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MATTSON TECHNOLOGY INC - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

August 1, 2014

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 net 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 customers, 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 net revenue, 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 operating expenses, and our quarterly break-even point; 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 international markets; 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 availability under our revolving credit agreement, to support future operations and capital expenditures and the availability of all financing resources; compliance with financial covenants related to our revolving credit facility and our control environment including our disclosure control and procedures, internal control over our financial reporting, and our related remediation efforts. 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 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, 2013. 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 which is dependent upon the consumer product industry. Since the demand for semiconductor devices is highly cyclical, the demand for wafer processing equipment also is highly cyclical. The semiconductor equipment industry is typically characterized by wide swings in operating results as the industry rotates between cycles. We continue to focus on the advances we have made in the market position for each of our major products. Our etch products, specifically our paradigmE XP, are established



process tools of record in advanced DRAM, NAND and 3D-NAND production

fabs. We are also establishing a development tool of record in advanced

foundry for sub-20 nanometer front-end of line processes. The combination of the paradigmE XP's technical capabilities and high productivity have established a growing etch market position in the memory segment.



Our conventional RTP, specifically our Helios XP product, continues to

run high-volume production for DRAM, NAND and foundry customers. The Helios XP has established industry leading technical performance in 20



nanometer production with its dual side wafer heating and differential

thermal energy control. When the transition to sub-20 nanometer technologies ramps up, we anticipate increasing shipments of our Helios XP products in the foundry and DRAM segments. 17

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Our millisecond anneal system ("Millios"), has been qualified and

released for high volume advanced foundry/logic production at multiple

manufacturing sites. The Millios, with our proprietary arc lamp technology, has achieved leading device performance as well as higher production throughput and system availability. We continue to expect the Millios to play an important role in the volume production of sub-20 nanometer devices. Our dry strip products continue to make a steady contribution to our business as our established customers in foundry/logic and memory are



expected to continue to make investments, maintaining our position in

the dry strip market during the remainder of 2014.

In February 2014, we completed a registered public offering of 14.1 million newly issued shares of our common stock. The common stock was issued at a price to the public of $2.45 per share. We received net proceeds of approximately $31.7 million from the offering after deducting underwriting discounts and estimated offering expenses. We intend to use the net proceeds from this stock offering for general corporate purposes, which may include working capital, capital expenditures and other corporate expenses. 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 margin 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 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 revenue 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 six months ended June 29, 2014. 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, 2013. 18 -------------------------------------------------------------------------------- Results of Operations A summary of our results of operations for the three and six months ended June 29, 2014 and June 30, 2013 are as follows (in thousands, except for percentages): Three Months Ended June 29, 2014 June 30, 2013 Increase (Decrease) Amount Percent Amount Percent Amount Percent Net revenue $ 42,029 100.0 $ 24,574 100.0 $ 17,455 71.0 Cost of goods sold 28,733 68.4 16,107 65.5 12,626 78.4 Gross margin 13,296 31.6 8,467 34.5 4,829 57.0 Operating expenses: Research, development and engineering 4,446 10.6 4,170 17.0 276 6.6 Selling, general and administrative 6,690 15.9 6,952 28.3 (262 ) (3.8 ) Restructuring and other 111 0.3 404 1.6 (293 ) (72.5 ) charges



Total operating 11,247 26.8 11,526 46.9

(279 ) (2.4 ) expenses Income (loss) from operations 2,049 4.8 (3,059 ) (12.4 ) 5,108 n/m (1) Interest income (expense), net (21 ) - (137 ) (0.6 ) 116 (84.7 ) Other income (expense), (142 ) (0.3 ) (359 ) (1.5 ) 217 (60.4 ) net Income (loss) before income taxes 1,886 4.5 (3,555 ) (14.5 ) 5,441 n/m (1) Provision for (benefit (30 ) (0.1 ) 12 - (42 ) n/m from) income taxes (1) Net income (loss) $ 1,916 4.6 $ (3,567 ) (14.5 ) $ 5,483 n/m (1) (1)Not meaningful. Six Months Ended June 29, 2014 June 30, 2013 Increase (Decrease) Amount Percent Amount Percent Amount Percent Net revenue $ 85,227 100.0 $ 44,811 100.0 $ 40,416 90.2 Cost of goods sold 57,285 67.2 31,976 71.4 25,309 79.1 Gross margin 27,942 32.8 12,835 28.6 15,107 117.7 Operating expenses: Research, development and engineering 8,970 10.5 8,483 18.9 487 5.7 Selling, general and administrative 14,111 16.6 14,502 32.4 (391 ) (2.7 ) Restructuring and other 111 0.1 2,662 5.9 (2,551 ) (95.8 ) charges



Total operating 23,192 27.2 25,647 57.2

(2,455 ) (9.6 ) expenses Income (loss) from operations 4,750 5.6 (12,812 ) (28.6 ) 17,562 n/m (1) Interest income (expense), net (147 ) (0.2 ) (121 ) (0.3 ) (26 ) 21.5 Other income (expense), (63 ) (0.1 ) (76 ) (0.2 ) 13 (17.1 ) net Income (loss) before income taxes 4,540 5.3 (13,009 ) (29.1 ) 17,549 n/m (1) Provision for income 159 0.2 66 0.1 93 140.9 taxes Net income (loss) $ 4,381 5.1 $ (13,075 ) (29.2 ) $ 17,456 n/m (1) (1)Not meaningful. 19

-------------------------------------------------------------------------------- Net Revenue A summary of our net revenue for the three and six months ended June 29, 2014 and June 30, 2013 are as follows (in thousands, except for percentages): Three Months Ended Six Months Ended June 29, June 30, Increase (Decrease) June 29, June 30, Increase (Decrease) 2014 2013 Amount Percent 2014 2013 Amount Percent Net revenue: United States $ 6,392$ 3,252$ 3,140 97 $ 10,575$ 6,336$ 4,239 67 International: South Korea 23,863 1,407 22,456 1,596 34,122 2,275 31,847 1,400 China 2,268 2,008 260 13 15,349 3,960 11,389 288 Taiwan 5,498 14,659 (9,161 ) (62 ) 16,320 26,724 (10,404 ) (39 ) Other Asia 1,589 2,292 (703 ) (31 ) 3,870 3,358 512 15 Europe and others 2,419 956 1,463 153 4,991 2,158 2,833 131 35,637 21,322 14,315 67



74,652 38,475 36,177 94 Total net revenue $ 42,029$ 24,574$ 17,455

71



$ 85,227$ 44,811$ 40,416 90

Net revenue was $42.0 million for the three months ended June 29, 2014, an increase of $17.5 million, or 71 percent, compared to $24.6 million for the three months ended June 30, 2013. The increase in net revenue during the three months ended June 29, 2014 compared to the three months ended June 30, 2013 was largely attributable to higher overall net revenue of our etch systems into memory applications. During the second quarter of 2014, net revenue from customers in Asia continued to account for a significant portion of our total net revenue. For the three months ended June 29, 2014 and June 30, 2013, international sales comprised approximately 85 percent and 87 percent, respectively, of our total net revenue. For the three months ended June 29, 2014, two customers accounted for 10 percent or more of our total net revenue, representing approximately 60 percent and 14 percent of our total net revenue, respectively. For the three months ended June 30, 2013, two customers accounted for 10 percent or more of our total net revenue, representing approximately 49 percent and 11 percent of our total net revenue, respectively. Net revenue was $85.2 million for the six months ended June 29, 2014, an increase of $40.4 million, or 90 percent, compared to $44.8 million for the six months ended June 30, 2013. The increase in net revenue during the six months ended June 29, 2014 compared to the six months ended June 30, 2013 was largely attributable to higher overall net revenue of our etch systems into memory applications. For the six months ended June 29, 2014 and June 30, 2013, international sales comprised approximately 88 percent and 86 percent, respectively, of our total net revenue. For the six months ended June 29, 2014, two customers accounted for 10 percent or more of our total net revenue, representing approximately 60 percent and 10 percent of our total net revenue, respectively. For the six months ended June 30, 2013, one customer accounted for 10 percent or more of our total net revenue, representing approximately 48 percent of our total net revenue. We have seen improvements in market conditions and customer demand since the third quarter of 2013. However, primarily due to a change in the sub 20-nanometer foundry product ramp and a pause in 3D-NAND spending, we expect our revenues for the third quarter of 2014 to decrease as compared to each of the first and second quarter of fiscal year 2014. On a long-term basis, we expect investment in capital equipment to remain positive, predominately driven by a memory investment cycle and foundry spending for 20- and sub 20-nanometer processing technologies. 20 --------------------------------------------------------------------------------



Cost of Goods Sold and Gross Margin A summary of our cost of goods sold and gross margin for the three and six months ended June 29, 2014 and June 30, 2013 are as follows (in thousands, except for percentages):

Three Months Ended Six Months Ended June 29, June 30, Increase (Decrease) June 29, June 30, Increase (Decrease) 2014 2013 Amount Percent 2014 2013 Amount Percent Cost of goods sold $ 28,733$ 16,107$ 12,626 78.4 $ 57,285$ 31,976$ 25,309 79.1 Gross margin $ 13,296$ 8,467$ 4,829 57.0 $ 27,942$ 12,835$ 15,107 117.7 Gross margin percentage 31.6 34.5 32.8 28.6 Our cost of goods sold 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. Our gross margin percentage decreased from 34.5 percent during the three months ended June 30, 2013 to 31.6 percent during the three months ended June 29, 2014, primarily attributable to a less favorable product mix and higher than expected installation and warranty costs for certain of our newer products. Our gross margin percentage increased from 28.6 percent during the six months ended June 30, 2013 to 32.8 percent during the six months ended June 29, 2014, primarily attributable to the increase in total net revenue and improvement in the product mix, partially offset by higher than expected installation and warranty costs for certain of our newer products. 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. Research, Development and Engineering A summary of our research, development and engineering expenses for the three and six months ended June 29, 2014 and June 30, 2013 are as follows (in thousands, except for percentages): Three Months Ended Six Months Ended June 29, June 30, Increase (Decrease) June 29, June 30, Increase (Decrease) 2014 2013 Amount Percent 2014 2013 Amount Percent Research, development and engineering $ 4,446$ 4,170$ 276 6.6 $ 8,970$ 8,483$ 487 5.7 Percentage of net revenue 10.6 % 17.0 % 10.5 % 18.9 % 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 increased by $0.3 million, or 7 percent, in the three months ended June 29, 2014 compared to the three months ended June 30, 2013. This increase was largely attributable to an increase in activity resulting from the development of new process applications for our products. Research, development and engineering expenses increased by $0.5 million, or 6 percent, in the six months ended June 29, 2014 compared to the six months ended June 30, 2013. This increase was largely attributable to an increase in activity resulting from the development of new process applications for our products. 21 -------------------------------------------------------------------------------- Selling, General and Administrative A summary of our selling, general and administrative expenses for the three and six months ended June 29, 2014 and June 30, 2013 are as follows (in thousands, except for percentages): Three Months Ended Six Months Ended June 29, June 30, Increase (Decrease) June 29, June 30, Increase (Decrease) 2014 2013 Amount Percent 2014 2013 Amount Percent Selling, general and administrative $ 6,690$ 6,952$ (262 ) (3.8 ) $ 14,111$ 14,502$ (391 ) (2.7 ) Percentage of net revenue 15.9 % 28.3 %



16.6 % 32.4 %

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 decreased by $0.3 million, or 4 percent during the three months ended June 29, 2014 as compared with the three months ended June 30, 2013, primarily due to a decrease in depreciation and amortization expense and a decrease in outside services, including audit and tax professional services. Selling, general and administrative expenses decreased by $0.4 million, or 3 percent percent during the six months ended June 29, 2014 as compared with the six months ended June 30, 2013, primarily due to a decrease in depreciation and amortization expense and a decrease in outside services, including audit and tax professional services. Restructuring and Other Charges 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. The fourth phase of the 2011 Restructuring Plan primarily consisted of further workforce reductions across all areas of the Company and additional contract termination costs related to two vacant facilities. The fourth phase of the 2011 Restructuring Plan was completed during the third quarter of 2013. We incurred $10.6 million in restructuring and other charges under the 2011 Restructuring Plan since its inception in the fourth quarter of 2011, of which $0.4 million and $2.7 million was recorded during the three and six months ended June 30, 2013, respectively. We also recorded $0.1 million during the three and six months ended June 29, 2014, which represents severance payments for certain workforce reductions as we continue to implement our cost reduction initiatives. Interest Income (Expense), net Interest income (expense), net was minimal for all periods presented. The net expense for the three and six months ended June 29, 2014 and three and six months ended June 30, 2013 primarily resulted from interest charges on borrowings under our Credit Facility. Other Income (Expense), net Other income (expense), net was $0.1 million net expense for each of the three and six months ended June 29, 2014, which primarily consisted of foreign exchange losses from foreign currency denominated inter-company balances. Other income (expense), net was $0.4 million and $0.1 million net expense for the three and six months ended June 30, 2013, respectively, which primarily consisted of foreign exchange losses from foreign currency denominated inter-company balances. Provision for (Benefit from) 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 a minimal income tax benefit and a $0.2 million income tax provision for the three and six months ended June 29, 2014, respectively. We recorded minimal income tax provisions for the three and six months ended June 30, 2013. The net tax provision was the result of the mix of profits earned by us in tax jurisdictions with a broad range of income tax rates. 22 -------------------------------------------------------------------------------- Liquidity and Capital Resources Our cash and cash equivalents as of June 29, 2014 and December 31, 2013 were $20.7 million and $14.6 million, respectively. Working capital as of June 29, 2014 was $63.5 million, compared to $27.0 million as of December 31, 2013. Stockholders' equity as of June 29, 2014 was $70.7 million, compared to $34.1 million as of December 31, 2013. The aforementioned increases in working capital and stockholders' equity are primarily related to a registered public offering in February 2014 of 14.1 million newly issued common stock shares which resulted in net proceeds to us of approximately $31.7 million.



Six Months Ended

June 29, 2014 June 30, 2013 Net cash used in operating activities $ (10,884 )$ (8,609 ) Net cash used in investing activities (451 ) (736 ) Net cash provided by financing activities 17,921 9,871 Effect of exchange rate changes on cash and cash equivalents (497 ) 44 Net increase in cash and cash equivalents $



6,089 $ 570

Liquidity and Capital Resources Outlook As of June 29, 2014, our primary sources of liquidity were $20.7 million of cash and cash equivalents, as well as $25.0 million available to us under our Credit Facility. On April 12, 2013, we entered into a three-year $25.0 million senior secured revolving credit facility with Silicon Valley Bank. Under the Credit Facility, advances are available based on (i) the achievement of certain quarterly levels of our consolidated EBITDA, as defined in the Credit Facility, 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. As of June 29, 2014, we had no outstanding borrowing under the Credit Facility. As of June 29, 2014, the effective interest rate on any outstanding borrowing would have been 4.75 percent per annum. In February 2014, we completed a registered public offering of 14.1 million newly issued shares of our common stock shares. The common stock was issued at a price to the public of $2.45 per share. We received net proceeds of approximately $31.7 million from the offering after deducting underwriting discounts and estimated offering expenses. We intend to use the net proceeds from this stock offering for general corporate purposes, which may include working capital, capital expenditures and other corporate expenses. We believe our available financial resources are sufficient to fund our working capital 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 revenue, gross margin and operating expenses, as well as changes in our operating assets and liabilities. 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, any ineffectiveness in our cost containment efforts may 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. 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 on an opportunistic basis from sources such as an asset-backed financing agreement or the issuance of equity or debt securities through public or private financings. We currently have an effective omnibus shelf registration statement on file with the SEC that registers up to $25.5 million in securities that we may offer. 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. 23 -------------------------------------------------------------------------------- Operating Activities Net cash used in operations was $10.9 million for the six months ended June 29, 2014, comprised primarily of $17.4 million of cash decreases reflected in the net change in assets and liabilities, partially offset by $4.4 million in net income and $2.2 million in non-cash charges. Cash flow decreases resulting from the net change in assets and liabilities primarily consisted primarily of a $9.3 million increase in inventory, a $5.2 million decrease in accounts payable and accrued compensation and benefits and other current liabilities, a $3.2 million decrease in deferred revenue, and a $1.0 million increase in prepaid expenses and other assets, partially offset by a $1.3 million decrease in accounts receivable and advance billings. The increase in inventory primarily resulted from the receipt of inventory intended for sale in future quarters. The decrease in accounts payable, accrued compensation and benefits and other current liabilities was largely attributable to the timing of purchases and payments to vendors and services providers. The decrease in deferred revenue was primarily related to the timing of revenue recognition for deliverables under a volume purchase agreement. Non-cash charges consisted primarily of $1.4 million of depreciation and amortization and $0.7 million of stock-based compensation. Net cash used in operations was $8.6 million in the six months ended June 30, 2013, comprised primarily of $13.1 million in net loss, partially offset by non-cash charges of $2.5 million and $2.0 million of cash increases reflected in the net change in assets and liabilities. Cash flow increases resulting from the net change in assets and liabilities primarily consisted of a $4.5 million decrease in accounts receivable and advance billings, partially offset by a $1.4 million decrease in accounts payable, accrued compensation and benefits and other current liabilities, and a $1.1 million increase in inventory. The decrease in accounts receivable and advance billings was primarily due to the timing of shipments and customer acceptance. The decrease in accounts payable, accrued compensation and benefits and other current liabilities were largely attributable to the timing of payments to vendors and service providers. Non-cash charges consisted primarily of $2.2 million of depreciation and amortization and $0.7 million of stock-based compensation, partially offset by a $0.5 million decrease in deferred income taxes. Cash provided by operations may fluctuate in future periods as a result of a number of factors, including fluctuations in our net revenue and operating results, amount of revenue deferred, inventory purchases, collection of accounts receivable and timing of payments. Investing Activities Net cash used in investing activities was $0.5 million in the six months ended June 29, 2014, which primarily consisted of our capital spending during the first half of the year. Cash used in investing activities was $0.7 million in the six months ended June 30, 2013, which consisted of $0.5 million capital spending and a $0.2 million increase in restricted cash. Financing Activities Net cash provided by financing activities was $17.9 million for the six months ended June 29, 2014, which primarily consisted of approximately $31.7 million in net proceeds from our February 2014 stock offering and $0.2 million in proceeds from the issuance of common stock under our employee stock plans, partially offset by the repayment of $14.0 million of borrowings under our revolving credit facility. Net cash provided by financing activities was $9.9 million for the six months ended June 30, 2013, which consisted of $9.6 million in proceeds from our revolving credit facility, net of borrowing costs, and $0.3 million in proceeds from the issuance of common stock under our employee stock plans. Off-Balance Sheet Arrangements As of June 29, 2014, we did not have any significant "off-balance sheet" arrangements, as defined in Item 303 (a)(4)(ii) of Regulation S-K. Contractual Obligations On April 12, 2013, we entered into a three-year $25.0 million senior secured revolving credit facility with Silicon Valley Bank. During the first quarter of 2014 we repaid the $14.0 million outstanding on our revolving credit facility, such that we had no outstanding borrowing as of June 29, 2014 under the Credit Facility. Amounts outstanding under the Credit Facility are reported as part of current liabilities in our condensed consolidated balance sheet. See Note 4. Revolving Credit Facility of the notes to condensed consolidated financial statements. Under U.S. GAAP, certain obligations and commitments are not required to be included in our condensed consolidated balance sheets. These obligations and commitments, while entered into in the normal course of business, may have a material impact on our liquidity. For further discussion of our contractual obligations, see our 2013 Annual Report on Form 10-K. 24



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Recent Accounting Pronouncements Information with respect to recent accounting pronouncements may be found in Note 1. Basis of Presentation and Significant Accounting Policies in the notes to condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.


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