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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
[ X ] ANNUAL REPORT Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (Fee required)
FOR FISCAL YEAR ENDED SEPTEMBER 30, 1996 or
------------------
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (no fee required)
For the transition period from __________ to ____________.
COMMISSION FILE NUMBER: 0-25434
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BROOKS AUTOMATION, INC.
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(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 04-3040660
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
15 ELIZABETH DRIVE, CHELMSFORD, MASSACHUSETTS 01824
- --------------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
508-262-2566
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(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
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
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Rule 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. [ ]
The aggregate market value of the registrant's Common Stock, $.01 par value,
held by non-affiliates of the registrant as of December 5, 1996 was
approximately $100,000,000 based on the closing price of $16 11/16 on that date
on the Nasdaq National Market. As of December 5, 1996, 7,574,109 shares of the
registrant's Common Stock, $.01 par value, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement are incorporated by reference
in Part III of this report. The Proxy Statement for the annual meeting of
stockholders to be held February 20, 1997 is expected to be filed within
120 days after the end of the Registrant's fiscal year.
1
PART I
ITEM 1. BUSINESS
Brooks Automation, Inc. (the "Company") is a leading, worldwide independent
developer, manufacturer and supplier of vacuum central wafer handling systems
and modules for the semiconductor process equipment industry. The Company has
developed a family of central wafer handling systems and modules, including
vacuum transfer robots, vacuum cassette elevator load locks, vacuum alignment
and thermal conditioning modules, and related software. In 1994, the Company
extended its vacuum automation product line by introducing a family of central
substrate handling systems and modules for the flat panel display manufacturing
industry. This product family includes a proprietary magnetically driven vacuum
transfer robot capable of handling large flat panel display substrates. In 1996,
the Company acquired Techware Systems Corporation ("Techware"), a designer and
supplier of integrated equipment control software for the semiconductor and
related industries, expanding its software and control capability. Techware now
operates as a wholly-owned subsidiary of the Company, under the name of Brooks
Automation Canada ("Brooks Canada").
The Company's systems and modules are used in radial cluster tools ("cluster
tools"), an architecture which integrates multiple vacuum process modules
around a vacuum central substrate handling system. The principal semiconductor
manufacturing processes that use vacuum cluster tools are physical vapor
deposition ("PVD"), chemical vapor deposition ("CVD") and etch, including strip
and clean. The Company believes that its products enable process equipment
manufacturers ("OEMs") to improve the productivity and availability of their
process equipment, thereby reducing semiconductor manufacturers' costs of
owning and operating this equipment.
The Company has over ten years' experience and know-how in developing and
manufacturing vacuum transfer robots and other vacuum automation modules and
systems. The Company has introduced multiple generations of products which have
improved throughput, reliability, contamination control and repeatability. To
maintain and enhance its growth, the Company is pursuing a variety of
strategies including enhancing technical leadership, increasing product
penetration with existing customers, developing customer confidence by
maintaining product neutrality, penetrating the flat panel display manufacturing
equipment market, collaborating with key customers and increasing international
sales.
The Company's Massachusetts predecessor was organized in February 1989 and
acquired the semiconductor wafer handling business of the Brooks Automation
Division of Aeronca Electronics, Inc., a subsidiary of Fleet Aerospace
Corporation, in March 1989. The Company and its predecessors have been in the
semiconductor wafer handling business since 1978. As used herein, the term
Company refers to Brooks Automation, Inc. and its subsidiaries, including Brooks
Canada.
SEMICONDUCTOR PRODUCTS
Background
The growth of the semiconductor process equipment market reflects increasing
demand for semiconductors (also known as integrated circuits), which is
attributable to continued growth of the personal computer market and the
expanding use of semiconductors in the automotive, telecommunications and
consumer electronics markets. This growth has been driven in large part by
continuing improvements in semiconductor performance (as measured by
functionality, processing speed and memory) at declining prices per function.
These improvements have been achieved by decreasing the linewidth (referred to
as feature size) of the integrated circuits on the semiconductor wafer, and by
increasing the number of layers of material deposited on the wafer.
Products
The Company's products include a family of vacuum central wafer handling systems
and modules for the semiconductor process equipment and manufacturing
industries. The systems include fully integrated automated wafer handling
platforms for vacuum cluster tools, and the modules include vacuum transfer
robots, vacuum cassette elevators, and vacuum alignment and thermal conditioning
modules. Both systems and modules include proprietary software to control and
monitor system and module functions.
The Company's systems provide turn-key automation solutions for vacuum cluster
tools. Features include efficient, reliable and clean wafer handling, vacuum
control including profiled pumping and venting, wafer alignment and
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thermal conditioning, intermodule communications and wafer transport scheduling.
The Company's systems and modules are interchangeable and comply with SEMI/MESC
standards. This open architecture provides flexibility for OEM customers to
configure application specific wafer handling systems and for semiconductor
manufacturers to retrofit vacuum wafer handling systems within their fabrication
facilities.
Vacuum Central Wafer Handling Systems
Central wafer handling systems for vacuum cluster tools link together various
process and conditioning modules (e.g. chambers for deposition, etch, heating
and cooling) using a transfer robot located in a central vacuum chamber. In a
cluster tool, a standard cassette of up to 25 wafers enters the vacuum
environment through a vacuum cassette elevator load lock. The load lock is
sealed and pumped to vacuum and then opened to the central wafer handling
system. A central transfer robot then carries the wafers between the cassette
and the different process and conditioning modules through the central vacuum
chamber. After all the wafers have been processed within the cluster tool and
returned to the cassette in the load lock, the load lock is sealed from the
vacuum central chamber and vented to atmospheric pressure. The cassette of
wafers is then removed from the cluster tool through the load lock. Vacuum
cluster tools often employ two load locks, with the wafers from one load lock
being actively transferred, conditioned and processed while wafers in the other
load lock are being brought to or removed from vacuum conditions. Although
cluster tool load lock doors are located in the most stringent and most
expensive clean room environments to avoid contamination of wafers when being
transferred into and out of a cluster tool, the main cluster tool platform and
its modules are located behind the clean room wall in an equipment bay in a less
stringent and less expensive clean room environment.
The following table sets forth the Company's family of vacuum central wafer
handling systems:
Model Number of Ports Features
- --------------- --------------- -------------
Marathon 400.............. 4 . 100 mm to 200 mm wafers
Marathon 500.............. 5 . Vacuum range: 10/-3 / to 10/-8/ torr
Marathon 600.............. 6 . Single or dual arm, 3-axis,
Marathon 700.............. 7 mechanically driven transfer robots
Marathon 800.............. 8 . Magnetically driven transfer
robots with high-speed, DSP-based
velocity and acceleration control (optional)
Marathon 4000............. 4 . 300 mm wafers
Marathon 6000............. 6 . Single or dual arm, 3-axis,
magnetically driven transfer
robots with high-speed, DSP-based
velocity and acceleration control
Under development
Marathon 5000............. 5
Marathon 7000............. 7
Marathon 8000............. 8
The Company's Marathon vacuum central wafer handling systems handle wafer sizes
of 100 mm to 200 mm in diameter, and are offered with four to eight sides
(referred to as ports) and vacuum ranges of 10/-3 / to 10/-8/ torr (a measure of
vacuum pressure; 760 torr equals one atmosphere). Each port can accommodate
process modules meeting SEMI/MESC standards. Using a two load lock
configuration, the Company's Marathon 800 eight-sided central wafer handling
system can accommodate up to six process modules.
PVD and CVD applications typically require high vacuum, as they are extremely
sensitive to molecular and particle contamination, and typically use seven- or
eight-sided central water handling systems. Etch, strip and clean applications
do not generally have the same vacuum requirements as deposition and often use
less complex and less expensive four- to six-sided cluster tool configurations.
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In anticipation of the emergence of next-generation standards for larger wafers,
the Company has developed central wafer handling systems (the Marathon 4000 and
6000) designed to handle 300 mm wafers. These systems have incorporated handling
technology developed by the Company for flat panel display substrates, which are
generally significantly more demanding to handle than wafers.
The Company continually enhances its vacuum transfer robots and other modules to
improve the performance of its systems and intends to offer such improvements
with its Marathon systems as they are developed. The Company has offered its
new DSP-controlled, magnetically driven MagnaTran vacuum transfer robot as a
Marathon option.
The Company's Marathon systems currently incorporate either the Company's single
(VacuTran) or dual (MultiTran) frog-arm vacuum transfer robot, one or more of
the Company's vacuum cassette elevator (VCE) load locks, the Company's InLigner
wafer aligner, and, if required, the Company's InCooler wafer cooling module.
The Company has been able to increase the availability of ports for use with
process modules by developing a wafer aligner and a cooling module which mount
between a cassette or process module and the central wafer handling chamber. The
Company is also developing a degas module that performs a degas function in a
single conditioning module requiring one port. This module is being designed to
virtually degas a wafer in 45 seconds.
The Company has also developed transport module control (TMC) CONTROLVision
proprietary applications software to control and monitor its vacuum substrate
handling systems and to interface with the cluster tool and process module. The
software interfaces with process tool controllers and provides environment
control, profiled load lock pumping and venting, error recovery diagnostics,
safety control and scheduling of wafer transfers. When providing a turn-key
solution that includes the Company's system control and scheduling software, the
Company is able to provide guarantees relating to throughput and particle
contamination. Throughput guarantees vary for each system configuration and each
process requirement. In an independent test of its Marathon 600 vacuum central
wafer handling system performed on behalf of the Company and a customer at the
facilities of an independent laboratory, the operation of the Marathon 600
produced significantly less particle contamination than the system's particle
contamination specifications. The Company is also developing cluster tool
control (CTC) CONTROLVision proprietary software to provide user interface and
overall system control.
Vacuum Transfer Robots
Building on its experience in developing transfer robots and employing its
patented dual and single frog-arm technology, the Company has developed multiple
generations of vacuum transfer robots. These robots are a standard feature of
the Company's Marathon central wafer handling systems, are constructed to
SEMI/MESC standards and are sold separately for use with other vacuum wafer
handling applications. The Company's robots incorporate electronics and
proprietary software to control and monitor their operation.
The Company's next-generation vacuum transfer robot, the MagnaTran 60, is
designed to carry large flat panel display substrates. The Company has also
developed a version of the MagnaTran 60, the MagnaTran 6, for the semiconductor
wafer market. The Company believes that the technical advances implemented to
meet the requirements of the flat panel display industry enabled the Company to
adapt the MagnaTran 6, with minimal technical innovations, to handle 200 mm
semiconductor wafers and the anticipated next-generation 300 mm semiconductor
wafers.
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The following table sets forth the model, year of introduction and description
of certain features of the Company's vacuum transfer robots:
MODEL YEAR OF INTRODUCTION FEATURES
----- -------------------- --------
MagnaTran 6 1996 . Magnetic drive
. Motion control with software and DSP-based
controller
. Magnetic seal
. Single or dual frog-arm/band joint
. Compatible for 200mm and 300mm wafer substrate size
MultiTran 5 1992 . Upgraded digital motion control
. Ferro-fluidic seal on rotational axis
. Servo motor and capstan
. Dual frog-arm/band joint
. Placement repeatability of .26 mm
. Reach of 875 mm
VacuTran 5 1992 . Upgraded digital motion control
. Ferro-fluidic seal on rotational axis
. Servo motor and capstan
. Single frog-arm/band joint
. Placement repeatability of .26 mm
. Reach of 860 mm
VacuTran 2 1984 . Gear motor flexure drive
. Analog motion controls
. Polymer ring seal
. Single frog-arm/gear joint
. Placement repeatability of 1.0 mm
. Reach of 375 mm
Throughput. By employing dual frog-arm robots, the MultiTran has been able to
achieve a significant improvement in throughput over single arm robots,
depending upon the cluster tool configuration and process requirements. The
Company has also been able to increase throughput by developing proprietary
algorithms to calculate efficient trajectories and acceleration and deceleration
profiles (time optimal trajectories) for its robot arms while reducing
vibrations and maintaining position control of the wafer being transported. By
incorporating a DSP and this time optimal trajectory software in its MagnaTran
6, the Company believes that it has achieved additional improvement in transfer
time. Time optimal trajectory software is also incorporated into the Company's
MagnaTran 60 vacuum transfer robot for flat panel display substrates.
Only one arm of the Company's dual arm robots may extend at a time, and each arm
is always positioned directly opposite (180 degrees) from the other. In contrast
to single arm robots, which must transfer a wafer removed from one handling,
conditioning or process module to another before picking up a new wafer, the
Company's dual arm robots are able to pick up a new wafer from a module before
retrieving the original wafer. This new wafer can then be placed in a module
before carrying the original wafer to a cassette or other module, thereby
enhancing continuous processing.
5
Reliability. The Company has developed and implemented a rigorous test program
to evaluate its products. Through the efforts of its reliability test group, the
Company has demonstrated in excess of one million mean cycles between failures
for its VacuTran 5 and MultiTran 5 robots. This translates into a mean time
between failures of approximately 5,500 hours for a transfer robot operating in
a typical cluster tool with three sequential processing modules that processes
30 wafers per hour. The Company's reliability program is guided by the computer-
based RAMP reliability model developed by SEMATECH and Sandia National
Laboratories and with an on-going training program managed by Sandia.
The magnetic drive in the Company's MagnaTran robot has less than half of the
moving parts of the drives used in the VacuTran and MultiTran robots. In
addition, this drive mechanism transmits force magnetically, without piercing
the vacuum barrier, and eliminates the need for moveable vacuum seals. By
reducing moving parts and eliminating moveable seals (all of which are prone to
wear) the Company believes that it will be able to increase the reliability of
its transfer robots significantly. Through the introduction of the MagnaTran
robot, the Company's goal is to achieve a fourfold increase in mean time between
failures within the next several years, although there can be no assurance that
the Company will be able to achieve this objective on a timely basis if at all.
Contamination Control. To reduce particle contamination, the Company designs
its vacuum transfer robots to eliminate the use of belts and gears and to reduce
the number of moving parts within the vacuum environment and above the wafer
plane, and selects materials that reduce particle and molecular contamination.
In addition, the robots pick and place wafers with a vertical motion to prevent
wafer sliding on process module surfaces and cassette slots. The Company
believes that the elimination of moveable vacuum seals in its MagnaTran robots
will further enhance the particle performance of its vacuum transfer robots.
Repeatability. As wafer sizes increase and placement repeatability becomes more
demanding, it is becoming increasingly important to minimize tracking errors,
wafer sliding and arm deflection (the bending or wobbling of the robot arm).
Narrow side clearances between a wafer and a process chamber or cassette often
require tracking errors of less than 0.5 mm. The two most widely used vacuum
transfer robot arm designs are SCARA arms, in which the end effector is
supported by a single arm, and the frog-arm pioneered by the Company, in which
the end effector is supported by a left and right arm. The Company believes that
the symmetrical mechanisms and inherent strength of frog-arms provide frog-arms
with a significant advantage over SCARA arms in reducing tracking errors, wafer
sliding and arm deflection.
The Company's vacuum transfer robots contain a closed loop servo control which
monitors and maintains placement repeatability in the rotational axis by
obtaining constant positioning feedback. Many other transfer robots use an open
loop stepper control system which commands a robot to move a specified number of
steps with limited or no feedback as to the final position of the robot. These
stepper systems can lead to misplacement of the robot arm if the number of steps
is miscounted. To further enhance tracking, the Company has incorporated a
closed loop feedback system with a proprietary DSP-based controller in its
MagnaTran robots.
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Other Vacuum Wafer Handling and Conditioning Modules
In addition to vacuum transfer robots, the Company offers a family of SEMI/MESC
compatible vacuum wafer handling modules (cassette load locks and aligners) and
vacuum thermal conditioning modules (a cool station and, under development, a
degas module). The Company incorporates these modules into its vacuum central
wafer handling systems and sells them separately. The following table sets forth
the model, year of introduction and certain features of the Company's other
vacuum wafer handling and thermal conditioning modules:
Year of
Model Introduction Features
------- ------------ --------
VACUUM CASSETTE ELEVATOR LOAD LOCKS
- ------------------------------------
VCE 5 1996 . 300 mm
. Side opening carrier interface option
VCE 4 1994 . Flexible and changeable interfaces:
. Automatic vertical or manual swing-out door
. SMIF interface option
. Automated and rail guided vehicle interface
option
. Advanced wafer position sensors
VCE 3 1992 . Automatic vertical door
. High performance, low vibration drive mechanisms
. Low profile, low particle door drive mechanism
. Nonvolatile memory for set-up data retention
VCE 2-0 1990 . Safety and wafer sensors
. Angled chamber for flush clean room interface
VCE 2-M 1989 . SEMI/MESC interface
VCE 2-8 1987 . Manual swing-out door
. Cassette, door and wafer sensors
VACUUM ALIGNERS
- ---------------
InLigner 3 1996 . 300 mm
. Intermodule design conserves cluster tool port
InLigner 1991 . Intermodule design conserves cluster tool port
. One step positioning with transfer robot
. Optical sensors
VWA1 1987 . Dedicated module design (uses port)
. Optical sensors
VACUUM THERMAL CONDITIONAL MODULES
- ----------------------------------
InCooler 3 1996 . 300 mm
. Intermodule design conserves cluster tool port
InCooler 1993 . Wafer cooling module
. Intermodule design conserves cluster tool port
. Cools wafers from 550 degrees C to 70 degrees C
in 45 seconds
Degas Module Under . Dedicated module design (uses port)
development . Heats to virtually degas water and other
1996 vapors from wafer in 45 seconds
7
Vacuum Cassette Elevator Load Locks. The Company has developed a family of
vacuum cassette elevator load locks to hold and index (raise and lower) wafers
for cluster tools and other vacuum automated equipment. The Company's VCE 4
cassette load lock features flexible and changeable interfaces, is field
upgradable and is available with either a manual or automatic door
configuration. The automatic door uses an innovative low particle, low profile
drive mechanism, which opens vertically below the cluster platform for standard
mechanical interface ("SMIF"), automated guided vehicle ("AGV") and rail guided
vehicle ("RGV") compatibility. The VCE 4 is also offered with a fixed cassette
platform, a swing-out AGV or RGV arm, and integrated SMIF options. The Company
has developed the VCE 5 for 300mm wafers, a side opening carrier interface is
also under development.
Vacuum Aligners. Wafer processing requires precise alignment and, often,
orientation of a wafer for processing. The Company's InLigner Intermodule Wafer
Aligner provides fast one-step wafer alignment by sensing the location of the
wafer on the aligner and communicating that position to the vacuum transfer
robot. Using this information, the transfer robot adjusts the placement of its
arm to pick up the wafer in the proper position. Other wafer aligners, including
the Company's VWA 1, do not communicate the position of the wafer to the
transfer robot, and take an extra step to move the wafer to a centered position.
The Company's aligners center and orient the wafer without edge contact by using
an optical sensor. The InLigner is designed for intermodule mounting between a
module, such as the cassette load lock and the central wafer handling chamber,
in order to conserve a port of the cluster tool. The Company's InLigner 3 is
designed for 300 mm wafer alignment
Intermodule Cool Station. The Company's InCooler Intermodule Cool Station cools
wafers after hot processing to a temperature that allows placement into a
plastic wafer cassette. The InCooler can cool a wafer from 550 degrees C to 70
degrees C in 45 seconds. This module is also designed for intermodule mounting.
The Company's InCooler 3 is designed for 300 mm wafer applications.
Degas Module. The Company is developing a degas module that performs a degas
function in a single conditioning module requiring one port. This module is
being designed to virtually degas a wafer in 45 seconds.
Factory Automation
Advanced semiconductor manufacturers are increasingly utilizing factory
automation systems to transport cassettes of wafers throughout the production
process with minimal human interface. These systems include AGV's, RGV's and
overhead track systems. To reduce clean room costs and the possibility of wafer
contamination, some semiconductor equipment manufacturers use mini-environment
SMIF systems. These systems can be used to isolate wafers in a clean,
atmospheric sealed wafer cassette container for storage or transport from one
process tool to the next. These containers can be transported by operators, AGVs
or RGVs through less clean environments while maintaining an ultraclean
environment within the sealed SMIF container. With the use of SMIF systems, only
the process tool cassette transfer interfaces need to be maintained in the most
stringent clean room environment.
During the fiscal 1996, the Company has developed products to interface with
advanced factory automation systems, including a SMIF system (VIS) to interface
with vacuum wafer handling systems, an ergonomic loading option (Tilt Platform)
for the VCE 4 designed to accommodate human interface requirements, a stationary
platform (Load Station) to accept delivery of cassettes of wafers, and a Buffer
Station which accommodates two cassettes of wafers in front of each load lock to
enhance throughput.
Atmospheric Products
Transfer Robots. The Company's Z-Bot II, introduced in 1986 and improved in
1994, is an atmospheric wafer transfer robot that features the Company's
proprietary, 3-axis frog-arm, which provides gentle motion and clean operation.
This robot has a much wider range of motion in the vertical axis than the
Company's vacuum transfer robots, and thereby can access wafers in fixed
cassettes that do not have indexing capability. The Company's Orbitran,
introduced in 1982, is an atmospheric wafer transport robot with a more limited
range of vertical motion than the Z-Bot II and offers the same frog-arm design,
gentle motion and clean operation at a lower price.
Atmospheric Wafer Aligner. The Company's Atmospheric Wafer Aligner II,
introduced in 1987 and improved in 1994, is an atmospheric wafer aligner that
features 3-axis alignment, clean operation and high speed.
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FLAT PANEL DISPLAY PRODUCTS
Background
Flat panel displays, such as active-matrix liquid crystal displays, are used in
color laptop and notebook computers, camcorder viewfinders and flat televisions.
Like semiconductors, flat panel displays are manufactured with deposition and
etch processes. Many flat panel display process equipment manufacturers are
located in Japan. Accordingly, the Company's sales of its products for the flat
panel display equipment market will be heavily dependent on its ability to
penetrate the Japanese market.
Products
In 1994, the Company introduced a family of vacuum central substrate handling
systems and modules for the flat panel display deposition and etch process
equipment markets, shipping its first Hercules central substrate handling system
for a flat panel display vacuum cluster tool in July 1994. As with the Marathon
central wafer handling systems, the Hercules systems are designed for
flexibility and are offered with from four to seven ports, varying vacuum ranges
and object-oriented control software. The Hercules systems can handle flat panel
display substrates from 350 mm x 460 mm to 600 mm x 720 mm in size.
The Hercules system includes the Company's newly developed MagnaTran 60
magnetically driven frog-arm vacuum transfer robot with two or three axes of
motion and single or dual arm options, a single slot load lock, and 20 or 30
vacuum cassette elevator load locks (VCE 40), and a seven slot batch degas
module. The VCE 40 vacuum cassette elevator load locks have automatic and
manual door design options.
MARKETING AND SALES
The Company markets and sells its products in the United States, Japan, Korea,
Taiwan and Europe through its direct sales and marketing organization. The
Company's sales and marketing organization operates out of the corporate
headquarters in Chelmsford, Massachusetts, and its regional sales and technology
centers in California, Japan, British Columbia, and England. The Company's
United States customers and potential customers are concentrated primarily in
California, and between New York and Boston. In July 1996, the Company opened
its technology center in Japan, significantly expanding its regional marketing
and technical support capabilities. The Company is seeking to expand its
presence in Japan, Korea and Taiwan by increasing customer support staff, hiring
and training a marketing and sales organization and opening additional regional
technology centers. In fiscal 1996, 1995 and 1994, foreign revenues accounted
for 20%, 12% and 16% of the Company's revenues, respectively. The Company
expects foreign revenues to continue to represent a significant percentage of
total revenues in the foreseeable future. To the extent that the Company expands
its international operations, the Company may be exposed to increased risks of
currency fluctuations.
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The Company believes that its marketing and sales efforts are significantly
enhanced by providing its customers and potential customers with the use of
demonstration equipment for evaluation, technical assistance and training. The
Company currently maintains demonstration equipment at its headquarters
facility, and in California, Japan and British Columbia. The Company plans to
increase its investment in demonstration equipment in its regional technology
centers strategically located near its customer base.
The selling process for the Company's products, particularly its vacuum central
wafer handling systems, is often multi-level, involving a team comprised of
individuals from sales, marketing, engineering, operations and senior
management. Each significant customer is assigned a team that engages the
customer at different organizational levels to provide planning and product
customization and to assure open communications and support. The Company's
marketing activities also include participation in trade shows, publication of
articles in trade journals, participation in industry forums and distribution of
sales literature.
The Company believes that its revenues will be primarily generated by sales to
existing customers. Several of the Company's largest OEM customers now
purchasing the Company's vacuum central wafer handling systems previously
purchased the Company's vacuum transfer robots and other modules. The Company
believes that once a customer has selected the Company's system for a cluster
tool, the customer is likely to rely on that equipment for the life of that
cluster tool model, which can be in excess of five years.
Due to the significant capital commitment usually incurred by semiconductor
manufacturers in their purchase of process equipment, these manufacturers demand
high performance and highly reliable products which require substantial time for
the Company's OEM customers to develop and validate. As a result, it may take as
long as several years between the Company's initial sales of a vacuum central
wafer handling system and commercial introduction of the OEM's new process tool.
In fiscal 1996, one customer, Lam Research Corporation ("Lam"), accounted for
21% of the Company's revenues. In fiscal 1995, revenues from two customers
accounted for 34% of the Company's revenues. In fiscal 1994, revenues from one
customer, Lam, accounted for 24% of the Company's revenues. Sales to the
Company's top ten customers accounted for 70%, 75% and 67% of revenues in
fiscal 1996, 1995 and 1994, respectively. A reduction or delay in orders from a
significant customer could have a material adverse effect on the Company's
results of operations.
ACQUISITION OF TECHWARE SYSTEMS CORPORATION
In February 1996, the Company acquired all of the outstanding shares of Techware
Systems Corporation ("Brooks Canada") in exchange for 462,189 shares of the
Company's Common Stock. Brooks Canada designs, develops, and supplies
integrated equipment control software solutions for the semiconductor and
related industries. The acquisition enhances and expands the Company's
proprietary control system software for transport module and cluster tool system
interface. The acquisition has been accounted for as a pooling of interests.
COMPETITION
The semiconductor and flat panel display process equipment manufacturing
industries are highly competitive and characterized by continual change and
improvement in technology. Many of the companies in these industries have
significantly greater research and development, clean room manufacturing,
marketing and financial resources than the Company.
Although other independent companies sell vacuum wafer and flat panel display
substrate handling automation systems and vacuum transfer robots to OEMs, the
Company believes that its primary competition is from the larger, integrated
semiconductor and flat panel display OEMs that satisfy their substrate handling
needs in-house rather than by purchasing handling systems or modules from an
independent source such as the Company. Such OEMs comprise the majority of the
Company's current and potential customers. Applied Materials, Inc., the leading
vacuum process equipment OEM, develops and manufactures its own vacuum central
wafer handling systems and modules. The Company believes that in fiscal 1996
most vacuum central wafer handling systems and modules were manufactured in-
house by OEMs.
Many OEMs have substantial resources and expertise in substrate handling and
automation in vacuum environments and will only purchase the Company's products
if the Company can demonstrate improved product performance as measured by
throughput, reliability, contamination control and repeatability, at an
acceptable price. The Company believes that it competes favorably with OEMs and
other independent suppliers with respect to all of these factors. However, there
can be no assurance that the Company will be successful in selling its products
to OEMs that currently satisfy their wafer and flat panel handling needs in-
house,
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regardless of the performance or the price of the Company's products. Moreover,
there can be no assurance that these OEMs will not commercialize their vacuum
handling capabilities and compete with the Company for sales to third parties.
The Company's sale of its products for the flat panel display process equipment
market is heavily dependent upon its penetration of the Japanese market. The
Company is also seeking to expand its presence in the Japanese semiconductor
process equipment market. In addressing the Japanese markets, the Company is at
a competitive disadvantage to Japanese suppliers, many of which have long
standing collaborative relationships with Japanese semiconductor and flat panel
manufacturers. Moreover, the Company's ability to compete effectively in the
Japanese market may be limited by its small size, its geographic location and
its selection of regional representatives. There can be no assurance that the
Company will be able to compete successfully in the Japanese semiconductor or
flat panel display process equipment markets.
RESEARCH AND DEVELOPMENT
The Company's research and development efforts are focused on developing new
products for the semiconductor and flat panel display process equipment
industries and further enhancing the functionality, reliability and performance
of existing products. The Company's engineering, marketing, operations and
management personnel have developed close collaborative relationships with many
of their customer counterparts and have used these relationships to identify
market demands and target its research and development to meet those demands.
The Company's current research and development efforts include the continued
enhancement of the Company's semiconductor and flat panel display products,
including 300 mm Marathon vacuum central wafer handling systems and modules,
control and scheduling software, and factory automation wafer cassette delivery.
There can be no assurance that the Company will be able to develop new products
effectively, to enhance its existing products, or to respond effectively to
technological changes or new industry standards or developments on a timely
basis, if at all. In fiscal 1996, 1995 and 1994, the Company's research and
product development expenses were $12.4 million, $6.8 million and $3.8 million,
respectively, representing 13.7%, 13.4% and 14.4% of the Company's revenues,
respectively.
MANUFACTURING
The Company's manufacturing operations consist primarily of assembly,
integration and final testing of parts and subassemblies supplied by third party
suppliers, all of which are conducted at the Company's manufacturing facility in
Massachusetts. The Company assembles and tests its vacuum systems and modules in
a clean room in order to reduce contaminants in its products. While the Company
often uses sole source suppliers for certain key components and common
assemblies to achieve quality control and the benefits of economies of scale,
the Company believes that these parts and materials are readily available from
several supply sources.
PATENTS AND PROPRIETARY RIGHTS
The Company relies upon trade secrets and patents to protect its technology. Due
to the rapid technological change that characterizes the semiconductor and flat
panel display process equipment industries, the Company believes that the
improvement of existing technology, reliance upon trade secrets and unpatented
proprietary know-how and the development of new products may be more important
than patent protection in establishing and maintaining a competitive advantage.
It is the Company's policy to require all technical and management personnel to
enter into nondisclosure agreements. Nevertheless, the Company has obtained
patents and will continue to make efforts to obtain patents, when available, in
connection with its product development program. There can be no assurance that
any patent obtained will provide protection or be of commercial benefit to the
Company, or that its validity will not be challenged.
The Company has 11 granted U.S. patents and 28 U.S. patent applications pending.
In addition, the Company has 11 granted foreign patents and 23 foreign patent
applications pending. Approximately one-half of the U.S. patents and patent
applications relate to the Company's transfer robot technology, including
patents and applications relating to the VacuTran, MultiTran and MagnaTran. The
Company's U.S. patents expire at various times from 1999 - 2015.
11
The Company has obtained a license from Texas Instruments Incorporated to use
Texas Instrument's ControlWORKS object-oriented software. The Company has
incorporated ControlWORKS in its TMC II proprietary applications software to
control and monitor its vacuum substrate handling systems and to interface with
the cluster tool and process module software control systems.
The Company has entered into a license and distribution agreement with its
German distributor, ACR, relating to ACR's SMIF technology. Under this
arrangement, the Company has a nonexclusive license to manufacture and sell
ACR's SMIF products worldwide, except for Europe, where ACR has retained
exclusive rights.
There has been substantial litigation regarding patent and other intellectual
property rights in semiconductor related industries. The Company has been
notified by General Signal Corporation ("General Signal") that General Signal
believes the Company is manufacturing and selling products that infringe certain
of General Signal's patents. The notification advised the Company that General
Signal is currently attempting to enforce its rights to those patents in
litigation against a major semiconductor process tool equipment manufacturer,
and that, at the conclusion of that litigation, it intends to enforce its rights
against the Company and others. The Company's patent counsel is investigating
the infringement allegations relating to the General Signal patents. If General
Signal successfully enforces these alleged rights against the Company or the
Company's customers, it could have a material adverse affect on the Company's
business.
In 1992, at the time that General Signal first raised patent claims in the
cluster tool area, the Company joined with six major semiconductor process tool
equipment manufacturers in forming an "Ad Hoc Committee for Defense against
General Signal Cluster Tool Patents." At that time, the members of the Ad Hoc
Committee notified General Signal that the member companies were of the opinion
that the General Signal patents were invalid based on (i) prior art, (ii)
inequitable conduct before the Patent & Trademark Office and (iii) estoppel as a
result of General Signal's activities in establishing standards for cluster
tools and interfaces within the semiconductor industry. The Company believes
that the position taken by the Ad Hoc Committee remains valid, and in the event
litigation is commenced against the Company by General Signal, is prepared to
defend its position vigorously. Even if the Company is determined to be
infringing the General Signal patents, the Company believes that the sale of its
products to process tool manufacturers would result in contributory and not
direct infringement. As such, certain license rights under the General Signal
patents held by the Company's customers could cover the Company's products sold
to those customers. For example, the Company has been advised by Lam, the
Company's largest customer, that Lam has a license under the General Signal
patents. The Company believes that the products sold to Lam are covered under
this license. To the extent other customers reach a license or settlement with
General Signal, such agreements could also cover the Company's products sold to
those customers.
General Signal has offered to license their patents to the Company, and because
patent litigation can be extremely expensive and time consuming, the Company may
seek to obtain a license to one or more of the disputed patents. There is no
assurance, however, that a license from General Signal will be available to the
Company on reasonable terms, if at all. If the General Signal patents are found
to be valid, if the Company's products are held to infringe such patents, and if
the Company or its OEM customers are not able to obtain a license from General
Signal on reasonable terms, it could have a material adverse effect on the
business of the Company.
BACKLOG
Backlog for the Company's products as of September 30, 1996 and 1995 totaled
$35.8 million and $29.2 million, respectively. Backlog consists of purchase
orders for which a customer has scheduled delivery within the next twelve
months. Orders included in the backlog may be canceled or rescheduled by
customers without significant penalty. Backlog as of any particular date should
not be relied upon as indicative of the Company's net revenues for any future
period.
EMPLOYEES
As of September 30, 1996, the Company had approximately 459 full-time employees.
Of these, 166 were involved in engineering, including 65 engaged in software
development, 26 in sales and marketing, 68 in global customer support, 164 in
manufacturing, and 35 in general and administrative. The Company believes its
future success will depend in large part on its ability to attract and retain
highly skilled employees. None of the employees of the Company are covered by a
collective bargaining agreement. The Company considers its relationships with
its employees to be good.
12
ITEM 2. PROPERTIES
- -------------------
In May 1995, the Company entered into a seven year lease for a new headquarters
and manufacturing facility. In August 1995, the Company completed its relocation
into this new facility. The new facility is a two story building with
approximately 130,000 square feet of space located in Chelmsford, Massachusetts.
The lease provides for the Company to move into all the space over a three year
period with the Company occupying a minimum of 83,000 square feet in the first
year, 107,000 square feet in the second year, 108,000 square feet in the third
year and the entire space thereafter. The Company believes that the new facility
will be adequate for its needs for the foreseeable future.
The Company also maintains sales and service offices in Santa Clara, California,
Tokyo, Japan, Kingston, England and Richmond, British Columbia, and service
offices in Seoul, Korea and Hsinchu, Taiwan.
In July 1996, the Company expanded its regional sales and support presence in
Japan, by relocating into a 10,000 square foot facility in Tokyo, Japan.
In August 1996, the Company entered into a six year lease for a new facility for
Brooks Canada. The new facility is a shared, three story building with
approximately 41,000 square feet of space and is located in Richmond, British
Columbia.
ITEM 3. LEGAL PROCEEDINGS
- --------------------------
The Company is not a party to any material pending legal proceedings. See
"Patent and Proprietary Rights" for a description of certain potential patent
disputes.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
During the quarter ended September 30, 1996, no matters were submitted to a vote
of security holders through the solicitation of proxies or otherwise.
13
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
- ------------------------------------------------------------------------------
Market Price
- ------------
The Company's Common Stock is traded on the Nasdaq National Market under the
symbol "BRKS". The following table sets forth the range of high and low trading
price quotations for the Common Stock as reported on the Nasdaq National Market
for the periods indicated.
Common Stock Price
------------------
Year ended September 30, 1995 HIGH LOW
- ----------------------------- ---- ---
Second Quarter (commencing February 1, 1995).. $14.75 $ 9.00
Third Quarter................................. 21.50 12.75
Fourth Quarter................................ 24.50 16.75
Year ended September 30, 1996
- -----------------------------
First Quarter................................. $22.25 $13.00
Second Quarter................................ 16.00 10.00
Third Quarter................................. 15.88 9.75
Fourth Quarter................................ 14.75 9.00
Number of Stockholders
- ----------------------
As of December 5, 1996, there were approximately 118 holders of record of the
Company's Common Stock. This does not reflect persons or entities who hold their
stock in nominee or "street" name through various brokerage firms.
Dividends
- ---------
The Company currently intends to retain earnings to finance future growth and,
therefore, does not anticipate paying cash dividends in the foreseeable future.
The declaration and payment of any future dividends and the amount thereof will
depend upon the Company's results of operations, financial condition, cash
requirements, future prospects, limitations imposed by credit arrangements and
other factors deemed relevant by the Board of Directors.
14
ITEM 6. SELECTED FINANCIAL DATA
Financial Highlights /(1)/
(in thousands, except per share data)
Year ended September 30,
-------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
Revenues/(2)/........................... $90,432 $50,958 $26,651 $16,425 $12,946
Gross profit............................ 37,822 21,175 10,646 6,761 5,176
Income from operations.................. 13,027 7,169 2,778 1,415 636
Income before income taxes.............. 12,973 7,194 2,340 1,189 484
Income tax provision.................... 4,476 2,249 724 51 159
Net income.............................. 8,497 4,945 1,616 1,138 325
Net income per share.................... $1.04 $0.73 $0.32 $0.24 $0.07
Weighted average number of common and
common equivalent shares.............. 8,199 6,803 5,045 4,737 4,541
Total assets............................ $64,761 $53,580 $14,488 $12,487 $ 8,129
Working capital......................... 32,582 32,563 6,032 4,261 703
Long-term obligations................... 589 531 3,227 3,264 907
Stockholders' equity.................... 50,691 42,222 5,589 3,388 2,118
(1) All financial information presented herein has been retroactively restated
to reflect the Techware acquisition which has been accounted for as a pooling of
interests. See Notes 1 and 2 to Consolidated Financial Statements for
additional information.
(2) Includes revenues from related party of $19,109, $10,530, $6,361 and $916
in the fiscal years ended September 30, 1996, 1995, 1994 and 1993, respectively.
15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
FISCAL 1996 COMPARED WITH FISCAL 1995
REVENUES
Revenues increased 77% to $90.4 million in fiscal 1996 from $51.0 million in
fiscal 1995. Sales of vacuum central wafer handling systems, modules and
control software comprised 72% of the increase in revenues. The remainder of
the increase was primarily attributable to increased unit sales of flat panel
display substrate handling systems and modules, and service revenues, each
comprising 14% of the increase in 1996 revenues. Fiscal 1996 shipments
included initial deliveries of 300 mm vacuum central wafer handling systems
incorporating the MagnaTran 6 high speed vacuum transport robot, the Company's
sixth generation product developed to enable the production of advanced
semiconductors (.35 micron and below). Direct foreign revenues increased to
$18.1 million (20% of revenues), including $13.3 million of direct sales to
Asian customers in fiscal 1996, compared to direct foreign revenues of $6
million (12% of revenues), including $3.9 million of direct sales to Asian
customers in fiscal 1995.
GROSS PROFIT
Gross profit as a percentage of revenues improved slightly to 41.8% in fiscal
1996, compared to 41.6% in fiscal 1995. Cost reductions attributable to
manufacturing efficiencies from increased unit sales and increased sales of
products incorporating higher value-added control software, were partially
offset by higher material costs related to changes in product mix, new product
introductions, including the introduction of the Company's 300 mm vacuum central
wafer handling systems and modules, and generally competitive price pressure.
RESEARCH AND DEVELOPMENT
Research and development expenses increased 81% to $12.4 million (13.7% of
revenues) in fiscal 1996 from $6.8 million (13.4% of revenues) in fiscal 1995.
The increase in research and development expenses primarily resulted from
continued enhancement of the Company's semiconductor and flat panel display
products, including 300 mm Marathon vacuum central wafer handling systems and
modules, control and scheduling software, and factory automation wafer cassette
delivery systems.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses increased 73% to $12.4 million
(13.8% of revenues) in fiscal 1996 from $7.2 million (14.1% of net revenues) in
fiscal 1995. The increase in selling, general and administrative expenses
resulted from the hiring of additional sales, marketing and administrative staff
to manage and support the Company's international expansion in Japan, Korea,
Taiwan and the United Kingdom.
INTEREST INCOME AND EXPENSE
Interest income decreased to $334,000 (0.4% of net revenues) in fiscal 1996 from
$507,000 (1.0% of net revenues) in fiscal 1995. The decrease reflects lower
cash balances in fiscal 1996 as a result of the Company's investments in
infrastructure and working capital to support its growth.
Interest expense decreased to $388,000 (0.4% of net revenues) in fiscal 1996
from $482,000 (0.9% of net revenues) in fiscal 1995. The decrease in interest
expense was due to the Company's improved working capital position and reduced
borrowings following the Company's fiscal 1995 public offerings of common stock.
INCOME TAX PROVISION
The Company's effective tax rate was 34.5% in fiscal 1996 compared to 31.3% in
fiscal 1995. The increase in the effective rate is primarily due to the
statutory lapse of federal research and development tax credits during the first
nine months of 1996.
16
FISCAL 1995 COMPARED WITH FISCAL 1994
REVENUES
Revenues increased 91% to $51.0 million in fiscal 1995 from $26.7 million in
fiscal 1994. The increase in revenues was primarily attributable to increased
unit sales of vacuum central wafer handling systems and to an increase in unit
sales of wafer handling and conditioning modules. Direct foreign revenues
increased to $6.0 million (12% of revenues), including $3.9 million in direct
sales to Asian customers in fiscal 1995, compared to direct foreign revenues of
$4.0 million (16% of revenues), including $1.8 million of direct sales to Asian
customers in fiscal 1994.
GROSS PROFIT
Gross profit as a percentage of revenues improved to 41.6% in fiscal 1995,
compared to 40.0% in fiscal 1994. Cost reductions attributable to manufacturing
efficiencies from increased unit sales, were partially offset by higher material
costs related to changes in product mix and new product introductions, including
the latest generation of the Company's vacuum cassette elevator load locks, the
VCE 4.
RESEARCH AND DEVELOPMENT
Research and development expenses increased 77% to $6.8 million (13.4% of
revenues) in fiscal 1995 from $3.8 million (14.4% of revenues) in fiscal 1994.
This increase was primarily attributable to the development of the Company's
latest generation of vacuum cassette elevator load locks, MagnaTran vacuum
transfer robots, SMIF factory automation technology, transport module control
and scheduling software, and new vacuum central substrate handling systems and
conditioning modules for the semiconductor and flat panel display manufacturing
industries.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses increased 79% to $7.2 million
(14.1% of revenues) in fiscal 1995 from $4.0 million (15.1% of revenues) in
fiscal 1994. The increase in these expenses was primarily attributable to the
addition of sales, marketing and administrative staff to manage and support the
Company's growth, domestically and internationally. The establishment of the
Company's new subsidiary in Japan, increased marketing and customer support
activities in Korea, and the increased costs associated with being a public
company also contributed to the increase in selling, general and administrative
expenses.
INTEREST INCOME AND EXPENSE
Interest income increased to $507,000 (1.0% of revenues) in fiscal 1995 from
$68,000 (0.3% of revenues) in fiscal 1994. The increase in investment income
reflects higher cash balances available for investment in fiscal 1995, following
the Company's two public offerings of common stock.
Interest expense decreased to $482,000 (0.9% of revenues) in fiscal 1995 from
$506,000 (1.9% of revenues) in fiscal 1994. The decrease in interest expense
was due to the Company's improved working capital position and reduced
borrowings following the Company's two public offerings of the common stock.
INCOME TAX PROVISION
The Company's effective tax rate increased to 31.3% in fiscal 1995 from 30.9%
in fiscal 1994.
17
FOREIGN CURRENCY FLUCTUATIONS
The Company's foreign revenues are generally denominated in U.S. dollars.
Accordingly, foreign currency fluctuations have not had a significant impact on
the comparison of the results of operations for the periods presented.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1996, the Company had working capital of $32.6 million,
including $2.1 million of cash and cash equivalents, compared with working
capital of $32.6 million, including $15.6 million of cash and cash equivalents,
as of September 30, 1995. During fiscal 1996, the Company used cash of $2.1
million in operating activities primarily to finance accounts receivable and
inventories resulting from revenue growth. Investing activities in fiscal 1996
consisted of capital expenditures primarily for reliability, test and
demonstration equipment, and the expansion of the Company's regional technology
and customer support center in Japan. The Company expects to continue to make
capital expenditures to support its business, especially anticipated growth in
regional technology and customer support centers in key geographic semiconductor
and flat panel display markets.
The Company has a $15.0 million unsecured revolving credit facility and a $3.0
million unsecured foreign currency line of credit, both of which expire in
December 1997. Under the revolving credit facility, advances bear interest, at
the option of the Company, at the prime rate or the LIBOR rate plus 2%. There
were no borrowings outstanding under the revolving credit facility at September
30, 1996. At September 30, 1996 the Company had $1,019,000 outstanding ($725,000
denominated in Japanese yen and $294,000 denominated in Canadian dollars) under
the foreign currency line of credit. Under the foreign currency line of credit,
advances bear interest at the LIBOR rate plus 2% (2.56% and 6.06%, respectively,
at September 30, 1996). The terms of the Loan Agreement require the Company to
comply with various covenants, including the maintenance of specified financial
ratios and a minimum tangible capital base, as defined, and limit the Company's
annual level of capital expenditures. At September 30, 1996, the Company was in
compliance with the terms of the agreement or had obtained the appropriate
waiver.
In February 1995, the Company received net proceeds of $13.6 million from its
initial public offering of 2,000,000 shares of common stock. In July 1995, the
Company received net proceeds of $16.6 million from a secondary offering of
1,000,000 shares of the Company's common stock.
The Company believes that anticipated cash flows from operations, available
funds and borrowings available under the Company's bank lines of credit, will be
adequate to meet the Company's cash requirements through at least fiscal 1997.
There has been substantial litigation regarding patent and other intellectual
property rights in the semiconductor and related industries. The Company has
received notice from a third party alleging infringements of such party's patent
rights by certain of the Company's products. The Company's patent counsel are
investigating the claim and the Company believes the patents claimed may be
invalid. In the event of litigation with respect to this claim, the Company is
prepared to vigorously defend its position. However, because patent litigation
can be extremely expensive and time consuming, the Company may seek to obtain a
license to one or more of the disputed patents. Based upon information
currently available to it, the Company would only do so if license fees would
not be material to the Company's business.
There can be no assurance that the Company would prevail in any litigation
seeking damages or expenses from the Company or to enjoin the Company from
selling its products on the basis of the alleged patent infringement, or that a
license for any of the alleged infringed patents will be available to the
Company on reasonable terms, if at all. Currently, the Company does not believe
that it is probable that future events related to these threatened matters will
have an adverse effect on the Company's business; however, there can be no
assurance that this will be the case. The Company is currently unable to
reasonably estimate any possible loss related to these matters.
18
NEW ACCOUNTING PRONOUNCEMENT
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-based
Compensation" (SFAS123), which establishes a fair-value based method of
accounting for stock-based compensation plans. The new standard allows
companies to continue to apply the intrinsic value method based on APB No. 25,
"Accounting for Stock Issued to Employees", provided certain pro forma
disclosures are made as if the fair-value-based method had been applied. The
Company will be required to implement SFAS123 in fiscal 1997 and intends to
adopt this standard through the pro forma disclosure method.
FACTORS THAT MAY AFFECT FUTURE RESULTS
From time to time, information provided by the Company or statements made by its
employees may contain "forward-looking" information which involve risks and
uncertainties. In particular, statements contained in the Management's
Discussion and Analysis of Financial Condition and Results of Operations which
are not historical facts (including, but not limited to, statements concerning
anticipated operating expense levels and the availability of funds to meet cash
requirements) may be "forward-looking" statements. The Company's actual future
results may differ significantly from those stated in any forward-looking
statements. Factors that may cause such differences include, but are not
limited to, the factors discussed below and the accuracy of the Company's
internal estimates of revenue and operating expense levels.
CUSTOMER CONCENTRATION
Relatively few customers account for a substantial portion of the Company's
revenues. Sales to the Company's ten largest customers in fiscal 1996, 1995 and
1994 accounted for 70%, 75% and 67% of revenues, respectively. In fiscal
1996, 1995, and 1994 sales to Lam Research Corporation, the Company's largest
customer in these periods accounted for approximately 21%, 21%, and 24% of the
Company's revenues, respectively. The Company expects that sales to Lam will
continue to represent a significant portion of the Company's revenues for the
foreseeable future. The Company's customers generally do not enter into long-
term agreements obligating them to purchase the Company's products. A
reduction or delay in orders from Lam or other significant customers, including
reductions or delays due to market, economic or competitive conditions in the
semiconductor or flat panel display industries, could have a material adverse
effect on the Company's future financial condition, revenues and operating
results.
DEPENDENCE ON CYCLICAL INDUSTRIES
The Company's business is significantly dependent on capital expenditures by
manufacturers of semiconductors. The semiconductor industry is highly cyclical
and historically has experienced periods of oversupply, resulting in
significantly reduced demands for capital equipment, including the products
manufactured and marketed by the Company. The Company's future financial
condition, revenues and operating results may be materially adversely affected
by semiconductor industry downturns or slowdowns. As a result of a recent broad
decline in capital spending by the semiconductor manufacturing equipment
industry, the Company expects that its revenues for at least the first quarter
of fiscal 1997 will be lower than the comparable period of fiscal 1996. There
can be no assurance as to when, if ever, capital spending in the semiconductor
manufacturing equipment industry will recover.
RELIANCE ON OEM CUSTOMERS; LENGTHY SALES CYCLE
The Company's products are principally sold to OEMs which incorporate the
Company's products into their equipment. Due to the significant capital
commitments usually incurred by semiconductor and flat panel display
manufacturers in their purchase of the OEM's equipment, these manufacturers
demand highly reliable products which require as long as several years for OEMs
to develop. The Company's revenues are therefore primarily dependent upon the
timing and effectiveness of the efforts of its OEM customers in developing and
marketing equipment incorporating the Company's products. There can be no
assurance that any equipment incorporating the Company's products will be
marketed successfully by the Company's customers. See "Business-Marketing
and Sales".
19
JAPANESE MARKET
The Japanese semiconductor and flat panel display process equipment markets are
large and difficult for foreign companies to penetrate. The Company believes
that increasing its penetration of the Japanese market is important to its
business, and that it is currently at a competitive disadvantage to Japanese
suppliers, many of which have long-standing collaborative relationships with
Japanese semiconductor and flat panel display process equipment manufacturers.
Moreover, the Company's ability to compete effectively in the Japanese market
may be limited by the Company's size and its geographic location. Although the
Company intends to expand its direct presence in Japan, there can be no
assurance that the Company will be able to achieve significant sales to, or
compete successfully in, Japan. See "Business-Marketing and Sales."
FOREIGN REVENUES
The Company does business worldwide, both directly and via sales to United
States-based OEMs who sell such products internationally. In fiscal 1996, 1995
and 1994, foreign revenues accounted for 20%, 12% and 16%, respectively, of the
Company's revenues. The Company anticipates that foreign revenues will continue
to account for a significant percentage of revenues, which will result in a
significant portion of the Company's revenues and operating results being
subject to risks associated with foreign revenues, including United States and
foreign regulatory and policy changes, political and economic instability,
difficulties in accounts receivable collection, difficulties in managing
representatives, and foreign currency fluctuations. See "Business-Marketing
and Sales."
HIGHLY COMPETITIVE INDUSTRY
The markets for the Company's products are highly competitive and subject to
rapid technological change. Many of the Company's current and potential
competitors have substantially greater resources than the Company. The Company
believes that its primary competition is from integrated OEMs that satisfy their
semiconductor and flat panel display handling needs in-house rather than by
purchasing systems or modules from an independent supplier such as the Company.
There can be no assurance that the Company will be successful in selling its
products to OEMs that currently satisfy their substrate handling needs in-house,
regardless of the performance or the price of the Company's products. Moreover,
there can be no assurance that these OEMs will not begin to commercialize their
vacuum handling capabilities. Competitors may develop superior products or
products of similar quality at the same or lower prices. Other technical
innovations may impair the Company's ability to market its products. There can
be no assurance that the Company will be able to compete successfully. See
"Business-Competition."
NEW PRODUCTS AND TECHNOLOGICAL CHANGE
The semiconductor and flat panel display manufacturing industries have been
characterized by rapid technological change and evolving industry requirements
and standards. The Company believes that these trends will continue into the
foreseeable future. The Company's success will depend upon its ability to
enhance its existing products and to develop new products to meet customer
requirements and to achieve market acceptance. There can be no assurance that
the Company will be successful in introducing products or product enhancements
on a timely basis, if at all, or that the Company will be able to market
successfully these products and product enhancements once developed. Further,
there can be no assurance that the Company's products will not be rendered
obsolete by new industry standards or changing technology. See "Business-
Research and Development".
MANAGEMENT OF GROWTH
The Company has recently gone through a period of rapid growth. Due to the
level of technical and marketing expertise necessary to support its existing and
new customers, the Company must attract highly qualified and well-trained
personnel. There can be only a limited number of persons with the requisite
skills to serve in these positions and it may become increasingly difficult for
the Company to hire such personnel. The Company's expansion may also
significantly strain the Company's management, manufacturing, financial and
other resources. There can be no assurance that the Company's systems,
procedures, controls and existing space will be adequate to support the
Company's operations. Failure to manage the Company's growth properly could
have a material adverse effect on the Company's future financial condition,
revenues and operating results.
20
QUARTERLY FLUCTUATIONS IN OPERATING RESULTS AND MARKET PRICE OF SECURITIES
The Company's quarterly operating results may vary significantly from quarter-
to-quarter depending on factors such as economic conditions in the semiconductor
and flat panel display industries, the timing of significant orders and
shipments of its products, changes and delays in product development, new
product introductions by the Company and its competitors, the mix of products
sold by the Company and competitive pricing pressures. Additionally, the
Company's vacuum central handling systems have high selling prices. As a
result, quarterly variations in systems sales will significantly affect the
Company's operating results. Moreover, customers may cancel or reschedule
shipments and production difficulties could delay shipments. These factors
could have a material adverse effect on the Company's future financial
condition, revenues and operating results.
The market price of the Company's securities could also be subject to wide
fluctuations in response to quarter-to-quarter variations in operating results,
changes in earnings estimates by analysts, and market conditions in the
semiconductor industry, as well as general economic conditions and other factors
external to the Company.
21
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements Pages
- ------------------------------------------ -----
Consolidated Financial Statements:
Report of Independent Accountants 23
Consolidated Balance Sheet at September 30, 1996 and 1995 24
Consolidated Statement of Income for the three years ended September 30, 1996 25
Consolidated Statement of Changes in Stockholders' Equity for the three years
ended September 30, 1996 26
Consolidated Statement of Cash Flows for the three years ended September 30, 1996 27
Notes to Consolidated Financial Statements 28-37
Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts 38
Schedules not listed above have been omitted because they are not applicable,
not required, or the information required to be set forth therein is included in
the consolidated financial statements or notes thereto.
22
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors
of Brooks Automation, Inc.
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Brooks Automation, Inc. and its subsidiaries at September 30, 1996
and 1995, and the results of their operations and their cash flows for each of
the three years in the period ended September 30, 1996, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
Price Waterhouse LLP
Boston, Massachusetts
November 19, 1996
23
BROOKS AUTOMATION, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
SEPTEMBER 30,
1995 1996
ASSETS
Current assets:
Cash and cash equivalents $ 2,102 $15,594
Accounts receivable, net of allowance for doubtful accounts of $100 and
$80, respectively, and including related party receivables of $5,533
and $3,118, respectively 24,381 12,964
Inventories 17,803 12,858
Prepaid expenses and other current assets 1,026 1,524
Deferred income taxes 653 281
------- -------
Total current assets 45,965 43,221
Fixed assets, net 16,698 9,347
Other assets 2,098 1,012
------- -------
Total assets $64,761 $53,580
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and capital lease obligations $ 1,431 $ 1,522
Accounts payable 8,103 6,075
Accrued compensation and benefits 2,719 1,556
Accrued expenses and other current liabilities 1,130 1,505
------- -------
Total current liabilities 13,383 10,658
Long-term debt and capital lease obligations 589 531
Deferred income taxes 98 169
------- -------
Total liabilities 14,070 11,358
------- -------
Commitments and contingency - -
Stockholders' equity:
Preferred stock, $.01 par value; 1,000,000 shares authorized; none issued
and outstanding - -
Common stock, $.01 par value; 21,500,000 shares authorized;
7,569,109 shares and 7,469,591 shares issued and outstanding 76 75
Additional paid-in capital 34,335 34,208
Cumulative translation adjustment (174) (136)
Deferred compensation (110) (139)
Retained earnings 16,564 8,214
------- -------
Total stockholders' equity 50,691 42,222
------- -------
Total liabilities and stockholders' equity $64,761 $53,580
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
24
BROOKS AUTOMATION, INC.
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Year Ended September 30,
1996 1995 1994
(Fiscal 1996) (Fiscal 1995) (Fiscal 1994)
Revenues, including related party revenues of $19,109, $10,530
and $6,361, respectively $90,432 $50,958 $26,651
Cost of revenues 52,610 29,783 16,005
------- ------- -------
Gross profit 37,822 21,175 10,646
------- ------- -------
Operating expenses:
Research and development 12,359 6,818 3,843
Selling, general and administrative 12,436 7,188 4,025
------- ------- -------
Total operating expenses 24,795 14,006 7,868
------- ------- -------
Income from operations 13,027 7,169 2,778
Interest expense 388 482 506
Interest income 334 507 68
------- ------- -------
Income before income taxes 12,973 7,194 2,340
Income tax provision 4,476 2,249 724
------- ------- -------
Net income $ 8,497 $ 4,945 $ 1,616
======= ======= =======
Net income per share $ 1.04 $ 0.73 $ 0.32
======= ======= =======
Weighted average number of common and common equivalent shares 8,199 6,803 5,045
======= ======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
25
BROOKS AUTOMATION, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)
Notes
Common Additional Cumulative receivable Total
stock at paid-in translation Deferred from Retained stockholders'
par value capital adjustment compensation stockholders earnings equity
BALANCE AT SEPTEMBER 30, 1993 $35 $ 1,687 $(111) $ - $ - $ 1,777 $ 3,388
Issuance of common stock 5 708 (60) 653
Issuance of common stock warrants 25 25
Currency translation adjustments (60) (60)
Dividends (33) (33)
Net income 1,616 1,616
______ ______ ______ ______ ______ _______ _______
BALANCE AT SEPTEMBER 30, 1994 40 2,420 (171) - (60) 3,360 5,589
Issuance of common stock - public 30 30,216 30,246
offerings
Exercise of common stock warrants 5 1,240 1,245
Exercise of common stock options 57 57
Purchase and retire treasury stock (119) 80 (39)
Currency translation adjustments 35 35
Deferred compensation 264 (264) -
Amortization of deferred compensation 45 45
Payment of stockholders' notes 60 60
receivable
Dividends (91) (91)
Income tax benefit related to stock 130 130
options
Net income 4,945 4,945
______ ______ ______ ______ ______ _______ _______
BALANCE AT SEPTEMBER 30, 1995 75 34,208 (136) (139) - 8,214 42,222
Issuance of common stock under
employee stock purchase plan 210 210
Exercise of common stock options 1 101 102
Purchase and retire treasury stock (184) (184)
Currency translation adjustments (38) (38)
Amortization of deferred compensation 29 29
Income tax benefit related to stock
options
Elimination of Techware net income for
the the three-months ended
December 31, 1995 (147) (147)
Net income 8,497 8,497
______ _______ ______ ______ ______ _______ _______
BALANCE AT SEPTEMBER 30, 1996 $ 76 $34,335 $ (174) $ (110) $ - $16,564 $50,691
======= ======= ====== ====== ====== ======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
26
BROOKS AUTOMATION, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(IN THOUSANDS)
Year ended September 30,
1996 1995 1994
(Fiscal 1996) (Fiscal 1995) (Fiscal 1994)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 8,497 $ 4,945 $ 1,616
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 3,057 1,315 935
Loss on disposal of fixed assets 122 50 -
Deferred income taxes (443) 115 (20)
Changes in operating assets and liabilities:
Accounts receivable (11,742) (8,340) (651)
Inventories (5,005) (8,413) (1,192)
Prepaid expenses and other current assets 511 (715) (191)
Accounts payable 2,127 4,195 (253)
Accrued compensation and benefits 1,019 717 331
Accrued expenses and other current liabilities (291) (855) (497)
-------- ------- -------
Net cash provided by (used in) operating activities (2,148) (6,986) 78
-------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of fixed assets (9,689) (7,673) (1,164)
Increase in other assets (1,267) (511) (52)
Proceeds from sales of short-term investments, net - 492 488
-------- ------- -------
Net cash used in investing activities (10,956) (7,692) (728)
-------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings under credit lines 123 236 441
Principal payments on long-term debt and capital lease obligations (462) (2,293) (511)
Proceeds from issuance of common stock 312 31,608 446
Dividends paid (91) - (33)
Purchase and retire treasury stock (253) (39) -
-------- ------- -------
Net cash provided by (used in) financing activities (371) 29,512 343
-------- ------- -------
Effects of exchange rate changes on cash and cash equivalents (17) 35 (60)
-------- ------- -------
Net increase (decrease) in cash and cash equivalents (13,492) 14,869 (367)
Cash and cash equivalents, beginning of year 15,594 725 1,092
-------- ------- -------
Cash and cash equivalents, end of year $ 2,102 $15,594 $ 725
======== ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for interest $ 419 $ 371 $ 393
Cash paid during the year for income taxes $ 4,076 $ 2,786 $ 505
The accompanying notes are an integral part of these consolidated financial
statements.
27
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Brooks Automation, Inc. (the "Company") is a leading, worldwide independent
developer, manufacturer and supplier of vacuum central wafer and substrate
handling systems and modules for the semiconductor process equipment and flat
panel display manufacturing industries.
A summary of the Company's significant accounting policies follows:
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All intercompany balances and transactions have
been eliminated.
On February 28, 1996, the Company acquired Techware Systems Corporation
("Techware"), a designer and supplier of integrated equipment control software
for the semiconductor and related industries. Techware now operates as a
wholly-owned subsidiary of the Company under the name of Brooks Automation
Canada. The acquisition of Techware has been accounted for as a pooling of
interests, and therefore the accompanying consolidated financial statements for
all periods prior to the Techware acquisition have been retroactively restated
to reflect the combination of the operations and the accounts of Techware with
those of the Company.
Due to the previously differing year-ends of the Company and Techware,
Techware's results of operations for the years ended December 31, 1995 and 1994
have been combined with the Company's results of operations for the years ended
September 30, 1995 and 1994, respectively. The results of operations for fiscal
1996 are for the twelve-months ended September 30, 1996 for both the Company and
Techware. Techware's financial position as of December 31, 1995 has been
combined with the Company's financial position as of September 30, 1995.
Accordingly, Techware's unaudited results of operations for the three months
ended December 31, 1995 (Note 2) are included in the consolidated statement of
income for both the year ended September 30, 1996 and 1995. Therefore, an amount
equal to Techware's net income for the three months ended December 31, 1995 was
eliminated from consolidated retained earnings for the year ended September 30,
1996.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from these estimates.
REVENUE RECOGNITION
Revenue from product sales is recorded upon shipment to the customer provided
that no significant obligations remain and collection of the related receivable
is probable. When insignificant obligations remain after shipment of the
product, the Company accrues the estimated costs of such obligations upon
shipment. A provision for product warranty costs is recorded at the time of
sale.
28
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CASH AND CASH EQUIVALENTS
The Company invests its excess cash in repurchase agreements with major banks
and U.S. government securities that are subject to minimal credit and market
risk. The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. At September
30, 1996 and 1995, cash and cash equivalents include $1,758,000 and $15,100,000,
respectively, of securities which are classified as held to maturity and for
which cost approximates fair value.
INVENTORIES
Inventories are stated at the lower of cost or market, cost being determined
using the first-in, first-out method. The Company provides inventory reserves
for excess, obsolete, or damaged inventory based on changes in customer demand,
technology, and other economic factors. While the Company often uses sole
source suppliers for certain key components and common assemblies to achieve
quality control and the benefits of economies of scale, the Company believes
that these parts and materials are readily available from several supply
sources.
FIXED ASSETS
Fixed assets are recorded at cost and depreciated over their estimated useful
lives using the straight-line method. Equipment held under capital leases is
recorded at the lower of the fair market value of the equipment or the present
value of the minimum lease payments at the inception of the leases. Leasehold
improvements and equipment held under capital leases are amortized over the
shorter of their estimated useful lives or the term of the respective leases.
Repair and maintenance costs are expensed as incurred.
PATENTS
The Company capitalizes the direct costs associated with obtaining patents.
Capitalized patent costs are amortized using the straight-line method over six
years, the estimated economic life of the patents.
RESEARCH AND DEVELOPMENT AND SOFTWARE DEVELOPMENT COSTS
Costs incurred in the research and development of the Company's products are
expensed as incurred, except for certain software development costs. Software
development costs are expensed prior to establishing technological feasibility
and capitalized thereafter until the related product is available for general
release to customers. Capitalized software development costs are amortized to
cost of sales on a product-by-product basis over the estimated lives of the
related products
STOCK COMPENSATION
The Company's stock compensation plans are accounted for in accordance with
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees". In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-based
Compensation" ("SFAS123"), which establishes a fair-value based method of
accounting for stock-based compensation plans. The new standard allows companies
to continue to apply the intrinsic value method based on APB No. 25 provided
certain pro forma disclosures are made as if the fair-value-based method had
been applied. The Company will be required to implement SFAS123 in fiscal 1997
and intends to adopt this standard through the pro forma disclosure method.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". Under this method,
deferred income tax assets and liabilities are recognized for the expected
future tax consequences, utilizing current tax rates, of temporary differences
between the financial statement carrying amounts and the tax bases of assets and
liabilities. Deferred income tax expense represents the change in the net
deferred tax asset and liability balances.
29
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOREIGN CURRENCY
The functional currency of the Company's international subsidiaries is the local
currency. Accordingly, foreign currency financial statements of the Company's
international subsidiaries are translated into U.S. dollars using exchange rates
in effect at period-end for assets and liabilities and at average rates during
the period for results of operations. The resulting foreign currency
translation adjustments are reflected as a separate component of consolidated
stockholders' equity.
NET INCOME PER SHARE
Net income per share is determined by dividing net income by the weighted
average number of common shares and common equivalent shares assumed
outstanding during the period. Pursuant to Securities and Exchange Commission
Staff Accounting Bulletin No. 83, certain common and common equivalent shares
issued by the Company during the twelve month period prior to the initial filing
of the registration statement relating to the Company's initial public offering
have been included in the calculation of weighted average shares, using the
treasury stock method and an estimated initial public offering price of $9.00
per share, as if these shares were outstanding for all periods prior to the
initial public offering.
2. ACQUISITION
In February 1996, the Company issued 462,189 shares of common stock in exchange
for all the outstanding shares of Techware pursuant to a Combination Agreement
dated as of February 28, 1996. The Techware acquisition has been accounted for
as a pooling of interests. In connection with the Techware acquisition, the
Company incurred expenses of $230,000, consisting primarily of transaction
costs to effect the acquisition, in the quarter ended March 31, 1996.
Adjustments recorded to conform the accounting policies of the companies were
not material to the consolidated financial statements. Revenues and net income
for each of the previously separate companies for the periods prior to the
Techware acquisition are as follows (in thousands):
YEAR ENDED THREE MONTHS ENDED
SEPTEMBER 30, DECEMBER 31,
1995 1994 1995 1994
(unaudited)
Revenues:
Brooks Automation $45,691 $24,030 $16,754 $8,414
Techware 5,267 2,621 1,810 1,185
------- ------- ------- --------
$50,958 $26,651 $18,564 $9,599
======= ======= ======= ========
Net income:
Brooks Automation $ 4,578 $ 1,473 $ 1,697 $ 678
Techware 367 143 147 233
------- ------- ------- --------
$ 4,945 $ 1,616 $ 1,844 $ 911
======= ======= ======= ========
3. INVENTORIES
Inventories consist of the following (in thousands):
SEPTEMBER 30,
1996 1995
Raw materials and purchased parts $12,547 $ 8,902
Work-in-process 2,899 3,317
Finished goods 2,357 639
------- -------
$17,803 $12,858
======= =======
30
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. FIXED ASSETS
Fixed assets consist of the following (in thousands):
ESTIMATED USEFUL SEPTEMBER 30,
LIFE IN YEARS 1996 1995
Computer equipment and software 3-5 $ 6,221 $ 3,296
Demonstration equipment 5-7 5,521 2,283
Machinery and equipment 5-7 3,093 1,112
Furniture and fixtures 3-10 3,077 1,907
Leasehold improvements 7 4,133 3,522
------- -------
22,045 12,120
Less-Accumulated depreciation and amortization (5,347) (2,773)
------- -------
$16,698 $ 9,347
======= =======
Fixed assets include $1,379,000 and $749,000 of machinery and equipment,
computer equipment and purchased software held under capital leases at September
30, 1996 and 1995, respectively. Accumulated amortization related to fixed
assets held under capital leases was $626,000 and $383,000 at September 30, 1996
and 1995, respectively. Amortization of fixed assets under capital leases was
$243,000, $124,000 and $113,000 in fiscal 1996, 1995 and 1994, respectively.
5. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
Long-term debt consists of the following (in thousands):
SEPTEMBER 30,
1996 1995
Outstanding borrowings under bank line of credit agreements $1,019 $1,272
Subordinated note payable in monthly installments of $5 plus
interest at prime plus 2.75% (11.0% and 11.5% at
September 30, 1996 and 1995) 246 311
Capital lease obligations at rates of 5% to 21%, secured
by certain fixed assets; expiring at various dates through
January 1999 755 470
------ ------
2,020 2,053
Less- Current portion 1,431 1,522
------ ------
$ 589 $ 531
====== ======
31
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The aggregate maturities of long-term debt and capital lease obligations are as
follows as of September 30, 1996
(in thousands):
FISCAL
1997 $1,431
1998 398
1999 137
2000 54
------
$2,020
======
The Company has a $15.0 million unsecured revolving credit facility and a $3.0
million unsecured foreign currency line of credit, both of which expire in
December 1997. Under the revolving credit facility, advances bear interest, at
the option of the Company, at the prime rate or the LIBOR rate plus 2%. There
were no borrowings outstanding under the revolving credit facility at September
30, 1996. At September 30, 1996 the Company had $1,019,000 outstanding ($725,000
denominated in Japanese yen and $294,000 denominated in Canadian dollars) under
the foreign currency line of credit. Under the foreign currency line of credit,
advances bear interest at the LIBOR rate plus 2% (2.56% and 6.06%, respectively,
at September 30, 1996). The terms of the Loan Agreement require the Company to
comply with various covenants, including the maintenance of specified financial
ratios and a minimum tangible capital base, as defined, and limit the Company's
annual level of capital expenditures.
The Company has a $450,000 term note agreement with a third party due in June
2000. The note is secured by the Company's fixed assets, with a subordinated
security interest in substantially all of the other assets of the Company and is
personally guaranteed by the president of the Company. The note agreement
contains various restrictive covenants.
At September 30, 1996, the Company was in compliance with the terms of these
credit agreements or had obtained the appropriate waivers.
6. INCOME TAXES
The components of the income tax provision are as follows (in thousands):
YEAR ENDED SEPTEMBER 30,
1996 1995 1994
Current:
Federal $3,695 $1,719 $ 615
State 625 241 115
Foreign 600 174 4
------ ------ -----
4,920 2,134 734
------ ------ -----
Deferred:
Federal (42) 67 36
State (402) 48 (46)
------ ------ -----
(444) 115 (10)
------ ------ -----
$4,476 $2,249 $ 724
====== ====== =====
32
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The components of income before income taxes are as follows (in thousands):
YEAR ENDED SEPTEMBER 30,
1996 1995 1994
Domestic $11,580 $6,651 $2,193
Foreign 1,393 543 147
------- ------ ------
$12,973 $7,194 $2,340
======= ====== ======
The significant components of the net deferred tax asset are as follows (in
thousands):
SEPTEMBER 30,
1996 1995 1994
Deferred tax assets:
Reserves not currently deductible $ 819 $ 382 $ 431
Tax credit carryforwards 411 - -
Other 61 12 44
------ ----- -----
Gross deferred tax assets 1,291 394 475
------ ----- -----
Deferred tax liabilities:
Depreciation and amortization (676) (266) (188)
Other (60) (16) (60)
------ ----- -----
Gross deferred tax liabilities (736) (282) (248)
------ ----- -----
$ 555 $ 112 $ 227
====== ===== =====
The differences between the income tax provision and income taxes computed using
the applicable U.S. statutory federal tax rate are as follows (in thousands):
YEAR ENDED SEPTEMBER 30,
1996 1995 1994
Taxes computed at federal statutory rate $4,540 $2,518 $ 819
State income taxes, net of federal benefit 420 207 45
Research and development tax credits (587) (255) (163)
Foreign sales corporation tax benefit (325) (85) -
Foreign income taxed at different rates 161 (20) -
Non-deductible transaction expenses 110 - -
Other 157 (116) 23
------ ------ -----
$4,476 $2,249 $ 724
====== ====== =====
The Company does not provide for U.S. income taxes applicable to undistributed
earnings of its foreign subsidiaries since these earnings are indefinitely
reinvested.
33
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. STOCKHOLDERS' EQUITY
In February 1995, the Company issued 2,000,000 shares of common stock in an
initial public offering, at a purchase price of $8.00 per share. Proceeds to
the Company, net of offering costs, were $13.6 million. In July 1995, the
Company completed a secondary offering of 1,000,000 shares of common stock.
Proceeds to the Company, net of offering costs, were $16.6 million.
8. STOCK PLANS
1992 COMBINATION STOCK OPTION PLAN
The 1992 Combination Stock Option Plan (the "1992 Plan") allows for the grant of
non-qualified and incentive stock options for the purchase of up to 1,550,000
shares of the Company's common stock, net of cancellations, by employees,
directors or consultants who provide services to the Company. In fiscal 1996,
the Company's stockholders approved an increase in the number of shares issuable
under the 1992 Plan from 1,050,000 shares to 1,550,000 shares. The Board of
Directors of the Company is responsible for administration of the 1992 Plan.
Stock options granted under the plan have been granted at exercise prices, as
determined by the Board of Directors, of not less than the fair value per common
share on the date of the grant. Both non-qualified and incentive stock options
are exercisable at various dates as determined by the Board of Directors.
Incentive stock options are exercisable either within 10 years of the date of
grant or within 5 years of the date of grant for employees holding greater than
10% of the Company's voting stock.
1993 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The 1993 Non-Employee Director Stock Option Plan (the "Director Plan") allows
for the issuance of stock options to directors who provide services to the
Company. The Director Plan allows for the purchase of up to 90,000 shares of the
Company's common stock. The price of the stock options is determined by the
Board of Directors and are priced at not less than the fair market value on the
date of grant. Options vest over a five year period.
Stock option activity under all plans is summarized as follows:
NUMBER OF EXERCISE
SHARES PRICE
Outstanding, September 30, 1993 302,499 $ .83
Granted 703,500 1.67-2.43
Canceled (38,499) .83-2.21
Exercised (25,200) .83
---------
Outstanding, September 30, 1994 942,300 .83-2.43
Granted 128,500 2.21-20.75
Canceled (9,000) 2.21
Exercised (49,700) .83-2.21
---------
Outstanding, September 30, 1995 1,012,100 .83-20.75
Granted 717,500 11.00-21.50
Canceled (405,375) .83-20.63
Exercised (101,575) .83-2.21
---------
Outstanding, September 30, 1996 1,222,650 .83-21.50
=========
Exercisable, September 30, 1996 217,150 $ .83-$17.75
=========
Available for grant, September 30, 1996 308,400
=========
34
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On July 25, 1996, the Board of Directors determined that certain stock options
issued to employees of the Company had an exercise price significantly higher
than the fair market value of the Company's common stock. In light of the
Board's conclusions that such options were not providing the desired incentive,
the Board provided employees with the opportunity to exchange options previously
granted to them under the 1992 Plan for new options (the "Replacement Options")
to purchase the same number of shares of common stock at an exercise price of
$11.00 per share, the then fair market value of the Company's common stock.
Employees were given the choice of retaining their existing options, with the
original vesting schedule, or accepting the Replacement Options, with a vesting
schedule commencing on July 25, 1996. The Company canceled and replaced options
to purchase 344,600 shares of common stock with an average exercise price of
$14.36 per share.
1995 EMPLOYEE STOCK PURCHASE PLAN
On February 22, 1996, the stockholders approved the 1995 Employee Stock Purchase
Plan (the "1995 Plan") which enables eligible employees to purchase shares of
the Company's common stock. Under the 1995 Plan, eligible employees may
purchase up to an aggregate of 150,000 shares during six-month offering periods
commencing on January 1 and July 1 of each year at a price per share of 85% of
the lower of the market price per share on the first or last day of each six-
month offering period. Participating employees may elect to have up to 10% of
base pay withheld and applied toward the purchase of such shares. The rights of
participating employees under the 1995 Plan terminate upon voluntary withdrawal
from the plan at any time or upon termination of employment. The Company has
reserved 128,607 shares of common stock for issuance under the 1995 Plan.
RESTRICTED STOCK PURCHASE PLAN
Prior to its initial public offering, the Company had an informal stock purchase
plan whereby selected key employees and consultants have been granted the
opportunity to purchase common stock. The shares of common stock sold pursuant
to this plan are generally subject to purchase by the Company at the original
purchase price plus a specified interest rate, if the individual ceases to be
employed or associated with the Company after various specified periods of time.
In connection with this plan, the Company issued a total of 423,195 shares of
common stock to employees and consultants at per share prices ranging from $.83
to $2.21. During fiscal 1996 and 1995, the Company purchased and retired 25,500
and 18,000 shares, respectively, under this plan. At September 30, 1996 and
1995, the number of shares of common stock outstanding includes 62,295 shares
and 154,345 shares, respectively, subject to purchase by the Company.
9. BENEFIT PLAN
The Company sponsors a defined contribution plan which meets the requirements of
Section 401(k) of the Internal Revenue Code. All domestic employees of the
Company who meet minimum age and service requirements are eligible to
participate in the plan. The plan allows employees to contribute 1% to 15% of
their annual salary subject to statutory limitations. The Company contributes
50% of amounts contributed by employees up to 3% of their annual salary. The
Company's contribution expense was $133,000, $82,000 and $25,000 in fiscal 1996,
1995 and 1994, respectively.
35
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. GEOGRAPHIC, SIGNIFICANT CUSTOMERS AND RELATED PARTY INFORMATION
Revenues from customers outside the United States were 20% (15% to Asia and 5%
to Europe), 12% (8% to Asia and 4% to Europe) and 16% (7% to Asia and 9% to
Europe) of total revenues for fiscal 1996, 1995 and 1994, respectively.
During fiscal 1996, 1995 and 1994, the Company had revenues from a related party
representing 21%, 21% and 24% of revenues, respectively. An executive of this
customer is a member of the Company's Board of Directors. In April 1994, this
customer purchased 240,000 shares of the Company's common stock from existing
stockholders. In June 1993, the Company issued a warrant to the customer to
purchase 463,974 shares of common stock for total consideration of $1,245,000.
A value of $168,000 was ascribed to this warrant when issued which has been
recorded as additional paid-in capital. The customer partially exercised this
warrant to purchase 300,000 shares for $805,000 upon closing of the Company's
initial public offering of common stock. In June 1995, the customer exercised
this warrant to purchase the remaining 163,974 shares for $440,000. At
September 30, 1996, this customer is no longer a stockholder of the Company.
During fiscal 1995, the Company had revenues from one customer (not a related
party) representing 13% of revenues.
A financial instrument which potentially exposes the Company to concentration of
credit risk is accounts receivable, as the Company's customers are concentrated
in the semiconductor industry and relatively few customers account for a
significant portion of the Company's revenues. At September 30, 1996 and 1995,
accounts receivable from two customers and three customers, respectively,
accounted for approximately 36% and 49%, respectively, of accounts receivable.
The Company regularly monitors the creditworthiness of its customers and
believes that it has adequately provided for any exposure to potential credit
losses.
11. SUPPLEMENTAL CASH FLOW INFORMATION
During fiscal 1996, 1995 and 1994, the Company acquired $630,000, $348,000 and
$155,000, respectively, of fixed assets under capital leases.
During fiscal 1996, the Company recorded compensation expense of $69,000 in
connection with the purchase and retirement of 25,500 shares of restricted
common stock (Note 8). During fiscal 1995, the Company recorded deferred
compensation of $264,000 relating to certain common stock issued and common
stock options granted during the twelve month period prior to the initial filing
of the registration statement relating to the Company's initial public offering.
36
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. COMMITMENTS AND CONTINGENCY
LEASE COMMITMENTS
The Company leases manufacturing and office facilities and certain equipment
under operating and capital leases (Notes 4 and 5) that expire through 2003.
Rent expense under operating leases for fiscal 1996, 1995 and 1994 was $976,000,
$725,000 and $460,000, respectively. Future minimum lease payments under
operating and capital leases with initial or remaining noncancelable terms of
one or more years are as follows as of September 30, 1996 (in thousands):
OPERATING CAPITAL
LEASES LEASES
FISCAL
1997 $1,401 $403
1998 1,307 368
1999 1,175 46
2000 1,140 -
2001 1,094 -
Thereafter 485 -
------ ----
Total minimum lease payments $6,602 817
======
Less- Amount representing interest 62
----
Net present value of minimum lease payments $755
====
CONTINGENCY
There has been substantial litigation regarding patent and other intellectual
property rights in the semiconductor and related industries. The Company has
received notice from a third-party alleging infringements of such party's patent
rights by certain of the Company's products. The Company's patent counsel is
investigating the claim and the Company believes the patents claimed may be
invalid. In the event of litigation with respect to this claim, the Company is
prepared to vigorously defend its position. However, because patent litigation
can be extremely expensive and time consuming, the Company may seek to obtain a
license to one or more of the disputed patents. Based upon currently available
information, the Company would only do so if such license fees would not be
material to the Company's consolidated financial statements. Currently, the
Company does not believe that it is probable that future events related to this
threatened matter will have an adverse effect on the Company's business. The
Company is currently unable to reasonably estimate any possible loss related to
this matter.
37
BROOKS AUTOMATION, INC.
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN THOUSANDS)
Additions
----------
Balance at Charged to Charged to Deductions Balance
beginning costs and other and at end
Description Year ended of period expenses accounts write-offs of period
- ------------------------------------ ------------------ ---------- ---------- ----------- ---------- ---------
Allowance for doubtful accounts September 30, 1996 $80 $20 $ - $ - $100
September 30, 1995 80 - - - 80
September 30, 1994 67 15 - (2) 80
38
PART II (CONTINUED)
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item 10 is hereby incorporated by reference to
the Company's definitive proxy statement to be filed by the Company within 120
days after the close of its fiscal year.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item 11 is hereby incorporated by reference to
the Company's definitive proxy statement to be filed by the Company within 120
days after the close of its fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item 12 is hereby incorporated by reference to
the Company's definitive proxy statement to be filed by the Company within 120
days after the close of its fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item 13 is hereby incorporated by reference to
the Company's definitive proxy statement to be filed by the Company within 120
days after the close of its fiscal year.
39
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)1. and 2. FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
------------------------------------------------------
The consolidated financial statements and financial statement schedules of
the Company are listed in the index under Part II, Item 8, in this Annual
Report.
(a)3. EXHIBITS
--------
Exhibit No. Reference
----------- ---------
2.01 Merger Agreement relating to the A**
reincorporation of the Registrant in
Delaware
3.01 Certificate of Incorporation of the A**
Registrant
3.02 Bylaws of the Registrant A**
4.01 Specimen Certificate for shares of the A**
Registrant's Common Stock
4.02 Description of Capital Stock (contained A**
in the Certificate of Incorporation of
the Registrant, filed as Exhibit 3.01)
4.03 Warrant issued to Lam Research A**
Corporation
4.04 Warrant issued to ACR A**
10.01 Agreement between the Registrant and A**
Robert J. Therrien
10.02 Employment Agreement between the A**
Registrant and Robert J. Therrien dated
as of October 1, 1994*
10.03 Employment Agreement between the A**
Registrant and Stanley D. Piekos*
10.04 1992 Combination Stock Option Plan* A**
10.05 1993 Nonemployee Director Stock Option A**
Plan*
10.06 Form of Indemnification Agreement for A**
directors and officers of the Registrant
10.07 Form of Selling Stockholder's Agreement B**
10.08 Lam Promissory Note A**
10.09 Lam Security Agreement A**
40
PART IV (CONTINUED)
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
10.10 Lam Production and Terms of Purchase A**
Agreement
10.11 Lam Term Sheet A**
10.12 Revolving Credit and Security Agreement A**
with US Trust
10.13 Loan and Security Agreement with the A**
Massachusetts Business Development
Corporation
10.14 Guarantee of Robert J. Therrien of A**
Revolving Credit Agreement with US
Trust and Release
10.15 Guarantee of Jeffrey Hohl of Revolving A**
Credit Agreement with US Trust and
Release
10.16 Guarantee of Robert J. Therrien of Loan A**
Agreement with Massachusetts Business
Development Corporation
10.17 Guarantee of Norman B. Brooks of A**
Revolving Credit Agreement with US
Trust and Release
10.18 Lease Extension Agreement C**
10.19 Headquarters Lease B**
10.20 Loan Agreement between Brooks D**
Automation, Inc. and
U.S. Trust dated June 25, 1996
11.01 Statement re: Computation of Per Share Filed herewith
Earnings
21.01 Subsidiaries of the Registrant Filed herewith
23.01 Consent of Price Waterhouse LLP Filed herewith
99.30 1995 Employee Stock Purchase Plan E**
_______________________
A Incorporated by reference to the Company's registration statement on Form
S-1 (No. 33-87296). The number set forth herein is the number of the
Exhibit in said registration statement.
B Incorporated by reference to the Company's registration statement on Form
S-1 (No. 33-93102). The number assigned to each Exhibit above is the same
as the number assigned to the Exhibit in said registration statement.
C Incorporated by reference to the Company's quarterly report on Form 10-Q
for the quarterly period ended March 31, 1995. The number assigned to the
Exhibit above is the same as the number assigned to the Exhibit in said
quarterly report.
D Incorporated by reference to the Company's quarterly report on Form 10-Q
for the quarterly period ended June 30, 1996. The number assigned to the
Exhibit above is the same as the number assigned to the Exhibit in said
quarterly report.
41
PART IV (CONTINUED)
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
E Incorporated by reference to the Company's registration statement on Form
S-8 (No. 333-07315). The number set forth herein is the number of the
Exhibit in said registration statement.
* Management contract or compensatory plan or arrangement.
** In accordance with Rule 12b-32 under the Securities Exchange Act of 1934,
as amended, reference is made to the documents previously filed with the
Securities and Exchange Commission, which documents are hereby incorporated
by reference.
(b) REPORTS ON FORM 8-K
- ---------------------------
No reports on Form 8-K were required to be filed during the quarter ended
September 30, 1996.
42
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
BROOKS AUTOMATION, INC.
Date: December 27, 1996 By: /s/ Robert J. Therrien
----------------------------------
Robert J. Therrien, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.
SIGNATURE TITLE DATE
---------- ----- -----
/s/ Robert J. Therrien Director and President December 27, 1996
- --------------------------- (Principal Executive Officer)
Robert J. Therrien
/s/ Stanley D. Piekos Chief Financial Officer December 27, 1996
- --------------------------- (Principal Financial and
Stanley D. Piekos Accounting Officer)
/s/ Norman B. Brooks Director December 27, 1996
- ---------------------------
Norman B. Brooks
Director December 27, 1996
- ---------------------------
Roger D. Emerick
/s/ Amin J. Khoury Director December 27, 1996
- ---------------------------
Amin J. Khoury
43