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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For fiscal year ended September 30, 1997 or
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[ ] 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
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(Address of Principal Executive Offices) (Zip Code)
978-262-2566
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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
Rights to Purchase Common Stock
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 12, 1997 was
$129,494,399 based on the closing price of $12.88 on that date on the Nasdaq
Stock Market. As of December 12, 1997, 10,053,913 shares of the registrant's
Common Stock, $.01 par value, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report to Stockholders for the fiscal year
ended September 30, 1997 are incorporated by reference in Part II and Part IV of
this Report.
Portions of the registrant's Proxy Statement involving the election of
directors, which is expected to be filed within 120 days after the end of the
registrant's fiscal year, are incorporated by reference in Part III of this
Report.
PART I
ITEM 1. BUSINESS
Brooks Automation, Inc. (the "Company") is a leading worldwide independent
developer, manufacturer and supplier of substrate handling robots, modules,
software, controls and fully integrated cluster tool handling systems for the
semiconductor and flat panel display process equipment industries. The Company's
products have evolved from individual robots used to transfer wafers in advanced
production equipment to fully integrated handling system solutions that increase
the throughput and utilization of semiconductor and flat panel display process
equipment. In 1996, the Company acquired Techware Systems Corporation (now
Brooks Canada), a designer and supplier of integrated equipment control software
for the semiconductor and related industries, expanding its software and control
capability. In 1997, the Company introduced a line of products for the
atmospheric handling market, including in-line and controlled environment
systems, robots, aligners and traversers.
Products
The Company offers a full complement of semiconductor wafer and flat panel
display substrate handling systems. The Company has developed comprehensive
product lines that encompass automation modules, complete handling systems and
integrated software and controls for its targeted markets. The Company's
systems, robots and modules are designed, developed and produced with similar
technologies and can use the Company's ClusterLink software. The Company uses
the synergies of its complementary products to respond to changing industry
demands such as processing 300mm semiconductor wafers and the larger, fourth
generation flat panel display substrates. The Company believes that its products
offer significant advantages in a number of areas, including those set forth
below:
Throughput. The Company's patented LeapFrog robots have been able to achieve
significant improvements in throughput compared to other robots. The Company
also has been able to increase throughput by developing patented 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 substrate being transported. The Company has
developed system software to improve cluster tool throughput. By combining
digital signal processing ("DSP") technology with time optimal trajectory
software, the Company believes that it has achieved additional reductions in
transfer time.
Reliability. The Company has developed and implemented a rigorous design and
test program to enhance and evaluate product reliability. The Company's
reliability initiative is guided by the computer-based reliability models
developed by SEMATECH and Sandia National Laboratories. The magnetic drive in
the Company's latest generation robots transmits force magnetically, without
piercing the vacuum barrier, and eliminates the need for moveable vacuum seals.
By designing robots with fewer moving parts and eliminating moveable seals, the
Company believes that it will be able to increase the reliability of its
transfer robots significantly. The Company's goal is to continue to increase
mean time between failures.
Accuracy. As wafer and substrate sizes increase and placement accuracy becomes
more demanding, it is becoming increasingly important to minimize tracking
errors, substrate sliding and arm deflection (the bending or wobbling of the
robot arm). The Company's transfer robots contain a closed loop servo control
which monitors and maintains placement accuracy 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
latest generation robots.
Contamination Control. The Company has designed its wafer and flat panel display
substrate handling systems and modules to reduce contamination by using several
design criteria: limited moving parts within the tool environment and above the
wafer or substrate plane; picking and placing with a vertical motion to prevent
wafer or substrate sliding on process module surfaces and cassette slots; gentle
handling motions which reduce relative wafer or substrate vibration and movement
on the transfer robot end effectors; controlled load lock pumping and venting;
incorporation of materials that reduce contamination; and assembly, test and
packaging in the Company's clean rooms.
The Company currently manufactures products for the semiconductor and flat panel
display markets. The following table lists the Company's product offerings
within each of the markets it serves:
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Market Product Lines
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Semiconductor Vacuum Products Central Wafer Handling Systems
Transfer Robots
Thermal Conditioning Modules (Cool and Degas)
Cassette Elevator Load Locks
Aligners
Factory Automation Interface Modules
System Software and Controls
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Semiconductor Atmospheric and Central Wafer Handling Systems
Inert Environment Products In-line Wafer Handling Systems
Transfer Robots
Robot Traversers
Thermal Conditioning Modules (Cool)
Cassette Elevator Load Locks
Aligners
Factory Automation Interface Modules
System Software and Controls
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Flat Panel Display Products Central Substrate Handling Systems
Transfer Robots
Cassette Elevator Load Locks
Thermal Conditioning Modules (Degas)
System Software and Controls
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Semiconductor Vacuum Products
Vacuum Central Wafer Handling Systems
The Company's family of Marathon vacuum central wafer handling systems handle
wafer sizes of 100mm to 300mm in diameter, are offered with four to eight sides
(referred to as ports) and have vacuum ranges of 10/-3/ to 10/-8/ torr (a
measure of vacuum pressure). 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.
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 vacuum cassette elevator load lock or process module and the central
wafer handling chamber. The Company is developing degas modules for its Marathon
systems.
The Company has also developed tool control ClusterLink 3 system software to
control its vacuum wafer handling systems, graphical user interface and process
modules. 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.
In 1997, the Company developed a next-generation 200mm wafer handling system,
the Marathon Express 800, which features the dual same-side LeapFrog robot and
offers improvement to throughput, vacuum performance and serviceability. In
anticipation of the emergence of next-generation 300mm wafers, the Company has
developed central wafer handling systems (the Marathon 4000 and 6000) and is
developing a Marathon Express 8000 eight-sided configuration. 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.
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Vacuum Transfer Robots
The Company's next-generation vacuum transfer robot, the MagnaTran 7, is a
second generation magnetic drive robot which incorporates the Company's patented
time optimal trajectory software algorithims to control and monitor its
operation. The MagnaTran 7 is smaller and lighter than its predecessor. Building
on its experience in developing robot wafer transfer technology, the Company has
developed the dual, same-side LeapFrog high-productivity arm configuration. The
LeapFrog arm is only available on the MagnaTran 7 robot and is a feature of the
Company's Marathon Express central handling systems. These robots are
constructed to SEMI/MESC standards and are sold separately for use with other
vacuum wafer handling applications. The Company believes that the technical
advances implemented to meet the requirements of the flat panel display industry
enabled the Company to adopt its MagnaTran robots, with minimal technical
modifications, to handle 300mm wafers.
Other Vacuum Wafer Handling and Conditioning Modules
Vacuum Cassette Elevator Load Locks. The Company has developed a family of
vacuum cassette elevator load locks to hold and index (raise and lower)
cassettes of wafers for cluster tools and other vacuum automated equipment. The
Company's VCE 4 200mm 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 SMIF, automated guided vehicle ("AGV") and rail guided vehicle
("RGV") compatibility. The Company has developed the VCE 5 for 300mm wafers with
a batch wafer transfer arm and a front opening unified pod ("FOUP") interface.
The Company is developing the VCE 7 for 300mm wafers to interface with the
Company's Caliber atmospheric, in-line handling system.
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 optically 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. 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 300mm wafer alignment. The
Company is developing a new family of aligners for 200mm and 300mm wafers, the
TopLigners, that mount from the top in the central transport chamber and offer
improved serviceability.
Vacuum Cool Modules. The Company's InCooler intermodule cool station cools
wafers after hot processing to a temperature that allows placement into a
plastic wafer cassette. This module is also designed for intermodule mounting.
The Company's InCooler 3 is designed for 300mm wafer applications. The Company
is developing a family of new cooling modules for 200mm and 300mm wafers, the
TopCoolers, that mount from the top in the central transport chamber and offer
improved serviceability.
Vacuum Degas Modules. The Company is developing degas modules to remove water
from the surface of the wafer. The Company is developing a stand alone 200mm and
a top mount 300mm module that offer improved serviceability.
Semiconductor Atmospheric and Inert Environment Products
Building upon its vacuum wafer handling systems, the Company is pursuing the
development of a broad line of products for atmospheric applications.
Atmospheric wafer handling systems may be segregated into two subcategories: the
traditional ambient atmospheric wafer handling systems and "inert" (principally
nitrogen) environment wafer handling systems. The traditional atmospheric wafer
handling systems include fully integrated automated wafer handling platforms for
open, ambient air in-line wafer handling platforms. The inert environment wafer
handling systems include fully integrated, automated wafer handling platforms
for at or above atmospheric pressure cluster tools.
Atmospheric Wafer Handling Systems
The Company's Caliber atmospheric, in-line wafer handling systems handle wafer
sizes from 150mm to 300mm in diameter and are offered with two to four cassette
staging locations and may be operated in Class 1 clean room environments. These
configurations have been developed to meet broad market requirements. The
Caliber 200 and 400 are used for 200mm wafer open cassettes and the Caliber 400
S is being developed for use with 200mm SMIF
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applications. The Company is developing the Caliber 2000 in-line wafer handling
system to handle 300mm wafers in open cassette or FOUP applications.
The Company's Caliber systems incorporate the Company's single scara-arm AcuTran
atmospheric transfer robot, the Company's AcuTrav robot traverser, two or more
of the Company's cassette staging locations, and, if required, the Company's
AcuLigner wafer aligner. The Company's Caliber systems also incorporate a system
controller to control all wafer handling functions and to interface to the
process tool's primary controller.
Atmospheric Transfer Robots
Building on its experience in developing transfer robots and employing its
magnetic direct drive technology, the Company has developed the AcuTran 3, its
next-generation atmospheric transfer robot, to handle up to 300mm wafers. These
robots are a standard feature of the Company's Caliber in-line wafer handling
systems, are constructed to SEMI standards and are sold separately for use with
other atmospheric wafer handling applications. The Company's robots incorporate
DSP technology and patented time optimal trajectory software to control and
monitor their operation.
Other Atmospheric Wafer Handling Modules
Atmospheric Robot Traverser. The Company's AcuTrav provides high speed
horizontal motion permitting the AcuTran 3 robot to access multiple process tool
load ports and cassette staging locations. The AcuTrav uses direct drive
mechanism which allows high speed motions comparable to the Company's robot
family.
Atmospheric Aligners. The Company's AcuLigner 3 wafer aligner is being designed
for fast one-step 150mm to 300mm wafer alignment by optically 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.
Inert Environment Wafer Handling Systems
In 1997, the Company introduced a new central wafer handling system to address
market needs for reduced water vapor environment central handling systems for
high temperature wafer processing (e.g. rapid thermal processing and epitaxial
deposition).
Building upon its expertise in vacuum central wafer handling systems and
modules, the Company developed the Atmospheric Express 600 "inert" environment
wafer handling system for 150mm to 200mm wafers. This inert environment central
wafer handling system transfers wafers at or above atmospheric pressure in a
principally nitrogen environment. The Atmospheric Express incorporate robots and
modules from the Company's vacuum wafer handling product line. The Company is
developing the Atmospheric Express 6000 to handle up to 300mm wafers.
Flat Panel Display 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. The Hercules systems
can handle flat panel display substrates from 350mm x 460mm to 600mm x 720mm in
size. The Company is developing a next generation flat panel display platform,
for substrates up to approximately 1 meter x 1 meter.
The Hercules system includes the Company's MagnaTran 60 magnetically driven
frog-arm vacuum transfer robot with two or three axes of motion and single or
dual arm options, a single substrate load lock, or a 20 to 30 substrate cassette
elevator load lock (VCE 40), and a seven substrate batch degas module.
The Company is developing a next generation magnetic drive robot, the MagnaTran
70, for the flat panel display market. The MagnaTran 70 robot series is expected
to be smaller and lighter and to feature an optional extended vertical axis for
deployment in the Company's next generation platforms.
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Customers
The Company's customers are primarily semiconductor wafer and flat panel display
substrate OEMs and semiconductor manufacturers who are retrofitting the vacuum
automation of their process equipment or developing advanced process equipment
for internal use. The Company's current customers are primarily located in the
United States, Japan, South Korea and Europe. The Company intends to market its
developing family of atmospheric central wafer handling equipment to its
existing customers in the vacuum and flat panel display markets and other
potential customers.
In fiscal 1997, 1996 and 1995, Lam Research Corporation ("Lam") accounted for
21% of the Company's revenues, and sales to the Company's top ten customers
accounted for approximately 71%, 69% and 75% of revenues, respectively. A
reduction or delay in orders from Lam or other significant customers could have
a material adverse effect on the Company's results of operations. See "Factors
That May Affect Future Results--Customer Concentration" in Management's
Discussion and Analysis on Financial Conditions and Results of Operations for
further discussion.
Marketing, Sales and Customer Support
The Company markets and sells its wafer and substrate handling systems and
modules in the United States, Japan, South Korea, Taiwan and Europe through its
direct sales and marketing organization. As of September 30, 1997, 45 persons
were engaged in sales and marketing activities worldwide. The selling process
for the Company's products is often multilevel, 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 organization levels to provide planning and product
customization and to assure open communication 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. To enhance this communication and support,
particularly with its international customers, the Company maintains technology
centers in California, British Columbia, South Korea and Japan. These
facilities, together with the Company's headquarters, maintain demonstration
equipment for customers to evaluate. Customers are also encouraged to discuss
the features and applications of the Company's demonstration equipment with the
Company's engineers located at these facilities. The Company also maintains
regional sales and service personnel in Taiwan, the United Kingdom, Phoenix,
Arizona and Austin, Texas. The Company has recently experienced significant
growth in foreign revenues. In fiscal 1997, 1996 and 1995, foreign revenues
accounted for 38%, 20% and 12%, respectively, of the Company's revenues. The
Company expects foreign revenues to continue to represent a significant
percentage of total revenues in the foreseeable future. However, there can be no
assurance that geographical growth rates, if any, in the foreseeable future,
particularly in Japan and South Korea which are suffering regional economic
downturns, will be comparable to those achieved in fiscal 1997. See "Factors
That May Affect Future Results--Risks of International Sales and Operations" in
Management's Discussion and Analysis on Financial Conditions and Results of
Operations and Note 10 to the Company's Consolidated Financial Statements for
further discussion.
In 1997, the Company developed a new sales and marketing tool, a process tool
throughput simulator, to enable the evaluation of various wafer handling system
configurations to identify the preferred tool configuration for a specific
application. This tool simulates the movement of wafers with execution times,
scheduling algorithms, and flow sequences similar to those of actual process
tools and outputs this information visually. This tool is capable of comparing
multiple tool configurations simultaneously for preferred fit comparison.
The Company provides support to its customers with (i) telephone technical
support access 24-hours a day, 365 days a year, (ii) direct training programs
and (iii) operating manuals and other technical support information for the
Company's products. The Company maintains spare parts inventories all locations
to enable its personnel to serve the Company's customers and repair their
products more efficiently.
Competition
The semiconductor and flat panel display process equipment manufacturing
industries are highly competitive and characterized by continual change and
improvement in technology. Although other independent companies sell vacuum and
atmospheric 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
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current and potential customers. Applied Materials Inc. ("Applied Materials"),
the leading process equipment OEM, develops and manufactures its own central
wafer handling systems and modules. The Company believes that most vacuum
central wafer handling systems and modules are manufactured in-house by OEMs.
Many of the companies in these industries have significantly greater research
and development, clean room manufacturing, marketing and financial resources
than the Company.
Many OEMs have substantial resources and expertise in substrate handling and
automation in vacuum and atmospheric 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 accuracy, 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 or from other independent suppliers, regardless of the
performance or the price of the Company's products.
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 may be
at a competitive disadvantage to Japanese suppliers. See "Factors That May
Affect Future Results--Risks of International Sales and Operations" in
Management's Discussion and Analysis on Financial Conditions and Results of
Operations for further discussion.
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
development and enhancement of the Company's semiconductor and flat panel
display products, including 300mm Marathon Express vacuum central wafer handling
systems and modules, fourth generation flat panel display substrate handling
systems and modules, control and scheduling software, and atmospheric handling
systems and modules. 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 1997, 1996 and 1995, the
Company's research and product development expenses were $14.2 million, $12.4
million and $6.8 million, respectively, representing 16.5%, 13.7% and 13.4% of
the Company's revenues, respectively. See "Factors That May Affect Future
Results--New Products and Rapid Technological Change" in Management's Discussion
and Analysis on Financial Conditions and Results of Operations for further
discussion.
Manufacturing
The Company's manufacturing operations consist primarily of product assembly,
integration, and testing. The Company has adopted stringent quality assurance
procedures that include standard design practices, component selection
procedures, vendor control procedures and comprehensive reliability testing and
analysis to assure the performance of its products. The Company received ISO
9001 certification in February 1996.
The Company employs a just-in-time manufacturing strategy. The Company believes
that this strategy, coupled with the outsourcing of noncritical subassemblies,
reduces fixed operating costs, improves working capital efficiency, reduces
manufacturing cycle times and improves flexibility to rapidly adjust its
production capacities. While the Company often uses single 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 other 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
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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 had obtained 20 United States patents and had 30 United States
patent applications pending on its behalf. In addition, the Company had obtained
10 foreign patents and had 43 foreign patent applications pending on its behalf.
The Company's United States patents expire at various times from 1999 to 2017.
There can be no assurance that the Company's pending patent applications or any
future applications will be approved, that any patents will provide it with
competitive advantages or will not be challenged by third parties, or that the
patents of others will not have an adverse effect on the Company's ability to do
business. Because foreign patents may afford less protection under foreign law
than is available under United States patent law, there can be no assurance that
any such patents issued to the Company will adequately protect the Company's
proprietary information. There can be no assurance that others will not
independently develop similar products, duplicate the Company's products or, if
patents are issued to the Company, design around the patents issued to the
Company.
Others may have filed and in the future may file patent applications that are
similar or identical to those of the Company. To determine the priority of
inventions, the Company may have to participate in interference proceedings
declared by the United States Patent and Trademark Office that could result in
substantial cost to the Company. No assurance can be given that any such patent
application will not have priority over patent applications filed by the
Company.
The Company also relies upon trade secret protection, employee and third-party
nondisclosure agreements and other intellectual property protection methods to
protect its confidential and proprietary information. Despite these efforts,
there can be no assurance that others will not independently develop
substantially equivalent proprietary information and techniques or otherwise
gain access to the Company's trade secrets or disclose such technology or that
the Company can meaningfully protect its trade secrets.
There has been substantial litigation regarding patent and other intellectual
property rights in the semiconductor related industries. The Company had
received notice from General Signal Corporation ("General Signal") alleging
infringements of General Signal's patent rights, relating to cluster tool
architecture, by certain of the Company's products. The notification advised the
Company that General Signal was attempting to enforce its rights to those
patents in litigation against Applied Materials, Inc. ("Applied Materials"), and
that, at the conclusion of that litigation, General Signal intended to enforce
its rights against the Company and others. According to a recent press release
issued by Applied Materials, Applied Materials settled its litigation with
General Signal by acquiring ownership of five General Signal patents. Although
not verified, these five patents would appear to be the patents referred to by
General Signal in its prior notice to the Company. Applied Materials has not
contacted the Company regarding these newly-acquired patents.
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 the 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. However, if the
holder of these patents were to seek to enforce these patents against the
Company, there can be no assurance that the Company would prevail in such
litigation.
The Company has in the past been, and may in the future be, notified that it may
be infringing intellectual property rights possessed by other third parties. Any
patent litigation would be costly and could divert the efforts and attention of
the Company's management and technical personnel, which could have a material
adverse effect on the Company's business, financial condition and results of
operations. There can be no assurance that infringement claims by third parties
or other claims for indemnification by customers or end users of the Company's
products resulting from infringement claims will not be asserted in the future
or that such assertions, if proven to be true, will not materially and adversely
affect the Company's business, financial condition and results of operations. If
any such claims are asserted against the Company's intellectual property rights
it may seek to enter into a royalty or licensing arrangement. There can be no
assurance, however, that a license will be available on reasonable terms or at
all. The Company could
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decide, in the alternative to resort to litigation to challenge such claims or
to design around the patented technology. Such actions could be costly and would
divert the efforts and attention of the Company's management and technical
personnel, which would materially and adversely affect the Company's business,
financial condition and results of operations. See "Factors That May Affect
Future Results--Intellectual Property Risks" in Management's Discussion and
Analysis on Financial Conditions and Results of Operations for further
discussion.
Backlog
Backlog for the Company's products as of September 30, 1997 and 1996 totaled
$43.8 million and $35.6 million, respectively. Backlog consists of purchase
orders for which a customer has scheduled delivery within the next 12 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 revenues for any future period.
Employees
As of September 30, 1997, the Company had approximately 518 employees. Of these,
161 were involved in engineering, 45 in sales and marketing, 265 in global
customer support and manufacturing operations and 47 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.
ITEM 2. PROPERTIES
The Company has a seven year lease, beginning May 1995, for its headquarters and
manufacturing facility. The facility has two stories 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 ending May
1998 with the Company occupying a minimum of approximately 83,000 square feet in
the first year, 93,000 square feet in the second year, 108,000 square feet in
the third year and the entire space thereafter.
The Company also maintains sales and service offices in Santa Clara, California,
Tokyo, Japan, Seoul, South Korea and Kingston, England. 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.
The Company believes that these facilities are adequate for its current needs
and that it can obtain additional space at commercially reasonable rates when
and as required.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material pending legal proceedings. See
"Patents and Proprietary Rights in Business" 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, 1997, no matters were submitted to a vote
of security holders through the solicitation of proxies or otherwise.
9
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The market for the Company's common stock and related stockholder matters, which
appear in the Brooks Automation, Inc. Annual Report to Stockholders, are hereby
incorporated by reference in this Form 10-K Annual Report.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data for the five years ended September 30, 1997, which
appear in the Brooks Automation, Inc. Annual Report to Stockholders, are hereby
incorporated by reference in this Form 10-K Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis of Financial Conditions and Results of
Operations, which appears in the Brooks Automation, Inc. Annual Report to
Stockholders is hereby incorporated by reference in this Form 10-K Annual
Report.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements, together with the report thereon of Price Waterhouse
LLP dated November 12, 1997, appearing in the Brooks Automation, Inc. Annual
Report to Stockholders are hereby incorporated by reference in this Form 10-K
Annual Report.
10
PART III
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
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.
11
PART IV
ITEM 14. EXHIBITS
Page in
Annual Report*
--------------
(a) The following documents are filed as part of this report:
(1) Financial Statements:
Consolidated Balance Sheet at September 30, 1997 and 1996........................................26*
Consolidated Statement of Income for the
three years ended September 30, 1997............................................................27*
Consolidated Statement of Changes in Stockholders'
Equity for the three years ended September 30, 1997.............................................28*
Consolidated Statement of Cash Flows for the
three years ended September 30, 1997............................................................29*
Notes to Consolidated Financial Statements.....................................................30-41*
Report of Independent Accountants.................................................................42*
(2) Financial Statement Schedules:
Report of Independent Accountants on Financial
Statement Schedule..............................................................................13
For the three years ended September 30, 1997 --
II. Valuation and Qualifying Accounts...........................................................14
Other schedules for the year ended September 30, 1997 are omitted because of the
absence of conditions under which they are required or because the required
information is given in the financial statements or notes thereto.
* Incorporated by reference from the indicated pages of the 1997 Annual Report
to Stockholders.
12
Report of Independent Accountants on
Financial Statement Schedule
To the Board of Directors
of Brooks Automation, Inc.
Our audits of the consolidated financial statements referred to in our report
dated November 12, 1997 appearing on page 42 of the 1997 Annual Report to
Stockholders of Brooks Automation, Inc. (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedule listed in Item 14(a)
of this Form 10-K. In our opinion, this Financial Statement Schedule presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
Price Waterhouse LLP
Boston, Massachusetts
November 12, 1997
13
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, 1997 $ 100 $ 162 $ - $ (102) $ 160
September 30, 1996 80 20 - - 100
September 30, 1995 80 - - - 80
14
(a)3. EXHIBITS
- ---------------
Exhibit No. Reference
----------- ---------
2.01 Merger Agreement relating to the reincorporation of the A**
Registrant in Delaware
3.01 Certificate of Incorporation of the Registrant A**
3.02 Bylaws of the Registrant A**
3.03 Certificate of Designation of Series A Junior Participating H**
Preferred Stock
4.01 Specimen Certificate for shares of the Registrant's Common A**
Stock
4.02 Description of Capital Stock (contained in the Certificate A**
of Incorporation of the Registrant, filed as Exhibit 3.01)
4.03 Rights Agreement dated July 23, 1997 I**
10.01 Agreement between the Registrant and Robert J. Therrien A**
10.02 Employment Agreement between the Registrant and Robert J. A**
Therrien dated as of October 1, 1994*
10.03 Employment Agreement between the Registrant and Stanley D. A**
Piekos*
10.04 intentionally omitted
10.05 intentionally omitted
10.06 Form of Indemnification Agreement for directors and officers A**
of the Registrant
10.07 Form of Selling Stockholder's Agreement B**
10.08 Lam Promissory Note A**
10.09 Lam Security Agreement A**
10.10 Lam Production and Terms of Purchase Agreement A**
10.11 Lam Term Sheet A**
10.12 Revolving Credit and Security Agreement with US Trust A**
10.13 Loan and Security Agreement with the Massachusetts Business A**
Development Corporation
10.14 Guarantee of Robert J. Therrien of Revolving Credit A**
Agreement with US Trust and Release
15
10.15 Guarantee of Jeffrey Hohl of Revolving Credit Agreement with A**
US Trust and Release
10.16 Guarantee of Robert J. Therrien of Loan Agreement with A**
Massachusetts Business Development Corporation
10.17 Guarantee of Norman B. Brooks of Revolving Credit Agreement A**
with US Trust and Release
10.18 Lease Extension Agreement C**
10.19 Headquarters Lease B**
10.20 Loan Agreement between Brooks Automation, Inc. and U.S. D**
Trust dated June 25, 1996
10.21 intentionally omitted
10.22 Loan Agreement First Amendment Dated April 30, 1997 F**
10.23 Revolving Loan Note First Amendment dated April 30, 1997 F**
10.24 Participation Agreement dated April 30, 1997 F**
10.25 Loan Agreement Second Amendment dated June 30, 1997 G**
10.26 Loan Agreement First Amendment dated June 3, 1997 G**
10.27 Amendment to Master Short Term Foreign Currency Borrowing Filed herewith
Agreement with Core States Bank dated June 3, 1997
11.01 Statement re: Computation of Per Share Earnings Filed herewith
13.01 Portions of Brooks Automation, Inc. Annual Report to Filed herewith
Stockholders
21.01 Subsidiaries of the Registrant Filed herewith
23.01 Consent of Price Waterhouse LLP Filed herewith
27.01 Financial Data Schedule Filed herewith
99.01 1993 Nonemployee Director Stock Option Plan J** *
99.02 1992 Combination Stock Option Plan K** *
99.30 1995 Employee Stock Purchase Plan E**
--------------------
A Incorporated by reference to the Company's registration statement on
Form S-1 (Registration 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 (Registration No. 33-93102). The number assigned to each
Exhibit above is the same as the number assigned to the Exhibit in said
registration statement.
16
C Incorporated by referenced 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.
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.
F Incorporated by reference to the Company's quarterly report on Form
10-Q for the quarterly period ended December 31, 1996. The number
assigned to the Exhibit above is the same as the number assigned to the
Exhibit in said quarterly report.
G Incorporated by reference to the Company's quarterly report on Form
10-Q for the quarterly period ended June 30, 1997. The number assigned
to the Exhibit above is the same as the number assigned to the Exhibit
in said quarterly report.
H Incorporated by reference to the Company's registration statement on
Form S-3 (No. 333-34487). The number assigned to each Exhibit above is
the same as the number assigned to the Exhibit in said registration
statement.
I Incorporated by reference to the Company's current report on Form 8-K
filed on August 7, 1997
J Incorporated by reference to the Company's registration statement on
Form S-8 (No. 333-22717). The number assigned to each Exhibit above is
the same as the number assigned to the Exhibit in said registration
statement.
K Incorporated by reference to the Company's registration statement on
Form S-8 (No. 333-07313). The number assigned to each Exhibit above is
the same as the number assigned to 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
- ---------------------------
The Company filed a Current Report on Form 8-K on August 7, 1997 relating to a
Shareholders' Rights Agreement.
17
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 18, 1997 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 (Principal December 18, 1997
- -------------------------------------- Executive Officer)
Robert J. Therrien
/s/ Stanley D. Piekos Chief Financial Officer (Principal December 18, 1997
- -------------------------------------- Financial and Accounting Officer)
Stanley D. Piekos
/s/ Deborah D. Fox Controller (Principal Accounting December 18, 1997
- -------------------------------------- Officer)
Deborah D. Fox
/s/ Norman B. Brooks Director December 18, 1997
- --------------------------------------
Norman B. Brooks
/s/ Roger D. Emerick Director December 18, 1997
- --------------------------------------
Robert D. Emerick
/s/ Amin J. Khoury Director December 18, 1997
- --------------------------------------
Amin J. Khoury
18
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 18, 1997 By:
---------------------------------
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
--------- ----- ----
- --------------------------------------- Director and President (Principal December 18, 1997
Robert J. Therrien Executive Officer)
- --------------------------------------- Chief Financial Officer (Principal December 18, 1997
Stanley D. Piekos Financial and Accounting Officer)
- --------------------------------------- Controller (Principal Accounting December 18, 1997
Deborah D. Fox Officer)
- --------------------------------------- Director December 18, 1997
Roger D. Emerick
- --------------------------------------- Director December 18, 1997
Amin Khoury
- --------------------------------------- Director December 18, 1997
Norman B. Brooks
19