Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
MTSN > SEC Filings for MTSN > Form 10-Q on 9-May-2013All Recent SEC Filings

Show all filings for MATTSON TECHNOLOGY INC | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for MATTSON TECHNOLOGY INC


9-May-2013

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This quarterly report on Form 10-Q contains forward-looking statements, which are subject to the Safe Harbor provisions created by the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and beliefs, including estimates and projections about our industry. Our forward-looking statements may include statements that relate to our future revenue, earnings, cash flow and cash position; growth of the industry and the size of our served available market; market demand for our products; the timing of significant customer orders for our products; our ability to attract new customer; customer acceptance of delivered products and our ability to collect amounts due upon shipment and upon acceptance; end-user demand for semiconductors, including the growing mobile device industry; customer demand for semiconductor manufacturing equipment; our ability to timely manufacture, deliver and support ordered products; our ability to bring new products to market, to gain market share with such products and the overall mix of our products; our ability to generate significant sales; customer rate of adoption of new technologies; risks inherent in the development of complex technology; the timing and competitiveness of new product releases by our competitors; margins; product development plans and levels of research, development and engineering activity; our ability to align our cost structure with market conditions, including outsourcing plans, operating expenses, and the expected effects, cost and timing of restructuring activities; tax expenses; excess inventory reserves, including the level of our vendor commitments compared to our requirements; economic conditions in general and in our industry; our dependence on international sales and our expectation of growth in the international market; the impact of any litigation or investigation on our operating results or financial position; any offering and sale of securities pursuant to our shelf registration statement or otherwise; volatility in our stock price and any delisting of our stock from NASDAQ for the failure to maintain a minimum bid price; the sufficiency of our financial resources, including our Credit Agreement to support future operations and capital expenditures and the expected cost reduction as a result of our 2011 Restructuring Plan; the availability of financing. Forward-looking statements typically are identified by use of terms such as "anticipates," "expects," "intends," "plans," "seeks," "estimates," "believes" and similar expressions, although some forward-looking statements are expressed differently. These statements are not guarantees of future performance and are subject to numerous risks, uncertainties and assumptions that are difficult to predict. Such risks and uncertainties include those set forth in Part II, Item 1A under "Risk Factors" and this Part I, Item 2 under "Management's Discussion and Analysis of Financial Condition and Results of Operations." Our actual results could differ materially from those anticipated by these forward-looking statements. The forward-looking statements in this report speak only as of the time they are made and do not necessarily reflect our outlook at any other point in time. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future event, or for any other reason. This discussion should be read in conjunction with the condensed consolidated financial statements and notes presented in this Quarterly Report on Form 10-Q and the consolidated financial statements and notes in our last filed Annual Report on Form 10-K for the year ended December 31, 2012.

Overview
We are a supplier of semiconductor wafer processing equipment used in the fabrication of integrated circuits ("ICs"). Our manufacturing equipment is primarily used for semiconductor manufacturing, utilizing innovative technology to deliver advanced processing capabilities and high productivity for the fabrication of current and next-generation ICs. We were incorporated in California in 1988 and reincorporated in Delaware in 1997. Our business depends upon capital expenditures by the manufacturers of semiconductor devices. The level of capital expenditures by these manufacturers depends upon the current and anticipated market demand for such devices. Since the demand for semiconductor devices is highly cyclical, the demand for wafer processing equipment also is highly cyclical. The semiconductor equipment industry typically is characterized by wide swings in operating results as the industry rotates between cycles. Demand also is becoming prone to seasonality due to the buying patterns of customers, which is dependent upon the consumer product industry.
We have made progress in our strategic initiatives over the past several years and are strengthening our product positions.

•Our Helios XP product line continues to strengthen its position in the foundry segment, reflected by a recent order from a customer in Asia. Furthermore, we received repeat orders for system shipments from another foundry customer in Asia.

•In the etch market, we continue to hold a position in advanced DRAM down to the 2x nanometer ("nm") technology node and have developed a position for 3-DNAND. In the first quarter of 2013, we focused on enhancing the capabilities of our paradigmE product to meet requirements for advanced 2x nm DRAM and 3-DNAND technologies. In the Foundry segment, we completed initial work on processing of advanced transistors. We have


shipped an etch system for leading-edge technology node development to an Asian foundry customer and have completed in-house development by another major foundry.

•In 2013, our dry strip systems continue to be used through the 20 nm technology node and are also in use for sub-20 nm technologies that are currently in development. As finFET transistor technologies are being developed, we continue to enhance the capabilities of our SUPREMA products to meet advanced aspect ratio driven process requirements as well as stringent defectivity requirements. In the memory market, the SUPREMA product continues to hold a strong position as non-volatile memory transitions to 3-DNAND technologies.

We experienced industry weakness beginning in the second quarter of 2012, as our customers continued their cautious approach to capacity expansion in reaction to the global economic environment and their expectation of supply and demand for their products.

In December 2011, we initiated a broad-based cost reduction plan ("2011 Restructuring Plan"). During 2012, we completed the first three phases of our cost reduction plan, which included the consolidation of our manufacturing and research and development facilities, moving a portion of our outsourced spare parts logistics operations in-house, and workforce reductions. On January 15, 2013, we announced plans for the fourth phase of the 2011 Restructuring Plan, which primarily consisted of further workforce reductions across all areas of the Company. The fourth phase of the 2011 Restructuring Plan was substantially completed during the first quarter of 2013.

We expect that our cost reduction initiatives included in the 2011 Restructuring Plan will provide in excess of $28 million reductions in annual operating expenses beginning in the second quarter of 2013 as measured against annualized operating expenses in the third quarter of 2011. As of March 31, 2013, we have incurred $9.1 million in restructuring and other charges under the 2011 Restructuring Plan, of which $2.3 million was recorded in the first quarter of 2013. We expect to incur an additional $0.5 million related to the 2011 Restructuring Plan in 2013.
In addition to expenses incurred under the 2011 Restructuring Plan, we also expect to incur up to $1.0 million in capital expenditures in 2013 related to the transfer of research, development and pilot-line production of the Millios system to our facility in Dornstadt, Germany and the consolidation of global manufacturing in our facility in Fremont, California.
As of March 31, 2013, we had cash, cash equivalents and restricted cash of $12.7 million and working capital of $32.3 million. On April 12, 2013, we entered into a three-year $25 million senior secured revolving credit facility (the "Credit Agreement") with Silicon Valley Bank, part of SVB Financial Group. Under the Credit Agreement, advances are available based on (i) the achievement of certain quarterly EBITDA levels, and (ii) a borrowing base formula equal to the sum of up to (a) 80 percent of eligible accounts receivable and advance billings and
(b) 30 percent of eligible inventory, minus any reserves established by the bank. Upon closing, we borrowed $10 million under the Credit Agreement at an annual interest rate of 4.75 percent, which is variable and represented the greater of the Federal Funds Effective Rate plus 0.50% and the prime rate, plus 1.5 percent margin. We believe that these balances will be sufficient to fund our working and other capital requirements over the course of the next twelve months. We will continue to review our operations and take further actions, as necessary, to minimize the cash used in operations and retain sufficient liquidity to fund our operating activities. However, improvements in our results of operations and resulting cash position are largely dependent upon an improvement in the semiconductor equipment industry. The future success of our business will depend on numerous factors, including, but not limited to, the market demand for semiconductors and semiconductor wafer processing equipment. Such factors also will include our ability to (a) enhance our competitiveness and profitability; (b) develop and bring to market new products that address our customers' needs; (c) grow customer loyalty through collaboration with and support of our customers; (d) maintain a cost structure that will enable us to operate effectively and profitably throughout changing industry cycles; and (e) generate the gross profits necessary to enable us to make the necessary investments in our business. Critical Accounting Policies and Use of Estimates Management's discussion and analysis of financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of net sales and expenses during the reporting periods.
On an on-going basis, we evaluate our estimates and judgments, including those related to reserves for excess and obsolete inventory, warranty, bad debts, intangible assets, income taxes, restructuring costs, stock-based compensation,


contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances. These form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
There were no significant changes to our critical accounting policies during the three months ended March 31, 2013. For information about critical accounting policies, see Note 1. Basis of Presentation and Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2012.

Results of Operations
A summary of our results of operations for three months ended March 31, 2013 and
April 1, 2012 are as follows (in thousands except for percentages):
                                                           Three Months Ended
                                   March 31, 2013           April 1, 2012          Increase (Decrease)
                                 Amount     Percent       Amount     Percent         Amount     Percent
Net sales                      $ 20,237       100.0     $ 50,504       100.0     $  (30,267 )     (59.9 )
Cost of sales                    15,869        78.4       33,570        66.5        (17,701 )     (52.7 )
Gross profit                      4,368        21.6       16,934        33.5        (12,566 )     (74.2 )
Operating expenses:
Research, development and
engineering                       4,313        21.3        6,630        13.1         (2,317 )     (34.9 )
Selling, general and
administrative                    7,550        37.3       10,867        21.5         (3,317 )     (30.5 )
Restructuring charges             2,258        11.2          720         1.4          1,538        n/m    (1)
   Total operating expenses      14,121        69.8       18,217        36.1         (4,096 )     (22.5 )
Loss from operations             (9,753 )     (48.2 )     (1,283 )      (2.5 )       (8,470 )     660.2
Interest income (expense), net       16         0.1           31         0.1            (15 )      n/m    (1)
Other income (expense), net         283         1.4          382         0.8            (99 )      n/m    (1)
Loss before income taxes         (9,454 )     (46.7 )       (870 )      (1.7 )       (8,584 )     986.7
 Provision for income taxes          54         0.3          249         0.5           (195 )      n/m    (1)
Net loss                       $ (9,508 )     (47.0 )   $ (1,119 )      (2.2 )   $   (8,389 )     749.7

(1)Not meaningful.


Net Sales
A summary of our net sales for three months ended March 31, 2013 and April 1,
2012 are as follows (in thousands except for percentages):
                                   Three Months Ended
                   March 31,      April 1,       Increase (Decrease)
                      2013          2012          Amount       Percent
Net sales:
United States     $     3,084    $  10,170    $     (7,086 )    (69.7 )
International:
Korea                     868       24,258         (23,390 )    (96.4 )
Taiwan                 12,065        7,943           4,122       51.9
Other Asia              3,018        4,064          (1,046 )    (25.7 )
Europe and others       1,202        4,069          (2,867 )    (70.5 )
                       17,153       40,334         (23,181 )    (57.5 )
Total net sales   $    20,237    $  50,504    $    (30,267 )    (59.9 )

Net sales were $20.2 million for the three months ended March 31, 2013, a decrease of approximately $30.3 million compared to $50.5 million for the three months ended April 1, 2012 primarily driven by lower overall net sales of etch and strip systems into memory applications. We experienced continued lower industry demand in the first quarter of 2013 as our customers maintained their cautious approach to incremental capital investment in reaction to the global economic environment.
Cost of Sales and Gross Profit
A summary of our cost of sales and gross profit for three months ended March 31, 2013 and April 1, 2012 are as follows (in thousands except for percentages):

                               Three Months Ended
               March 31,     April 1,       Increase (Decrease)
                 2013          2012          Amount       Percent
Cost of sales $  15,869     $ 33,570     $    (17,701 )    (52.7 )
Gross profit  $   4,368     $ 16,934     $    (12,566 )    (74.2 )
Gross margin       21.6 %       33.5 %

Our cost of sales consists of the costs associated with manufacturing our products, and includes the purchase of raw materials and related overhead, labor, warranty costs, charges for excess and obsolete inventory and costs incurred by our contract manufacturers in the production of our components and major sub-assemblies/modules.
Gross margin decreased from 33.5 percent during the three months ended April 1, 2012 to 21.6 percent during the three months ended March 31, 2013 primarily due to lower sales and an unfavorable mix of system sales that were heavily weighted towards our low-margin legacy strip systems in the first quarter of 2013, partially offset by a decrease in manufacturing spending as a result of our cost reduction initiatives.
Our gross margin has varied over the years and will continue to be affected by many factors, including competitive pressures, product mix, inventory reserves, economies of scale, material and other costs, overhead absorption levels and the timing of revenue recognition.


Operating Expenses
In December 2011, we initiated the 2011 Restructuring Plan, which in addition to general cost reduction activities, included consolidation of our manufacturing and research and development facilities, moving a portion of our outsourced spare parts logistics operations in-house, and workforce reductions. Prior to the initiation of the 2011 Restructuring Plan in the fourth quarter of 2011, annualized operating expenses from the third quarter of 2011 were $72.6 million. We expect that our cost reduction initiatives included in the 2011 Restructuring Plan will provide a reduction of over $28 million in annual operating expenses beginning in the second quarter of 2013 as measured against annualized operating expenses in the third quarter of 2011. Combined with the ongoing gross margin improvement efforts, our cash flow break-even point is expected to be reduced to the mid to high $20 million quarterly net sales level beginning in the second quarter of 2013.
Our financial results for the three months ended March 31, 2013 benefited from the favorable impact of our cost reduction initiatives. Our total operating expenses decreased $4.1 million in the three months ended March 31, 2013 as compared to the same period in prior year. Research, Development and Engineering
A summary of our research, development and engineering expenses for the three months ended March 31, 2013 and April 1, 2012 are as follows (in thousands except for percentages):

                                       March 31,      April 1,      Increase (Decrease)
                                          2013          2012         Amount       Percent
Research, development and engineering $    4,313     $  6,630     $    (2,317 )   (34.9)
Percentage of net sales                     21.3 %       13.1 %

Research, development and engineering expenses consist primarily of salaries and related costs of employees engaged in research, development and engineering activities, costs of product development and depreciation on equipment used in the course of research, development and engineering activities.
Research, development and engineering expenses decreased $2.3 million in the three months ended March 31, 2013 compared to the three months ended April 1, 2012 largely attributable to reductions in employee related expenses, engineering materials, depreciation expense and certain facilities and information technology costs. The decreases in employee related expenses, engineering material, certain facilities and information technology costs were primarily due to the cost reduction activities which have been on-going since the fourth quarter of 2011. The decrease in depreciation expense was the result of several assets being fully depreciated as of the end of 2012. Selling, General and Administrative
A summary of our selling, general and administrative expenses for the three months ended March 31, 2013 and April 1, 2012 are as follows:

                                     March 31,      April 1,      Increase (Decrease)
                                        2013          2012         Amount       Percent
Selling, general and administrative $    7,550     $ 10,867     $    (3,317 )   (30.5)
Percentage of net sales                   37.3 %       21.5 %

Selling, general and administrative expenses consist primarily of employee-related expenses, as well as legal and professional fees, insurance costs, amortization of evaluation systems and certain facilities and information technology costs.
Selling, general and administrative expenses were $7.6 million in the three months ended March 31, 2013, a decrease of $3.3 million compared to $10.9 million in the three months ended April 1, 2012.
The decrease in selling, general and administrative expenses was primarily attributable to decreases in employee related expenses, outside services, travel and entertainment expenses, all resulting from cost reduction activities which have been on-going since the fourth quarter of 2011 as well as lower sales commissions resulting from lower net sales in the first quarter of 2013. These decreases were partially offset by an increase in amortization and other costs associated with supporting our evaluation tools at customer sites.


Restructuring and Other Charges
As of March 31, 2013, we have incurred $9.1 million in restructuring charges under the 2011 Restructuring Plan, of which $2.3 million was recorded during the first quarter of 2013. We completed the first three phases of the 2011 Restructuring Plan in 2012 and substantially completed the fourth phase of the 2011 Restructuring Plan during the first quarter of 2013.
During the three months ended March 31, 2013, we incurred $2.3 million in restructuring and other expense, which included recruiting costs for our new Chief Executive Officer as well as severance expense for our former Chief Executive Officer totaling approximately $0.6 million. During the three months ended March 31, 2013 we paid $2.6 million in employee severance and other costs. For the remainder of 2013, we expect to incur an additional $0.5 million to $1.0 million related to the 2011 Restructuring Plan.
In addition to expenses incurred under the 2011 Restructuring Plan, we also expect to incur up to $1.0 million in capital expenditures in 2013 related to the transfer of research, development and pilot-line production of the Millios system to our facility in Dornstadt, Germany and the consolidation of global manufacturing to our facility in Fremont, California. Other Income (Expense), net
Other income (expense), net was $0.3 million in income for the three months ended March 31, 2013, and primarily consisted of foreign exchange gains from foreign currency denominated inter-company balances.
Other income (expense), net was $0.4 million in the first quarter of 2012, which primarily consisted of $0.5 million foreign exchange gains resulting from favorable foreign currency exchange rates. Provision for Income Taxes
On a quarterly basis, we record our income tax expense or benefit based on our year-to-date results and expected results for the remainder of the year. We recorded an income tax provision of $0.1 million and $0.2 million for the three months ended March 31, 2013 and April 1, 2012, respectively. The net tax provision for three months ended March 31, 2013 and April 1, 2012 is the result of the mix of profits earned in tax jurisdictions with a broad range of income tax rates.
Liquidity and Capital Resources
Our cash and cash equivalents was $10.8 million as of March 31, 2013, a decrease of approximately $3.5 million, compared to $14.4 million as of December 31, 2012. Working capital as of March 31, 2013 was $32.3 million, compared to $41.5 million as of December 31, 2012. Stockholders' equity as of March 31, 2013 was $33.7 million, compared to $43.3 million as of December 31, 2012.

                                                                       Three Months Ended
                                                                March 31, 2013     April 1, 2012
Net cash provided by (used in) operating activities            $       (3,263 )   $       4,954
Net cash used in investing activities                                     (82 )            (421 )
Net cash provided by financing activities                                   5               127
Effect of exchange rate changes on cash and cash equivalents             (203 )            (175 )
Net increase (decrease) in cash and cash equivalents           $       (3,543 )   $       4,485

Liquidity and Capital Resources Outlook
As of March 31, 2013, we had cash and cash equivalents of $10.8 million and working capital of $32.3 million. On April 12, 2013, we entered into a three-year $25 million senior secured revolving credit facility with Silicon Valley Bank, part of SVB Financial Group. Under the Credit Agreement, advances are available based on (i) the achievement of certain quarterly EBITDA levels, and (ii) a borrowing base formula equal to the sum of up to (a) 80 percent of eligible accounts receivable and advance billings and (b) 30 percent of eligible inventory, minus any reserves established by the bank. Upon closing, we borrowed $10 million under the Credit Agreement at an annual interest rate of 4.75 percent, which is variable and represented the greater of the Federal Funds Effective Rate plus 0.50% and the prime rate, plus 1.5 percent margin. We are subject to customary affirmative and negative covenants and customary events of default under the Credit Agreement. We believe that these balances will be sufficient to fund our working and other capital requirements over the course of the next twelve months.


Our operations require careful management of our cash and working capital balances. Our liquidity is affected by many factors including, among others, fluctuations in our net sales, gross profits and operating expenses, as well as changes in our operating assets and liabilities. For example, our net sales for the three months ended March 31, 2013 decreased 60 percent compared to the same period in 2012. The cyclicality of the semiconductor industry makes it difficult to predict our future liquidity needs with certainty. Any upturn in the semiconductor industry would result in short-term uses of cash to fund inventory purchases. In addition, our cost reduction efforts may prove ineffective and cause us to incur additional losses in the future and lower our cash balances. We may need additional funds to support our working capital requirements and operating expenses, or for other requirements. Historically, we have relied on a combination of fundraising from the sale and issuance of equity securities (such as our common stock offering in May 2011) and cash generated from product, service and royalty revenues to provide funding for our operations. Improvements in our results of operations and resulting cash position are largely dependent upon an improvement in the semiconductor equipment industry. We periodically review our liquidity position and may decide to raise additional funds, and may seek such funding from a combination of sources including, but not limited to, an asset-backed financing agreement or the issuance of equity or debt securities through public or private financings. These financing options may not be available on a timely basis, or on terms acceptable to us, and could be dilutive to our stockholders. If adequate funds are not available on acceptable terms, our ability to achieve our intended long-term business objectives could be limited.
Operating Activities
Net cash used in operations was $3.3 million in the three months ended March 31, 2013, comprised primarily of $9.5 million in net loss, partially offset by non-cash charges of $1.5 million and $4.7 million of cash increases reflected in . . .

  Add MTSN to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for MTSN - All Recent SEC Filings
Sign Up for a Free Trial to the NEW EDGAR Online Pro
Detailed SEC, Financial, Ownership and Offering Data on over 12,000 U.S. Public Companies.
Actionable and easy-to-use with searching, alerting, downloading and more.
Request a Trial      Sign Up Now


Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.