “separation from service” within the meaning of Treasury Regulation Section 1.409A-1(h). For the sake of clarity, a termination of employment due to Executive’s death or disability will not constitute a Change in Control Termination for purposes of this Agreement.

(e)“COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.

(f)“Code” means the Internal Revenue Code of 1986, as amended.

(g)“Covered Termination” means an “Involuntary Termination Without Cause” or “Resignation for Good Reason” either of which occurs other than on or within twelve (12) months following the effective date of a Change in Control, provided that any such termination is a “separation from service” within the meaning of Treasury Regulation Section 1.409A-1(h).  For the sake of clarity, a termination of employment due to Executive’s death or disability will not constitute a Covered Termination for purposes of this Agreement.

(h)“Involuntary Termination Without Cause” means Executive’s dismissal or discharge by the Company for reasons other than Cause and other than as a result of death or disability.  

(i)“Resignation for Good Reason” means Executive’s resignation from all positions Executive holds with the Company at such time, which resignation occurs within ninety (90) days following any of the following events taken without Executive’s written consent, provided that Executive has given the Company written notice of such event within thirty (30) days after the first occurrence of such event and the Company has not cured such event, to the extent curable, within thirty (30) days thereafter:

i.A material decrease in Executive’s base compensation (which includes Executive’s base salary and target bonus);

ii.A material diminution in Executive’s authority, duties or responsibilities (including any change in Executive’s position such that Executive is no longer employed in substantially the same position and with substantially the same level of authority, responsibilities or duties at the ultimate parent corporation in an affiliated group of companies);

iii.A relocation of Executive’s assigned office location to a facility which is more than fifty (50) miles from its current location and which materially increases Executive’s one-way driving distance from Executive’s principal personal residence to such office location at which Executive is required to perform services (except for required business travel to the extent consistent with Executive’s prior business travel obligations); or

iv.The material breach by the Company of this Agreement, the Prior Agreement or any other then current agreement under which Executive performs services for the Company.

13.

(j)“Termination Date” means the effective date of the Change in Control Termination or Covered Termination, as applicable.

11.Confidential Information. Executive shall execute the Company’s standard Invention Assignment and Non-Disclosure Agreement (the “Confidential Information Agreement”) at the commencement of employment hereunder.

12.Assignment. This Agreement will be binding upon and inure to the benefit of (a) the heirs, executors and legal representatives of Executive upon Executive’s death, and (b) any successor of the Company. Any such successor of the Company will be deemed substituted for the Company under the terms of this Agreement for all purposes. For this purpose, “successor” means any person, firm, corporation, or other business entity which at any time, whether by purchase, merger, or otherwise, directly or indirectly acquires all or substantially all of the assets or business of the Company. None of the rights of Executive to receive any form of compensation payable pursuant to this Agreement may be assigned or transferred except by will or the laws of descent and distribution. Any other attempted assignment, transfer, conveyance, or other disposition of Executive’s right to compensation or other benefits will be null and void.

13.Notices. All notices, requests, demands and other communications called for hereunder will be in writing and will be deemed given (a) on the date of delivery if delivered personally, (b) one (1) day after being sent overnight by a well established commercial overnight service, or (c) four (4) days after being mailed by registered or certified mail, return receipt requested, prepaid and addressed to the parties or their successors at the following addresses, or at such other addresses as the parties may later designate in writing:

If to the Company:

Attn: Chairman of the Compensation Committee

c/o Corporate Secretary

Nanometrics Incorporated

1550 Buckeye Drive

Milpitas, CA 95035

If to Executive

At the last residence address known by the Company

14.Severability. If any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable, or void, this Agreement will continue in full force and effect without said provisions.

15.Arbitration.   To ensure the timely and economical resolution of disputes that may arise in connection with Executive’s employment with the Company, Executive and the Company agree that any and all disputes, claims, or causes of action arising from or relating to the enforcement, breach, performance, negotiation, execution, or interpretation of this Agreement, or Executive’s employment, or the termination of Executive’s employment, including but not limited to all statutory claims, shall be resolved pursuant to the Federal Arbitration Act, 9 U.S.C. §1-16, and to the fullest extent permitted by law, by final, binding and confidential arbitration by a single arbitrator conducted by JAMS, Inc. (“JAMS”) under the then applicable JAMS rules (available upon request and also currently available at http://www.jamsadr.com/rules-employment-arbitration/).  By agreeing to this arbitration procedure, both Executive and the Company waive the right to resolve any such dispute through a trial by jury or judge or administrative proceeding.  In addition, all claims, disputes, or causes of action under this section, whether by Executive or the Company, must be

14.

brought in an individual capacity, and shall not be brought as a plaintiff (or claimant) or class member in any purported class or representative proceeding, nor joined or consolidated with the claims of any other person or entity.  The Arbitrator may not consolidate the claims of more than one person or entity, and may not preside over any form of representative or class proceeding.  To the extent that the preceding sentences regarding class claims or proceedings are found to violate applicable law or are otherwise found unenforceable, any claim(s) alleged or brought on behalf of a class shall proceed in a court of law rather than by arbitration.  This paragraph shall not apply to an action or claim brought in court pursuant to the California Private Attorneys General Act of 2004, as amended.  The Company acknowledges that Executive will have the right to be represented by legal counsel at any arbitration proceeding.  Questions of whether a claim is subject to arbitration under this agreement shall be decided by the arbitrator.  Likewise, procedural questions which grow out of the dispute and bear on the final disposition are also matters for the arbitrator.  The arbitrator shall:  (a) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be permitted by law; (b) issue a written arbitration decision, to include the arbitrator’s essential findings and conclusions and a statement of the award; and (c) be authorized to award any or all remedies that Executive or the Company would be entitled to seek in a court of law.  The Company shall pay all JAMS’ arbitration fees in excess of the amount of court fees that would be required of Executive if the dispute were decided in a court of law.  Nothing in this Agreement is intended to prevent either Executive or the Company from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration.  Any awards or orders in such arbitrations may be entered and enforced as judgments in the federal and state courts of any competent jurisdiction.

16.Waiver of Breach. The waiver of a breach of any term or provision of this Agreement, which must be in writing, will not operate as or be construed to be a waiver of any other previous or subsequent breach of this Agreement.

17.Survival. The Confidential Information Agreement and the Company’s and Executive’s responsibilities under Section 7 will survive the termination of this Agreement.

18.Headings. All captions and Section headings used in this Agreement are for convenient reference only and do not form a part of this Agreement.

19.Tax Withholding. All payments made pursuant to this Agreement will be subject to withholding of applicable taxes.

20.Governing Law. This Agreement will be governed by the laws of the State of California without regard to its conflict of laws provisions.

21.Acknowledgment. Executive acknowledges that s/he has the opportunity to discuss this matter with and obtain advice from a private attorney, has had sufficient time to, and has carefully read and fully understands all the provisions of this Agreement, and is knowingly and voluntarily entering into this Agreement.

22.Conditions. This offer is conditioned upon Executive providing to Company references relating to Executive’s employment in a form acceptable to the Company, and Company’s satisfactory review of such references.

23.Counterparts. This Agreement may be executed in counterparts, and each counterpart will have the same force and effect as an original, and will constitute an effective, binding agreement on the part of each of the undersigned

15.

24.Entire Agreement.This Agreement, together with the Confidential Information Agreement, in effect for Executive, represent the entire agreement and understanding between the parties as to the subject matter herein and supersedes all prior or contemporaneous agreements whether written or oral, including, without limitation, the Existing Agreement and any offer letters. No waiver, alteration or modification of this Agreement will be binding unless agreed to in a writing signed by duly authorized representatives of the parties hereto.

16.

IN WITNESS WHEREOF, each of the parties has executed this Employment Agreement, in the case of the Company by a duly authorized officer, as of the day and year written below.

NANOMETRICS INCORPORATED

	Date:	November 27, 2017
Philip Ziman
Vice President, Human Resources

EXECUTIVE

	Date:	November 27, 2017
Pierre-Yves Lesaicherre

17.

Exhibit A

Release and Waiver of Claims

In consideration of the payments and other benefits set forth in the Nanometrics Incorporated Pierre-Yves Lesaicherre Employment Agreement dated November 27, 2017 to which this form is attached (the “Employment Agreement”), I, Pierre-Yves Lesaicherre, hereby furnish Nanometrics Incorporated (the “Company”) with the following release and waiver of claims (“Release and Waiver”).

In exchange for the consideration provided to me by the Employment Agreement that I am not otherwise entitled to receive, I hereby generally and completely release the Company and its current and former directors, officers, employees, stockholders, partners, agents, attorneys, predecessors, successors, parent and subsidiary entities, insurers, affiliates, and assigns (collectively, the “Released Parties”) from any and all claims, liabilities and obligations, both known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions occurring prior to or on the date that I sign this Release and Waiver (collectively, the “Released Claims”).  The Released Claims include, but are not limited to:  (a) all claims arising out of or in any way related to my employment with the Company, or the termination of that employment; (b) all claims related to my compensation or benefits from the Company including salary, bonuses, commissions, vacation pay, paid time off, expense reimbursements, severance pay, fringe benefits, stock, stock options, or any other ownership interests in the Company; (c) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing; (d) all tort claims, including claims for fraud, defamation, emotional distress, and discharge in violation of public policy; and (e) all federal, state, and local statutory claims, including claims for discrimination, harassment, retaliation, misclassification, attorneys’ fees, or other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990 (as amended), the federal Age Discrimination in Employment Act of 1967 (as amended) (the “ADEA”), the California Labor Code, and the California Fair Employment and Housing Act (as amended).  

Notwithstanding the foregoing, the following are not included in the Released Claims (the “Excluded Claims”): (a) any rights or claims for indemnification I may have pursuant to any written indemnification agreement with the Company to which I am a party, the charter, bylaws, or operating agreements of the Company, or under applicable law; (b) any rights or claims to unemployment compensation, funds accrued in my 401k account, or any vested equity incentives; (c) any rights that cannot be waived as a matter of law; or (d) any claims arising from the breach of this Release and Waiver.  I hereby represent and warrant that, other than the Excluded Claims, I am not aware of any claims I have or might have against any of the Released Parties that are not included in the Released Claims. In addition, I understand that nothing in this Release and Waiver limits my ability to file a charge or complaint with the Equal Employment Opportunity Commission, the National Labor Relations Board, the Occupational Safety and Health Administration, the Securities and Exchange Commission or any other federal, state or local governmental agency or commission (“Government Agencies”).  I further understand this Release and Waiver does not limit my ability to communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to the Company.  While this Release and Waiver does not limit my right to receive an award for information provided to the Securities and Exchange Commission, I understand and agree that, to maximum extent permitted by law, I am otherwise waiving any and all rights I may have to individual relief based on any claims that I have released and any rights I have waived by signing this Release and Waiver.  

1.

I also acknowledge that I have read and understand Section 1542 of the California Civil Code which reads as follows:  “A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.”I hereby expressly waive and relinquish all rights and benefits under that Section and any law of any jurisdiction of similar effect with respect to any claims I may have against the Company.

I acknowledge that, among other rights, I am waiving and releasing any rights I may have under ADEA, that this Release and Waiver is knowing and voluntary, and that the consideration given for this Release and Waiver is in addition to anything of value to which I was already entitled as an executive of the Company.  If I am 40 years of age or older upon execution of this Release and Waiver, I further acknowledge that I have been advised, as required by the Older Workers Benefit Protection Act, that:  (a) the release and waiver granted herein does not relate to claims under the ADEA which may arise after this Release and Waiver is executed; (b) I should consult with an attorney prior to executing this Release and Waiver; and (c) I have twenty-one (21) days from the date of termination of my employment with the Company in which to consider this Release and Waiver (although I may choose voluntarily to execute this Release and Waiver earlier); (d) I have seven (7) days following the execution of this Release and Waiver to revoke my consent to this Release and Waiver; and (e) this Release and Waiver shall not be effective until the seven (7) day revocation period has expired without my having previously revoked this Release and Waiver.

I acknowledge my continuing obligations under my Invention Assignment and Non-Disclosure Agreement (the “Confidential Information Agreement”).  Pursuant to the Confidential Information Agreement I understand that among other things, I must not use or disclose any confidential or proprietary information of the Company and I must immediately return all Company property and documents (including all embodiments of proprietary information) and all copies thereof in my possession or control.  I understand and agree that my right to the severance pay I am receiving in exchange for my agreement to the terms of this Release and Waiver is contingent upon my continued compliance with my Confidential Information Agreement.

This Release and Waiver constitutes the complete, final and exclusive embodiment of the entire agreement between the Company and me with regard to the subject matter hereof.  I am not relying on any promise or representation by the Company that is not expressly stated herein.  This Release and Waiver may only be modified by a writing signed by both me and a duly authorized officer of the Company.

	Pierre-Yves Lesaicherre
Date:

154097073 v1

2.

EX-10.21

Exhibit 10.21

	Nanometrics Incorporated	Tel: 408.545.6000
	1550 Buckeye Drive	Fax: 408.232.5910
	Milpitas, CA 95035
	www.nanometrics.com

December 21, 2017

Stanislaw Marek Borowicz

1377 Camino Robles Way

San Jose, CA 95120

Re:Separation Agreement

Dear Mark:

This Separation Agreement and General Release of All Claims (“Agreement”) is made by and between Nanometrics Incorporated (the “Company”) and Stanislaw Marek Borowicz (“You” or “Your”) (collectively the “Parties”) with respect to the following facts:

WHEREAS, You and the Company previously entered into a certain agreement entitled General Severance Benefits and Change in Control Severance Benefits Agreement, dated as of May 19, 2015 (the “General Severance Benefits Agreement”);

WHEREAS, You and the Company have mutually determined that it is Your and their respective best interests for You to separate your employment from the Company.  Effective as of January 9, 2017, your employment with the Company as Executive Vice President, Business Operations and as an employee of the Company will terminate, and You and the Company desire to specify the terms of Your separation and termination of employment and to provide for the termination of the General Severance Benefits Agreement; and

WHEREAS, in connection with Your termination of employment, the Company wishes to secure Your services as a consultant to the Company upon the terms and subject to the conditions set forth herein, and You wish to render such services to the Company upon the terms and subject to the conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:

1.Termination of Employment.  Effective as of January 9, 2018 (the “Separation Date”), Your employment with the Company as an employee and officer of the Company and its subsidiaries and affiliates shall terminate. You and the Company acknowledge and agree that the termination of Your employment shall constitute a “Covered Termination” (as defined in the General Severance Benefits Agreement) for purposes of the General Severance Benefits Agreement or any other plan or agreement between You and the Company or its subsidiaries or affiliates.  You and the Company further acknowledge and agree that Your termination shall be subject to Article 2 of the General Severance Benefits Agreement. In addition, effective as of the Separation Date, the General Severance Benefits Agreement shall terminate, and You shall have no further right or interest thereunder; provided, however, that notwithstanding the foregoing, Article 4 (Limitations and Conditions on Benefits), Article 5 (Tax Treatment, Reductions and

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Offsets), and Article 7 (General Provisions) of the General Severance Benefits Agreement shall remain in full force and effect in accordance with their terms.

2.Accrued Salary and Paid Time Off (PTO).  On the Separation Date, the Company will pay you all accrued salary, and all accrued and unused PTO earned through the Separation Date, subject to standard payroll deductions and withholdings.  You are entitled to these payments regardless of whether or not You sign this Agreement.

3.Severance Package.  

(a)Severance.  Subject to the terms and conditions of this Agreement and Article 2 of the General Severance Benefits Agreement, the Company shall pay to you a total sum of One Hundred and Fifty-Five Thousand Dollars and 0/100 cents ($155,000.00), less all appropriate federal and state income and employment taxes (“Severance”).  The Severance shall be paid to you in equal installments over a six (6) month period beginning on the Company’s first regular pay day at after the Effective Date of this Agreement, provided you do not revoke your acceptance pursuant to paragraph 13(d) below.  

(b)COBRA.  Your health insurance benefits shall cease on the last day of January 2018.  Subject to the terms and conditions of this Agreement, and provided You are eligible for and timely elect coverage for yourself and your covered dependents pursuant to the terms of the Consolidated Omnibus Reconciliation Act, as amended (“COBRA”), the Company shall directly pay the applicable COBRA premium for medical and dental coverage through and (approximately US$2,500 per month), which was in effect immediately prior to the Separation Date, through and until July 31, 2018 (or, if applicable, such earlier date upon which You and/or Your covered dependents are no longer eligible for COBRA) (“COBRA Payment”).  Thereafter, You shall be entitled to elect to continue such COBRA coverage for the remainder of Your COBRA coverage period, at Your own expense.  You shall timely provide any documentation of COBRA enrollment once Your election to continue such medical and dental coverage in accordance with COBRA is complete.  You also must provide timely notice if You becomes eligible for medical benefits with a new employer.

(c)Executive Bonus.  Subject to the terms and conditions of this Agreement, the Company agrees to pay You Your target bonus, under the Company’s 2017 Executive Performance Bonus Plan (the “Plan”), of One Hundred Eight Six Thousand Dollars and 0/100 cents ($186,000.00) (“Executive Bonus”), less appropriate and applicable payroll deductions.    To the extent the Company determines that You are entitled to an amount higher than the Executive Bonus based on the criteria set forth in the Plan, the Company shall pay the higher amount.  If the amount is determined to be lower than the Executive Bonus, the Company shall pay the Executive Bonus amount.  The Executive Bonus will be paid to You in a lump sum on or before March 15, 2018.

You acknowledge and agree that this Severance, COBRA Payment, and Bonus (collectively “Severance Package”) constitute adequate legal consideration, which you are not otherwise entitled to, in exchange for the covenants, promises, obligations and representations made by you in this Agreement.

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Stanislaw Marek Borowicz

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4.Equity Compensation.Under the terms of your restricted stock unit and performance share agreements and the applicable plan documents, vesting of your restricted stock units and performance shares will cease as of the February 28, 2018.  Your right to exercise any vested shares, and all other rights and obligations with respect to your restricted stock units and performance shares, will be as set forth in your restricted stock and performance share agreements, grant notice and applicable plan documents.

5.Independent Contractor Agreement.  As further consideration, You agree to provide consulting services to the Company beyond the Separation Date by executing the Independent Contractor Agreement attached hereto as Exhibit A.  You acknowledge and agree that the Company’s offer of the Independent Contractor Agreement, attached as Exhibit A, is contingent upon You executing this Agreement and that it becomes effective pursuant to paragraph 13(d).  You further agree that the Company has the option of revoking or rescinding the Independent Contractor Agreement if this Agreement does not become effective under paragraph 13(d).  As further consideration for the Severance Package, You shall also execute and deliver a second release agreement, which is attached as Exhibit E to the Independent Contractor Agreement, within twenty-one (21) days following the date Your consulting relationship terminates.  

6.No Other Compensation or Benefits.  Aside from the Severance, COBRA Payment and Executive Bonus, you acknowledge that you have been paid all wages or other compensation, including, but not limited to accrued, unused PTO, incentives, bonuses, or commissions that you earned or become entitled to during your employment with the Company through the date you execute this Agreement.  You agree that you do not have knowledge of any potential or actual dispute with the Company about any unpaid wages or compensation which you believe you are entitled to but has not been paid as of the date you execute this Agreement, including but not limited to any compensation or benefits pursuant to the General Severance Benefits Agreement.  You understand and acknowledge that you shall not be entitled to any payments or benefits from the Company other than those expressly set forth in paragraph 3.

7.Expense Reimbursements.  You agree that, within thirty (30) days of the Separation Date, you will submit your final documented expense reimbursement statement reflecting all business expenses you incurred through the Separation Date, if any, for which you seek reimbursement.  The Company will reimburse you for these expenses pursuant to its regular business practice and expense reimbursement policy.

8.Return of Company Property. Within five (5) days after the Separation Date, you shall return to the Company all Company documents (and all copies thereof) and other Company property in your possession or control, including, but not limited to, Company files, notes, financial and operational information, customer lists and contact information, product and services information, research and development information, drawings, records, plans, forecasts, reports, payroll information, spreadsheets, studies, analyses, compilations of data, proposals, agreements, sales and marketing information, personnel information, specifications, code, software, databases, computer-recorded information, tangible property and equipment (including, but not limited to, computers, facsimile machines, mobile telephones, tablets, handheld devices, and servers), credit cards, entry cards, identification badges and keys; and any materials of any

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kind which contain or embody any proprietary or confidential information of the Company and all reproductions thereof in whole or in part and in any medium.  You agree that you will make a diligent search to locate any such documents, property and information within the timeframe referenced above.  In addition, if you have used any personally owned computer, server, or e-mail system to receive, store, review, prepare or transmit any confidential or proprietary data, materials or information of the Company, then within five (5) days after the Separation Date, you must provide the Company with a computer-useable copy of such information and then permanently delete and expunge such confidential or proprietary information from those systems without retaining any reproductions (in whole or in part); and you agree to provide the Company access to your system, as requested, to verify that the necessary copying and deletion is done.  Your timely compliance with the provisions of this paragraph is a precondition to your receipt of the Severance Package provided hereunder.

9.Proprietary Information Obligations.  You hereby acknowledge and reaffirm your continuing obligations under your Nanometrics Incorporated At-Will Employment, Confidential Information, Invention Assignment and Arbitration Agreement, dated March 14, 2013, which is incorporated herein by reference).

10.Confidentiality.  The provisions of this Agreement shall be held in strictest confidence by you and shall not be publicized or disclosed in any manner whatsoever; provided, however, that:  (a) you may disclose this Agreement in confidence to your immediate family; (b) you may disclose this Agreement in confidence to your attorneys, accountants, auditors, tax preparers, and financial advisors; and (c) you may disclose this Agreement insofar as such disclosure may be necessary to enforce its terms or as otherwise required by law.  In particular, and without limitation, you agree not to disclose the terms of this Agreement to any current or former employee, consultant or independent contractor of the Company.  

In the event that You believe that You are  legally obligated by statutory or regulatory requirements (including compulsory legal process), to make such disclosures, You will contact Philip Ziman at pziman@nanometrics.com, within 24 hours of receiving notice that You are so obligated.

Nothing herein is intended to be or will be construed to prevent, impede, or interfere with your right to respond accurately and fully to any question, inquiry, or request for information regarding the Company or your employment with the Company when required by legal process, or from initiating communications directly with, or responding to any inquiry from, or providing truthful testimony and information to, any federal, state, or other regulatory authority in the course of an investigation or proceeding authorized by law and carried out by such agency.  Employees, including you, are not required to contact the Company regarding the subject matter of any such communications before they engage in such communications.  You may disclose trade secrets in confidence, either directly or indirectly, to a federal, state, or local government official, or to an attorney, solely for the purpose of reporting or investigating a suspected violation of law, or in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.  Additionally, Company employees, contractors, and consultants who file retaliation lawsuits for reporting a suspected violation of law may disclosed related trade secrets to their attorney and use them in related court proceedings, as long as the individual

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files any documents containing the trade secret under seal and does not otherwise disclose the trade secret except pursuant to court order.

11.Nondisparagement.  You agree that you will not make any voluntary statements, written, oral, or electronic (including any social media forum whether expressly or anonymously), or cause or encourage others to make any such statements that defame or in any way disparage the personal and/or business reputations, products, practices or conduct of the Company or any of the other Released Parties at any time, now or in the future.  The Company agrees that any and all executive employees who report directly to the Chief Executive Officer, will not make any voluntary statements, written, oral, or electronic (including any social media forum whether expressly or anonymously), or cause or encourage other to make any such statements that defame or in any way disparage the personal and/or business reputation, practices or conduct of You at any time, now or in the future. Nothing contained in this paragraph is intended to prevent you from testifying truthfully in any legal proceeding, including, but not limited to responding to any inquiries made by the U.S. Equal Employment Opportunity Commission or any government agency.  The Parties understand that the covenant of nondisparagement contained in this Agreement is a material inducement for each Party in making this agreement and that, for the breach thereof, will be considered a material breach of this Agreement.

12.No Admissions.  The promises and payments in consideration of this Agreement shall not be construed to be an admission of any liability or obligation by either party to the other party, and neither party makes any such admission.

13.Release of Claims.  

(a)General Release.  In exchange for the consideration provided to you under this Agreement to which you would not otherwise be entitled, you hereby generally and completely release the Company, and its affiliated, related, parent and subsidiary entities,  and its and their current and former directors, officers, employees, shareholders, partners, agents, attorneys, predecessors, successors, insurers, affiliates, contractors and assigns (collectively, the “Released Parties”) from any and all claims, liabilities and obligations, both known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions occurring prior to or on the date you sign this Agreement (collectively, the “Released Claims”).  

(b)Scope of Release.  The Released Claims include, but are not limited to:  (i) all claims arising out of or in any way related to your employment with the Company, or the termination of that employment; (ii) all claims related to compensation or benefits from the Company, including salary, bonuses, commissions, vacation, paid time off, expense reimbursements, severance pay, fringe benefits, stock, stock options, or any other ownership, equity, or profits interests in the Company; (iii) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing; (iv) all tort claims, including claims for fraud, defamation, emotional distress, and discharge in violation of public policy; (v) all claims arising from or related to the General Severance Benefits Agreement and the Plan; and (vi) all federal, state, and local statutory claims, including claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under the federal

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Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990, the federal Age Discrimination in Employment Act of 1967 (as amended) (the “ADEA”), the California Labor Code (as amended), and the California Fair Employment and Housing Act (as amended).  

(c)Excluded Claims. Notwithstanding the foregoing, the following are not included in the Released Claims (the “Excluded Claims”): (i) any rights or claims for indemnification you may have pursuant to any written indemnification agreement with the Company to which you are a party or under applicable law; (ii) any rights which cannot be waived as a matter of law; (iii) any rights you have to file or pursue a claim for workers’ compensation or unemployment insurance; and (iv) any claims for breach of this Agreement.  In addition, nothing in this Agreement prevents you or interferes with your right to filing, cooperating with, or participating in any proceeding before the Equal Employment Opportunity Commission, the Department of Labor, the California Department of Fair Employment and Housing, National Labor Relations Board, or any analogous government agency, except that you acknowledge and agree that you hereby waive your right to any monetary benefits in connection with any such claim, charge or proceeding.Moreover, nothing in this Agreement shall be interpreted to prohibit or prevent You from recovering an award for filing or participating in any whistleblower complaint filed with the Securities and Exchange Commission.  You represent and warrant that, other than the Excluded Claims, you are not aware of any claims you have or might have against any of the Released Parties that are not included in the Released Claims.  

(d)ADEA Waiver. This Agreement is intended to satisfy the requirements of the Older Workers Benefit Protection Act, 29 U.S.C. § 626(f).  You acknowledge that you are knowingly and voluntarily waiving and releasing any rights you may have under the ADEA, and that the consideration given for the waiver and release in this Section is in addition to anything of value to which you are already entitled.  You further acknowledge that you have been advised that:  (i) your waiver and release do not apply to any rights or claims that you may have under the ADEA that arise after the date that you sign this Agreement; (ii) you should consult with an attorney prior to signing this Agreement; (iii) you have twenty-one (21) days to consider this Agreement (although you may choose voluntarily to sign it earlier); (iv) you have seven (7) days following the date you sign this Agreement to revoke it (by providing written notice of your revocation to me at pziman@nanometrics.com); and (v)if You do not revoke acceptance of this Agreement within the seven (7) day period, Your acceptance of this Agreement shall become binding and enforceable on the eighth day after execution of this Agreement (the “Effective Date”).

14.Waiver of Unknown Claims.  In giving the releases set forth in this Agreement, which include claims which may be unknown to you at present, you acknowledge that you have read and understand Section 1542 of the California Civil Code which reads as follows: “A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.”  You hereby expressly waive and relinquish all rights and benefits under that section and any law or legal principle of

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similar effect in any jurisdiction with respect to your release of claims herein, including but not limited to the release of unknown and unsuspected claims.

15.Representations.You hereby represent that you have been paid all compensation owed and for all hours worked, you have received all the leave and leave benefits and protections for which you are eligible pursuant to the federal Family and Medical Leave Act, the California Family Rights Act, or otherwise, and you have not suffered any on-the-job injury for which you have not already filed a workers’ compensation claim.  You further represent and warrant that you do not presently have on file, and further represent that you will not hereafter file, any claims, grievances, actions, appeals or complaints against the Company or the Released Parties in or with any state, federal or other governmental entity, board or court, or before any other tribunal or panel of arbitrators, public or private, based upon any actions occurring prior to the date of this Agreement, including but not limited to any claims arising out of the cessation of your employment with the Company or the General Severance Benefits Agreement, unless otherwise permitted by law.  If such an action or charge has been filed by you, or on your behalf, you agree not to participate in any such proceeding and you will use your best efforts to cause it immediately to be withdrawn and dismissed with prejudice.

16.Ownership of Claims.  You represent and warrant that you are the sole and lawful owner of all rights, title and interest in and to all released matters, claims and demands referred to herein.  You further represent and warrant that there has been no assignment or other transfer of any interest in any such matters, claims or demands which you may have against the Released Parties.

17.Consultation with Counsel.  You acknowledge that you have had the opportunity to consult with legal counsel of your choice prior to execution and delivery of this Agreement.  You understand and agree that you may be waiving significant legal rights by signing this Agreement, and represent that you have entered into this Agreement voluntarily with a full understanding of and in agreement with all of its terms.

18.Tax Compliance.  Notwithstanding any other provision herein: the parties hereto intend that payments and benefits under this Agreement be exempt from Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations and guidance promulgated thereunder (collectively, “Section 409A”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be exempt therefrom, and the Company and You may mutually adopt such amendments to the Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Company determines are necessary or appropriate to make any payment hereunder exempt from or compliant with Section 409A; provided that, in no event whatsoever shall the Company be liable for any additional tax, interest or penalty that may be imposed on You by Section 409A or damages for failing to comply with Section 409A; whenever a payment under this Agreement specifies a payment period with reference to a number of days, the actual date of payment within the specified period shall be within the sole discretion of the Company; and You shall have no right to determine, directly or indirectly, the year of any payment subject to Section 409A.  Notwithstanding any provision to the contrary, if the period described in

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paragraph 13(d) begins in a first taxable year and ends in a second taxable year, the Severance Package shall begin to be paid in the second taxable year.

19.Consideration of Medicare’s Interests. You affirm, covenant, and warrant that You are not a Medicare beneficiary and are not currently receiving, have not received in the past, will not have received at the time the Severance Package is due under this Agreement, are not entitled to, are not eligible for, and have not applied for or sought Social Security Disability or Medicare benefits. In the event any statement in the preceding sentence is incorrect (for example, but not limited to, if You are a Medicare beneficiary, etc.), the following sentences of this paragraph apply. You affirm, covenant, and warrant You have made no claim for illness or injury against, nor are You aware of any facts supporting any claim against, the Released Parties under which the Released Parties could be liable for medical expenses incurred by You before or after the execution of this Agreement. Furthermore, You are aware of no medical expenses that Medicare has paid and for which the Released Parties are or could be liable now or in the future. You agree and affirm that, to the best of You knowledge, no liens of any governmental entities, including those for Medicare conditional payments, exist. You will indemnify, defend, and hold the Released Parties harmless from Medicare claims, liens, damages, conditional payments, and rights to payment, if any, including attorneys’ fees, and You further agree to waive any and all future private causes of action for damages pursuant to 42 U.S.C. § 1395y(b)(3)(A) et seq.

20.Indemnification.  You agree to hold the Released Parties harmless from, and to defend and indemnify the Released Parties from and against, all further claims, cross-claims, third-party claims, demands, costs, complaints, obligations, causes of action, damages, judgments, liability, contribution, or indemnity related in any way to the allegations that were or could have been made by You with respect to the claims and causes of action released as part of this Agreement, as well as any claims that may be made indirectly against the Released Parties for contribution, indemnity, or otherwise by any third party from whom or which You seeks relief or damages, directly or indirectly, for the same claims and/or causes of action released as part of this Agreement, regardless of whether such claims are caused in whole or in part by the negligence, acts, or omissions of any of the Released Parties.  You shall be responsible for all federal, state, and local tax liability, if any, that may attach to amounts payable or other consideration given under this Agreement, and will defend, indemnify, and hold the Released Parties harmless from and against, and will reimburse the Released Parties for, any and all liability of whatever kind incurred by the Released Parties as a result of any tax obligations of You, including but not limited to taxes, levies, assessments, penalties, fines, interest, attorneys’ fees, and costs. You warrant that You are is not relying on the judgment or advice of any of the Released Parties or legal counsel concerning the tax consequences, if any, of this Agreement.

21.Applicable Law/Venue.  This Agreement, in all respects, shall be interpreted, enforced and governed by and under the laws of the State of California. The Parties agree that jurisdiction and venue shall lie exclusively within the State of California for any action involving the validity, interpretation or enforcement of this Agreement, or for any claim for breach of this Agreement, for damages, and for other relief sought under this Agreement.

22.Miscellaneous.  This Agreement, including Exhibits A, constitutes the complete, final and exclusive embodiment of the entire agreement between you and the Company with

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regard to the subject matter hereof.  It is entered into without reliance on any promise or representation, written or oral, other than those expressly contained herein, and it supersedes any other agreements, promises, warranties or representations concerning its subject matter.  This Agreement may not be modified or amended except in a writing signed by both you and a duly authorized officer of the Company.  This Agreement will bind the heirs, personal representatives, successors and assigns of both you and the Company, and inure to the benefit of both you and the Company, their heirs, successors and assigns.  If any provision of this Agreement is determined to be invalid or unenforceable, in whole or in part, this determination shall not affect any other provision of this Agreement and the provision in question shall be modified so as to be rendered enforceable in a manner consistent with the intent of the parties insofar as possible under applicable law.  Any ambiguity in this Agreement shall not be construed against either party as the drafter.  Any waiver of a breach of this Agreement, or rights hereunder, shall be in writing and shall not be deemed to be a waiver of any successive breach or rights hereunder.  This Agreement may be executed in counterparts which shall be deemed to be part of one original, and facsimile and electronic image signatures shall be equivalent to original signatures.In the event that any Party to this Agreement asserts a claim for breach of this Agreement,  seeks to enforce its terms, or asserts the existence of this Agreement as an affirmative defense, the prevailing Party in any such proceeding shall be entitled to recover costs and reasonable attorney’s fees, to the fullest extent permitted by law.

If this Agreement is acceptable to you, please sign and date below at the conclusion of the twenty first (21) day after receiving this Agreement, and send me the fully signed Agreement.  The Company’s offer contained herein will automatically expire if we do not receive the fully signed Agreement at the conclusion of the twenty-first day.  

We wish you the best in your future endeavors.

Sincerely,

Nanometrics Incorporated

By:
	Pierre-Yves Lesaicherre
	President and Chief Executive Officer

Understood and Agreed:

Stanislaw Marek Borowicz

January 8, 2018

Date

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Exhibit A

Independent Contractor Agreement

32025762.1

EX-10.22

Exhibit 10.22

INDEPENDENT CONTRACTOR AGREEMENT

THIS INDEPENDENT CONTRACTOR AGREEMENT (“Agreement”) is made effective as of January 10, 2018, conditional upon the Separation Agreement (as defined below) becoming effective as provided therein (“Effective Date”), by and between Nanometrics Incorporated (“Company”) and Stanislaw Marek Borowicz (“Contractor”) (collectively the “Parties”) and when signed below by both parties, sets forth the terms and conditions under which Contractor shall provide services to Company.

RECITALS

A. On or about January 8, 2018, Contractor and the Company entered into a Separation Agreement and General Release of All Claims (“Separation Agreement”).  This Agreement does not modify or alter the Parties’ respective rights and/or responsibilities under the Separation Agreement.

B. Notwithstanding the terms and conditions of the Separation Agreement, Contractor separately desires to perform contracting services for the Company, and the Company desires to have such services performed by Contractor; and

C.The Company does not retain the authority to direct the day-to-day performance of Contractor’s services, but rather is requesting certain tasks to be accomplished by Contractor based upon Contractor’s specific skill set and expertise.

NOW, THEREFORE, for and in consideration of the mutual promises and covenants hereinafter set forth, the parties hereto agree as follows:

1. SERVICES, CONSIDERATION AND TERM

(a)Services.  Contractor shall perform for the Company services described in Exhibit A attached hereto and incorporated herein by reference (“Services”) and other such Services as the Company may prescribe.  

(b)Consideration.  The Company shall pay Contractor as set forth in Exhibit A attached hereto and incorporated herein by reference.  Contractor shall devote such time as is reasonably required to the performance of Contractor’s responsibilities under this Agreement.

(c)Term.  This Agreement shall become effective as of the Effective Date and shall remain in full force and effect until February 28^th, or until the Agreement is terminated in accordance with Paragraph 7.  Any extensions of the Term of this Agreement must be in writing signed by both Parties.  

2. CONFLICTING OBLIGATIONS

Contractor confirms that Contractor has not executed nor is bound by, or party to, any non-compete covenant, restriction, or other agreement, contractual or otherwise, with any prior or current employer, supplier, customer or firm with which the Contractor has been associated and which would prevent the contractor from working with the Company in the capacity as stated herein, or otherwise impede or restrict the fulfillment of the terms of this Agreement with the Company.

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3. INDEPENDENT CONTRACTOR

(a)Independent Contractor Status.  It is the express intention of the parties that Contractor is an independent contractor and not an employee, agent, representative, joint venture or partner of the Company.  Nothing in this Agreement shall be interpreted or construed as creating or establishing the relationship of employer and employee between the Company and Contractor or any employee or agent of Contractor.  The parties acknowledge that Contractor is not an employee for state or federal tax purposes.  Contractor is obligated to report all income received by Contractor pursuant to this Agreement, and Contractor agrees to and acknowledges the obligation to pay any and all self-employment and any other taxes thereon including any applicable federal, state and local income taxes, unemployment insurance, workers’ compensation insurance, disability insurance, Social Security taxes and other charges.  Contractor further agrees to indemnify the Company and hold the Company harmless from any and all claims made by any entity on account of an alleged failure by Contractor or the Company to satisfy such withholding or other obligation.  Contractor agrees to provide the Company with a completed IRS Form W-9, W-8BEN or other applicable form upon the effective date of this Agreement.  

(b)Consulting for Others.  Contractor is free to perform work as a contractor employee for any other entity and/or person provided that such engagement does not create a conflict of interest with Contractor’s obligations to Company.  Specifically, none of Contractor’s services for any other entity and/or person shall compromise in any way the Company’s “Confidential Information” as defined in Paragraph 4(a) below.  Further, Contractor must at all times comply with Paragraph 4 below.

(c)Employment of Assistants.  Contractor may, at Contractor’s own expense, employ such assistants as Contractor deems necessary to perform the services required of Contractor by this Agreement.  Contractor assumes full and sole responsibility for the payment of all compensation and expenses of these assistants and for all federal, state and local income taxes, unemployment insurance, workers’ compensation insurance (which covers Contractor and Contractor’s employees), disability insurance, Social Security taxes, and other applicable withholdings.  Contractor must also obtain prior written approval from the Company before using or disclosing any Confidential Information to any such assistants or bringing any such assistant onto the Company’s property, subject to any reasonable, additional terms or conditions of the Company in light of the nature of such request by Contractor.  Such assistants must execute the Company’s standard confidentiality agreement before commencing any work under this Agreement.

(d)Time, Places and Methods of Providing Services.  Due to the nature of the project, the Company may allow access to Company equipment during specific times and days of the week in order for Contractor to provide such services.  As long as Contractor delivers acceptable services to the Company in a timely fashion, Contractor shall generally have the discretion to determine the location and times of rendering services as well as the method of accomplishing Contractor’s Services.      

(e)Records and Invoices.  Contractor shall submit monthly invoices on the first day of each month for services and agreed upon expenses incurred during the previous month to the Company’s accounts payable for all Services rendered. Upon request, Contractor shall provide reasonable receipts or other documentation of agreed upon expenses as Company might request, including copies of time records.  Payment shall be due ten (10) days from receipt of invoice.  

(f)Equipment, Instruments, Documentation and Specifications.  Contractor shall supply all equipment, instruments, documentation and specifications required to perform Services under this Agreement, except when such equipment, instruments, documentation and specifications are unique to the Company, in which case the Company shall provide Contractor with such equipment, instruments, documentation and specifications as may reasonably be required by Contractor for performance by Contractor of duties set forth herein.  Such equipment, instruments, documentation and specifications shall at all times remain the property of the Company. Contractor is not required to purchase or rent any tools, equipment or services from the Company.

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(g)Contractor’s Qualifications.  Contractor represents and warrants that Contractor has the qualifications and skills necessary to perform the Services under this Agreement in a competent, professional manner, without the advice or direction of the Company.  This means Contractor is able to fulfill all the requirements of this Agreement.

(h)Expenses.  Unless otherwise expressly set forth in Exhibit A, Contractor will be responsible for all expenses in connection with performing the Services.  If the Company is obligated to reimburse for any expenses, all expenses must have been approved in advance in writing by the Company and the Company may demand proper and acceptable documentation, including valid receipts evidencing such Expense, prior to payment.  

(i)Indemnity.  The Services are to be performed entirely at Contractor’s own risk.  Contractor agrees to indemnify, defend, and hold harmless the Company and its directors, officers, and employees (past or present) from and against all taxes, losses, damages, liabilities, costs and expenses, including attorney’s fees and other legal expenses, arising directly or indirectly from (i) any negligent, reckless or intentionally wrongful act of Contractor or Contractor’s assistants, employees or agents, (ii) a determination by a court or agency that the Contractor is not an independent contractor, (iii) any breach by the Contractor or Contractor’s assistants, employees or agents of any of the covenants contained in this Agreement, or (iv) any and all claims arising out of any injury, disability, or death of any of Contractor’s assistants, employees or agents. Contractor guarantees to the Company that any Inventions or Intellectual Property developed are free and clear of any claims by third parties.

(j)Warranty.  Contractor’s work (including the accuracy and completeness of any documentation) shall be of the highest professional quality and free of any material defects in quality or workmanship.  All Services shall be merchantable and free of any and all claims as to ownership or control over the Services, any products or designs completed therein or any intellectual property rights related thereto.

4. CONFIDENTIAL INFORMATION

(a)Definition.  “Confidential Information” means any of the Company’s (including its parents’, affiliates’ or subsidiaries’) proprietary information, technical data, trade secrets or know-how, including but not limited to all actual or potential customer, employee, supplier, and distributor lists, contacts and addresses, information about employees and employee relations, training manuals and procedures, information about recruitment method and procedures, employment contracts, employee handbooks, information about marketing, business plans and projections, price lists, information about costs and expenses, budgets, proposals, financial information, product plans, products, services, research, developments, systems, formulas, technology, inventions, data bases, know how, developments, experiments, improvements, prototypes, computer programs, software, devices, patterns, processes, designs, source codes, mask-works, drawings, engineering, hardware configuration information, manufacturing methods, distribution techniques, specifications, tapes, and compilations of information that are owned by Company, parents, affiliates or subsidiaries of Company, other parties with which the Company does business (“Third Parties”) or customers of Company, and that are used in the operation of Company’s, Third Parties’ and/or a customer’s business.  Confidential Information includes, but is not limited to, information disclosed to or developed by Contractor in connection with the Services.  Confidential Information shall not include information that:  (i) is now or subsequently becomes generally available to the public through no wrongful act or omission of Contractor; (ii) Contractor can demonstrate to have had rightfully in its possession prior to disclosure to Contractor by Company; (iii) is independently developed by Contractor without use, directly or indirectly, of any Confidential Information; or (iv) Contractor rightfully obtains from a third party who has the right to transfer or disclose it.

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(b)Non-Use and Non-Disclosure.  Except to the extent necessary to perform Services under this Agreement, Contractor shall not reproduce, use, distribute, disclose or otherwise disseminate Confidential Information.  Contractor shall not take any action causing, or fail to take any reasonable action necessary to prevent, any Confidential Information to lose its character as Confidential Information.  Contractor shall not remove Confidential Information from the Company or the location(s) designated by the Company except as expressly permitted by the Company in writing.  

Contractor agrees that access to Confidential Information will be limited to those employees or other authorized representatives of Contractor who: (1) need to know such Confidential Information in connection with their provision of Services; and (2) have signed agreements with Contractor obligating them to maintain the confidentiality of information disclosed to them and designated or defined as confidential.  Contractor further agrees to inform such employees or authorized representatives of the confidential nature of Confidential Information and agrees to take all necessary steps to ensure that the terms of this Agreement are not violated by them.

Additionally, Contractor agrees not to use any Developments, as defined in Paragraph 5(b), in connection with any project that Contractor undertakes for Contractor or for any party other than the Company without the prior express written approval of the Company in each instance.

(c)Former Employer’s Confidential Information.  Contractor shall not, during the term of this Agreement, improperly use or disclose any proprietary information or trade secrets of any former or current employer or other person or entity with which Contractor has an agreement or duty to keep in confidence information acquired by Contractor in confidence, if any, and Contractor will not bring onto the premises of the Company any unpublished document or proprietary information belonging to such employer, person or entity, unless consented to in writing by such employer, person or entity.  Contractor will indemnify the Company and hold the Company harmless from and against all claims, liabilities, damages and expenses, including reasonable attorneys’ fees and costs of suit, arising out of or in connection with any violation or claimed violation of a third party’s rights resulting in whole or in part from Company’s use of the work product of Contractor under this Agreement.

(d)No Export.  Contractor acknowledges that Confidential Information or other information disclosed in connection with the Services might be considered technical data that is subject to compliance with the export control laws and regulations of the United States, and hereby agrees to comply with such laws.

(e)Return of Company Property and Information.  Upon termination of this Agreement or upon request by Company, Contractor shall promptly deliver to the Company any and all Company property and Confidential Information in Contractor’s, or Contractor’s agent’s possession, custody or control.  Contractor agrees to sign and deliver the Termination Certification attached hereto as Exhibit B.  

5. INTELLECTUAL PROPERTY RIGHTS

(a)Assignment.  Contractor has attached hereto, as Exhibit C, a list describing all inventions, original works of authorship, developments, improvements, and trade secrets that were made by Contractor prior to the date hereof, that belong to Contractor and that relate to the Company’s proposed business and products, and that are not assigned to the Company; or, if such list is not attached or is left blank, Contractor represents that there are no such inventions.

All Confidential Information shall remain the property of the Company and no license or other right to such information is granted or implied hereby.  The Services and all Confidential Information developed in connection therewith shall be the sole and exclusive property of Company.  In the event such Services or Confidential Information developed in connection therewith is deemed not to be the

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property of the Company, Contractor hereby assigns all rights thereto to the Company and hereby agrees to sign all instruments reasonably necessary in the opinion of Company to eliminate any ambiguity as to ownership by Company.  Contractor agrees and herein assigns to the Company all of Contractor’srights, provided that no assignment is made that extends beyond what would be allowed under Section 2870 of the California Labor Code (as set forth in Exhibit D hereto) if Contractor were an employee of Company.  Under Section 2870, the assignment requirement shall not apply to any invention as to which Contractorcan prove the following: (i) it was developed entirely on Contractor’s own time; and (ii) no equipment, supplies, facility or trade secret of the Company was used in its development; and (iii) it does not relate to the business of the Company or to Company’s actual or demonstrably anticipated research and development; and (iv) it does not result from any work performed by Contractor for Company.

(b)Further Assurances.  Contractor agrees that all ideas, techniques, inventions, systems, formulae, business and/or marketing plans, projections or analyses, discoveries, technical information, programs, prototypes, and similar developments, improvements or creations developed, conceived, created, discovered, made, written or obtained by Contractor in the course of or as the result, direct or indirect, of the performance of Contractor’s duties hereunder (hereinafter called “Developments”), and all related intellectual property rights, including but not limited to writings and other works of authorship, United States and/or foreign letters, patents, maskworks, copyright or trademark registrations and/or other forms of protection thereof, shall be and remain the property of Company, its parents, affiliates or subsidiaries.  Contractor further agrees to assign (or cause to be assigned) and does hereby assign fully to the Company all such Developments and any copyrights, patents, maskwork rights or other intellectual property rights relating thereto.  Contractor, insofar as Contractor has the right to do so, agrees that Contractor will execute or cause to be executed such United States and/or foreign letters, patents, maskworks, copyright or trademark registrations and other documents and agreements and take such other action as may be desirable in the opinion of the Company to enable intellectual property, copyright and/or other forms of protection for Developments to be obtained, maintained, renewed, preserved and protected throughout the world by or on behalf of Company.  

(c)Pre-Existing Materials.  Contractor agrees that if in the course of performing the Services, Contractor incorporates into any invention developed hereunder any invention, improvement, development, concept, discovery or other proprietary information owned by Contractor or in which Contractor has an interest, (i) Contractor shall inform Company, in writing, before incorporating such invention, improvement, development, concept, discovery or other proprietary information into any invention; and (ii) the Company is hereby granted and shall have a nonexclusive, royalty-free, perpetual, irrevocable, worldwide license to make, have made, modify, use and sell such item as part of or in connection with such invention.  Contractor shall not incorporate any invention, improvement, development, concept, discovery or other proprietary information owned by any third party into any invention without Company’s prior written permission.

6. NONSOLICITATION

Contractor agrees that for a period of one (1) year after the termination of this Agreement, in any State in the United States in which the Company does business, or equivalent geographical subdivision in any foreign jurisdiction in which the Company does business, Contractor will not solicit or induce employees, consultants, or independent contractors of the Companywith whom Contractor had contact, association, or knowledge of during the course of this Agreement to terminate their employment with Company.

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7.TERMINATION

(a)Termination Upon Notice.  Either party may, at its option, terminate this Agreement upon thirty (30) calendar days’ written notice to the other party.  Upon such termination all rights and duties of the parties toward each other shall cease except as to Contractor’s maintenance of Confidential Information and except that the Company shall be obliged to pay, within thirty (30) days of the effective date of termination, for all satisfactory Services completed by Contractor through the date of notice of termination.  If there is work in progress, the Company shall be liable for only the pro-rata portion of the completed work, in accordance with the provisions of Exhibit A hereof.  Any notice or other communication to be given by the Company to Contractor hereunder shall be in writing and shall be deemed received when personally delivered or mailed by certified or registered mail with return receipt requested, and shall be addressed to Contractor at Contractor’s address that was furnished in writing.  Any notice or other communication to be given by Contractor to the Company hereunder shall be in writing and mailed by certified or registered mail with return receipt requested, and shall be addressed to the Company at its principal corporate offices, to the attention of Philip Ziman, Human Resources, 1550 Buckeye Drive, Milpitas, CA 95035.

(b)Automatic Termination.  This Agreement shall terminate automatically on the occurrence of bankruptcy or insolvency of either party, by death of Contractor or by assignment of this Agreement except as provided under Paragraph 8(e).

(c)Continuation of Obligations.  Contractor agrees that all obligations under Paragraphs 4 and 6 of this Agreement shall continue in effect after termination of the Agreement, and that Contractor will notify any future client, potential client or employer of Contractor’s obligations under this Agreement and that the Company will be entitled to notify any such person or entity of Contractor’s obligations.

(d)General Release.  As further consideration of the Severance Package (defined in the Separation Agreement), pursuant to Paragraph 5 of the Separation Agreement, Contractor shall execute and deliver the general release, attached hereto as Exhibit E, within twenty-one (21) days following the date Contractor’s consulting relationship terminates.

8.MISCELLANEOUS

(a)Injunctive Relief.  Contractor acknowledges that any unauthorized disclosure or use of Confidential Information would constitute a material breach of this Agreement and may cause great or irreparable injury to the Company for which pecuniary compensation would not afford adequate relief, or that it would be extremely difficult to ascertain the amount of the compensation that would afford adequate relief.  Therefore, in the event of such breach, Contractor agrees that the Company will have the right to seek and obtain injunctive relief in addition to any other rights and remedies it may have.

(b)Governing Law and Venue.  This Agreement shall be deemed to be a contract made under, and shall be governed and construed in accordance with, the laws of the State of California.  An arbitrator, if applicable, or the state courts of the State of California, County of Santa Clara, or any federal court encompassing the County of Santa Clara shall have exclusive jurisdiction to adjudicate any dispute arising out of this Agreement, and the parties hereto consent to the jurisdiction of said courts and waive any objection to said venue.

(c)Entire Agreement.  This Agreement constitutes the entire agreement between the parties hereto with respect to the parties’ independent contractor relationship herein.  Any and all written or oral agreements existing between the parties with respect to the parties’ independent contractor relationship herein are expressly canceled.  No modification, amendment or waiver of any of the provisions of this Agreement shall be effective unless made in writing specifically referring to this Agreement and duly signed by an authorized officer or agent for each party hereto.

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(d)Severability.  The invalidity or unenforceability of any particular provision of this Agreement shall not affect the other provisions hereof, all of which shall remain enforceable in accordance with their terms.  Should any of the obligations created hereunder be found illegal and unenforceable for being too broad with respect to the duration, scope, or subject matter thereof, such obligation shall be deemed and construed to be reduced to the maximum duration, scope or subject matter permitted by law.

(e)Assignability.  Neither party shall assign, transfer or sell its rights under this Agreement or delegate its duties hereunder without the prior express written consent of the other party, and any attempted assignment or delegation shall be void and without effect; provided, however, that the Company may assign this Agreement to any person or entity acquiring its business and assets.

(f)Attorneys’ Fees and Court Costs.  If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees, costs and necessary disbursements in addition to any other relief to which it may otherwise be entitled

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first written above.

			Signature:
			Name:	Stanislaw Marek Borowicz
Accepted and Agreed to:
Nanometrics Incorporated
By:
	Name:	Pierre-Yves Lesaicherre
	Title:	President and Chief Executive Officer

7

EXHIBIT A

1. Contact.  Contractor’s principal Company contact is:  

Name: Pierre-Yves Lesaicherre

Title: President and Chief Executive Officer

2. Services. Transition services for operation and engineering, as required.  Such services shall require a response to any phone calls from the Company within 48 hours of such calls and response to any emails from the Company within 24 hours of any such emails if placed and sent Monday - Friday and within 48 hours if placed or sent on national holidays, Saturday or Sunday.  Contractor is required to deliver required materials as requested within the reasonable deadlines set by the Company.

3. Consideration Contractor shall receive $6,000 every two weeks for the Services rendered in this Agreement.     

4. Expenses.  Any business expenses must be approved in advance in writing by the Company.  

8

EXHIBIT B

NANOMETRICS INCORPORATED

CERTIFICATION OF RETURN OF COMPANY PROPERTY AND INFORMATION

This is to certify that I do not have in my possession, nor have I failed to return, any devices, records, software, data, notes, reports, proposals, lists, and sources of customers, lists of employees, proposals to customers, drafts of proposals, business plans and projections, reports, job notes, correspondence, specifications, drawings, blueprints, sketches, materials, equipment, other documents or property, or reproductions of any aforementioned items belonging to Nanometrics Incorporated, its subsidiaries, affiliates, successors or assigns (together, the “Company”).

I further certify that I have complied with all terms of the Company’s confidential and proprietary information provisions in the Independent Contractor Agreement signed by me, including the reporting of any inventions and original works of authorship conceived or made by me (solely or jointly with others) covered by that Agreement.

I further agree that, in compliance with the Independent Contractor Agreement, I will preserve as confidential all trade secrets, confidential knowledge, data or other proprietary information relating to products, processes, know-how, designs, formulas, developmental or experimental work, computer programs, data bases, other original works of authorship, customer lists, business plans, financial information or other subject matter pertaining to any business of the Company or any of its customers, consultants or licensees.

Date:
	Name:
	Signature

9

EXHIBIT C

LIST OF PRIOR INVENTIONS

AND ORIGINAL WORKS OF AUTHORSHIP

TITLE DATE IDENTIFYING NUMBER OR BRIEF DESCRIPTION

10

EXHIBIT D

CALIFORNIA LABOR CODE SECTION 2870
EMPLOYMENT AGREEMENTS, ASSIGNMENT OF RIGHTS

“(a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer's equipment, supplies, facilities, or trade secret information except for those inventions that either:  

(1) Relate at the time of conception or reduction to practice of the invention to the employer's business, or actual or demonstrably anticipated research or development of the employer; or

(2) Result from any work performed by the employee for the employer.

(b) To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable.”

11

EXHIBIT E

GENERAL RELEASE OF CLAIMS

In exchange for my receipt of the payments set forth in Paragraph 3 of my Separation Agreement, dated January 8, 2018, with Nanometrics Incorporated (the “Company”), and for other valuable consideration, the receipt and adequacy of which are hereby acknowledged, I do hereby generally release, forever discharge, and agree not to sue the Company, and its parent and subsidiary corporations, divisions and affiliated corporations, partnerships or other affiliated entities, past and present, as well as their past and present employees, officers, directors, agents, contractors, successors, insurers, attorneys, and assigns (collectively, “Released Parties”), for any and all claims, known and unknown, related in any way to the transactions or occurrences between them to date, to the fullest extent permitted by law, including, but not limited to, my employment and subsequent contractor relationship with the Company, the separation of my employment from the Company, the termination of my contractor relationship with the Company, and any claim arising from the General Severance Benefits and Change in Control Severance Benefits Agreement (dated as of May 19, 2015), Separation Agreement, and Independent Contractor Agreement.  This release is intended to have the broadest possible application and includes, but is not limited to, any tort, contract, common law, constitutional or other statutory claims, including, but not limited to alleged violations of the California Labor Code (e.g., sections 132a, 4553 et seq.), Title VII of the Civil Rights Act of 1964, as amended, Employee Retirement Income Security Act of 1974, the Americans with Disabilities Act, the Equal Pay Act, the federal Family Medical Leave Act, the federal Age Discrimination in Employment Act of 1967 (as amended) (the “ADEA”), all wage claims, wrongful termination claims, discrimination claims, harassment claims, retaliation claims, and any and all claims arising under any federal, state or other governmental statute, law, regulation or ordinance, and all claims for attorney’s fees, costs and expenses.  I expressly waive my right to recovery of any type, including damages or reinstatement, in any administrative or court action, whether state or federal, and whether brought by me or on my behalf, related in any way to the matters released herein.  However, this general release is not intended to bar any claims that, by statute, may not be waived, such as any challenge to the validity of my release of claims under the Age Discrimination in Employment Act of 1967, as amended, as set forth in this General Release of Claims (“Release”).

Notwithstanding the foregoing, this Release shall not be construed in any way to release any claim (i) to payments and benefits under Paragraphs 3 and 4 of my Separation Agreement , (ii) to accrued or vested benefits I may have, if any, as of the date hereof under any applicable plan, policy, practice, program, contract or agreement with the Company, (iii) to any rights or benefits that may not be waived pursuant to applicable law, including, without limitation, any right to unemployment insurance benefits, or (iv) to my right to communicate directly with, cooperate with, or provide information to, any federal, state or local government regulator.

I expressly acknowledge and agree that all rights under Section 1542 of the California Civil Code are expressly waived.  That section provides:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.

In connection with such waiver and relinquishment, I hereby acknowledge that I may hereafter discover claims or facts in addition to, or different from, those which I now know or believe to exist, but that I expressly agree to fully, finally and forever settle and release any and all claims, known or unknown, suspected or unsuspected, which exist or may exist on my behalf against the Company and/or Released Parties at the time of execution of this Release.

12

I represent and warrant that I do not presently have on file, and further represents that I will not hereafter file, any claims, grievances, actions, appeals or complaints against the Company or the Released Parties in or with any state, federal or other governmental entity, board or court, or before any other tribunal or panel of arbitrators, public or private, based upon any actions occurring prior to the date of this Release, including but not limited to any claims arising out of the cessation of my employment with the Company, unless otherwise permitted by law.  If such an action or charge has been filed by me, or on my behalf, I agree not to participate in any such proceeding and I will use my best efforts to cause it immediately to be withdrawn and dismissed with prejudice.

Notwithstanding the foregoing, nothing in this Release shall interfere with my right to file a charge, cooperate or participate in an investigation or proceeding conducted by the Equal Employment Opportunity Commission (“EEOC”) and/or the Department of Fair Employment and Housing, or other federal or state regulatory or law enforcement agency.  However, the consideration provided to me in this Release shall be the sole relief provided to me for the claims that are released by me herein and I will not be entitled to recover and agrees to waive any monetary benefits or recovery against the Company in connection with any such claim, charge or proceeding without regard to who has brought such Complaint or Charge, except that nothing in this Release shall be interpreted to prohibit or prevent me from recovering an award for filing or participating in any whistleblower complaint filed with the Securities and Exchange Commission.

I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have under the ADEA, and that the consideration given under my Separation Agreement for the waiver and release I am providing herein is in addition to anything of value to which I was already entitled. I further acknowledge that I have been advised by this writing that: (a) my waiver and release do not apply to any rights or claims that may arise after the date I sign this Release; (b) I should consult with an attorney prior to signing this Release (although I may choose voluntarily not to do so); (c) I have twenty-one (21) days to consider this Release (although I may choose voluntarily to sign this Release before the end of the 21-day period) and to return the signed Release to the Company; (d) I have seven (7) days following the date I sign this Release (the “Revocation Period”) to revoke this General Release of All Claims as described below; and (e) this General Release of All Claims shall not be effective until the date upon which the Revocation Period has expired, which shall be the eighth day after I sign this Release (the “Effective Date”). I understand and agree that if I choose to revoke this Release, I must deliver notice of such revocation in writing to Philip Ziman at 1550 Buckeye Drive, Milpitas, CA 95035, or pziman@nanometrics.com, no later than the last day of the Revocation Period. If mailed, the revocation must be properly addressed and postmarked no later than the last day of the Revocation Period

I acknowledge and represent that I have not suffered any discrimination or harassment by any of the Released Parties on account of race, gender, national origin, religion, marital or registered domestic partner status, sexual orientation, age, disability, veteran status, medical condition or any other characteristic protected by applicable law. I acknowledge and represent that I have not been denied any leave, benefits, or rights to which I may have been entitled under the Family Medical Leave Act or any other federal or state law, and that I have not suffered any job-related wrongs or injuries for which I might be entitled to compensation or relief. I further acknowledge and represent that, other than the benefits that will be provided to me pursuant to my Separation Agreement, I have been paid all wages, bonuses, compensation, benefits, and other amounts that any of the Released Parties has ever owed to me, and I am not entitled to any additional compensation, severance, or benefits after the date on which my service or employment with the Company terminated, with the sole exception of any benefit the right to which has vested under the express terms of a Company benefit plan document.  I represent and warrant that all of the factual representations made herein, all of which induce the Company to enter into this Release, are true in all material respects.

13

I agree that if any provision of this General Release of All Claims is determined to be invalid or unenforceable, in whole or in part, this determination will not affect any other provision of this General Release of All Claims and the provision in question shall be modified so as to be rendered enforceable in a manner consistent with the intent of the parties insofar as possible under applicable law. I understand that this General Release of All Claims, together with my Separation Agreement (and its exhibits), constitutes the complete, final and exclusive embodiment of the entire agreement between the Company and me with regard to the subject matter hereof.  It is entered into without reliance on any promise or representation, written or oral, other than those expressly contained herein, and it supersedes any other agreements, promises, warranties or representations concerning its subject matter.  

This General Release of all Claims may not be modified or amended except in a writing signed by me and duly authorized officer of the Company.  This General Release of All Claims will bind my heirs, personal representatives, successors and assigns, and inure to the benefit of both me and the Company, our heirs, successors and assigns.  This Release shall be construed and enforced in accordance with the laws of the State of California without regard to conflicts of law principles.  Any ambiguity in this Release shall not be construed against either party as the drafter.  Any waiver of a breach of this Release, or rights hereunder, shall be in writing and shall not be deemed to be a waiver of any successive breach or rights hereunder.  In the event that any Party to this Release asserts a claim for breach of this Release, seeks to enforce its terms, or asserts the existence of this Release as an affirmative defense, the prevailing Party in any such proceeding shall be entitled to recover costs and reasonable attorney’s fees, to the fullest extent permitted by law.

I acknowledge that in order for this General Release of All Claims to become effective, I must sign below and return it by email or mail to Philip Ziman, Vice President, Human Resources (pziman@nanometrics.com) at Nanometrics Incorporated, 1550 Buckeye Drive, Milpitas, CA 95035, within twenty-one (21) days after the date of termination of my Independent Contractor Agreement, and I must not exercise my right to revoke the Release as described above.  

I have carefully read and fully understand this General Release of All Claims, and agree to be bound by its terms.

Stanislaw Marek Borowicz

Date

14

EX-10.23

EXHIBIT 10.23

Retention Bonus Agreement

This Retention Bonus Agreement (“Agreement”), dated as of December __, 2017, is made and entered into by and between Nanometrics Incorporated (the “Company”) and Greg Swyt (“Employee”) (collectively the “Parties”).

WHEREAS, the Company desires to continue to employ Employee through July 1, 2018 (“Retention Date”).  As of December 6, 2017, Employee will continue to serve as Vice President of Finance and the Company’s interim Principal Financial Officer until a Chief Financial Officer is hired by the Company.

NOW THEREFORE, in consideration of the mutual promises and covenants set forth herein, the adequacy and sufficiency of which are hereby acknowledged, the Company and Employee agree as follows:

1.Subject to the Employee satisfying the terms and conditions in this Agreement, the Company agrees to pay Employee the amount of Fifty Thousand Dollars and 0/100 cents ($50,000.00) (“Retention Bonus”), less appropriate and applicable payroll deductions, if Employee remains continuously employed by the Company through the Retention Date (“Retention Period”).  The Retention Bonus will be paid at the conclusion of the Retention Period on the Company’s next regularly scheduled pay day.  

2.To be eligible to receive the Retention Bonus, Employee must satisfy each of the following terms and conditions during the Retention Period:  (a) remain actively employed with the Company through the Retention Period; (b) not resign for any reason or be terminated for cause prior to the Retention Date; (c) must perform all duties and responsibilities of the Principal Financial Officer in a satisfactory manner; (d) perform all tasks given to Employee in a satisfactory and timely manner, including transition tasks to the new Chief Financial Officer; (e) comply with the terms and conditions of this Agreement; and (f) must comply with all Company policies and procedures.  If Employee does not satisfy all of the above terms and conditions, Employee will not have earned the Retention Bonus, or any part thereof.  

3.If Employee resigns for any reason or is terminated for cause as described before the end of the Retention Period, no Retention Bonus, or any pro rata portion thereof, shall be paid.  Cause includes: (1) Employee’s failure to satisfactorily perform the duties and responsibilities of Employee’s position as a Principal Financial Officer; (2) any act of insubordination, dishonesty, vandalism, theft, misappropriation, embezzlement, fraud, misrepresentation, or similar conduct by Employee; or (3) a breach by Employee of any of his obligations under this Agreement.  If Employee is terminated without cause as described above, Employee shall be paid a pro rata share of the Retention Bonus.

4.The Retention Bonus eligibility and/or its payment shall not alter the terms of other employment-related compensation or benefits for which Employee is eligible.

1

5.The Parties agree that this Agreement is for the sole purpose of providing a Retention Bonus to Employee.  This Agreement does not constitute an employment contract between Employee and the Company for any specific time period and does not in any way alter Employee’s status as an at-will employee.  By signing this Agreement, Employee expressly acknowledges that Employee can be terminated at any time, by the Employee or Company, with or without a reason.

6.This Agreement shall be interpreted and enforced in accordance with the laws of the State of California, without reference to its conflict of laws rules.

7.This Agreement shall be binding upon the parties hereto.  Nothing contained in this Agreement shall permit the assignment by Employee of any of Employee’s rights or obligations hereunder, and such assignment by Employee is expressly prohibited.  The Company may assign this Agreement to an entity affiliated or related to the Company.

8.If any term or provision of this Agreement is held invalid or unenforceable to any extent, the remainder of this Agreement shall not be affected thereby, and each term and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.

9.None of the provisions of this Agreement shall be considered waived except when set forth in writing and signed by the parties hereto.

10.This Agreement constitutes the entire understanding of the parties with regard to the Company’s provision of a Retention Bonus to Employee.  This Agreement supersedes all prior or contemporaneous discussions, representations, correspondence or agreements, whether oral or written, pertaining to the Retention Bonus.  All other agreements with regard to Employee’s employment shall remain in full force and effect.  Any modifications to this Agreement shall be in writing and signed by both parties.  

11.The parties have each reviewed this Agreement and understand the terms and conditions hereof.  Each party has entered into this Agreement voluntarily and knowingly and without coercion or duress.

12.Notwithstanding any other provision herein: the parties intend that payments under this Agreement shall be exempt from, or comply with,  Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations and guidance promulgated thereunder (collectively, “Section 409A”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be exempt therefrom.  Notwithstanding the foregoing, to the extent that any amounts payable in accordance with this Agreement are subject to Section 409A, this Agreement shall be interpreted and administered in such a way as to comply with Section 409A to the maximum extent possible.  If payment of any amount subject to Section 409A is triggered by a separation from service that occurs while the Employee is a “specified employee” (as defined by Section 409A)  with, and if such amount is scheduled to be paid within six (6) months after such separation from service, the amount shall accrue without interest and shall be paid the first business day after the end of such six-month period, or, if

2

earlier, within 15 days after the appointment of the personal representative or executor of the Employee’s estate following the Employee’s death.  The Employee shall be solely responsible for the tax consequences with respect to all amounts payable under this Agreement, and in no event whatsoever shall the Company be liable for any additional tax, interest or penalty that may be imposed on Employee by Section 409A or damages for failing to comply with Section 409A. 

Dated:	Greg Swyt
		Greg Swyt
Dated:	Nanometrics Incorporated
	By:
	Its:

3

EX-10.24

Exhibit 10.24

RELOCATION AGREEMENT

This Relocation Agreement (this “Agreement”) is made by and between Nanometrics,

Incorporated (“Company”) and Rollin Kocher (“Employee”). The Company agrees to

reimburse Employee for reasonable expenses relating to his relocation from Austin, Texas to

within fifty (50) miles of the Nanometrics offices in Milpitas California, subject to the following

terms and conditions:

• To be reimbursed, Employee must submit all original receipts along with an Expense Report for relocation expenses incurred to the Company within one hundred eighty (180) days of Employee’s expected relocation date of July 1, 2017.

• Employee must report to and continue to work primarily from the Nanometrics offices in Milpitas, California by the date of July 1, 2017.

• The Company will reimburse Employee a maximum expense limit based on the following:

▪ Packing, transportation for the Employee and his household members and temporary storage of household goods, personal vehicle transportation, temporary housing, rental car or other local transportation up to, but not exceeding $35,000.

▪ Reimbursement of realtor fees associated with the selling of the Employee’s current home in Austin, up to, but not exceeding $50,000.

• No meal/food reimbursements will be provided unless it is part of the physical relocation travel.

• The Company and employee each agree to be responsible for their own tax consequences as a result of this Agreement.

• If the Employee should terminate the employment relationship voluntarily or should be terminated due to misconduct, violation of company policy or other prohibited action, within two (2) years of relocation, the Employee shall repay reimbursed relocation expenses on a prorated basis based on the number of months remaining of the two (2) years subsequent to the Employee’s relocation expected date of July 1, 2017.

• This Agreement should not be construed to create or imply the creation of a contract of employment for a specified term between Nanometrics and Employee, nor should it be construed as a guarantee of employment for a specific period of time. In all circumstances, employment at Nanometrics is “at-will”, which means that either the Employee or the Company can terminate the employment relationship at any time, with or without cause and with or without prior notice.

1

• This Agreement represents the entire understanding and agreement of the partieshereto with respect to the terms contained herein. All other terms and condition ofEmployee’s employment with the Company remain in full force and effect.

Nanometrics Incorporated
By:	/S/ Philip Ziman
Name:	Philip Ziman	Rollin Kocher
Date:	12/16/2016	Date:

2

EX-21.1

Exhibit 21.1

List of Subsidiaries

Name	Jurisdiction
Nanometrics France S.A.S	France
Accent Optical Technologies (Germany) GmbH	Germany
Nanometrics (Switzerland) GmbH	Switzerland
Nanometrics U.K. Ltd.	United Kingdom
Nanometrics China Company Ltd.	China
Nanometrics Israel, Ltd.	Israel
Nanometrics Japan K.K.	Japan
Nanometrics Korea Limited	South Korea
Nanometrics Southeast Asia Pte. Limited	Singapore
Nanda Technologies GmbH	Germany

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8  (Nos. 333-33583, 333-40866, 333-91714, 333-101137, 333-108474, 333-136557, 333-149339, 333-164088, 333-176502, 333-192183, 333-213277, and 333-220135) and on Form S-3 (No. 333-163168) of Nanometrics Incorporated of our report dated February 26, 2018 relating to the financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

San Jose, California

February 26, 2018

EX-31.1

Exhibit 31.1

Certification of the Principal Executive Officer Pursuant to

Act of Rules 13a-14(a) or 15d-14(a) of the Securities Exchange 1934,

As Adopted Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, Pierre-Yves Lesaicherre, the Chief Executive Officer of Nanometrics Incorporated, certify that:

1. I have reviewed this annual report on Form 10-K of Nanometrics Incorporated;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	February 26, 2018
By:	/s/ Pierre-Yves Lesaicherre
	Pierre-Yves Lesaicherre
	Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of the Principal Financial Officer Pursuant to

Rules 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934,

As Adopted Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, Greg Swyt, the Principal Financial Officer of Nanometrics Incorporated, certify that:

1. I have reviewed this annual report on Form 10-K of Nanometrics Incorporated;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	February 26, 2018
By:	/s/ Greg Swyt
	Greg Swyt
	Vice President, Finance (Principal Financial Officer and Controller)

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Each of the undersigned hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in his capacity as an officer of Nanometrics Incorporated (the “Company”) that based on his knowledge:

1. The Annual Report on Form 10-K of the Company for the fiscal year ended December 30, 2017 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	February 26, 2018	By:	/S/ PIERRE-YVES LESAICHERRE
		Name:	Pierre-Yves Lesaicherre
		Title:	Chief Executive Officer
Date:	February 26, 2018	By:	/S/ GREG SWYT
		Name:	Greg Swyt
		Title:	Vice President, Finance (Principal Financial Officer and Controller)

XML

Document and Entity Information - USD ($) $ in Millions	12 Months Ended
	Dec. 30, 2017	Feb. 20, 2018	Jun. 30, 2017
Document And Entity Information [Abstract]
Entity Registrant Name	NANOMETRICS INC
Entity Central Index Key	0000704532
Document Type	10-K
Document Period End Date	Dec. 30, 2017
Amendment Flag	false
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	FY
Trading Symbol	NANO
Current Fiscal Year End Date	--12-30
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		23,761,304
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Public Float			$ 468.3

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 30, 2017	Dec. 31, 2016
Current assets:
Cash and cash equivalents	$ 34,899	$ 47,062
Marketable securities	82,130	82,899
Accounts receivable, net of allowances of $126 and $73, respectively	62,457	39,457
Inventories	52,860	38,837
Inventories-delivered systems	1,534	2,457
Prepaid expenses and other	6,234	5,667
Total current assets	240,114	216,379
Property, plant and equipment, net	44,810	44,226
Goodwill	10,232	8,940
Intangible assets, net	2,206	412
Deferred income tax assets	11,924	17,399
Other assets	413	474
Total assets	309,699	287,830
Current liabilities:
Accounts payable	13,857	11,342
Accrued payroll and related expenses	12,901	12,656
Deferred revenue	7,408	9,168
Other current liabilities	7,249	8,047
Income taxes payable	2,680	813
Total current liabilities	44,095	42,026
Deferred revenue	1,661	816
Income taxes payable	860	841
Deferred tax liability	179	20
Other long-term liabilities	521	353
Total liabilities	47,316	44,056
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock, $0.001 par value; 3,000,000 shares authorized; no shares issued or outstanding	0	0
Common stock, $0.001 par value, 47,000,000 shares authorized: 24,628,722 and 25,070,889, respectively, issued and outstanding	26	25
Additional paid-in capital	255,368	271,969
Retained earnings (deficit)	9,113	(22,174)
Accumulated other comprehensive income (loss)	(2,124)	(6,046)
Total stockholders’ equity	262,383	243,774
Total liabilities and stockholders’ equity	$ 309,699	$ 287,830

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Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Dec. 30, 2017	Dec. 31, 2016
Statement Of Financial Position [Abstract]
Allowances for doubtful accounts	$ 126	$ 73
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	3,000,000	3,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	47,000,000	47,000,000
Common stock, shares issued	24,628,722	25,070,889
Common stock, shares outstanding	24,628,722	25,070,889

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Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 30, 2017	Dec. 31, 2016	Dec. 26, 2015
Net revenues:
Products	$ 214,877	$ 185,066	$ 146,945
Service	43,744	36,063	40,422
Total net revenues	258,621	221,129	187,367
Costs of net revenues:
Cost of products	100,910	85,391	76,224
Cost of service	20,804	20,160	19,450
Amortization of intangible assets	206	1,454	2,026
Total costs of net revenues	121,920	107,005	97,700
Gross profit	136,701	114,124	89,667
Operating expenses:
Research and development	36,716	31,443	32,701
Selling	30,839	30,181	28,055
General and administrative	26,340	23,381	22,444
Amortization of intangible assets		24	114
Restructuring charge			1,380
Total operating expenses	93,895	85,029	84,694
Income from operations	42,806	29,095	4,973
Other (income) expense:
Interest income	8	35	71
Interest expense	(92)	(285)	(289)
Other income, net	576	290	813
Total other income, net	492	40	595
Income before income taxes	43,298	29,135	5,568
Provision for (benefit from) income taxes	13,096	(14,900)	2,663
Net income	$ 30,202	$ 44,035	$ 2,905
Net income per share:
Basic (in dollars per share)	$ 1.19	$ 1.79	$ 0.12
Diluted (in dollars per share)	$ 1.17	$ 1.75	$ 0.12
Weighted average shares used in per share calculation:
Basic (in shares)	25,334	24,655	24,059
Diluted (in shares)	25,919	25,153	24,375

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Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 30, 2017	Dec. 31, 2016	Dec. 26, 2015
Statement Of Income And Comprehensive Income [Abstract]
Net income	$ 30,202	$ 44,035	$ 2,905
Other comprehensive income (loss):
Change in foreign currency translation adjustment	4,170	(869)	(2,344)
Employee benefit plan adjustment	(160)	(17)	(76)
Net change on unrealized (losses) gains on available-for-sale investments	(88)	42	(13)
Other comprehensive income (loss)	3,922	(844)	(2,433)
Comprehensive income	$ 34,124	$ 43,191	$ 472

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Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Accumulated Other Comprehensive Income
Beginning Balance Value at Dec. 27, 2014	$ 179,537	$ 24	$ 251,396	$ (69,114)	$ (2,769)
Beginning Balance Shares at Dec. 27, 2014		23,813,729
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	2,905			2,905
Employee benefit plan adjustment	(76)				(76)
Foreign currency translation adjustments	(2,344)				(2,344)
Unrealized gain (loss) on investments, net of tax	(13)				(13)
Issuance of common stock under stock-based compensation plans	2,792		2,792
Issuance of common stock under stock-based compensation plans, Shares		521,607
Stock-based compensation expense	6,248		6,248
Repurchases and retirement of common stock under share repurchase plans	$ (1,721)		(1,721)
Repurchases and retirement of common stock under share repurchase plans, Shares	(111,050)	(111,050)
Ending Balance Value at Dec. 26, 2015	$ 187,328	$ 24	258,715	(66,209)	(5,202)
Ending Balance Shares at Dec. 26, 2015		24,224,286
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	44,035			44,035
Employee benefit plan adjustment	(17)				(17)
Foreign currency translation adjustments	(869)				(869)
Unrealized gain (loss) on investments, net of tax	42				42
Issuance of common stock under stock-based compensation plans	6,625	$ 1	6,624
Issuance of common stock under stock-based compensation plans, Shares		846,603
Stock-based compensation expense	7,666		7,666
Excess tax benefit related to stock options	(1,036)		(1,036)
Ending Balance Value at Dec. 31, 2016	$ 243,774	$ 25	271,969	(22,174)	(6,046)
Ending Balance Shares at Dec. 31, 2016	25,070,889	25,070,889
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	$ 30,202			30,202
Adjustment due to adoption of ASU 2016-09 Improvements to Employee Share-Based Payment Accounting | Accounting Standards Update 2016-09 [Member]	1,224		139	1,085
Employee benefit plan adjustment	(160)				(160)
Foreign currency translation adjustments	4,170				4,170
Unrealized gain (loss) on investments, net of tax	(88)				(88)
Issuance of common stock under stock-based compensation plans	1,441	$ 1	1,440
Issuance of common stock under stock-based compensation plans, Shares		623,681
Stock-based compensation expense	8,819		8,819
Repurchases and retirement of common stock under share repurchase plans	$ (26,999)		(26,999)
Repurchases and retirement of common stock under share repurchase plans, Shares	(1,065,848)	(1,065,848)
Ending Balance Value at Dec. 30, 2017	$ 262,383	$ 26	$ 255,368	$ 9,113	$ (2,124)
Ending Balance Shares at Dec. 30, 2017	24,628,722	24,628,722

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 30, 2017	Dec. 31, 2016	Dec. 26, 2015
Cash flows from operating activities:
Net income	$ 30,202	$ 44,035	$ 2,905
Reconciliation of net income to net cash provided by operating activities:
Depreciation and amortization	6,920	8,295	9,075
Stock-based compensation	8,819	7,666	6,248
Excess tax benefit from equity awards		1,036
Disposal of fixed assets	631	478	1,121
Inventory write-down	2,020	2,110	2,645
Deferred income taxes	6,858	(16,783)	345
Changes in fair value of contingent payments to Zygo Corporation		(1,175)	(56)
Changes in assets and liabilities:
Accounts receivable	(19,523)	(2,707)	(12,610)
Inventories	(18,037)	4,526	(16,431)
Inventories-delivered systems	923	399	(943)
Prepaid expenses and other	(230)	905	3,271
Accounts payable, accrued and other liabilities	1,049	2,462	4,167
Deferred revenue	(915)	(3,634)	1,006
Income taxes payable	1,886	(1,928)	828
Net cash provided by operating activities	20,603	45,685	1,571
Cash flows from investing activities:
Payment for acquisition of certain assets	(2,000)
Sales of marketable securities	53,030	5,955	3,383
Maturities of marketable securities	77,250	38,775	41,863
Purchases of marketable securities	(129,766)	(82,864)	(41,449)
Purchases of property, plant and equipment	(5,204)	(3,999)	(1,846)
Net cash (used in) provided by investing activities	(6,690)	(42,133)	1,951
Cash flows from financing activities:
Payments to Zygo Corporation related to acquisition		(315)	(851)
Proceeds from sale of shares under employee stock option plans and purchase plan	5,576	8,447	3,974
Excess tax benefit from equity awards		(1,036)
Taxes paid on net issuance of stock awards	(4,135)	(1,822)	(1,182)
Net cash (used in) provided by financing activities	(25,558)	5,274	220
Effect of exchange rate changes on cash and cash equivalents	(518)	82	(264)
Net (decrease) increase in cash and cash equivalents	(12,163)	8,908	3,478
Cash and cash equivalents, beginning of period	47,062	38,154	34,676
Cash and cash equivalents, end of period	34,899	47,062	38,154
Supplemental disclosure of cash flow information:
Cash paid (refund) for income taxes, net	3,040	3,767	(826)
Supplemental disclosure of non-cash investing activities:
Transfer of inventory to property, plant and equipment, net	2,451	2,345	1,469
Property, plant and equipment included in accounts payable	957	$ 683	36
Share Repurchase Plans [Member]
Cash flows from financing activities:
Repurchases of common stock	$ (26,999)		$ (1,721)

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Nature of Business, Basis of Presentation and Significant Accounting Policies

12 Months Ended

Dec. 30, 2017

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Nature of Business, Basis of Presentation and Significant Accounting Policies

Note 1. Nature of Business, Basis of Presentation and Significant Accounting Policies

Description of Business – Nanometrics Incorporated (“Nanometrics” or the “Company”) and its wholly-owned subsidiaries design, manufacture, market, sell and support optical critical dimension ("OCD"), thin film and overlay dimension metrology and inspection systems used primarily in the manufacturing of semiconductors, solar photovoltaics (“solar PV”) and high-brightness LEDs (“HB-LED”), as well as by customers in the silicon wafer and data storage industries. Nanometrics' metrology systems precisely measure a wide range of film types deposited on substrates during manufacturing to control manufacturing processes and increase production yields in the fabrication of integrated circuits. The Company’s OCD technology is a patented critical dimension measurement technology that is used to precisely determine the dimensions on the semiconductor wafer that directly control the resulting performance of the integrated circuit devices. The thin film metrology systems use a broad spectrum of wavelengths, high-sensitivity optics, proprietary software, and patented technology to measure the thickness and uniformity of films deposited on silicon and other substrates as well as their chemical composition. The overlay metrology systems are used to measure the overlay accuracy of successive layers of semiconductor patterns on wafers in the photolithography process. Nanometrics' inspection systems are used to find defects on patterned and unpatterned wafers at nearly every stage of the semiconductor production flow. The corporate headquarters of Nanometrics is located in Milpitas, California.

Basis of Presentation – The consolidated financial statements include Nanometrics Incorporated and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Fiscal Year – The Company utilizes a 52/53 week fiscal year ending on the last Saturday of the calendar year. For each of fiscal years ended December 30, 2017, December 31, 2016, and December 26, 2015, the period presented consisted of a 52-week year, 53-week year and 52-week year, respectively.

Upgrade Revenue and Related Cost - Beginning the first quarter of 2016, revenues associated with upgrade sales are now included under Products Revenues, and the related costs in Cost of Products Revenue. This change was due to the types of upgrades currently being sold, which are primarily system software and hardware performance upgrades to extend the features and functionality of a product. Previously upgrades consisted of a group of parts and/or software that change the existing configuration of a product. For the twelve months ended December 30, 2017, and December 31, 2016, $12.1 million and $11.0 million, respectively, of upgrade sales and $2.7 million and $2.4 million of costs, respectively, are included in Products Revenues and Cost of Products Revenues. For the year ended December 26, 2015, $7.9 million related to upgrade sales, and $3.0 million of costs, are included in Service Revenues and Costs of Service Revenues, respectively, in the accompanying Condensed Consolidated Statement of Operations.

Use of Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ materially from those estimates. Estimates are used for, but not limited to, revenue recognition, the provision for doubtful accounts, the provision for excess, obsolete, or slow-moving inventories, valuation of intangible and long-lived assets, warranty accruals, income taxes, valuation of stock-based compensation, and contingencies.

Foreign Currency Translation – The assets and liabilities of foreign subsidiaries are translated from their respective local functional currencies at exchange rates in effect at the balance sheet date and income and expense accounts are translated at average exchange rates during the reporting period. Resulting translation adjustments are reflected in “Accumulated other comprehensive income,” a component of stockholders’ equity. Foreign currency transaction gains and losses, as well as remeasurement of assets and liabilities denominated in a currency other than the functional currency are reflected in “Other income (expense)” in the consolidated statements of operations in the period incurred, and consists of a $0.6 million loss, a $0.4 million loss and a $0.5 million gain for the years ended December 30, 2017, December 31, 2016, and December 26, 2015, respectively.

Revenue Recognition –  The Company derives revenue from the sale of process control metrology and inspection systems and related upgrades (“product revenue”) as well as spare part sales, billable service and service contracts (together “service revenue”). Upgrades are system software and hardware performance upgrades that extend the features and functionality of a product. As discussed above, commencing in the first quarter of 2016, upgrades are included in product revenue, which consists of sales of complete, advanced process control metrology and inspection systems (the “system(s)”). Nanometrics’ systems consist of hardware and software components that function together to deliver the essential functionality of the system. Arrangements for sales of systems and upgrades often include defined customer-specified acceptance criteria.

In summary, the Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the seller's price is fixed or determinable, and collectability is reasonably assured.

For repeat product sales to existing customers, revenue recognition occurs at the time title and risk of loss transfer to the customer, which usually occurs upon shipment from the Company's manufacturing location, if it can be reliably demonstrated that the product has successfully met the defined customer specified acceptance criteria and all other recognition criteria have been met. For initial sales where the product has not previously met the defined customer specified acceptance criteria, product revenues are recognized upon the earlier of receipt of written customer acceptance or expiration of the contractual acceptance period. In Japan, where contractual terms with the customer specify risk of loss and title transfers upon customer acceptance, revenue is recognized upon receipt of written customer acceptance, provided that all other recognition criteria have been met.

The Company warrants its products against defects in manufacturing. Upon recognition of product revenue, a liability is recorded for anticipated warranty costs. On occasion, customers request a warranty period longer than the Company's standard warranty. In those instances, where extended warranty services are separately quoted to the customer, the associated revenue is deferred and recognized as service revenue ratably over the term of the extended warranty period. The portion of service contracts and extended warranty services agreements that are uncompleted at the end of any reporting period are included in deferred revenue.

As part of its customer services, the Company sells software that is considered to be an upgrade to a customer's existing systems. These standalone software sales are not essential to the tangible product's functionality and are accounted for under software revenue recognition rules which require vendor specific objective evidence (“VSOE”) of fair value to allocate revenue in a multiple element arrangement. Revenue from software sales is recognized when the software is delivered to the customer, provided that all other recognition criteria have been met.

The majority of other upgrades are sold based on published specifications. For simple upgrades that do not require major configuration, revenue is recognized at the time title and risk of loss transfer to the customer, which is usually upon shipment. For complex and extensive upgrades, specific acceptance or prior acceptance for a similar upgrade is required in order to recognize revenue.

Revenue related to spare parts is recognized upon shipment. Revenue related to billable services is recognized as the services are performed. Service contracts may be purchased by the customer during or after the warranty period and revenue is recognized ratably over the service contract period.

Frequently, the Company delivers products and various services in a single transaction. The Company's deliverables consist of tools, installation, upgrades, billable services, spare parts, and service contracts. The Company's typical multi-element arrangements include a sale of one or multiple tools that include installation and standard warranty. Other arrangements consist of a sale of tools bundled with service elements or delivery of different types of services. The Company's tools, upgrades, and spare parts are generally delivered to customers within a period of up to six months from order date. Installation is usually performed soon after delivery of the tool. The portion of revenue associated with installation is deferred based on relative selling price and that revenue is recognized upon completion of the installation and receipt of final acceptance. Billable services are billed on a time and materials basis and performed as requested by customers. Under service contract arrangements, services are provided as needed over the fixed arrangement term, which terms can be up to twelve months. The Company does not grant its customers a general right of return or any refund terms and imposes a penalty on orders cancelled prior to the scheduled shipment date.

The Company regularly evaluates its revenue arrangements to identify deliverables and to determine whether these deliverables are separable into multiple units of accounting. The Company allocates the arrangement consideration among the deliverables based on relative selling prices. The Company has established VSOE for some of its products and services when a substantial majority of selling prices falls within a narrow range when sold separately. For deliverables with no established VSOE, the Company uses best estimate of selling price to determine standalone selling price for such deliverable. The Company does not use third party evidence to determine standalone selling price since this information is not widely available in the market as the Company's products contain a significant element of proprietary technology and the solutions offered differ substantially from competitors. The Company has established a process for developing estimated selling prices, which incorporates historical selling prices, the effect of market conditions, gross margin objectives, pricing practices, as well as entity-specific factors. The Company monitors and evaluates estimated selling price on a regular basis to ensure that changes in circumstances are accounted for in a timely manner.

When certain elements in multiple-element arrangements are not delivered or accepted at the end of a reporting period, the relative selling prices of undelivered elements are deferred until these elements are delivered and/or accepted. If deliverables cannot be accounted for as separate units of accounting, the entire arrangement is accounted for as a single unit of accounting and revenue is deferred until all elements are delivered and all revenue recognition requirements are met.

Cash, Cash Equivalents and Marketable Securities – The Company considers all highly liquid investments with original maturities of three months or less, when purchased, to be cash equivalents. Marketable securities are classified as “available-for-sale” and are reported at fair value with unrealized gains and losses reported in stockholders' equity as a component of other comprehensive income. The cost of securities sold is based on the specific identification method. The Company classifies its investments as current based on the nature of the investment and their availability for use in current operations. The Company reviews its investment portfolio quarterly to determine if any securities may be other-than-temporarily impaired due to increased credit risk, changes in industry or sector of a certain instrument or ratings downgrades.

Fair Value of Financial Instruments – Financial instruments include cash and cash equivalents, accounts receivable and accounts payable. Cash equivalents are stated at fair market value based on quoted market prices. The carrying values of accounts receivable and accounts payable approximate their fair values because of the short-term maturity of these financial instruments.

Derivatives – The Company enters into foreign currency forward exchange contracts to protect against currency exchange risks associated with existing assets and liabilities. A foreign currency forward exchange contract acts as a hedge by increasing in value when underlying assets decrease in value or underlying liabilities increase in value due to changes in foreign exchange rates. Conversely, a foreign currency forward exchange contract decreases in value when underlying assets increase in value or underlying liabilities decrease in value due to changes in foreign exchange rates. These forward contracts are not designated as accounting hedges, so the unrealized gains and losses are recognized in other income, net, in advance of the actual foreign currency cash flows with the fair value of these forward contracts being recorded as accrued liabilities or other current assets. The Company does not use forward contracts for trading purposes.

Allowance for Doubtful Accounts – The Company maintains allowances for estimated losses resulting from the inability of its customers to make required payments. Credit limits are established through a process of reviewing the financial history and stability of its customers. Where appropriate and available, the Company obtains credit rating reports and financial statements of customers when determining or modifying their credit limits. The Company regularly evaluates the collectability of its trade receivable balances based on a combination of factors such as the length of time the receivables are past due, customary payment practices in the respective geographies and historical collection experience with customers. The Company believes that its allowance for doubtful accounts adequately reflects the risk associated with its receivables. If the financial conditions of a customer were to deteriorate, resulting in their inability to make payments, the Company may need to record additional allowances, which would result in additional general and administrative expenses being recorded for the period in which such determination was made.

Inventories – Inventories are stated at the lower of cost, which approximates actual cost on a first-in, first-out basis, or net realizable value. The Company is exposed to a number of economic and industry factors that could result in portions of inventory becoming either obsolete or in excess of anticipated usage, or saleable only for amounts that are less than their carrying amounts. These factors include, but are not limited to, technological changes in the market, the Company’s ability to meet changing customer requirements, competitive pressures in products and prices, and the availability of key components from suppliers. The Company has established inventory reserves when conditions exist that suggest that inventory may be in excess of anticipated demand or is obsolete based upon assumptions about future demand for the Company’s products and market conditions. Once a reserve has been established, it is maintained until the part to which it relates is sold or is otherwise disposed of. The Company regularly evaluates its ability to realize the value of inventory based on a combination of factors including the following: historical usage rates, forecasted sales of usage, product end-of-life dates, estimated current and future market values and new product introductions. For demonstration inventory, the Company also considers the age of the inventory and potential cost to refurbish the inventory prior to sale. Demonstration inventory is amortized over its useful life and the amortization expense is included in total inventory write down on the statements of cash flows. When recorded, reserves are intended to reduce the carrying value of the Company’s inventory to its net realizable value. If actual demand for the Company’s products deteriorates, or market conditions are less favorable than those that the Company projects, additional reserves may be required.

Inventories – delivered systems – The Company reflects the cost of systems that were invoiced upon shipment but deferred for revenue recognition purposes separate from its inventory held for sale as “Inventories – delivered systems.”

Property, Plant and Equipment – Property, plant and equipment are stated at cost. Depreciation and amortization is computed using the straight–line method over the following estimated useful lives of the assets:

Building and Improvements	5-40 years
Machinery and equipment	3-10 years
Furniture and fixtures	3-10 years
Software	3-7 years

Goodwill and Intangible Assets – Goodwill is initially recorded when the purchase price paid for an acquisition exceeds the estimated fair value of the net identified tangible and intangible assets acquired. Intangible assets with finite lives are amortized over their respective useful lives on a straight-line basis and are also evaluated annually for impairment or whenever events or circumstances occur which indicate that those assets might be impaired. Goodwill and indefinite lived assets are not amortized but tested annually for impairment. The Company’s impairment review process is completed during the fourth quarter of each year or whenever events, or circumstances occur which indicate that an impairment may have occurred. The Company assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If, after assessing the qualitative factors, the Company determines that it is not likely that the fair value of a reporting unit is less than its carrying value, then performing the two-step impairment test is unnecessary. However, if the Company concludes otherwise, then it is required to perform the first step of the two-step goodwill impairment test. The first step requires a comparison of the fair value of Nanometrics’ reporting unit to its net book value. If the fair value of the reporting unit is greater than its carrying value, then no impairment is deemed to have occurred. If the fair value is less, then the second step must be performed to determine the amount, if any, of actual impairment. Amortization of intangible assets with finite lives is computed using the straight-line method over the following estimated useful lives of the assets:

Developed technology	5-10 years
Customer relationships	2-10 years
Brand name	5-10 years
Patented technology	7-10 years
Trademark	5 years

Long-Lived Assets – The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When the sum of the undiscounted future net cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount, impairment may exist. To determine the amount of impairment, the Company compares the fair value of the asset to its carrying value. If the carrying value of the asset exceeds its fair value, an impairment loss equal to the difference is recognized. See Note 7, "Goodwill and Intangible Assets" for further details.

Income Tax Assets and Liabilities – The Company accounts for income taxes such that deferred tax assets and liabilities must be recognized using enacted tax rates for the effect of temporary differences between the book and tax accounting for assets and liabilities. Also, deferred tax assets are reduced by a valuation allowance to the extent that management cannot conclude that it is more likely than not that a portion of the deferred tax asset will be realized in the future. The Company evaluates the deferred tax assets on a continuous basis throughout the year to determine whether or not a valuation allowance is appropriate. Factors used in this determination include future expected income and the underlying asset or liability which generated the temporary tax difference. The income tax provision is primarily impacted by federal statutory rates, state and foreign income taxes and changes in the valuation allowance.

Product Warranties – The Company sells the majority of its products with a twelve-month repair or replacement warranty from the date of acceptance, which generally represents the date of shipment. The Company provides an accrual for estimated future warranty costs based upon the historical relationship of warranty costs to the cost of products sold. The estimated future warranty obligations related to product sales are reported in the period in which the related revenue is recognized. The estimated future warranty obligations are affected by the warranty periods, sales volumes, product failure rates, material usage and labor and replacement costs incurred in correcting a product failure. If actual product failure rates, material usage, labor or replacement costs differ from the Company’s estimates, revisions to the estimated warranty obligations would be required. For new product introductions where limited or no historical information exists, the Company may use warranty information from other previous product introductions to guide it in estimating the warranty accrual. The warranty accrual represents the best estimate of the amount necessary to settle future and existing claims on products sold as of the balance sheet date. The Company periodically assesses the adequacy of its recorded warranty reserve and adjusts the amounts in accordance with changes in these factors.

Shipping and Handling Costs – Shipping and handling costs are included as a component of cost of net revenues.

Advertising Costs – The Company expenses advertising costs as incurred. Advertising costs were $0.2 million in 2017, $0.2 million in 2016, and $0.3 million in 2015.

Defined Employee Benefit Plans – The Company maintains a defined benefit pension plan in Taiwan for which current service costs are charged to operations as they accrue based on services rendered by employees during the year. Pension benefit obligations are determined by using management’s actuarial assumptions, including discount rates, assumed asset rates of return, compensation increases and employee turnover rates.

Net Income Per Share - Basic net income per share excludes dilution and is computed by dividing net income by the number of weighted average common shares outstanding for the period. Diluted net income per share reflects the potential dilution from outstanding dilutive stock options (using the treasury stock method), restricted stock units subject to vesting and shares issuable under the employee stock purchase plan. In applying the treasury stock method 0.6 million, 0.5 million and 0.3 million stock option shares for fiscal year 2017, 2016 and 2015, respectively, were included in the calculation of diluted shares.  

Certain Significant Risks and Uncertainties – Financial instruments that potentially subject us to a concentration of credit risk consist of cash, cash equivalents, marketable securities, and accounts receivable. The Company's cash and cash equivalents are primarily invested in deposit accounts and money market accounts with large financial institutions. At times, these deposits and securities may exceed federally insured limits; however, the Company has not experienced any losses on such accounts. The Company invests its cash not required for use in operations in high credit quality securities based on the Company's investment policy. The Company's investment policy provides guidelines and limits regarding credit quality, investment concentration, investment type, and maturity that the Company believes will provide liquidity while reducing risk of loss of capital. Investments are of a short-term nature and include investments in commercial paper, corporate debt securities, U.S. Treasury, U.S. Government, and U.S. Agency debt.

The Company sells its products primarily to end users in the United States, Asia and Europe and, generally, does not require its customers to provide collateral or other security to support accounts receivable. Management performs ongoing credit evaluations of its customers’ financial condition and maintains an allowance for estimated potential bad debt losses. The Company’s customer base is highly concentrated and historically, a relatively small number of customers have accounted for a significant portion of its revenues. Aggregate revenue from the Company's top five largest customers in 2017, 2016 and 2015 consisted of 73%, 73% and 69%, respectively, of its total net revenues. The Company participates in a dynamic high technology industry and believes that changes in any of the following areas could have a material adverse effect on its future financial position, results of operations or cash flows: advances and trends in new technologies and industry standards; competitive pressures in the form of new products or price reductions on current products; changes in product mix; changes in the overall demand for products offered; changes in third-party manufacturers; changes in key suppliers; changes in certain strategic relationships or customer relationships; litigation or claims against the Company based on intellectual property, patent, product, regulatory or other factors; fluctuations in foreign currency exchange rates; risk associated with changes in domestic and international economic and/or political regulations; availability of necessary components or sub-assemblies; disruption of manufacturing facilities; and its ability to attract and retain employees necessary to support its growth.

Certain components and sub-assemblies used in the Company’s products are purchased from a sole supplier or a limited group of suppliers. In particular, the Company currently purchases its spectroscopic ellipsometer and robotics used in its advanced measurement systems from a sole supplier or a limited group of suppliers located in the United States. Any shortage or interruption in the supply of any of the components or sub-assemblies used in its products or its inability to procure these components or sub-assemblies from alternate sources on acceptable terms could have a material adverse effect on its business, financial condition and results of operations.

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Recent Accounting Pronouncements

12 Months Ended

Dec. 30, 2017

Accounting Changes And Error Corrections [Abstract]

Recent Accounting Pronouncements

Note 2. Recent Accounting Pronouncements

Accounting Standards Adopted

In March 2016, the FASB issued an accounting standard update that simplifies several aspects of the accounting for share-based payment award transactions, including income tax consequences, classification of awards as equity or liability, and classification on the statement of cash flows. The new standard requires adoption of certain amendments relevant to the Company to be applied using a modified retrospective transition method by means of cumulative effect adjustment to retained earnings as of the beginning of the fiscal year 2017.

The new standard permits entities to make an accounting policy election related to how forfeitures will impact the recognition of compensation cost for stock-based compensation. The Company has elected to account for forfeitures as they occur and adopted this change on a modified retrospective basis. The cumulative effect of this change resulted in a $0.1 million increase to accumulated deficit as of January 1, 2017.

Furthermore, the standard requires excess tax benefits and tax deficiencies to be recorded in the income statement when the awards vest or are settled rather than paid-in capital. The Company recorded the cumulative effect of this change as a $1.2 million reduction to accumulated deficit in the first quarter of fiscal 2017 to reflect the recognition of excess tax benefits in prior years, with a corresponding adjustment to deferred tax assets and long-term tax liabilities. The Company adopted the guidance related to the recognition of excess tax benefits and deficiencies as income tax expense or benefit on a modified retrospective basis. In addition, the Company elected to report cash flows related to excess tax benefits on a prospective basis. The presentation requirements for cash flows related to employee taxes paid for withheld shares had no impact to the Company’s statement of cash flows since such cash flows have historically been presented as a financing activity. 

In July 2015, the FASB issued an accounting standard update which simplifies the measurement of inventory by requiring inventory to be measured at the lower of cost and net realizable value. The new standard applies only to inventories for which cost is determined by methods other than last-in-first-out and the retail inventory method. Effective in the first quarter of fiscal 2017, the Company adopted this guidance. The adoption of this guidance did not have a significant impact on the Company’s consolidated financial condition and results of operation.

Accounting Standards Not Yet Adopted

In January 2017, the Financial Accounting Standards Board (the "FASB") issued an accounting standard update which simplifies the subsequent measurement of goodwill and removes step 2 from the goodwill impairment test. Instead, an entity should record an impairment charge based on excess of a reporting unit’s carrying amount over its fair value. The standard is effective for public companies for fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The adoption of this guidance is not expected to have a significant impact on the Company’s consolidated financial condition and results of operations.

In October 2016, the FASB issued an accounting standard update which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. This standard will be effective for annual reporting periods beginning after December 15, 2017, including interim reporting period within those annual periods. Early adoption is permitted. This standard update is required to be adopted using the modified retrospective approach, with a cumulative catch-up adjustment to retained earnings in the period of adoption. The Company is currently evaluating the impact of adopting this standard on its consolidated financial condition and results of operations.

In August 2016, the FASB issued an accounting standard which addresses eight specific cash flow classification issues. This update is effective for public companies for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. Early adoption is permitted, including in an interim period. If early adopted in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period, and all the amendments must be adopted in the same period. The standard is to be applied through a retrospective transition method to each period presented. If it is impracticable to apply retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date practicable. The adoption of this guidance is not expected to have a significant impact on the Company’s consolidated statement of cash flows.

In June 2016, the FASB issued an accounting standard which requires measurement and timely recognition of expected credit losses for financial assets. The update is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The standard is to be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company is currently evaluating the effect of this update on its consolidated financial condition and results of operations.

In February 2016, the FASB issued an accounting standard update which requires lessees to record a right-of-use asset and a corresponding lease liability on the balance sheet (with the exception of short-term leases). For lessees, leases will continue to be classified as either operating or financing in the income statement. The standard is effective for public companies for annual reporting periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. This standard is required to be applied with a modified retrospective transition approach. The Company generally does not finance purchases of equipment or other capital, but does lease some equipment and facilities. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures but anticipates most its existing operating lease commitments will be recognized as operating lease liabilities and right-of-use assets.

In May 2014, the FASB issued an accounting standard update which requires an entity to recognize the amount of revenue to which it expects to be entitled to for transferring promised goods or services to customers. The updated standard replaces most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either the retrospective or cumulative effect transition method (“modified retrospective” method). In August 2015, the FASB deferred for one year the effective date of the new revenue standard, with early adoption permitted but not earlier than the original effective date. Consequently, the new standard will be effective for the Company on December 31, 2017 and the Company has determined it will not adopt early.

Based on the Company’s assessment, the Company will adopt the new guidance in the first quarter of fiscal 2018 by using the modified retrospective method of transition. While the Company is concluding its assessment of the impact of the new standard, the Company believes that the timing of revenue recognition for certain systems and performance obligations, will generally occur earlier than under current revenue recognition guidance. Under current U.S. GAAP, revenue for certain systems or performance obligations is delayed until formal customer sign-off has occurred and/or contractual obligations have been met, whereas under the new standard, revenue should be recorded when transfer of control has occurred, which is normally upon shipment. While the Company expects revenue related to these arrangements to remain unchanged in total, the nature of when control transfers may change the timing of revenue recognition. Nanometrics expects the full-year positive impact to the opening balance of retained earnings related to the adoption of the new standard to be in the range of $0.7 million to $1.2 million. This amount reflects the margin related to revenue deferred as of December 30, 2017, that will not be reported as revenue in fiscal 2018. The amount of this revenue is estimated to be between $1.5 million and $2.5 million. This amount will also be reflected as a reduction to the beginning backlog of the first quarter of fiscal 2018. This amount is comprised of goods shipped in fiscal 2017 but deferred due to either lack of customer acceptance or failure of the customer to meet certain contractual commitments. Under the new standard, the Company has determined that transfer of control occurs at the time of shipment for these items and that the deferral of revenue associated with the unbilled amount is no longer appropriate per the new standard. Additionally, the Company believes the adoption of the new standard will not result in a different set of performance obligations, when compared to current GAAP. The Company further believes that required changes to its current business processes and IT systems, to comply with the new standard, will be minor in nature. Other aspects of the standard, including the capitalization of costs related to the acquisition and/or fulfillment of the Company’s contracts are still being evaluated, but the Company believes impacts are immaterial. The Company is concluding its evaluation of the impact of the new standard on the Company’s contracts with customers and will continue to monitor industry activities and other guidance provided by the accounting profession and regulators and adjust its approach and implementation plans as required.

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Fair Value Measurements and Disclosures

12 Months Ended

Dec. 30, 2017

Fair Value Disclosures [Abstract]

Fair Value Measurements and Disclosures

Note 3. Fair Value Measurements and Disclosures

The Company determines the fair values of its financial instruments based on the fair value hierarchy established in FASB Accounting Standards Codification ("ASC") 820, Fair Value Measurement, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The classification of a financial asset or liability within the hierarchy is based upon the lowest level input that is significant to the fair value measurement. The fair value hierarchy prioritizes the inputs into the following three levels that may be used to measure fair value:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.

Level 3 — Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. Such unobservable inputs include an estimated discount rate used in the Company's discounted present value analysis of future cash flows, which reflects the Company's estimate of debt with similar terms in the current credit markets. As there is currently minimal activity in such markets, the actual rate could be materially different.

Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard assumes that the transaction to sell the asset or transfer the liability occurs in the principal or most advantageous market for the asset or liability and establishes that the fair value of an asset or liability shall be determined based on the assumptions that market participants would use in pricing the asset or liability.

The following tables present the Company’s assets and liabilities measured at estimated fair value on a recurring basis, excluding accrued interest components, categorized in accordance with the fair value hierarchy (in thousands), as of the following dates:

	December 30, 2017								December 31, 2016
	Fair Value Measurements Using Input Types								Fair Value Measurements Using Input Types
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	256	$	—	$	—	$	256	$	959	$	—	$	—	$	959
Commercial paper    and corporate debt    securities		—		—		—		—		—		2,499		—		2,499
Total cash equivalents	$	256	$	—	$	—	$	256	$	959	$	2,499	$	—	$	3,458
Marketable securities:
U.S. Treasury,    U.S. Government    and U.S. Government    agency debt securities		—		1,495		—		1,495		—		17,072		—		17,072
Certificate of deposits		—		14,497		—		14,497		—		23,019		—		23,019
Commercial paper		—		7,949		—		7,949		—		22,402		—		22,402
Municipal securities and    corporate debt securities		—		47,968		—		47,968		—		14,943		—		14,943
Asset backed securities		—		10,221		—		10,221		—		5,463		—		5,463
Total marketable securities	$	—	$	82,130	$	—	$	82,130	$	—	$	82,899	$	—	$	82,899
Total(1)	$	256	$	82,130	$	—	$	82,386	$	959	$	85,398	$	—	$	86,357

⁽¹⁾ Excludes $34.6 million and $43.6 million held in operating accounts as of December 30, 2017, and December 31, 2016, respectively.

The fair values of the marketable securities that are classified as Level 1 in the table above were derived from quoted market prices for identical assets or liabilities in active markets that the Company has the ability to access. The fair value of marketable securities that are classified as Level 2 in the table above were derived from non-binding market consensus prices that were corroborated by observable market data, quoted market prices for similar instruments, or pricing models, such as discounted cash flow techniques with all significant inputs derived from or corroborated by observable market data. There were no transfers of instruments between Level 1, Level 2 and Level 3 during the financial periods presented. 

Derivatives

The Company uses foreign currency forward contracts to mitigate variability in gains and losses generated from the re-measurement of certain monetary assets and liabilities denominated in foreign currencies. These derivatives are carried at fair value with changes recorded in other income, net in the consolidated statements of operations. Changes in the fair value of these derivatives are largely offset by re-measurement of the underlying assets and liabilities. The derivatives have maturities of approximately 30 days.

The settlement result of forward foreign currency contracts included in the fiscal year ended December 30, 2017 and December 31, 2016, was a gain of $1.4 million and a loss of $1.7 million, respectively, and these balances are included in other income, net, in the consolidated statements of operations.

The following table summarizes the Company’s outstanding derivative instruments on a gross basis:

	As of December 30, 2017						As of December 31, 2016
	Notional Amount		Fair Value				Notional Amount		Fair Value
	(in millions)		Asset		Liability		(in millions)		Asset		Liability
Undesignated Hedges:
Forward Foreign Currency Contracts
Purchase	$	27.5		—	$	0.1	$	12.6		—		—
Sell	$	16.8		0.1		—	$	1.3		—		—

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Cash and Investments

12 Months Ended

Dec. 30, 2017

Investments Debt And Equity Securities [Abstract]

Cash and Investments

Note 4. Cash and Investments

The following table presents cash, cash equivalents, and available-for-sale investments as of the following dates (in thousands):

	December 30, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Market Value
Cash	$	34,643	$	—	$	—		$	34,643
Cash equivalents:
Money market funds		256		—		—			256
Marketable securities:
U.S. Government agency securities		1,500		—		(5	)		1,495
Certificates of deposits		14,498		—		(1	)		14,497
Commercial paper		7,952		—		(3	)		7,949
Corporate debt securities		48,073		—		(105	)		47,968
Asset-backed securities		10,240		—		(19	)		10,221
Total cash, cash equivalents, and marketable    securities	$	117,162	$	—	$	(133	)	$	117,029
	December 31, 2016
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Market Value
Cash	$	43,604	$	—	$	—		$	43,604
Cash equivalents:
Money market funds		959		—		—			959
Commercial paper and corporate debt securities		2,499		—		—			2,499
Marketable securities:
U.S. Treasury securities		5,667		—		—			5,667
U.S. Government agency securities		11,412		—		(7	)		11,405
Certificates of deposits		23,000		19		—			23,019
Commercial paper		22,402		—		—			22,402
Corporate debt securities		14,194		—		(6	)		14,188
Municipal securities		756		—		(1	)		755
Asset-backed securities		5,466		—		(3	)		5,463
Total cash, cash equivalents, and marketable    securities	$	129,959	$	19	$	(17	)	$	129,961

Available-for-sale marketable securities, readily convertible to cash, with maturity dates of 90 days or less are classified as cash equivalents, while those with maturity dates greater than 90 days are classified as marketable securities within short-term assets. All marketable securities as of December 30, 2017, and December 31, 2016, were available-for-sale and reported at fair value based on the estimated or quoted market prices as of the balance sheet date. Gross realized gains and losses on sale of securities are recorded in other income, net, in the Company’s statement of operations. Net realized gains and losses for fiscal 2017, 2016, and 2015 was $1.3 million, $0.5 million and $0.2 million, respectively.

Unrealized gains or losses, net of tax effect, are recorded in accumulated other comprehensive income (loss) within stockholders' equity. Both the gross unrealized gains and gross unrealized losses for the fiscal years ended December 30, 2017, and December 31, 2016 were insignificant and no marketable securities had other than temporary impairment. All marketable securities as of December 30, 2017, and December 31, 2016, had maturity dates of less than two years.

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Accounts Receivable

12 Months Ended

Dec. 30, 2017

Receivables [Abstract]

Accounts Receivable

Note 5. Accounts Receivable

The Company maintains arrangements under which eligible accounts receivable in Japan are sold without recourse to unrelated third-party financial institutions. These receivables were not included in the consolidated balance sheets as the criteria for sale treatment had been met. After a transfer of financial assets, an entity stops recognizing the financial assets when control has been surrendered. The agreement met the criteria of a true sale of these assets since the acquiring party retained the title to these receivables and had assumed the risk that the receivables will be collectible. The Company pays administrative fees as well as interest ranging from 0.61% to 1.68% based on the anticipated length of time between the date the sale is consummated and the expected collection date of the receivables sold. The Company sold $18.6 million and $31.5 million of receivables during fiscal years ended December 30, 2017, and December 31, 2016, respectively. There were no material gains or losses on the sale of such receivables. There were no amounts due from such third party financial institutions at December 30, 2017, and December 31, 2016.

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Financial Statement Components

12 Months Ended

Dec. 30, 2017

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Financial Statement Components

Note 6. Financial Statement Components

The following tables provide details of selected financial statement components as of the following dates (in thousands):

	At
	December 30, 2017			December 31, 2016
Inventories:
Raw materials and sub-assemblies	$	32,187		$	23,506
Work in process		13,498			10,347
Finished goods		7,175			4,984
Inventories		52,860			38,837
Inventories-delivered systems		1,534			2,457
Total inventories	$	54,394		$	41,294
Property, plant and equipment, net:(1)
Land	$	15,573		$	15,568
Building and improvements		20,880			20,532
Machinery and equipment		36,380			35,659
Furniture and fixtures		2,420			2,282
Software		9,558			9,756
Capital in progress		4,418			2,748
Total property, plant and equipment, gross		89,229			86,545
Accumulated depreciation and amortization		(44,419	)		(42,319	)
Total property, plant and equipment, net	$	44,810		$	44,226
(1) Total depreciation and amortization expense for the years ended December 30, 2017, December 31, 2016 and December 26, 2015 was $6.7 million, $6.8 million, and $6.9 million, respectively.
Other Current Liabilities:
Accrued warranty	$	4,863		$	3,838
Accrued taxes		813			706
Customer deposits		—			581
Accrued professional services		534			424
Accrued royalties		—			1,233
Other		1,039			1,265
Total other current liabilities	$	7,249		$	8,047

Components of Accumulated Other Comprehensive Income (Loss)

	Foreign Currency Translations			Defined Benefit Pension Plans			Unrealized Income (Loss) on Investment			Accumulated Other Comprehensive Income
Balance as of December 26, 2015	$	(4,948	)	$	(210	)	$	(44	)	$	(5,202	)
Current period change		(869	)		(17	)		42			(844	)
Balance as of December 31, 2016		(5,817	)		(227	)		(2	)		(6,046	)
Current period change		4,170			(160	)		(88	)		3,922
Balance as of December 30, 2017	$	(1,647	)	$	(387	)	$	(90	)	$	(2,124	)

The items above, except for unrealized income (loss) on investment, did not impact the Company’s income tax provision. The amounts reclassified from each component of accumulated other comprehensive income into income statement line items were insignificant.

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Goodwill and Intangible Assets

12 Months Ended

Dec. 30, 2017

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

Note 7. Goodwill and Intangible Assets

The following table summarizes the activity in the Company’s goodwill during the years ended December 30, 2017 and December 31, 2016, respectively (in thousands):

	Amounts
Balance as of December 26, 2015	$	9,415
Foreign currency movements		(475	)
Balance as of December 31, 2016		8,940
Foreign currency movements		1,292
Balance as of December 30, 2017	$	10,232

There were no business acquisitions made by the Company during fiscal years 2017, 2016 and 2015.

Goodwill Impairment and Long-lived Asset Impairment

The Company’s impairment review process is completed during the fourth quarter of each year, or whenever events or circumstances occur that indicate that an impairment may have occurred. The goodwill impairment assessment involves three tests, Step 0, Step 1 and Step 2. The Company performs a Step 0 test, which involves an initial qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If, after assessing the qualitative factors, the Company determines that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then performing the two-step impairment test is necessary. Otherwise, no further testing is necessary.

The Company completed its annual goodwill impairment assessment during the fourth quarter of 2017 by first performing a Step 0 qualitative assessment. As part of this assessment, the Company considered the trading value of the Company's stock, the industry trends, and the Company's sales forecast and products plans. The Company concluded that it was more likely than not that the fair value was more than the carrying values of the Company's reporting unit and therefore did not proceed to the Step 1 goodwill impairment test.

The process of evaluating the potential impairment of long-lived assets is highly subjective and requires significant judgment. In estimating the fair value of these assets, the Company made estimates and judgments about future revenues and cash flows. The Company’s forecasts were based on assumptions that are consistent with the plans and estimates the Company is using to manage its business. Changes in these estimates could change the Company’s conclusion regarding impairment of the long-lived assets and potentially result in future impairment charges for all or a portion of their balance at December 30, 2017. The Company did not record any impairment charges related to goodwill in fiscal year 2017.

The Company assesses if there have been triggers that may require it to evaluate the reasonableness of the remaining estimated useful lives of its intangible assets. No such triggers were identified during fiscal year 2017.

Finite-lived intangible assets are recorded at cost, less accumulated amortization. Finite-lived intangible assets as of December 30, 2017, and December 31, 2016 consisted of the following (in thousands):

	December 30, 2017
	Adjusted cost		Accumulated amortization			Net carrying amount
Developed technology	$	18,887	$	(16,681	)	$	2,206
Customer relationships		9,438		(9,438	)		—
Brand names		1,927		(1,927	)		—
Patented technology		2,252		(2,252	)		—
Trademark		80		(80	)		—
Total	$	32,584	$	(30,378	)	$	2,206

	December 31, 2016
	Adjusted cost		Accumulated amortization			Net carrying amount
Developed technology	$	15,726	$	(15,380	)	$	346
Customer relationships		9,322		(9,322	)		—
Brand names		1,927		(1,927	)		—
Patented technology		2,252		(2,186	)		66
Trademark		80		(80	)		—
Total	$	29,307	$	(28,895	)	$	412

The amortization of finite-lived intangibles is computed using the straight-line method. Estimated lives of finite-lived intangibles range from two to ten years. Total amortization expense for the fiscal years ended December 30, 2017, December 31, 2016 and December 26, 2015, was $0.2 million, $1.5 million and $2.1 million, respectively.

There were no impairment charges related to intangible assets recorded during the year ended December 30, 2017.

The estimated future amortization expense of finite intangible assets as of December 30, 2017, is as follows (in thousands):

Fiscal Years	Amounts
2018		283
2019		352
2020		286
2021		286
2022		286
Thereafter		713
Total future amortization expense		2,206

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Warranties

12 Months Ended

Dec. 30, 2017

Product Warranties Disclosures [Abstract]

Warranties

Note 8. Warranties

Product Warranty – The Company sells the majority of its products with a 12 months repair or replacement warranty from the date of acceptance or shipment date. The Company provides an accrual for estimated future warranty costs based upon the historical relationship of warranty costs to the cost of products sold. The estimated future warranty obligations related to product sales are recorded in the period in which the related revenue is recognized. The estimated future warranty obligations are affected by the warranty periods, sales volumes, product failure rates, material usage, and labor and replacement costs incurred in correcting a product failure. If actual product failure rates, material usage, labor or replacement costs were to differ from the Company’s estimates, revisions to the estimated warranty obligations would be required. For new product introductions where limited or no historical information exists, the Company may use warranty information from other previous product introductions to guide it in estimating its warranty accrual. The warranty accrual represents the best estimate of the amount necessary to settle future and existing claims on products sold as of the balance sheet date. The Company periodically assesses the adequacy of its reported warranty reserve and adjusts such amounts in accordance with changes in these factors.

Components of the warranty accrual, which were included in the accompanying consolidated balance sheets with other current liabilities, were as follows (in thousands):

	Years Ended
	December 30, 2017			December 31, 2016
Balance as of beginning of period	$	3,838		$	4,504
Accruals for warranties issued during period		5,247			4,509
Settlements during the period		(4,222	)		(5,175	)
Balance as of end of period	$	4,863		$	3,838

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Commitments and Contingencies

12 Months Ended

Dec. 30, 2017

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 9. Commitments and Contingencies

Intellectual Property Indemnification Obligations – The Company will, from time to time, in the normal course of business, agree to indemnify certain customers, vendors or others against third party claims that Nanometrics’ products, when used for their intended purpose(s), or the Company’s intellectual property, infringe the intellectual property rights of such third parties or other claims made against parties with whom it enters into contractual relationships. It is not possible to determine the maximum potential amount of liability under these indemnification obligations due to the limited history of prior indemnification claims and the unique facts and circumstances that are likely to be involved in each particular claim. Historically, the Company has not made payments under these obligations and believes that the estimated fair value of these agreements is immaterial. Accordingly, no liabilities have been recorded for these obligations in the accompanying consolidated balance sheets as of December 30, 2017, and December 31, 2016.

Contractual Obligations – The Company maintains certain open inventory purchase agreements with its suppliers to ensure a smooth and continuous supply availability for key components. The Company’s liability under these purchase commitments is generally restricted to a forecasted time-horizon as mutually agreed upon between the parties. This forecasted time-horizon can vary among different suppliers. The Company estimates its open inventory purchase commitment as of December 30, 2017, was approximately $50.7 million. Actual expenditures will vary based upon the volume of the transactions and length of contractual service provided. In addition, the amounts paid under these arrangements may be less in the event that the arrangements are renegotiated or cancelled.

The Company leases facilities and certain equipment under non-cancelable operating leases. Rent expense, which is recorded on a straight-line basis over the term of the respective lease, for 2017, 2016 and 2015 was approximately $1.8 million, $1.8 million and $1.7 million, respectively. Future minimum lease payments under its operating leases are as follows (in thousands):

	Operating Leases
2018		1,664
2019		935
2020		313
2021		54
2022		2
Thereafter		—
Total	$	2,968

Legal Proceedings – From time to time, the Company is subject to various legal proceedings or claims arising in the ordinary course of business.

On August 2, 2017, the Company was named as defendant in a complaint filed in New Hampshire Superior Court (“Complaint”). The Complaint, brought by Optical Solutions, Inc. (“OSI”), alleges claims arising from a purported exclusive purchase contract between OSI and the Company pertaining to certain product. On September 18, 2017, the Company removed the action to the United States District Court for the District of New Hampshire. On September 25, 2017, the Company moved to transfer the Complaint to the Northern District of California and to dismiss all claims in the Complaint for lack of personal jurisdiction and for failure to state a claim. On September 27, 2017, OSI filed a motion to remand. On January 31, 2018, the District Court of New Hampshire denied OSI’s motion to remand. OSI has not yet responded to the Company’s motions to transfer or dismiss, but is scheduled to on February 19, 2018.

The Company records a provision for a loss when it believes that it is both probable that a loss has been incurred and the amount can be reasonably estimated. Based on current information, the Company believes it does not have any probable and reasonably estimable losses related to any current legal proceedings and claims. Although it is difficult to predict the outcome of legal proceedings, the Company believes that any liability that may ultimately arise from the resolution of these ordinary course matters will not have a material adverse effect on the business, financial condition and results of operations.

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Net Income Per Share

12 Months Ended

Dec. 30, 2017

Earnings Per Share [Abstract]

Net Income Per Share

Note 10. Net Income Per Share

The Company presents both basic and diluted net income per share on the face of its consolidated statements of operations. Basic net income per share excludes the effect of potentially dilutive shares and is computed by dividing net income by the weighted-average number of shares of common stock outstanding for the period. Diluted net income per share is computed using the weighted-average number of shares of common stock outstanding for the period plus the effect to all potentially dilutive common shares outstanding during the period, including contingently issuable shares and certain stock options, calculated using the treasury stock method. A reconciliation of the share denominator of the basic and diluted net income per share computations is as follows (in thousands):

	Years Ended
	December 30, 2017		December 31, 2016		December 26, 2015
Weighted average common shares outstanding used in    basic net income per share calculation		25,334		24,655		24,059
Potential dilutive common stock equivalents,    using treasury stock method		585		498		316
Weighted average shares used in diluted net income    per share calculation		25,919		25,153		24,375

For the year ended December 30, 2017, December 31, 2016, and December 26, 2015, the Company had securities outstanding which could potentially dilute basic earnings per share in the future. For the years ended December 30, 2017, December 31, 2016 and December 26, 2015, the weighted average common share equivalents consisting of stock options and restricted stock units included in the calculation of diluted net income per share were 0.6 million, 0.5 million and 0.3 million shares, respectively.

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Stockholders' Equity and Stock-Based Compensation

12 Months Ended

Dec. 30, 2017

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stockholders' Equity and Stock-Based Compensation

Note 11. Stockholders' Equity and Stock-Based Compensation

Stockholders' Equity

Preferred and Common Stock

The authorized capital stock of Nanometrics consists of 47,000,000 shares of common stock, par value $0.001 per share, and 3,000,000 shares of preferred stock, par value $0.001 per share.

Stock Repurchase

On May 29, 2012, our Board of Directors authorized the repurchase of up to $20.0 million of our common stock of which $4.4 million remained as of December 31, 2016.

On November 15, 2017, the Company's Board of Directors approved a program to repurchase up to $50.0 million of its common stock which superseded the 2012 repurchase program. This new plan is referred to as the Stock Repurchase Plan with an effective date of November 20, 2017. Stock repurchases under this plan may be made through open market and privately negotiated transactions, at times and in such amounts as management deems appropriate. The timing and actual number of shares repurchased is dependent on a variety of factors including price, corporate and regulatory requirements and other market conditions.

Shares repurchased and retired for fiscal year 2017, 2016 and 2015, with the associated cost of repurchase and amount available for repurchase at the end of the respective periods are as follows (in thousands, except number of shares and weighted average price per share):

	Fiscal Year 2017		Fiscal Year 2016		Fiscal Year 2015
Number of shares of common stock repurchased		1,065,848	—			111,050
Weighted average price per share	$	25.33		—	$	15.49
Total cost of repurchase	$	26,999	—		$	1,721
Amount available for repurchase at end of period	$	23,001		—	$	4,397

The Stock Repurchase Plan was completed in February 2018, with purchases since December 30, 2017 of 896,187 shares of our common stock at the weighted average price of $25.65 for a cost of $23.0 million.

Stock Option Plans

The Nanometrics option plans are as follows:

Plan Name	Participants	Shares Authorized
2005 Equity Incentive Plan	Employees, consultants and directors		8,292,594
2000 Employee Stock Option Plan	Employees and consultants		2,450,000
2000 Director Stock Option Plan	Non-employee directors		250,000
Accent Optical Technologies, Inc. Stock Incentive Plan	Employees and consultants		205,003

Employee Stock Purchase Plan

Under the 2003 Employee Stock Purchase Plan (“ESPP”), eligible employees are allowed to have salary withholdings of up to 10% of their base compensation to purchase shares of common stock at a price equal to 85% of the lower of the market value of the stock at the beginning or end of each six-month offering period, subject to an annual statutory limitation. At the end of the fiscal year ended December 30, 2017, the Company had 0.5 million shares remaining for issuance under the ESPP. Shares purchased under the ESPP were 122,298 shares, 212,619 shares and 125,504 shares in 2017, 2016 and 2015 at a weighted average price of $21.19, $14.29 and $13.98, respectively.

Stock-based Compensation

The Company measures and recognizes compensation expense for all share-based payment awards made to employees and directors including employee stock options, restricted stock units and employee stock purchases related to the Employee Stock Purchase Plan (collectively “Employee Stock Purchases”) based on estimated fair values. The fair value of share-based payment awards is estimated on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the Company's consolidated statement of operations.

Valuation and Expense Information

The fair value of stock-based awards to employees is calculated using the Black-Scholes option pricing model, which requires subjective assumptions, including future stock price volatility and expected time to exercise. The expected life was calculated using the simplified method allowed by the SAB 107. The risk-free rates were based on the U.S Treasury rates in effect during the corresponding period. The expected volatility was based on the historical volatility of the Company's stock price. These factors could change in the future, which would affect the stock-based compensation expense in future periods.

The weighted-average fair value of stock-based compensation to employees is based on the single option valuation approach. Forfeitures are estimated and it is assumed no dividends will be declared. The estimated fair value of stock-based compensation awards to employees is amortized over the vesting period. The weighted-average fair value calculations are based on the following average assumptions:

	Fiscal Year 2017	Fiscal Year 2016	Fiscal Year 2015
Employee Stock Purchase Plan:
Expected life	0.5 years	0.5 years	0.5 years
Volatility	37.2%	38.7%	36.9%
Risk free interest rate	0.91%	0.44%	0.12%
Dividends	—	—	—

Stock Options and Restricted Stock Units (“RSUs”)

On May 23, 2017, the Company approved further amendments to the 2005 Equity Incentive Plan including: increasing the number of shares of common stock authorized by 1.0 million shares and extending the term of the 2005 Equity Incentive Plan through 2027. All other terms remained the same.

Stock Options

No stock options were granted in fiscal years 2017, 2016 and 2015. A summary of activity of stock options is as follows:

	Number of Shares Outstanding (Options)			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (in Thousands)
Options
Outstanding at December 26, 2015		1,059,471		$	14.61		2.47	$	1,920
Exercised		(442,339	)		13.66
Cancelled/Forfeited		(176,587	)		15.83
Outstanding at December 31, 2016		440,545			15.06		2.12	$	4,405
Exercised		(223,364	)		13.35
Cancelled/Forfeited		(855	)		16.63
Outstanding at December 30, 2017		216,326		$	16.82		1.76	$	1,752
Exercisable at December 30, 2017		215,620		$	16.81		1.76	$	1,748

The aggregate intrinsic value in the above table represents the total pretax intrinsic value, based on the Company’s closing stock price of $24.92 as of December 30, 2017, which would have been received by the option holders had all option holders exercised their options as of that date. The total intrinsic value of options exercised during 2017, 2016 and 2015 was $3.1 million, $2.7 million and $1.6 million, respectively. The fair value of options vested during 2017, 2016 and 2015 was $0.3 million, $0.7 million and $1.5 million, respectively.

The following table summarizes ranges of outstanding and exercisable options as of December 30, 2017.

	Options Outstanding						Options Exercisable
Exercise Prices	Number Outstanding		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$12.98-$15.00		23,383		1.83	$	14.64		23,383	$	14.64
$15.08-$15.65		27,697		1.37		15.62		27,697		15.62
$15.74-$15.74		3,333		0.40		15.74		3,333		15.74
$15.85-$15.85		60,000		2.20		15.85		60,000		15.85
$16.00-$17.33		31,700		1.82		17.00		31,700		17.00
$17.70-$18.08		6,613		1.55		17.92		6,588		17.92
$18.22-$18.22		3,600		3.16		18.22		3,449		18.22
$18.51-$18.51		9,000		3.14		18.51		8,583		18.51
$18.79-$18.79		1,000		3.23		18.79		887		18.79
$19.03-$19.03		50,000		1.13	$	19.03		50,000	$	19.03
$12.98-$19.03		216,326						215,620

As of December 30, 2017, the total unrecognized compensation costs related to unvested stock options was less than $0.1 million and is expected to be recognized as an expense over a weighted average remaining amortization period of 0.10 years.

Restricted Stock Units (“RSUs”)

Each RSU counts against the Company’s “2005 Equity Incentive Plan” at a ratio of one and seven tenths shares for each unit granted but represents an amount equal to the fair value of one share of the Company’s common stock. The Company granted 454,600 and 476,667 RSUs during the years ended December 30, 2017, and December 31, 2016, respectively, to key employees with vesting periods up to three years.

A summary of activity for RSUs is as follows:

Summary of activity for RSUs	Number of RSUs			Weighted Average Fair Value
Outstanding RSUs as of December 26, 2015		713,243		$	15.99
Granted		476,667			17.45
Released		(315,872	)		16.05
Cancelled		(54,253	)		16.29
Outstanding RSUs as of December 31, 2016		819,785			16.79
Granted		454,600			27.12
Released		(387,592	)		16.81
Cancelled		(96,494	)		19.01
Outstanding RSUs as of December 30, 2017		790,299		$	22.46

As of December 30, 2017, the total unrecognized compensation costs related to RSU's was $12.5 million and is expected to be recognized as an expense over a weighted average remaining amortization period of 1.75 years.

Market-Based Performance Stock Units (“PSUs”)

In addition to granting RSUs that vest on the passage of time only, the Company granted PSUs to certain executives. The PSUs will vest in tranches over one, two, and three years based on the relative performance of the Company’s stock during those periods, compared to a peer group over the same period. If target stock price performance is achieved, 66.7% of the shares of the Company’s stock subject to the PSUs will vest, and up to a maximum of 100% of the shares subject to the PSUs will vest if the maximum stock price performance is achieved for each tranche. For certain shares granted in fiscal 2017, 62,500 shares are the cumulative maximum number of shares that may vest for all measurement periods.

A summary of activity for PSUs is as follows:

Summary of activity for PSUs	Number of PSUs			Weighted Average Fair Value
Outstanding PSUs as of December 26, 2015		60,000		$	12.23
Granted		67,500			8.52
Released		(13,333	)		12.03
Cancelled		(6,667	)		12.03
Outstanding PSUs as of December 31, 2016		107,500			9.94
Granted		122,050			20.51
Released		(38,500	)		10.41
Cancelled		(61,100	)		19.41
Outstanding PSUs as of December 30, 2017		129,950		$	15.60

Valuation of PSUs

On the date of grant, the Company estimated the fair value of PSUs using a Monte Carlo simulation model. The assumptions for the valuation of PSUs are summarized as follows:

	2017 Award	2016 Award		2015 Award
Grant Date Fair Values Per Share	$14.57-$26.75	$	8.52	$	12.23
Weighted-average assumptions/inputs:
Expected Dividend	—	—		—
Range of risk-free interest rates	1.74%-1.84%	0.92%		0.25%-1.1%
Range of expected volatilities for peer group	22%-66%	22%-93%		23%-65%

The number of RSUs granted during fiscal year 2017 was 454,600, which counted as 772,820 shares, and PSUs granted during fiscal year 2017 was 122,050, which counted as 207,485 against the 2005 Equity Incentive Plan. The number of RSUs cancelled during fiscal year 2017 was 96,494, which counted as 164,040 shares, and PSUs cancelled during fiscal year 2017 was 61,100, which counted as 103,870, against the 2005 Equity Incentive Plan. Each RSU represents an amount equal to the fair value of one share of the Company's common stock.

A summary of activity under the Company’s stock option plans including options, RSUs and PSUs during fiscal year 2017, 2016 and 2015 and shares available for grant as of the respective period end dates, is as follows:

	Fiscal Year 2017			Fiscal Year 2016			Fiscal Year 2015
Shares available for grant at beginning of fiscal year		1,334,581			1,916,589			2,464,082
Additional Shares Authorized		1,000,000			—			—
Options – cancelled		855			176,587			94,012
Options - expired plan shares					(116,192	)		(1,800	)
RSUs – granted		(772,820	)		(810,334	)		(860,980	)
RSUs – cancelled		164,040			92,230			202,356
RSUs - shares issued to satisfy tax    withholding obligations		251,724			179,117			120,919
PSUs – granted		(207,485	)		(114,750	)		(102,000	)
PSUs – cancelled		103,870			11,334			—
Shares available for grant at end of fiscal year		1,874,765			1,334,581			1,916,589

Stock-based Compensation Expense

Stock-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. Effective January 1, 2017, as a result of the adoption of ASU No. 2016-09 “Improvements to Employee Share-Based Payment Accounting”, the Company has elected to account for forfeitures as they occur. Refer to Note 2. Recent Accounting Pronouncements for further discussion on the adoption. As such, for fiscal year ended December 30, 2017, stock-based compensation expense is recognized in the consolidated statement of operations, net of actual forfeitures during the period. Prior to the adoption of ASU No. 2016-09, the Company estimated forfeitures at the time of grant, based on historical forfeiture experience, and revised if necessary, in subsequent periods, if actual forfeitures differ from estimates. Stock-based compensation expense recognized in the consolidated statement of operations for the years ended December 31, 2016, and December 26, 2015, has been reduced for estimated forfeitures.

Tax benefits resulting from tax deductions in excess of the compensation cost recognized for those options are required to be separately classified in the consolidated statements of cash flows. The Company recognized $1.0 million of excess tax benefit in fiscal year 2016, and none in both fiscal years 2017 and 2015, respectively.

Stock-based compensation expense for all share-based payment awards made to the Company’s employees and directors pursuant to the employee stock option and employee stock purchase plans by function were as follows (in thousands):

	Fiscal Year 2017		Fiscal Year 2016		Fiscal Year 2015
Cost of products	$	842	$	403	$	274
Cost of service		616		509		309
Research and development		1,720		1,408		1,036
Selling		2,323		2,046		1,881
General and administrative		3,318		3,300		2,748
Total stock-based compensation expense related to employee    stock options and employee stock purchases	$	8,819	$	7,666	$	6,248

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Defined Benefit Pension Plan

12 Months Ended

Dec. 30, 2017

Compensation And Retirement Disclosure [Abstract]

Defined Benefit Pension Plan

Note 12. Defined Benefit Pension Plan

Nanometrics sponsors a statutory government mandated defined benefit pension plan (the “Benefit Plan”) in Taiwan for its local employees. The fair value of plan assets was $0.3 million for fiscal year ended 2017, and $0.2 million for each of fiscal years 2016 and 2015, respectively; and the net funding deficiency of the Benefit Plan was $0.5 million, $0.4 million, and $0.3 million for the fiscal years ended December 30, 2017, December 31, 2016, and December 26, 2015, respectively. Based on the nature and limited extent of the pension plan, we determined this pension plan was not material for separate disclosure.

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Income Taxes

12 Months Ended

Dec. 30, 2017

Income Tax Disclosure [Abstract]

Income Taxes

Note 13. Income Taxes

Income Tax Assets and Liabilities - The Company accounts for income taxes whereby deferred tax assets and liabilities are recognized using enacted tax rates for the effect of temporary differences between the book and tax accounting for assets and liabilities. Also, deferred tax assets are reduced by a valuation allowance to the extent that management cannot conclude that it is more likely than not that a portion of the deferred tax asset will be realized in the future. The Company evaluates the deferred tax assets on a continuous basis throughout the year to determine whether or not a valuation allowance is appropriate. Factors used in this determination include future expected income and the underlying asset or liability which generated the temporary tax difference. The income tax provision is primarily impacted by federal statutory rates, state and foreign income taxes, and changes in the valuation allowance.

Income (loss) before provision for income taxes consists of the following (in thousands):

	Years Ended
	December 30, 2017		December 31, 2016		December 26, 2015
Domestic	$	34,238	$	25,372	$	178
Foreign		9,060		3,763		5,390
Income (loss) before income taxes	$	43,298	$	29,135	$	5,568

The provision (benefit) for income taxes consists of the following (in thousands):

	Years Ended
	December 30, 2017		December 31, 2016			December 26, 2015
Current:
Federal	$	3,250	$	697		$	148
State		9		85			3
Foreign		2,998		2,111			2,266
		6,257		2,893			2,417
Deferred:
Federal		6,314		(16,641	)		190
State		53		(320	)		3
Foreign		472		(832	)		53
		6,839		(17,793	)		246
Provision (benefit) for income taxes	$	13,096	$	(14,900	)	$	2,663

Significant components of the Company's deferred tax assets and liabilities are as follows (in thousands):

	At
	December 30, 2017			December 31, 2016
Deferred tax assets:
Reserves and accruals	$	5,797		$	11,043
Deferred revenue		240			349
Shared based compensation		1,483			2,590
Tax credit carry-forwards		9,669			10,112
Net operating losses		9,755			8,434
Depreciation & amortization		(1,525	)		(2,898	)
Other		207			(1,252	)
Total deferred tax assets		25,626			28,378
Less: Valuation allowance		(13,702	)		(10,980	)
Total deferred tax assets net of valuation allowance		11,924			17,398
Deferred tax liabilities:
Depreciation & amortization		(12	)		(6	)
Other		(167	)		(14	)
Total deferred tax liabilities		(179	)		(20	)
Net deferred tax assets	$	11,745		$	17,378

As of December 30, 2017, the Company had net operating loss carryforwards of $25.6 million in California, $3.0 million in other states, and $35.0 million in foreign countries, which begin to expire in 2018.

As of December 30, 2017, the Company had available carryforward Federal and California R&D tax credits of $7.0 million and $8.9 million, respectively. Federal R&D tax credit carryforwards begin to expire in 2032. State R&D tax credits carryforward indefinitely.

During the years ended December 30, 2017, and December 31, 2016, the change in valuation allowances was $1.5 million and $(25.8) million, respectively. The valuation allowance increase in 2017 was primarily related to the increase net benefit of the California deferred tax assets from lower federal rates, offset by a valuation allowance release against a portion of the Company’s foreign deferred tax assets. The realization of deferred tax assets is primarily dependent on the Company generating sufficient U.S. and foreign taxable income in future fiscal years. The Company regularly assesses the need for a valuation allowance against its deferred tax assets. In making that assessment, the Company considers both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more-likely-than-not that some or all of the deferred tax assets will not be realized. For the year ended December 30, 2017, the Company possessed enough positive evidence to determine that is was more-likely-than-not that the Company would utilize a significant portion of its Singapore deferred tax assets.

Therefore, the Company released $0.3 million of valuation allowance in that jurisdiction. The Company continues to maintain valuation allowances against its California and certain foreign deferred tax assets as a result of uncertainties regarding the realization of the asset due to cumulative losses and uncertainty of future taxable income. The Company will continue to assess the realizability of the deferred tax assets in each of the applicable jurisdictions and maintain the valuation allowances until sufficient positive evidence exists to support a reversal. In the event the Company determines that the deferred tax assets are realizable, an adjustment to the valuation allowances will be reflected in the tax provision for the period such determination is made.

Changes in tax laws and tax rates could affect the Company's recorded deferred tax assets and liabilities in the future. The Company's tax liabilities involve dealing with uncertainties in the application of complex tax laws and regulations in a multitude of jurisdictions across its global operations. Management will account for any such changes or factors in the period in which such law changes are enacted. On December 22, 2017, H.R.1, formerly known as the Tax Cuts and Jobs Act (“The Act”), was signed into law. Among other items, H.R.1 reduces the federal corporate tax rate from 35% to 21% effective January 1, 2018. As a result, the Company revalued its net deferred tax asset to the lower enacted rate. The Company's net deferred tax asset represents differences between the carrying amounts and tax bases of assets and liabilities carried on the Company's balance sheet.

In addition to the revaluation of deferred tax assets and liabilities in reflecting the lower tax rates, the Act also imposes a deemed repatriation tax on the Company’s total post-1986 deferred foreign income.  During the year ended December 30, 2017, the company recognized $0.6 million as a provisional estimate for income taxes under the U.S. Securities and Exchange Commission Accounting Bulletin No. 118. The provisional estimate is subject to revisions as we complete our analysis of the Act, collect and prepare necessary data, and interpret any additional guidance issued by the U.S. Treasury Department, Internal Revenue Service (“IRS”), FASB, and other standard-setting and regulatory bodies.  Our accounting for the tax effects of the Act will be completed during the measurement period, which should not extend beyond one year from the enactment date.

Differences between income taxes computed by applying the statutory federal income tax rate to income (loss) before income taxes and the provision (benefit) for income taxes consist of the following (in thousands):

	Years Ended
	December 30, 2017			December 31, 2016			December 26, 2015
Income taxes computed at U.S. statutory rate	$	15,153		$	10,197		$	1,949
State income taxes		227			223			28
Foreign tax rate differential		794			3,502			342
Change in valuation allowance		1,490			(25,738	)		1,648
Equity compensation		(1,803	)		380			311
Tax credits		(2,336	)		(3,191	)		(1,834	)
Domestic production activities deduction		(608	)		(354	)		—
Liabilities for uncertain tax positions		18			67			74
Other, net		161			14			145
Provision (benefit) for income taxes	$	13,096		$	(14,900	)	$	2,663

As of December 30, 2017, The Company has provided U.S income taxes on all its foreign earnings. The Company still continues to permanently reinvest the cash held offshore to support its working capital needs.   Accordingly, no additional foreign withholding taxes that may be required from certain jurisdictions in the event of a cash distribution have been provided thereon.

The Company recognizes tax liabilities for uncertain tax positions and adjusts these liabilities when its judgment changes as a result of the evaluation of new information not previously available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the Company's current estimate of the tax liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which they are determined.

The accounting for uncertainty in income taxes recognized in an enterprise's financial statements prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken on a tax return, and the derecognition of tax benefits, classification on the balance sheet, interest and penalties, accounting in interim periods, disclosure, and transition.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

	Rollforward Table (at Gross): As of
	December 30, 2017			December 31, 2016			December 26, 2015
Unrecognized tax benefits - beginning of the period	$	6,477		$	6,961		$	6,442
Gross increases-tax positions in prior period		32			23			127
Gross decreases-tax positions in prior period		—			(1,193	)		(306	)
Gross increases-current-period tax positions		723			686			698
Lapse of statute of limitations		(81	)		—			—
Unrecognized tax benefits - end of the period	$	7,151		$	6,477		$	6,961

The unrecognized tax benefit at December 30, 2017, was $7.2 million, of which $4.0 million would impact the effective tax rate if recognized. The Company accrues interest and penalties related to unrecognized tax benefits in its provision for income taxes. The total amount of penalties and interest were not material as of December 30, 2017, December 31, 2016, and December 26, 2015. The Company does not expect a material change in its unrecognized tax benefits within the next 12 months.

The Company is subject to taxation in the U.S. and various states including California, and foreign jurisdictions including Korea, Japan, Taiwan, and China. Due to tax attribute carry-forwards, the Company is subject to examination for tax years 2003 forward for U.S. tax purposes. The Company was also subject to examination in various states for tax years 2002 forward. The Company is subject to examination for tax years 2009 forward for various foreign jurisdictions.

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Segment, Geographic, Product and Significant Customer Information

12 Months Ended

Dec. 30, 2017

Segment Reporting [Abstract]

Segment, Geographic, Product and Significant Customer Information

Note 14. Segment, Geographic, Product and Significant Customer Information

The Company has one operating segment, which is the sale, design, manufacture, marketing and support of thin film and optical critical dimension systems. The Chief Executive Officer has been identified as the Chief Operating Decision Maker (“CODM”) because he has the final authority over resource allocation decisions and performance assessment. The CODM does not receive discrete financial information about individual components of the Company's business. For the years ended December 30, 2017, December 31, 2016, and December 26, 2015, the Company recorded revenue from customers primarily in the United States, Asia and Europe. The following tables summarize total net revenues and long-lived assets (excluding intangible assets) attributed to significant countries (in thousands):

	Years Ended
	December 30, 2017		December 31, 2016		December 26, 2015
Total net revenues (1):
South Korea	$	94,082	$	44,735	$	30,572
China		29,826		43,460		17,373
Singapore		21,810		37,096		17,395
United States		33,983		29,887		36,720
Taiwan		20,147		27,189		46,715
Japan		41,979		26,604		31,140
Other		16,794		12,158		7,452
Total net revenues	$	258,621	$	221,129	$	187,367

⁽¹⁾ Net revenues are attributed to countries based on the customer's deployment and service locations of systems.

	December 30, 2017		December 31, 2016
Long-lived tangible assets:
United States	$	43,427	$	42,688
Taiwan		510		818
South Korea		576		554
Japan		60		57
All Other		237		109
Total long-lived tangible assets	$	44,810	$	44,226

The Company’s product lines differ primarily based on the environment in which the systems will be used. Automated systems are used primarily in high-volume production environments. Materials characterization products are primarily used to measure the composition, band gap, structure, and other physical and electrical properties of semiconducting materials for discrete electronic industry, high brightness LED and solar/photovoltaic structures in both development and high-volume environments. Integrated systems are installed inside wafer processing equipment to provide near real-time measurements for improving process control and increasing throughput. Revenues by product type were as follows (in thousands): 

	Years Ended
	December 30, 2017		December 31, 2016		December 26, 2015
Automated Systems	$	151,401	$	127,378	$	102,386
Integrated Systems		42,183		43,846		31,579
Materials Characterization Systems		21,293		13,842		12,980
Total product revenues	$	214,877	$	185,066	$	146,945

The following customers accounted for 10% or more of total accounts receivable, net:

	Years Ended
	December 30, 2017			December 31, 2016			December 26, 2015
Taiwan Semiconductor Manufacturing Company Limited	***				20	%		26	%
Samsung Electronics Co. Ltd.		13	%		14	%	***
Micron Technology, Inc.		18	%		12	%	***
Intel Corporation	***				11	%	***
Toshiba Corporation		31	%		10	%		27	%

*** The customer accounted for less than 10% of total accounts receivable, net, as of that period end.

The following customers accounted for 10% or more of total net revenue:

	Years Ended
	December 30, 2017			December 31, 2016			December 26, 2015
Samsung Electronics Co. Ltd.		26	%	***				13	%
SK Hynix		13	%		15	%		11	%
Micron Technology, Inc.		12	%		20	%		16	%
Intel Corporation		11	%		18	%	***
Toshiba Corporation		11	%	***				10	%
Taiwan Semiconductor Manufacturing Company Limited	***				10	%		19	%

*** The customer accounted for less than 10% of total net revenue during the period.

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Schedule II - Valuation and Qualifying Accounts

12 Months Ended

Dec. 30, 2017

Valuation And Qualifying Accounts [Abstract]

Schedule II - Valuation and Qualifying Accounts

Schedule

II - Valuation and Qualifying Accounts as of and for the years ended December 30, 2017, December 31, 2016 and December 26, 2015

Our allowance for doubtful accounts receivable consists of the following (in thousands):

Year Ended	Balance at beginning of period		Additions to Allowance		Charges Utilized/Write-offs			Balance at end of period
December 30, 2017	$	73	$	78	$	(25	)	$	126
December 31, 2016	$	150	$	—	$	(77	)	$	73
December 26, 2015	$	253	$	10	$	(113	)	$	150

Our valuation allowance for deferred tax assets consists of the following (in thousands):

Year Ended	Balance at beginning of period		Additions to Allowance		Charges Utilized/Write-offs			Balance at end of period
December 30, 2017	$	10,980	$	2,984	$	(262	)	$	13,702
December 31, 2016	$	36,786	$	1,643	$	(27,449	)	$	10,980
December 26, 2015	$	35,835	$	951	$	—		$	36,786

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Nature of Business, Basis of Presentation and Significant Accounting Policies (Policies)

12 Months Ended

Dec. 30, 2017

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Description of Business

Description of Business – Nanometrics Incorporated (“Nanometrics” or the “Company”) and its wholly-owned subsidiaries design, manufacture, market, sell and support optical critical dimension ("OCD"), thin film and overlay dimension metrology and inspection systems used primarily in the manufacturing of semiconductors, solar photovoltaics (“solar PV”) and high-brightness LEDs (“HB-LED”), as well as by customers in the silicon wafer and data storage industries. Nanometrics' metrology systems precisely measure a wide range of film types deposited on substrates during manufacturing to control manufacturing processes and increase production yields in the fabrication of integrated circuits. The Company’s OCD technology is a patented critical dimension measurement technology that is used to precisely determine the dimensions on the semiconductor wafer that directly control the resulting performance of the integrated circuit devices. The thin film metrology systems use a broad spectrum of wavelengths, high-sensitivity optics, proprietary software, and patented technology to measure the thickness and uniformity of films deposited on silicon and other substrates as well as their chemical composition. The overlay metrology systems are used to measure the overlay accuracy of successive layers of semiconductor patterns on wafers in the photolithography process. Nanometrics' inspection systems are used to find defects on patterned and unpatterned wafers at nearly every stage of the semiconductor production flow. The corporate headquarters of Nanometrics is located in Milpitas, California.

Basis of Presentation

Basis of Presentation – The consolidated financial statements include Nanometrics Incorporated and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Fiscal Year

Fiscal Year – The Company utilizes a 52/53 week fiscal year ending on the last Saturday of the calendar year. For each of fiscal years ended December 30, 2017, December 31, 2016, and December 26, 2015, the period presented consisted of a 52-week year, 53-week year and 52-week year, respectively.

Upgrade Revenue and Related Cost

Upgrade Revenue and Related Cost - Beginning the first quarter of 2016, revenues associated with upgrade sales are now included under Products Revenues, and the related costs in Cost of Products Revenue. This change was due to the types of upgrades currently being sold, which are primarily system software and hardware performance upgrades to extend the features and functionality of a product. Previously upgrades consisted of a group of parts and/or software that change the existing configuration of a product. For the twelve months ended December 30, 2017, and December 31, 2016, $12.1 million and $11.0 million, respectively, of upgrade sales and $2.7 million and $2.4 million of costs, respectively, are included in Products Revenues and Cost of Products Revenues. For the year ended December 26, 2015, $7.9 million related to upgrade sales, and $3.0 million of costs, are included in Service Revenues and Costs of Service Revenues, respectively, in the accompanying Condensed Consolidated Statement of Operations.

Use of Estimates

Use of Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ materially from those estimates. Estimates are used for, but not limited to, revenue recognition, the provision for doubtful accounts, the provision for excess, obsolete, or slow-moving inventories, valuation of intangible and long-lived assets, warranty accruals, income taxes, valuation of stock-based compensation, and contingencies.

Foreign Currency Translation

Foreign Currency Translation – The assets and liabilities of foreign subsidiaries are translated from their respective local functional currencies at exchange rates in effect at the balance sheet date and income and expense accounts are translated at average exchange rates during the reporting period. Resulting translation adjustments are reflected in “Accumulated other comprehensive income,” a component of stockholders’ equity. Foreign currency transaction gains and losses, as well as remeasurement of assets and liabilities denominated in a currency other than the functional currency are reflected in “Other income (expense)” in the consolidated statements of operations in the period incurred, and consists of a $0.6 million loss, a $0.4 million loss and a $0.5 million gain for the years ended December 30, 2017, December 31, 2016, and December 26, 2015, respectively.

Revenue Recognition

Revenue Recognition –  The Company derives revenue from the sale of process control metrology and inspection systems and related upgrades (“product revenue”) as well as spare part sales, billable service and service contracts (together “service revenue”). Upgrades are system software and hardware performance upgrades that extend the features and functionality of a product. As discussed above, commencing in the first quarter of 2016, upgrades are included in product revenue, which consists of sales of complete, advanced process control metrology and inspection systems (the “system(s)”). Nanometrics’ systems consist of hardware and software components that function together to deliver the essential functionality of the system. Arrangements for sales of systems and upgrades often include defined customer-specified acceptance criteria.

In summary, the Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the seller's price is fixed or determinable, and collectability is reasonably assured.

For repeat product sales to existing customers, revenue recognition occurs at the time title and risk of loss transfer to the customer, which usually occurs upon shipment from the Company's manufacturing location, if it can be reliably demonstrated that the product has successfully met the defined customer specified acceptance criteria and all other recognition criteria have been met. For initial sales where the product has not previously met the defined customer specified acceptance criteria, product revenues are recognized upon the earlier of receipt of written customer acceptance or expiration of the contractual acceptance period. In Japan, where contractual terms with the customer specify risk of loss and title transfers upon customer acceptance, revenue is recognized upon receipt of written customer acceptance, provided that all other recognition criteria have been met.

The Company warrants its products against defects in manufacturing. Upon recognition of product revenue, a liability is recorded for anticipated warranty costs. On occasion, customers request a warranty period longer than the Company's standard warranty. In those instances, where extended warranty services are separately quoted to the customer, the associated revenue is deferred and recognized as service revenue ratably over the term of the extended warranty period. The portion of service contracts and extended warranty services agreements that are uncompleted at the end of any reporting period are included in deferred revenue.

As part of its customer services, the Company sells software that is considered to be an upgrade to a customer's existing systems. These standalone software sales are not essential to the tangible product's functionality and are accounted for under software revenue recognition rules which require vendor specific objective evidence (“VSOE”) of fair value to allocate revenue in a multiple element arrangement. Revenue from software sales is recognized when the software is delivered to the customer, provided that all other recognition criteria have been met.

The majority of other upgrades are sold based on published specifications. For simple upgrades that do not require major configuration, revenue is recognized at the time title and risk of loss transfer to the customer, which is usually upon shipment. For complex and extensive upgrades, specific acceptance or prior acceptance for a similar upgrade is required in order to recognize revenue.

Revenue related to spare parts is recognized upon shipment. Revenue related to billable services is recognized as the services are performed. Service contracts may be purchased by the customer during or after the warranty period and revenue is recognized ratably over the service contract period.

Frequently, the Company delivers products and various services in a single transaction. The Company's deliverables consist of tools, installation, upgrades, billable services, spare parts, and service contracts. The Company's typical multi-element arrangements include a sale of one or multiple tools that include installation and standard warranty. Other arrangements consist of a sale of tools bundled with service elements or delivery of different types of services. The Company's tools, upgrades, and spare parts are generally delivered to customers within a period of up to six months from order date. Installation is usually performed soon after delivery of the tool. The portion of revenue associated with installation is deferred based on relative selling price and that revenue is recognized upon completion of the installation and receipt of final acceptance. Billable services are billed on a time and materials basis and performed as requested by customers. Under service contract arrangements, services are provided as needed over the fixed arrangement term, which terms can be up to twelve months. The Company does not grant its customers a general right of return or any refund terms and imposes a penalty on orders cancelled prior to the scheduled shipment date.

The Company regularly evaluates its revenue arrangements to identify deliverables and to determine whether these deliverables are separable into multiple units of accounting. The Company allocates the arrangement consideration among the deliverables based on relative selling prices. The Company has established VSOE for some of its products and services when a substantial majority of selling prices falls within a narrow range when sold separately. For deliverables with no established VSOE, the Company uses best estimate of selling price to determine standalone selling price for such deliverable. The Company does not use third party evidence to determine standalone selling price since this information is not widely available in the market as the Company's products contain a significant element of proprietary technology and the solutions offered differ substantially from competitors. The Company has established a process for developing estimated selling prices, which incorporates historical selling prices, the effect of market conditions, gross margin objectives, pricing practices, as well as entity-specific factors. The Company monitors and evaluates estimated selling price on a regular basis to ensure that changes in circumstances are accounted for in a timely manner.

When certain elements in multiple-element arrangements are not delivered or accepted at the end of a reporting period, the relative selling prices of undelivered elements are deferred until these elements are delivered and/or accepted. If deliverables cannot be accounted for as separate units of accounting, the entire arrangement is accounted for as a single unit of accounting and revenue is deferred until all elements are delivered and all revenue recognition requirements are met.

Cash and Cash Equivalents

Cash, Cash Equivalents and Marketable Securities – The Company considers all highly liquid investments with original maturities of three months or less, when purchased, to be cash equivalents.

Marketable Securities

Marketable securities are classified as “available-for-sale” and are reported at fair value with unrealized gains and losses reported in stockholders' equity as a component of other comprehensive income. The cost of securities sold is based on the specific identification method. The Company classifies its investments as current based on the nature of the investment and their availability for use in current operations. The Company reviews its investment portfolio quarterly to determine if any securities may be other-than-temporarily impaired due to increased credit risk, changes in industry or sector of a certain instrument or ratings downgrades.

Fair Value of Financial Instruments

Fair Value of Financial Instruments – Financial instruments include cash and cash equivalents, accounts receivable and accounts payable. Cash equivalents are stated at fair market value based on quoted market prices. The carrying values of accounts receivable and accounts payable approximate their fair values because of the short-term maturity of these financial instruments.

Derivatives

Derivatives – The Company enters into foreign currency forward exchange contracts to protect against currency exchange risks associated with existing assets and liabilities. A foreign currency forward exchange contract acts as a hedge by increasing in value when underlying assets decrease in value or underlying liabilities increase in value due to changes in foreign exchange rates. Conversely, a foreign currency forward exchange contract decreases in value when underlying assets increase in value or underlying liabilities decrease in value due to changes in foreign exchange rates. These forward contracts are not designated as accounting hedges, so the unrealized gains and losses are recognized in other income, net, in advance of the actual foreign currency cash flows with the fair value of these forward contracts being recorded as accrued liabilities or other current assets. The Company does not use forward contracts for trading purposes.

Allowance for Doubtful Accounts

Allowance for Doubtful Accounts – The Company maintains allowances for estimated losses resulting from the inability of its customers to make required payments. Credit limits are established through a process of reviewing the financial history and stability of its customers. Where appropriate and available, the Company obtains credit rating reports and financial statements of customers when determining or modifying their credit limits. The Company regularly evaluates the collectability of its trade receivable balances based on a combination of factors such as the length of time the receivables are past due, customary payment practices in the respective geographies and historical collection experience with customers. The Company believes that its allowance for doubtful accounts adequately reflects the risk associated with its receivables. If the financial conditions of a customer were to deteriorate, resulting in their inability to make payments, the Company may need to record additional allowances, which would result in additional general and administrative expenses being recorded for the period in which such determination was made.

Inventories

Inventories – Inventories are stated at the lower of cost, which approximates actual cost on a first-in, first-out basis, or net realizable value. The Company is exposed to a number of economic and industry factors that could result in portions of inventory becoming either obsolete or in excess of anticipated usage, or saleable only for amounts that are less than their carrying amounts. These factors include, but are not limited to, technological changes in the market, the Company’s ability to meet changing customer requirements, competitive pressures in products and prices, and the availability of key components from suppliers. The Company has established inventory reserves when conditions exist that suggest that inventory may be in excess of anticipated demand or is obsolete based upon assumptions about future demand for the Company’s products and market conditions. Once a reserve has been established, it is maintained until the part to which it relates is sold or is otherwise disposed of. The Company regularly evaluates its ability to realize the value of inventory based on a combination of factors including the following: historical usage rates, forecasted sales of usage, product end-of-life dates, estimated current and future market values and new product introductions. For demonstration inventory, the Company also considers the age of the inventory and potential cost to refurbish the inventory prior to sale. Demonstration inventory is amortized over its useful life and the amortization expense is included in total inventory write down on the statements of cash flows. When recorded, reserves are intended to reduce the carrying value of the Company’s inventory to its net realizable value. If actual demand for the Company’s products deteriorates, or market conditions are less favorable than those that the Company projects, additional reserves may be required.

Inventories – delivered systems – The Company reflects the cost of systems that were invoiced upon shipment but deferred for revenue recognition purposes separate from its inventory held for sale as “Inventories – delivered systems.”

Property, Plant and Equipment

Property, Plant and Equipment – Property, plant and equipment are stated at cost. Depreciation and amortization is computed using the straight–line method over the following estimated useful lives of the assets:

Building and Improvements	5-40 years
Machinery and equipment	3-10 years
Furniture and fixtures	3-10 years
Software	3-7 years

Goodwill and Intangible Assets

Goodwill and Intangible Assets – Goodwill is initially recorded when the purchase price paid for an acquisition exceeds the estimated fair value of the net identified tangible and intangible assets acquired. Intangible assets with finite lives are amortized over their respective useful lives on a straight-line basis and are also evaluated annually for impairment or whenever events or circumstances occur which indicate that those assets might be impaired. Goodwill and indefinite lived assets are not amortized but tested annually for impairment. The Company’s impairment review process is completed during the fourth quarter of each year or whenever events, or circumstances occur which indicate that an impairment may have occurred. The Company assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If, after assessing the qualitative factors, the Company determines that it is not likely that the fair value of a reporting unit is less than its carrying value, then performing the two-step impairment test is unnecessary. However, if the Company concludes otherwise, then it is required to perform the first step of the two-step goodwill impairment test. The first step requires a comparison of the fair value of Nanometrics’ reporting unit to its net book value. If the fair value of the reporting unit is greater than its carrying value, then no impairment is deemed to have occurred. If the fair value is less, then the second step must be performed to determine the amount, if any, of actual impairment. Amortization of intangible assets with finite lives is computed using the straight-line method over the following estimated useful lives of the assets:

Developed technology	5-10 years
Customer relationships	2-10 years
Brand name	5-10 years
Patented technology	7-10 years
Trademark	5 years

Long-Lived Assets

Long-Lived Assets – The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When the sum of the undiscounted future net cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount, impairment may exist. To determine the amount of impairment, the Company compares the fair value of the asset to its carrying value. If the carrying value of the asset exceeds its fair value, an impairment loss equal to the difference is recognized. See Note 7, "Goodwill and Intangible Assets" for further details.

Income Tax Assets and Liabilities

Income Tax Assets and Liabilities – The Company accounts for income taxes such that deferred tax assets and liabilities must be recognized using enacted tax rates for the effect of temporary differences between the book and tax accounting for assets and liabilities. Also, deferred tax assets are reduced by a valuation allowance to the extent that management cannot conclude that it is more likely than not that a portion of the deferred tax asset will be realized in the future. The Company evaluates the deferred tax assets on a continuous basis throughout the year to determine whether or not a valuation allowance is appropriate. Factors used in this determination include future expected income and the underlying asset or liability which generated the temporary tax difference. The income tax provision is primarily impacted by federal statutory rates, state and foreign income taxes and changes in the valuation allowance.

Product Warranties

Product Warranties – The Company sells the majority of its products with a twelve-month repair or replacement warranty from the date of acceptance, which generally represents the date of shipment. The Company provides an accrual for estimated future warranty costs based upon the historical relationship of warranty costs to the cost of products sold. The estimated future warranty obligations related to product sales are reported in the period in which the related revenue is recognized. The estimated future warranty obligations are affected by the warranty periods, sales volumes, product failure rates, material usage and labor and replacement costs incurred in correcting a product failure. If actual product failure rates, material usage, labor or replacement costs differ from the Company’s estimates, revisions to the estimated warranty obligations would be required. For new product introductions where limited or no historical information exists, the Company may use warranty information from other previous product introductions to guide it in estimating the warranty accrual. The warranty accrual represents the best estimate of the amount necessary to settle future and existing claims on products sold as of the balance sheet date. The Company periodically assesses the adequacy of its recorded warranty reserve and adjusts the amounts in accordance with changes in these factors.

Shipping and Handling Costs

Shipping and Handling Costs – Shipping and handling costs are included as a component of cost of net revenues.

Advertising Costs

Advertising Costs – The Company expenses advertising costs as incurred. Advertising costs were $0.2 million in 2017, $0.2 million in 2016, and $0.3 million in 2015.

Defined Employee Benefit Plans

Defined Employee Benefit Plans – The Company maintains a defined benefit pension plan in Taiwan for which current service costs are charged to operations as they accrue based on services rendered by employees during the year. Pension benefit obligations are determined by using management’s actuarial assumptions, including discount rates, assumed asset rates of return, compensation increases and employee turnover rates.

Net Income Per Share

Net Income Per Share - Basic net income per share excludes dilution and is computed by dividing net income by the number of weighted average common shares outstanding for the period. Diluted net income per share reflects the potential dilution from outstanding dilutive stock options (using the treasury stock method), restricted stock units subject to vesting and shares issuable under the employee stock purchase plan. In applying the treasury stock method 0.6 million, 0.5 million and 0.3 million stock option shares for fiscal year 2017, 2016 and 2015, respectively, were included in the calculation of diluted shares.  

Certain Significant Risks and Uncertainties

Certain Significant Risks and Uncertainties – Financial instruments that potentially subject us to a concentration of credit risk consist of cash, cash equivalents, marketable securities, and accounts receivable. The Company's cash and cash equivalents are primarily invested in deposit accounts and money market accounts with large financial institutions. At times, these deposits and securities may exceed federally insured limits; however, the Company has not experienced any losses on such accounts. The Company invests its cash not required for use in operations in high credit quality securities based on the Company's investment policy. The Company's investment policy provides guidelines and limits regarding credit quality, investment concentration, investment type, and maturity that the Company believes will provide liquidity while reducing risk of loss of capital. Investments are of a short-term nature and include investments in commercial paper, corporate debt securities, U.S. Treasury, U.S. Government, and U.S. Agency debt.

The Company sells its products primarily to end users in the United States, Asia and Europe and, generally, does not require its customers to provide collateral or other security to support accounts receivable. Management performs ongoing credit evaluations of its customers’ financial condition and maintains an allowance for estimated potential bad debt losses. The Company’s customer base is highly concentrated and historically, a relatively small number of customers have accounted for a significant portion of its revenues. Aggregate revenue from the Company's top five largest customers in 2017, 2016 and 2015 consisted of 73%, 73% and 69%, respectively, of its total net revenues. The Company participates in a dynamic high technology industry and believes that changes in any of the following areas could have a material adverse effect on its future financial position, results of operations or cash flows: advances and trends in new technologies and industry standards; competitive pressures in the form of new products or price reductions on current products; changes in product mix; changes in the overall demand for products offered; changes in third-party manufacturers; changes in key suppliers; changes in certain strategic relationships or customer relationships; litigation or claims against the Company based on intellectual property, patent, product, regulatory or other factors; fluctuations in foreign currency exchange rates; risk associated with changes in domestic and international economic and/or political regulations; availability of necessary components or sub-assemblies; disruption of manufacturing facilities; and its ability to attract and retain employees necessary to support its growth.

Certain components and sub-assemblies used in the Company’s products are purchased from a sole supplier or a limited group of suppliers. In particular, the Company currently purchases its spectroscopic ellipsometer and robotics used in its advanced measurement systems from a sole supplier or a limited group of suppliers located in the United States. Any shortage or interruption in the supply of any of the components or sub-assemblies used in its products or its inability to procure these components or sub-assemblies from alternate sources on acceptable terms could have a material adverse effect on its business, financial condition and results of operations.

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Nature of Business, Basis of Presentation and Significant Accounting Policies (Tables)

12 Months Ended

Dec. 30, 2017

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Estimated useful lives of property, plant and equipment

Depreciation and amortization is computed using the straight–line method over the following estimated useful lives of the assets:

Building and Improvements	5-40 years
Machinery and equipment	3-10 years
Furniture and fixtures	3-10 years
Software	3-7 years

Estimated Useful Lives of Intangible Assets

Amortization of intangible assets with finite lives is computed using the straight-line method over the following estimated useful lives of the assets:

Developed technology	5-10 years
Customer relationships	2-10 years
Brand name	5-10 years
Patented technology	7-10 years
Trademark	5 years

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Fair Value Measurements and Disclosures (Tables)

12 Months Ended

Dec. 30, 2017

Fair Value Disclosures [Abstract]

Assets and liabilities measurements at estimated fair value on recurring basis excluding accrued interest components

The following tables present the Company’s assets and liabilities measured at estimated fair value on a recurring basis, excluding accrued interest components, categorized in accordance with the fair value hierarchy (in thousands), as of the following dates:

	December 30, 2017								December 31, 2016
	Fair Value Measurements Using Input Types								Fair Value Measurements Using Input Types
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	256	$	—	$	—	$	256	$	959	$	—	$	—	$	959
Commercial paper    and corporate debt    securities		—		—		—		—		—		2,499		—		2,499
Total cash equivalents	$	256	$	—	$	—	$	256	$	959	$	2,499	$	—	$	3,458
Marketable securities:
U.S. Treasury,    U.S. Government    and U.S. Government    agency debt securities		—		1,495		—		1,495		—		17,072		—		17,072
Certificate of deposits		—		14,497		—		14,497		—		23,019		—		23,019
Commercial paper		—		7,949		—		7,949		—		22,402		—		22,402
Municipal securities and    corporate debt securities		—		47,968		—		47,968		—		14,943		—		14,943
Asset backed securities		—		10,221		—		10,221		—		5,463		—		5,463
Total marketable securities	$	—	$	82,130	$	—	$	82,130	$	—	$	82,899	$	—	$	82,899
Total(1)	$	256	$	82,130	$	—	$	82,386	$	959	$	85,398	$	—	$	86,357

⁽¹⁾ Excludes $34.6 million and $43.6 million held in operating accounts as of December 30, 2017, and December 31, 2016, respectively.

Outstanding derivative instruments

The following table summarizes the Company’s outstanding derivative instruments on a gross basis:

	As of December 30, 2017						As of December 31, 2016
	Notional Amount		Fair Value				Notional Amount		Fair Value
	(in millions)		Asset		Liability		(in millions)		Asset		Liability
Undesignated Hedges:
Forward Foreign Currency Contracts
Purchase	$	27.5		—	$	0.1	$	12.6		—		—
Sell	$	16.8		0.1		—	$	1.3		—		—

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Cash and Investments (Tables)

12 Months Ended

Dec. 30, 2017

Investments Debt And Equity Securities [Abstract]

Cash, Cash Equivalents and Available-for-Sale Investments

The following table presents cash, cash equivalents, and available-for-sale investments as of the following dates (in thousands):

	December 30, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Market Value
Cash	$	34,643	$	—	$	—		$	34,643
Cash equivalents:
Money market funds		256		—		—			256
Marketable securities:
U.S. Government agency securities		1,500		—		(5	)		1,495
Certificates of deposits		14,498		—		(1	)		14,497
Commercial paper		7,952		—		(3	)		7,949
Corporate debt securities		48,073		—		(105	)		47,968
Asset-backed securities		10,240		—		(19	)		10,221
Total cash, cash equivalents, and marketable    securities	$	117,162	$	—	$	(133	)	$	117,029
	December 31, 2016
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Market Value
Cash	$	43,604	$	—	$	—		$	43,604
Cash equivalents:
Money market funds		959		—		—			959
Commercial paper and corporate debt securities		2,499		—		—			2,499
Marketable securities:
U.S. Treasury securities		5,667		—		—			5,667
U.S. Government agency securities		11,412		—		(7	)		11,405
Certificates of deposits		23,000		19		—			23,019
Commercial paper		22,402		—		—			22,402
Corporate debt securities		14,194		—		(6	)		14,188
Municipal securities		756		—		(1	)		755
Asset-backed securities		5,466		—		(3	)		5,463
Total cash, cash equivalents, and marketable    securities	$	129,959	$	19	$	(17	)	$	129,961

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Financial Statement Components (Tables)

12 Months Ended

Dec. 30, 2017

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Selected financial statement components

The following tables provide details of selected financial statement components as of the following dates (in thousands):

	At
	December 30, 2017			December 31, 2016
Inventories:
Raw materials and sub-assemblies	$	32,187		$	23,506
Work in process		13,498			10,347
Finished goods		7,175			4,984
Inventories		52,860			38,837
Inventories-delivered systems		1,534			2,457
Total inventories	$	54,394		$	41,294
Property, plant and equipment, net:(1)
Land	$	15,573		$	15,568
Building and improvements		20,880			20,532
Machinery and equipment		36,380			35,659
Furniture and fixtures		2,420			2,282
Software		9,558			9,756
Capital in progress		4,418			2,748
Total property, plant and equipment, gross		89,229			86,545
Accumulated depreciation and amortization		(44,419	)		(42,319	)
Total property, plant and equipment, net	$	44,810		$	44,226
(1) Total depreciation and amortization expense for the years ended December 30, 2017, December 31, 2016 and December 26, 2015 was $6.7 million, $6.8 million, and $6.9 million, respectively.
Other Current Liabilities:
Accrued warranty	$	4,863		$	3,838
Accrued taxes		813			706
Customer deposits		—			581
Accrued professional services		534			424
Accrued royalties		—			1,233
Other		1,039			1,265
Total other current liabilities	$	7,249		$	8,047

Components of accumulated other comprehensive income (loss)

Components of Accumulated Other Comprehensive Income (Loss)

	Foreign Currency Translations			Defined Benefit Pension Plans			Unrealized Income (Loss) on Investment			Accumulated Other Comprehensive Income
Balance as of December 26, 2015	$	(4,948	)	$	(210	)	$	(44	)	$	(5,202	)
Current period change		(869	)		(17	)		42			(844	)
Balance as of December 31, 2016		(5,817	)		(227	)		(2	)		(6,046	)
Current period change		4,170			(160	)		(88	)		3,922
Balance as of December 30, 2017	$	(1,647	)	$	(387	)	$	(90	)	$	(2,124	)

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Goodwill and Intangible Assets (Tables)

12 Months Ended

Dec. 30, 2017

Goodwill And Intangible Assets Disclosure [Abstract]

Schedule of goodwill

The following table summarizes the activity in the Company’s goodwill during the years ended December 30, 2017 and December 31, 2016, respectively (in thousands):

	Amounts
Balance as of December 26, 2015	$	9,415
Foreign currency movements		(475	)
Balance as of December 31, 2016		8,940
Foreign currency movements		1,292
Balance as of December 30, 2017	$	10,232

Summary of finite-lived intangible assets

Finite-lived intangible assets are recorded at cost, less accumulated amortization. Finite-lived intangible assets as of December 30, 2017, and December 31, 2016 consisted of the following (in thousands):

	December 30, 2017
	Adjusted cost		Accumulated amortization			Net carrying amount
Developed technology	$	18,887	$	(16,681	)	$	2,206
Customer relationships		9,438		(9,438	)		—
Brand names		1,927		(1,927	)		—
Patented technology		2,252		(2,252	)		—
Trademark		80		(80	)		—
Total	$	32,584	$	(30,378	)	$	2,206

	December 31, 2016
	Adjusted cost		Accumulated amortization			Net carrying amount
Developed technology	$	15,726	$	(15,380	)	$	346
Customer relationships		9,322		(9,322	)		—
Brand names		1,927		(1,927	)		—
Patented technology		2,252		(2,186	)		66
Trademark		80		(80	)		—
Total	$	29,307	$	(28,895	)	$	412

Estimated future amortization expense

The estimated future amortization expense of finite intangible assets as of December 30, 2017, is as follows (in thousands):

Fiscal Years	Amounts
2018		283
2019		352
2020		286
2021		286
2022		286
Thereafter		713
Total future amortization expense		2,206

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Warranties (Tables)

12 Months Ended

Dec. 30, 2017

Product Warranties Disclosures [Abstract]

Components of the warranty accrual

Components of the warranty accrual, which were included in the accompanying consolidated balance sheets with other current liabilities, were as follows (in thousands):

	Years Ended
	December 30, 2017			December 31, 2016
Balance as of beginning of period	$	3,838		$	4,504
Accruals for warranties issued during period		5,247			4,509
Settlements during the period		(4,222	)		(5,175	)
Balance as of end of period	$	4,863		$	3,838

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Commitments and Contingencies (Tables)

12 Months Ended

Dec. 30, 2017

Commitments And Contingencies Disclosure [Abstract]

Future minimum lease payments under operating leases

Future minimum lease payments under its operating leases are as follows (in thousands):

	Operating Leases
2018		1,664
2019		935
2020		313
2021		54
2022		2
Thereafter		—
Total	$	2,968

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Net Income Per Share (Tables)

12 Months Ended

Dec. 30, 2017

Earnings Per Share [Abstract]

Reconciliation of the basic and diluted net income (loss) per share computations

A reconciliation of the share denominator of the basic and diluted net income per share computations is as follows (in thousands):

	Years Ended
	December 30, 2017		December 31, 2016		December 26, 2015
Weighted average common shares outstanding used in    basic net income per share calculation		25,334		24,655		24,059
Potential dilutive common stock equivalents,    using treasury stock method		585		498		316
Weighted average shares used in diluted net income    per share calculation		25,919		25,153		24,375

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Stockholders' Equity and Stock-Based Compensation (Tables)

12 Months Ended

Dec. 30, 2017

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Share repurchases

Shares repurchased and retired for fiscal year 2017, 2016 and 2015, with the associated cost of repurchase and amount available for repurchase at the end of the respective periods are as follows (in thousands, except number of shares and weighted average price per share):

	Fiscal Year 2017		Fiscal Year 2016		Fiscal Year 2015
Number of shares of common stock repurchased		1,065,848	—			111,050
Weighted average price per share	$	25.33		—	$	15.49
Total cost of repurchase	$	26,999	—		$	1,721
Amount available for repurchase at end of period	$	23,001		—	$	4,397

Option plans

The Nanometrics option plans are as follows:

Plan Name	Participants	Shares Authorized
2005 Equity Incentive Plan	Employees, consultants and directors		8,292,594
2000 Employee Stock Option Plan	Employees and consultants		2,450,000
2000 Director Stock Option Plan	Non-employee directors		250,000
Accent Optical Technologies, Inc. Stock Incentive Plan	Employees and consultants		205,003

Employee stock purchase plan assumptions

The weighted-average fair value calculations are based on the following average assumptions:

	Fiscal Year 2017	Fiscal Year 2016	Fiscal Year 2015
Employee Stock Purchase Plan:
Expected life	0.5 years	0.5 years	0.5 years
Volatility	37.2%	38.7%	36.9%
Risk free interest rate	0.91%	0.44%	0.12%
Dividends	—	—	—

Stock option plans activity

A summary of activity of stock options is as follows:

	Number of Shares Outstanding (Options)			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (in Thousands)
Options
Outstanding at December 26, 2015		1,059,471		$	14.61		2.47	$	1,920
Exercised		(442,339	)		13.66
Cancelled/Forfeited		(176,587	)		15.83
Outstanding at December 31, 2016		440,545			15.06		2.12	$	4,405
Exercised		(223,364	)		13.35
Cancelled/Forfeited		(855	)		16.63
Outstanding at December 30, 2017		216,326		$	16.82		1.76	$	1,752
Exercisable at December 30, 2017		215,620		$	16.81		1.76	$	1,748

Ranges of outstanding and exercisable options

The following table summarizes ranges of outstanding and exercisable options as of December 30, 2017.

	Options Outstanding						Options Exercisable
Exercise Prices	Number Outstanding		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$12.98-$15.00		23,383		1.83	$	14.64		23,383	$	14.64
$15.08-$15.65		27,697		1.37		15.62		27,697		15.62
$15.74-$15.74		3,333		0.40		15.74		3,333		15.74
$15.85-$15.85		60,000		2.20		15.85		60,000		15.85
$16.00-$17.33		31,700		1.82		17.00		31,700		17.00
$17.70-$18.08		6,613		1.55		17.92		6,588		17.92
$18.22-$18.22		3,600		3.16		18.22		3,449		18.22
$18.51-$18.51		9,000		3.14		18.51		8,583		18.51
$18.79-$18.79		1,000		3.23		18.79		887		18.79
$19.03-$19.03		50,000		1.13	$	19.03		50,000	$	19.03
$12.98-$19.03		216,326						215,620

Summary of activity for RSUs

A summary of activity for RSUs is as follows:

Summary of activity for RSUs	Number of RSUs			Weighted Average Fair Value
Outstanding RSUs as of December 26, 2015		713,243		$	15.99
Granted		476,667			17.45
Released		(315,872	)		16.05
Cancelled		(54,253	)		16.29
Outstanding RSUs as of December 31, 2016		819,785			16.79
Granted		454,600			27.12
Released		(387,592	)		16.81
Cancelled		(96,494	)		19.01
Outstanding RSUs as of December 30, 2017		790,299		$	22.46

Summary of activity for PSUs

A summary of activity for PSUs is as follows:

Summary of activity for PSUs	Number of PSUs			Weighted Average Fair Value
Outstanding PSUs as of December 26, 2015		60,000		$	12.23
Granted		67,500			8.52
Released		(13,333	)		12.03
Cancelled		(6,667	)		12.03
Outstanding PSUs as of December 31, 2016		107,500			9.94
Granted		122,050			20.51
Released		(38,500	)		10.41
Cancelled		(61,100	)		19.41
Outstanding PSUs as of December 30, 2017		129,950		$	15.60

PSUs valuation assumptions

The assumptions for the valuation of PSUs are summarized as follows:

	2017 Award	2016 Award		2015 Award
Grant Date Fair Values Per Share	$14.57-$26.75	$	8.52	$	12.23
Weighted-average assumptions/inputs:
Expected Dividend	—	—		—
Range of risk-free interest rates	1.74%-1.84%	0.92%		0.25%-1.1%
Range of expected volatilities for peer group	22%-66%	22%-93%		23%-65%

Stock-based compensation expense for all share-based payment awards

Stock-based compensation expense for all share-based payment awards made to the Company’s employees and directors pursuant to the employee stock option and employee stock purchase plans by function were as follows (in thousands):

	Fiscal Year 2017		Fiscal Year 2016		Fiscal Year 2015
Cost of products	$	842	$	403	$	274
Cost of service		616		509		309
Research and development		1,720		1,408		1,036
Selling		2,323		2,046		1,881
General and administrative		3,318		3,300		2,748
Total stock-based compensation expense related to employee    stock options and employee stock purchases	$	8,819	$	7,666	$	6,248

Stock Options, RSUs and PSUs [Member]

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Stock option plans activity including options, RSUs and PSUs

A summary of activity under the Company’s stock option plans including options, RSUs and PSUs during fiscal year 2017, 2016 and 2015 and shares available for grant as of the respective period end dates, is as follows:

	Fiscal Year 2017			Fiscal Year 2016			Fiscal Year 2015
Shares available for grant at beginning of fiscal year		1,334,581			1,916,589			2,464,082
Additional Shares Authorized		1,000,000			—			—
Options – cancelled		855			176,587			94,012
Options - expired plan shares					(116,192	)		(1,800	)
RSUs – granted		(772,820	)		(810,334	)		(860,980	)
RSUs – cancelled		164,040			92,230			202,356
RSUs - shares issued to satisfy tax    withholding obligations		251,724			179,117			120,919
PSUs – granted		(207,485	)		(114,750	)		(102,000	)
PSUs – cancelled		103,870			11,334			—
Shares available for grant at end of fiscal year		1,874,765			1,334,581			1,916,589

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Income Taxes (Tables)

12 Months Ended

Dec. 30, 2017

Income Tax Disclosure [Abstract]

Income (loss) before provision for income taxes

Income (loss) before provision for income taxes consists of the following (in thousands):

	Years Ended
	December 30, 2017		December 31, 2016		December 26, 2015
Domestic	$	34,238	$	25,372	$	178
Foreign		9,060		3,763		5,390
Income (loss) before income taxes	$	43,298	$	29,135	$	5,568

Provision (benefit) for income taxes

The provision (benefit) for income taxes consists of the following (in thousands):

	Years Ended
	December 30, 2017		December 31, 2016			December 26, 2015
Current:
Federal	$	3,250	$	697		$	148
State		9		85			3
Foreign		2,998		2,111			2,266
		6,257		2,893			2,417
Deferred:
Federal		6,314		(16,641	)		190
State		53		(320	)		3
Foreign		472		(832	)		53
		6,839		(17,793	)		246
Provision (benefit) for income taxes	$	13,096	$	(14,900	)	$	2,663

Components of deferred tax assets and liabilities

Significant components of the Company's deferred tax assets and liabilities are as follows (in thousands):

	At
	December 30, 2017			December 31, 2016
Deferred tax assets:
Reserves and accruals	$	5,797		$	11,043
Deferred revenue		240			349
Shared based compensation		1,483			2,590
Tax credit carry-forwards		9,669			10,112
Net operating losses		9,755			8,434
Depreciation & amortization		(1,525	)		(2,898	)
Other		207			(1,252	)
Total deferred tax assets		25,626			28,378
Less: Valuation allowance		(13,702	)		(10,980	)
Total deferred tax assets net of valuation allowance		11,924			17,398
Deferred tax liabilities:
Depreciation & amortization		(12	)		(6	)
Other		(167	)		(14	)
Total deferred tax liabilities		(179	)		(20	)
Net deferred tax assets	$	11,745		$	17,378

Income Tax Rate Reconciliation

Differences between income taxes computed by applying the statutory federal income tax rate to income (loss) before income taxes and the provision (benefit) for income taxes consist of the following (in thousands):

	Years Ended
	December 30, 2017			December 31, 2016			December 26, 2015
Income taxes computed at U.S. statutory rate	$	15,153		$	10,197		$	1,949
State income taxes		227			223			28
Foreign tax rate differential		794			3,502			342
Change in valuation allowance		1,490			(25,738	)		1,648
Equity compensation		(1,803	)		380			311
Tax credits		(2,336	)		(3,191	)		(1,834	)
Domestic production activities deduction		(608	)		(354	)		—
Liabilities for uncertain tax positions		18			67			74
Other, net		161			14			145
Provision (benefit) for income taxes	$	13,096		$	(14,900	)	$	2,663

Reconciliation of unrecognized tax benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

	Rollforward Table (at Gross): As of
	December 30, 2017			December 31, 2016			December 26, 2015
Unrecognized tax benefits - beginning of the period	$	6,477		$	6,961		$	6,442
Gross increases-tax positions in prior period		32			23			127
Gross decreases-tax positions in prior period		—			(1,193	)		(306	)
Gross increases-current-period tax positions		723			686			698
Lapse of statute of limitations		(81	)		—			—
Unrecognized tax benefits - end of the period	$	7,151		$	6,477		$	6,961

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Segment, Geographic, Product and Significant Customer Information (Tables)

12 Months Ended

Dec. 30, 2017

Segment Reporting [Abstract]

Total net revenue

The following tables summarize total net revenues and long-lived assets (excluding intangible assets) attributed to significant countries (in thousands):

	Years Ended
	December 30, 2017		December 31, 2016		December 26, 2015
Total net revenues (1):
South Korea	$	94,082	$	44,735	$	30,572
China		29,826		43,460		17,373
Singapore		21,810		37,096		17,395
United States		33,983		29,887		36,720
Taiwan		20,147		27,189		46,715
Japan		41,979		26,604		31,140
Other		16,794		12,158		7,452
Total net revenues	$	258,621	$	221,129	$	187,367

⁽¹⁾ Net revenues are attributed to countries based on the customer's deployment and service locations of systems.

Long-lived tangible assets

	December 30, 2017		December 31, 2016
Long-lived tangible assets:
United States	$	43,427	$	42,688
Taiwan		510		818
South Korea		576		554
Japan		60		57
All Other		237		109
Total long-lived tangible assets	$	44,810	$	44,226

Revenues by product type

The Company’s product lines differ primarily based on the environment in which the systems will be used. Automated systems are used primarily in high-volume production environments. Materials characterization products are primarily used to measure the composition, band gap, structure, and other physical and electrical properties of semiconducting materials for discrete electronic industry, high brightness LED and solar/photovoltaic structures in both development and high-volume environments. Integrated systems are installed inside wafer processing equipment to provide near real-time measurements for improving process control and increasing throughput. Revenues by product type were as follows (in thousands): 

	Years Ended
	December 30, 2017		December 31, 2016		December 26, 2015
Automated Systems	$	151,401	$	127,378	$	102,386
Integrated Systems		42,183		43,846		31,579
Materials Characterization Systems		21,293		13,842		12,980
Total product revenues	$	214,877	$	185,066	$	146,945

Customers accounted for 10% or more of total accounts receivable

The following customers accounted for 10% or more of total accounts receivable, net:

	Years Ended
	December 30, 2017			December 31, 2016			December 26, 2015
Taiwan Semiconductor Manufacturing Company Limited	***				20	%		26	%
Samsung Electronics Co. Ltd.		13	%		14	%	***
Micron Technology, Inc.		18	%		12	%	***
Intel Corporation	***				11	%	***
Toshiba Corporation		31	%		10	%		27	%

*** The customer accounted for less than 10% of total accounts receivable, net, as of that period end.

Customers accounted for 10% or more of total revenue

The following customers accounted for 10% or more of total net revenue:

	Years Ended
	December 30, 2017			December 31, 2016			December 26, 2015
Samsung Electronics Co. Ltd.		26	%	***				13	%
SK Hynix		13	%		15	%		11	%
Micron Technology, Inc.		12	%		20	%		16	%
Intel Corporation		11	%		18	%	***
Toshiba Corporation		11	%	***				10	%
Taiwan Semiconductor Manufacturing Company Limited	***				10	%		19	%

*** The customer accounted for less than 10% of total net revenue during the period.

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Nature of Business, Basis of Presentation and Significant Accounting Policies - Textual (Details) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 30, 2017 USD ($) Customer shares	Dec. 31, 2016 USD ($) Customer shares	Dec. 26, 2015 USD ($) Customer shares
Accounting Policies [Line Items]
Fiscal year duration	364 days	371 days	364 days
Products revenues	$ 214,877	$ 185,066	$ 146,945
Cost of products revenues	100,910	85,391	76,224
Service revenues	43,744	36,063	40,422
Cost of service revenues	20,804	20,160	19,450
Foreign currency transaction gain (loss)	$ (600)	(400)	500
Maximum period of delivery to customers	6 months
Maximum period services are provided over the fixed arrangement term	12 months
Product warranty period	12 months
Advertising costs	$ 200	$ 200	$ 300
Potential dilutive common stock equivalents, using treasury stock method | shares	585	498	316
Number of Major Customer | Customer	5	5	5
Sales Revenue, Goods, Net [Member] | Customer Concentration Risk [Member]
Accounting Policies [Line Items]
Concentration of risk percentage	73.00%	73.00%	69.00%
Stock Options [Member]
Accounting Policies [Line Items]
Potential dilutive common stock equivalents, using treasury stock method | shares	600	500	300
Reclassification [Member]
Accounting Policies [Line Items]
Products revenues	$ 12,100	$ 11,000
Cost of products revenues	$ 2,700	$ 2,400
Service revenues			$ 7,900
Cost of service revenues			$ 3,000
Minimum [Member]
Accounting Policies [Line Items]
Fiscal year duration	364 days
Maximum [Member]
Accounting Policies [Line Items]
Fiscal year duration	371 days

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Nature of Business, Basis of Presentation and Significant Accounting Policies - Estimated Useful Lives of Property, Plant and Equipment (Details)	12 Months Ended
	Dec. 30, 2017
Building and Improvements [Member] | Minimum [Member]
Accounting Policies [Line Items]
Estimated useful lives of depreciable assets	5 years
Building and Improvements [Member] | Maximum [Member]
Accounting Policies [Line Items]
Estimated useful lives of depreciable assets	40 years
Machinery and equipment [Member] | Minimum [Member]
Accounting Policies [Line Items]
Estimated useful lives of depreciable assets	3 years
Machinery and equipment [Member] | Maximum [Member]
Accounting Policies [Line Items]
Estimated useful lives of depreciable assets	10 years
Furniture and fixtures [Member] | Minimum [Member]
Accounting Policies [Line Items]
Estimated useful lives of depreciable assets	3 years
Furniture and fixtures [Member] | Maximum [Member]
Accounting Policies [Line Items]
Estimated useful lives of depreciable assets	10 years
Software [Member] | Minimum [Member]
Accounting Policies [Line Items]
Estimated useful lives of depreciable assets	3 years
Software [Member] | Maximum [Member]
Accounting Policies [Line Items]
Estimated useful lives of depreciable assets	7 years

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Nature of Business, Basis of Presentation and Significant Accounting Policies - Estimated Useful Lives of Intangible Assets (Details)	12 Months Ended
	Dec. 30, 2017
Minimum [Member]
Accounting Policies [Line Items]
Finite-lived intangibles estimated lives	2 years
Maximum [Member]
Accounting Policies [Line Items]
Finite-lived intangibles estimated lives	10 years
Developed technology [Member] | Minimum [Member]
Accounting Policies [Line Items]
Finite-lived intangibles estimated lives	5 years
Developed technology [Member] | Maximum [Member]
Accounting Policies [Line Items]
Finite-lived intangibles estimated lives	10 years
Customer relationships [Member] | Minimum [Member]
Accounting Policies [Line Items]
Finite-lived intangibles estimated lives	2 years
Customer relationships [Member] | Maximum [Member]
Accounting Policies [Line Items]
Finite-lived intangibles estimated lives	10 years
Brand name [Member] | Minimum [Member]
Accounting Policies [Line Items]
Finite-lived intangibles estimated lives	5 years
Brand name [Member] | Maximum [Member]
Accounting Policies [Line Items]
Finite-lived intangibles estimated lives	10 years
Patented technology [Member] | Minimum [Member]
Accounting Policies [Line Items]
Finite-lived intangibles estimated lives	7 years
Patented technology [Member] | Maximum [Member]
Accounting Policies [Line Items]
Finite-lived intangibles estimated lives	10 years
Trademark [Member]
Accounting Policies [Line Items]
Finite-lived intangibles estimated lives	5 years

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Recent Accounting Pronouncements - Textual (Details) - USD ($) $ in Thousands		3 Months Ended
	Jan. 02, 2017	Apr. 01, 2017	Dec. 30, 2017	Dec. 31, 2016
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Deferred revenue			$ 1,661	$ 816
Accounting Standards Update 2016-09 [Member]
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Increase (decrease) in accumulated deficit	$ 100	$ 1,200
Adjustments for New Accounting Pronouncement [Member] | Minimum [Member] | Pro Forma [Member]
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Retained earnings related to new standard accounting			700
Deferred revenue			1,500
Adjustments for New Accounting Pronouncement [Member] | Maximum [Member] | Pro Forma [Member]
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Retained earnings related to new standard accounting			1,200
Deferred revenue			$ 2,500

XML

Fair Value Measurements and Disclosures - Measured at Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands	Dec. 30, 2017	Dec. 31, 2016
Assets:
Total marketable securities	$ 82,130	$ 82,899
Fair Value, Measurements, Recurring [Member]
Assets:
Total cash equivalents	256	3,458
Total marketable securities	82,130	82,899
Total	82,386	86,357
Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
Assets:
Total cash equivalents	256	959
Total marketable securities	0	0
Total	256	959
Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Assets:
Total cash equivalents	0	2,499
Total marketable securities	82,130	82,899
Total	82,130	85,398
Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
Assets:
Total cash equivalents	0	0
Total marketable securities	0	0
Total	0	0
Money market funds [Member] | Fair Value, Measurements, Recurring [Member]
Assets:
Total cash equivalents	256	959
Money market funds [Member] | Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
Assets:
Total cash equivalents	256	959
Money market funds [Member] | Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Assets:
Total cash equivalents	0	0
Money market funds [Member] | Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
Assets:
Total cash equivalents	0	0
Commercial paper and corporate debt securities [Member] | Fair Value, Measurements, Recurring [Member]
Assets:
Total cash equivalents	0	2,499
Commercial paper and corporate debt securities [Member] | Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
Assets:
Total cash equivalents	0	0
Commercial paper and corporate debt securities [Member] | Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Assets:
Total cash equivalents	0	2,499
Commercial paper and corporate debt securities [Member] | Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
Assets:
Total cash equivalents	0	0
U.S. Treasury securities and U.S. Government agency debt securities [Member] | Fair Value, Measurements, Recurring [Member]
Assets:
Total marketable securities	1,495	17,072
U.S. Treasury securities and U.S. Government agency debt securities [Member] | Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
Assets:
Total marketable securities	0	0
U.S. Treasury securities and U.S. Government agency debt securities [Member] | Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Assets:
Total marketable securities	1,495	17,072
U.S. Treasury securities and U.S. Government agency debt securities [Member] | Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
Assets:
Total marketable securities	0	0
Certificates of deposits [Member] | Fair Value, Measurements, Recurring [Member]
Assets:
Total marketable securities	14,497	23,019
Certificates of deposits [Member] | Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
Assets:
Total marketable securities	0	0
Certificates of deposits [Member] | Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Assets:
Total marketable securities	14,497	23,019
Certificates of deposits [Member] | Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
Assets:
Total marketable securities	0	0
Commercial paper [Member] | Fair Value, Measurements, Recurring [Member]
Assets:
Total marketable securities	7,949	22,402
Commercial paper [Member] | Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
Assets:
Total marketable securities	0	0
Commercial paper [Member] | Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Assets:
Total marketable securities	7,949	22,402
Commercial paper [Member] | Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
Assets:
Total marketable securities	0	0
Municipal securities and corporate debt securities [Member] | Fair Value, Measurements, Recurring [Member]
Assets:
Total marketable securities	47,968	14,943
Municipal securities and corporate debt securities [Member] | Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
Assets:
Total marketable securities	0	0
Municipal securities and corporate debt securities [Member] | Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Assets:
Total marketable securities	47,968	14,943
Municipal securities and corporate debt securities [Member] | Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
Assets:
Total marketable securities	0	0
Asset-backed Securities [Member] | Fair Value, Measurements, Recurring [Member]
Assets:
Total marketable securities	10,221	5,463
Asset-backed Securities [Member] | Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
Assets:
Total marketable securities	0	0
Asset-backed Securities [Member] | Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Assets:
Total marketable securities	10,221	5,463
Asset-backed Securities [Member] | Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
Assets:
Total marketable securities	$ 0	$ 0

XML

Fair Value Measurements and Disclosures - Measured at Fair Value on Recurring Basis (Parenthetical) (Details) - Fair Value, Measurements, Recurring [Member] - USD ($) $ in Thousands	Dec. 30, 2017	Dec. 31, 2016
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total cash equivalents	$ 256	$ 3,458
Cash [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total cash equivalents	$ 34,600	$ 43,600

XML

Fair Value Measurements and Disclosures - Textual (Details) - USD ($)	12 Months Ended
	Dec. 30, 2017	Dec. 31, 2016
Fair Value Measurements and Disclosures (Textual) [Abstract]
Fair value assets among level 1, level 2 and level 3 transfers, amount	$ 0
Forward Foreign Currency Contracts [Member]
Fair Value Measurements and Disclosures (Textual) [Abstract]
Derivative term	30 days
Forward Foreign Currency Contracts [Member] | Other Income (Expense), Net [Member]
Fair Value Measurements and Disclosures (Textual) [Abstract]
Gain (loss) on settlement of derivatives	$ 1,400,000	$ (1,700,000)

XML

Fair Value Measurements and Disclosures - Outstanding Derivative Instruments (Details) - Forward Foreign Currency Contracts [Member] - Not Designated as Hedging Instrument [Member] - USD ($)	Dec. 30, 2017	Dec. 31, 2016
Purchase [Member]
Derivatives Fair Value [Line Items]
Notional Amount	$ 27,500,000	$ 12,600,000
Fair Value Asset	0	0
Fair Value Liability	100,000	0
Sell [Member]
Derivatives Fair Value [Line Items]
Notional Amount	16,800,000	1,300,000
Fair Value Asset	100,000	0
Fair Value Liability	$ 0	$ 0

XML

Cash and Investments (Details) - USD ($) $ in Thousands	Dec. 30, 2017	Dec. 31, 2016
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	$ 117,162	$ 129,959
Gross Unrealized Gains	0	19
Gross Unrealized Losses	(133)	(17)
Estimated Fair Market Value	117,029	129,961
U.S. Government agency securities [Member]
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	1,500	11,412
Gross Unrealized Gains	0	0
Gross Unrealized Losses	(5)	(7)
Estimated Fair Market Value	1,495	11,405
Commercial paper [Member]
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	7,952	22,402
Gross Unrealized Gains	0	0
Gross Unrealized Losses	(3)	0
Estimated Fair Market Value	7,949	22,402
Corporate debt securities [Member]
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	48,073	14,194
Gross Unrealized Gains	0	0
Gross Unrealized Losses	(105)	(6)
Estimated Fair Market Value	47,968	14,188
Asset-backed Securities [Member]
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	10,240	5,466
Gross Unrealized Gains	0	0
Gross Unrealized Losses	(19)	(3)
Estimated Fair Market Value	10,221	5,463
Cash [Member]
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	34,643	43,604
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Estimated Fair Market Value	34,643	43,604
Money market funds [Member]
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	256	959
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Estimated Fair Market Value	256	959
Certificates of deposits [Member]
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	14,498	23,000
Gross Unrealized Gains	0	19
Gross Unrealized Losses	(1)	0
Estimated Fair Market Value	$ 14,497	23,019
U.S. Treasury securities [Member]
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost		5,667
Gross Unrealized Gains		0
Gross Unrealized Losses		0
Estimated Fair Market Value		5,667
Commercial paper and corporate debt securities [Member]
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost		2,499
Gross Unrealized Gains		0
Gross Unrealized Losses		0
Estimated Fair Market Value		2,499
Municipal securities [Member]
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost		756
Gross Unrealized Gains		0
Gross Unrealized Losses		(1)
Estimated Fair Market Value		$ 755

XML

Cash and Investments - Additional Information (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 30, 2017	Dec. 31, 2016	Dec. 26, 2015
Investments Debt And Equity Securities [Abstract]
Net realized gains and losses on sale of securities	$ 1.3	$ 0.5	$ 0.2
Investment maturity period, less than	2 years	2 years

XML

Accounts Receivable - Textual (Details) - USD ($)	12 Months Ended
	Dec. 30, 2017	Dec. 31, 2016
Accounts Receivable (Additional Textual) [Abstract]
Sold receivables amount	$ 18,600,000	$ 31,500,000
Due from unrelated third parties	$ 0	$ 0
Minimum [Member]
Accounts Receivable (Textual) [Abstract]
Administrative fees as well as interest percent	0.61%
Maximum [Member]
Accounts Receivable (Textual) [Abstract]
Administrative fees as well as interest percent	1.68%

XML

Financial Statement Components - Selected Financial Statement Components (Details) - USD ($) $ in Thousands	Dec. 30, 2017	Dec. 31, 2016	Dec. 26, 2015
Inventories:
Raw materials and sub-assemblies	$ 32,187	$ 23,506
Work in process	13,498	10,347
Finished goods	7,175	4,984
Inventories	52,860	38,837
Inventories-delivered systems	1,534	2,457
Total inventories	54,394	41,294
Property, plant and equipment, net:
Total property, plant and equipment, gross	89,229	86,545
Accumulated depreciation and amortization	(44,419)	(42,319)
Total property, plant and equipment, net	44,810	44,226
Other Current Liabilities:
Accrued warranty	4,863	3,838	$ 4,504
Accrued taxes	813	706
Customer deposits		581
Accrued professional services	534	424
Accrued royalties		1,233
Other	1,039	1,265
Total other current liabilities	7,249	8,047
Land [Member]
Property, plant and equipment, net:
Total property, plant and equipment, gross	15,573	15,568
Building and improvements [Member]
Property, plant and equipment, net:
Total property, plant and equipment, gross	20,880	20,532
Machinery and equipment [Member]
Property, plant and equipment, net:
Total property, plant and equipment, gross	36,380	35,659
Furniture and fixtures [Member]
Property, plant and equipment, net:
Total property, plant and equipment, gross	2,420	2,282
Software [Member]
Property, plant and equipment, net:
Total property, plant and equipment, gross	9,558	9,756
Capital in progress [Member]
Property, plant and equipment, net:
Total property, plant and equipment, gross	$ 4,418	$ 2,748

XML

Financial Statement Components - Selected Financial Statement Components (Parenthetical) (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 30, 2017	Dec. 31, 2016	Dec. 26, 2015
Organization Consolidation And Presentation Of Financial Statements [Abstract]
Depreciation and amortization expense	$ 6.7	$ 6.8	$ 6.9

XML

Financial Statement Components - Components of Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 30, 2017	Dec. 31, 2016	Dec. 26, 2015
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning Balance Value	$ 243,774	$ 187,328	$ 179,537
Current period change	3,922	(844)	(2,433)
Ending Balance Value	262,383	243,774	187,328
Foreign Currency Translations [Member]
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning Balance Value	(5,817)	(4,948)
Current period change	4,170	(869)
Ending Balance Value	(1,647)	(5,817)	(4,948)
Defined Benefit Pension Plans [Member]
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning Balance Value	(227)	(210)
Current period change	(160)	(17)
Ending Balance Value	(387)	(227)	(210)
Unrealized Income (Loss) on Investment [Member]
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning Balance Value	(2)	(44)
Current period change	(88)	42
Ending Balance Value	(90)	(2)	(44)
Accumulated Other Comprehensive Income (Loss) [Member]
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning Balance Value	(6,046)	(5,202)	(2,769)
Ending Balance Value	$ (2,124)	$ (6,046)	$ (5,202)

XML

Goodwill and Intangible Assets - Goodwill (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 30, 2017	Dec. 31, 2016
Goodwill [Roll Forward]
Beginning balance	$ 8,940	$ 9,415
Foreign currency movements	1,292	(475)
Ending balance	$ 10,232	$ 8,940

XML

Goodwill and Intangible Assets - Intangible Assets (Details) - USD ($) $ in Thousands	Dec. 30, 2017	Dec. 31, 2016
Summary of Finite-lived intangible assets
Adjusted cost	$ 32,584	$ 29,307
Accumulated amortization	(30,378)	(28,895)
Finite lived intangible assets, Net carrying amount	2,206	412
Developed technology [Member]
Summary of Finite-lived intangible assets
Adjusted cost	18,887	15,726
Accumulated amortization	(16,681)	(15,380)
Finite lived intangible assets, Net carrying amount	2,206	346
Customer relationships [Member]
Summary of Finite-lived intangible assets
Adjusted cost	9,438	9,322
Accumulated amortization	(9,438)	(9,322)
Finite lived intangible assets, Net carrying amount	0	0
Brand names [Member]
Summary of Finite-lived intangible assets
Adjusted cost	1,927	1,927
Accumulated amortization	(1,927)	(1,927)
Finite lived intangible assets, Net carrying amount	0	0
Patented technology [Member]
Summary of Finite-lived intangible assets
Adjusted cost	2,252	2,252
Accumulated amortization	(2,252)	(2,186)
Finite lived intangible assets, Net carrying amount	0	66
Trademark [Member]
Summary of Finite-lived intangible assets
Adjusted cost	80	80
Accumulated amortization	(80)	(80)
Finite lived intangible assets, Net carrying amount	$ 0	$ 0

XML

Goodwill and Intangible Assets - Textual (Details) - USD ($)	12 Months Ended
	Dec. 30, 2017	Dec. 31, 2016	Dec. 26, 2015
Finite-Lived Intangible Assets [Line Items]
Total amortization expense	$ 200,000	$ 1,500,000	$ 2,100,000
Impairment charges	$ 0
Minimum [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangibles estimated lives	2 years
Maximum [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangibles estimated lives	10 years

XML

Goodwill and Intangible Assets - Future Amortization (Details) - USD ($) $ in Thousands	Dec. 30, 2017	Dec. 31, 2016
Estimated future amortization expense
2018	$ 283
2019	352
2020	286
2021	286
2022	286
Thereafter	713
Finite lived intangible assets, Net carrying amount	$ 2,206	$ 412

XML

Warranties - Textual (Details)	12 Months Ended
	Dec. 30, 2017
Product Warranties Disclosures [Abstract]
Product warranty period	12 months

XML

Warranties (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 30, 2017	Dec. 31, 2016
Components of the warranty accrual [Roll Forward]
Balance as of beginning of period	$ 3,838	$ 4,504
Accruals for warranties issued during period	5,247	4,509
Settlements during the period	(4,222)	(5,175)
Balance as of end of period	$ 4,863	$ 3,838

XML

Commitments and Contingencies - Textual (Details) - USD ($)	12 Months Ended
	Dec. 30, 2017	Dec. 31, 2016	Dec. 26, 2015
Long Term Purchase Commitment [Line Items]
Liabilities recorded for obligations	$ 0	$ 0
Rent expense	1,800,000	$ 1,800,000	$ 1,700,000
Inventories [Member]
Long Term Purchase Commitment [Line Items]
Purchase commitment	$ 50,700,000

XML

Commitments and Contingencies - Future minimum lease payments (Details) $ in Thousands	Dec. 30, 2017 USD ($)
Future minimum lease payments under operating leases
2018	$ 1,664
2019	935
2020	313
2021	54
2022	2
Thereafter	0
Total	$ 2,968

XML

Net Income Per Share (Details) - shares shares in Thousands	12 Months Ended
	Dec. 30, 2017	Dec. 31, 2016	Dec. 26, 2015
Reconciliation of the basic and diluted net income per share computations
Weighted average common shares outstanding used in basic net income per share calculation	25,334	24,655	24,059
Potential dilutive common stock equivalents, using treasury stock method	585	498	316
Weighted average shares used in diluted net income per share calculation	25,919	25,153	24,375

XML

Net Income Per Share - Textual (Details) - shares shares in Thousands	12 Months Ended
	Dec. 30, 2017	Dec. 31, 2016	Dec. 26, 2015
Earnings Per Share [Abstract]
Weighted average common share equivalents consisting of stock options included in the calculation of diluted net income per share	585	498	316

XML

Stockholders' Equity and Stock-Based Compensation - Textual (Details) - USD ($)		2 Months Ended	12 Months Ended
	May 23, 2017	Feb. 28, 2018	Dec. 30, 2017	Dec. 31, 2016	Dec. 26, 2015	Nov. 15, 2017	May 29, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock authorized			47,000,000	47,000,000
Common stock, par value per share			$ 0.001	$ 0.001
Shares of preferred stock authorized			3,000,000	3,000,000
Preferred stock, par value per share			$ 0.001	$ 0.001
Maximum amount of common stock approved to repurchase, Value							$ 20,000,000
Remaining shares available for future repurchase (in shares)			$ 23,001,000	$ 4,400,000	$ 4,397,000
Number of shares of common stock repurchased			1,065,848		111,050
Weighted average price per share			$ 25.33		$ 15.49
Cost of repurchase			$ 26,999,000		$ 1,721,000
Number of options granted			0	0	0
Closing stock price			$ 24.92
Intrinsic value of options exercised			$ 3,100,000	$ 2,700,000	$ 1,600,000
Fair value of options vested			300,000	700,000	1,500,000
Excess tax benefit			0	$ 1,000,000	$ 0
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation costs			$ 100,000
2005 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares of common stock authorized	1,000,000		8,292,594
Share-based compensation plan, extended throguh	2027
Employee Stock Purchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum percentage of salary withholdings			10.00%
Purchase price of common stock, percent			85.00%
Shares remaining for issuance under the ESPP			500,000
Shares purchased under the ESPP			122,298	212,619	125,504
Weighted average price of shares issued (in dollars per share)			$ 21.19	$ 14.29	$ 13.98
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average remaining amortization period for unrecognized compensation costs			1 month 6 days
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average remaining amortization period for unrecognized compensation costs			1 year 9 months
Shares per unit granted			1.7
Granted (in shares)			454,600	476,667
Unrecognized compensation costs			$ 12,500,000
Cancelled (in shares)			96,494	54,253
Restricted Stock Units (RSUs) [Member] | Key Employees [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)			454,600	476,667
Restricted Stock Units (RSUs) [Member] | Maximum [Member] | Key Employees [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Period of vesting			3 years
Restricted Stock Units (RSUs) [Member] | 2005 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)			772,820
Cancelled (in shares)			164,040
Performance-Based Restricted Stock Units (PSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)			122,050	67,500
Percent of granted shares that will vest if target stock price performance is achieved			66.70%
Maximum percent of granted shares that will vest if maximum stock price performance is achieved			100.00%
Cumulative maximum number of shares expected to vest for all measurement period			62,500
Cancelled (in shares)			61,100	6,667
Performance-Based Restricted Stock Units (PSUs) [Member] | Tranche One [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Period of vesting			1 year
Performance-Based Restricted Stock Units (PSUs) [Member] | Tranche Two [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Period of vesting			2 years
Performance-Based Restricted Stock Units (PSUs) [Member] | Tranche Three [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Period of vesting			3 years
Performance-Based Restricted Stock Units (PSUs) [Member] | 2005 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)			207,485
Cancelled (in shares)			103,870
Share Repurchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum amount of common stock approved to repurchase, Value						$ 50,000,000
Stock repurchase program, effective date			Nov. 20, 2017
Share Repurchase Plan [Member] | Subsequent Event [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock repurchase program completed month and year		2018-02
Number of shares of common stock repurchased		896,187
Weighted average price per share		$ 25.65
Cost of repurchase		$ 23,000,000

XML

Stockholders' Equity and Stock-Based Compensation - Share Repurchases (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 30, 2017	Dec. 26, 2015	Dec. 31, 2016
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Number of shares of common stock repurchased	1,065,848	111,050
Weighted average price per share	$ 25.33	$ 15.49
Total cost of repurchase	$ 26,999	$ 1,721
Amount available for repurchase at end of period	$ 23,001	$ 4,397	$ 4,400

XML

Stockholders' Equity and Stock-Based Compensation - Option Plans (Details) - shares	Dec. 30, 2017	May 23, 2017
2005 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares Authorized	8,292,594	1,000,000
2000 Employee Stock Option Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares Authorized	2,450,000
2000 Director Stock Option Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares Authorized	250,000
Accent Optical Technologies, Inc. Stock Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares Authorized	205,003

XML

Stockholders' Equity and Stock-Based Compensation - Employee Stock Purchase Plan Assumptions (Details) - Employee Stock Purchase Plan [Member]	12 Months Ended
	Dec. 30, 2017	Dec. 31, 2016	Dec. 26, 2015
Assumption of stock option's fair value
Expected life	6 months	6 months	6 months
Volatility	37.20%	38.70%	36.90%
Risk free interest rate	0.91%	0.44%	0.12%
Dividends	0.00%	0.00%	0.00%

XML

Stockholders' Equity and Stock-Based Compensation - Summary of Activity of Stock Options (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 30, 2017	Dec. 31, 2016	Dec. 26, 2015
Activity of stock option plans [Roll Forward]
Number of Shares Outstanding (Options), Beginning Balance (in shares)	440,545	1,059,471
Number of Shares Outstanding (Options), Exercised (in shares)	(223,364)	(442,339)
Number of Shares Outstanding (Options), Cancelled/Forfeited (in shares)	(855)	(176,587)	(94,012)
Number of Shares Outstanding (Options), Ending Balance (in shares)	216,326	440,545	1,059,471
Number of Shares Outstanding (Options), Exercisable (in shares)	215,620
Weighted average exercise price for stock option plans [Roll Forward]
Weighted Average Exercise Price, Beginning Balance (in dollars per share)	$ 15.06	$ 14.61
Weighted Average Exercise Price, Exercised (in dollars per share)	13.35	13.66
Weighted Average Exercise Price, Cancelled/Forfeited (in dollars per share)	16.63	15.83
Weighted Average Exercise Price, Ending Balance (in dollars per share)	16.82	$ 15.06	$ 14.61
Weighted Average Exercise Price, Exercisable (in dollars per share)	$ 16.81
Weighted Average Remaining Contractual Term, Outstanding	1 year 9 months 3 days	2 years 1 month 13 days	2 years 5 months 19 days
Weighted Average Remaining Contractual Term, Exercisable	1 year 9 months 3 days
Aggregate Intrinsic Value, Outstanding	$ 1,752	$ 4,405	$ 1,920
Aggregate Intrinsic Value, Exercisable	$ 1,748

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Stockholders' Equity and Stock-Based Compensation - Ranges of Outstanding and Exercisable Options (Details) - $ / shares	12 Months Ended
	Dec. 30, 2017	Dec. 31, 2016	Dec. 26, 2015
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Options Outstanding, Number Outstanding (in shares)	216,326	440,545	1,059,471
Options Outstanding, Weighted Average Remaining Contractual Life (Years)	1 year 9 months 3 days	2 years 1 month 13 days	2 years 5 months 19 days
Options Outstanding, Weighted Average Exercise Price (in dollars per share)	$ 16.82	$ 15.06	$ 14.61
Options Exercisable, Number Exercisable (in shares)	215,620
Options Exercisable, Weighted Average Exercise Price (in dollars per share)	$ 16.81
$12.98-$15.00 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercise Price, Lower Range Limit	12.98
Exercise Price, Upper Range Limit	$ 15.00
Options Outstanding, Number Outstanding (in shares)	23,383
Options Outstanding, Weighted Average Remaining Contractual Life (Years)	1 year 9 months 29 days
Options Outstanding, Weighted Average Exercise Price (in dollars per share)	$ 14.64
Options Exercisable, Number Exercisable (in shares)	23,383
Options Exercisable, Weighted Average Exercise Price (in dollars per share)	$ 14.64
$15.08-$15.65 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercise Price, Lower Range Limit	15.08
Exercise Price, Upper Range Limit	$ 15.65
Options Outstanding, Number Outstanding (in shares)	27,697
Options Outstanding, Weighted Average Remaining Contractual Life (Years)	1 year 4 months 13 days
Options Outstanding, Weighted Average Exercise Price (in dollars per share)	$ 15.62
Options Exercisable, Number Exercisable (in shares)	27,697
Options Exercisable, Weighted Average Exercise Price (in dollars per share)	$ 15.62
$15.74-$15.74 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercise Price, Lower Range Limit	15.74
Exercise Price, Upper Range Limit	$ 15.74
Options Outstanding, Number Outstanding (in shares)	3,333
Options Outstanding, Weighted Average Remaining Contractual Life (Years)	4 months 24 days
Options Outstanding, Weighted Average Exercise Price (in dollars per share)	$ 15.74
Options Exercisable, Number Exercisable (in shares)	3,333
Options Exercisable, Weighted Average Exercise Price (in dollars per share)	$ 15.74
$15.85-$15.85 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercise Price, Lower Range Limit	15.85
Exercise Price, Upper Range Limit	$ 15.85
Options Outstanding, Number Outstanding (in shares)	60,000
Options Outstanding, Weighted Average Remaining Contractual Life (Years)	2 years 2 months 12 days
Options Outstanding, Weighted Average Exercise Price (in dollars per share)	$ 15.85
Options Exercisable, Number Exercisable (in shares)	60,000
Options Exercisable, Weighted Average Exercise Price (in dollars per share)	$ 15.85
$16.00-$17.33 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercise Price, Lower Range Limit	16.00
Exercise Price, Upper Range Limit	$ 17.33
Options Outstanding, Number Outstanding (in shares)	31,700
Options Outstanding, Weighted Average Remaining Contractual Life (Years)	1 year 9 months 25 days
Options Outstanding, Weighted Average Exercise Price (in dollars per share)	$ 17.00
Options Exercisable, Number Exercisable (in shares)	31,700
Options Exercisable, Weighted Average Exercise Price (in dollars per share)	$ 17.00
$17.70-$18.08 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercise Price, Lower Range Limit	17.70
Exercise Price, Upper Range Limit	$ 18.08
Options Outstanding, Number Outstanding (in shares)	6,613
Options Outstanding, Weighted Average Remaining Contractual Life (Years)	1 year 6 months 18 days
Options Outstanding, Weighted Average Exercise Price (in dollars per share)	$ 17.92
Options Exercisable, Number Exercisable (in shares)	6,588
Options Exercisable, Weighted Average Exercise Price (in dollars per share)	$ 17.92
$18.22-$18.22 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercise Price, Lower Range Limit	18.22
Exercise Price, Upper Range Limit	$ 18.22
Options Outstanding, Number Outstanding (in shares)	3,600
Options Outstanding, Weighted Average Remaining Contractual Life (Years)	3 years 1 month 28 days
Options Outstanding, Weighted Average Exercise Price (in dollars per share)	$ 18.22
Options Exercisable, Number Exercisable (in shares)	3,449
Options Exercisable, Weighted Average Exercise Price (in dollars per share)	$ 18.22
$18.51-$18.51 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercise Price, Lower Range Limit	18.51
Exercise Price, Upper Range Limit	$ 18.51
Options Outstanding, Number Outstanding (in shares)	9,000
Options Outstanding, Weighted Average Remaining Contractual Life (Years)	3 years 1 month 20 days
Options Outstanding, Weighted Average Exercise Price (in dollars per share)	$ 18.51
Options Exercisable, Number Exercisable (in shares)	8,583
Options Exercisable, Weighted Average Exercise Price (in dollars per share)	$ 18.51
$18.79-$18.79 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercise Price, Lower Range Limit	18.79
Exercise Price, Upper Range Limit	$ 18.79
Options Outstanding, Number Outstanding (in shares)	1,000
Options Outstanding, Weighted Average Remaining Contractual Life (Years)	3 years 2 months 23 days
Options Outstanding, Weighted Average Exercise Price (in dollars per share)	$ 18.79
Options Exercisable, Number Exercisable (in shares)	887
Options Exercisable, Weighted Average Exercise Price (in dollars per share)	$ 18.79
$19.03-$19.03 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercise Price, Lower Range Limit	19.03
Exercise Price, Upper Range Limit	$ 19.03
Options Outstanding, Number Outstanding (in shares)	50,000
Options Outstanding, Weighted Average Remaining Contractual Life (Years)	1 year 1 month 17 days
Options Outstanding, Weighted Average Exercise Price (in dollars per share)	$ 19.03
Options Exercisable, Number Exercisable (in shares)	50,000
Options Exercisable, Weighted Average Exercise Price (in dollars per share)	$ 19.03
$12.98-$19.03 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercise Price, Lower Range Limit	12.98
Exercise Price, Upper Range Limit	$ 19.03
Options Outstanding, Number Outstanding (in shares)	216,326
Options Exercisable, Number Exercisable (in shares)	215,620

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Stockholders' Equity and Stock-Based Compensation - Restricted Stock Unit Activity (Details) - Restricted Stock Units (RSUs) [Member] - $ / shares	12 Months Ended
	Dec. 30, 2017	Dec. 31, 2016
Activity for RSUs [Roll Forward]
Number of units Beginning balance (in shares)	819,785	713,243
Number of units, Granted (in shares)	454,600	476,667
Number of units, Released (in shares)	(387,592)	(315,872)
Number of units, Cancelled (in shares)	(96,494)	(54,253)
Number of units, Ending balance (in shares)	790,299	819,785
Weighted Average Fair Value for RSUs [Roll Forward]
Weighted Average Fair Value, Beginning balance (in dollars per share)	$ 16.79	$ 15.99
Weighted Average Fair Value, Granted (in dollars per share)	27.12	17.45
Weighted Average Fair Value, Released (in dollars per share)	16.81	16.05
Weighted Average Fair Value, Cancelled (in dollars per share)	19.01	16.29
Weighted Average Fair Value, Ending balance (in dollars per share)	$ 22.46	$ 16.79

XML

Stockholders' Equity and Stock-Based Compensation - Performance Stock Units Activity (Details) - Performance-Based Restricted Stock Units (PSUs) [Member] - $ / shares	12 Months Ended
	Dec. 30, 2017	Dec. 31, 2016	Dec. 26, 2015
Activity for PSUs [Roll Forward]
Number of units Beginning balance (in shares)	107,500	60,000
Number of units, Granted (in shares)	122,050	67,500
Number of units, Released (in shares)	(38,500)	(13,333)
Number of units, Cancelled (in shares)	(61,100)	(6,667)
Number of units, Ending balance (in shares)	129,950	107,500	60,000
Weighted Average Fair Value for PSUs [Roll Forward]
Weighted Average Fair Value, Beginning balance (in dollars per share)	$ 9.94	$ 12.23
Weighted Average Fair Value, Granted (in dollars per share)	20.51	8.52	$ 12.23
Weighted Average Fair Value, Released (in dollars per share)	10.41	12.03
Weighted Average Fair Value, Cancelled (in dollars per share)	19.41	12.03
Weighted Average Fair Value, Ending balance (in dollars per share)	$ 15.60	$ 9.94	$ 12.23

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Stockholders' Equity and Stock-Based Compensation - Performance Stock Units Valuation Assumptions (Details) - Performance-Based Restricted Stock Units (PSUs) [Member] - $ / shares	12 Months Ended
	Dec. 30, 2017	Dec. 31, 2016	Dec. 26, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Grant Date Fair Values Per Share (in dollars per share)	$ 20.51	$ 8.52	$ 12.23
Expected Dividend	0.00%	0.00%	0.00%
Risk free interest rate		0.92%
Range of risk-free interest rates, minimum	1.74%		0.25%
Range of risk-free interest rates, maximum	1.84%		1.10%
Range of expected volatilities for peer group, minimum	22.00%	22.00%	23.00%
Range of expected volatilities for peer group, maximum	66.00%	93.00%	65.00%
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Grant Date Fair Values Per Share (in dollars per share)	$ 14.57
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Grant Date Fair Values Per Share (in dollars per share)	$ 26.75

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Stockholders' Equity and Stock-Based Compensation - Stock Option Plans Activity Including Options, RSUs and PSUs (Details) - shares	12 Months Ended
	Dec. 30, 2017	Dec. 31, 2016	Dec. 26, 2015
Activity of stock option plans including options and RSUs [Roll Forward]
Additional Shares Authorized, (in shares)	1,000,000	0	0
Options cancelled (in shares)	855	176,587	94,012
Options - expired plan shares (in shares)	0	(116,192)	(1,800)
Stock Options, RSUs and PSUs [Member]
Activity of stock option plans including options and RSUs [Roll Forward]
Number of Shares Outstanding (Options), Beginning Balance (in shares)	1,334,581	1,916,589	2,464,082
Number of Shares Outstanding (Options), Ending Balance (in shares)	1,874,765	1,334,581	1,916,589
Restricted Stock Units - Equivalent Shares [Member]
Activity of stock option plans including options and RSUs [Roll Forward]
Granted (in shares)	(772,820)	(810,334)	(860,980)
Cancelled (in shares)	164,040	92,230	202,356
RSUs - shares issued to satisfy tax withholding obligations (in shares)	251,724	179,117	120,919
Performance Stock Units - Equivalent Shares [Member]
Activity of stock option plans including options and RSUs [Roll Forward]
Granted (in shares)	(207,485)	(114,750)	(102,000)
Cancelled (in shares)	103,870	11,334	0

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Stockholders' Equity and Stock-Based Compensation - Stock-based Compensation Expense (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 30, 2017	Dec. 31, 2016	Dec. 26, 2015
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense related to employee stock options and employee stock purchases	$ 8,819	$ 7,666	$ 6,248
Cost of products [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense related to employee stock options and employee stock purchases	842	403	274
Cost of service [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense related to employee stock options and employee stock purchases	616	509	309
Research and development [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense related to employee stock options and employee stock purchases	1,720	1,408	1,036
Selling [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense related to employee stock options and employee stock purchases	2,323	2,046	1,881
General and administrative [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense related to employee stock options and employee stock purchases	$ 3,318	$ 3,300	$ 2,748

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Defined Benefit Pension Plan (Details) - Pension Plans, Defined Benefit [Member] - USD ($) $ in Millions	Dec. 30, 2017	Dec. 31, 2016	Dec. 26, 2015
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	$ 0.3	$ 0.2	$ 0.2
Net funding deficiency of the Benefit Plan	$ 0.5	$ 0.4	$ 0.3

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Income Taxes - Income (Loss) Before Provision for Income Taxes (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 30, 2017	Dec. 31, 2016	Dec. 26, 2015
Income Tax Disclosure [Abstract]
Domestic	$ 34,238	$ 25,372	$ 178
Foreign	9,060	3,763	5,390
Income before income taxes	$ 43,298	$ 29,135	$ 5,568

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Income Taxes - Provision (Benefit) for Income Taxes (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 30, 2017	Dec. 31, 2016	Dec. 26, 2015
Current:
Federal	$ 3,250	$ 697	$ 148
State	9	85	3
Foreign	2,998	2,111	2,266
Total current	6,257	2,893	2,417
Deferred:
Federal	6,314	(16,641)	190
State	53	(320)	3
Foreign	472	(832)	53
Total deferred	6,839	(17,793)	246
Provision (benefit) for income taxes	$ 13,096	$ (14,900)	$ 2,663

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Income Taxes - Components of Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands	Dec. 30, 2017	Dec. 31, 2016
Deferred tax assets:
Reserves and accruals	$ 5,797	$ 11,043
Deferred revenue	240	349
Shared based compensation	1,483	2,590
Tax credit carry-forwards	9,669	10,112
Net operating losses	9,755	8,434
Depreciation & amortization	(1,525)	(2,898)
Other	207	(1,252)
Total deferred tax assets	25,626	28,378
Less: Valuation allowance	(13,702)	(10,980)
Total deferred tax assets net of valuation allowance	11,924	17,398
Deferred tax liabilities:
Depreciation & amortization	(12)	(6)
Other	(167)	(14)
Total deferred tax liabilities	(179)	(20)
Net deferred tax assets	$ 11,745	$ 17,378

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Income Taxes - Textual (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 29, 2018	Dec. 30, 2017	Dec. 31, 2016	Dec. 26, 2015	Dec. 27, 2014
Operating Loss Carryforwards [Line Items]
Change in amount of operating loss carryforwards valuation allowance		$ 1,500	$ (25,800)
Increase in valuation allowance for deferred tax assets		$ 300
Federal corporate tax rate		35.00%
Provisional estimate for income taxes		$ 600
Maximum amount company recognize from unrecognized tax benefit		7,151	$ 6,477	$ 6,961	$ 6,442
Unrecognized tax benefits that would impact effective tax rate if recognized		4,000
Scenario, Forecast [Member]
Operating Loss Carryforwards [Line Items]
Federal corporate tax rate	21.00%
California [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards		25,600
State research and experimental tax credit carryforward		8,900
Other States [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards		3,000
Foreign Tax Authority [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards		35,000
Federal [Member]
Operating Loss Carryforwards [Line Items]
State research and experimental tax credit carryforward		$ 7,000

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Income Taxes - Income Tax Rate Reconciliation (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 30, 2017	Dec. 31, 2016	Dec. 26, 2015
Income Tax Expense Benefit Continuing Operations Income Tax Reconciliation [Abstract]
Income taxes computed at U.S. statutory rate	$ 15,153	$ 10,197	$ 1,949
State income taxes	227	223	28
Foreign tax rate differential	794	3,502	342
Change in valuation allowance	1,490	(25,738)	1,648
Equity compensation	(1,803)	380	311
Tax credits	(2,336)	(3,191)	(1,834)
Domestic production activities deduction	(608)	(354)
Liabilities for uncertain tax positions	18	67	74
Other, net	161	14	145
Provision (benefit) for income taxes	$ 13,096	$ (14,900)	$ 2,663

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Income Taxes - Reconciliation of Unrecognized Tax Benefits (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 30, 2017	Dec. 31, 2016	Dec. 26, 2015
Reconciliation Of Unrecognized Tax Benefits Excluding Amounts Pertaining To Examined Tax Returns Roll Forward
Unrecognized tax benefits - beginning of the period	$ 6,477	$ 6,961	$ 6,442
Gross increases-tax positions in prior period	32	23	127
Gross decreases-tax positions in prior period		(1,193)	(306)
Gross increases-current-period tax positions	723	686	698
Lapse of statute of limitations	(81)		0
Unrecognized tax benefits - end of the period	$ 7,151	$ 6,477	$ 6,961

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Segment, Geographic, Product and Significant Customer Information - Textual (Details)	12 Months Ended
	Dec. 30, 2017 segment
Segment Reporting [Abstract]
Number of operating segments	1

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Segment, Geographic, Product and Significant Customer Information - Revenue Net (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 30, 2017	Dec. 31, 2016	Dec. 26, 2015
Net revenues:
Total net revenues	$ 258,621	$ 221,129	$ 187,367
South Korea [Member]
Net revenues:
Total net revenues	94,082	44,735	30,572
China [Member]
Net revenues:
Total net revenues	29,826	43,460	17,373
Singapore [Member]
Net revenues:
Total net revenues	21,810	37,096	17,395
United States [Member]
Net revenues:
Total net revenues	33,983	29,887	36,720
Taiwan [Member]
Net revenues:
Total net revenues	20,147	27,189	46,715
Japan [Member]
Net revenues:
Total net revenues	41,979	26,604	31,140
Other [Member]
Net revenues:
Total net revenues	$ 16,794	$ 12,158	$ 7,452

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Segment, Geographic, Product and Significant Customer Information - Long-lived Tangible Assets (Details) - USD ($) $ in Thousands	Dec. 30, 2017	Dec. 31, 2016
Long-lived tangible assets:
Total long-lived tangible assets	$ 44,810	$ 44,226
United States [Member]
Long-lived tangible assets:
Total long-lived tangible assets	43,427	42,688
Taiwan [Member]
Long-lived tangible assets:
Total long-lived tangible assets	510	818
South Korea [Member]
Long-lived tangible assets:
Total long-lived tangible assets	576	554
Japan [Member]
Long-lived tangible assets:
Total long-lived tangible assets	60	57
All Other [Member]
Long-lived tangible assets:
Total long-lived tangible assets	$ 237	$ 109

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Segment, Geographic, Product and Significant Customer Information - Product Revenues (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 30, 2017	Dec. 31, 2016	Dec. 26, 2015
Segment Reporting Information [Line Items]
Products	$ 214,877	$ 185,066	$ 146,945
Automated Systems [Member]
Segment Reporting Information [Line Items]
Products	151,401	127,378	102,386
Integrated Systems [Member]
Segment Reporting Information [Line Items]
Products	42,183	43,846	31,579
Materials Characterization Systems [Member]
Segment Reporting Information [Line Items]
Products	$ 21,293	$ 13,842	$ 12,980

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Segment, Geographic, Product and Significant Customer Information - Customers More Than 10% of Accounts Receivable (Details) - Accounts Receivable [Member] - Credit Concentration Risk [Member]	12 Months Ended
	Dec. 30, 2017	Dec. 31, 2016	Dec. 26, 2015
Taiwan Semiconductor Manufacturing Company Limited [Member]
Customers accounted for 10% or more of total accounts receivable
Customers accounted for 10% or more of total accounts receivable		20.00%	26.00%
Samsung Electronics Co. Ltd. [Member]
Customers accounted for 10% or more of total accounts receivable
Customers accounted for 10% or more of total accounts receivable	13.00%	14.00%
Micron Technology, Inc. [Member]
Customers accounted for 10% or more of total accounts receivable
Customers accounted for 10% or more of total accounts receivable	18.00%	12.00%
Intel Corporation [Member]
Customers accounted for 10% or more of total accounts receivable
Customers accounted for 10% or more of total accounts receivable		11.00%
Toshiba Corporation [Member]
Customers accounted for 10% or more of total accounts receivable
Customers accounted for 10% or more of total accounts receivable	31.00%	10.00%	27.00%

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Segment, Geographic, Product and Significant Customer Information - Customers More Than 10% of Revenues (Details) - Sales Revenue, Net [Member] - Customer Concentration Risk [Member]	12 Months Ended
	Dec. 30, 2017	Dec. 31, 2016	Dec. 26, 2015
Micron Technology, Inc. [Member]
Net revenues:
Customers accounted for 10% or more of total revenue	12.00%	20.00%	16.00%
Intel Corporation [Member]
Net revenues:
Customers accounted for 10% or more of total revenue	11.00%	18.00%
SK Hynix [Member]
Net revenues:
Customers accounted for 10% or more of total revenue	13.00%	15.00%	11.00%
Taiwan Semiconductor Manufacturing Company Limited [Member]
Net revenues:
Customers accounted for 10% or more of total revenue		10.00%	19.00%
Samsung Electronics Co. Ltd. [Member]
Net revenues:
Customers accounted for 10% or more of total revenue	26.00%		13.00%
Toshiba Corporation [Member]
Net revenues:
Customers accounted for 10% or more of total revenue	11.00%		10.00%

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Schedule II - Valuation and Qualifying Accounts (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 30, 2017	Dec. 31, 2016	Dec. 26, 2015
Allowance for Doubtful Accounts Receivable [Member]
Valuation And Qualifying Accounts Disclosure [Line Items]
Balance at beginning of period	$ 73	$ 150	$ 253
Additions to Allowance	78		10
Charges Utilized/Write-offs	(25)	(77)	(113)
Balance at end of period	126	73	150
Valuation Allowance for Deferred Tax Assets [Member]
Valuation And Qualifying Accounts Disclosure [Line Items]
Balance at beginning of period	10,980	36,786	35,835
Additions to Allowance	2,984	1,643	951
Charges Utilized/Write-offs	(262)	(27,449)
Balance at end of period	$ 13,702	$ 10,980	$ 36,786