<PAGE> 1
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 26, 2000
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)
DELAWARE 77-0208119
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2800 BAYVIEW DRIVE
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 April 24, 2000: 19,709,550
<PAGE> 2
PART I -- FINANCIAL INFORMATION
1. FINANCIAL STATEMENTS
MATTSON TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
ASSETS
<TABLE>
<CAPTION>
MAR. 26, DEC. 31,
2000 1999
--------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 127,606 $ 16,965
Accounts receivable, net 36,110 21,500
Inventories 29,018 25,374
Prepaid expenses and other current assets 2,275 2,299
--------- --------
Total current assets 195,009 66,138
Property and equipment, net 11,012 11,260
Goodwill, intangibles and other assets 3,438 3,750
--------- --------
$ 209,459 $ 81,148
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit $ -- $ 3,000
Accounts payable 8,631 8,494
Accrued liabilities 20,384 17,635
--------- --------
Total current liabilities 29,015 29,129
--------- --------
Stockholders' equity:
Common stock 19 16
Additional paid in capital 190,690 66,280
Retained earnings (deficit) (7,080) (11,099)
Treasury stock (2,987) (2,987)
Accumulated other comprehensive loss (198) (191)
--------- --------
Total stockholders' equity 180,444 52,019
--------- --------
$ 209,459 $ 81,148
========= ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE> 3
MATTSON TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------
MAR. 26, MAR. 28,
2000 1999
-------- --------
<S> <C> <C>
Net sales $ 42,581 $ 14,320
Cost of sales 21,606 7,076
-------- --------
Gross profit 20,975 7,244
-------- --------
Operating expenses:
Research, development and engineering 6,298 3,898
Selling, general and administrative 10,610 6,031
-------- --------
Total operating expenses 16,908 9,929
-------- --------
Income (loss) from operations 4,067 (2,685)
Interest and other income, net 398 293
-------- --------
Income (loss) before income taxes 4,465 (2,392)
Provision for income taxes 446 49
-------- --------
Net income (loss) $ 4,019 $ (2,441)
======== ========
Net income (loss) per share:
Basic $ 0.24 $ (0.16)
======== ========
Diluted $ 0.21 $ (0.16)
======== ========
Shares used in computing net income (loss)
per share:
Basic 16,863 15,423
======== ========
Diluted 19,184 15,423
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
MATTSON TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------
MAR. 26, MAR. 28,
2000 1999
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 4,019 $ (2,441)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation and amortization 1,387 1,318
Changes in assets and liabilities:
Accounts receivable (14,610) (3,516)
Inventories (3,644) (3,376)
Prepaid expenses and other current assets 24 (94)
Other assets 32 168
Accounts payable 137 1,936
Accrued liabilities 2,749 379
--------- --------
Net cash used in operating activities (9,906) (5,626)
--------- --------
Cash flows from investing activities:
Acquisition of property and equipment (859) (485)
Sales and maturities of short-term investments -- 8,128
--------- --------
Net cash (used in) provided by investing activities (859) 7,643
--------- --------
Cash flows from financing activities:
Repayment of line of credit (3,000) --
Proceeds from the issuance of Common Stock, net 124,413 29
--------- --------
Net cash provided by financing activities 121,413 29
--------- --------
Effect of exchange rate changes on cash and cash equivalents (7) (89)
--------- --------
Net increase in cash and cash equivalents 110,641 1,957
Cash and cash equivalents, beginning of period 16,965 11,863
--------- --------
Cash and cash equivalents, end of period $ 127,606 $ 13,820
========= ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
MATTSON TECHNOLOGY, INC. AND SUBSIDIARIES
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 our Annual Report for the year ended December
31, 1999.
The results of operations for the three months ended March 26, 2000 are not
necessarily indicative of results that may be expected for the entire year
ending December 31, 2000.
NOTE 2 BALANCE SHEET DETAIL (IN THOUSANDS):
<TABLE>
<CAPTION>
MAR. 26, DEC. 31,
2000 1999
-------- --------
<S> <C> <C>
Inventories:
Purchased parts and raw materials $17,266 $13,656
Work-in-process 10,491 9,433
Evaluation systems 1,261 2,285
------- -------
$29,018 $25,374
======= =======
Accrued liabilities:
Warranty and installation reserve $ 8,421 $ 7,371
Accrued compensation and benefits 4,601 5,041
Income taxes 1,733 1,392
Commissions 832 1,045
Deferred income and customer deposits 3,607 1,561
Other 1,190 1,225
------- -------
$20,384 $17,635
======= =======
</TABLE>
NOTE 3 ACQUISITION OF CONCEPT SYSTEMS DESIGN, INC.
On July 24, 1998, we acquired Concept Systems Design. The transaction was
achieved through the merger of a wholly owned subsidiary of the Company with and
into Concept. In connection with the merger, the Company issued 795,138 shares
of Common Stock to the former shareholders of Concept.
In addition to the issuance of the 795,138 shares mentioned above, the agreement
for the acquisition of Concept also includes the contingent issuance and
distribution of 100,000 shares of Mattson Common Stock to the Concept
shareholders if Concept achieves net revenues of at least $16,667,000 during the
first 24 full calendar months following the acquisition date. Additional shares
issued, if any, will be valued at the fair value of the shares at the date of
issue and will result in additional goodwill. The transaction has been accounted
for as a purchase.
5
<PAGE> 6
In the first quarter of 1999, a preacquisition contingency was resolved which
reduced the liabilities assumed from Concept by approximately $2.2 million.
Under the provisions of Statement of Financial Accounting Standards No. 38, this
has been recorded by the Company in the first quarter of 1999 on a prospective
basis as an elimination of previously recorded goodwill and a pro-rata reduction
of the balance to the acquired developed technology, workforce and property and
equipment.
NOTE 4 NET INCOME (LOSS) PER SHARE
SFAS No. 128 requires dual presentation of basic and diluted earnings per share
on the face of the income statement. Basic EPS is computed by dividing income
(loss) available to common stockholders (numerator) by the weighted average
number of common shares outstanding (denominator) for the period. Diluted EPS
gives effect to all dilutive potential common shares outstanding during the
period. The computation of diluted EPS uses the average market prices during the
period. All amounts in the following table are in thousands except per share
data.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------
MAR. 26, MAR. 28,
2000 1999
-------- --------
<S> <C> <C>
NET INCOME (LOSS) ..................................... $ 4,019 $ (2,441)
BASIC EARNINGS (LOSS) PER SHARE:
Income (loss) available to common shareholders ...... $ 4,019 $ (2,441)
Weighted average common shares outstanding .......... 16,863 15,423
------- --------
Basic earnings (loss) per share ..................... $ 0.24 $ (0.16)
======= ========
DILUTED EARNINGS (LOSS) PER SHARE:
Income (loss) available to common shareholders ...... $ 4,019 $ (2,441)
Weighted average common shares outstanding .......... 16,863 15,423
Diluted potential common shares from stock options .. 2,321 --
------- --------
Weighted average common shares and dilutive
potential common shares ............................. 19,184 15,423
------- --------
Diluted earnings (loss) per share ................... $ 0.21 $ (0.16)
======= ========
</TABLE>
Options to purchase 4,756 shares during the three months ended March 26, 2000
were excluded from the computation of diluted EPS because these options'
exercise price were greater than the average market price of the Company's
common stock during the period. Total stock options outstanding at March 28,
1999 of 2,893,816 were excluded from the computation of diluted EPS because the
effect of including them would have been anitdilutive due to the loss available
to common stockholders.
NOTE 5 COMPREHENSIVE INCOME
SFAS 130 establishes rules for the reporting and display of comprehensive income
and its components; however, the adoption of this Statement had no impact on the
Company's net income or stockholders' equity.
The following are the components of comprehensive income (loss):
(in thousands)
6
<PAGE> 7
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------
MAR. 26, MAR. 28,
2000 1999
------- -------
<S> <C> <C>
Net income (loss) $ 4,019 $(2,441)
Foreign currency translation adjustments (7) (92)
------- -------
Comprehensive income (loss) $ 4,012 $(2,533)
======= =======
</TABLE>
The components of accumulated other comprehensive income, net of related tax are
as follows:
<TABLE>
<CAPTION>
MAR. 26, DEC. 31,
(in thousands) 2000 1999
------- -------
<S> <C> <C>
Cumulative translation adjustments $ (198) $ (191)
======= =======
</TABLE>
NOTE 6 REPORTABLE SEGMENTS
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information" supersedes SFAS No. 14, "Financial Reporting for Segments of a
Business Enterprise", replacing the "industry segment" approach with the
"management" approach. SFAS No. 131 establishes standards for reporting
information about operating segments in financial statements. Operating segments
are defined as components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker, or chief decision making group, in deciding how to allocate
resources and in assessing performance. Brad Mattson, Chairman and Chief
Executive Officer of the Company, is the Company's chief decision maker. As the
Company's business is completely focused on one industry segment, design,
manufacturing and marketing of advanced fabrication equipment to the
semiconductor manufacturing industry, management believes that the Company has
one reportable segment. The Company's revenues and profits are generated through
the sale and service of products for this one segment. As a result, no
additional operating segment information is required to be disclosed.
NOTE 7 LINE OF CREDIT
During 1999 we entered into a one-year revolving line of credit with a bank in
the amount of $15.0 million. This line of credit expires in July 2000. All
borrowings under this line of credit bear interest at a per annum rate equal to
the lender's prime rate, which was 8.75% at March 26, 2000. The line of credit
is secured by our accounts receivable and other tangible assets. During the
third quarter of 1999 we had borrowed $3.0 million against the revolving line of
credit. This outstanding balance was fully repaid during the first quarter of
2000. Our revolving credit line requires us to maintain certain quarterly
financial covenants, including a minimum quick ratio and minimum tangible net
worth. We were in compliance with all of our financial covenants at March 26,
2000.
NOTE 8 REVENUE RECOGNITION
We generally recognize sales upon shipment of a system. From time to time,
however, we allow customers to evaluate systems, and since customers can return
such systems any time with limited or no penalty, we do not recognize the
associated revenue until the evaluation system is accepted by the customer.
Sales to our distributor in Japan are recognized upon shipment with reserves
provided for limited rights of return. Service and maintenance contract revenue,
which to date has been insignificant, is recognized on a straight-line basis
over the service period of the related contract. A provision for the estimated
future cost of system installation and warranty is recorded at the time revenue
is recognized.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our condensed consolidated
financial statements and related notes included elsewhere in this report. In
addition to historical information, this discussion contains certain
forward-looking statements that involve risks and uncertainties. Our actual
results could differ materially from those anticipated by these forward-looking
statements due to factors, including but not limited to, those set forth or
incorporated by reference under "Factors That May Affect Future Results and
Market Price of Stock" and elsewhere in this report.
OVERVIEW
We are a leading supplier of advanced, high-productivity semiconductor
processing equipment used in the fabrication of integrated circuits. We
currently offer Aspen Strip, CVD, RTP, LiteEtch and EpiPro products. We began
operations in 1989 and in 1991 we shipped our first product, the Aspen Strip, a
photoresist removal system. Our current Aspen Strip, CVD, RTP and LiteEtch
product lines are based on a common Aspen platform with a modular,
multi-station, multi-chamber architecture, designed to deliver high
productivity, low cost of ownership and savings of cleanroom space. Until 1999,
we derived a substantial majority of our sales from our Aspen Strip systems,
with our remaining sales derived from our CVD, RTP, LiteEtch and Epi systems, as
well as spare parts and maintenance services.
We had net income of $4.0 million during the first quarter ended March 26, 2000.
Future results will depend on a variety of factors, particularly overall market
conditions and timing of significant orders, the ability for us to bring new
systems to market, the timing of new product releases by our competitors,
patterns of capital spending by our customers, market acceptance of new and/or
enhanced versions of our systems, changes in pricing by the Company, its
competitors, customers, or suppliers and the mix of products sold. We are
increasing our expense levels to support long term growth in our business. As a
result, we are dependent upon increases in sales in order to sustain
profitability. If our sales do not increase, the current levels of operating
expenses could materially and adversely affect our financial results.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." SFAS 133 establishes new standards of accounting and
reporting for derivative instruments and hedging activities. SFAS 133 requires
that all derivatives be recognized at fair value in the statement of financial
position, and that the corresponding gains or losses be reported either in the
statement of operations or as a component of comprehensive income, depending on
the type of hedging relationship that exists. SFAS 133 is effective for fiscal
years beginning after June 15, 2000 and cannot be applied retroactively. The
effect of SFAS 133 is not expected to be material to our financial statements.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101 ("SAB 101"), Revenue Recognition in Financial Statements. SAB
101 provides guidance on applying generally accepted accounting principles to
revenue recognition issues in financial statements. Among other things, SAB 101
would result in a change from the established practice in many industries of
recognizing revenue at the time of shipment of a system, and instead delay
revenue recognition until the time of installation or customer acceptance.
Because of the cyclical nature of the semiconductor equipment industry, and our
dependence on a small number of comparatively large sales, a change in revenue
recognition practices could have a material affect on revenue in any particular
reporting period. We are currently evaluating the effect that such adoption may
have on our consolidated results of operations and financial position and may be
required to adopt SAB 101 in the second quarter of 2000.
8
<PAGE> 9
We generally recognize sales upon shipment of a system. From time to time,
however, we allow customers to evaluate systems, and since customers can return
such systems any time with limited or no penalty, we do not recognize the
associated revenue until the evaluation system is accepted by the customer.
Sales to our distributor in Japan are recognized upon shipment with reserves
provided for limited rights of return. Service and maintenance contract revenue,
which to date has been insignificant, is recognized on a straight-line basis
over the service period of the related contract. A provision for the estimated
future cost of system installation and warranty is recorded at the time revenue
is recognized.
RESULTS OF OPERATIONS
The following table sets forth our statement of operations data expressed as a
percentage of net sales for the period indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------
MAR. 26, MAR. 28,
2000 1999
-------- --------
<S> <C> <C>
Net sales 100% 100%
Cost of sales 51% 49%
---- -----
Gross margin 49% 51%
---- -----
Operating expenses:
Research, development and engineering 15% 27%
Selling, general and administrative 25% 42%
Total operating expenses 40% 69%
Income (loss) from operations 10% (19%)
Income (loss) before income taxes 10% (17%)
Net income (loss) 9% (17%)
</TABLE>
Net Sales
Net sales for the first quarter of 2000 increased 198% to $42.6 million from
$14.3 million for the same quarter last year. The increase in quarterly sales
reflects a 280% increase in unit sales for the first quarter of 2000 compared to
the first quarter of 1999. This increase was offset by a different product mix
sold during the first quarter of 2000 as compared to the same quarter last year.
First quarter bookings were $57.4 million, an increase of 171% compared to
bookings of $21.2 million in the first quarter of 1999, resulting in a book to
bill ratio of 1.3 to 1.0. Backlog increased by $41.4 million to $70.9 million in
the first quarter 2000 from $29.5 million in the first quarter of 1999.
International sales, which are predominantly to customers based in Japan and the
Pacific Rim (which includes Taiwan, Singapore and Korea), accounted for 62% and
36% of net sales for the first quarter of 2000 and 1999, respectively. In 1999,
we shifted our strategy in Japan to a direct sales model. We are in the process
of terminating our distributor relationship with Marubeni and establishing our
own direct sales force in Japan. We believe that the transition to direct sales
will be completed during the first half of 2000. We anticipate that
international sales will continue to account for a significant portion of total
net sales for 2000.
Gross Margin
Our gross margin for the first quarter of 2000 decreased to 49% from 51% for the
first quarter of 1999. The decrease in gross margins was principally due to a
different product mix sold during the first quarter of 2000 as compared to the
same period last year.
9
<PAGE> 10
Our gross margin may continue to be affected by a variety of factors. Although
we have not offered substantial discounts on our systems to date, there can be
no assurance that we will not continue to experience pricing pressures in the
future. Our 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 was primarily responsible for
sales and support costs in Japan. We are in the process of terminating our
distribution relationship with Marubeni and shifting to a direct sales model in
Japan. We anticipate this process to be completed in the first half of 2000.
Research, Development and Engineering
Research, development and engineering expenses for the first quarter of 2000
were $6.3 million, or 15% of net sales, as compared to $3.9 million, or 27% of
net sales, for the first quarter of 1999. The increase was primarily due to
compensation and related benefits, which increased to $2.9 million in the first
quarter of 2000 from $1.8 million in the first quarter of last year and
engineering materials, which increased to $1.4 million in the first quarter of
2000 from $0.7 million in the first quarter of 1999. The increase in
compensation and related benefits expense was due to increased personnel
required to support our anticipated growth. The increase in engineering
materials is due to ongoing and new product development. The decrease in
research, development and engineering materials as a percentage of net sales
during the first quarter of 2000 as compared to the same period last year is due
to increased sales during the first quarter of 2000.
Selling, General and Administrative
Selling, general and administrative expenses for the first quarter of 2000 were
$10.6 million, or 25% of net sales, as compared to $6.0 million, or 42% of net
sales, for the first quarter of 1999. The increase was primarily due to a $3.2
million increase in compensation and related benefits, a $0.5 million increase
in outside services, a $0.3 million increase in advertising and promotion
expenses and a $0.2 million increase in travel and entertainment expenses.
Compensation and related benefits expense increased as we hired more personnel
to support the increase in sales activity. Outside services increased as we
utilized more contractors to support the increase in sales volume. Advertising
and promotion expenses increased as we had more tradeshow and advertising
activity during the first quarter of 2000 as compared to the same quarter last
year. Lastly, travel and entertainment expenses continue to increase as our
sales activity increased during the first quarter of 2000. The decrease in
selling, general and administrative expenses as a percentage of net sales during
the first quarter of 2000 as compared to the same period last year is due to
higher revenues during the first quarter of 2000.
Provision for Income Taxes
During the first quarter of 2000, we provided taxes at an effective tax rate of
10%. The 2000 tax rate is less than the federal statutory rate primarily as a
result of having fully reserved deferred tax assets due to the uncertainty of
their realization, offset by income tax liability for our foreign operations. We
intend to evaluate the realization of the deferred tax assets on a quarterly
basis.
Liquidity and Capital Resources
Our cash and cash equivalents and short term investments were $128 million at
March 26, 2000, an increase of $111 million from cash and cash equivalents and
short term investments of $17 million at December 31, 1999. We did not have an
outstanding balance on our line of credit and no long term debt at March 26,
2000. Stockholders' equity at March 26, 2000 was approximately $180 million.
Net cash used in operating activities was $9.9 million during the first quarter
of 2000 as compared to $5.6 million during the same quarter last year. The net
cash used in operating activities during the first quarter of 2000 was primarily
due to an increase in accounts receivable and inventories of $14.6 million and
$3.6 million, respectively.
10
<PAGE> 11
The increase in accounts receivable and inventories was partially offset by our
net income of $4.0 million and depreciation and amortization expense of $1.4
million.
Net cash used in investing activities was $0.9 million during the first quarter
of 2000 as compared to net cash provided by investing activities of $7.6 million
during the first quarter of 1999. The net cash used in investing activities
during the first quarter of 2000 is attributable to the purchase of property and
equipment of $0.9 million. The net cash provided by investing activities during
the same quarter last year was attributable to the sale of short term
investments of $8.1 million offset by purchases of property and equipment of
$0.5 million.
Net cash provided by financing activities was $121 million during the first
quarter of 2000 as compared to $29,000 during the same period last year. The net
cash provided by financing activities during the first quarter of 2000 is
primarily attributable to the completion of our follow on public offering of
3,000,0000 shares of common stock on March 8, 2000. The public offering price
was $42.50 per share before offering costs. This increase was offset by a $3.0
million repayment against our line of credit.
Our Board of Directors authorized us to repurchase, through the year 2000, up to
1,000,000 shares of our Common Stock in the open market from time to time. As of
March 26, 2000, 274,800 of these shares had been repurchased by the Company. We
do not intend to repurchase any additional shares of our stock under this
repurchase program.
During 1999 we entered into a one-year revolving line of credit with a bank in
the amount of $15.0 million. This line of credit expires in July 2000. All
borrowings under this line of credit bear interest at a per annum rate equal to
the lender's prime rate, which was 8.75% at March 26, 2000. The line of credit
is secured by our accounts receivable and other tangible assets. We borrowed
$3.0 million against this line of credit during the third quarter of 1999 and
repaid the balance in full during the first quarter of 2000. The line of credit
requires us to maintain certain financial covenants, including a minimum quick
ratio and minimum tangible net worth. We were in compliance with all of our
financial covenants at March 26, 2000.
On March 8, 2000 we completed our public offering of 3,000,000 shares of our
common stock. The public offering price was $42.50 per share. On March 16, 2000,
the underwriters exercised a right to purchase an additional 90,000 shares to
cover over-allotments. We expect to use the net proceeds for general corporate
purposes, principally working capital and capital expenditures. We currently
anticipate that the net proceeds from the offering discussed above, together
with our current cash, cash equivalents and available credit facilities, will be
sufficient to meet our anticipated cash needs for working capital and capital
expenditures for at least the next 12 months. However, we may need to raise
additional funds in future periods through public or private financings, or
other sources, to fund our operations and any potential acquisitions. We may not
be able to obtain adequate or favorable financing when needed. Failure to raise
capital when needed could harm our business. If we raise additional funds
through the issuance of equity securities, the percentage ownership of our
stockholders would be reduced. Furthermore, these equity securities might have
rights, preferences or privileges senior to our common stock.
FACTORS THAT MAY AFFECT FUTURE RESULTS AND MARKET PRICE OF STOCK
In this report and from time to time, we may make forward looking statements
regarding, among other matters, our future strategy, product development plans,
productivity gains of our products, financial performance 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,
including those set forth in our Annual Report on Form 10-K, all of which are
incorporated here by reference, and the following:
MOST OF OUR REVENUE COMES FROM A SMALL NUMBER OF LARGE SALES, AND ANY DELAY IN
THE TIMING OF INDIVIDUAL SALES COULD CAUSE OUR OPERATING RESULTS TO FLUCTUATE
FROM QUARTER TO QUARTER
11
<PAGE> 12
A delay in a shipment near the end of a quarter may cause net sales in that
quarter to fall below our expectations and the expectations of market analysts
or investors. We derive most of our revenues from the sale of a relatively small
number of expensive systems. The list prices on these systems range from
$500,000 to over $2.2 million. At our current revenue level, each sale, or
failure to make a sale, could have a material effect on us. Our lengthy sales
cycle, coupled with customers' competing capital budget considerations, make the
timing of customer orders uneven and difficult to predict. In addition, our
backlog at the beginning of a quarter typically does not include all orders
required to achieve our sales objectives for that quarter. As a result, our net
sales and operating results for a quarter depend on us shipping orders as
scheduled during that quarter as well as obtaining new orders for systems to be
shipped in that same quarter. Any delay in scheduled shipments or in shipments
from new orders would materially and adversely affect our operating results for
that quarter, which could cause our stock price to decline.
OUR QUARTERLY FINANCIAL RESULTS FLUCTUATE SIGNIFICANTLY AND MAY FALL SHORT OF
ANTICIPATED LEVELS, WHICH COULD CAUSE OUR STOCK PRICE TO DECLINE
We base our operating expenses on anticipated revenue levels, and a substantial
percentage of our expenses are fixed in the short term. As a result, any delay
in generating or recognizing revenues could cause our operating results to be
below the expectations of market analysts or investors, which could cause the
price of our common stock to decline.
Our quarterly revenue and operating results have varied significantly in the
past and may vary significantly in the future due to a number of factors,
including:
- market acceptance of our systems and the products of our customers;
- substantial changes in revenues from significant customers;
- increased manufacturing overhead expenses due to reductions in the number
of systems manufactured;
- timing of announcement and introduction of new systems by us and by our
competitors;
- sudden changes in component prices or availability;
- changes in product mix;
- delays in orders due to customer financial difficulties;
- manufacturing inefficiencies caused by uneven or unpredictable order
patterns, reducing our gross margins; and
- higher fixed costs due to increased levels of research and development and
expansion of our worldwide sales and marketing organization.
Due to the foregoing factors, we believe that period-to-period comparisons of
our operating results should not be relied upon as an indicator of our future
performance.
WE ARE ESTABLISHING A DIRECT SALES ORGANIZATION IN JAPAN AND TERMINATING OUR
JAPANESE DISTRIBUTOR, WHICH COULD RESULT IN LOST SALES OR INCREASED RISKS TO OUR
BUSINESS IN JAPAN
As part of our original strategy for penetrating the Japanese market, we
established a distributor relationship with Marubeni Solutions Corp. in 1990. In
1999, we shifted our strategy in Japan to a direct sales model. We are in the
12
<PAGE> 13
process of terminating our distribution relationship with Marubeni and
establishing our own direct sales force in Japan. We believe that the transition
to direct sales will be completed during the first half of 2000. Although we
intend to continue to invest significant resources in Japan, including the
hiring of additional personnel to support our direct sales effort, we may not be
able to maintain or increase our sales to the Japanese semiconductor industry.
We may miss sales opportunities or lose competitive sales as we transition to
this direct sales model, or Japanese customers and potential customers may be
unwilling to purchase our systems from us directly. When we make sales directly
to customers in Japan, we expect that payment terms may be as long as 180 days
from shipment, compared to 30 days from shipment for sales in our other regions.
Such a delay would negatively impact our cash flows.
CHANGES TO FINANCIAL ACCOUNTING STANDARDS MAY AFFECT OUR REPORTED
RESULTS OF OPERATIONS
We prepare our financial statements to conform with generally accepted
accounting principles, or GAAP. GAAP are subject to interpretation by the
American Institute of Certified Public Accountants, the SEC and various bodies
formed to interpret and create appropriate accounting policies. A change in
those policies can have a significant effect on our reported results.
In December 1999, the SEC issued SAB 101, Revenue Recognition in Financial
Statements. SAB 101 provides new interpretive guidance on applying GAAP to
revenue recognition issues in financial statements. Among other things, SAB 101
would result in a change from the established practice in the semiconductor
equipment industry and many industries of recognizing revenue at the time of
shipment of a system, and instead delay revenue recognition until the time of
installation or customer acceptance. Because of the cyclical nature of the
semiconductor equipment industry, and our dependence on a small number of
comparatively large sales, such a change in revenue recognition practices could
have a material affect on our revenue in any particular reporting period. We may
be required to adopt SAB 101 in the second quarter of 2000. We are currently
evaluating the effect that such adoption may have on our consolidated results of
operations and financial position.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES REGARDING MARKET RISK
As of March 26, 2000, we had no short term investments and thus no exposure to
changes in market values for investments.
We have international facilities and are, therefore, subject to foreign currency
exposure. The local currency is the functional currency for all foreign sales
operations except those in Japan, where the U.S. dollar is the functional
currency. To date, our exposure related to exchange rate volatility has not been
significant. Due to the short term nature of our investments, we do not believe
that we have a material risk exposure with respect to financial instruments.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None
ITEM 2. CHANGES IN SECURITIES.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
13
<PAGE> 14
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
3.1* Restated Articles of Incorporation of the Company (1)
3.2* Bylaws of the Registrant (1)
10.1* Form of Underwriting Agreement. (2)
Exhibit 27 (Electronic filing only)
(1) Incorporated by reference to the corresponding Exhibit
previously filed as an Exhibit to the Registrant's Registration
Statement on Form S-1 filed August 12, 1994 (33-92738), as
amended.
(2) Incorporated by reference to Exhibit 1.1 previously filed as
part of Registrant's Registration Statement on Form S-3
(333-95667).
(b) Reports on Form 8-K
None.
14
<PAGE> 15
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 9, 2000 /s/ Brian R. McDonald
------------------------------------
Brian R. McDonald
Vice President of Finance
and Chief Financial Officer
(as principal financial officer
and on behalf of Registrant)
15
<PAGE> 16
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AND CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS FOUND ON PAGES 2 AND 3 OF THE COMPANY'S 10Q 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-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-26-2000
<CASH> 127,606
<SECURITIES> 0
<RECEIVABLES> 36,110
<ALLOWANCES> 0
<INVENTORY> 29,018
<CURRENT-ASSETS> 195,009
<PP&E> 11,012
<DEPRECIATION> 0
<TOTAL-ASSETS> 209,459
<CURRENT-LIABILITIES> 29,015
<BONDS> 0
0
0
<COMMON> 190,709
<OTHER-SE> (10,265)
<TOTAL-LIABILITY-AND-EQUITY> 180,444
<SALES> 42,581
<TOTAL-REVENUES> 42,581
<CGS> 21,606
<TOTAL-COSTS> 21,606
<OTHER-EXPENSES> 16,908
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,465
<INCOME-TAX> 446
<INCOME-CONTINUING> 4,019
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,019
<EPS-BASIC> .24
<EPS-DILUTED> .21
</TABLE>
