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 29, 1998
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 (I.R.S. Employer Identification No.)
of incorporation or organization)
3550 WEST WARREN AVENUE
FREMONT, CALIFORNIA 94538
(Address of principal executive offices) (Zip Code)
(510) 657-5900
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
_____ _____
Number of shares of common stock outstanding as of April 30, 1998:
14,480,179
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PART I -- FINANCIAL INFORMATION
1. FINANCIAL STATEMENTS
MATTSON TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
(unaudited)
ASSETS
MAR. 29, DEC. 31,
1998 1997
-------- --------
Current assets:
Cash and cash equivalents $33,454 $25,583
Short-term investments 7,107 8,598
Accounts receivable, net 11,271 14,784
Inventories 15,254 19,068
Deferred taxes 4,222 4,222
Prepaid expenses and other current assets 986 1,000
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Total current assets 72,294 73,255
Property and equipment, net 11,581 11,188
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$83,875 $84,443
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------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,244 $ 3,349
Accrued liabilities 14,605 12,910
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Total current liabilities 16,849 16,259
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Stockholders' equity:
Common stock 14 14
Additional paid in capital 57,458 57,418
Retained earnings 10,897 12,117
Treasury stock (1,075) (1,075)
Other (268) (290)
------- -------
Total stockholders' equity 67,026 68,184
------- -------
$83,875 $84,443
------- -------
------- -------
See accompanying notes to condensed consolidated financial statements.
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MATTSON TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
THREE MONTHS ENDED
MAR. 29, MAR. 30,
1998 1997
------- --------
Net sales $20,248 $13,023
Cost of sales 11,173 6,458
------- --------
Gross profit 9,075 6,565
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Operating expenses:
Research, development and engineering 4,501 2,944
Selling, general and administrative 6,725 4,908
------- --------
Total operating expenses 11,226 7,852
------- --------
Loss from operations (2,151) (1,287)
Interest and other income (expense), net 481 437
------- --------
Loss before income taxes (1,670) (850)
Benefit from income taxes (450) (282)
------- --------
Net loss $(1,220) $(568)
------- --------
------- --------
Net loss per share:
Basic $(0.09) $(0.04)
------- --------
Diluted $(0.09) $(0.04)
------- --------
Weighted average shares outstanding:
Basic 14,254 14,180
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Diluted 14,254 14,180
------- --------
See accompanying notes to condensed consolidated financial statements.
3
MATTSON TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
THREE MONTHS ENDED
MAR. 29, MAR. 30,
1998 1997
------- ---------
Cash flows from operating activities:
Net loss $(1,220) $(568)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Depreciation and amortization 815 698
Changes in assets and liabilities:
Accounts receivable 3,513 (280)
Inventories 3,814 (2,255)
Prepaid expenses and other assets 14 90
Accounts payable (1,105) 705
Accrued liabilities 1,695 (537)
------- --------
Net cash provided by (used in) operating activities 7,526 (2,147)
------- --------
Cash flows from investing activities:
Acquisition of property and equipment (1,208) (227)
Purchases of short-term investments 2,537 (7,956)
Sales and maturities of short-term investments 4,028 3,912
------- --------
Net cash provided by (used in) investing activities 283 (4,271)
------- --------
Cash flows from financing activities:
Proceeds from the issuance of Common Stock, net 40 19
Purchase of Common Stock - (1,973)
------- --------
Net cash provided by (used in) financing activities 40 (1,954)
------- --------
Effect of exchange rate changes on cash and
cash equivalents 22 (29)
------- --------
Net increase (decrease) in cash and cash equivalents 7,871 (8,401)
Cash and cash equivalents, beginning of period 25,583 21,547
------- --------
Cash and cash equivalents, end of period $33,454 $13,146
------- --------
------- --------
See accompanying notes to condensed consolidated financial statements.
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MATTSON TECHNOLOGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation have been included.
The financial statements should be read in conjunction with the audited
financial statements included in the Company's Annual Report for the year
ended December 31, 1997.
The results of operations for the three months ended March 29, 1998 are not
necessarily indicative of results that may be expected for the entire year
ending December 31, 1998.
NOTE 2 BALANCE SHEET DETAIL (IN THOUSANDS):
MAR. 29, DEC. 31,
1998 1997
-------- --------
Inventories:
Purchased parts and raw materials $7,431 $7,648
Work-in-process 5,593 7,606
Finished goods 1,960 2,266
Evaluation systems 270 1,548
------- --------
$15,254 $19,068
------- --------
------- --------
Accrued liabilities:
Warranty reserve $5,081 $4,756
Accrued compensation and benefits 2,063 2,199
Income taxes 1,119 1,971
Commissions 950 1,277
Deferred income 3,930 1,598
Other 1,462 1,109
------- --------
$14,605 $12,910
------- --------
------- --------
NOTE 3 CERTAIN STOCK TRANSACTIONS
In March 1998, the Board of Directors has authorized the Company to purchase
up to 1,000,000 shares of the Company's Common Stock, of which no shares
have been purchased as of March 29, 1998.
NOTE 4 NET INCOME (LOSS) PER SHARE
The Company has adopted Financial Accounting Standards Board (FASB) Statement
128 effective with the quarter and year ended December 31, 1997. All
earnings per share data has been restated to reflect the FASB 128 method of
computation. FASB 128 requires dual presentation of basic and diluted
earnings per share (EPS) on the face of the income statement. Basic EPS is
computed by dividing income 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.
5
During the quarters ended March 29, 1998 and March 30, 1997 there were no
differences between the numerators used for the basic and diluted EPS
calculations. There were also no differences in the denominators in those
quarters because the effect of including stock options would be
anti-dilutive. Total stock options outstanding at March 29, 1998 and March
30, 1997 were 2,674,736 and 2,461,744, respectively.
NOTE 5 NEW ACCOUNTING PRONOUNCEMENT
As of January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130 (SFAS 130), "Reporting Comprehensive Income". SFAS 130
establishes new 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):
THREE MONTHS ENDED
(in thousands) MAR. 29, MAR. 30,
1998 1997
------- --------
Net loss $(1,220) $ (568)
Foreign currency translation adjustments 22 (34)
------- --------
Comprehensive income (loss) $(1,198) $ (602)
------- --------
------- --------
The accumulated other comprehensive income of ($268,000) and ($290,000) at
March 29, 1998 and March 30, 1997, respectively is comprised only of
cumulative translations adjustments.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
OVERVIEW
Mattson Technology, Inc. ("Mattson" or the "Company") designs, manufactures
and markets advanced fabrication equipment to semiconductor manufacturers
worldwide. The Company's product line is based on the Company's modular
"Aspen" platform, which accommodates two process chambers supporting
increased throughput. The Company currently offers Aspen Strip, CVD, RTP and
LiteEtch products. To date, the Company has derived a substantial majority
of its sales from Aspen Strip systems. In addition, the Company derives
sales from spare parts and maintenance services.
As a result of the previous well-publicized Asian Financial Crisis,
particularly as it has impacted the market for DRAMs, many semiconductor
manufacturers have been delaying or canceling previously planned new
equipment purchases. The cyclicality and uncertainties regarding overall
market conditions continue to present significant challenges to the Company
and the Company expects that they will continue to have a significant adverse
impact on the Company's ability to forecast near term revenue expectations.
The ability of the Company to modify its operations in response to short term
changes in market conditions is limited. The extent and duration of any
slowdown and the short term and ultimate impact on the Company and its
results of operations and financial condition cannot be precisely predicted.
The Company experienced a loss in the quarter ended March 29, 1998 and
expects to continue to incur losses at least for the next two quarters. In
response to the continuing "pushouts" and cancellations of orders from Asian
customers, the Company has initiated cost control measures, including a 15
percent reduction in its workforce and a reduction in executive salaries in
March 1998. Future results will depend on a variety of factors, particularly
overall market conditions and also timing of significant orders, the ability
of the Company to bring new systems to market,
6
the timing of new product releases by the Company's competitors, patterns of
capital spending by the Company's customers, market acceptance of new and/or
enhanced versions of Company systems, changes in pricing by the Company, its
competitors, customers, or suppliers and the mix of products sold.
The Company generally recognizes a sale upon shipment of a system. However,
from time to time, the Company allows customers to evaluate systems. The
Company does not recognize the associated sale until and unless an evaluation
system is accepted by the customer.
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 that 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
other filings with the Securities and Exchange Commission.
RESULTS OF OPERATIONS
The following table sets forth the statement of operations data of the Company
expressed as a percentage of net sales for the period indicated:
MAR. 29, MAR. 30,
1998 1997
-------- --------
Net sales 100% 100%
Cost of sales 55% 50%
-------- --------
Gross margin 45% 50%
-------- --------
Operating expenses:
Research, development and engineering 22% 23%
Selling, general and administrative 33% 38%
Total operating expenses 55% 60%
Loss from operations (11%) (10%)
Loss before income taxes (8%) (7%)
Net loss (6%) (4%)
NET SALES
Net sales for the first quarter of 1998 increased 55% to $20.3 million from
$13.0 million for the first quarter of 1997. The quarterly increase in sales
reflects a 39% increase in unit sales for the first quarter of 1998 compared
to the first quarter of 1997. Average selling prices (ASP's) increased 11%
for the first quarter of 1998 compared to the first quarter of 1997. The
increase was primarily a result of the proportionate increase in sales
between Aspen Strip dual chamber systems compared to Aspen Strip single
chamber systems. Sales in the first quarter consist principally of single and
dual chamber Aspen Strip systems.
First quarter bookings were $9.6 million, a decrease of 36% compared to
bookings of $14.9 million in the first quarter of 1997, resulting in a book
to bill ratio of 0.5 to 1.0. This decrease was due principally to the
general industry slowdown including "pushouts" of orders and cancellations
during the quarter of previously booked orders totaling $7.8 million.
7
International sales, which are predominantly to customers based in Japan and
the Pacific Rim (which includes Taiwan, Singapore and Korea), accounted for
55% and 50% of net sales for the first quarter of 1998 and 1997,
respectively. All sales are denominated in U.S. dollars. Notwithstanding
the effects of the Asian Financial Crisis, international sales did not
decline as a percentage of revenues as the pushouts and cancellations by
Asian based companies included sales by the Company to U.S. based operations
and joint ventures of Asian based companies. The Company anticipates that
international sales will continue to account for a significant portion of
1998 total net sales and that as a result, the Company will continue to be
significantly impacted by regional slowdowns such as that which has resulted
from the Asian Financial Crisis.
GROSS MARGIN
The Company's gross margin for the first quarter of 1998 decreased to 45%
from 50% for the first quarter of 1997. The decrease in margins for the first
quarter of 1998 was due principally to unfavorable manufacturing volume
variances. Excess finished goods inventory at the end of the fourth quarter
of 1997 required a reduction in first quarter production causing unfavorable
overhead and material burdens. Margins were also affected by pricing
pressure in Taiwan and Japan.
The Company's gross margin may continue to be affected by a variety of
factors. As the industry slowdown has continued, the Company has experienced
increasing pricing pressures. The Company's gross margin on international
sales, other than sales through Marubeni, is substantially the same as
domestic sales. Sales to Marubeni typically carry a lower gross margin, as
Marubeni is primarily responsible for sales and support costs in Japan. In
addition, the Company has incurred additional research, development and
engineering and marketing expenses primarily through the Company's Japanese
subsidiary, Mattson Technology Center K.K. ("MTC").
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 and
rapid growth may also have an adverse effect on gross margin due to the
inefficiencies associated with manufacturing of new product lines and rapid
expansion, respectively.
RESEARCH, DEVELOPMENT AND ENGINEERING
Research, development and engineering expenses for the first quarter of 1998
were $4.5 million, or 22% of net sales, as compared to $2.9 million, or 23%,
for the first quarter of 1997. The increase in expenses for the first
quarter of 1998 was primarily attributable to salaries and related expenses
and engineering materials, which increased to $2.4 million and $1.1 million
for the first quarter of 1998 from $1.7 million and $0.6 million for the
first quarter of 1997, respectively. The Company believes that continued
investment in research and development, including its multi-product strategy
and its 300mm development program, is critical to maintaining a strong
technological position in the industry.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses for the first quarter of 1998
were $6.7 million, or 33% of net sales, as compared to $4.9 million, or 38%,
for the first quarter of 1997. The increase in expenses for the first
quarter of 1998 was primarily due to salary and related expenses which
increased to $4.3 million for the first quarter of 1998 from $3.2 million for
the first quarter of 1997 and building and utilities which increased to $0.7
million for the first quarter of 1998 from $0.4 million for the first quarter
of 1997. Salary and related expenses increased principally as a
8
result of higher quarterly average headcount and the costs associated with
the March 1998 reduction in force while the building and utilities costs
increased primarily as a result of the lease in 1997 of an additional
100,000 square feet of office space to expand its headquarters in Fremont,
California.
PROVISION FOR INCOME TAXES
The Company's expected annual tax rate was 27% in the first quarter of 1998.
In the fourth quarter of 1997, the Company revised its expected annual tax
rate from 33% to 27% principally as a result of expected lower earnings
without a corresponding decrease in tax credits in 1998 compared to 1997.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operations during the first quarter of 1998 was $7.5
million, compared to $2.1 million of net cash used in operations during the
first quarter of 1997. Net cash provided by operations during the first
quarter of 1998 was primarily attributable to a decrease in accounts
receivable of $3.5 million and a decrease in inventories of $3.8 million.
In March 1998, the Board of Directors has authorized the Company to purchase
up to 1,000,000 shares of the Company's Common Stock, of which no shares have
been purchased as of March 29, 1998.
The Company believes that existing cash and short-term investment balances
will be sufficient to meet the Company's cash requirements during the next
twelve months. However, depending upon its rate of growth and profitability,
the Company may require additional equity or debt financing to meet its
working capital requirements or capital equipment needs. There can be no
assurance that additional financing will be available when required or, if
available, will be on terms satisfactory to the Company.
9
PART II -- OTHER INFORMATION
ITEM 5. OTHER INFORMATION.
None
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: May 13, 1998 /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