UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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 June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________________ to _____________________
Commission file number 0-21970
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MATTSON TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 77-0208119
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
3550 WEST WARREN AVENUE
FREMONT, CALIFORNIA 94538
(Address of principal executive offices) (Zip Code)
(510) 657-5900
(Registrant's telephone number, including area code)
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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 AUGUST 12, 1996 : 14,118,512
1
PART I -- FINANCIAL INFORMATION
1. FINANCIAL STATEMENTS
MATTSON TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
(unaudited)
ASSETS
JUNE 30, DEC. 31,
1996 1995
----------- -----------
Current assets:
Cash and cash equivalents $ 13,164 $ 14,310
Short-term investments 24,053 27,861
Accounts receivable, net 16,876 13,988
Inventories 15,784 10,839
Prepaid expenses and other current assets 3,021 2,440
----------- -----------
Total current assets 72,898 69,438
Property and equipment, net 8,347 4,651
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$ 81,245 $ 74,089
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,602 3,887
Accrued liabilities 9,584 9,126
----------- -----------
Total current liabilities 12,186 13,013
----------- -----------
Shareholders' equity:
Common stock 56,882 55,898
Deferred compensation (19) (73)
Net unrealized loss on investments (26) -
Cumulative translation adjustments (38) (16)
Retained earnings 12,260 5,267
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Total shareholders' equity 69,059 61,076
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$ 81,245 74,089
----------- -----------
----------- -----------
See accompanying notes to condensed consolidated financial statements.
2
MATTSON TECHNOLOGY, INC.
CONDENSED CONSOLIDATED INCOME STATEMENT
(in thousands, except per share amounts)
(unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
JUNE 30, JUL. 2, JUNE 30, JUL. 2,
1996 1995 1996 1995
---------- ---------- ---------- ----------
Net sales $ 23,244 $ 11,866 $ 45,246 $ 21,303
Cost of sales 9,949 5,418 19,130 9,950
---------- ---------- ---------- ----------
Gross profit 13,295 6,448 26,116 11,353
---------- ---------- ---------- ----------
Operating expenses:
Research, development and engineering 2,943 1,294 5,591 2,328
Selling, general and administrative 5,444 2,431 10,710 4,327
---------- ---------- ---------- ----------
Total operating expenses 8,387 3,725 16,301 6,655
---------- ---------- ---------- ----------
Income from operations 4,908 2,723 9,815 4,698
Interest and other income 489 374 1,099 721
---------- ---------- ---------- ----------
Income before income taxes 5,397 3,097 10,914 5,419
Tax provision 1,942 877 3,921 1,519
---------- ---------- ---------- ----------
Net income $ 3,455 $ 2,220 $ 6,993 $ 3,900
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income per share 0.23 $ 0.15 $ 0.46 $ 0.28
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Shares used in computing net income per share 15,335 14,382 15,292 14,166
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
See accompanying notes to condensed consolidated financial statements.
3
MATTSON TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
SIX MONTHS ENDED
----------------
JUNE 30, JUL. 2,
1996 1995
---------- ----------
Cash flows from operating activities:
Net income $ 6,993 $ 3,900
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization 648 207
Deferred compensation related to stock options 54 40
Changes in assets and liabilities:
Accounts receivable (2,888) (2,688)
Inventories (6,529) (3,096)
Prepaid expenses and other current assets (581) (848)
Accounts payable (1,285) 388
Accrued liabilities 458 3,612
---------- ----------
Net cash provided by (used in) operating activities (3,130) 1,515
Cash flows from investing activities:
Acquisition of property and equipment (2,760) (513)
Purchases of short-term investments (25,692) (9,620)
Sales and maturities of short-term investments 29,474 11,136
---------- ----------
Net cash provided by investing activities 1,022 1,003
Cash flows from financing activities:
Proceeds from the issuance of Common Stock, net 984 21,026
Repayment of notes receivable from shareholders - 65
---------- ----------
Net cash provided by financing activities 984 21,091
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Effect of exchange rate changes on cash and cash equivalents (22) -
---------- ----------
Net increase (decrease) in cash and cash equivalents (1,146) 23,609
Cash and cash equivalents, beginning of period 14,310 12,617
---------- ----------
Cash and cash equivalents, end of period $ 13,164 $ 36,226
---------- ----------
---------- ----------
Supplemental disclosure of non-cash operating activities:
Inventory totaling $1,584 and $811 was capitalized and transferred to property
and equipment during the first six months of 1996 and 1995, respectively.
See accompanying notes to condensed consolidated financial statements.
4
MATTSON TECHNOLOGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been included.
The financial statements should be read in conjunction with the audited
financial statements included in the Company's Annual Report for the year ended
December 31, 1995.
The results of operations for the three and six month periods ended June 30,
1996 are not necessarily indicative of results that may be expected for the
entire year ending December 31, 1996.
NOTE 2 BALANCE SHEET DETAIL (IN THOUSANDS):
JUNE 30, DEC. 31,
1996 1995
---------- ----------
Inventories:
Purchased parts and raw materials $ 7,191 $ 5,227
Work-in-process 6,395 4,070
Finished goods 1,462 1,072
Evaluation systems 736 470
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$ 15,784 $ 10,839
---------- ----------
---------- ----------
Accrued liabilities:
Warranty reserve $ 3,127 $ 2,384
Accrued compensation and benefits 1,901 2,270
Income taxes 784 1,543
Commissions 404 675
Deferred income 1,184 591
Other 2,184 1,663
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$ 9,584 $ 9,126
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5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
OVERVIEW
Mattson Technology, Inc. ("Mattson" or the "Company") designs, manufactures and
markets advanced fabrication equipment to semiconductor manufacturers worldwide.
The Company began operations in 1989 and shipped its first photoresist removal
product, the Aspen Strip, in 1991. The Company's current product line is based
on a modular Aspen platform which accommodates two process chambers supporting
increased throughput. The Company currently offers Strip, CVD and RTP and has
announced a LiteEtch product.
The Company has derived substantially all of its sales from Aspen Strip and CVD
systems. In addition, the Company derives sales from spare parts and
maintenance services.
The Company has experienced rapid growth and there can be no assurance that the
Company will be able to continue sales growth or profitability. Future results
will depend on a variety of factors, including the timing of significant orders,
the ability of the Company to bring new systems to market, the timing of new
product releases by the Company's competitors, patterns of capital spending by
the Company's customers, market acceptance of new and/or enhanced versions of
the Company's systems, changes in pricing by the Company, its competitors,
customers, or suppliers, the mix of products sold and the cyclicality in the
semiconductor industry and the markets served by the Company's customers. The
Company is increasing its expense levels to support long term growth in its
business. As a result, the Company is dependent upon continuous increases in
sales in order to maintain profitability. If the Company's sales do not
increase, the expected higher level of operating expenses could materially and
adversely affect the financial results of the Company.
The Company expects sales and earnings in the third quarter of 1996 to be
significantly below prior expectations, principally as a result of customers
deferring scheduled shipments of the Company's Aspen Strip product. As a result
of the well publicized slowdown in the semiconductor market, particularly for
DRAMs, many semiconductor manufacturers are delaying or canceling previously
planned new equipment purchases. The extent and duration of the slowdown and
the ultimate impact on the Company and its results of operations and financial
condition cannot be precisely predicted.
FORWARD LOOKING STATEMENTS
This report on Form 10-Q contains forward looking statements regarding, among
other matters, the Company's future strategy, product development plans, and
productivity gains and growth. The forward looking statements are made pursuant
to the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Forward looking statements address matters which are subject to a number
of risks and uncertainties. In addition to the general risks associated with
the development of complex technology, future results of the Company will depend
on a variety of factors as described herein and in the Company's Annual Report
on Form 10-K and other filings with the Securities and Exchange Commission.
6
RESULTS OF OPERATIONS
The following table sets forth the statement of income data of the Company
expressed as a percentage of net sales for the period indicated:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUL. 2, JUNE 30, JUL. 2,
1996 1995 1996 1995
---- ---- ---- ----
Net sales 100% 100% 100% 100%
Cost of sales 43% 46% 42% 47%
---- ---- ---- ----
Gross margin 57% 54% 58% 53%
---- ---- ---- ----
Operating expenses:
Research, development and engineering 13% 11% 12% 11%
Selling, general and administrative 23% 20% 24% 20%
---- ---- ---- ----
Total operating expenses 36% 31% 36% 31%
---- ---- ---- ----
Income from operations 21% 23% 22% 22%
Income before income taxes 23% 26% 24% 25%
Net income 15% 19% 15% 18%
NET SALES
Net sales for the second quarter of 1996 increased 96% to $23.2 million from
$11.9 million for the second quarter of 1995. Net sales increased as a result of
a 58% increase in unit shipments and a 24% increase in average selling prices
(ASP's). Net sales for the first six months of 1996 increased 112% to $45.2
million from $21.3 million for the first six months of 1995. Net sales
increased as a result of a 64% increase in unit shipments and a 28% increase in
average selling prices (ASP's). Sales to date consist principally of single and
dual chamber Aspen Strip and CVD systems and to a lesser extent, spare parts and
service revenue. Higher ASP's have resulted primarily from increasing sales of
the Company's dual chamber Aspen Strip systems and, to a lesser extent, sales of
the Aspen ICP Strip and CVD systems, 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 87% and
57% of net sales for the second quarter of 1996 and 1995, respectively.
International sales for the first six months of 1996 and 1995 were 87% and 75%,
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 1996 total net sales due primarily to orders from customers in Japan
and the Pacific Rim.
GROSS MARGIN
The Company's gross margin for the second quarter of 1996 increased to 57% from
54% for the second quarter of 1995 and for the first six months of 1996
increased to 58% from 53% for the first six months of 1995. The increase was
principally due to an increase in gross margin on shipments through Marubeni as
a result of a 1995 agreement with Marubeni, in which the Company is now
providing research, development and engineering and marketing support in Japan
and certain other Asian markets. In addition, gross margin increased as a
result of increases in volume which resulted in improved economies of scale, and
a sales mix shift to higher ASP products.
The Company's gross margin will continue to be affected by a variety of factors.
The Company's gross margin on international sales, other than sales through
Marubeni, is substantially the same as domestic sales. Sales to
7
Marubeni typically carry a lower gross margin as Marubeni is still primarily
responsible for sales and support costs in Japan. As a result of the 1995
agreement with Marubeni, as described above, gross margins increased in the
first quarter and the first six months of 1996 on sales through Marubeni. In
addition, the Company has incurred additional research, development and
engineering and marketing expenses primarily through the newly established
Japanese subsidiary, Mattson Technology Center K.K. ("MTC").
Although the Company has not offered substantial discounts on its systems to
date, the Company may face discounting pressures in the future which could
adversely affect gross margins. The Company's reliance on outside vendors
generally, and a sole or a limited group of suppliers in particular, involves
several risks, including a potential inability to obtain an adequate supply of
required components and reduced control over pricing and timely delivery of
components. Any inability to obtain adequate deliveries or any other
circumstance that would require the Company to seek alternative sources of
supply or to manufacture such components internally could delay the Company's
ability to ship its systems and could have a material adverse effect on the
Company, including an increase in the Company's cost of sales and therefore an
adverse impact on gross margin. In addition, new system introductions and
enhancements may also have an adverse effect on gross margin due to the
inefficiencies associated with manufacturing of new product lines.
RESEARCH, DEVELOPMENT AND ENGINEERING
Research, development and engineering expenses for the second quarter of 1996
were $2.9 million, or 13% of net sales, as compared to $1.3 million, or 11%, for
the second quarter of 1995. Research, development and engineering expenses for
the first six months of 1996 were $5.6 million, or 12% of net sales, as compared
to $2.3 million, or 11% of net sales, for the first six months of 1995. The
increase in expenses was primarily due to salaries and related expenses which
increased to $1.5 million and $2.7 million for the second quarter and first six
months of 1996, respectively, from $.7 and $1.2 for the second quarter and first
six months of 1995, respectively, and engineering project materials which
increased to $.4 and $.9 for the second quarter and first six months of 1996,
respectively, from $.3 and $.5 for the second quarter and first six months of
1995, respectively. The increase in salaries and related expenses was due to
hiring additional employees required to support the Company's growth. The
increase in engineering project materials expense was due to ongoing product
development. Expenses also increased due to the Company's agreement with
Marubeni. The Company believes that substantial investment in research and
development is critical to maintaining a strong technological position in the
industry and therefore expects research and development expenses to continue to
increase in the foreseeable future.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses for the second quarter of 1996 were
$5.4 million, or 23% of net sales, as compared to $2.4 million, or 20%, for the
second quarter of 1995. Selling, general and administrative expenses for the
first six months of 1996 were $10.7 million, or 24% of net sales, as compared to
$4.3 million, or 20%, for the first six months of 1995. The increase in
expenses was primarily due to salaries, commissions and related expenses which
increased to $3.2 million and $6.6 million in the second quarter and first six
months of 1996, respectively, from $1.5 million and $2.9 million in the second
quarter and first six months of 1995, respectively. The increase in salaries,
commissions and related expenses was due to the increase in sales and hiring
required to support the Company's growth. Expenses also increased due to the
Company's agreement with Marubeni. The Company expects selling, general and
administrative expenses to continue to increase in the foreseeable future.
PROVISION FOR INCOME TAXES
The Company provided income taxes at the expected annual rate of 36% and 28% in
1996 and 1995, respectively. The Company's provision for income taxes in 1995
reflected utilization of tax loss carryforwards.
8
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operations during the first six months of 1996 was $3.1
million, compared to $1.5 million of net cash provided by operations during the
first six months of 1995. Net cash used in operations during the first six
months of 1996 was primarily attributable to increases in accounts receivable
and inventories of $2.9 and $6.5 million, respectively, offset by net income of
$7.0 million.
Net cash provided by investing activities during the first six months of 1996
was $1.0 million, compared to $1.0 million net cash provided by investing
activities during the first six months of 1995. Investing activities during the
first six months of 1996 consisted primarily of purchases and maturities of
short-term investments and acquisition of fixed assets.
Net cash provided by financing activities during the first six months of 1996
was $1.0 million, compared to $21.1 million net cash provided by financing
activities in the first six months of 1995. Cash provided during the first six
months of 1995 was primarily due to net proceeds of $20.7 million from the
Company's secondary public offering.
The Board of Directors has authorized the Company to repurchase up to 500,000
shares of the Company's common stock.
The Company believes that existing cash and short-term investment balances along
with anticipated cash flows from operations will be sufficient to meet the
Company's cash requirements during the next twelve months. However, 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
PART II -- OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Shareholders of Mattson Technology, Inc. was
held on May 16, 1996.
(b) The following five individuals were elected to serve for a one year
term as directors of the Company:
Brad Mattson
Stephen J. Ciesinski
Shigeru Nakayama
John C. Savage
Kenneth G. Smith
(c) The following other matters were voted on and approved at the Annual
Meeting of Shareholders:
A proposal to increase the number of shares authorized for grant under
the Company's 1989 Employee Stock Option Plan to 4,000,000: 5,960,056
votes were cast in favor of this proposal, 1,557,297 votes were cast
against this proposal.
A proposal to ratify the selection of Price Waterhouse LLP as
independent auditors for the fiscal year ending December 31, 1996:
10,582,507 votes were cast in favor of this proposal, 11,163 votes
were cast against this proposal.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit 27 (Electronic filing only)
(b) Reports on Form 8-K
None.
10
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: August 14, 1996 /s/ Richard S. Mora
------------------------------------
Richard S. Mora
Vice President of Finance
and Chief Financial Officer
(as principal financial
officer and on behalf of
Registrant)
11