<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 September 24, 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
__________
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 November 3, 2000:
21,195,865.
1
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PART I -- FINANCIAL INFORMATION
1. Financial Statements
MATTSON TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
ASSETS
Sept. 24, Dec. 31,
2000 1999
-------- --------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 73,149 $ 16,965
Short term investments 34,472 -
Accounts receivable, net 52,357 21,500
Inventories 40,437 25,374
Prepaid expenses and other current assets 3,019 2,299
-------- --------
Total current assets 203,434 66,138
Property and equipment, net 11,824 11,260
Long term investments 12,940 -
Goodwill, intangibles and other assets 4,866 3,750
-------- --------
$233,064 $ 81,148
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit $ - $ 3,000
Accounts payable 9,528 8,494
Accrued liabilities 25,232 17,635
-------- --------
Total current liabilities 34,760 29,129
-------- --------
Stockholders' equity:
Common stock 21 16
Additional paid in capital 193,630 66,280
Retained earnings (deficit) 7,940 (11,099)
Treasury stock (2,987) (2,987)
Accumulated other comprehensive loss (300) (191)
-------- --------
Total stockholders' equity 198,304 52,019
-------- --------
$233,064 $ 81,148
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
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MATTSON TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------- --------------------------
SEPT. 24, SEPT. 26, SEPT. 24, SEPT. 26,
2000 1999 2000 1999
------- ------- -------- -------
<S> <C> <C> <C> <C>
Net sales $58,191 $29,189 $150,902 $67,637
Cost of sales 28,865 15,171 75,035 34,995
------- ------- -------- -------
Gross profit 29,326 14,018 75,867 32,642
------- ------- -------- -------
Operating expenses:
Research, development and engineering 7,393 5,297 20,558 13,720
Selling, general and administrative 14,701 8,567 38,331 21,704
------- ------- -------- -------
Total operating expenses 22,094 13,864 58,889 35,424
------- ------- -------- -------
Income (loss) from operations 7,232 154 16,978 (2,782)
Interest and other income, net 2,267 221 4,176 647
------- ------- -------- -------
Income (loss) before income taxes 9,499 375 21,154 (2,135)
Provision for income taxes 950 59 2,115 176
------- ------- -------- -------
Net income (loss) $ 8,549 $ 316 $ 19,039 $(2,311)
======= ======= ======== =======
Net income (loss) per share:
Basic $ 0.42 $ 0.02 $ 1.00 $ (0.15)
======= ======= ======== =======
Diluted $ 0.39 $ 0.02 $ 0.91 $ (0.15)
======= ======= ======== =======
Shares used in computing net income (loss)
per share:
Basic 20,152 15,887 18,964 15,637
======= ======= ======== =======
Diluted 21,704 17,191 20,981 15,637
======= ======= ======== =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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MATTSON TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------------
SEPT. 24, SEPT. 26,
2000 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 19,039 $ (2,311)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 3,489 3,479
Amortization of intangibles 677 246
Changes in assets and liabilities:
Accounts receivable (30,857) (19,085)
Inventories (15,063) (9,043)
Prepaid expenses and other current assets (720) 4,245
Goodwill, intangibles and other assets (1,793) -
Accounts payable 1,034 2,159
Accrued liabilities 7,597 4,533
-------- --------
Net cash used in operating activities (16,597) (15,777)
-------- --------
Cash flows from investing activities:
Acquisition of property and equipment (4,053) (1,875)
Purchase of short-term investments (34,472) -
Purchase of long-term investments (12,940) -
Sale and maturities of short-term investments - 8,128
-------- --------
Net cash (used in) provided by investing activities (51,465) 6,253
-------- --------
Cash flows from financing activities:
Borrowings/(repayment) under line of credit (3,000) 3,000
Proceeds from the issuance of Common Stock, net 127,355 1,164
-------- --------
Net cash provided by financing activities 124,355 4,164
-------- --------
Effect of exchange rate changes on cash and cash equivalents (109) (74)
-------- --------
Net increase (decrease) in cash and cash equivalents 56,184 (5,434)
Cash and cash equivalents, beginning of period 16,965 11,863
-------- --------
Cash and cash equivalents, end of period $ 73,149 $ 6,429
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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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 on Form 10-K for the year
ended December 31, 1999.
The results of operations for the three month and nine month periods ended
September 24, 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>
SEPT. 24, DEC. 31,
2000 1999
------- -------
<S> <C> <C>
Inventories:
Purchased parts and raw materials $22,879 $13,656
Work-in-process 12,717 9,433
Finished goods and evaluation systems 4,841 2,285
------- -------
$40,437 $25,374
======= =======
Accrued liabilities:
Warranty and installation reserve $11,135 $ 7,371
Accrued compensation and benefits 6,907 5,041
Income taxes 2,304 1,392
Commissions 2,158 1,045
Deferred income and customer deposits 458 1,561
Other 2,270 1,225
------- -------
$25,232 $17,635
======= =======
</TABLE>
Note 3 Acquisition of Concept Systems Design, Inc.
On July 24, 1998, we acquired Concept Systems Design ("Concept"). The
transaction was achieved through the merger of a wholly owned subsidiary of the
Company with and into Concept and has been accounted for as a purchase. 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 included the contingent issuance and
distribution of 100,000 shares of Mattson Common Stock to the Concept
shareholders if Concept achieved net revenues of at least $16,667,000 during the
first 24 full calendar months following the acquisition date. These revenue
goals were not achieved by Concept during the specified period, and no such
additional shares will be issued.
5
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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 NINE MONTHS ENDED
------------------------ ------------------------
SEPT. 24, SEPT. 26, SEPT. 24, SEPT. 26,
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
NET INCOME (LOSS) $ 8,549 $ 316 $19,039 $(2,311)
BASIC EARNINGS (LOSS) PER SHARE:
Income (loss) available to common shareholders $ 8,549 $ 316 $19,039 $(2,311)
Weighted average common shares outstanding 20,152 15,887 18,964 15,637
------- ------- ------- -------
Basic earnings (loss) per share $ 0.42 $ 0.02 $ 1.00 $ (0.15)
======= ======= ======= =======
DILUTED EARNINGS (LOSS) PER SHARE:
Income (loss) available to common shareholders $ 8,549 $ 316 $19,039 $(2,311)
Weighted average common shares outstanding 20,152 15,887 18,964 15,637
Diluted potential common shares from stock options 1,552 1,304 2,017 -
------- ------- ------- -------
Weighted average common shares and dilutive
potential common shares 21,704 17,191 20,981 15,637
------- ------- ------- -------
Diluted earnings (loss) per share $ 0.39 $ 0.02 $ 0.91 $ (0.15)
======= ======= ======= =======
</TABLE>
Options to purchase 155,958 shares during the three months ended September 24,
2000 were excluded from the computation of diluted EPS because the exercise
price of these options was greater than the average market price of the
Company's common stock during the period. Total stock options outstanding at
September 26, 1999 of 2,994,333 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.
6
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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):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------- -----------------------
(in thousands) SEPT. 24, SEPT. 26, SEPT. 24, SEPT. 26,
2000 1999 2000 1999
------ ----- ------- -------
<S> <C> <C> <C> <C>
Net income (loss).......................... $8,549 $ 316 $19,039 $(2,311)
Foreign currency translation adjustments... (76) (24) (109) (74)
------ ----- ------- -------
Comprehensive income (loss)................ $8,473 $ 292 $18,930 $(2,385)
====== ===== ======= =======
</TABLE>
The components of accumulated other comprehensive income, net of related tax are
as follows:
<TABLE>
<CAPTION>
(in thousands) SEPT. 24, DEC. 31,
2000 1999
------ -----
<S> <C> <C>
Cumulative translation adjustments......... $ (300) $(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 expired in July 2000. All
borrowings under this line of credit bore interest at a per annum rate equal to
7
<PAGE>
the lender's prime rate, which was 9.75% at June 25, 2000. The line of credit
was secured by our accounts receivable and other tangible assets. During the
third quarter of 1999 we had borrowed $3.0 million against this revolving line
of credit. The outstanding balance was fully repaid during the first quarter of
2000. Our revolving credit line required 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 throughout the
tenure of the line of credit. At this time the Company is reviewing further
line of credit requirements.
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.
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.
Note 9 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
required implementation date of the standard was delayed by the issuance of
Statement of Financial Accounting Standard No. 137 and amended by Statement of
Financial Accounting Standard No. 138. The Company is required to adopt the
standards in the first quarter of 2001, and does not expect adoption to have a
significant effect on its consolidated results of operations or financial
position.
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, it is
expected that 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 will have on our consolidated results of operations and financial
position. We will be required to adopt SAB 101 in the fourth quarter of 2000
with any impact being recorded as a cumulative effect of a change in accounting
in the first quarter of 2000 and the interim periods of 2000 restated if
necessary.
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.
8
<PAGE>
On June 27, 2000, we entered into a definitive Strategic Business Combination
Agreement to acquire the semiconductor equipment division of STEAG Electronic
Systems AG (excluding STEAG's optical storage and photomask operations), and
entered into an Agreement and Plan of Merger to acquire CFM Technologies, Inc.
We announced these agreements in our June 28, 2000 press release. The
Registration Statement on Form S-4 we filed with the Securities and Exchange
Commission on September 25, 2000 was declared effective on October 6, 2000.
Please see the discussion below under the caption "Pending Mergers and
Acquisitions". Further information about the transactions is available in
filings we have made with the SEC.
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. In 1999 and the three
quarters of 2000 we derived a substantial majority of our sales from our Aspen
Strip systems and to a lesser extent our CVD systems, with our remaining sales
derived from our RTP, LiteEtch and Epi systems, as well as spare parts and
maintenance services.
We had net income of $8.5 million during the third quarter ended September 24,
2000 and $19.0 million during the first nine months of 2000. Future results
will depend on a variety of factors, particularly overall market conditions and
timing of significant orders, our ability 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 us, our competitors, customers, or suppliers and
the mix of products we sell, and the successful integration of our Steag-CFM
acquisition assuming consummation. 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 and planned levels of operating expenses could materially
and adversely affect our financial results.
Results of Operations
The following table sets forth our statement of operations data expressed as a
percentage of net sales for the periods indicated:
9
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<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------- ------------------
SEPT. 24, SEPT. 26, SEPT. 24, SEPT. 26,
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales 100% 100% 100% 100%
Cost of sales 50% 52% 50% 52%
------ ------ ------ ------
Gross margin 50% 48% 50% 48%
------ ------ ------ ------
Operating expenses:
Research, development and engineering 13% 18% 14% 20%
Selling, general and administrative 25% 29% 25% 32%
Total operating expenses 38% 47% 39% 52%
Income (loss) from operations 12% 1% 11% (4)%
Income (loss) before income taxes 16% 1% 14% (3)%
Net income (loss) 15% 1% 13% (3)%
</TABLE>
Net Sales
Net sales for the third quarter of 2000 increased 99% to $58.2 million from
$29.2 million for the same quarter last year. The increase in quarterly sales
reflects a 75% increase in unit sales for the third quarter of 2000 compared to
the third quarter of 1999. This increase was also due to a different product
mix, resulting in higher per unit average sales price for products sold during
the third quarter of 2000, as compared to the same quarter last year. Net sales
for the first nine months of 2000 increased 123% to $150.9 million from $67.6
million in the first nine months of 1999. The increase in net sales reflects a
136% increase in unit sales offset by a 3.3% decline in per unit average sales
price during the first nine months of 2000 compared to the first nine months of
1999.
Third quarter bookings were $76.6 million, an increase of 115% compared to
bookings of $35.6 million in the third quarter of 1999, resulting in a book to
bill ratio of 1.3 to 1.0 for the third quarter of 2000. Backlog increased by
$63.5 million to $104.9 million in the third quarter 2000 from $41.4 million in
the third quarter of 1999.
International sales, which are predominantly to customers based in the Pacific
Rim (which includes Japan, Taiwan, Singapore and Korea), accounted for 55% and
50% of net sales for the third quarter of 2000 and 1999, respectively.
International sales, in the Pacific Rim, for the first nine months of 2000 and
1999 were 58% and 51% respectively. In 1999, we shifted from sales through a
distributor in Japan to a direct sales model, and we completed this transition
during the second quarter of 2000. We anticipate that international sales will
continue to account for a significant portion of total net sales for 2000.
Gross Margin
For both the third quarter of 2000 and the first nine months of 2000, our gross
margin increased to 50% from 48% for the third quarter of 1999, and the first
nine months of 1999. This increase in gross margins was due to fixed cost
absorption over higher sales volume, partially-offset by a different product mix
sold during the third quarter of 2000 and the first nine months of 2000 as
compared to the same periods last year.
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 experience pricing pressures in the future. Our
gross margin on international sales is substantially the same as domestic sales.
10
<PAGE>
Research, Development and Engineering
Research, development and engineering expenses for the third quarter of 2000
were $7.4 million, or 13% of net sales, as compared to $5.3 million, or 18% of
net sales, for the third quarter of 1999. These expenses for the first nine
months of 2000 were $20.6 million, or 14% of net sales, as compared to $13.7
million, or 20% of net sales, for the first nine months of 1999. The increases
were primarily due to compensation and related benefits, and to increased
expenditure for engineering materials. Compensation and related benefits
increased to $3.2 million in the third quarter of 2000 from $2.4 million in the
third quarter of last year, and increased to $9.2 million in the first nine
months of 2000 from $6.3 million in the first nine months of last year.
Expenditures for engineering materials, increased to $1.9 million in the third
quarter of 2000 from $0.8 million in the third quarter of 1999 and increased to
$5.1 million in the first nine months of 2000 from $2.2 million in the first
nine months of 1999. The increase in compensation and related benefits expense
was due to increased personnel hired to support our growth. The increase in
engineering materials expenses is due to ongoing and new product development.
The decrease in research, development and engineering materials as a percentage
of net sales during the third quarter of 2000 and during the first nine months
of 2000 as compared to the same periods last year is due to higher sales during
the third quarter of 2000.
Selling, General and Administrative
Selling, general and administrative expenses for the third quarter of 2000 were
$14.7 million, or 25% of net sales, as compared to $8.6 million, or 29% of net
sales, for the third quarter of 1999. The increase was comprised primarily of
$2.6 million in compensation and related benefits, and $2.4 million in outside
services, professional fees, advertising and promotion, building and utilities,
and travel and entertainment.
Selling, general and administrative expenses for the first nine months of 2000
were $38.3 million, or 25% of net sales, as compared to $21.7 million, or 32%
of net sales, for the first nine months of 1999. The increase was comprised
primarily of $8.6 million in compensation and related benefits, and
$6.0 million in outside services, professional fees, advertising and promotion,
building and utilities, and travel and entertainment.
These increases in selling, general and administrative expenses are the result
of higher spending levels required to support the increased sales activity
incurred during the third quarter and the first nine months of 2000 over the
same periods in previous year. The decrease in selling, general and
administrative expenses as a percentage of net sales during the third quarter
and the first nine months of 2000 as compared to the same period last year is
due to higher net sales.
Provision for Income Taxes
During the third quarter of 2000 and first nine months of 2000, we provided for
taxes at an effective tax rate of 10%. The 2000 tax rate is less than the
federal statutory rate primarily as a result of the planned utilization of net
operating loss and credit carryforwards that would partially offset the
Company's tax liability.
Liquidity and Capital Resources
Our cash and cash equivalents and short term investments were $107.6 million at
September 24, 2000, an increase of $91 million from $17 million at December 31,
1999. We did not have an outstanding balance on our line of credit and had no
long term debt at September 24, 2000. Stockholders' equity at September 24, 2000
was approximately $198 million.
11
<PAGE>
Net cash used in operating activities was $16.9 million during the nine months
ended September 24, 2000 as compared to $15.8 million during the same period
last year. The net cash used in operating activities during the nine months
ended September 24, 2000 was primarily due to an increase in accounts receivable
and inventories of $30.9 million and $15.1 million, respectively. The increase
in accounts receivable and inventories was partially offset by our net income of
$19.0 million, depreciation and amortization expense of $3.5 million, and an
increase in accrued liabilities of $7.6 million.
Net cash used in investing activities was $51.2 million during the nine months
ended September 24, 2000 as compared to net cash provided by investing
activities of $6.3 million during the same period of 1999. The net cash used in
investing activities during the nine months ended September 24, 2000 is
attributable to the purchase of property and equipment of $3.8 million, short
term investments of $34.5 million, and long term investments of $12.9 million.
The net cash provided by investing activities during the same period last year
was attributable to the sale of short term investments of $8.1 million offset by
purchases of property and equipment of $1.9 million.
Net cash provided by financing activities was $124 million during the nine
months ended September 24, 2000 as compared to $4.2 million during the same
period last year. The net cash provided by financing activities during the nine
months ended September 24, 2000 is primarily attributable to the completion of
our follow on public offering of 3,000,000 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 June 25, 2000, 274,800 of such shares had been repurchased. No such shares
were purchased during the third quarter of 2000 and 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 expired in July 2000. All
borrowings under this line of credit bore interest at a per annum rate equal to
the lender's prime rate. We borrowed $3.0 million under 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 required 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 throughout the term of
the line of credit.
On March 8, 2000 we completed our follow on 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. 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 may have rights,
preferences or privileges senior to our common stock.
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Pending Mergers and Acquisitions
On June 27, 2000, we entered into a definitive Strategic Business Combination
Agreement to acquire the semiconductor equipment division of STEAG Electronic
Systems AG (excluding STEAG's optical storage and photomask operations), and
entered into an Agreement and Plan of Merger to acquire CFM Technologies, Inc.
We believe the combined company will gain significant advantages in terms of
size, product line breadth, geographic scope and other synergies.
When the merger with CFM is completed, CFM shareholders will receive 0.5233
shares of Mattson common stock for each CFM share they own, and will hold in the
aggregate approximately 11% of the outstanding common stock of the combined
company. STEAG will receive 11,850,000 shares of Mattson common stock, and will
hold approximately 32% of the outstanding common stock of the combined company.
Under the Strategic Business Combination Agreement (the "Combination Agreement")
dated as of June 27, 2000 with STEAG Electronic Systems AG ("STEAG"), Mattson
will acquire STEAG's semiconductor equipment division (the "STEAG Semiconductor
Division"), consisting of eleven subsidiaries (the "STEAG Semiconductor
Subsidiaries") in exchange for issuing 11,850,000 shares of Mattson common stock
to STEAG. At the closing, Mattson will also grant options to purchase 850,000
shares of common stock to employees of the STEAG Semiconductor Division.
Mattson, STEAG, and Brad Mattson, CEO of Mattson Technology, have also agreed to
enter into a Stockholder Agreement (the "Stockholder Agreement") providing for,
among other things, the expansion of Mattson's board of directors from five
members to seven, the election of two persons designated by STEAG to Mattson's
board of directors, restrictions on future acquisitions or dispositions of
Mattson common stock by STEAG, and registration rights in favor of STEAG.
Following the transaction, STEAG's Dr. Jochen Melchior will serve as the initial
Chairman of the Board of the combined company. The terms of the transaction
with STEAG are more fully described in our joint proxy statement-prospectus and
in the Combination Agreement and Stockholder Agreement, which are filed with the
Securities and Exchange Commission, on October 10, 2000.
Under the Agreement and Plan of Merger (the "Merger Agreement") dated as of June
27, 2000 with CFM, Mattson will acquire CFM in a stock-for-stock merger in which
Mattson will issue 0.5223 shares of Mattson's common stock for each share of CFM
common stock outstanding at the closing (which would represent approximately
4,115,000 shares of Mattson common stock as of October 4, 2000). The merger with
CFM is intended to qualify as a tax-free reorganization for purposes of U.S. tax
law. In addition to the share issuance, Mattson will assume all outstanding CFM
stock options, based on the same 0.5223 exchange ratio. As of October 4, 2000,
CFM had options to purchase approximately 1,782,000 shares of CFM common stock
outstanding, which would become options to purchase approximately 930,740 shares
of Mattson common stock upon completion of the merger. Mattson has agreed, at
the closing, to issue additional options to purchase 500,000 shares of its
common stock to employees of CFM. The terms of the transaction with CFM are more
fully described in our joint proxy statement-prospectus and in the Merger
Agreement which we filed with the Securities and Exchange Commission.
We have an agreement in principle to acquire R.F. Services, Inc.
for a price anticipated to be approximately $915,000. Brad Mattson, CEO of
Mattson Technology, owns a majority of the outstanding shares of R.F.
Services, Inc. and serves as a director of that corporation.
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,
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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
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 $2.5 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.
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THE PRICE OF OUR COMMON STOCK HAS FLUCTUATED IN THE PAST AND MAY CONTINUE TO
FLUCTUATE SIGNIFICANTLY IN THE FUTURE, INCLUDING AS A RESULT OF OUR ANNOUNCED,
PENDING ACQUISITIONS, WHICH MAY LEAD TO LOSSES BY INVESTORS OR TO SECURITIES
LITIGATION
The market price of our common stock has been highly volatile in the past, and
our stock price may decline in the future. We believe that a number of factors
could cause the price of our common stock to fluctuate, perhaps substantially,
including:
. our recently announced, pending acquisitions of the semiconductor business
of STEAG Electronic Systems AG and of CFM Technologies, Inc., and other
announcements of developments related to our business;
. general conditions in the semiconductor industry or in the worldwide
economy;
. fluctuations in our operating results and order levels;
. announcements of technological innovations by us or by our competitors;
. new products or product enhancements by us or by our competitors;
. developments in patents or other intellectual property rights; or
. developments in our relationships with our customers, distributors and
suppliers.
In addition, in recent years the stock market in general and the market for
shares of high technology stocks in particular, have experienced extreme price
fluctuations. These fluctuations have frequently been unrelated to the operating
performance of the affected companies. Such fluctuations could adversely affect
the market price of our common stock. In the past, securities class action
litigation has often been instituted against a company following periods of
volatility in the company's stock price. This type of litigation, if filed
against us, could result in substantial costs and divert our management's
attention and resources.
OUR RECENTLY ANNOUNCED, PENDING ACQUISITIONS AND ANY FUTURE BUSINESS
ACQUISITIONS MAY DISRUPT OUR BUSINESS, DILUTE STOCKHOLDER VALUE OR DISTRACT
MANAGEMENT ATTENTION
As part of our business strategy, we consider acquisitions of, or significant
investments in, businesses that offer products, services and technologies
complementary to ours. We have announced that we have entered into definitive
agreements to acquire the semiconductor equipment division of STEAG Electronic
Systems AG (excluding STEAG's optical storage and photomask operations), and
entered into an Agreement and Plan of Merger to acquire CFM Technologies, Inc.
Such acquisitions could materially adversely affect our operating results and/or
the price of our common stock. Acquisitions also entail numerous risks,
including:
. difficulty of assimilating the operations, products and personnel of the
acquired businesses, particularly where these involve international
operations;
. potential disruption of our ongoing business;
. unanticipated costs associated with the acquisitions;
. inability of management to manage the financial and strategic position of
acquired or developed products, services and technologies;
. inability to maintain uniform standards, controls, policies and procedures;
and
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. impairment of relationships with employees and customers which may occur
as a result of integration of the acquired business.
To the extent that shares of our stock or other rights to purchase stock are
issued in connection with any future acquisitions, dilution to our existing
stockholders will result and our earnings per share may suffer. Any future
acquisitions may not generate additional revenue or provide any benefit to our
business, and we may not achieve a satisfactory return on our investment in any
acquired businesses.
WE HAVE ESTABLISHED A DIRECT SALES ORGANIZATION IN JAPAN AND TERMINATED 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 had
established a distributor relationship with Marubeni Solutions Corp. in 1990. In
1999, we shifted our strategy in Japan to a direct sales model. The process of
terminating our distribution relationship with Marubeni and establishing our own
direct sales force in Japan was 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, it is
expected that 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
are required to adopt SAB 101 in the fourth quarter of 2000 unless adoption is
further extended by the SEC. 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 September 24, 2000, we had short term investments of $34.5 million and
long term investments of $12.9 million and are exposed 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.
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PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities and Use of Proceeds.
None
Item 3. Defaults Upon Senior Securities.
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
2.1 Strategic Business Combination Agreement, dated as of June 27,
2000, by and between STEAG Electronic systems AG, an
Aktiengesellschaft organized and existing under the laws of the
Federal Republic of Germany, and Mattson Technology, Inc., a
Delaware corporation. (1)
2.2 Form of Stockholder Agreement to be entered by and among STEAG
Electronic systems AG, an Aktiengesellschaft organized and
existing under the laws of the Federal Republic of Germany,
Mattson Technology, Inc., a Delaware corporation and Brad
Mattson. (1)
2.3 Agreement and Plan of Merger, dated as of June 27, 2000, by and
among Mattson Technology, Inc., a Delaware corporation, M2C
Acquisition Corporation, a Delaware corporation and wholly-
owned subsidiary of Mattson Technology, Inc., and CFM
Technologies, Inc., a Pennsylvania corporation. (1)
2.4 Stock Option Agreement made and entered into as of June 27, 2000
by and between Mattson Technology, Inc., a Delaware
corporation, and CFM Technologies, Inc., a Commonwealth of
Pennsylvania corporation. (1)
2.5 Voting Agreement, dated as of June 27, 2000, by and between STEAG
Electronic Systems AG, an Aktiengesellschaft organized and
existing under the laws of the Federal Republic of Germany, and
Brad Mattson. (1)
2.6 Voting Agreement, dated as of June 27, 2000 by and between CFM
Technologies, Inc., a Pennsylvania corporation, and Brad
Mattson. (1)
2.7 Voting Agreement, dated as of June 27, 2000, by and between
Mattson Technology, Inc., a Delaware corporation, and
Christopher F. McConnell. (1)
3.1 Restated Articles of Incorporation of the Company (2)
3.2 Bylaws of the Registrant (2)
99.1 Risk Factors incorporated by reference to Annual Report on
Form 10-K.
Exhibit 27 (Electronic filing only)
(1) Incorporated by reference to Registrant's filing on Form 425 dated
July 6, 2000.
(2) 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.
(b) Reports on Form 8-K
None.
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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: November 7, 2000 /s/ Brian R. McDonald
_________________________________________
Brian R. McDonald
Vice President of Finance
and Chief Financial Officer
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