<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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 0-21970
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MATTSON TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 77-0208119
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
3550 WEST WARREN AVENUE
FREMONT, CALIFORNIA 94538
(Address of principal executive offices) (Zip Code)
(510) 657-5900
(Registrant's telephone number, including area code)
----------------------
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 X No
----- -----
Number of shares of common stock outstanding as of MAY 10, 1996: 13,864,110
<PAGE>
PART I -- FINANCIAL INFORMATION
1. FINANCIAL STATEMENTS
MATTSON TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
(unaudited)
ASSETS
<TABLE>
<CAPTION>
MAR. 31, DEC. 31,
1996 1995
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 25,751 $ 14,310
Short-term investments 14,019 27,861
Accounts receivable, net 19,126 13,988
Inventories 12,446 10,839
Prepaid expenses and other current assets 3,196 2,440
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Total current assets 74,538 69,438
Property and equipment, net 6,968 4,651
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$ 81,506 $ 74,089
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,494 $ 3,887
Accrued liabilities 12,354 9,126
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Total current liabilities 16,848 13,013
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Shareholders' equity:
Common stock 55,951 55,898
Deferred compensation (60) (73)
Net unrealized loss on investments 12 -
Cumulative translation adjustments (26) (16)
Retained earnings 8,805 5,267
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Total shareholders' equity 64,658 61,076
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$ 81,506 $ 74,089
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</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
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MATTSON TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
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MAR. 31, APR. 2,
1996 1995
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<S> <C> <C>
Net sales $ 22,002 $ 9,437
Cost of sales 9,181 4,532
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Gross profit 12,821 4,905
Operating expenses:
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Research, development and engineering 2,648 1,034
Selling, general and administrative 5,266 1,896
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Total operating expenses 7,914 2,930
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Income from operations 4,907 1,975
Interest and other income 610 347
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Income before income taxes 5,517 2,322
Tax provision 1,979 642
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Net income $ 3,538 $ 1,680
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Net income per share $ 0.23 $ 0.12
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--------- ---------
Shares used in computing net income per share 15,276 13,962
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</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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MATTSON TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
MAR. 31, APR. 2,
1996 1995
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,538 $ 1,680
Adjustments to reconcile net income to net cash provided by (used in)
operating activities
Depreciation and amortization 296 81
Deferred compensation related to stock options 13 14
Changes in assets and liabilities:
Accounts receivable (5,138) 444
Inventories (2,643) (1,112)
Prepaid expenses and other current assets (756) (190)
Accounts payable 607 307
Accrued liabilities 3,228 813
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Net cash provided by (used in) operating activities (855) 2,037
Cash flows from investing activities:
Acquisition of property and equipment (1,577) (227)
Purchases of short-term investments (5,961) (3,555)
Sales and maturities of short-term investments 19,791 1,048
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Net cash provided by (used in) investing activities 12,253 (2,734)
Cash flows from financing activities:
Proceeds from the issuance of Common Stock, net 53 19
--------- ---------
Effect of exchange rate changes on cash and cash equivalents (10) -
--------- ---------
Net increase (decrease) in cash and cash equivalents 11,441 (678)
Cash and cash equivalents, beginning of period 14,310 12,617
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Cash and cash equivalents, end of period $ 25,751 $ 11,939
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</TABLE>
Supplemental disclosure of non-cash operating activities:
During the first three months of 1996 and 1995, inventory totaling $1 million
and $465,000 respectively was capitalized and transferred to property and
equipment.
See accompanying notes to condensed consolidated financial statements.
4
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MATTSON TECHNOLOGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been included.
The financial statements should be read in conjunction with the audited
financial statements included in the Company's Annual Report for the year ended
December 31, 1995.
The results of operations for the three month period ended March 31, 1996 are
not necessarily indicative of results that may be expected for the entire year
ending December 31, 1996.
NOTE 2 BALANCE SHEET DETAIL (IN THOUSANDS):
<TABLE>
<CAPTION>
MAR. 31, DEC. 31,,
1996 1995
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<S> <C> <C>
Inventories:
Purchased parts and raw materials $ 6,043 $ 5,227
Work-in-process 5,829 4,070
Finished goods 108 1,072
Evaluation systems 466 470
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$ 12,446 $ 10,839
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Accrued liabilities:
Warranty reserve $ 2,747 $ 2,384
Accrued compensation and benefits 2,656 2,270
Income taxes 3,199 1,543
Commissions 1,353 675
Deferred income 993 591
Other 1,406 1,663
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$ 12,354 $ 9,126
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</TABLE>
5
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
OVERVIEW
Mattson Technology, Inc. ("Mattson" or the "Company") designs, manufactures and
markets advanced fabrication equipment to semiconductor manufacturers worldwide.
The Company began operations in 1989 and shipped its first photoresist removal
product, the Aspen Strip, in 1991. The Company's current product line is based
on a modular Aspen platform which accommodates two process chambers supporting
increased throughput. The Company currently offers Strip, CVD and RTP processes
for this platform.
The Company has derived substantially all of its sales from Aspen Strip and CVD
systems. In addition, the Company derives sales from spare parts and
maintenance services.
The Company has experienced rapid growth and there can be no assurance that the
Company will be able to continue sales growth or profitability. Future results
will depend on a variety of factors, including the timing of significant orders,
the ability of the Company to bring new systems to market, the timing of new
product releases by the Company's competitors, patterns of capital spending by
the Company's customers, market acceptance of new and/or enhanced versions of
the Company's systems, changes in pricing by the Company, its competitors,
customers, or suppliers, the mix of products sold and the cyclicality in the
semiconductor industry and the markets served by the Company's customers. The
Company is increasing its expense levels to support growth. As a result, the
Company is dependent upon continuous increases in sales in order to maintain
profitability. If the Company's sales do not increase, the expected higher
level of operating expenses could materially and adversely affect the financial
results of the Company.
FORWARD LOOKING STATEMENTS
This report on Form 10-Q contains forward looking statements regarding, among
other matters, the Company's future strategy, product development plans, and
productivity gains and growth. The forward looking statements are made pursuant
to the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Forward looking statements address matters which are subject to a number
of risks and uncertainties. In addition to the general risks associated with
the development of complex technology, future results of the Company will depend
on a variety of factors as described herein and in the Company's Annual Report
on Form 10-K and other filings with the Securities and Exchange Commission.
6
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RESULTS OF OPERATIONS
The following table sets forth the statement of income data of the Company
expressed as a percentage of net sales for the period indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------
MAR. 31, APR. 2,
1996 1995
---- ----
<S> <C> <C>
Net sales 100% 100%
Cost of sales 42% 48%
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Gross margin 58% 52%
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Operating expenses:
Research, development and engineering 12% 11%
Selling, general and administrative 24% 20%
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Total operating expenses 36% 31%
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Income from operations 22% 21%
Income before income taxes 25% 25%
Net income 16% 18%
</TABLE>
NET SALES
Net sales for the first quarter of 1996 increased 133% to $22.0 million from
$9.4 million for the first quarter of 1995. Net sales increased as a result of a
70% increase in unit shipments and a 34% increase in average selling prices
(ASP's). Sales to date consist principally of single and dual chamber Aspen
Strip and CVD systems and to a lesser extent, spare parts and service revenue.
Higher ASP's have resulted primarily from increasing sales of the Company's dual
chamber Aspen Strip systems and, to a lesser extent, sales of the Aspen ICP
Strip and CVD systems.
International sales, which are predominantly to customers based in Japan and the
Pacific Rim (which includes Taiwan, Singapore and Korea), accounted for 87% and
98% of net sales for the first quarter of 1996 and 1995 respectively. All sales
are denominated in U.S. dollars. The Company's operating results could be
materially and adversely affected by any loss of business from, the cancellation
of orders by, or decreases in prices of systems sold through Marubeni. The
Company anticipates that international sales will continue to account for a
significant portion of 1996 total net sales due primarily to orders from
customers in Japan and the Pacific Rim.
GROSS MARGIN
The Company's gross margin for the first quarter of 1996 increased to 58% from
52% for the first quarter of 1995. The increase was due to an increase in gross
margin on shipments through Marubeni as a result of the 1995 joint venture
agreement. In addition, gross margin increased as a result of increases in
volume which resulted in improved economies of scale, and a sales mix shift to
higher ASP products.
The Company's gross margin will continue to be affected by a variety of factors.
The Company's gross margin on international sales, other than sales through
Marubeni, is substantially the same as domestic sales. Sales to Marubeni
typically carry a lower gross margin as Marubeni is primarily responsible for
sales and support costs in Japan. As a result of the 1995 joint venture
agreement with Marubeni, gross margins increased in the first quarter of 1996 on
sales through Marubeni. However, the Company also incurred additional research,
development and engineering and marketing expenses primarily through the newly
established Japanese subsidiary, Mattson Technology Center K.K. ("MTC").
7
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Although the Company has not offered substantial discounts on its systems to
date, the Company may face discounting pressures in the future which could
adversely affect gross margins. The Company's reliance on outside vendors
generally, and a sole or a limited group of suppliers in particular, involves
several risks, including a potential inability to obtain an adequate supply of
required components and reduced control over pricing and timely delivery of
components. Any inability to obtain adequate deliveries or any other
circumstance that would require the Company to seek alternative sources of
supply or to manufacture such components internally could delay the Company's
ability to ship its systems and could have a material adverse effect on the
Company, including an increase in the Company's cost of sales and therefore an
adverse impact on gross margin. In addition, new system introductions and
enhancements may also have an adverse effect on gross margin due to the
inefficiencies associated with manufacturing of new product lines.
RESEARCH, DEVELOPMENT AND ENGINEERING
Research, development and engineering expenses for the first quarter of 1996
were $2.6 million, or 12% of net sales, as compared to $1.0 million, or 11%, for
the first quarter of 1995. The increase in expenses for the first quarter of
1996 was primarily due to salaries and related expenses which increased to $1.3
million from $0.5 million for the first quarter of 1995 and engineering project
materials which increased to $0.5 million from $0.2 million for the first
quarter of 1995. The increase in salaries and related expenses was due to
hiring additional employees required to support the Company's growth. The
increase in engineering project materials expense was due to ongoing product
development. Expenses also increased due to the Company's joint venture in
Japan. The Company believes that substantial investment in research and
development is critical to maintaining a strong technological position in the
industry and therefore expects research and development expenses to continue to
increase in the foreseeable future.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses for the first quarter of 1996 were
$5.3 million, or 24% of net sales, as compared to $1.9 million, or 20%, for the
first quarter of 1995. The increase in expenses for the first quarter of 1996
was primarily due to salaries, commissions and related expenses which increased
to $3.4 million from $1.4 million for the first quarter of 1995. The increase
in salaries, commissions and related expenses was due to the increase in sales
and hiring additional employees required to support the Company's growth.
Expenses also increased due to the Company's joint venture in Japan. The
Company expects selling, general and administrative expenses to continue to
increase in the foreseeable future.
PROVISION FOR INCOME TAXES
The Company provided income taxes at the expected annual rate of 36% and 28% in
1996 and 1995 respectively. The Company's provision for income taxes in 1995
reflected utilization of tax loss carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operations during the first three months of 1996 was $0.9
million, compared to $2.0 million of net cash provided by operations during the
first three months of 1995. Net cash used in operations during the first three
months of 1996 was primarily attributable to increases in accounts receivable
and inventories of $5.1 and $2.6 million respectively offset by net income of
$3.5 million and increases in accrued liabilities of $3.2 million.
Net cash provided by investing activities during the first three months of 1996
was $12.2 million, compared to $2.7 million used in investing activities during
the first three months of 1995. Investing activities during the first three
months of 1996 consisted primarily of purchases and maturities of short-term
investments and acquisition of fixed assets.
The Company believes that existing cash and short-term investment balances along
with anticipated cash flows from operations will be sufficient to meet the
Company's cash requirements during the next twelve months. However,
8
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depending upon its rate of growth and profitability, the Company may require
additional equity or debt financing to meet its working capital requirements or
capital equipment needs. There can be no assurance that additional financing
will be available when required or, if available, will be on terms satisfactory
to the Company.
9
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PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit 27 (Electronic filing only)
(b) Reports on Form 8-K
None.
10
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SIGNATURES
Pursuant to the requirements 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.
MATTSON TECHNOLOGY, INC.
Date: May 10, 1996 /s/ Richard S. Mora
--------------------------------------
Richard S. Mora
Vice President of Finance
and Chief Financial Officer
(as principal financial officer
and on behalf of Registrant)
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 25,751
<SECURITIES> 14,019
<RECEIVABLES> 19,126
<ALLOWANCES> 0
<INVENTORY> 12,446
<CURRENT-ASSETS> 3,196
<PP&E> 6,968
<DEPRECIATION> 0
<TOTAL-ASSETS> 81,506
<CURRENT-LIABILITIES> 16,848
<BONDS> 0
0
0
<COMMON> 55,951
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 81,506
<SALES> 22,002
<TOTAL-REVENUES> 22,002
<CGS> 9,181
<TOTAL-COSTS> 7,914
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,517
<INCOME-TAX> 1,979
<INCOME-CONTINUING> 3,538
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,538
<EPS-PRIMARY> .23
<EPS-DILUTED> .23
</TABLE>
