<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 30, 1997
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
MATTSON TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 77-0208119
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
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 13, 1997 : 14,034,555
1
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PART I -- FINANCIAL INFORMATION
1. FINANCIAL STATEMENTS
MATTSON TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
(unaudited)
ASSETS
<TABLE>
<CAPTION>
MARCH 30, DEC. 31,
1997 1996
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 13,146 $ 21,547
Short-term investments 20,656 16,620
Accounts receivable, net 15,328 15,954
Inventories 15,209 12,954
Deferred taxes 4,197 4,197
Prepaid expenses and other current assets 749 882
---------- ----------
Total current assets 69,285 72,154
Property and equipment, net 8,902 9,373
Other assets 43 2,962
---------- ----------
$ 78,230 $ 84,489
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,945 $ 1,240
Accrued liabilities 9,729 14,134
---------- ----------
Total current liabilities 11,674 15,374
---------- ----------
Shareholders' equity:
Common stock 56,206 57,580
Retained earnings 10,477 11,625
Other (127) (90)
---------- ----------
Total shareholders' equity 66,556 69,115
---------- ----------
$ 78,230 $ 84,489
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
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MATTSON TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
MARCH 30, MARCH 31,
1997 1996
---- ----
<S> <C> <C>
Net sales $ 13,023 $ 22,002
Cost of sales 6,458 9,181
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Gross profit 6,565 12,821
--------- ---------
Operating expenses:
Research, development and engineering 2,944 2,648
Selling, general and administrative 4,908 5,266
--------- ---------
Total operating expenses 7,852 7,914
--------- ---------
Income (loss) from operations (1,287) 4,907
Interest and other income (expense), net 437 610
--------- ---------
Income (loss) before income taxes (850) 5,517
Provision for (benefit from) income taxes (282) 1,979
--------- ---------
Net income (loss) $ (568) $ 3,538
--------- ---------
--------- ---------
Net income (loss) per share $ (.04) $ 0.23
--------- ---------
--------- ---------
Shares used in computing net income (loss)
per share 14,180 15,276
--------- ---------
--------- ---------
</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
------------------
MARCH 30, MARCH 31,
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (568) $ 3,538
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation and amortization 698 296
Changes in assets and liabilities:
Accounts receivable (280) (5,138)
Inventories (2,255) (2,643)
Prepaid expenses and other assets 90 (756)
Accounts payable 705 607
Accrued liabilities (537) 3,241
-------- --------
Net cash used in operating activities (2,147) (855)
-------- --------
Cash flows from investing activities:
Acquisition of property and equipment (227) (1,577)
Purchases of short-term investments (7,956) (5,961)
Sales and maturities of short-term investments 3,912 19,791
-------- --------
Net cash provided by (used in) investing activities (4,271) 12,253
-------- --------
Cash flows from financing activities:
Proceeds from the issuance of Common Stock, net 19 53
Purchase of Common Stock (1,973) -
-------- --------
Net cash provided by (used in) financing activities (1,954) 53
-------- --------
Effect of exchange rate changes on cash and cash equivalents (29) (10)
-------- --------
Net increase (decrease) in cash and cash equivalents (8,401) 11,441
Cash and cash equivalents, beginning of period 21,547 14,310
-------- --------
Cash and cash equivalents, end of period $ 13,146 $ 25,751
-------- --------
-------- --------
Supplemental disclosure of non-cash operating activities:
Inventory totaling $1 million was capitalized and
transferred to property and equipment during the
first three months of 1996.
</TABLE>
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, 1996.
The results of operations for the three month period ended March 30, 1997 are
not necessarily indicative of results that may be expected for the entire year
ending December 31, 1997.
NOTE 2 BALANCE SHEET DETAIL (IN THOUSANDS):
MARCH 30, DEC. 31,
1997 1996
---- ----
Inventories:
Purchased parts and raw materials $ 6,790 $ 6,763
Work-in-process 5,974 4,634
Finished goods 1,201 734
Evaluation systems 1,244 823
-------- --------
$ 15,209 $ 12,954
-------- --------
Accrued liabilities:
Warranty reserve $ 3,549 $ 3,378
Accrued compensation and benefits 1,354 1,252
Income taxes 1,304 2,082
Commissions 380 1,082
Deferred income 1,685 4,966
Other 1,457 1,374
-------- --------
$ 9,729 $ 14,134
-------- --------
-------- --------
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's product line is based on the Company's modular
"Aspen" platform which accommodates two process chambers supporting increased
throughput. The Company currently offers Aspen Strip, CVD, RTP and LiteEtch
products.
The Company has derived substantially all of its sales from Aspen Strip and
CVD systems. The Company has sold two LiteEtch systems and one RTP system.
The Company's LiteEtch and RTP products are each in an early marketing phase.
In addition, the Company derives sales from spare parts and maintenance
services.
Until the quarter ended September 29, 1996, the Company experienced rapid
growth. There can be no assurance that the Company will be able to regain
sales growth or profitability. Future results will depend on a variety of
factors, particularly overall market conditions and also 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 Company systems, changes in pricing by the
Company, its competitors, customers, or suppliers and the mix of products
sold. In order to support long term growth in its business the Company has
not decreased its expense levels compared with the decrease in the rate of
sales growth. As a result, the Company is dependent upon increases in sales
in order to regain profitability. If the Company's sales do not increase,
the current levels of operating expenses could materially and adversely
affect the financial results of the Company.
As a result of the well publicized slowdown in the semiconductor market,
particularly for DRAMs, many semiconductor manufacturers have been delaying
or canceling previously planned new equipment purchases. The cyclicality and
uncertainties regarding overall market conditions continue to present
significant challenges to the Company and have a significant adverse impact
on the Company's ability to forecast near term revenue expectations. The
ability of the Company to modify its operations in response to short term
changes in market conditions is limited. The extent and duration of the
slowdown and the short term and ultimate impact on the Company and its
results of operations and financial condition cannot be precisely predicted.
The Company generally recognizes a sale upon shipment of a system. However,
from time to time, the Company allows customers to evaluate systems. The
Company does not recognize the associated sale until and unless an evaluation
system is accepted by the customer.
6
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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 other filings with the
Securities and Exchange Commission.
RESULTS OF OPERATIONS
The following table sets forth the statement of operations data of the Company
expressed as a percentage of net sales for the period indicated:
THREE MONTHS ENDED
------------------
MARCH 30, MARCH 31,
1997 1996
---- ----
Net sales 100% 100%
Cost of sales 50% 42%
---- ----
Gross margin 50% 58%
---- ----
Operating expenses:
Research, development and engineering 23% 12%
Selling, general and administrative 38% 24%
Total operating expenses 60% 36%
Income (loss) from operations (10%) 22%
Income (loss) before income taxes (7%) 25%
Net income (loss) (4%) 16%
NET SALES
Net sales for the first quarter of 1997 decreased 41% to $13.0 million from
$22.0 million for the first quarter of 1996. Net sales decreased as a result
of overall industry conditions and reflected a 32% decrease in unit shipments
and an 11% decrease in average selling prices (ASP's). Sales in the first
quarter consist principally of single and dual chamber Aspen Strip systems.
Lower ASP's resulted primarily from a quarter-to-quarter proportionate
decrease in sales of the Company's dual chamber Aspen Strip compared to sales
of single chamber Aspen Strip systems.
International sales, which are predominantly to customers based in Japan and
the Pacific Rim (which includes Taiwan, Singapore and Korea), accounted for
50% and 87% of net sales for the first quarter of 1997 and 1996,
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's distributor in Japan. The
Company anticipates that international sales will continue to account for a
significant portion of 1997 total net sales due primarily to orders from
customers in Japan and the Pacific Rim.
7
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GROSS MARGIN
The Company's gross margin for the first quarter of 1997 decreased to 50%
from 58% for the first quarter of 1996. The quarter-to-quarter decrease was
principally due to the allocation of relatively fixed overhead costs over
lower sales volume and higher warranty reserves associated with the Company's
newer products.
The Company's gross margin will continue to be affected by a variety of
factors. In particular, until and unless the Company's sales volume
increases, lower economies of scale will adversely affect gross margin. 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 still primarily
responsible for sales and support costs in Japan. In addition, the Company
has incurred additional research, development and engineering and marketing
expenses primarily through the Company's Japanese subsidiary, Mattson
Technology Center K.K. ("MTC").
Although the Company has not offered substantial discounts on its systems to
date, particularly in light of the overall industry slowdown, 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 1997
were $2.9 million, or 23% of net sales, as compared to $2.6 million, or 12%,
for the first quarter of 1996. The increase in expenses was primarily due to
depreciation expense which increased to $0.3 million from $0.1 million for
the first quarter of 1996. The increase in depreciation expense was due to
additions of capital equipment for ongoing product development. The increase
in expense as a percentage of net sales was due to lower sales volume in the
first quarter of 1997. The Company believes that continued 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 1997
were $4.9 million, or 38% of net sales, as compared to $5.3 million, or 24%,
for the first quarter of 1996. The decrease in expenses was primarily due to
commission expense which decreased to $0.4 million from $1.5 million in the
first quarter of 1996, which was partially offset by salaries and payroll
taxes which increased to $2.7 million from $1.9 million, principally as a
result of additional personnel. The increase in expense as a percentage of
net sales was due to lower sales volume in the first quarter of 1997.
PROVISION FOR INCOME TAXES
The Company's expected annual tax rate was 33% and 36% in the first quarter
of 1997 and 1996, respectively. In the third quarter of 1996, the Company
revised its expected annual tax rate from 36% to 33% which was principally a
result of Congress's reinstatement of the Research and Development credit,
effective July 1, 1996. In addition, the expected annual tax rate of 33% in
1997 and 1996 also reflects benefit derived from the Company's Foreign Sales
Corporation.
8
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LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operations during the first three months of 1997 was $2.1
million, compared to $0.9 million of net cash used in operations during the
first three months of 1996. Net cash used by operations during the first
three months of 1997 was primarily attributable to the net loss of $0.6
million and an increase in inventories of $2.3 million.
Net cash used in investing activities during the first three months of 1997
was $4.3 million, compared to $12.3 million net cash provided by investing
activities during the first three months of 1996. Investing activities during
the first three months of 1997 consisted primarily of purchases and
maturities of short-term investments and acquisition of fixed assets.
Net cash used in financing activities during the first three months of 1997
was $2.0 million, compared to $0.1 million net cash provided by financing
activities in the first three months of 1996. Cash used in financing
activities during the first three months of 1997 was primarily due to the
Company's repurchase of 200,000 shares of Common Stock in the first quarter
of 1997. The Board of Directors has authorized the Company to repurchase up
to 500,000 shares of the Company's common stock of which 400,000 shares have
been repurchased to date.
In September 1996, the Company entered into a four year lease agreement with
a major customer for the customer's lease of certain products. The total
sales value of products covered under the lease was approximately $3.9
million. The Company deferred income recognition on the lease. In the first
quarter of 1997, the customer exercised its right to prepay the lease and
purchase the equipment. The $3.9 million was recognized as a sale and the
corresponding receivable was recorded in the first quarter of 1997.
Subsequent to the first quarter of 1997, the Company collected the $3.9
million receivable from the customer.
The Company believes that existing cash and short-term investment balances
will be sufficient to meet the Company's cash requirements during the next
twelve months. However, 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
<PAGE>
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 14, 1997 /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
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AND CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS FOUND ON PAGES 2 AND 3 OF THE COMPANY'S FORM 10-Q
FOR THE YEAR TO DATE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-30-1997
<CASH> 13,146
<SECURITIES> 20,656
<RECEIVABLES> 15,328
<ALLOWANCES> 0
<INVENTORY> 15,209
<CURRENT-ASSETS> 69,285
<PP&E> 8,902
<DEPRECIATION> 0
<TOTAL-ASSETS> 78,230
<CURRENT-LIABILITIES> 11,674
<BONDS> 0
0
0
<COMMON> 56,206
<OTHER-SE> 10,350
<TOTAL-LIABILITY-AND-EQUITY> 78,230
<SALES> 13,023
<TOTAL-REVENUES> 13,023
<CGS> 6,458
<TOTAL-COSTS> 6,458
<OTHER-EXPENSES> 7,852
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (850)
<INCOME-TAX> (282)
<INCOME-CONTINUING> (568)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (568)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
