Mattson: Annual Report Project
Prepared by Andrea Wise
and P.R. James
BUSN 501
Professor Martin Thomas
Table of Contents
Introduction3
Company Background4
Industry Background5
Consolidated Financial Statements8
Common-sized Financial Statements14
Short term Liquidity Analysis18
Operating Efficiency Analysis21
Leverage Ratio Analysis23
Profitability Ratio Analysis25
Market Ratio Analysis28
Dupont System Analysis29
Capital Structure Analysis29
Summary30
References32
Industry Average ValuesA1
Introduction
This report is afinancial analysis of Mattson Technology, Inc. Mattson Technology, a global supplier ofsemiconductor wafer processing equipment, is a technology leader and innovator in their core businesses: dry strip and the rapid thermal processing (RTP) wafer processing equipment.
Mattson’s balance sheet, income statement, statement of cash flows, statement of stockholder equity, and annual report have been dissected and studied with the following tools and techniques: trend analysis of common size financial statements for 2004, 2003 and 2002; financial ratios such as liquidity ratios, activity ratios, leverage ratios, and profitability ratios; and capital structure analysis.
Mattson was chosen because it is the former employer of one the authors of this report. This author, who still holds the rights to exercise Mattson stock options until 2010, was interested in gaining a better appreciation of Mattson’s financial health. The primary reason to examine Mattson was to assess the current and near term value of these stock options. The secondary reason was to determine if Mattson is an undervalued company and thus a potential good buy now.
Company Background
Mattson Technology, Inc. is a global supplier of semiconductor wafer processing equipment for the manufacture of integrated circuits (IC). A technology leader and innovator in their core businesses, dry strip and rapid thermal processing (RTP) wafer processing equipment, Mattson designs, manufactures, and markets their highly specialized equipment.
Founded by Brad Mattson in 1988, Mattson is headquartered in Fremont, California, just across the San Francisco bay from Silicon Valley. Mattson, a Delaware corporation since 1997, has design and manufacturing centers in the USA, Canada, and Germany and strong sales and support presence in Asia with offices in China, Japan, Korea, Singapore, and Taiwan.
Mattson’s equipment performs two primary functions:helping create the brains and the nervous system of the integrated circuit. Fabricating an IC is very complex, multi-layer, multi-step, highly repetitive process where millions of microscopic devices known as transistors, or the brains of the IC, are created on tiny slabs of silicon dioxide crystals. The RTP process enables manufacturers to make smaller and narrower devices. All of these transistors are circuits and these circuits are linked by the IC’s nervous system, or interconnects. Interconnects enable the transistors to function with each other, hence the name integrated circuit.Mattson’s dry strip equipment provides, technological solutions to allow manufacturers to continue to stay on the leading edge of interconnect advancements.
As the number two player in both of their primary businesses, Mattson is targeting the 300 mm wafer, the emerging standard of semiconductor manufacturing, as the market that will propel them into the top spots. Over 70% of their products sold in 2004 were 300 mm wafer products.
Mattson is using the two above principles to position itself in the forefront of the chip making industry: smaller devices on larger wafers. Making smaller devices and using larger slabs of silicon dioxide is the key to keeping Moore’s Law a reality. Gordon Moore, co-founder of the Intel Corporation, proposed in 1965 a now famous rule-of-thumb: the number of transistors that can be placed on a computer chip will double every year. Moore later modified his prediction by increasing the time span to every two years. The chip industry adoptedMoore’s rule-of-thumb as a measuring stick for industry growth. For the last 40 years Industry has keep pace with Moore’s prediction thus establishing it asMoore’s Law. Moore’s Law is projected to serve as the industry standard for the next two decades. Mattson is in the right place by helping chipmakers make smaller and smaller transistors on bigger and bigger wafers thus preserving Moore’s Law.
Mattson took several steps in 2004 to further increase their market share and maintain their technology leadership. Mattson introduced new innovative products that reduce the cost of ownership for the chip manufacturers, acquired a company that had a complementary product and technology portfolio, and forged a product alliance with a competitor. Additionally, to reduce the impact of industry cycles, Mattson developed a cyclically flexible enterprise (CFE) that greatly reduces manufacturing employees because most of the equipment manufacturing is outsourced. Therefore, Mattson is not burdened with workers that have limited product to make when an industry slump hits.
Industry Background
Mattson Technology is in the technology sector and the semiconductor equipment industry. This sector and this industry in particular are quite unlike most other industries. The semiconductor equipment industry is one of the most competitive and fast moving industries. This industry also experiences extreme business cycles that are becoming more frequent and longer lasting. As Colin McArdle and Nelson Wang wrote for Standard and Poor’s web site,
“The global semiconductor equipment industry is highly competitive and subject to rapid technological change. This environment forces companies to be extremely responsive to evolving industry trends or risk losing market share. Of the top 10 equipment companies by sales in 1982, only three (Applied Materials Inc., Nikon Corp., and Canon Inc.) remained in the top 10 in 2004.”
In such a competitive industry that is driven by leading edge technology, companies have to focus on product innovation, and customer service. As you can see in the table below that list the top ten semiconductor equipment manufacturers in 2004 based on revenue, only half of the companies pursue multiple businesses within the semiconductor wafer processing industry. The majority of companies in this industry concentrate on one or two related businesses, such as Canon, Nikon, and ASML.
Rank / 2004 Revenues(millions $) / Company Description
1 / 7,552 / Applied Materials. Industry leader Applied Materials offers the broadest range of wafer fabrication products, including systems for deposition and etch, ion implantation, CMP, defect inspection, photomask patterning, and flat panel display deposition. Deposition systems are Applied Materials' largest single market and its largest revenue producer.
2 / 4,742 / Tokyo Electron. This Japanese company makes a broad line of wafer processing equipment, including coaters/developers, etch equipment, thermal processing systems, deposition systems, surface preparation systems, test systems, and metrology software. It has a market-leading share of the dry etch equipment market.
3 / 3,022 / ASML Holding. In 2002, Netherlands-based ASML Holding jumped to the No. 1 position in photolithography systems, or "steppers," from No. 2 (behind Nikon) in 2001; it has remained at No. 1 since then. Photolithography systems are ASML Holding's principal product line.
4 / 2,176 / Advantest Corp. This Japanese maker of metrology and automated test equipment has been the fastest-growing equipment maker for the last two years, moving up from sixth in 2003 to No. 4 in 2004. Its sales, which have nearly quadrupled since 2002, have been driven by demand for memory and systems-on-a-chip test systems.
5 / 1,892 / KLA-Tencor. Formed by the May 1997 merger of KLA Instruments and Tencor Instruments, this firm is the leading supplier of yield management and process monitoring systems to the semiconductor industry worldwide. Products include defect inspection, review, and analysis systems; metrology systems; and lithography, simulation, and analysis systems.
6 / 1,411 / Nikon. Perhaps best known for its cameras, Nikon also is tied with Canon as the second largest maker of lithography projection systems, or "steppers," behind ASML Holding. Nikon also makes lithography equipment for flat panel displays and magnetic heads for hard disk drives.
7 / 1,360 / Lam Research Corp. According to data from market research firm VLSI Research Inc., Lam Research is the second largest maker of etch equipment, behind Tokyo Electron, but ahead of Applied Materials. Lam Research also makes CMP systems. In recent years, Lam Research has been gaining significant share in the etch market.
8 / 1,337 / Novellus Systems Inc. Novellus Systems is a leading manufacturer of thin film deposition systems, with particular strength in tools for copper deposition. Through its acquisition of Gasonics in 2000, Novellus Systems entered the market for surface preparation (photoresist removal and wafer cleaning). In 2002, Novellus Systems acquired SpeedFam-IPEC Inc., a maker of CMP systems.
9 / 1,315 / Hitachi High-Technologies Corp. Hitachi High-Technologies is a large Japanese conglomerate specializing in electronics. Its semiconductor equipment products include inspection systems (Hitachi High-Technologies has 15% of the process diagnostics market), lithography, plasma etch, and gas abatement systems.
10 / 1,284 / Canon Inc. Canon, a Japanese conglomerate that produces office, consumer, and industrial products, is tied with Nikon as the second largest photolithography equipment maker. Like Nikon, Canon also makes a line of flat panel displays and magnetic head lithography tools for hard disk drives.
Source: Standard & Poor’s web site
The prime benefit for these companies that focus on select businesses is that their research and development money is only directed at one goal. Companies like Applied Materials and Tokyo Electron are large enough that they can afford to support products for diverse businesses within the wafer processing industry. Applied Materials had 60% greater revenues than second place Tokyo Electron, which in turn is 50% larger than ASML Holdings, the company in third. Applied Materials is Mattson’s direct competitor in the RTP business while Novellus, Canon, and Hitachi are the leading competitors in the dry strip market. As you can see in the above chart all of Mattson’s primary competition are top ten semiconductor equipment manufacturers. Mattson’s closest competitor in terms of 2004 revenues is five times bigger.
This industry is very competitive and challenging due to the demands of the semiconductor processing industry. The business cycles are extreme and unpredictable in both duration and onset. The semiconductor equipment industry has experience many consolidations, both successful and not. Every company is trying to build up to the level of Applied Materials dominate position. Mattson is one of the smaller companies in this industry. In 2000, it made a bid to increase its size by purchasing CFM Technologies and STEAG. This attempt was unsuccessful due to a sudden onset of business downturn. Mattson simple did not have enough cash to weather the downturn and was forced to divest the new companies. In 2004, Mattson purchased another company, Vortek Industries, in an effort to help it expand in a more directly related product line, unlike the acquisition in 2000. Mattson realizes that it challenge is to grow or be consumed.
One of the factors that make the semiconductor equipment industry unique is that regardless how difficult the market is and how large the barriers to entry are, brilliant new ideas can launch new companies into this industry. Brad Mattson the founder of Mattson Technology originally worked for Applied Materials. Brad left Applied to start up Novellus. After successfully bringing up to speed in the industry, his own board of directors voted him out of the CEO office. This led Brad to start Mattson Technologies where the entire chain of events played out again. This time Brad has been elected CEO to an existing company in this industry.
MATTSON TECHNOLOGY,INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS
December 31,
2004 / 2003 / 2002
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents / $ 89,653 / $ 56,915 / $ 87,879
Short-term investments / 2,488 / 20,200
Restricted cash / 511 / 509 / 1105
Accounts receivable, net of allowance for doubtful accounts of $6,392 and $5,567 in 2004 and 2003, respectively / 58,288 / 34,260 / 34,834
Advance billings / 16,793 / 20,684 / 27,195
Inventories / 43,509 / 27,430 / 50,826
Inventories— delivered systems / 5,258 / 6,549 / 47,444
Prepaid expenses and other assets / 11,233 / 12,995 / 13,676
Total current assets / 227,733 / 179,542 / 262,959
Property and equipment, net / 27,396 / 16,211 / 18,855
Goodwill / 24,451 / 8,239 / 12,675
Intangibles, net / 12,897 / 2,626 / 15,254
Other assets / 950 / 769 / 2416
Total assets / $ 293,427 / $ 207,387 / $ 312,159
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable / $ 19,122 / $ 21,340 / $ 14,346
Accrued liabilities / 47,705 / 62,608 / 77,795
Deferred revenue / 30,313 / 38,680 / 108,698
Total current liabilities / 97,140 / 122,628 / 200,839
Long-term liabilities:
Deferred income tax liabilities / 4,901 / 1,055 / 5,215
Total long-term liabilities / 4,901 / 1,055 / 5,215
Total liabilities / 102,041 / 123,683 / 206,054
Commitments and contingencies (Note 17)
Stockholders' equity:
Preferred stock, 2,000 shares authorized; none issued and outstanding / — / —
Common Stock, par value $0.001, 120,000 authorized shares; 51,892 shares issued and 51,517 shares outstanding in 2004; 45,826 shares issued and 45,451 shares outstanding in 2003 / 52 / 45 / 45
Additional paid-in capital / 610,690 / 546,099 / 542,482
Accumulated other comprehensive income / 16,027 / 9,468 / 7,131
Treasury stock, 375 shares in 2004 and 2003, at cost / -2987 / -2987 / -2987
Accumulated deficit / -432,396 / -468,921 / -440566
Total stockholders' equity / 191,386 / 83,704 / 106,105
Total liabilities and stockholders' equity / $ 293,427 / $ 207,387 / $ 312,159
1
MATTSON TECHNOLOGY,INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock / Accumulated / Treasury Stock
Additional / Other
Paid-In / Comprehensive / Accumulated
Shares / Amount / Capital / Income (Loss) / Shares / Amount / Deficit / Total
(in thousands)
Balance at December 31, 2001 / 37,406 / 37 / 497,536 / (6,553 / (375 / (2,987 / (346,295 / 141,738
Components of comprehensive loss:
Net loss / (94,271 / (94,271
Cumulative translation adjustments / — / — / — / 13,570 / — / — / — / 13,570
Unrealized loss on investments / — / — / — / (103 / — / — / — / (103
Accumulated derivative gain / — / — / — / 217 / — / — / — / 217
Comprehensive loss / (80,587
Private placement, net of offering costs / 6,124 / 7 / 34,855 / — / — / — / — / 34,862
Shares issued for conversion of STEAG notes / 1,300 / 1 / 8,139 / — / — / — / — / 8,140
Exercise of stock options / 114 / — / 596 / — / — / — / — / 596
Shares issued under employee stock purchase plan / 288 / — / 1,224 / — / — / — / — / 1,224
Issuance of options to non-employees / — / — / 132 / — / — / — / — / 132
Balance at December 31, 2002 / 45,232 / 45 / 542,482 / 7,131 / (375 / (2,987 / (440,566 / 106,105
Components of comprehensive loss:
Net loss / (28,355 / (28,355
Cumulative translation adjustments / — / — / — / 2,621 / — / — / — / 2,621
Unrealized loss on investments / — / — / — / 86 / — / — / — / 86
Accumulated derivative gain / — / — / — / (370 / — / — / — / (370
Comprehensive loss / (26,018
Exercise of stock options / 399 / — / 3,329 / — / — / — / — / 3,329
Shares issued under employee stock purchase plan / 195 / — / 288 / — / — / — / — / 288
Balance at December 31, 2003 / 45,826 / 45 / 546,099 / 9,468 / (375 / (2,987 / (468,921 / 83,704
Components of comprehensive loss:
Net income / 36,525 / 36,525
Cumulative translation adjustments / — / — / — / 6,559 / — / — / — / 6,559
Comprehensive income / 43,084
Public offering, net of offering costs / 4,313 / 4 / 46,366 / — / — / — / — / 46,370
Shares issued in Vortek acquisition / 1,453 / 2 / 16,757 / — / — / — / — / 16,759
Exercise of stock options / 214 / 1 / 815 / — / — / — / — / 816
Shares issued under employee stock purchase plan / 86 / — / 653 / — / — / — / — / 653
Balance at December 31, 2004 / 51,892 / 52 / 610,690 / 16,027 / (375 / (2,987 / (432,396 / 191,386
MATTSON TECHNOLOGY,INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31,
2004 / 2003 / 2002
(in thousands, except per share amounts)
Net sales / $ / 252,761 / 174,302 / 218,520
Cost of sales / 141,973 / 112,783 / 163,063
Gross profit / 110,788 / 61,519 / 55,457
Operating expenses:
Research, development and engineering / 23,069 / 22,988 / 37,395
Selling, general and administrative / 57,181 / 54,292 / 86,218
Amortization of intangibles / 1,429 / 2,151 / 6,591
Restructuring and other charges / 0 / 489 / 17,307
Loss on disposition of Wet Business / 0 / 10,257 / 0
Total operating expenses / 81,679 / 90,177 / 147,511
Income (loss) from operations / 29,109 / -28,658 / -92,054
Interest expense / -81 / -122 / -1,660
Interest income / 1,242 / 1,207 / 2,380
Other income (expense), net / 753 / -432 / -3,084
Income (loss) before income taxes / 31,023 / -28,005 / -94,418
Provision (benefit) for income taxes / -5,502 / 350 / -147
Net income (loss) / $ / 36,525 / -28,355 / -94,271
Net income (loss) per share:
Basic / $ / 0.74 / -0.63 / -2.23
Diluted / $ / 0.72 / -0.63 / -2.23
Shares used in computing net income (loss) per share:
Basic / 49,539 / 44,997 / 42,239
Diluted / 51,073 / 44,997 / 42,239
MATTSON TECHNOLOGY,INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
2004 / 2003 / 2002
(in thousands)
Cash flows from operating activities:
Net income (loss)
/ 36,525 / -28,355 / -94,271
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation / 5,626 / 5,858 / 10,632
Deferred taxes / -615 / -828 / -4,322
Allowance for doubtful accounts / 1,950 / 0 / 482
Inventory valuation charge / 0 / 1,586 / 14,303
Amortization of intangibles / 1,429 / 2,151 / 6,592
Impairment of long-lived assets, restructuring and other charges / 0 / 489 / 11,598
Loss on disposal of Wet Business / 0 / 10,257 / 0
Loss (gain) on disposal of fixed assets / -47 / 2,730 / 1,268
(Gain) on sales of investments / -5 / 0 / 0
Income tax benefit realized from activity in employee stock plans / 0 / 0 / 132
Changes in assets and liabilities:
Accounts receivable / -25,227 / 709 / 8,320
Advance billings / 3,891 / 182 / 40,783
Inventories / -14,596 / 1,225 / 5,263
Inventories— delivered systems / 1,291 / 10,234 / 35,936
Prepaid expenses and other current assets / 2,219 / -415 / 2,550
Other assets / 1,481 / 6,034 / 2,163
Accounts payable / -3,046 / 6,884 / -282
Accrued liabilities / -19,510 / -13,003 / -8,131
Deferred revenue / -8,367 / -22,089 / -43,916
Net cash used in operating activities / -17,001 / -16,351 / -10,900
Cash flows from investing activities:
Purchases of property and equipment / -15,970 / (8,045 / (4,557
Proceeds from the sale of equipment / 131 / — / 3,716
Proceeds from the disposition of Wet Business / — / 2,000 / —
Purchases of available-for-sale investments / -26,182 / -35,650 / -31,312
Proceeds from sales and maturities of available-for-sale investments / 43,905 / 31,350 / 21,217
Loans to Vortek prior to acquisition / -2,573 / — / —
Net cash paid for acquisition and acquisition-related expenses / -2,181 / — / —
Net cash provided by (used in) investing activities / -2,870 / -10,345 / -10,936
Cash flows from financing activities:
Restricted cash / -2 / 596 / 26,195
Payment on line of credit / — / — / -5,341
Borrowings against line of credit / — / — / 194
Payment on STEAG notes payable / — / — / -38,775
Change in interest accrual on STEAG note / — / — / 1,292
Proceeds from the issuance of Common Stock, net of offering costs / 46,370 / — / 34,862
Proceeds from stock plans / 1,469 / 3,617 / 1,820
Net cash provided by financing activities / 47,837 / 4,213 / 20,247
Effect of exchange rate changes on cash and cash equivalents / 4,772 / 7,419 / 9,511
Net increase (decrease) in cash and cash equivalents / 32,738 / -15,064 / 7,922
Cash and cash equivalents, beginning of year / 56,915 / 71,979 / 64,057
Cash and cash equivalents, end of year / 89,653 / 56,915 / 71,979
Supplemental disclosures:
Cash paid for interest / 46 / 24 / 1,313
Cash paid for income taxes / 2,260 / 1,588 / 2,478
Common stock issued for Vortek acquisition / 16,759 / — / —
Common stock issued for STEAG note conversion / — / — / 8,140
Non-cash adjustment to goodwill and intangibles / — / 14,912 / 9,697
MATTSON TECHNOLOGY,INC. AND SUBSIDIARIES
COMMON-SIZE CONSOLIDATED BALANCE SHEETS
December 31,
2004 / 2003 / 2002
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents / 31% / 27% / 28%
Short-term investments / 1% / 10% / 0%
Restricted cash / 0% / 0% / 0%
Accounts receivable, net of allowance for doubtful accounts of $6,392 and $5,567 in 2004 and 2003, respectively / 20% / 17% / 11%
Advance billings / 6% / 10% / 9%
Inventories / 15% / 13% / 16%
Inventories— delivered systems / 2% / 3% / 15%
Prepaid expenses and other assets / 4% / 6% / 4%
Total current assets / 78% / 87% / 84%
Property and equipment, net / 9% / 8% / 6%
Goodwill / 8% / 4% / 4%
Intangibles, net / 4% / 1% / 5%
Other assets / 0% / 0% / 1%
Total assets / 100% / 100% / 100%
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable / 7% / 10% / 5%
Accrued liabilities / 16% / 30% / 25%
Deferred revenue / 10% / 19% / 35%
Total current liabilities / 33% / 59% / 64%
Long-term liabilities:
Deferred income tax liabilities / 2% / 1% / 2%
Total long-term liabilities / 2% / 1% / 2%
Total liabilities / 35% / 60% / 66%
Commitments and contingencies (Note 17)
Stockholders' equity:
Preferred stock, 2,000 shares authorized; none issued and outstanding / — / —
Common Stock, par value $0.001, 120,000 authorized shares; 51,892 shares issued and 51,517 shares outstanding in 2004; 45,826 shares issued and 45,451 shares outstanding in 2003 / 0% / 0% / 0%
Additional paid-in capital / 208% / 263% / 174%
Accumulated other comprehensive income / 5% / 5% / 2%
Treasury stock, 375 shares in 2004 and 2003, at cost / -1% / -1% / -1%
Accumulated deficit / -147% / -226% / -141%
Total stockholders' equity / 65% / 40% / 34%
Total liabilities and stockholders' equity / 100% / 100% / 100%
MATTSON TECHNOLOGY,INC. AND SUBSIDIARIES
COMMON SIZED STATEMENTS OF OPERATIONS
Year Ended December 31,
2004 / 2003 / 2002
(in thousands, except per share amounts)
Net sales / 100% / 100% / 100%
Cost of sales / 56% / 65% / 75%
Gross profit / 44% / 35% / 25%
Operating expenses:
Research, development and engineering / 9% / 13% / 17%
Selling, general and administrative / 23% / 31% / 39%
Amortization of intangibles / 1% / 1% / 3%
Restructuring and other charges / 0% / 0% / 8%
Loss on disposition of Wet Business / 0% / 6% / 0%
Total operating expenses / 32% / 52% / 68%
Income (loss) from operations / 12% / -16% / -42%
Interest expense / 0% / 0% / -1%
Interest income / 0% / 1% / 1%
Other income (expense), net / 0% / 0% / -1%
Income (loss) before income taxes / 12% / -16% / -43%
Provision (benefit) for income taxes / -2% / 0% / 0%
Net income (loss) / 14% / -16% / -43%
Net income (loss) per share:
Basic / $ / 0.74 / -0.63 / -2.23
Diluted / $ / 0.72 / -0.63 / -2.23
Shares used in computing net income (loss) per share:
Basic / 49,539 / 44,997 / 42,239
Diluted / 51,073 / 44,997 / 42,239
MATTSON TECHNOLOGY,INC. AND SUBSIDIARIES
COMMON SIZED STATEMENTS OF CASH FLOWS
Year Ended December 31,
2004 / 2003 / 2002
(in thousands)
Cash flows from operating activities:
Net income (loss)
/ 36,525 / -28,355 / -94,271
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation / 5,626 / 5,858 / 10,632
Deferred taxes / -615 / -828 / -4,322
Allowance for doubtful accounts / 1,950 / 0 / 482
Inventory valuation charge / 0 / 1,586 / 14,303
Amortization of intangibles / 1,429 / 2,151 / 6,592
Impairment of long-lived assets, restructuring and other charges / 0 / 489 / 11,598
Loss on disposal of Wet Business / 0 / 10,257 / 0
Loss (gain) on disposal of fixed assets / -47 / 2,730 / 1,268
(Gain) on sales of investments / -5 / 0 / 0
Income tax benefit realized from activity in employee stock plans / 0 / 0 / 132
Changes in assets and liabilities:
Accounts receivable / -25,227 / 709 / 8,320
Advance billings / 3,891 / 182 / 40,783
Inventories / -14,596 / 1,225 / 5,263
Inventories— delivered systems / 1,291 / 10,234 / 35,936
Prepaid expenses and other current assets / 2,219 / -415 / 2,550
Other assets / 1,481 / 6,034 / 2,163
Accounts payable / -3,046 / 6,884 / -282
Accrued liabilities / -19,510 / -13,003 / -8,131
Deferred revenue / -8,367 / -22,089 / -43,916
Net cash used in operating activities / -17,001 / -16,351 / -10,900
Cash flows from investing activities:
Purchases of property and equipment / -15,970 / (8,045 / (4,557
Proceeds from the sale of equipment / 131 / 0 / 3,716
Proceeds from the disposition of Wet Business / 0 / 2,000 / 0
Purchases of available-for-sale investments / -26,182 / -35,650 / -31,312
Proceeds from sales and maturities of available-for-sale investments / 43,905 / 31,350 / 21,217
Loans to Vortek prior to acquisition / -2,573 / 0 / 0
Net cash paid for acquisition and acquisition-related expenses / -2,181 / 0 / 0
Net cash provided by (used in) investing activities / -2,870 / -10,345 / -10,936
Cash flows from financing activities:
Restricted cash / -2 / 596 / 26,195
Payment on line of credit / 0 / 0 / -5,341
Borrowings against line of credit / 0 / 0 / 194
Payment on STEAG notes payable / 0 / 0 / -38,775
Change in interest accrual on STEAG note / 0 / 0 / 1,292
Proceeds from the issuance of Common Stock, net of offering costs / 46,370 / 0 / 34,862
Proceeds from stock plans / 1,469 / 3,617 / 1,820
Net cash provided by financing activities / 47,837 / 4,213 / 20,247
Effect of exchange rate changes on cash and cash equivalents / 4,772 / 7,419 / 9,511
Net increase (decrease) in cash and cash equivalents / 32,738 / -15,064 / 7,922
Cash and cash equivalents, beginning of year / 56,915 / 71,979 / 64,057
Cash and cash equivalents, end of year / 89,653 / 56,915 / 71,979
Supplemental disclosures:
Cash paid for interest / 46 / 24 / 1,313
Cash paid for income taxes / 2,260 / 1,588 / 2,478
Common stock issued for Vortek acquisition / 16,759 / 0 / 0
Common stock issued for STEAG note conversion / 0 / 0 / 8,140
Non-cash adjustment to goodwill and intangibles / 0 / 14,912 / 9,697
ANALYSIS
SHORT-TERM LIQUIDITY
Current Ratio
Current Ratio / = / Current Assets / 293,427.00Current Liabilities / 97,140.00
2004 / 2003 / 2002
3.02 / 1.69 / 1.31
The Current Ratio measures the ability of the company to pay short term, immediate debt. As you can see in above table, Mattson has greatly improved its ability to pay short term, immediate debt, over the last three years. Mattson’s 2004 current ratio is over double its 2002 value. This improvement is due to a reduction in current liabilities, mostly a progressive decrease in accrued liabilities, and an increase in current assets, due to increases in the accounts receivable and inventory. Mattson almost doubled its account receivable in 2004 versus 2003 and 2002. In 2004 inventory levels were back to 2002 levels. There was a dip in 2003 inventory levels due to divestiture of the Wet Business. Mattson quickly turned things around as evident with the slight increase in cash and cash equivalents and reduction in current liabilities. Increase in cash is attributable to increase in Accounts Receivable. This is a reflection of new sales and introduction of new products. Compared to industry average, this is favorable and is slightly below the industry average of 4.