Welcome to the Nanometrics First Quarter 2009 Financial Results Conference Call. Before we get started, I would like to call your attention to the following Safe Harbor statement. This conference call contains certain forward-looking statements within the meaning of Federal securities laws. These statements are based on management's current expectations and involve risks and uncertainties that may cause actual results to differ materially from those described in the forward-looking statements. Factors that could cause such differences include, but they are not limited to, changes in demand for the Company's products, changes in the Company's ability to ship its products in the timely manner, changes in business or economic conditions and the additional risk factors and cautionary statements set forth in the Company's Form 10-Q for the quarter ending March 28, 2009 and in the other reports, which the Company files with the Securities and Exchange Commission and incorporates herein by reference. Leading the call today will be Tim Stultz, President and CEO of Nanometrics. A Q&A session will be held at the end of the call. Until that time, all participants will be in a listen-only mode. I would now like to turn the call over to Dr. Tim Stultz. Please proceed, sir.

Thank you for joining us for Nanometrics first quarter 2009 conference call. With me today is Jim Moniz, our Chief Financial Officer, who joined us in February of this year. Jim will be reviewing our financial performance in more detail following my prepared remarks. Over the last several months, spend in our semiconductor capital equipment dropped severely, and along with the rest of our sector, we experienced a sharp decline in revenues. During this period, our customers have had to adjust to the lack of visibility, market uncertainty, and reduced consumer spending, while at the same time accessing the effects, changes in the global economic environment were having on their respective businesses. These customers in turn took a prudent wait and see approach, holding back on spending to expand capacity or capability, effectively paralyzing normal industry capital procurement processes. While we did anticipate declines in spending, this trough revenue quarter is unprecedented in its severity, with significant order push outs and cancellations. Throughout this difficult period, we continued to focus on our core business elements, while executing well on our cost reduction initiatives and efforts to align operations with the current economic and business climate. At the same time, we remained steadfast in our commitment to invest in new products and applications, which will be the fuel for growth when steady resumes. For the fifth straight quarter, we reduced our ongoing operating expenses, and drove down our cash breakeven level. This was achieved through a combination of restructuring and consolidation of operations, head count reductions, plant shut downs, renegotiation of contracts for Company's services, and conservative management of operating expenses. Assuming a normalized cash based gross margin, we have meaningfully exceeded our original goal of driving cash breakeven revenues to below $25 million. With Q1 breakeven at just over $20…

Nanometrics' press release containing first quarter fiscal 2009 results was sent out by Business Wire today April 30 around 1 P.M. Pacific Time. The press release may also be found on our website at nanometrics.com. Also on our website, a reconciliations to non-GAAP figures referred to in our prepared remarks, such as ongoing cash-based operating expenses and cash-based revenue breakeven. As Tim mentioned in his remarks, while we did anticipate declines in spending, this trough revenue quarter is unprecedented in its severity with significant order push outs and cancellations. First quarter revenues at $10.1 million were down 51% from the previous quarter and were down 71% from the first quarter of fiscal year 2008. Revenue by geographic region is based upon the shift to or first-in-use destination. During the quarter, the break down was Japan at 47%, U.S. at 23%, Europe at 17% and rest of world at 13%. Revenue by product type was materials characterization at 32%, standalone and integrated metrology at 17% and service at 51%. Gross margin in the first quarter was 28.3% compared to 42.1% in the previous quarter and 45.6% in the first quarter of fiscal year 2008. The lower level of gross margin was primarily the result of factory under absorption due to the short decrease in sales volume. Service gross margins, however, remained above 30% for the third straight quarter. Our operating expenses in the first quarter were $11.9 million compared with $12.1 million in the previous quarter and $16.8 million in the first quarter of 2008. There was $0.7 million of restructuring cost in the first quarter, as well as $0.4 million for amortization of intangible assets. There was also a charge of $0.4 million in the first quarter for additional reserves for bad debt expense driven by a customer whose collections…

(Operator Instructions). Your first question comes from the line of Wen Jiang with Oppenheimer. Please proceed.

First question is regarding the next two quarters, you're mentioning about the possibility of new shipments on orders canceled and new orders. Could you elaborate on those orders those in which categories and to which type of customers?

So the new orders, the ones that were canceled and the ones that were pushed out and the ones that are now reemerging in this quarter are all in the areas of front-end primarily in the technology purchasing areas and our standalone tools.

Okay, mostly in the standalone tools. Okay. In which area, memories regions and areas?

So we are getting increased business activity both in logic and memory areas.

The next question is regarding inventory reductions. Obviously, the inventory has been continually pretty high in the last several quarters, and it can be a major resource for working capital management. So you mentioned about shipping some of the systems that's currently in the inventory. What do you think realistically can we reduce the inventory in the next couple of quarters?

Actually there are important thing that we also look at, but I can't give you guidance and I am not going to give you a number, other than to say, the investments we made in the product demo tools and the last minute customer push outs were the main contributions to the net increase in inventory. We do expect that that inventory will turn in the second quarter and that inventory will be a source of cash for us in the upcoming next few quarters.

Last question is regarding some of the products fronts. Could you give us some updates on your overlay product evaluations and also the OCD product evaluations at customer sites?

We are actually seeing some very nice reception to all of our product areas. The two areas that I would point to that probably are amongst the most exciting then I think will drive most of our growth in the OCD area. Then with our Lynx platform as a metrology tool with a unique architecture that gives the lowest cost of ownership and the highest productivity. We have head to head evaluations underway and also some of that are being concluded in overlay, thin film, OCD and integrated metrology. We are feeling very good about the position we are in with each of those key customers.

Your next question comes from the line of Weston Twigg with Pacific Crest. Please proceed.

Just a couple of questions here. One, on the cash side, if I heard correctly, cash used for operating activities was $7.3 million and I am wondering if you had the same type of revenue level next quarter with some of the ongoing cost reductions, what would the cash level be next quarter.

Again, Weston, I would say that even at the same level of revenue next quarter or this quarter, as you say, Q2 versus Q1, I would not expect to see the same amount of cash decrease as we saw in the first quarter. The inventory that we have, we did expect to convert to revenue and to drive down into increased cash a little bit in the first quarter and we will see that in second quarter.

I guess in terms of the operating activities, the cash used for that, I assume that would be lower next quarter with some of the ongoing efforts. So at the same revenue level that would be less than $7.3 million next quarter?

I would say, yes, that will be less.

Okay. Then along the same vein, new breakeven level, I know you said that was around, let's say, over 20 million in this quarter, is there a chance that you can get breakeven below $20 million?

I believe so, yes. We've already taken some steps in Q1 and we've got some additional activities in Q2 reducing some of our fixed costs and fully expect the breakeven numbers to come even lower.

Okay. Then back to that Lynx platform, just as a follow up, I am wondering how many Lynx tools are now placed in the field. How many customers do you have or I guess how many of those Lynx platforms have been revenued?

I won't give you a specific cal, but we have multiple tools that are more than one customer site there has been follow-on orders and they have been revenued.

Okay. To the other thing, so product revenue sounds like with orders coming in, we could expect that to a bit a higher without giving guidance for next quarter. On the service side, there was a bit of a drop. Maybe you can't afford, but why was the drop relatively down from 7.6 million in December down to 5.1? And should we expect that to be down in Q2?

So that there are two components of that. As you know, when we report service, that includes both upgrades and our core service. Although we saw continued strength in the upgrade business. We actually had a very high quarter in upgrades in Q4 and that represents one of the primary adjustments. Our core service is being pushed a little bit, but it's actually going up pretty well in this environment.

Okay. Is there an upgrade cycle that you would expect to maybe help over the next couple of quarters?

Yes. I think I am pleasantly surprised and very happy with our upgrade business. It may be a little bit lumpy based on different customer levels of granularity. I think that's as an area that has likes and will continue to contribute not only to our revenues, but nicely to our gross margins.

Your next question comes from the line of Bill Sarix with Reveno Wood Capital. Please proceed.

Jim, you mentioned a charge in the quarter related to the Korean facility. How big do you think that will be?

We are determining that now. I don't have the number actually at this time Bill.

And the building, have you sold the building or is it up for sale?

We actually just took the action in the last few weeks, so we were now going out to see what the building would be appraised for. So I don't have a concrete number for what that would be. We do believe that there will be a source of cash. Although I don't think we should count on that for the second quarter.

Is it worth more than the charge?

As the building, if I knew the appraisal I could answer that question, but since I don't I can't.

What do you think?

What do I think?

Yes.

I think I would be very smart not to answer that question because I don't know, honestly.

Okay. Then finally, a change in treatment in currency due to the change in the categorization of the loans, that 1.3 million hit that you have to take is not in your EBITDA analysis I take it?

No. It's not.

Okay. So that's an additional 1.3 million non-cash item that existed in this quarter, correct?

If I breakout the 1.3 million, because we actually did transfer some cash back from Japan to the U.S., not all of the inter-company loans have been settled, and not all will be settled this year. Majority of that 1.3 million was a recognized translation loss, but not a cash loss.

Right. Okay. So actually the EPS, the cash EPS is a little bit better than what you are showing?

Yes.

(Operator Instructions). At this time, we have no further questions. I would like to turn the call back over to Mr. Tim Stultz for any closing remarks. Sir?

Thank you. I want to once again give special recognition and thanks to the extraordinary efforts and contributions of our employees. It's been a difficult time and they are doing a terrific job, for the continued support of our investors, and express my appreciation to the Board and our management team for their help and guidance during these highly challenging times. I want to thank you once again for calling in. We look forward to updating you on our second quarter results at the next conference call. Operator: Thank you for your participation in today's conference. This concludes the presentation. You many now disconnect. Have a great day.