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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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, 2000 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
BROOKS AUTOMATION, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 04-3040660
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
15 ELIZABETH DRIVE, CHELMSFORD, MASSACHUSETTS 01824
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
978-262-2400
(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, $0.01 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, $0.01 par value,
held by nonaffiliates of the registrant as of November 30, 2000, was
$318,532,732.88 based on the closing price per share of $22.64 on that date on
the Nasdaq Stock Market. As of November 30, 2000, 17,223,759 shares of the
registrant's Common Stock, $0.01 par value, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
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.
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PART I
ITEM 1. BUSINESS
Brooks Automation, Inc. ("Brooks" or the "Company") is a leading supplier
of integrated tool and factory automation solutions for the global semiconductor
and related industries such as the data storage and flat panel display
manufacturing industries. Brooks has distinguished itself as a technology and
market leader, particularly in the demanding cluster-tool vacuum-processing
environment and in integrated factory automation software applications. The
Company's offerings have grown from individual robots used to transfer
semiconductor wafers in advanced production equipment to fully integrated
automation solutions that control the flow of resources in the factory from
process tools to factory scheduling and dispatching. In 1998, the Company began
an aggressive program of investment and acquisition. By the close of fiscal year
2000, Brooks had emerged as one of the leading suppliers of factory and tool
automation solutions for semiconductor and original equipment manufacturers.
INDUSTRY BACKGROUND
Semiconductor manufacturing has become and continues to be increasingly
automated. Today, almost every aspect of processing includes automation, from
tracking work-in-process to recipe management to process control and scheduling.
Factory and tool automation directly impacts factory performance. Factory
performance, in turn, drives semiconductor manufacturers' ability to:
- get to market first when product profitability is greatest; and
- drive manufacturing costs down to remain competitive in the face of
constant downward price pressure.
Fabrication of semiconductors and flat panel displays requires a large
number of complex process steps in which electrically insulating or conductive
materials are deposited and etched into patterns on the surface of a substrate
or wafer. A flat panel display substrate may contain as few as two laptop
computer displays, while a wafer may contain more than 500 semiconductors. Flat
panel display substrates are typically rectangular in shape. Wafers are
circular, typically 200mm or 300mm in diameter. A simplified production sequence
consists of deposition, photolithography and etch processes. In deposition, one
or more layers of a film of material are deposited on a substrate or wafer.
Then, with photolithography, the desired circuit pattern is imaged on the
deposited material. Finally, in the etch process, the material not covered with
the pattern is selectively removed. Each deposition, photolithography or etch
process requires the use of one or more process tools. This basic sequence is
repeated up to 25 times for complex semiconductor devices. The overall process
can consist of over 400 process steps.
Semiconductor and flat panel display substrates must be handled in
ultraclean environments during this manufacturing process, either in a clean
room at atmospheric pressure levels, in controlled environments such as nitrogen
purged atmospheric environment or in a vacuum environment. Physical vapor
deposition, chemical vapor deposition, etch and ion implant are typically
conducted in a vacuum environment. The types of semiconductor equipment
operating at atmospheric pressure, rather than vacuum pressure, are much more
diverse and encompass a range of tools relating to steps before, during and
after photolithography and a wide range of process tools as well as inspection
and metrology tools. Semiconductor and flat panel display process tools
generally use vacuum environments for deposition and etch processes, and
atmospheric environments for photolithography and other processes.
The automation requirements of the wafer and substrate handling equipment
markets have resulted in two common architectural solutions -- cluster tools and
in-line handling systems. Cluster tool handling systems
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typically link together multiple processes such as deposition, etch and heating
and cooling of the substrate using a transfer robot located in a central vacuum
chamber. In-line handling systems typically link together multiple processes
such as photoresist processing, using a transfer robot located on an atmospheric
horizontal traverser. In these systems, the process tools are lined up rather
than clustered around an automation tool. The traversers in these systems move
substrates back and forth across the line of process tools. The in-line
architecture is now emerging in the stripping, cleaning and chemical mechanical
polishing process markets.
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 atmospheric pressure clean room environment.
Production is more difficult in a vacuum environment. Unlike atmospheric
transfer robots, which often use vacuum suction to hold a substrate in place
when being carried, vacuum transfer robots use gravity and the friction between
the substrate and the robot's hand, known as an end effector. Carrying a
substrate in a vacuum requires sophisticated motion control to maximize the
speed of substrate transfer, while maintaining the substrate position and
placement accuracy. Production can also be improved through the use of
sophisticated software algorithms that carefully control the speed and
scheduling of substrate transfers within the cluster tool.
Vacuum environments create further challenges in constructing and operating
a highly reliable central handling system. Materials must be carefully selected
and surface finished to reduce and control particle and molecular contamination.
Many plastics and lubricants do not work in a vacuum, as they emit gases that
contaminate the vacuum environment. Gears, pulleys and other mechanical
interfaces and moving parts, that are potential sources of particle
contamination within the vacuum environment, must be minimized. Pumping and
venting of load locks must be carefully controlled to reduce wafer
contamination.
From the overall factory perspective, semiconductor and flat panel display
manufacturers use a wide variety of hardware and software systems to automate
and control their operations. The factory automation systems are utilized to
improve factory performance. Almost all fabrication facilities, or fabs apply
statistical process control to their processes and equipment. Manufacturing
execution system ("MES") applications coordinate and track the activities of
manufacturing resources, including equipment, material, operators, engineers and
software applications. Many fabs use sensors and software applications to
monitor equipment performance and provide automated notification of
out-of-control conditions and on-line help in troubleshooting. In addition, many
fabs use automated tracking systems to collect large amounts of data about
process and product conditions, equipment maintenance and operation history, lot
production history and yield results. Engineers use applied statistical tools to
analyze large volumes of data from multiple sources in order to identify and
correct problems that negatively impact yields, equipment utilization and
throughput. Finally, capacity planning and scheduling solutions are used to
efficiently manage all the constraints in the factory, from shift schedules to
machine efficiency. These solutions help increase throughput, improve
utilization of resources and reduce in-process inventory.
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Material handling automation includes sorters and interbay, intrabay and
step-level automation. Sorters perform random sampling of wafers for statistical
process control routines, which, when coupled with metrology inspection, help
assure the quality of the process tool and the materials used in the fabrication
process. Interbay automation is the movement of lots between equipment bays
using automated guided vehicles ("AGVs") or overhead tracks to transport lots
between stockers serving the bays. Intrabay automation concerns the movement of
lots between stockers and processing machines in the bay using AGVs or traveling
robot arms. Step-level automation includes the use of robot arms or tracks to
handle wafers or cassettes of wafers between lot box and processing chamber, or
between consecutive processing chambers.
PRODUCTS
AUTOMATION SYSTEMS
Brooks offers a comprehensive line of wafer handling solutions, including
robotics and systems, for the vacuum, atmospheric and flat panel markets, and is
a leader in the vacuum and tools software markets.
Building on its vacuum wafer handling systems, the Company has developed an
extensive line of products for atmospheric applications. Atmospheric wafer
handling systems may be grouped into two categories: 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.
TOOL AUTOMATION
Brooks provides tool automation systems for semiconductor and flat panel
display substrate handling and products for data storage. The Company has
developed comprehensive product lines that encompass automation modules,
complete handling systems and integrated software and controls for targeted
markets. The Company uses a common architectural foundation in the design and
production of systems, robots and modules. These shared technologies and common
software controls enable us to respond to changing industry demands, such as
processing larger diameter 300mm semiconductor wafers and the larger, fourth
generation flat panel display substrates.
The Company provides components to customers who build their own systems
and complete, integrated systems to those customers who do not.
Brooks believes its products and services for tool automation offer
significant advantages in a number of areas, including those set forth below:
Throughput. Throughput refers to the production of substrates within
specifications. The Company's patented LeapFrog robots have been able to achieve
significant improvements in throughput compared to other robots. Brooks has also
been able to increase throughput by developing patented algorithms to calculate
efficient trajectories and acceleration and deceleration profiles known as time
optimal trajectories for its robot arms while reducing vibrations and
maintaining position control of the substrate being transported. Brooks has
developed system software to improve cluster tool throughput. By combining
digital signal processing technology with time optimal trajectory software, the
Company believes that it has achieved additional reductions in transfer time.
Reliability. Brooks 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
Brooks' 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, Brooks
believes that it
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will be able to increase the reliability of its transfer robots significantly.
The Company's goal is to continue to increase mean time between equipment
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 the bending or wobbling of the robot arm.
Brooks' 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 that 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, Brooks has incorporated a closed loop
feedback system with a proprietary digital signal processing-based controller in
its latest generation of robots.
Contamination Control. Brooks has designed its wafer and flat panel
display substrate handling systems and modules to reduce contamination by using
several design criteria:
- Limiting 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 that reduce relative wafer or substrate vibration
and movement on the transfer robot end effectors;
- Controlling load lock pumping and venting;
- Incorporating materials that reduce contamination; and
- Assembling, testing and packaging in Brooks' clean rooms.
FACTORY INTERFACE SOLUTIONS
Brooks provides comprehensive solutions for 200mm Standard Mechanical
Interface Facilities ("SMIF"), MiniEnvironments and 300mm Front Opening Uniform
Pod ("FOUP") automation. The Company's load ports for 200mm and 300mm wafer
carriers are designed so that carriers can be accessed by most types of
transport systems. Brooks Equipment Front-End Modules ("EFEMs") can be
configured for 200mm or 300mm wafers without modification of system hardware or
software.
Brooks provides advanced lot tracking with interfaces to major automated
material handling systems ("AMHS"). Brooks factory interface solutions also
include multicassette sorting systems. Finally, Brooks provides equipment
interfaces and control software to integrate material tracking, work in process
("WIP") tracking and real-time dispatching functions. The Company believes its
factory interface solutions enhance return on investment in new fabs and
retrofit projects, as well as investment in process tools, by providing
integrated automation solutions to manage the complex logistics of material
handling and sorting.
FACTORY AUTOMATION SOLUTIONS
Semiconductor manufacturers require factory automation systems that track
WIP, move material, start and stop processing, monitor sorting operations,
collect process data, change controllable variables, select recipes and control
dispatching.
Brooks has designed a family of factory automation solutions to automate
and control the flow of resources through the factory. The MES provides the
unifying framework for factory automation. The MES fills the gap between control
applications and enterprise resource planning systems. The system includes
integrated applications
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for material control, WIP tracking, maintenance management, process and
equipment control, recipe management, process optimization and factory
scheduling. These applications integrate, coordinate and track the activities of
manufacturing resources, including equipment, material, operators, engineers and
software applications.
Brooks factory automation solutions are configurable and scaleable. The
Company's flexible, distributed MES framework can be configured to meet
site-specific requirements. This typically reduces complicated, resource-
intensive customization efforts for semiconductor manufacturers. The MES
framework is scaleable and adaptable to changes in factory operations. This
gives semiconductor manufacturers the opportunity to leverage their investment
in automation solutions across products, technologies and process tools. Brooks
offers a variety of specific applications for material control, wafer logistics,
process and tool control, recipe management, scheduling, dispatching and WIP
tracking to help semiconductor manufacturers build efficient, flexible and
responsive manufacturing operations. These solutions help assure that date from
the equipment is not isolated on "process islands", but is readily available to
engineers so they can identify significant process variations and respond to
them rapidly. Data from equipment and processes is also available to the
manufacturing execution system, helping the MES manage and optimize the flow of
work-in-progress throughout the factory. The Company's software solutions
provide access to over 200 process tools for driving the flow of data to the MES
and factory scheduling systems, supporting efficiencies at the process level,
and supporting overall equipment utilization, process optimization and
throughput.
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The following table lists the Company's primary product offerings within
each of the markets it serves:
AUTOMATION SYSTEMS PRODUCT LINES
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Vacuum Intra-Tool Automation Central Wafer Handling Systems
Transfer Robots
Thermal Conditioning Modules (Cool and
Degas)
Cassette Elevator Load Locks
Aligners
Atmospheric Intra-Tool Automation Wafer Handling Systems
Transfer Robots
Thermal Conditioning Modules (Cool)
Cassette Elevator Load Locks
Aligners
Flat Panel Display Products Indexers
Substrate Handling Systems
Transfer Robots
Cassette Elevator Load Locks
Thermal Conditioning Modules (Degas)
Tool Controllers and Software ClusterLink
Run-to-Run Control ControlVision
ExpressLink
APC Link
Factory Interfaces and Wafer Sorters Standard Mechanical (SMIF) Interfaces
Front Opening Uniform Pods (FOUP) Interfaces
Mini-Environments, Load Ports
Equipment Front End Modules (EFEM)
Sorters, Indexers
Carrier Tracking Systems
FACTORY AUTOMATION SOLUTIONS PRODUCT LINES
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Integrated CIM solutions FABworks, LCDworks
WIP Tracking and Automation FACTORYworks
Recipe, Reticle Management PhotoStation, WaferTrax, ReticleTrax
Scheduling and Dispatching Autosched AP, APF, RTD
Material Control and Tracking MCS CLASS
Equipment and Cell Control STATIONworks, CELLworks
Engineering Data Analysis RS/Series, Cornerstone
Maintenance Management Xsite
Fault Detection and Classification Patterns
Process Development Starfire Process Optimization
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AUTOMATION SYSTEMS PRODUCTS
VACUUM INTRA-TOOL AUTOMATION
VACUUM CENTRAL WAFER HANDLING SYSTEMS
Brooks' family of Marathon Express vacuum central wafer handling systems
handles wafer sizes of 100mm to 300mm in diameter. These systems are offered
with four to eight sides, referred to as ports, and have vacuum ranges of 10-3
to 10-8 torr. Torr is a measure of vacuum pressure. Each port can accommodate
process modules meeting SEMI/MESC industry standards. Using a two-load lock
configuration, Brooks' Marathon Express 800 eight-sided central wafer handling
system can accommodate up to six process modules. Marathon Express systems
typically incorporate either Brooks' single or dual frog-arm MagnaTran 7 vacuum
transfer robot, one or more of Brooks' vacuum cassette elevator load locks,
Brooks' TopLigner wafer aligner, and, if required, Brooks' TopCooler 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.
In 1999, Brooks developed a next-generation 200mm and 300mm wafer handling
system, the Gemini Express 6000, which features the dual same-side LeapFrog
MagnaTran 7 robot, the AcuTran 7 transfer robot and standardized open cassette
SMIF and FOUP interfaces. The system offers improvements in flexibility to meet
factory wafer carrier and size requirements and permits multiple wafer sizes to
be handled concurrently.
Gemini Express-series 200mm/300mm bridge systems utilize Brooks'
atmospheric handling robotics and non-indexing Small Volume Locks to allow
increased WIP for higher throughput applications. Configurations are available
for vacuum levels ranging from 10(-3) Torr to <5 10(-8) Torr. Common components
between all Gemini Express systems such as robots, vacuum systems and frame
assemblies as well as controls make the Gemini series a configurable platform
for 200mm/300mm production. The systems can handle both 200mm and 300mm wafers
at the same time without any hardware changes.
VACUUM TRANSFER ROBOTS
Brooks' vacuum transfer robot, the MagnaTran 7, is a second generation
magnetic drive robot that incorporates the Company's patented time optimal
trajectory software algorithms to control and monitor its operation. Building on
its experience in developing robot wafer transfer technology, Brooks 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
Brooks' Marathon Express and Gemini Express central handling systems. These
robots are constructed to SEMI/MESC industry standards and are also sold
separately for use with other vacuum wafer handling applications. Brooks
believes that the technical advances implemented to meet the requirements of the
flat panel display industry enable Brooks to adopt its MagnaTran robots, with
minimal technical modifications, to handle 300mm wafers.
THERMAL CONDITIONING UNITS
Brooks' TopCooler cool station cools wafers after hot processing to a
temperature that allows placement into a plastic wafer cassette. Brooks'
TopCooler is designed for 200mm and 300mm wafer applications.
VACUUM CASSETTE ELEVATOR LOAD LOCKS
Brooks has developed a family of vacuum cassette elevator load locks to
hold, raise and lower cassettes of wafers for cluster tools and other vacuum
automation equipment. Brooks' VCE 6 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 is designed for
compatibility with a number of methodologies for
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transporting batches of wafers from destination to destination within the
semiconductor fabrication facility. These methodologies include standard
mechanical interfaces, automated guided vehicles and rail guided vehicles.
Brooks has developed the VCE 5 for 300mm wafers with a batch wafer transfer arm
and a FOUP interface. Like cassettes, FOUPs are devices used to carry wafers
from process tool to process tool while maintaining a clean environment. Brooks
has developed the small volume facilities lock for 300mm wafers to interface
with Brooks' atmospheric, in-line handling system.
VACUUM ALIGNERS
Wafer processing requires precise alignment and, often, orientation of a
wafer for processing. The Company's TopLigner 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 TopLigner 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. Brooks' TopLigner is
designed for 200mm and 300mm wafer alignment.
ATMOSPHERIC INTRA-TOOL AUTOMATION
The inert environment wafer handling systems include fully integrated,
automated wafer handling platforms for at or above atmospheric pressure cluster
tools. The traditional atmospheric wafer handling systems include fully
integrated automated wafer handling platforms for open, ambient air in-line
wafer handling platforms.
ATMOSPHERIC WAFER HANDING SYSTEMS
Brooks' Atmospheric Express platforms include the AX500, AX600 and AX6000,
which were launched in fiscal 1997. They are available in 6-sided configurations
for both 200mm and 300mm wafers. These low cost systems are designed for
applications that do not require vacuum pressure, but rather only a strictly
controlled nitrogen environment free of oxygen and water vapor.
Brooks' Gemini Express atmospheric front end platforms are used for direct
loading of process modules such as Cleaning, Atmospheric Pressure Chemical Vapor
Deposition ("APCVD"), Rapid Thermal Processing ("RTP") and ashing. They can also
be used to load wafers into vacuum load lock modules attached to a vacuum
cluster tool.
ATMOSPHERIC TRANSFER ROBOTS
Building on its experience in developing transfer robots and employing its
magnetic direct drive technology, Brooks developed the AcuTran 7, an atmospheric
transfer robot, to handle up to 300mm wafers in ambient atmospheric
environments. The Company uses these robots as a standard component of its
atmospheric in-line wafer handling systems. The robots are built to SEMI
industry standards and sold separately for use with other atmospheric wafer
handling applications. Brooks also developed a wet environment robot, the
AquaTran 7, which has the same features as the AcuTran 7, with the addition of
wet environment capability. Some wafer fabrication processes such as cleaning,
electroplating and chemical mechanical planarization operate in environments
with caustic solutions. These environments are known as wet environments.
Brooks' robots incorporate digital signal processing technology and patented
time optimal trajectory software to control and monitor their operation.
The Reliance ATR(TM) is the first member of Brook's next generation
Reliance family of atmospheric Series 8 robots. Like the Series 7 robots, the
Reliance family of robots uses direct drive technology. No belts, pulleys or
gears are used in the drive. The Reliance ATR offers all of the performance
benefits of the AcuTran 7. All
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advanced software features developed for the Brooks Series 7 family of robots
have been ported to the Reliance family of Series 8 controls. The Reliance ATR
incorporates a common controls architecture.
ATMOSPHERIC ALIGNERS
The technologies developed by Brooks for its InLigner aligners have been
applied to the AcuLine(TM) atmospheric aligners. Brooks' AcuLigner wafer aligner
has been developed 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.
FLAT PANEL DISPLAY PRODUCTS
In 1994, Brooks 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 Hercules system includes Brooks' MagnaTran
70 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 and a seven substrate batch degas
module.
Brooks has developed a next generation magnetic drive robot, the MagnaTran
70, for the flat panel display market. The MagnaTran 70 robot series is smaller
and lighter and features an optional extended vertical axis for deployment in
Brooks' next generation platforms. The Company also has developed the MagnaTran
77 Long Z Axis and MagnaTran 74 long reach flat panel display robots. These
robots handle the larger substrates.
In 1999, Brooks Automation introduced the BALI-400 Series LCD Indexer for
fourth generation liquid crystal display ("LCD") glass manufacturing equipment.
The BALI 400 provides a Class 10 mini-environment for substrate handling and is
designed to load and unload substrates from process equipment.
TOOL CONTROL SOLUTIONS AND RUN-TO-RUN CONTROL
Brooks software and hardware for equipment control works with a wide array
of factory tool types. The solutions are configurable for rapid integration with
existing and new tool designs in 200mm and 300mm fabs. In addition, they can be
configured for different types of operations -- embedded, embedded plus
front-end graphical user interface ("GUI"), as well as embedded with both
front-end GUI and supervisory control. Brooks' tool control solutions support
single-wire tool operation and conform to SEMI industry standards.
TOOL CONTROLLERS
The ControlVision(TM) software environment has been optimized to provide
process control functionality. Its flexibility, modularity and open architecture
design provide users with control software solutions that are adaptable to a
variety of process tool configurations. ControlVision applications can be
modified and linked into factory automation networks via standard industry
communications interfaces.
ControlVisionJ(TM) is based on ControlVision(TM). It is the next-generation
equipment control engine. Using ControlVisionJ, OEMs can shorten their software
development cycle and costs, because they can re-use up to 80 percent of their
application code for similar tool configurations. Developed for control of thin
film processes such as PVD, CVD, Etch, Epitaxy, Ash, RTP and others,
ControlVisionJ offers a comprehensive feature set for equipment OEMs to build
real-time control systems.
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Brooks provides ClusterLink 3 tool control 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, load lock pumping and venting, error recovery diagnostics, safety
control and scheduling of wafer transfers.
ClusterLink(TM) TMC software for transport/cassette module control is fully
integrated with Brooks' line of automation platforms. ClusterLink TMC is
designed to deliver optimal throughput in a variety of configurations. It can
operate in either standalone mode for maintenance operations, or in CTC-driven
mode for operational and maintenance procedures.
ClusterLink(TM) CTC software utilizes a predictive, real-time reactive,
optimizing scheduler designed to maximize different tool configuration and wafer
flow throughputs. Centralized alarm handling, recipe management, data storage,
configuration/set-up information, wafer tracking and reporting features are all
provided. ClusterLink CTC includes standard industry communications interfaces
for integration with factory networks. It is designed for integration with
ClusterLink TMC and PMC software modules and includes cluster tool integration
services for customization of individual tool applications and operator
interface.
ExpressLink(TM) is used to control FabExpress(TM), Brooks' new equipment
front-end module ("EFEM"). Brooks' ExpressLink EFEM control software package
builds on the common technologies of the ClusterLink(TM) and ControlVision
products. ExpressLink also works with existing process tool design. ExpressLink
includes integral support for wafer alignment, wafer identification and carrier
identification, and integrates to factory host systems via a SEMI E-30 compliant
GEM (generic equipment model) interface.
Brooks' new TEC-3000(TM) family of Controllers consists of a single module
controller ("SMC") and a multi-module system ("MMS"). The SMC provides a
solution for single module equipment control -- with extensive I/O and Ethernet
communications. The MMS integrates multiple controllers -- supervisory,
transport, process -- into a single package. Brooks believes this enables OEMs
to spend less time sourcing and integrating hardware, and more time focusing on
their core competency.
Brooks also provides APCLink for Run To Run ("R2R") Control. It is a
SEMATECH-compliant APC Framework with plug-ins for integrated R2R control and
fault detection and classification ("FDC"). R2R has been identified by the
Semiconductor Industry Association and I300I as a key technology for advanced
200mm facilities and as a required component of 300mm facilities, providing
tighter control of uniformity across the wafer, increased process capability,
reduced scrap, reduced need for non-product wafers and test wafers, reduced
equipment down-time and increased process yield. The Company's run-to-run
software offers a model-based, pre-process control mechanism. It slightly
modifies recipes for enhanced performance and improved run-to-run variability.
FACTORY INTERFACE SOLUTIONS
Brooks' factory interface hardware and software solutions include a system
of minienvironments and automated transfer mechanisms to isolate the
semiconductor wafer from the production environment. This isolation protects the
product from contamination, which can adversely affect its performance.
STANDARD MECHANICAL INTERFACE FACILITIES
Brooks' 200mm SMIF products can be divided into two major product lines.
The fist product line consists of cassette loaders, including ERGOSPEED 3800,
which was one of the first systems incorporating ergonomics designs. Brooks also
offers a second generation loader in this product line, ERGOSPEED II, which
offers improved footprint, ergonomics, loading time and communications. The
second 200mm SMIF product line offers
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a range of products, including the integrated SMIF Elevator, the ISE 200 and
variations on these products. Both SMIF product lines feature operator safety,
reliability in operation and wafer handling protection.
FRONT OPENING UNIFIED PODS
Brooks offers a wide and customizable range of FOUPs. Brooks believes its
FOUPs provide easy installation, ultra-clean operation, fast cycle times,
reliability and operator safety. Brooks' FOUPs can be equipped with advanced
functionality, including features such as communication, ccd-mapping and carrier
identification. These products can handle wafers ranging from 100mm to 300mm in
size. Brooks' FIXLOAD is compliant with SEMI standards for 300mm FOUPs.
MINIENVIRONMENTS, LOAD PORTS
A minienvironment is comprised of sealed containers that encapsulate wafer
cassettes with engineered airflows that surround process equipment and robotic
systems that transfer wafer cassettes into and out of process equipment. Brooks
provides technologically and dimensionally tailored minienvironments to
end-users and OEM customers.
Brooks' load port module family includes BOLTS-compatible (Box
Opener/Loader to Tool Standard) units for FOUP, SMIF and open cassettes
delivered either manually or by AMHS (automated material handling systems)
systems.
EQUIPMENT FRONT-END MODULES
FabExpress, released in fiscal 2000, is Brooks' new self-contained EFEM for
semiconductor processing equipment. FabExpress provides equipment OEMs with a
low-cost, plug-and-play, factory integration solution for 300mm and hybrid fabs.
FabExpress:
- is based on a controls architecture;
- eliminates the need for power supplies and computers;
- addresses configuration and SEMI software standard compliance issues
through a Java-based API and development environment;
- offers multiple load port selections;
- supports multiple cassette tracking hardware; and
- delivers wafers to process wafers with a smaller footprint than other
systems.
FabExpress incorporates Brooks' ExpressLink EFEM control software package,
which is based on the common technologies of the ClusterLink(TM) and
ControlVision(TM) products.
SORTERS, INDEXERS
Brooks provides open and closed cassette solutions for wafer handling and
lot process control. Standard systems include micro and macro inspection and
multi-cassette sorting tools. Systems are certified for SEMI standards CE, S2-93
and S8-95. OEM applications include front-end handling and robotic solutions as
well as SECS/GEM (communication protocol) compatibility.
The Company's MapTrak(TM) Express is a 300mm wafer logistics station. It is
part of the Company's family of modular wafer sorters engineered for ultra-high
cleanliness and maximum throughput. The components are designed for fast wafer
transfer to promote high productivity and high yield. The handlers within the
MapTrak
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Express directly access the wafers in the FOUP on the integrated load port
module. The MapTrak Express enables the user to align and identify wafers
quickly and safely. In the ultra-clean minienvironment component, wafers can be
rapidly handled in a wide variety of sorting tasks.
TRACKING SYSTEMS
The Company provides carrier tracking systems for automated tracking and
control of the wafers at the batch, lot and wafer level throughout the
manufacturing process. Tracking systems support both 200mm and 300mm
semiconductor manufacturing. Brooks' Iridnet provides an advanced tracking
system that allows customers to track products, people, tools and other
resources throughout the fab. Tracking technologies are applied through a common
customer interface to create a complete, cost-effective tracking solution.
Iridnet promotes efficient material management, shortens cycle times by
minimizing search time for work-in-process and the elimination of mis-processed
lots.
Brooks' MCS CLASS provides real-time material control for fab-wide interbay
and intrabay AMHS equipment. The system tracks movement and storage of lots,
reticles, and other materials. It is integrated with MES and equipment
automation applications.
FACTORY AUTOMATION SOLUTIONS
INTEGRATED COMPUTER INTEGRATED MANUFACTURING ("CIM") SOLUTIONS
FABworks is built upon the Company's suite of factory automation products
to provide pre-configured applications tailored to meet the requirements of
300mm wafer manufacturing as well as highly automated 200mm factories. It
includes extensions to handle carrier and full wafer traceability, real-time
dispatching, test wafer management, sorter management, transport interfaces,
recipe and reticle management.
LCDworks is an integrated MES designed specifically for the LCD
manufacturing industry. LCDworks is built on Brooks' FACTORYworks MES solution.
The LCDworks solution includes integrated and comprehensive functions for the
line operator, line engineer, production manager and others who require
production and engineering information. The functions that are included are
Operator interfaces, Automation services, Statistical process control,
Monitoring and Reporting.
WIP TRACKING AND AUTOMATION
FACTORYworks is a set of integrated, graphical MES application modules that
allow customers to configure their factory resources and process plans, track
inventory and orders, collect and analyze production data, monitor equipment,
dispatch work orders to manufacturing operators and trace consumption of
components into finished products. These modules provide tools designed to allow
customers to define manufacturing workflow and extend and customize the standard
applications to meet site-specific needs.
Brooks ReticleTrax reticle management system tracks the location/status of
all reticles throughout the fab and in off-site storage locations via a
web-based user interface, reducing the stepper idle time that occurs when
operators have to search for reticles. ReticleTrax can also control the
transport of reticles using AMHS equipment to ensure on-time delivery. The
MES/host interface of ReticleTrax reduces misprocessing by allowing automatic
selection of the appropriate reticle for each lot. ReticleTrax provides
comprehensive reticle management including reticle archiving/reactivation,
automated inspection/cleaning cycles, a reticle reservation system, replacement
reticle tracking, and reticle histories. Additionally, all the reticles needed
to process a specific product can be grouped together and managed as a family of
reticles.
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PhotoStation is designed to improve throughput for the entire track/stepper
processing cycle by reducing equipment wait time and lot setup errors.
PhotoStation accomplishes this by providing advanced automation that
synchronizes and coordinates the track and stepper as if they were one tool with
one GUI. Lot setup for both the track and the stepper is performed at the same
time using a single operator console (or host interface). Having a single setup
point increases operator productivity since the operator no longer is required
to walk back and forth between the track and stepper consoles to set up lots.
WaferTrax is an independent wafer-level tracking system that works in
conjunction with optical character recognition ("OCR") readers to ensure the
correct processing of all wafers throughout the fab process.
SCHEDULING AND DISPATCHING
Brooks' Autosched AP provides finite capacity planning and scheduling. The
system schedules constraints in the factory including shift schedules, work
setup rules, batching, preventative maintenance, and machine efficiency.
Typically, the system includes integration services for manufacturing,
distribution and logistics systems. It is readily interfaced with real-time
inventory control, automated storage and retrieval systems, and MES systems.
Brooks' AutoSimulations Productivity Family ("APF") dispatching and
simulation software allows customers to experiment with alternative designs and
"what if" scenarios before they invest in building or remodeling their factory
or fab. The APF software solution provides a dispatcher, report and simulator
that work together to improve throughput while reducing cycle time and
work-in-process without adding equipment or personnel.
Brooks' Real Time Dispatcher ("RTD") provides access to the status of the
shop floor via a repository and executes dispatching rules whenever signaled to
do so by the MES. Dispatching rules are flexible, can contain multiple criteria,
and can reference the dynamic state of any entity in the factory. The repository
is stored on a different machine than the MES database, so queries to the
repository for reporting and dispatching do not slow down the MES itself.
MATERIAL CONTROL AND TRACKING
CLASS MCS is a material control system ("MCS") that controls automated
material handling systems from multiple vendors. It offers an integrated
real-time scheduler/dispatcher designed to dynamically optimize lot movement
throughout the fab process. Brooks' APF family of rules-based scheduling
products has been integrated with Brooks' CLASS MCS to provide real-time
intrabay and interbay dispatch of material, batching and queuing of lots
according to priorities/equipment status, and ad-hoc reporting to locate
bottlenecks. CLASS MCS supports the standards and functionality required for
300mm environments including IBSEM, Stocker SEM, and control of intrabay
material delivery to process equipment load ports.
EQUIPMENT AND CELL CONTROL
STATIONworks is a packaged set of tools that integrates process and
production data from various equipment with a MES, including Brooks'
FACTORYworks product. STATIONworks includes a library of equipment interface
drivers (currently approximately 200 unique drivers) that are provided as a part
of the Tool-Object-Model portion of the product. The product also provides a
common service design that gives customers the capability to develop customer
services that are re-usable across various applications.
CELLworks is a set of software tools for developing manufacturing
applications that manage, monitor and coordinate equipment, material and
operators. These object-based tools are designed to provide an integrated
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environment for building and deploying applications that are independent of
specific manufacturing devices, hardware platforms and databases.
ENGINEERING DATA ANALYSIS
RS/Series and Cornerstone provide applied statistical software for
engineers who manage complex manufacturing processes.
MAINTENANCE MANAGEMENT
Xsite is an integrated software package providing a computerized means of
controlling many aspects of maintenance activity, from breakdown analysis and
work order control to condition monitoring and preventive maintenance
scheduling. The product provides the ability to display and utilize charts,
diagrams and drawings.
FAULT DETECTION AND CLASSIFICATION
Patterns combines event recognition technology with traditional control
techniques to provide real-time equipment monitoring, fault detection, and
end-point detection. Patterns can be used with different types of equipment in
different manufacturing processes.
PROCESS DEVELOPMENT
Starfire is a software solution for process characterization and process
optimization. Starfire systematically leverages expertise of manufacturing
development teams and engineers to employ statistical and analysis methods.
CUSTOMERS
Brooks' customers for wafer and flat panel display substrate handling
systems are primarily original equipment manufacturers ("OEMs") and
semiconductor manufacturers who are constructing new and/or retrofitting
existing vacuum and atmospheric automation of their process equipment or
developing advanced process equipment for internal use. Brooks' customers for
factory automation software and factory interface solutions are primarily
semiconductor manufacturers. The Company's customers are primarily located in
the United States, Japan, South Korea, Europe, Southeast Asia and Taiwan. Brooks
markets its developing family of atmospheric central wafer handling equipment to
its existing customers in the vacuum and flat panel display markets and to
potential new customers.
Relatively few customers account for a substantial portion of Brooks'
revenues. Sales to the Company's ten largest customers, which include Lam
Research Corporation ("Lam"), Brooks largest customer, and to Lam, as a
percentage of total sales are as follows:
YEAR ENDED SEPTEMBER 30,
--------------------------
2000 1999 1998
------ ------ ------
Ten largest customers 43% 52% 52%
Lam Research Corporation 11% 13% 14%
A reduction or delay in orders from Lam or other significant customers
could have a material adverse effect on Brooks' results of operations. See Note
11, "Segment and Geographic Information," of the consolidated financial
statements for further discussion of the Company's sales by geographic region
and of the Company's revenues, income and assets by financial reporting segment.
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Brooks derives a significant amount of its total revenues from direct
foreign sales. Revenues outside the United States were approximately 49%, 42%
and 44% of total revenues for the years ended September 30, 2000, 1999 and 1998,
respectively.
The Company expects foreign revenues to continue to represent a significant
percentage of total revenues in the foreseeable future. Brooks cannot guarantee
that geographical revenue rates in the foreseeable future will be comparable to
those achieved in recent years. See "Factors That May Affect Future
Results -- Brooks Conducts Its Business Internationally, Which Exposes It to a
Number of Difficulties in Coordinating Its Activities Outside the United States
and in Dealing with Multiple Regulatory Environments" for a discussion of
additional factors which could adversely affect foreign revenues.
MARKETING, SALES AND CUSTOMER SUPPORT
Brooks markets and sells its tool and factory automation hardware and
software solutions for factory performance optimization in the United States,
Japan, South Korea, Taiwan, Southeast Asia and Europe through its direct sales
and marketing organization. The selling process for Brooks' 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. Brooks also utilizes a network of value-added integration partners to
provide implementation and integration services for its factory automation
software products.
The Company's marketing activities also include participation in trade
shows, publication of articles in trade journals, seminars, participation in
industry forums and distribution of sales literature. To enhance this
communication and support, particularly with its international customers, Brooks
maintains technology and implementation centers in the United States, British
Columbia, Japan, South Korea, Taiwan, Singapore, Malaysia, the United Kingdom
and Germany. These facilities, together with Brooks' headquarters, maintain
demonstration equipment for customers to evaluate. Customers are also encouraged
to discuss the features and applications of Brooks' demonstration equipment with
Brooks' engineers located at these facilities. The Company maintains a number of
regional sales and service centers throughout the world.
In 1998, Brooks 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.
Brooks provides support to its customers with:
- Telephone technical support access 24-hours a day, 365 days a year;
- Direct training programs; and
- Operating manuals and other technical support information for Brooks'
products.
The Company maintains spare parts inventories in all of its locations to
enable its personnel to serve Brooks' customers and repair their products more
efficiently.
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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 original equipment manufacturers, Brooks believes
that its primary competition is from the larger, integrated semiconductor and
flat panel display original equipment manufacturers that satisfy their substrate
handling needs in-house rather than by purchasing handling systems or modules
from an independent source such as Brooks. Such original equipment manufacturers
comprise the majority of Brooks' current and potential customers. Applied
Materials, Inc., the leading process equipment original equipment manufacturer,
develops and manufactures its own central wafer handling systems and modules.
Brooks believes that most vacuum central wafer handling systems and modules are
manufactured in-house by original equipment manufacturers. Many of the companies
in these industries have significantly greater research and development, clean
room manufacturing, marketing and financial resources than Brooks.
Many original equipment manufacturers have substantial resources and
expertise in substrate handling and automation in vacuum and atmospheric
environments and will only purchase Brooks' products if Brooks can demonstrate
improved product performance, as measured by throughput, reliability,
contamination control and accuracy, at an acceptable price. Brooks believes that
it competes favorably with original equipment manufacturers and other
independent suppliers with respect to all of these factors. However, Brooks
cannot guarantee that it will be successful in selling its products to original
equipment manufacturers 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 Brooks' products.
Brooks' sale of its products for the flat panel display process equipment
market is heavily dependent upon its penetration of the Japanese market. Brooks
continues to expand its presence in the Japanese semiconductor process equipment
market. In addressing the Japanese markets, Brooks may be at a competitive
disadvantage to Japanese suppliers.
Brooks believes that the primary competition for its factory automation
software business is from several semiconductor-focused application software
companies and a larger number of systems integrators.
Brooks believes that the primary competitive factors in the end-user market
for factory automation software and process control software are breadth of
solution offerings, product functionality, degree of integration, price/
performance, ease of implementation, hardware and software platform
compatibility, vendor reputation and financial stability. Brooks believes its
products currently compete favorably with other systems on the primary factors
listed above. Brooks also believes that the relative importance of these
competitive factors may change over time. Brooks experiences direct competition
in the semiconductor factory automation market industry from various
competitors, including Applied Materials-Consilium, PRI-Promis, IBM and numerous
small independent software companies.
Brooks believes that the competitive factors in the factory interface
market are technical and technological capabilities reliability,
price/performance, and global sales and support capability. Furthermore, Brooks
believes that it distinguishes itself from its competitors through product
innovations, technological experience and solid skill base, wide product range
and perceived excellence in performance of products and services, quality and
reliability. Brooks' robots are easy to use and flexible and are being
maintained by a globally trained, skilled field service support organization.
The effectiveness of marketing, sales and price secure the Company's competitive
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position in the market. In this market, Brooks encounters direct competition
from Asyst, Fortrend and Kensington. Some of these competitors have extensive
engineering, manufacturing and marketing capabilities.
RESEARCH AND DEVELOPMENT
Brooks' research and development efforts are focused on developing new
products for the semiconductor, data storage and flat panel display process
equipment industries and further enhancing the functionality, degree of
integration, reliability and performance of existing products. Brooks'
engineering, marketing, operations and management personnel have developed close
collaborative relationships with many of their counterparts in customer
organizations and have used these relationships to identify market demands and
target Brooks' research and development to meet those demands. Brooks' current
research and development efforts include the continued development and
enhancement of Brooks' semiconductor and flat panel display products, including
Gemini Express vacuum central wafer handling systems and modules, fourth
generation flat panel display substrate handling systems and modules, 300mm
loadport modules, integrated equipment front-end modules, atmospheric handling
systems and modules, manufacturing execution system, station control software,
advanced tool control solutions, advanced process control solutions, factory
scheduling and dispatching solutions and material handling control software.
Furthermore, the Company is investing in a common information systems framework
to provide ease of integration across these applications. The Company also
maintains relationships with IC manufacturers and equipment suppliers to define
hardware and software solutions for equipment front-end automation,
contamination control, logistic management, material tracking and equipment
integration.
MANUFACTURING
Brooks' manufacturing operations consist primarily of product assembly,
integration, and testing. Brooks 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's facilities in
Chelmsford, MA, Germany and Scotland are ISO 9001 certified.
Brooks employs a just-in-time manufacturing strategy. Brooks believes that
this strategy, coupled with the outsourcing of non-critical subassemblies,
reduces fixed operating costs, improves working capital efficiency, reduces
manufacturing cycle times and improves flexibility to rapidly adjust its
production capacities. While Brooks often uses single source suppliers for
certain key components and common assemblies to achieve quality control and the
benefits of economies of scale, Brooks believes that these parts and materials
are readily available from other supply sources. Brooks also believes that its
software development and manufacturing facilities are more than adequate to
service foreseeable needs.
PATENTS AND PROPRIETARY RIGHTS
Brooks relies upon trade secret laws, confidentiality procedures, patents,
copyrights, trademarks and licensing agreements to protect its technology. Due
to the rapid technological change that characterizes the semiconductor and flat
panel display process equipment industries, Brooks 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. To protect
trade secrets and know-how, it is Brooks' policy to require all technical and
management personnel to enter into nondisclosure agreements. Brooks cannot
guarantee that these efforts will meaningfully protect its trade secrets.
Brooks has obtained patents and will continue to make efforts to obtain
patents, when available, in connection with its product development program.
Brooks cannot guarantee that any patent obtained will provide protection or be
of commercial benefit to Brooks. Despite these efforts, others may independently
develop
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substantially equivalent proprietary information and techniques, As of September
30, 2000, Brooks had obtained 76 United States patents and had 42 United States
patent applications pending on its behalf. In addition, Brooks had obtained 78
foreign patents and had 161 foreign patent applications pending on its behalf.
Brooks' United States patents expire at various times from 2005 to 2019. Brooks
cannot guarantee that its pending patent applications or any future applications
will be approved, or that any patents will not be challenged by third parties.
Others may have filed and in the future may file patent applications that are
similar or identical to those of Brooks. These patent applications may have
priority over patent applications filed by Brooks.
There has been substantial litigation regarding patent and other
intellectual property rights in the semiconductor related industries. Brooks 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 Brooks'
management and technical personnel, which could have a material adverse effect
on Brooks' business, financial condition and results of operations. Brooks
cannot guarantee that infringement claims by third parties or other claims for
indemnification by customers or end users of Brooks' 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 Brooks' business,
financial condition and results of operations. If any such claims are asserted
against Brooks' intellectual property rights, the Company may seek to enter into
a royalty or licensing arrangement. Brooks cannot guarantee, however, that a
license will be available on reasonable terms or at all. Brooks could 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 could divert
the efforts and attention of Brooks' management and technical personnel, which
could materially and adversely affect Brooks' business, financial condition and
results of operations.
Brooks had received notice from General Signal Corporation alleging
infringement of patents then owned by General Signal, relating to cluster tool
architecture, by certain of Brooks' products. The notification advised Brooks
that General Signal was attempting to enforce its rights to those patents in
litigation against Applied Materials. According to a press release issued by
Applied Materials in November 1997, 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 Brooks. Applied Materials
has not contacted Brooks regarding these patents.
BACKLOG
Backlog for Brooks' products as of September 30, 2000, totaled $118.2
million. Backlog consists of purchase orders for which a customer has scheduled
delivery within the next 12 months. Backlog for the Company's automation systems
segment and factory automation solutions segment was $79.8 million and $38.4
million, respectively, at September 30, 2000. Orders included in the backlog may
be cancelled or rescheduled by customers without significant penalty. Backlog as
of any particular date should not be relied upon as indicative of Brooks'
revenues for any future period. A substantial percentage of current business
generates no backlog because the Company delivers its products and services in
the same period in which the order is received.
EMPLOYEES
At September 30, 2000, Brooks had approximately 1,600 employees. Brooks
believes its future success will depend in large part on its ability to attract
and retain highly skilled employees. Approximately 150 employees in the
Company's Jena, Germany facility are covered by a collective bargaining
agreement. Brooks considers its relationships with its employees to be good.
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ITEM 2. PROPERTIES
Brooks corporate headquarters and primary manufacturing facility is located
in two buildings, comprising the Brooks campus, in Chelmsford, Massachusetts.
Brooks maintains additional manufacturing facilities, all of which are leased.
Information on these facilities is in the table below:
SQUARE FOOTAGE
LOCATION FUNCTIONS (APPROX) LEASE EXPIRATION
- -------- --------- -------------- ----------------
Chelmsford, Massachusetts Corporate headquarters, 131,000 June 2010
manufacturing, training,
software development
Chelmsford, Massachusetts Manufacturing, R&D-hardware 80,000 June 2010
and software
Tempe, Arizona Manufacturing 10,000 January 2001
Richmond, Canada Manufacturing, training 41,000 October 2002
Burbank, California Manufacturing, sales and 41,000 January 2001
support, R&D-hardware
San Jose, California Manufacturing, R&D-hardware 15,000 November 2001
and software
Colorado Springs, Colorado Manufacturing, training, R&D- 14,000 April 2004
hardware and software
Jena, Germany Manufacturing 22,000 December 2002
The Company's automation systems segment utilizes the manufacturing
facilities in Massachusetts, Arizona, California, Colorado and Germany. The
Company's factory automation solutions segment utilizes the manufacturing
facility in Canada.
Brooks maintains additional sales and service offices in Japan, South
Korea, Taiwan and the United Kingdom. Brooks maintains sales offices in Florida,
Indiana, Massachusetts, Michigan, New Mexico, New York, Oregon, Pennsylvania,
Texas, Utah, France, Germany, Malaysia and Singapore. Training is also provided
at the majority of these sites. The sales, service and training locations serve
both of the Company's segments.
ITEM 3. LEGAL PROCEEDINGS
Brooks is not a party to any material pending legal proceedings. See
"Patents and Proprietary Rights," in Part I, Item 1, "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, 2000, no matters were submitted to a
vote of security holders through the solicitation of proxies or otherwise.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is traded on the Nasdaq National Market under
the symbol "BRKS". The following table sets forth, for the periods indicated,
the high and low sales prices per share of the Company's common stock, as
reported by the Nasdaq National Market:
HIGH LOW
------ ------
Fiscal year ended September 30, 2000
First quarter $34.25 $16.69
Second quarter $83.25 $29.75
Third quarter $91.88 $37.00
Fourth quarter $69.38 $29.63
Fiscal year ended September 30, 1999
First quarter $17.44 $ 8.25
Second quarter $26.38 $14.50
Third quarter $28.38 $16.75
Fourth quarter $31.00 $17.38
NUMBER OF HOLDERS
As of November 30, 2000, there were 300 holders of record of the Company's
Common Stock.
DIVIDEND POLICY
Other than dividends paid by one of our subsidiaries prior to its
acquisition by Brooks, Brooks has never paid or declared any cash dividends on
its capital stock and does not plan to pay any cash dividends in the foreseeable
future. Brooks' current policy is to retain all of its earnings to finance
future growth.
ISSUANCE OF UNREGISTERED COMMON STOCK
On January 6, 2000, Brooks completed the acquisition of the businesses of
Auto-Soft Corporation and Auto Simulations, Inc. from Daifuku America
Corporation in exchange for cash and 535,404 shares of Brooks common stock,
subject to adjustment. The common stock issued in this transaction was sold in
reliance upon the exemption from registration set forth in Section 4(2) of the
Securities Act relating to sales by an issuer not involving any public offering.
On May 5, 2000, Brooks completed the acquisition of Irvine Optical Company
LLC in exchange for 309,013 shares of Brooks common stock, subject to
adjustment. The common stock issued in this transaction was sold in reliance
upon the exemption from registration set forth in Section 4(2) of the Securities
Act relating to sales by an issuer not involving any public offering.
On June 23, 2000, Brooks completed the acquisition of substantially all of
the assets of MiTeX Solutions, Inc. in exchange for cash and 5,486 shares of
Brooks common stock, subject to adjustment. The common stock issued in this
transaction was sold in reliance upon the exemption from registration set forth
in Section 4(2) of the Securities Act relating to sales by an issuer not
involving any public offering.
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ITEM 6. SELECTED FINANCIAL DATA
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------
2000(2) 1999(1)(3) 1998(1) 1997(1) 1996(1)
-------- ---------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues(4) $321,099 $114,955 $117,290 $126,572 $126,213
Gross profit $149,735 $ 49,821 $ 33,257 $ 52,007 $ 60,530
Income (loss) from operations $ 16,845 $(12,307) $(29,316) $ (1,728) $ 11,483
Income (loss) before income taxes
and minority interests $ 25,232 $(10,897) $(27,996) $ (3,168) $ 11,176
Net income (loss) $ 12,753 $ (9,842) $(23,315) $ (3,635) $ 7,245
Accretion and dividends on preferred
stock $ -- $ 654 $ 1,420 $ 1,005 $ 521
Net income (loss) attributable to
common stockholders $ 12,753 $(10,496) $(24,735) $ (4,640) $ 6,724
Diluted earnings (loss) per share $ 0.78 $ (0.94) $ (2.39) $ (0.59) $ 0.71
Shares used in computing diluted
earnings (loss) per share 16,351 11,192 10,337 7,880 9,468
AS OF SEPTEMBER 30,
---------------------------------------------------------
2000 1999(1) 1998(1) 1997(1) 1996(1)
-------- ---------- -------- -------- -------
(IN THOUSANDS)
Total assets $513,128 $193,800 $157,755 $179,277 $88,576
Working capital $303,080 $105,394 $104,176 $119,165 $37,279
Notes payable and revolving credit
facilities $ 16,000 $ 5,813 $ 4,348 $ 3,703 $ --
Current portion of long-term debt and
capital lease obligations $ 519 $ 537 $ 511 $ 1,327 $ 5,254
Long-term debt and capital lease
obligations (less current portion)
and senior subordinated note $ 282 $ 6,679 $ 9,038 $ 6,210 $ 1,647
Redeemable convertible preferred
stock $ -- $ -- $ 3,562 $ 13,029 $ 9,831
Members' capital $ -- $ 930 $ 1,134 $ 195 $ --
Stockholders' equity $413,854 $138,741 $116,810 $128,664 $49,779
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FIRST SECOND THIRD FOURTH
QUARTER(1) QUARTER(1) QUARTER(1) QUARTER(1)
---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED SEPTEMBER 30, 2000
Revenues(5) $54,396 $79,557 $87,827 $99,319
Gross profit $26,347 $36,131 $39,915 $47,342
Net income $ 3,004 $ 1,873 $ 2,486 $ 5,390
Net income attributable to common stockholders $ 3,004 $ 1,873 $ 2,486 $ 5,390
Diluted earnings per share $ 0.22 $ 0.12 $ 0.14 $ 0.29
YEAR ENDED SEPTEMBER 30, 1999
Revenues(6) $21,584 $26,281 $29,054 $38,036
Gross profit $ 8,863 $11,246 $12,291 $17,421
Net loss $(2,455) $(1,055) $(1,209) $(5,123)
Net loss attributable to common stockholders $(2,680) $(1,217) $(1,371) $(5,228)
Diluted loss per share $ (0.24) $ (0.11) $ (0.12) $ (0.46)
- ---------------
(1) Amounts have been restated to reflect the acquisition of Irvine Optical
Company LLC in a pooling of interests transaction effective May 5, 2000.
(2) Amounts include results of operations of the Infab Division of Jenoptik AG
(acquired September 30, 1999), Auto-Soft Corporation and AutoSimulations,
Inc. (acquired January 6, 2000) and MiTeX Solutions (acquired June 23, 2000)
for the periods subsequent to their respective acquisitions.
(3) Amounts include results of operations of Domain Manufacturing Corporation
(acquired June 30, 1999) and Hanyon Technology, Inc. (acquired April 21,
1999) for the periods subsequent to their respective acquisitions.
(4) Includes revenues from a related party of $36.9 million, $15.3 million,
$15.9 million, $19.1 million and $10.5 million in the years ended September
30, 2000, 1999, 1998, 1997 and 1996, respectively.
(5) Includes revenues from a related party of $7.0 million, $8.5 million, $9.9
million and $11.5 million in the first, second, third and fourth quarters of
the fiscal year ended September 30, 2000, respectively.
(6) Includes revenues from a related party of $0.7 million, $3.4 million, $5.5
million and $5.7 million in the first, second, third and fourth quarters of
the fiscal year ended September 30, 1999, respectively.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Certain statements in this Annual Report on Form 10-K constitute
"forward-looking statements" which involve know risks, uncertainties, and other
factors which may cause the actual results, performance, or achievements of
Brooks to be materially different from any future results, performance, or
achievements expressed or implied by such forward-looking statements. Such
factors include the factors that may affect future results set forth in
Management's Discussion and Analysis of Financial Condition and Results of
Operations, which is included in this report. Precautionary statements made
herein should be read as being applicable to all related forward-looking
statements whenever they appear in this report.
OVERVIEW
The predecessor Brooks 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.
Brooks is a leading supplier of tool and factory hardware and software
automation solutions for the global semiconductor, data storage, and flat panel
display manufacturing industries. Brooks has distinguished itself as a
technology and market leader, particularly in the demanding cluster-tool
vacuum-processing environment and in integrated factory automation software
applications. The Company's offerings have evolved from individual robots used
to optimize fab performance. In 1998 and 1999 the Company diversified and
entered the factory automation market, beginning with the acquisition of FASTech
Integration, Inc. Through a recent series of acquisitions Brooks has emerged as
one of the leading suppliers of factory automation software and hardware
solutions to end users in these markets.
In 1992, the Company introduced the family of vacuum central wafer handling
systems and modules that forms the foundation of the Company's current business.
In 1994, the Company introduced a similar family of systems and modules for flat
panel display substrates, including a next-generation magnetically driven vacuum
transfer robot. In 1996, the Company acquire 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. 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. In 1998, the Company acquired FASTech
Integration, Inc. ("FASTech"), a designer and supplier of top-to-bottom
integrated Manufacturing Execution Systems ("MES") software solutions. Both of
these acquisitions were accounted for under the pooling of interests methods.
The Company made several acquisitions during fiscal year 1999. On April 21,
1999, the Company completed the acquisition of Hanyon Technology, Inc.
("Hanyon"). Hanyon, based in Korea, provides MES systems integration services
and cell control automation solutions to the semiconductor and liquid crystal
display industries in Korea and Taiwan. On June 30, 1999, the Company completed
the acquisition of substantially all the assets and certain liabilities of
Domain Manufacturing Corporation ("Domain"). Domain is a leading developer of
process development, data analysis and advanced process control software. These
acquisitions were accounted for using the purchase method of accounting.
Accordingly, the Company's consolidated Statements of Operations and of Cash
Flows include the results of Hanyon and Domain for the periods subsequent to
their respective dates of acquisition.
On August 31, 1999, the Company completed the acquisition of Smart Machines
Inc. ("Smart Machines"). Smart Machines produces process tool automation
components for semiconductor manufacturers. This acquisition was accounted for
as a pooling of interests.
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On September 30, 1999, the Company completed the acquisition of certain
assets of the Infab Division ("Infab") of Jenoptik AG, a leading supplier of
advanced factory interface systems. This acquisition was accounted for using the
purchase method of accounting. Accordingly, the Company's Consolidated
Statements of Operations and Cash Flows contain the results of Infab for the
periods subsequent to the date of its acquisition.
On May 5, 2000, the Company acquired Irvine Optical Company LLC ("Irvine
Optical"). Irvine Optical is a manufacturer of micro/macro inspection, wafer
handling, and sorting and control equipment, primarily for the semiconductor
industry. The transaction was accounted for as a pooling of interests.
Accordingly, the Company's consolidated financial statements and notes thereto
have been restated to include the financial position and results of operations
of Irvine Optical for all periods prior to the acquisition.
On January 6, 2000, the Company completed the acquisition of the businesses
of Auto-Soft Corporation ("ASC") and AutoSimulations, Inc. ("ASI") from Daifuku
America Corporation ("Daifuku America"), a U.S. subsidiary of Daifuku Co., Ltd.
of Japan. ASC is a material handling software and systems integration company.
ASC is a robotic and material handling simulation, schedule and real time
dispatching software company. The acquisition was accounted for using the
purchase method of accounting. Accordingly, the Company's Consolidated
Statements of Operations and of Cash Flows for the year ended September 30, 2000
include the results of ASC and ASI for the period subsequent to their
acquisition.
On June 23, 2000, the Company acquired the assets of MiTeX Solutions
("MiTeX"), a provider of run-to-run control technology. The acquisition was
accounted for using the purchase method of accounting. The Company's
Consolidated Statements of Operations and of Cash Flows for the year ended
September 30, 2000 include the results of MiTeX for the period from July 1, 2000
to September 30, 2000. The results of operations of MiTeX for the period from
acquisition to June 30, 2000, are not material to the consolidated results of
the Company.
In June 1999, the Company formed a joint venture in Korea with Samsung
Electronics. This joint venture is 70% owned by the Company and 30% owned by
Samsung, and has been organized to design, develop, and manufacture atmospheric
flat panel display loaders along with other products. The Company consolidated
fully the financial position and results of operations of the joint venture and
accounts for the minority interest in the financial statements.
The Company's product revenues include sales of hardware and software
products. The Company's service revenues are primarily comprised of tool control
application consulting services, consulting, software customization and spare
parts sales.
Many of the Company's customers purchase the Company's vacuum transfer
robots and other modules before purchasing the Company's vacuum central wafer
handling systems. The Company believes that once a customer has selected the
Company's products for a process tool, the customer is likely to rely on those
products for the life of that process tool model, which can be in excess of five
years. Conversely, losing a bid for a manufacturing execution system ("MES")
does not preclude the Company from securing optimization products to fit with a
competitor's MES.
A significant portion of the Company's revenues have been generated by
sales to customers in the United States, although the Company believes that a
significant portion of these customers incorporate the Company's products into
equipment sold to their foreign customers. The Company's foreign sales have
occurred principally in Asia and Europe. Sales in Asia have occurred primarily
in Japan and South Korea, and, to a lesser extent, in Taiwan and Singapore.
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The Company's foreign revenues are generally denominated in United States
dollars. Accordingly, foreign currency fluctuations have not had a significant
impact on the comparison of the results of operations for the periods presented.
The costs and expenses of the Company's international subsidiaries are generally
denominated in currencies other than the United States dollar. However, since
the functional currency of the Company's international subsidiaries is the local
currency, foreign currency translation adjustments are reflected as a component
of stockholders' equity under the caption "Accumulated other comprehensive
income (loss)". To the extent that the Company expands its international
operations or changes its pricing practices to denominate prices in foreign
currencies, the Company will be exposed to increased risk of currency
fluctuation.
The Company's business is highly dependent upon the capital expenditures of
semiconductor and flat panel display manufacturers which historically have been
cyclical, and the Company's ability to develop, manufacture and sell new
products and product enhancements. The Company's revenues grew substantially in
fiscal 2000 compared to fiscal 1999 due in large part to high levels of capital
expenditures of semiconductor manufacturers. The Company cannot guarantee that
these levels of expenditure will be sustained in fiscal 2001. The Company's
results will also be affected, especially when measured on a quarterly basis, by
the volume, composition and timing of orders, conditions in industries served by
the Company, competition and general economic conditions.
RESULTS OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 2000, COMPARED TO YEAR ENDED SEPTEMBER 30, 1999
The Company reported net income of $12.8 million for the year ended
September 30, 2000, compared to a net loss of $9.8 million in the previous year.
The results for the year ended September 30, 2000 include $18.5 million of
amortization of acquired intangible assets and $0.6 million of
acquisition-related charges. The Company's net loss attributable to common
stockholders in the previous year includes $0.6 million of amortization of
acquired intangible assets, $5.3 million of acquisition-related and
restructuring charges and other costs and $0.7 million of accretion and
dividends on preferred stock. There was no accretion or dividends on preferred
stock in the year ended September 30, 2000.
REVENUES
The Company reported revenues of $321.1 million in the year ended September
30, 2000, compared to $115.0 million in the previous year, a 179.3% increase.
The overall increase is principally attributable to the strength in both the
original equipment manufacturer ("OEM") and end user markets and incremental
revenue from acquisitions. This Company experienced growth in all of the
geographic regions in which it operates. Both the automation systems segment and
the factory automation solutions segment increased from the prior year, by
159.8% and 252.6%, respectively.
Product revenues increased $174.8 million, or 187.0%, to $268.3 million in
the year ended September 30, 2000, from $93.5 million in the previous fiscal
year. This growth is primarily attributable to the overall strength in the OEM
and End User markets and acquisitions.
Service revenues increased $31.3 million, or 146.0%, to $52.8 million. This
increase is primarily attributable to internal growth and the Company's
acquisitions.
Revenues outside the United States were $155.8 million, or 48.5% of
revenues, and $48.0 million, or 41.7% of revenues, in the years ended September
30, 2000 and 1999, respectively. The increase is primarily the result of the
Company's expanded global presence from its recent acquisitions. The Company
expects that foreign revenues will continue to account for a significant portion
of total revenues. However, the Company cannot guarantee that foreign revenues,
particularly from Asia, will remain a strong component of the Company's total
revenues.
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GROSS MARGIN
Gross margin increased to 46.6% for the year ended September 30, 2000,
compared to 43.3% for the previous year. The Company's automation systems
segment gross margin increased to 38.9% in the year ended September 30, 2000,
from 34.3% in the prior year, and is primarily the result of operational
efficiencies and change in product mix. This increase was partially offset by a
decrease in gross margin of the Company's factory automation solutions segment,
to 68.0% in the year ended September 30, 2000, from 77.4% in the prior year.
This segment's gross margin decline is primarily attributable to the acquired
service business of ASC, which has a historically lower margin structure than
that of the segment. In future years, gross margin may be adversely affected by
changes in product mix and/or price competition.
Gross margin on product revenues was 49.3% for the year ended September 30,
2000. Gross margin on product revenues for the year ended September 30, 1999,
which included charges aggregating $1.6 million, comprised of $1.0 million to
provide additional reserves for slow-moving and obsolete inventories and $0.6
million of additional depreciation expense, was 44.8%. Excluding these charges,
gross margin for the year ended September 30, 1999, was 46.5%. The increase is
primarily attributable to improvements in manufacturing capacity utilization and
the acquisition of higher margin software product businesses, partially offset
by the Infab operations' historically lower margin structure.
Gross margin on service revenues decreased to 33.0% for the year ended
September 30, 2000, from 36.8% in the previous year. The decrease is primarily a
result of business mix, combined with ASC's historically lower margin structure.
Included in the cost of service revenues are global customer support costs,
consisting primarily of personnel costs and travel expenses.
RESEARCH AND DEVELOPMENT
Research and development expenses for the year ended September 30, 2000,
were $42.9 million, an increase of $18.9 million, compared to $24.0 million in
the previous year. However, research and development expenses decreased as a
percentage of revenues, to 13.4%, from 20.9% in fiscal 1999. The increase in
absolute spending is the result of the research and development efforts related
to the Company's recent acquisitions as well as incremental spending associated
with the launch of new atmospheric products and the transition to the next
generation vacuum wafer handling products, partially offset by the elimination
of redundant research and development programs. The Company plans to invest in
research and development to enhance existing and develop new tool and factory
hardware and software automation solutions for the semiconductor, data storage
and flat panel display manufacturing industries.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses were $70.9 million for the
year ended September 30, 2000, an increase of $36.5 million, compared to $34.4
million in the previous year. However, selling, general and administrative
expenses decreased as a percentage of revenues, to 22.1% in the year ended
September 30, 2000, from 30.0% in the previous year. The increase in absolute
spending is the result of expanded sales and marketing activities as well as
general and administration support costs associated with the Company's recently
completed acquisitions and infrastructure improvements, while the improvement of
these costs as a percentage of revenues reflects the Company's efforts at
expanding its product offerings and customer base. The Company expects that
future expenditure levels will continue at or above current levels to support
its worldwide sales and administrative organizations.
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AMORTIZATION OF ACQUIRED INTANGIBLE ASSETS
Amortization expense for acquired intangible assets totaled $18.5 million
for the year ended September 30, 2000, and relates to acquired intangible assets
from the June 23, 2000 Mitex acquisition, the January 6, 2000 ASC and ASI
acquisition, the Infab, Domain and Hanyon acquisitions, all of which occurred
during the second half of fiscal 1999 and Irvine Optical's acquisition of a
corporation in March 1997. Amortization expense for acquired intangible assets
was $0.6 million in the year ended September 30, 1999, and relates to the Domain
and Hanyon acquisitions and Irvine Optical.
ACQUISITION-RELATED AND RESTRUCTURING COSTS
Acquisition-related charges of $0.6 million in the year ended September 30,
2000, relate primarily to transaction costs in connection with the acquisition
of Irvine Optical. In fiscal 1999, the Company incurred acquisition-related and
restructuring costs of $3.1 million, comprised of $1.2 million for transaction
costs related to the Smart Machines acquisition, $0.3 million for severance
costs and $1.6 million for the write-off of certain fixed assets.
INTEREST INCOME AND EXPENSE
Interest income increased by $6.6 million, to $9.7 million, in the year
ended September 30, 2000, compared to the previous year. This increase is due
primarily to higher cash and investment asset balances which resulted from the
Company's public offering of shares of common stock in March 2000. Interest
expense of $1.3 million and $1.5 million for the years ended September 30, 2000
and 1999, respectively, relates primarily to Irvine Optical's debt, which was
discharged on May 6, 2000. Fiscal 2000 interest expense also includes interest
on the Company's note payable to Daifuku America issued as part of the
consideration for ASC and ASI.
INCOME TAX PROVISION (BENEFIT)
The Company recorded net income tax expense of $12.8 million for the year
ended September 30, 2000, and net income tax benefits of $1.0 million for the
year ended September 30, 1999. The fiscal 2000 tax provision is attributable to
federal, state, foreign and withholding taxes. Federal and state taxes have been
reduced for net operating losses, research and development tax credits and a
foreign sales corporation benefit. The tax benefit recorded in fiscal 1999 is
primarily due to anticipated future tax benefit of domestic net operating losses
and research and development credits, partially offset by a $1.6 million
increase in the deferred tax asset valuation allowance.
YEAR ENDED SEPTEMBER 30, 1999, COMPARED TO YEAR ENDED SEPTEMBER 30, 1998
The Company reported a net loss of $9.8 million for the year ended
September 30, 1999 (including $0.6 million of amortization of acquired
intangible assets and $5.3 million of acquisition-related and restructuring
charges and other costs), compared to a net loss of $23.3 million in the
previous year (including $0.2 million of amortization of acquired intangible
assets and $11.8 million of acquisition-related and restructuring charges and
other costs). The Company reported net losses attributable to common
stockholders (after dividends and accretion on preferred stock) of $10.5 million
and $24.7 million for the years ended September 30, 1999 and 1998, respectively.
REVENUES
The Company reported revenues of $115.0 million in the year ended September
30, 1999, compared to $117.3 million in the previous year, a 2.0% decline.
However, excluding the results of Irvine Optical, revenues increased 3.6%, to
$103.9 million in the year ended September 30, 1999, from $100.3 million in the
previous
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year. The decrease in total revenue is attributable to the automation systems
segment, which includes Irvine Optical, partially offset by an increase in the
factory automation solutions segment's revenue.
Product revenues decreased $4.4 million, or 4.5%, to $93.5 million in the
year ended September 30, 1999, from $97.9 million in the previous fiscal year.
The decline is the net result of Irvine Optical's lower revenues, partially
offset by improving 200mm revenues.
Service revenues increased $2.1 million, or 10.7%, to $21.5 million. This
increase is primarily attributable to the Company's acquisitions and the impact
of those acquisitions on consulting services associated with factory automation.
Revenues outside the United States were $48.0 million, or 41.7% of revenues, and
$51.9 million, or 44.3% of revenues, in the years ended September 30, 1999 and
1998, respectively.
GROSS MARGIN
Gross margin increased to 43.3% for the year ended September 30, 1999,
compared to 28.3% for the previous year. Both of the Company's segments showed
improved gross margin performance. The Company's automation systems segment
gross margin increased to 34.3% in the year ended September 30, 1999, from 22.0%
in the prior year. This increase is primarily the result of improved
manufacturing capacity utilization. The Company's factory automation solutions
segment gross margin was 77.4% in the year ended September 30, 1999, an increase
from 66.8% in the previous year. This increase is primarily due to the
acquisition of higher margin software product businesses.
Gross margin on product revenues increased to 44.8% for the year ended
September 30, 1999, from 25.9% in the previous year. Included in the cost of
product revenues for the years ended September 30, 1999 and 1998 are charges of
$1.6 million and $6.6 million, respectively, for acquisition-related,
restructuring and other costs. The fiscal 1999 charges are comprised of a $1.0
million charge to provide additional reserves for slow-moving and obsolete
inventories and $0.6 million of additional depreciation expense, while the
fiscal 1998 charge was comprised of $6.2 million to provide additional reserves
for slow-moving and obsolete inventories, $0.3 million for additional
depreciation costs and $0.1 million for severance costs. Excluding these costs,
gross margin on product revenues was 46.5% and 32.7% for the years ended
September 30, 1999 and 1998, respectively.
Gross margin on service revenues decreased to 36.8% for the year ended
September 30, 1999, from 40.5% in the previous year. Included in the cost of
service revenues are global customer support costs, consisting primarily of
personnel costs and travel expenses.
RESEARCH AND DEVELOPMENT
Research and development expenses for the year ended September 30, 1999
were $24.0 million, a decrease of $3.0 million, from $27.0 million in the
previous year. Research and development expenses also decreased as a percentage
of revenues, to 20.9% in the year ended September 30, 1999, compared to 23.0% in
the previous year. The spending decrease was the effect of reduced personnel
costs and other related spending associated with the changing mix of supported
technologies.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses increased by 8.9%, to $34.4
million for the year ended September 30, 1999, compared to $31.6 million in the
previous year. Selling, general and administrative expenses also increased as a
percentage of revenues, to 30.0% in the year ended September 30, 1999, from
27.0% in the previous year. Fiscal 1999 expenses included $0.2 million for
additional depreciation expense and fiscal 1998 expenses included $1.0 million
for additional accounts receivable reserves and additional depreciation expense.
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The spending increase is due to expanded sales and marketing activities as well
as increased general and administration support costs associated with the
Company's acquisitions and infrastructure improvements completed in 1999.
AMORTIZATION OF ACQUIRED INTANGIBLE ASSETS
Amortization expense for acquired intangible assets totaled $0.6 million
for the year ended September 30, 1999, and relates to the Infab, Domain and
Hanyon acquisitions, all of which occurred during the second half of fiscal 1999
and Irvine Optical's acquisition of a corporation in March 1997. Amortization
expense for acquired intangible assets was $0.2 million for the year ended
September 30, 1998, and is attributable to Irvine Optical.
ACQUISITION-RELATED AND RESTRUCTURING COSTS
In fiscal 1999, the Company incurred acquisition-related and restructuring
costs of $3.1 million, comprised of $1.2 million for transaction costs related
to the Smart Machines acquisition, $0.3 million for severance costs and $1.6
million for the write-off of certain fixed assets. The fiscal 1998
acquisition-related and restructuring costs of $3.7 million were comprised of
$1.4 million to exit duplicate facilities, $1.0 million for legal, accounting
and other transaction costs related to the FASTech acquisition and $1.3 million
for severance costs.
INTEREST INCOME AND EXPENSE
Interest income decreased by 13.2%, to $3.2 million, in the year ended
September 30, 1999, compared to $3.6 million in the previous year, due primarily
to lower cash and investment asset balances. Interest expense decreased by
34.1%, to $1.5 million in the year ended September 30, 1999, from $2.3 million
in the previous year. Fiscal 1998 interest expense includes $0.3 million to
retire debt in conjunction with the acquisition of FASTech. The decrease is
primarily attributable to reduced borrowings and the aforementioned fiscal 1998
debt retirement charge.
INCOME TAX BENEFIT
The Company recorded net tax benefits of $1.0 million and $4.7 million in
the years ended September 30, 1999 and 1998, respectively. These tax benefits
are primarily due to anticipated future tax benefit of domestic net operating
losses and research and development credits, which were partially offset by $1.6
million and $3.8 million increases in the deferred tax asset valuation allowance
in fiscal 1999 and fiscal 1998, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $131.2 million at September 30, 2000, an
increase of $64.8 million from September 30, 1999. The Company realized
proceeds, net of issuance costs, of $220.5 million from a public offering of
shares of its common stock in March 2000. In connection with its acquisition of
ASC and ASI on January 6, 2000, the Company paid Daifuku America $27.0 million
in cash and issued Daifuku America a note in the amount of $16.0 million, which
is due on January 6, 2001. The Company has invested net $103.0 million of excess
cash in short- and long-term marketable securities. At September 30, 2000, $88.0
million was invested in marketable securities with maturities of one year or
less and $15.0 million in marketable securities which will mature October 1,
2001 or later.
Cash used in operations was $13.2 million, and is primarily attributable to
increases in accounts receivable, inventories and prepaid expenses and other
current assets of $50.6 million, $26.8 million and $7.8 million, respectively,
partially offset by depreciation and amortization of $30.2 million, and
increases of $12.0 million in accounts payable, $8.4 million in deferred
revenue, $9.7 million in accrued compensation and benefits and $8.7 million in
accrued expenses and other current liabilities. The increase in accounts
receivable and inventories is
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primarily attributable to the Company's recent rapid growth. The Company's
increased sales, particularly in Asia, combined with a greater number of
long-term contracts, have also contributed to the increase in accounts
receivable.
Cash used in investing activities was $141.9 million, and was principally
comprised of $118.0 million for the purchase of marketable securities, partially
offset by $15.0 million of marketable securities sold/matured, $24.4 million
used for the purchase of businesses, net of cash acquired (primarily the
acquisition of ASC and ASI) and $13.7 million used for capital additions,
primarily in its telecommunications systems infrastructure and for computer
requirements, including expenditures needed to accommodate the Company's
expanding capacity needs, such as the completion this year of its additional
facility in Chelmsford, Massachusetts.
Cash provided by financing activities was $220.1 million, comprised of
$220.5 million of proceeds from the public offering of common stock, net of
$12.9 million of issuance costs, and $5.4 million of proceeds from the exercise
of common stock options and the employee stock purchase plan. The total proceeds
of $225.9 million from the issuance of common stock were partially offset by
$5.3 million for net repayments on the revolving credit facility of an acquired
entity and $0.5 million for the payment of long-term debt of the Company.
While the Company has no significant capital commitments, as it expands its
product offerings and prepares for expected growth, the Company anticipates that
it will continue to make capital expenditures to support its business. The
Company may also use its resources to acquire companies, technologies or
products that complement the business of the Company.
The Company terminated its $30.0 million unsecured revolving credit
facility and entered into a $10.0 million uncommitted demand promissory note
facility with ABN AMRO Bank N.V. ("ABN AMRO") on May 2, 2000. The Company
transferred all of its outstanding letters of credit, totaling approximately
$1.1 million, to the new facility. ABN AMRO is not obligated to extend loans or
issue letters of credit under this new facility. At September 30, 2000, $1.3
million of the facility was in use, all of it for letters of credit.
The Company believes that its existing resources will be adequate to fund
the Company's currently planned working capital and capital expenditure
requirements for at least the next twelve months. The sufficiency of the
Company's resources to fund its needs for capital is subject to known and
unknown risks, uncertainties and other factors which may have a material adverse
effect on the Company's business, including without limitation, the factors
discussed under "Factors That May Affect Future Results."
RECENT ACCOUNTING PRONOUNCEMENTS
In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44 ("FIN 44"), "Accounting for Certain Transactions Involving
Stock Compensation -- an interpretation of APB Opinion No. 25". FIN 44 clarifies
the application of APB Opinion No. 25 ("APB 25"), including the following: the
definition of an employee for purposes of applying APB 25; the criteria for
determining whether a plan qualifies as a non-compensatory plan; the accounting
consequences of various modifications to the terms of previously fixed stock
options or awards; and the accounting for an exchange of stock compensation
awards in a business combination. FIN 44 is effective July 1, 2000, but certain
conclusions in FIN 44 cover specific events that occurred after either December
15, 1998 or January 12, 2000. Application of this pronouncement has not had a
material impact on the Company's financial position or results of operations.
In December 1999, the U.S. Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in
Financial Statements". SAB 101 summarizes the SEC's views in applying generally
accepted accounting principles to selected revenue recognition issues in
financial statements. In
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June 2000, the SEC issued Staff Accounting Bulletin No. 101B, an amendment to
SAB 101, which delays the implementation of SAB 101. The application of the
guidance in SAB 101 will now be required in the Company's fourth quarter of
fiscal 2001. The Company is currently determining the impact that SAB 101 may
have on its financial position and results of operations.
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133").
This statement was amended by the issuance of Statement No. 137, "Deferral of
the Effective Date of FASB Statement No. 133", which changed the effective date
of FAS 133 to all fiscal years beginning after June 15, 2000 (fiscal 2001 for
the Company) and requires that all derivative instruments be recorded on the
balance sheet at their fair value. This statement was further amended by
Statement No. 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activities - an Amendment of FASB Statement No. 133". Changes in the
fair value of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part of
a hedge transaction and, if it is, the type of hedge transaction. The Company's
management anticipates that the adoption of FAS 133 will not have a significant
effect on the Company's results or operations or financial position, as the
Company currently does not utilize derivative instruments.
FACTORS THAT MAY AFFECT FUTURE RESULTS
From time to time, information provided by Brooks or statements made by its
employees may contain forward-looking information that involves substantial
known and unknown risks and uncertainties such as those described below that
could cause actual results to differ materially from targets or projected
results.
You should carefully consider the risks described below and the other
information in this report before deciding to invest in shares of our common
stock. While these are the risks and uncertainties we believe are most important
for you to consider, you should know that they are not the only risks or
uncertainties facing us or which may adversely affect our business. If any of
the following risks or uncertainties actually occur, our business, financial
condition and operating results would likely suffer. In that event, the market
price of our common stock could decline and you could you lose all or part of
the money you paid to buy our common stock.
RISKS RELATING TO OUR OPERATIONS
The Cyclical Demand of Semiconductor Manufacturers Affects our Operating
Results. Our business is significantly dependent on capital expenditures by
semiconductor manufacturers. The level of semiconductor manufacturers' capital
expenditures is dependent on the current and anticipated market demand for
semiconductors. Demand for semiconductors is cyclical and has historically
experienced periodic downturns. During these downturns, our revenues have
dropped, and we have incurred losses. We believe that downturns in the
semiconductor manufacturing industry will occur in the future and will result in
decreased demand for our products. Despite the addition of our factory
automation business in fiscal 1999, our financial results will continue to be
dependent on capital expenditures by semiconductor manufacturers. Downturns in
the semiconductor business, when fewer new facilities are being built, could
harm our financial results as have downturns in the past.
Our Sales Volume Depends on the Sales Volume of our Original Equipment
Manufacturer Customers. We sell a majority of our tool automation products to
original equipment manufacturers who incorporate our products into their
equipment. Therefore, our revenues are directly dependent on the ability of
these customers to develop and market their equipment in a timely,
cost-effective manner.
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We Rely on a Small Number of Customers for a Large Portion of our
Revenues. We receive a significant portion of our revenues in each fiscal
period from a limited number of customers. The loss of one or more of these
major customers, or a decrease in orders by one or more customers, would
adversely affect our business. Sales to our ten largest customers accounted for
approximately 43% and 52% of total revenues in the years ended September 30,
2000 and 1999, respectively. Sales to Lam Research Corporation, our largest
customer, accounted for approximately 11% and 13% of total revenues in the years
ended September 30, 2000 and 1999, respectively.
Delays in Shipment of a Few of our Large Orders Could Substantially
Decrease our Revenues. Historically, a substantial portion of our quarterly and
annual revenues came from sales of a small number of large orders. These orders
consist of products with high selling prices compared to our other products. As
a result, the timing of the recognition of revenue from one of these large
orders can have a significant impact on our total revenues and operating results
for a particular period. Our operating results could be harmed if orders for
even a small number of large orders are canceled or rescheduled by customers or
cannot be filled due to delays in manufacturing, testing, shipping or product
acceptance.
We Have Significant Fixed Costs Which Are Not Easily Reduced if Revenues
Fall Below Expectations. Our expense levels are based in part on our future
revenue expectations. Many of our expenses, particularly those relating to
capital equipment and manufacturing overhead, are relatively fixed. If we do not
meet our sales goals we may be unable to rapidly reduce these fixed costs. Our
ability to reduce expenses is further constrained because we must continue to
invest in research and development to maintain our competitive position to
maintain service and support for our existing global customer base. Accordingly,
if we suffer an unexpected downturn in revenue, our inability to reduce fixed
costs rapidly could increase the adverse impact on our results of operations.
Our Lengthy Sales Cycle Requires Us to Incur Significant Expenses With No
Assurance That We Will Generate Revenue. Our tool automation products are
generally incorporated into original equipment manufacturer equipment at the
design stage. To obtain new business from our original equipment manufacturer
customers, we must develop products for selection by a potential customer at the
design stage. This often requires us to make significant expenditures, without
any assurance of success. The original equipment manufacturer's design decisions
often precede the generation of volume sales, if any, by a year or more. We also
must complete successfully a lengthy evaluation period before we can achieve
volume sales of our manufacturing execution system software and process
optimization software to our factory automation customers. We cannot guarantee
that we will continue to achieve design wins or satisfy evaluations by our
factory automation customers of our software. We cannot guarantee that the
equipment manufactured by our original equipment manufacturing customers will be
commercially successful. If we or our original equipment manufacturing customers
fail to develop and introduce new products successfully and in a timely manner,
our business and financial results will suffer.
Our International Business Operations Expose Us to a Number of Difficulties
in Coordinating Our Activities Abroad and in Dealing with Multiple Regulatory
Environments. Approximately 49% and 42% of our total revenues were derived from
customers located outside North America in the years ended September 30, 2000
and 1999, respectively. We anticipate that international sales will continue to
account for a significant portion of our revenues. Our vendors are located in
several different foreign countries. As a result of our international business
operations, we are subject to various risks, including:
- difficulties in staffing and managing operations in multiple locations in
many countries;
- challenges presented by collecting trade accounts receivable in foreign
jurisdictions;
- possible adverse tax consequences;
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- governmental currency controls;
- changes in various regulatory requirements;
- political and economic changes and disruptions; and
- export/import controls and tariff regulations.
To support our international customers, we maintain locations in several
countries, including Canada, Germany, Japan, Malaysia, Singapore, South Korea,
Taiwan, France and the United Kingdom. We cannot guarantee that we will be able
to manage these operations effectively. We cannot assure you that our investment
in these international operations will enable us to compete successfully in
international markets or to meet the service and support needs of our customers,
some of whom are located in countries where we have no infrastructure.
Although our international sales are primarily denominated in U.S. dollars,
changes in currency exchange rates can make it more difficult for us to compete
with foreign manufacturers on price. If our international sales increase
relative to our total revenues, these factors could have a more pronounced
effect on our operating results.
We Must Continually Improve Our Technology to Remain
Competitive. Technology changes rapidly in the semiconductor, data storage and
flat panel display manufacturing industries. We believe our success will depend
upon our ability to enhance our existing products and to develop and market new
products to meet customer needs. We cannot guarantee that we will identify and
adjust to changing market conditions or succeed in introducing commercially
rewarding products or product enhancements. The success of our product
development and introduction depends on a number of factors, including:
- accurately identifying and defining new products;
- completing and introducing new product designs in a timely manner;
- market acceptance of our products and our customers' products; and
- determining a comprehensive, integrated product strategy.
We Face Significant Competition Which Could Result in Decreased Demand For
Our Products or Services. The markets for our products are intensely
competitive and we may not be able to compete successfully. We believe that our
primary competition in the tool automation market is from integrated original
equipment manufacturers that satisfy their semiconductor and flat panel display
handling needs themselves rather than by purchasing systems or modules from an
independent supplier like us. Many of these original equipment manufacturers
have substantially greater resources than we do. Applied Materials, Inc., the
leading process equipment original equipment manufacturer, develops and
manufactures its own central wafer handling systems and modules. We may not be
successful in selling our products to original equipment manufacturers that
currently satisfy their wafer or substrate handling needs themselves, regardless
of the performance or the price of our products. Moreover, integrated original
equipment manufacturers may begin to commercialize their handling capabilities
and become our competitors.
We believe that the primary competitive factors in the end-user
semiconductor manufacturer market for factory automation software and process
control software are product functionality, price/performance, ease of use,
hardware and software platform compatibility, vendor reputation and financial
stability. The relative importance of these competitive factors may change over
time. We directly compete in this market with various competitors, including
Applied Materials-Consilium, PRI-Promis, IBM-Poseidon and numerous small,
independent software
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companies. We also compete with the in-house software staffs of semiconductor
manufacturers like NEC. Most of those manufacturers have substantially greater
resources than us.
We believe that the primary competitive factors in the factory interface
market are technical and technological capabilities, reliability,
price/performance, ease of integration and global sales and support capability.
In this market, we compete directly with Asyst, Fortrend, Kensington and Rorze.
Some of these competitors have substantial financial resources and extensive
engineering, manufacturing and marketing capabilities.
Much of Our Success and Value Lies in Our Ownership and Use of Intellectual
Property and Our Failure to Protect That Property Could Adversely Affect Our
Future Growth. Our ability to compete is heavily affected by our ability to
protect our intellectual property. We rely primarily on trade secret laws,
confidentiality procedures, patents, copyrights, trademarks and licensing
arrangements to protect our intellectual property. The steps we have taken to
protect our technology may be inadequate. Existing trade secret, trademark and
copyright laws offer only limited protection. Our patents could be invalidated
or circumvented. The laws of certain foreign countries in which our products are
or may be developed, manufactured or sold may not fully protect our products or
intellectual property rights. This may make the possibility of piracy of our
technology and products more likely. We cannot guarantee that the steps we have
taken to protect our intellectual property will be adequate to prevent
misappropriation of our technology. There has been substantial litigation
regarding patent and other intellectual property rights in semiconductor-related
industries. We may engage in litigation to:
- enforce our patents;
- protect our trade secrets or know-how;
- defend ourselves against claims we infringe on the rights of others; or
- determine the scope and validity of the patents or intellectual property
rights of others.
Any litigation could result in substantial cost to us and divert the
attention of our management, which could harm our operating results.
Our Operations Could Infringe on the Intellectual Property Rights of
Others. Particular aspects of our technology could be found to infringe on the
intellectual property rights or patents of others. Other companies may hold or
obtain patents on inventions or may otherwise claim proprietary rights to
technology necessary to our business. We cannot predict the extent to which we
may be required to seek licenses or alter our products so that they no longer
infringe on the rights of others. We cannot guarantee that the terms of any
licenses we may be required to seek will be reasonable. Similarly, changing our
products or processes to avoid infringing on the rights of others may be costly
or impractical or could detract from the value of our products.
Our Business May Be Harmed by Infringement Claims of General Signal or
Applied Materials. We received notice from General Signal Corporation alleging
infringements of its patent rights by certain of our products. The notification
advised us that General Signal was attempting to enforce its rights to those
patents in litigation against Applied Materials, and that, at the conclusion of
that litigation, General Signal intended to enforce its rights against us and
others. According to a press release issued by Applied Materials in November
1997, Applied Materials settled its litigation with General Signal by acquiring
ownership of five General Signal patents. Although not verified by us, these
five patents would appear to be the patents referred to by General Signal in its
prior notice to us. Applied Materials has not contacted us regarding these
patents.
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We Do Not Have Long-term Contracts With Our Customers and Our Customers May
Cease Purchasing Our Products at Any Time. We generally do not have long-term
contracts with our customers. As a result, our agreements with our customers do
not provide any assurance of future sales. Accordingly:
- our customers can cease purchasing our products at any time without
penalty;
- our customers are free to purchase products from our competitors;
- we are exposed to competitive price pressure on each order; and
- our customers are not required to make minimum purchases.
Our Future Growth Relies in Part on the Commercial Adoption of 300mm Wafer
Technology, Which is Progressing More Slowly Than Expected, and Competition for
300mm Orders May Be Intense. Our future growth relies in part on the adoption
of new systems and technologies to automate the processing of 300mm wafers.
However, the industry transition from the current, widely used 200mm
manufacturing technology to 300mm manufacturing technology is occurring more
slowly than expected. Any significant delay in the adoption of 300mm
manufacturing technology, or the failure of the industry to adopt 300mm
manufacturing technology, could significantly reduce our opportunities for
future growth. Moreover, continued delay in transition to 300mm technology could
permit our competitors to introduce competing or superior 300mm products.
Competition, including price competition, for such 300mm orders could be
vigorous and could harm our results of operations.
RISKS RELATING TO OUR GROWTH
Rapid Growth is Straining Our Operations and Requiring Us to Incur Costs to
Upgrade Our Infrastructure. During the last year, we have experienced extremely
rapid growth in our operations, the number of our employees, our product
offerings and the geographic area of our operations. Our growth places a
significant strain on our management, operations and financial systems. Our
future operating results will be dependent in part on our ability to continue to
implement and improve our operating and financial controls and management
information systems. If we fail to manage our growth effectively, our financial
condition, results of operations and business could be materially adversely
affected.
Our Operating Results Would Be Harmed If One of Our Key Suppliers Fails to
Deliver Components for Our Products. We currently procure many of our
components on an as needed, purchase order basis. We do not carry significant
inventories or have any long-term supply contracts with our vendors. With the
recent increased demand for semiconductor manufacturing equipment, our suppliers
are facing significant challenges in providing components on a timely basis. Our
inability to obtain components in required quantities or of acceptable quality
could result in significant delays or reductions in product shipments. This
would materially and adversely affect our operating results.
Our Business Could Be Harmed If We Fail to Adequately Integrate the
Operations of Our Acquisitions. Our management must devote substantial time and
resources to the integration of the operations of our acquired businesses with
our business and with each other. If we fail to accomplish this integration
efficiently, we may not realize the anticipated benefits of our acquisitions.
The process of integrating supply and distribution channels, research and
development initiatives, computer and accounting systems and other aspects of
the operation of our acquired businesses, presents a significant challenge to
our management. This is compounded by the challenge of simultaneously managing a
larger entity. We have completed a number of acquisitions in a short period of
time.
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These businesses have operations and personnel located in Asia, Europe and the
United States and present a number of additional difficulties of integration,
including:
- difficulties in the assimilation of products and designs into integrated
solutions;
- difficulties in informing customers, suppliers and distributors of the
effects of the acquisitions and integrating them into our overall
operations;
- difficulties integrating personnel with disparate business backgrounds
and cultures;
- difficulties in defining and executing a comprehensive product strategy;
- difficulties in managing geographically remote units;
- difficulties associated with managing the risks of entering markets or
types of businesses in which we have limited or no direct experience; and
- difficulties in minimizing the loss of key employees of the acquired
businesses.
If we delay integrating or fail to integrate an acquired business or
experience other unforeseen difficulties, the integration process may require a
disproportionate amount of our management's attention and financial and other
resources. Our failure to adequately address these difficulties could harm our
business and financial results.
Our Business May Be Harmed by Acquisitions We Complete in the Future. We
plan to continue to pursue additional acquisitions of related businesses. Our
identification of suitable acquisition candidates involves risks inherent in
assessing the values, strengths, weaknesses, risks and profitability of
acquisition candidates, including the effects of the possible acquisition on our
business, diversion of our management's attention and risks associated with
unanticipated problems or latent liabilities. If we are successful in pursuing
future acquisitions, we will be required to expend significant funds, incur
additional debt or issue additional securities, which may negatively affect our
results of operations and be dilutive to our stockholders. If we spend
significant funds or incur additional debt, our ability to obtain financing for
working capital or other purposes could decline and we may be more vulnerable to
economic downturns and competitive pressures. We cannot guarantee that we will
be able to finance additional acquisitions or that we will realize any
anticipated benefits from acquisitions that we complete. Should we successfully
acquire another business, the process of integrating acquired operations into
our existing operations may result in unforeseen operating difficulties and may
require significant financial resources that would otherwise be available for
the ongoing development or expansion of our existing business.
We May Not Be Able to Recruit and Retain Necessary Personnel Because of
Intense Competition for Highly Skilled Personnel. We need to hire and retain
substantial numbers of employees with technical backgrounds for both our
hardware and software engineering and support staffs. The market for these
employees is intensely competitive, and we have occasionally experienced delays
in hiring these personnel. Due to the cyclical nature of the demand for our
products, we have had to reduce our workforce and then rebuild our workforce as
our business has gone through downturns followed by upturns. We currently need
to hire a number of highly skilled employees, especially in manufacturing, to
meet customer demand. Due to the competitive nature of the labor markets in
which we operate, this type of employment cycle increases our risk of not being
able to retain and recruit key personnel. Our inability to recruit, retain and
train adequate numbers of qualified personnel on a timely basis could adversely
affect our ability to develop, manufacture, install and support our products.
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RISKS RELATING TO OUR COMMON STOCK
Our Operating Results Fluctuate Significantly, Which Could Negatively
Impact Our Business and Our Stock Price. Our margins, revenues and other
operating results can fluctuate significantly from quarter to quarter depending
upon a variety of factors, including:
- the level of demand for semiconductors in general;
- cycles in the market for semiconductor manufacturing equipment and
automation software;
- the timing and size of orders from our customer base;
- our ability to manufacture, test and deliver products in a timely and
cost-effective manner;
- our success in winning competitions for orders;
- the timing of our new product announcements and releases and those of our
competitors;
- the mix of products sold by us;
- competitive pricing pressures; and
- the level of automation required in fab extensions, upgrades and new
facilities.
We entered into the factory automation software business in fiscal 1999. We
believe a portion of our revenues from this business is dependent on achieving
project milestones. As a result, our revenue from this business will be subject
to fluctuations depending upon a number of factors, including whether we can
achieve project milestones on a timely basis, if at all, as well as the timing
and size of projects.
The Volatility of Our Stock Price Could Adversely Affect an Investment in
Our Stock. The market price of our common stock has fluctuated widely. For
example, between April 14, 2000 and April 28, 2000, the closing price of our
common stock rose from approximately $62.38 to $89.69 per share. Between April
28, 2000 and May 31, 2000, the price of our common stock dropped from
approximately $89.69 to $39.75 per share. Consequently, the current market price
of our common stock may not be indicative of future market prices, and we may
not be able to sustain or increase the value of an investment in our common
stock. Factors affecting our stock price may include:
- variations in operating results from quarter to quarter;
- changes in earnings estimates by analysts or our failure to meet
analysts' expectations;
- changes in the market price per share of our public company customers;
- market conditions in the industry;
- general economic conditions;
- low trading volume of our common stock; and
- the number of firms making a market in our common stock.
In addition, the stock market has recently experienced extreme price and
volume fluctuations. These fluctuations have particularly affected the market
prices of the securities of high technology companies like us. These market
fluctuations could adversely affect the market price of our common stock.
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Provisions of Our Certificate of Incorporation, Bylaws and Contracts May
Discourage Takeover Offers and May Limit the Price Investors Would Be Willing to
Pay for Our Common Stock. Our certificate of incorporation and bylaws contain
provisions that may make an acquisition of us more difficult and discourage
changes in our management. These provisions could limit the price that certain
investors might be willing to pay in the future for shares of our common stock.
In addition, we have adopted a rights plan. In many potential takeover
situations, rights issued under the plan become exercisable to purchase our
common stock at a price substantially discounted from the then applicable market
price of our common stock. Because of its possible dilutive effect to a
potential acquirer, the rights plan would generally discourage third parties
from proposing a merger with or initiating a tender offer for us that is not
approved by our board of directors. Accordingly, the rights plan could have an
adverse impact on our stockholders who might want to vote in favor of the merger
or participate in the tender offer. In addition, shares of our preferred stock
may be issued upon terms the board of directors deems appropriate without
stockholder approval. Our ability to issue preferred stock in such a manner
could enable our board of directors to prevent changes in our management or
control.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE EXPOSURE
The Company believes within a 95% confidence level that its overall
interest exposure at September 30, 2000, including all interest rate sensitive
instruments, a near-term change in interest rates, based on historical interest
rate movements, would not materially affect the consolidated results of
operations or financial position.
CURRENCY RATE EXPOSURE
Brooks' foreign revenues are generally denominated in United States
dollars. Accordingly, foreign currency fluctuations have not had a significant
impact on the comparison of the results of operations for the periods presented.
The costs and expenses of Brooks' international subsidiaries are generally
denominated in currencies other than the United States dollar. However, since
the functional currency of Brooks' international subsidiaries is the local
currency, foreign translation adjustments do not impact operating results, but
instead are reflected as a component of stockholders' equity. To the extent
Brooks expands its international operations or changes its pricing practices to
denominate prices in foreign currencies, Brooks will be exposed to increased
risk of currency fluctuation.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reports of Independent Accountants 40
Report of Independent Auditors 41
Consolidated Balance Sheets as of September 30, 2000 and
1999 42
Consolidated Statements of Operations for the three years
ended September 30, 2000, 1999 and 1998 43
Consolidated Statements of Changes in Stockholders' Equity
for the three years ended September 30, 2000, 1999 and
1998 44
Consolidated Statements of Cash Flows for the three years
ended September 30, 2000, 1999 and 1998 45
Notes to Consolidated Financial Statement 47
FINANCIAL STATEMENT SCHEDULES:
Schedule II - Valuation and Qualifying Accounts and
Reserves 70
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors
of Brooks Automation, Inc.:
In our opinion, based on our audits and the report of other auditors, the
accompanying consolidated balance sheets and the related consolidated statements
of operations, of changes in stockholders' equity and of cash flows present
fairly, in all material respects, the financial position of Brooks Automation,
Inc. and its subsidiaries at September 30, 2000 and 1999, and the results of
their operations and their cash flows for each of the three years in the period
ended September 30, 2000 in conformity with accounting principles generally
accepted in the United States of America. In addition, in our opinion, the
financial statement schedules listed in the accompanying index present fairly,
in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. These financial
statements and financial statement schedules are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements and financial statement schedules based on our audits. We
did not audit the financial statements of Irvine Optical Company LLC, a wholly
owned subsidiary acquired through a pooling of interests during the year ended
September 30, 2000, which statements reflect total assets of $16,492,000 as of
December 31, 1999, and total revenues of $11,049,000 and $17,038,000 for the
years ended December 31, 1999 and 1998, respectively. Those statements were
audited by other auditors whose report thereon has been furnished to us, and our
opinion expressed herein, insofar as it relates to the amounts included for
Irvine Optical Company LLC, is based solely on the report of the other auditors.
We conducted our audits of these statements in accordance with auditing
standards generally accepted in the United States of America, 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 and the report of other
auditors provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 15, 2000
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REPORT OF INDEPENDENT AUDITORS
To the Members
Irvine Optical Company, LLC
We have audited the balance sheets of Irvine Optical Company, LLC (the
Company) as of December 31, 1999 and 1998, and the related statements of
operations, members' deficit, and cash flows for the years then ended (not
presented separately herein). 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 audit.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards 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. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of December
31, 1999 and 1998, and the results of its operations and its cash flows for the
years then ended, in conformity with accounting principles generally accepted in
the United States.
The financial statements have been prepared assuming that the Company will
continue as a going concern. As more fully described in Note 1 to the financial
statements, the Company's ability to generate sufficient revenue and ultimately
achieve profitable operations is uncertain. The Company's future prospects
depend upon its ability to demonstrate sustained product sales and to generate
sufficient working capital through new financing and/or operating cash flows,
all of which raise substantial doubt about the Company's ability to continue as
a going concern. Management's plans in regard to these matters are also
described in Note 1. The financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
assets or amounts and classification of liabilities that may result from the
outcome of this uncertainty.
/s/ ERNST & YOUNG LLP
March 3, 2000, except for Note 4
as to which the date is March 31, 2000
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BROOKS AUTOMATION, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30,
----------------------
2000 1999
--------- ---------
(IN THOUSANDS, EXCEPT
SHARE DATA)
ASSETS
Current assets
Cash and cash equivalents $131,203 $ 66,366
Marketable securities 88,034 --
Accounts receivable, net, including related party
receivables of $6,820 and $3,384, respectively 92,779 35,570
Inventories 56,975 38,274
Prepaid expenses and other current assets 8,441 3,580
Deferred income taxes 17,952 6,542
-------- --------
Total current assets 395,384 150,332
Fixed assets, net 24,899 18,185
Intangible assets, net 60,263 16,842
Long-term marketable securities 15,000 --
Deferred income taxes 13,361 4,192
Other assets 4,221 4,249
-------- --------
Total assets $513,128 $193,800
======== ========
LIABILITIES, MINORITY INTERESTS, MEMBERS' CAPITAL AND
STOCKHOLDERS' EQUITY
Current liabilities
Notes payable $ 16,000 $ 213
Revolving line of credit -- 5,600
Current portion of long-term debt
and capital lease obligations 519 537
Accounts payable 20,874 12,472
Deferred revenue 17,018 6,879
Accrued compensation and benefits 14,407 4,909
Accrued acquisition-related and restructuring costs 538 3,868
Accrued income taxes payable 9,188 2,093
Accrued expenses and other current liabilities 13,760 8,367
-------- --------
Total current liabilities 92,304 44,938
Long-term debt and capital lease obligations 282 801
Senior subordinated note payable -- 5,878
Deferred income taxes 5,064 174
Other long-term liabilities 438 878
-------- --------
Total liabilities 98,088 52,669
-------- --------
Commitments and contingencies
Minority interests 1,186 1,460
-------- --------
Members' capital -- 10,000 units issued and 1,000 units
outstanding at September 30, 1999 -- 930
-------- --------
Stockholders' equity
Preferred stock, $0.01 par value, 1,000,000 shares
authorized, none issued and outstanding -- --
Common stock, $0.01 par value, 43,000,000 shares
authorized, 17,218,484 and 12,760,084 shares issued and
outstanding, respectively 172 128
Additional paid-in capital 433,101 168,827
Deferred compensation (35) (65)
Accumulated other comprehensive loss (2,942) (1,093)
Accumulated deficit (16,442) (29,056)
-------- --------
Total stockholders' equity 413,854 138,741
-------- --------
Total liabilities, minority interests, members'
capital and stockholders' equity $513,128 $193,800
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
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BROOKS AUTOMATION, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED SEPTEMBER 30,
--------------------------------------
2000 1999 1998
---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues
Product, including related party revenues of $36,934,
$15,255 and $15,913, respectively $268,281 $ 93,486 $ 97,894
Services 52,818 21,469 19,396
-------- -------- --------
Total revenues 321,099 114,955 117,290
-------- -------- --------
Cost of revenues
Product 135,993 51,568 72,495
Services 35,371 13,566 11,538
-------- -------- --------
Total cost of revenues 171,364 65,134 84,033
-------- -------- --------
Gross profit 149,735 49,821 33,257
-------- -------- --------
Operating expenses
Research and development 42,950 24,000 27,023
Selling, general and administrative 70,856 34,443 31,621
Amortization of acquired intangible assets 18,506 565 207
Acquisition-related and restructuring charges 578 3,120 3,722
-------- -------- --------
Total operating expenses 132,890 62,128 62,573
-------- -------- --------
Income (loss) from operations 16,845 (12,307) (29,316)
Interest income 9,707 3,150 3,629
Interest expense 1,318 1,515 2,300
Other income (expense) (2) (225) (9)
-------- -------- --------
Income (loss) before income taxes and minority interests 25,232 (10,897) (27,996)
Income tax provision (benefit) 12,753 (1,015) (4,681)
-------- -------- --------
Income (loss) before minority interests 12,479 (9,882) (23,315)
Minority interests in loss of consolidated subsidiary (274) (40) --
-------- -------- --------
Net income (loss) 12,753 (9,842) (23,315)
Accretion and dividends on preferred stock -- (654) (1,420)
-------- -------- --------
Net income (loss) attributable to common stockholders $ 12,753 $(10,496) $(24,735)
======== ======== ========
Earnings (loss) per share
Basic $ 0.84 $ (0.94) $ (2.39)
Diluted $ 0.78 $ (0.94) $ (2.39)
Shares used in computing earnings (loss) per share
Basic 15,224 11,192 10,337
Diluted 16,351 11,192 10,337
The accompanying notes are an integral part of these consolidated financial
statements.
43
45
BROOKS AUTOMATION, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
NONREDEEMABLE
CONVERTIBLE COMMON ADDITIONAL
PREFERRED STOCK AT PAID-IN DEFERRED COMPREHENSIVE
STOCK PAR VALUE CAPITAL COMPENSATION INCOME (LOSS)
------------- --------- ---------- ------------ -------------
(IN THOUSANDS, EXCEPT SHARE DATA)
Balance September 30, 1997 $6,619 $102 $120,227 $ (416)
Shares issued under stock option
and purchase plans (112,694
shares) 1 806
Common stock issued in
acquisitions (697,695) shares (152) 7 10,900
Deferred compensation (208) 208
Amortization of deferred
compensation 89
Accretion and dividends on
preferred stock
Revaluation of members' capital
Income tax adjustment from stock
options (301)
Comprehensive loss:
Net loss $(23,315)
Currency translation
adjustments (430)
--------
Comprehensive loss $(23,745)
========
Elimination of FASTech net loss
for the three months
ended December 31, 1997
------ ---- -------- -------
Balance September 30, 1998 6,467 110 131,424 (119)
Shares issued under stock option
and purchase plans (341,877
shares) 4 1,679
Common stock issued in
acquisitions (1,410,926 shares) (6,467) 14 35,594
Amortization of deferred
compensation 54
Accretion and dividends on
preferred stock
Revaluation of members' capital
Income tax benefit from stock
options 130
Comprehensive loss:
Net loss $ (9,842)
Currency translation
adjustments (557)
--------
Comprehensive loss $(10,399)
========
Elimination of Smart Machines
net loss for the three
months ended December 31, 1998
------ ---- -------- -------
Balance September 30, 1999 -- 128 168,827 (65)
Shares issued under stock option
and purchase plans and warrants
(537,997 shares) 5 5,397
Common stock offering (3,070,500
shares) 31 220,445
Common stock issued in
acquisitions (849,903 shares) 8 21,829
Amortization of deferred
compensation 30
Income tax benefit from stock
options 6,738
Income tax benefit from
acquisition 9,865
Comprehensive income:
Net income $ 12,753
Currency translation
adjustments (1,849)
--------
Comprehensive income $ 10,904
========
Elimination of Irvine Optical
net income for the three
months ended December 31, 1999
------ ---- -------- -------
Balance September 30, 2000 $ -- $172 $433,101 $ (35)
====== ==== ======== =======
ACCUMULATED RETAINED
OTHER EARNINGS
COMPREHENSIVE (ACCUMULATED
LOSS DEFICIT) TOTAL
------------- ------------ --------
(IN THOUSANDS, EXCEPT SHARE DATA)
Balance September 30, 1997 $ (106) $ 2,238 $128,664
Shares issued under stock option
and purchase plans (112,694
shares) 807
Common stock issued in
acquisitions (697,695) shares 147 10,902
Deferred compensation --
Amortization of deferred
compensation 89
Accretion and dividends on
preferred stock (1,420) (1,420)
Revaluation of members' capital (939) (939)
Income tax adjustment from stock
options (301)
Comprehensive loss:
Net loss (23,315) (23,315)
Currency translation
adjustments (430) (430)
Comprehensive loss
Elimination of FASTech net loss
for the three months
ended December 31, 1997 2,753 2,753
------- -------- --------
Balance September 30, 1998 (536) (20,536) 116,810
Shares issued under stock option
and purchase plans (341,877
shares) 1,683
Common stock issued in
acquisitions (1,410,926 shares) 29,141
Amortization of deferred
compensation 54
Accretion and dividends on
preferred stock (654) (654)
Revaluation of members' capital 377 377
Income tax benefit from stock
options 130
Comprehensive loss:
Net loss (9,842) (9,842)
Currency translation
adjustments (557) (557)
Comprehensive loss
Elimination of Smart Machines
net loss for the three
months ended December 31, 1998 1,599 1,599
------- -------- --------
Balance September 30, 1999 (1,093) (29,056) 138,741
Shares issued under stock option
and purchase plans and warrants
(537,997 shares) 5,402
Common stock offering (3,070,500
shares) 220,476
Common stock issued in
acquisitions (849,903 shares) 21,837
Amortization of deferred
compensation 30
Income tax benefit from stock
options 6,738
Income tax benefit from
acquisition 9,865
Comprehensive income:
Net income 12,753 12,753
Currency translation
adjustments (1,849) (1,849)
Comprehensive income
Elimination of Irvine Optical
net income for the three
months ended December 31, 1999 (139) (139)
------- -------- --------
Balance September 30, 2000 $(2,942) $(16,442) $413,854
======= ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
44
46
BROOKS AUTOMATION, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED SEPTEMBER 30,
--------------------------------
2000 1999 1998
--------- ------- --------
(IN THOUSANDS)
Cash flows from operating activities
Net income (loss) $ 12,753 $(9,842) $(23,315)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization 30,213 11,536 9,364
Compensation expense related to common stock options 30 54 89
Deferred income taxes (8,533) (3,017) (4,779)
Minority interests (274) (40) --
(Gain) loss on disposal of long-lived assets (142) -- --
Changes in operating assets and liabilities:
Accounts receivable (50,624) (4,483) 14,525
Inventories (26,842) (2,290) 5,287
Prepaid expenses and other current assets (7,777) 1,052 (1,427)
Accounts payable 11,954 6,188 (5,935)
Deferred revenue 8,385 1,763 398
Accrued compensation and benefits 9,684 858 517
Accrued acquisition-related and restructuring costs (680) 1,724 2,254
Accrued expenses and other current liabilities 8,661 1,651 (744)
--------- ------- --------
Net cash provided by (used in) operating activities (13,192) 5,154 (3,766)
--------- ------- --------
Cash flows from investing activities
Purchases of fixed assets (13,706) (6,029) (4,643)
Acquisition of businesses, net of cash acquired (24,399) (4,476) --
Purchases of marketable securities (118,034) -- --
Sale/maturity of marketable securities 15,000 -- --
Proceeds from sale of long-lived assets 735 -- --
Increase in other assets (1,509) (701) (682)
--------- ------- --------
Net cash used in investing activities (141,913) (11,206) (5,325)
--------- ------- --------
Cash flows from financing activities
Net (repayments of) borrowings under lines of credit (5,263) 1,252 645
Net increase (decrease) in short-term borrowings -- (260) 825
Proceeds from issuance of convertible notes -- -- 2,500
Proceeds from issuance of senior subordinated debt -- -- 2,500
Payments of long-term debt and capital lease obligations (537) (1,171) (3,952)
Issuance of long-term debt -- 1,154 --
Proceeds from issuance of common stock, net of issuance
costs 225,878 1,683 807
--------- ------- --------
Net cash provided by (used in) financing activities 220,078 2,658 3,325
--------- ------- --------
Elimination of net cash activities of Irvine Optical for the
three months ended December 31, 1999 14 -- --
--------- ------- --------
Elimination of net cash activities of Smart Machines for the
three months ended December 31, 1998 -- (63) --
--------- ------- --------
Elimination of net cash activities of FASTech for the three
months ended December 31, 1997 -- -- (1,761)
--------- ------- --------
Effects of exchange rate changes on cash and cash
equivalents (150) 327 (310)
--------- ------- --------
Net increase (decrease) in cash and cash equivalents 64,837 (3,130) (7,837)
Cash and cash equivalents, beginning of period 66,366 69,496 77,333
--------- ------- --------
Cash and cash equivalents, end of period $ 131,203 $66,366 $ 69,496
========= ======= ========
Supplemental disclosure of cash flow information
Cash paid during the year for interest $ 1,387 $ 1,128 $ 1,643
Cash paid during the year for income taxes, net of refunds $ 9,787 $ 1,049 $ 240
Supplemental disclosure of noncash financing and investing
activities
Deferred compensation related to stock options $ -- $ -- $ (208)
Accretion and dividends on preferred stock $ -- $ 654 $ 1,420
Conversion of senior subordinated note payable to common
stock $ 5,878 $ -- $ --
Conversion of members' capital to common stock $ 930 $ -- $ --
The accompanying notes are an integral part of these consolidated financial
statements.
45
47
BROOKS AUTOMATION, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
YEAR ENDED SEPTEMBER 30,
--------------------------------
2000 1999 1998
--------- ------- --------
(IN THOUSANDS)
The Company utilized available funds, issued common stock
and issued a note in connection with certain business
combinations during the years ended September 30, 2000 and
1999. The fair values of the assets and liabilities of the
acquired companies are presented as follows:
Assets acquired $ 14,166 $30,218 $ --
Liabilities assumed (17,364) (8,414) --
--------- ------- --------
Net assets acquired (liabilities assumed) $ (3,198) $21,804 $ --
========= ======= ========
The acquisitions were funded as follows:
Cash consideration $ 27,300 $10,447 $ --
Common stock 15,027 22,473 --
Note issued to seller 16,000 -- --
Transaction costs 2,874 1,891 --
Cash received (5,775) (7,862) --
--------- ------- --------
$ 55,426 $26,949 $ --
========= ======= ========
The accompanying notes are an integral part of these consolidated financial
statements.
46
48
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF THE BUSINESS
Brooks Automation, Inc. ("Brooks" or the "Company") is a leading supplier
of integrated tool and factory automation solutions for the global semiconductor
and related industries such as the data storage and flat panel display
manufacturing industries. The Company's product revenues include sales of
hardware and software products. The Company's service revenues are primarily
comprised of tool control application consulting services, software
customization and spare parts sales.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company
and all majority-owned subsidiaries. All significant intercompany accounts and
transactions are eliminated.
On June 23, 2000, the Company acquired the assets of MiTeX Solutions
("MiTeX"). The acquisition was accounted for using the purchase method of
accounting. The Company's Consolidated Statements of Operations and of Cash
Flows for the year ended September 30, 2000 include the results of MiTeX for the
period from July 1, 2000 to September 30, 2000. The results of operations for
MiTeX for the period from acquisition to June 30, 2000, are not material to the
consolidated results of the Company.
On May 5, 2000, the Company acquired Irvine Optical Company LLC ("Irvine
Optical") in a transaction accounted for as a pooling of interests. Accordingly,
the Company's consolidated financial statements and notes thereto have been
restated to include the financial position and results of operations of Irvine
Optical for all periods prior to the acquisition. Prior to its acquisition by
the Company, Irvine Optical's fiscal year-end was December 31. Accordingly, the
Company's consolidated balance sheet as of September 30, 1999, includes Irvine
Optical's balance sheet as of December 31, 1999, and the Company's consolidated
statements of operations for the years ended September 30, 1999 and 1998,
include Irvine Optical's results of operations for the years ended December 31,
1999 and 1998, respectively. As a result of conforming dissimilar year-ends,
Irvine Optical's results of operations for the three months ended December 31,
1999, are included in both of the Company's fiscal years 2000 and 1999. An
amount equal to Irvine Optical's net income for the three months ended December
31, 1999, was eliminated from consolidated retained earnings for the year ended
September 30, 2000. Irvine Optical's revenues and net income for that quarter
were $4.1 million and $0.1 million, respectively.
On January 6, 2000, the Company completed the acquisition of the businesses
of Auto-Soft Corporation ("ASC") and AutoSimulations, Inc. ("ASI") from Daifuku
America Corporation ("Daifuku America"), a U.S. subsidiary of Daifuku Co., Ltd.
of Japan. The acquisition was accounted for using the purchase method of
accounting. Accordingly, the Company's Consolidated Statements of Operations and
of Cash Flows for the year ended September 30, 2000 include the results of ASC
and ASI for the period subsequent to their acquisition.
On August 31, 1999 the Company completed the acquisition of Smart Machines
Inc. ("Smart Machines"). The acquisition was accounted for as a pooling of
interests. Accordingly, the results of operations and financial position of
Smart Machines are included in the Company's consolidated results for all
periods presented.
The Company made several acquisitions during the year ended September 30,
1999, which were accounted for using the purchase method of accounting: the
Infab Division ("Infab") of Jenoptik AG on September 30, 1999; Domain
Manufacturing Corporation ("Domain") on June 30, 1999 and Hanyon Technology,
Inc.
47
49
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
("Hanyon") on April 21, 1999. Accordingly, the Company's Consolidated Statements
of Operations and of Cash Flows include the results of these acquired entities
for all periods subsequent to their acquisition.
In June 1999 the Company formed a joint venture in Korea with Samsung
Electronics ("Samsung"). This joint venture is 70% owned by the Company and 30%
owned by Samsung. The Company consolidates fully the financial position and
results of operations of the joint venture and accounts for the minority
interest in the consolidated financial statements.
Certain amounts in previously issued financial statements have been
reclassified to conform to current presentation.
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 revenues and expenses during the
reporting period. Significant estimates include revenues and costs under long-
term contracts, collectibility of accounts receivable, recoverability of
depreciable assets, intangibles and deferred tax assets and the adequacy of
acquisition-related and restructuring reserves. Although the Company regularly
assesses these estimates, actual results could differ from those estimates.
Changes in estimates are recorded in the period in which they become known.
FOREIGN CURRENCY TRANSLATION
For non-U.S. subsidiaries, which operate in a local currency environment,
assets and liabilities are translated at period-end exchange rates, and income
statement items are translated at the average exchange rates for the period. The
local currency for all foreign subsidiaries is considered to be the functional
currency and accordingly, translation adjustments are reported in Accumulated
other comprehensive income (loss). To date, foreign currency translation
adjustments are the only component added to the Company's net income (loss) in
the calculation of comprehensive net income (loss).
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash and highly liquid investments with
original maturities of three months or less. At both September 30, 2000 and
1999, all cash equivalents were classified as available-for-sale and are held at
amortized cost, which approximates fair value.
MARKETABLE SECURITIES
The Company invests its excess cash in marketable debt and equity
securities. The Company records these securities in accordance with Financial
Accounting Standards Board Statement No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" ("FAS 115"). Under FAS 115,
investments in debt and equity securities classified as available for sale are
reported at fair value, while investments in debt securities classified as held
to maturity are reported at unamortized cost. Marketable securities reported as
current assets represent investments that mature within one year. Long-term
marketable securities represent investments with maturity dates greater than one
year from the balance sheet date. At the time that the maturity dates of these
investments become one year or less, the values will be reclassified to current
assets. At September 30, 2000, the Company's
48
50
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
marketable securities include U.S. Government and corporate debt securities with
maturities not exceeding 14 months.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentration
of credit risk consist primarily of trade receivables and temporary and
long-term cash investments in repurchase agreements, treasury bills,
certificates of deposit and commercial paper. The Company restricts its
investments to repurchase agreements with major banks, U.S. government and
corporate securities, and mutual funds that invest in U.S. government
securities, which are subject to minimal credit and market risk. The Company's
customers are concentrated in the semiconductor industry, and relatively few
customers account for a significant portion of the Company's revenues. The
Company regularly monitors the creditworthiness of its customers and believes
that it has adequately provided for exposure to potential credit losses.
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
Property, plant and equipment are stated at cost less accumulated
depreciation. Depreciation is computed principally by use of the straight-line
method. Depreciable lives are summarized below:
Buildings 20 years
Computer equipment and software 2 - 6 years
Machinery and equipment 2 - 7 years
Furniture and fixtures 3 - 10 years
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. Equipment used for demonstrations to
customers is included in machinery and equipment and is depreciated over its
estimated useful life. Repair and maintenance costs are expensed as incurred.
INTANGIBLE ASSETS
Patents include capitalized direct costs associated with obtaining patents
as well as assets that were acquired as a part of purchase business
combinations. Capitalized patent costs are amortized using the straight-line
method over the shorter of seven years or the estimated economic life of the
patents. The fair value of acquired patents are amortized over three years using
the straight-line method. As of September 30, 2000 and 1999, the net book value
of the Company's patents was $4.1 million and $6.1 million, respectively.
49
51
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Costs incurred in the research and development of the Company's products
are expensed as incurred, expect for certain software development costs.
Software development costs are expensed prior to establishing technological
feasibility and capitalized thereafter until the 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. As of both September 30, 2000 and 1999, the net
book value of the Company's capitalized software was $0.6 million.
Goodwill represents the excess of purchase price over the fair value of net
tangible and identifiable intangible assets of businesses the Company has
acquired. As of September 30, 2000 and 1999, the net book value of goodwill was
$43.4 million and $10.1 million, respectively.
Amortization expense for all intangible assets was $19.5 million and $1.3
million for the years ended September 30, 2000 and 1999, respectively.
Whenever events or changes in circumstances indicate that the carrying
amount of an intangible asset may not be recoverable, the Company evaluates the
carrying value of intangible assets to determine if impairment exists. This
evaluation is based upon estimated undiscounted future cash flows, net of taxes,
over the remaining useful life of the assets. The impairment, if any, will be
measured by the difference between carrying value and estimated discounted
future cash flows, net of taxes, and will be charged to expense in the period
identified.
The amortizable lives of intangible assets, including those identified as a
result of purchase accounting, are summarized as follows:
Patents 3 - 7 years
Completed technology 5 years
License agreements 5 years
Trademarks and trade names 5 years
Non-competition agreements 5 years
Assembled workforces 3 years
Customer relationships 4 years
Goodwill 3 - 15 years
REVENUE RECOGNITION
Revenue from product sales and software license sales is recorded upon
transfer of title and risk of loss to the customer provided that no significant
obligations remain and collection of the related receivable is probable. A
provision for product warranty costs is recorded to estimate costs associated
with such warranty liabilities. In the event significant post-shipment
obligations or uncertainties remain, revenue is deferred and recognized when
such obligations are fulfilled by the Company or the uncertainties are resolved.
Revenue from services is recognized as the services are rendered. Revenue
from fixed fee application consulting contracts is recognized using the
percentage-of-completion method of contract accounting based on the ratio that
costs incurred to date bear to estimated total costs at completion. Revisions in
revenue and cost estimates are recorded in the periods in which the facts that
require such revisions become known. Losses, if any, are provided for in the
period in which such losses are first identified by management. For maintenance
contracts, service revenue is recognized ratably over the term of the
maintenance contract.
50
52
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
STOCK-BASED COMPENSATION
The Company's employee stock compensation plans are accounted for in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," ("APB 25") and related interpretations. Under this
method, no compensation expense is recognized as long as the exercise price
equals the market price of the underlying stock on the date of the grant. The
Company elected the disclosure-only alternative permitted under statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," ("FAS 123") for fixed stock-based awards to employees. All
non-employee stock-based awards are accounted for in accordance with FAS 123.
INCOME TAXES
Deferred income tax assets and liabilities are recognized for the expected
future tax consequences, utilizing current tax rates, of temporary differences
between the carrying amounts and the tax bases of assets and liabilities.
Deferred tax assets are recognized, net of any valuation allowance, for the
estimated future tax effects of deductible temporary differences and tax
operating loss and credit carryforwards. Deferred income tax expense or benefit
represents the change in the net deferred tax asset and liability balances.
EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is calculated based on the weighted average
number of common shares outstanding during the period. Diluted earnings per
share is calculated based on the weighted average number of common shares and
dilutive common equivalent shares assumed outstanding during the period. Shares
used to compute diluted earnings per share in loss years exclude common share
equivalents, as their inclusion would have an anti-dilutive effect. The
Company's net income (loss), for purposes of calculating basic and diluted
earnings per share, has been adjusted by dividends and accretion related to the
Company's preferred stock.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and cash equivalents,
investments in long- and short-term debt securities and long- and short-term
debt. The carrying amounts reported in the balance sheets for cash and cash
equivalents, investments debt securities classified as available for sale and
the Company's long- and short-term debt approximate their fair value at both
September 30, 2000 and 1999. The carrying amounts reported for investments in
debt securities classified as held-to-maturity are reported at unamortized cost,
which equals fair value, as the debt securities are not discounted upon
purchase.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44 ("FIN 44"), "Accounting for Certain Transactions Involving
Stock Compensation -- an interpretation of APB Opinion No. 25". FIN 44 clarifies
the application of APB Opinion No. 25 ("APB 25"), including the following: the
definition of an employee for purposes of applying APB 25; the criteria for
determining whether a plan qualifies as a non-compensatory plan; the accounting
consequences of various modifications to the terms of previously fixed stock
options or awards; and the accounting for an exchange of stock compensation
awards in a business combination. FIN 44 is effective July 1, 2000, but certain
conclusions in FIN 44 cover specific events that occurred after either December
15, 1998 or January 12, 2000. Application of this pronouncement has not had a
material impact on the Company's financial position or results of operations.
51
53
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In December 1999, the U.S. Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in
Financial Statements". SAB 101 summarizes the SEC's views in applying generally
accepted accounting principles to selected revenue recognition issues in
financial statements. In June 2000, the SEC issued Staff Accounting Bulletin No.
101B, an amendment to SAB 101, which delays the implementation of SAB 101. The
application of the guidance in SAB 101 will now be required in the Company's
fourth quarter of fiscal 2001. The Company is currently determining the impact
that SAB 101 may have on its financial position and results of operations.
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133").
This statement was amended by the issuance of Statement No. 137, "Deferral of
the Effective Date of FASB Statement No. 133", which changed the effective date
of FAS 133 to all fiscal years beginning after June 15, 2000 (fiscal 2001 for
the Company) and requires that all derivative instruments be recorded on the
balance sheet at their fair value. This statement was further amended by
Statement No. 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activities -- an Amendment of FASB Statement No. 133". Changes in the
fair value of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivatives is designated as part
of a hedge transaction and, if it is, the type of hedge transaction. The
Company's management anticipates that the adoption of FAS 133 will not have a
significant effect on the Company's results or operations or financial position,
as the Company currently does not utilize derivative instruments.
3. BUSINESS ACQUISITIONS
MiTEX
On June 23, 2000, the Company acquired substantially all of the assets of
MiTeX. MiTeX, located in Canton, Michigan, provides run-to-run controller
technology. In consideration, the Company paid $300,000 cash, 5,486 shares of
its common stock and the potential for an additional amount ("royalties") of up
to $5.0 million in the aggregate over the next five years. The royalties will be
calculated at the end of each fiscal year based on net revenue and gross margin
performance of the MiTeX business unit. These royalties will be recorded to Cost
of product revenues in the year that the costs are incurred. Amounts recorded to
Cost of product revenues in the year ended September 30, 2000 were immaterial.
The acquisition was accounted for using the purchase method of accounting in
accordance with Accounting Principles Board Opinion No. 16, "Business
Combinations" ("APB 16").
IRVINE OPTICAL
On May 5, 2000, the Company acquired Irvine Optical in exchange for 309,013
shares of Brooks common stock. The acquisition was accounted for as a pooling of
interests. Irvine Optical is engaged principally in the design, engineering and
manufacturing of wafer handling and inspection equipment for sale primarily to
the semiconductor industry. In connection with this acquisition, the Company
incurred $0.6 million of costs, consisting primarily of transaction costs to
effect the acquisition.
The accompanying consolidated financial statements and notes thereto have
been restated to include the financial position and results of operations for
Irvine Optical for all periods prior to the acquisition. As a result of
conforming dissimilar year-ends, Irvine Optical's results of operations for the
three months ended December 31, 1999, are included in both of the Company's
fiscal years 2000 and 1999. Accordingly, an amount equal to Irvine Optical's net
income for the three months ended December 31, 1999, was eliminated from
consolidated retained
52
54
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
earnings for the year ended September 30, 2000. Irvine Optical's revenues and
net income for that quarter were $4.1 million and $0.1 million, respectively.
The results of operations previously reported by the separate companies and
the combined amounts presented in the accompanying Consolidated Statements of
Operations are as follows:
SIX MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, ------------------------
2000 1999 1998
---------- ---------- ----------
Revenues
Brooks Automation, Inc. $123,290 $103,906 $100,252
Irvine Optical LLC 10,663 11,049 17,038
-------- -------- --------
$133,953 $114,955 $117,290
======== ======== ========
Net income (loss)
Brooks Automation, Inc. $ 4,317 $ (7,884) $(22,563)
Irvine Optical LLC 560 (1,958) (752)
-------- -------- --------
$ 4,877 $ (9,842) $(23,315)
======== ======== ========
ASC/ASI
On January 6, 2000, the Company completed the acquisition of the businesses
of ASC and ASI from Daifuku America. ASC is a material handling software and
systems integration company focusing on manufacturing and distribution of
logistic systems for the semiconductor industry. ASI develops, markets and sells
robotic and material handling simulation, scheduling and real time dispatching
software for the semiconductor industry. At closing, the Company paid $27.0
million in cash, issued 535,404 shares of Brooks common stock with a value of
$14.7 million and issued a $16.0 million promissory note payable in one year,
bearing interest at a rate of 4.0% per annum. The acquisition was accounted for
using the purchase method of accounting in accordance with APB 16.
A summary of the acquisition follows (in thousands):
Consideration:
Cash, net of cash acquired of $5,775 $21,225
Common stock 14,727
Promissory note 16,000
Transaction costs 2,498
-------
Total consideration 54,450
Estimated fair value of net liabilities assumed 3,198
-------
Excess of purchase price over fair value of net liabilities
assumed $57,648
=======
The excess of purchase price over the fair value of net liabilities assumed
and identifiable intangible assets has been recorded based on a preliminary
price allocation. Finalization of the allocation of the purchase price to assets
acquired and liabilities assumed will be made after analysis of their fair
values. Any reduction in purchase price resulting from this analysis will be
recognized at the time of settlement.
53
55
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A portion of the excess of purchase price over the fair value of net
liabilities assumed was allocated to certain identifiable intangible assets
based on the report of an independent appraiser. The balance of the excess was
recorded as goodwill. The allocation of the $57.6 million of excess of purchase
price over the fair value of net liabilities assumed to specific intangible
assets and their estimated useful lives is as follows (dollars in thousands):
ALLOCATION ESTIMATED USEFUL LIFE
---------- ---------------------
Completed technology $ 4,505 5 years
Customer relationships 1,305 4 years
Trademarks and trade names 1,564 5 years
Non-competition agreement 1,033 5 years
Assembled workforces 5,880 3 years
Goodwill 43,361 3 years
-------
$57,648
=======
The following pro forma results of operations have been prepared as though
the acquisition had occurred as of the beginning of the fiscal year prior to the
acquisition. This pro forma financial information does not purport to be
indicative of the results of operations that would have been attained had the
acquisition been made as of those dates or of results of operations that may
occur in the future (in thousands except per share data):
YEAR ENDED SEPTEMBER 30,
------------------------
2000 1999
---------- ----------
(UNAUDITED)
Revenues $326,991 $163,532
Net income (loss) $ 5,554 $(31,124)
Net income (loss) attributable to common stockholders $ 5,554 $(31,778)
Net income (loss) per share attributable to common
stockholders $ 0.34 $ (2.71)
INFAB
On September 30, 1999, the Company acquired certain assets of Infab in
exchange for 914,286 shares of the Company's common stock. Infab is a worldwide
supplier of advanced factory automation systems headquartered in Germany. The
assets purchased principally included fixed assets, inventory, receivables,
patents and intellectual property.
A summary of the acquisition follows:
Consideration:
Common stock $22,473
Transaction costs 1,127
-------
Total consideration 23,600
Fair value of net tangible assets acquired 12,033
Fair value of identifiable intangible assets 5,154
-------
Excess of purchase price over fair value of net tangible and
identifiable intangible assets acquired $ 6,413
=======
54
56
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As part of the preliminary purchase price allocation recorded at September
30, 1999, the Company had established an accrual of $2.7 million related
primarily to severance costs and costs to exit certain duplicate facilities.
During the year ended September 30, 2000, review of these accruals determined
that the accruals were not required due to changed conditions and circumstances
subsequent to the preliminary purchase price allocation. Accordingly, these
accruals were reversed and recorded as a purchase accounting adjustment to
goodwill. Additionally, during the year ended September 30, 2000, the Company
finalized its evaluation of the fair value of assets acquired and liabilities
assumed. This evaluation resulted in a reduction to the value of net tangible
assets acquired of $7.1 million, primarily related to inventories and accounts
receivable, and resulting in an increase to goodwill for the same amount.
SMART MACHINES
On August 31, 1999, the Company acquired Smart Machines and issued 496,640
shares of common stock in exchange for all of the outstanding common and
preferred shares of Smart Machines Inc. ("Smart Machines"). The transaction was
accounted for as a pooling of interests. Smart Machines is located in San Jose,
California, and manufactures direct drive Selectively Compliant Assembly Robot
Arm ("SCARA") atmospheric and vacuum robots. In connection with this
acquisition, the Company incurred $1.2 million of costs, consisting primarily of
transaction costs to affect the acquisition. As a result of conforming
dissimilar year-ends, Smart Machines' results of operations for the three months
ended December 31, 1998, are included in both of the Company's fiscal years 1999
and 1998. Accordingly, an amount equal to Smart Machines' net loss applicable to
common stockholders for the three months ended December 31, 1998, was eliminated
from consolidated retained earnings for the year ended September 30, 1999. Smart
Machines' revenues, net loss and net loss applicable to common stockholders for
that quarter were $0.2 million, $1.4 million and $1.6 million, respectively.
FASTECH
On September 30, 1998, the Company acquired FASTech and issued 852,428
shares of common stock in exchange for all of the outstanding common and
preferred shares of FASTech. In connection with this acquisition, the Company
incurred $2.4 million of costs, consisting primarily of transaction costs to
effect the acquisition and costs to exit duplicate facilities. As a result of
conforming dissimilar year-ends, FASTech's results of operations for the three
months ended December 31, 1997 (including revenues, operating loss and net loss
of $5.0 million, $1.0 million and $2.8 million, respectively), are included in
both of the Company's fiscal years 1998 and 1997. Accordingly, an amount equal
to FASTech's net loss for the three months ended December 31, 1997, was
eliminated from consolidated retained earnings for the year ended September 30,
1998.
4. EARNINGS (LOSS) PER SHARE
The following table is a summary of net income (loss) applicable to common
stockholders used in the calculation of basic and diluted earnings (loss) per
share (in thousands):
YEAR ENDED SEPTEMBER 30,
-------------------------------
2000 1999 1998
------- -------- --------
Net income (loss) $12,753 $ (9,842) $(23,315)
Accretion and dividends on preferred stock -- (654) (1,420)
------- -------- --------
Net income (loss) applicable to common stockholders $12,753 $(10,496) $(24,735)
======= ======== ========
55
57
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table is a summary of shares used in calculating basic and
diluted earnings (loss) per share (in thousands):
YEAR ENDED SEPTEMBER 30,
--------------------------
2000 1999 1998
------ ------ ------
Weighted average shares used in computing basic earnings
(loss) per share 15,224 11,192 10,337
Dilutive securities:
Common stock options and warrants 1,127 -- --
------ ------ ------
Shares used in computing diluted earnings (loss) per
share 16,351 11,192 10,337
====== ====== ======
Options to purchase approximately 291,000 shares of common stock were
excluded from the computation of diluted income per share for the year ended
September 30, 2000, as their effect would be anti-dilutive. However, these
options could become dilutive in future periods. Options and warrants to
purchase approximately 774,000 and 635,000 shares of common stock were excluded
from the computation of diluted loss per share for the years ended September 30,
1999 and 1998, respectively, as their effect would be anti-dilutive.
5. INCOME TAXES
The components of the income tax provision (benefit) are as follows (in
thousands):
YEAR ENDED SEPTEMBER 30,
-------------------------------
2000 1999 1998
------- -------- --------
Current:
Federal $ 8,621 $ 272 $ (887)
State 1,177 66 5
Foreign 7,737 1,664 (212)
------- -------- --------
17,535 2,002 (1,094)
------- -------- --------
Deferred:
Federal (5,017) (2,403) (3,031)
State 134 (429) (554)
Foreign 101 (185) (2)
------- -------- --------
(4,782) (3,017) (3,587)
------- -------- --------
$12,753 $ (1,015) $ (4,681)
======= ======== ========
The components of income (loss) before income taxes, but including minority
interests, are as follows (in thousands):
YEAR ENDED SEPTEMBER 30,
-------------------------------
2000 1999 1998
------- -------- --------
Domestic $18,992 $(13,010) $(27,632)
Foreign 6,514 2,153 (364)
------- -------- --------
$25,506 $(10,857) $(27,996)
======= ======== ========
56
58
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The significant components of the net deferred tax asset are as follows (in
thousands):
YEAR ENDED SEPTEMBER 30,
------------------------------
2000 1999 1998
------- -------- -------
Reserves not currently deductible $20,377 $ 7,227 $ 4,818
Federal and state tax credits 8,182 5,081 4,397
Capitalized research and development 1,895 2,894 1,953
Net operating loss carryforwards 6,407 6,525 6,255
Other -- -- 444
------- -------- -------
Gross deferred tax asset 36,861 21,727 17,867
------- -------- -------
Depreciation and amortization 5,088 174 881
Other 119 -- 34
------- -------- -------
Gross deferred tax liability 5,207 174 915
------- -------- -------
Valuation reserve 5,548 10,993 9,405
------- -------- -------
Net deferred tax asset $26,106 $ 10,560 $ 7,547
======= ======== =======
The differences between the income tax provision (benefit) and income taxes
computed using the applicable U.S. statutory federal tax rate are as follows (in
thousands):
YEAR ENDED SEPTEMBER 30,
-----------------------------
2000 1999 1998
------- ------- -------
Taxes computed at federal statutory rate $ 8,927 $(3,115) $(9,536)
State income taxes, net of federal tax benefit 852 (235) (494)
Research and development tax credits (1,061) (544) (840)
Foreign sales corporation tax benefit (474) -- --
Foreign income taxed at different rates 1,157 (81) 266
Nondeductible transaction expenses 379 371 195
Change in deferred tax asset valuation allowance (447) 1,588 3,795
Permanent differences 298 309 90
Elimination of FASTech provision -- -- 1,334
Nondeductible amortization of goodwill 3,751 -- --
Foreign tax credit carryforwards (2,754) -- --
Withholding taxes 2,125 807 --
Other -- (115) 509
------- ------- -------
$12,753 $(1,015) $(4,681)
======= ======= =======
The Company does not provide for U.S. income taxes applicable to
undistributed earnings of its foreign subsidiaries since these earnings are
indefinitely reinvested. A valuation allowance has been established for certain
of the future domestic income tax benefits primarily related to Research and
Development and Foreign Tax Credits based on management's assessment that it is
more likely than not that such benefits will not be realized. The Company's
valuation allowance decreased $5.4 million to $5.5 million at September 30,
2000.
57
59
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As of September 30, 2000, the Company had federal and state net operating
losses of approximately $22.0 million and federal and state research and
development tax credit carryforwards of approximately $4.2 million and foreign
tax credit carryforwards of approximately $4.0 million available to reduce
future tax liabilities, which expire at various dates through 2020. The ultimate
realization of the remaining loss carryforwards is dependent upon the generation
of sufficient taxable income in respective jurisdictions.
6. FINANCING ARRANGEMENTS
On January 7, 2000, the Company entered into an agreement for an unsecured
revolving credit facility with ABN AMRO Bank N.V. ("ABN AMRO") and other lending
institutions. The two-year facility provided for borrowings and letters of
credit of up to $30.0 million. The Company replaced this facility with a $10.0
million uncommitted demand promissory note credit facility with ABN AMRO on May
2, 2000. The new facility is payable on demand or on December 31, 2001,
whichever occurs first. ABN AMRO is not obligated to extend loans or issue
letters of credit under this facility. The interest rates for borrowings and
letters of credit under the facility are expressed in relation to LIBOR and a
margin of 1.75%, or at 0.75% above ABN AMRO's base rate. Approximately $1.1
million in face amount of letters of credit outstanding under the original
facility were transferred to the replacement facility. At September 30, 2000,
$1.3 million of the facility was in use, all of it for letters of credit.
In connection with the acquisition of ASC and ASI, the Company issued a
promissory note to Daifuku America in the amount of $16.0 million, bearing
interest at 4.0% per annum. The interest on the note is being paid quarterly,
with the principal payment of $16.0 million due on January 6, 2001.
At the time of its acquisition by the Company, Irvine Optical had a
revolving line of credit agreement that allowed Irvine Optical to borrow up to
$7.2 million based upon a borrowing base of eligible accounts receivable and
inventory. Subsequent to its acquisition of Irvine Optical, the Company repaid
Irvine Optical's revolving credit facility.
Long-term debt consists of the following (in thousands):
SEPTEMBER 30,
--------------
2000 1999
---- ------
Senior subordinated note payable $ -- $5,878
Credit facility for working capital borrowings at 8.92% per
annum, secured by assets 775 1,209
Capital lease obligations at rates of 5.0% to 21.0% per
annum, secured by certain fixed assets, expiring at
various dates through November 2000 26 129
---- ------
801 7,216
Less current portion 519 537
---- ------
Long-term debt $282 $6,679
==== ======
In 1997, Irvine Optical issued a senior subordinated note payable to a
private lender in the amount of $3.2 million. The senior subordinated note was
subsequently amended several times. At the time of its acquisition by the
Company, Irvine Optical's outstanding balance on the senior subordinated note
payable was $5.9 million. This outstanding balance was converted into the
Company's common stock on May 5, 2000, in conjunction with the acquisition of
Irvine Optical.
58
60
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In November 1998, Smart Machines entered into a loan and security agreement
with a leasing company. The agreement allowed for working capital borrowings of
up to $2.0 million and equipment loans of up to $0.5 million. The ability to
borrow against this facility expired on December 31, 1999. All borrowings are
collateralized by Smart Machines' assets and have stated interest rates of 8.92%
and 8.63% per year for working capital borrowings and equipment loans,
respectively. At September 30, 2000, the Company had working capital loans of
$0.8 million outstanding, maturing through April 2002. The loans are payable in
monthly installments of principal and interest, with a 10.0% principal payback
due at the time of the final payment. Annual principal payments due under these
notes are $0.5 million and $0.3 million in the years ended September 30, 2001
and 2002, respectively.
7. POSTRETIREMENT BENEFITS
The Company sponsors defined contribution plans that meet the requirements
of Section 401(k) of the Internal Revenue Code. All United States employees of
the Company who meet minimum age and service requirements are eligible to
participate in the plan. The plan allows employees to invest, on a pre-tax
basis, a percentage of their annual salary subject to statutory limitations. The
Company's contribution expense was $1.1 million, $0.2 million and $0.2 million
in the years ended September 30, 2000, 1999 and 1998, respectively.
8. STOCKHOLDERS' EQUITY
PREFERRED STOCK
At September 30, 2000 and 1999, there were one million shares of preferred
stock, $0.01 par value per share authorized; however, none were issued or
outstanding. Preferred stock may be issued at the discretion of the Board of
Directors without stockholder approval with such designations, rights and
preferences as the Board of Directors may determine.
COMMON STOCK OFFERING
On March 7, 2000, the Company completed a public offering of 3,250,000
shares of its common stock, of which 2,750,000 shares were offered by the
Company and 500,000 were offered by selling stockholders. The Company realized
proceeds, net of $12.9 million of issuance costs, of $220.5 million on the sale
of the initial 2,750,000 shares and the additional 320,500 shares purchased by
the underwriters from the Company on March 23, 2000 to cover over-allotments of
shares. The Company did not receive any proceeds from the sale of shares by the
selling stockholders.
WARRANTS
In connection with debt it had issued prior to its acquisition by the
Company, Smart Machines had issued warrants to purchase 10,000 shares of its
Series C preferred stock, 57,182 shares of its Series D preferred stock, 961,234
shares of its Series E stock and 42,658 shares of its common stock. These
warrants were converted into warrants to purchase the Company's common stock on
August 31, 1999, in conjunction with the acquisition of Smart Machines. As of
September 30, 2000, there were 84,691 warrants outstanding at an exercise price
of $25.56 per share, all of which expire on May 30, 2001. At September 30, 1999,
and 93,220 warrants were outstanding, of which 699 were exercisable at $42.67
per share and 92,521 were exercisable at $25.56 per share.
59
61
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
RIGHTS DISTRIBUTION
In July 1997, the Board of Directors declared a dividend of one preferred
purchase right (a "right") for each share of common stock outstanding on August
12, 1997. Each right entitles the registered holder to purchase from the
Company, upon certain triggering events, one one-thousandth of a share of Series
A Junior Participating Preferred Stock (the "Series A Preferred Shares"), par
value $0.01 per share, of the Company, at a purchase price of $135.00 per one
one-thousandth of a Series A Preferred Share, subject to adjustment. Redemption
of the rights could generally discourage a merger or tender offer involving the
securities of the Company that is not approved by the Company's Board of
Directors by increasing the cost of effecting any such transaction and,
accordingly, could have an adverse impact on stockholders who might want to vote
in favor of such merger or participate in such tender offer. The rights will
expire on the earlier of July 31, 2007 or the date on which the rights are
redeemed. The terms of the rights may generally be amended by the Board of
Directors without the consent of the holders of the rights.
9. STOCK PLANS
2000 COMBINATION STOCK OPTION PLAN
The purposes of the 2000 Combination Stock Option Plan (the "2000 Plan"),
adopted by the Board of Directors of the Company in February 2000, are to
attract and retain employees and to provide an incentive for them to assist the
Company to achieve long-range performance goals and to enable them to
participate in the long-term growth of the Company. Under the 2000 Plan the
Company may grant (i) incentive stock options intended to qualify under Section
422 of the Internal Revenue Code of 1986, as amended; and (ii) options that are
not qualified as incentive stock options ("nonqualified stock options"). All
employees of the Company or any affiliate of the Company are eligible to
participate in the 2000 Plan. Options under the 2000 Plan generally vest over
four years and expire seven years from the date of grant. A total of 1,000,000
shares of common stock were reserved for issuance under the 2000 Plan. Of these
shares, 388,206 shares are outstanding and 611,794 shares remain available for
grant as of September 30, 2000.
1998 EMPLOYEE EQUITY INCENTIVE PLAN
The purposes of the 1998 Employee Equity Incentive Plan (the "1998 Plan"),
adopted by the Board of Directors of the Company in April 1998, are to attract
and retain employees and provide an incentive for them to assist the Company in
achieving long-range performance goals, and to enable them to participate in the
long-term growth of the Company. All employees of the Company, other than its
officers and directors, (including contractors, consultants, service providers
or others) who are in a position to contribute to the long-term success and
growth of the Company, are eligible to participate in the 1998 Plan. A total of
2,300,000 shares of common stock have been reserved for issuance under the 1998
Plan. Of these shares, options on 1,931,325 shares are outstanding and 285,438
shares remain available for grant as of September 30, 2000. In order to align
the 1998 Plan with its current practices, in January 2000, the Board of
Directors amended the 1998 Plan to eliminate the Company's ability to award
nonqualified stock options with exercise prices at less than fair market value.
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 750,000 shares during six-month offering
periods
60
62
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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. As of
September 30, 2000, 201,277 shares of common stock have been purchased under the
1995 Plan and 548,723 remain available for purchase.
1993 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The purpose of the 1993 Non-Employee Director Stock Option Plan (the
"Directors Plan") is to attract and retain the services of experienced and
knowledgeable independent directors of the Company for the benefit of the
Company and its stockholders and to provide additional incentives for such
independent directors to continue to work for the best interests of the Company
and its stockholders through continuing ownership of its common stock. Each
director who is not an employee of the Company or any of its subsidiaries is
eligible to receive options under the Directors Plan. Under the Directors Plan,
each eligible director receives an automatic grant of an option to purchase
10,000 shares of common stock upon becoming a director of the Company and an
option to purchase 5,000 shares on July 1 each year thereafter. Options granted
under the Directors Plan generally vest over a period of five years and
generally expire ten years from the date of grant. A total of 190,000 shares of
common stock has been reserved for issuance under the Directors Plan. Of these
shares, options on 71,000 shares are outstanding and 71,000 shares remain
available for grant as of September 30, 2000.
1992 COMBINATION STOCK OPTION PLAN
Under the Company's 1992 Stock Option Plan (the "1992 Plan"), the Company
may grant both incentive stock options ("incentive stock options") intended to
qualify under Section 422 of the Internal Revenue Code of 1986, as amended, and
other options which are not qualified as incentive stock options ("nonqualified
stock options"). Incentive stock options may only be granted to persons who are
employees of the Company at the time of grant, which may include officers and
directors who are also employees. Nonqualified stock options may be granted to
persons who are officers, directors or employees of or consultants or advisors
to the Company or persons who are in a position to contribute to the long-term
success and growth of the Company at the time of grant. Options granted under
the 1992 Plan generally vest over a period of four years and generally expire
ten years from the date of grant. A total of 1,950,000 shares of common stock
has been reserved for issuance under the 1992 Plan. Of these shares, options on
898,172 shares are outstanding and 56,514 shares remain available for grant as
of September 30, 2000.
STOCK OPTIONS OF ACQUIRED COMPANY
In connection with the acquisition of FASTech, the Company assumed 80,351
options in September 1998. These assumed options were granted at prices equal to
the fair value at the date of grant, become exercisable in installments
(generally ratably over five years) and expire ten years from the date of grant.
The Company does not intend to issue any additional options under the FASTech
stock option plans. As of September 30, 2000, 26,710 options are outstanding.
61
63
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
STOCK OPTION ACTIVITY AND PRO FORMA INFORMATION
Aggregate stock option activity for all plans for the years ended September
30, 2000, 1999 and 1998, is as follows:
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------------------------
2000 1999 1998
--------------------- --------------------- ---------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- -------- --------- -------- --------- --------
Options outstanding at
beginning of year 1,975,482 $15.33 1,059,155 $ 8.47 1,274,245 $ 8.20
Granted 2,072,281 $35.96 1,331,746 $18.31 172,710 $17.75
Exercised (488,812) $ 8.83 (298,948) $ 3.77 (70,229) $ 3.01
Canceled (243,538) $25.73 (116,471) $16.75 (317,571) $13.64
--------- --------- ---------
Options outstanding at end
of year 3,315,413 $28.41 1,975,482 $15.33 1,059,155 $ 8.47
========= ========= =========
Options exercisable at end
of year 375,508 $15.66 465,152 $ 7.32 553,063 $ 4.71
========= ========= =========
Weighted average fair value
of options granted during
the period $26.24 $13.07 $ 9.72
Options available for
future grant 1,024,746
=========
Pro forma information regarding net income and earnings per share is
required by FAS 123, and has been calculated as if the Company had accounted for
its employee stock options and stock purchase plan under the fair value method
of that Statement. The fair value of each option grant was estimated on the date
of grant; the fair value of each employee stock purchase was estimated on the
commencement date of each offering period using the Black-Scholes option pricing
model with the following assumptions:
YEAR ENDED SEPTEMBER 30,
--------------------------------------
2000 1999 1998
---------- ---------- ----------
Risk-free interest rate 6.3% - 6.6% 5.5% - 6.3% 5.5% - 6.3%
Volatility 103% 100% 100%
Expected life (years) -- options 4.0 4.0 4.0
Expected life (years) -- Employee Stock Purchase
Plan 0.5 0.5 0.5
Dividend yield 0% 0% 0%
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because
62
64
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
changes in the subjective input assumptions can materially affect the fair value
estimate, in management's opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its employee stock
options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows (in thousands, except earnings per share
information):
YEAR ENDED SEPTEMBER 30,
------------------------------
2000 1999 1998
------ -------- --------
Pro forma net income (loss) $8,361 $(12,897) $(25,831)
Pro forma net income (loss) per share
Basic $ 0.55 $ (1.15) $ (2.50)
Diluted $ 0.51 $ (1.15) $ (2.50)
Because most options vest over several years and additional option grants
are expected to be made subsequent to September 30, 2000, the results of
applying the fair value method may have a materially different effect on pro
forma net income in future years.
The following table summarizes information about stock options outstanding
at September 30, 2000:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------- --------------------------
WEIGHTED-AVERAGE
REMAINING
RANGE OF CONTRACTUAL LIFE WEIGHTED-AVERAGE WEIGHTED-AVERAGE
EXERCISE PRICES SHARES (YEARS) EXERCISE PRICE SHARES EXERCISE PRICE
- ------------------- --------- ---------------- ---------------- ------- ----------------
$ 0.8330 - $1.6700 16,750 2.58 $ 1.1075 16,750 $ 1.1075
$ 2.2100 - $2.2130 53,250 3.89 $ 2.2129 53,250 $ 2.2129
$ 4.7070 - $10.5000 212,646 7.93 $ 9.6174 29,309 $ 9.5611
$11.0000 120,417 5.82 $11.0000 75,392 $11.0000
$11.7500 - $14.6250 365,631 7.95 $14.1106 51,873 $13.6968
$14.7500 - $21.7500 438,056 8.75 $19.8078 61,929 $21.1136
$21.8750 - $27.2500 300,065 8.55 $26.9264 71,291 $26.8925
$27.7500 - $30.2500 936,612 9.26 $30.1238 1,000 $27.8125
$31.4375 - $39.7500 478,219 7.20 $39.2836 -- $ --
$40.0000 - $68.0000 354,367 7.25 $53.1650 14,714 $45.7138
$69.2500 - $78.8750 39,100 9.43 $74.4512 -- $ --
$83.3750 300 6.55 $83.3750 -- $ --
- ------------------- --------- ---- -------- ------- --------
$ 0.8330 - $83.3750 3,315,413 8.14 $28.4124 375,508 $15.6631
========= =======
10. ACQUISITION-RELATED AND RESTRUCTURING COSTS AND ACCRUALS
During the year ended September 30, 2000, the Company recorded
acquisition-related costs of $0.6 million, primarily for legal, accounting and
other costs associated with acquiring Irvine Optical.
63
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BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
During the year ended September 30, 1999, the Company recorded
acquisition-related and restructuring costs of $3.1 million, including $1.2
million of legal, accounting and other costs associated with acquiring Smart
Machines. In addition, the Company approved and implemented a restructuring
program designed to integrate its fiscal 1999 acquisitions. These actions
involved 7 employees, all of whom were terminated prior to September 30, 1999,
and the write-off of certain fixed assets prior to September 30, 1999.
Accordingly, during fiscal 1999, the Company recorded a charge of $1.9 million
related to the restructuring program. The Company also recorded $2.9 million of
costs in purchase accounting transactions consisting of $2.0 million for
severance costs principally related to former Infab employees, $0.6 million to
exit certain duplicate facilities and $0.3 million for other related costs.
During the year ended September 30, 1998, the Company approved and
implemented a restructuring program designed to align the Company's cost
structure with lower revenue levels indicative of the decline in that period in
demand for semiconductor equipment. These actions involved approximately 120
employees, all of whom were terminated prior to September 30, 1998. Accordingly,
the Company recorded a charge of $1.3 million for employee severance costs. The
Company also recorded charges of $2.4 million in connection with its acquisition
of FASTech. This charge is comprised of $1.4 million to exit duplicate
facilities, principally, FASTech's former headquarters facility, and $1.0
million for legal, accounting and other costs in connection with the
acquisition.
Periodically, the accruals related to the restructuring and
acquisition-related charges are reviewed and compared to their respective
requirements. As a result of those reviews, the accruals are adjusted for
changes in cost and timing assumptions of previously approved and recorded
initiatives. During the year ended September 30, 2000, review of these accruals
identified $2.7 million of excess reserves which had initially been recorded as
part of the purchase accounting for Infab. The reversal of these reserves was
recorded as a purchase accounting adjustment to Infab goodwill.
The activity related to the Company's acquisition-related and restructuring
accruals is below (in thousands):
FISCAL 2000 ACTIVITY
----------------------------------------------------------------------
NEW INITIATIVES
BALANCE --------------------- BALANCE
SEPTEMBER 30, PURCHASE SEPTEMBER 30,
1999 EXPENSE ACCOUNTING UTILIZATION 2000
------------- ------- ---------- ----------- -------------
Facilities $1,325 $ -- $ (450) $ (368) $507
Depreciable assets -- -- -- -- --
Workforce-related 2,332 -- (2,000) (312) 20
Other 211 578 (200) (578) 11
------ ---- ------- ------- ----
$3,868 $578 $(2,650) $(1,258) $538
====== ==== ======= ======= ====
64
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BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FISCAL 1999 ACTIVITY
----------------------------------------------------------------------
NEW INITIATIVES
BALANCE --------------------- BALANCE
SEPTEMBER 30, PURCHASE SEPTEMBER 30,
1998 EXPENSE ACCOUNTING UTILIZATION 1999
------------- ------- ---------- ----------- -------------
Facilities $1,294 $ -- $ 630 $ (599) $1,325
Depreciable assets -- 1,628 20 (1,648) --
Workforce-related 238 332 2,000 (238) 2,332
Other 722 1,160 200 (1,871) 211
------ ------ ------ ------- ------
$2,254 $3,120 $2,850 $(4,356) $3,868
====== ====== ====== ======= ======
FISCAL 1998 ACTIVITY
----------------------------------------------------------------------
NEW INITIATIVES
BALANCE --------------------- BALANCE
SEPTEMBER 30, PURCHASE SEPTEMBER 30,
1997 EXPENSE ACCOUNTING UTILIZATION 1998
------------- ------- ---------- ----------- -------------
Facilities $-- $1,400 $-- $ (106) $1,294
Depreciable assets -- -- -- -- --
Workforce-related -- 1,300 -- (1,062) 238
Other -- 1,022 -- (300) 722
-- ------ -- ------- ------
$-- $3,722 $-- $(1,468) $2,254
== ====== == ======= ======
11. SEGMENT AND GEOGRAPHIC INFORMATION
The Company has two reportable segments: automation systems and factory
automation solutions. The automation systems segment provides a full complement
of semiconductor wafer and flat panel display substrate handling systems.
Automation systems revenue is comprised of factory hardware, including factory
interface hardware products, tool control software products, spare parts sales
and tool control application consulting services. The factory automation
solutions segment provides software products for the semiconductor manufacturing
execution system ("MES") market, including consulting and software
customization.
The Company evaluates performance and allocates resources based on revenues
and operating income. Operating income for each segment includes selling,
general and administrative expenses directly attributable to the segment.
Amortization of acquired intangible assets and acquisition-related and
restructuring costs are excluded from the segments' operating income. The
Company's non-allocable overhead costs, which include corporate general and
administrative expenses, but exclude amortization of acquired intangible assets
and acquisition-related and restructuring costs, are allocated between the
segments based upon segment revenues. Segment assets exclude deferred taxes,
acquired intangible assets, all assets of the Company's Securities Corporation
subsidiary and investments in subsidiaries.
65
67
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Financial information for the Company's business segments is as follows (in
thousands):
FACTORY
AUTOMATION AUTOMATION
SYSTEMS SOLUTIONS TOTAL
---------- ---------- --------
YEAR ENDED SEPTEMBER 30, 2000
Revenues $235,810 $85,289 $321,099
Gross profit $ 91,766 $57,969 $149,735
Operating income $ 30,657 $ 5,272 $ 35,929
Depreciation $ 7,712 $ 2,988 $ 10,700
Assets $171,111 $43,965 $215,076
YEAR ENDED SEPTEMBER 30, 1999
Revenues $ 90,768 $24,187 $114,955
Gross profit $ 31,111 $18,710 $ 49,821
Operating loss $ (6,291) $(2,331) $ (8,622)
Depreciation $ 6,014 $ 1,327 $ 7,341
Assets $ 99,169 $18,930 $118,069
YEAR ENDED SEPTEMBER 30, 1998
Revenues $100,668 $16,622 $117,290
Gross profit $ 22,158 $11,099 $ 33,257
Operating loss $(19,631) $(5,756) $(25,387)
Depreciation $ 6,439 $ 1,812 $ 8,251
Assets $115,669 $ 7,000 $122,669
A reconciliation of the Company's reportable segment operating income and
segment assets to the corresponding consolidated amounts as of and for the years
ended September 30, 2000, 1999 and 1998 is as follows (in thousands):
AS OF AND FOR THE YEAR ENDED SEPTEMBER 30,
--------------------------------------------
2000 1999 1998
------------ ------------ ------------
Segment operating income (loss) $ 35,929 $ (8,622) $(25,387)
Amortization of acquired intangibles 18,506 565 207
Acquisition-related and restructuring costs 578 3,120 3,722
-------- -------- --------
Total operating income (loss) $ 16,845 $(12,307) $(29,316)
======== ======== ========
Segment assets $215,076 $118,099 $122,669
Deferred tax asset 31,313 10,734 8,462
Acquired intangible assets 58,405 15,328 2,725
Securities Corporation assets 208,334 49.639 23,899
-------- -------- --------
Total assets $513,128 $193,800 $157,755
======== ======== ========
66
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BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Net revenues by geographic area are as follows (in thousands):
YEAR ENDED SEPTEMBER 30,
--------------------------------
2000 1999 1998
-------- -------- --------
North America $165,177 $ 66,687 $ 65,383
Asia/Pacific 111,573 35,328 37,437
Europe 44,349 12,940 14,470
-------- -------- --------
$321,099 $114,955 $117,290
======== ======== ========
Long-lived assets, including property, plant and equipment and intangible
assets are as follows (in thousands):
SEPTEMBER 30,
-----------------------------
2000 1999 1998
------- ------- -------
North America $74,244 $22,969 $23,184
Asia/Pacific 4,948 2,965 772
Europe 5,970 9,093 14
------- ------- -------
$85,162 $35,027 $23,970
======= ======= =======
12. SIGNIFICANT CUSTOMERS AND RELATED PARTY INFORMATION
One of the Company's directors is also a director of one of the Company's
customers. Net revenue recognized from this customer was $36.9 million, $15.3
million and $15.9 million in the years ended September 30, 2000, 1999 and 1998,
respectively. These amounts comprised 11.5%, 13.3% and 13.6% of revenues in the
aforementioned years, respectively. Amounts due from this customer included in
accounts receivable at September 30, 2000 and 1999 were $6.8 million and $3.4
million, respectively. Related party amounts included in accounts receivable are
on standards terms and manner of settlement. The Company had no other customer
who accounted for more than 10% of the Company's revenues in any of the years
ended September 30, 2000, 1999 or 1998.
67
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BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. OTHER BALANCE SHEET INFORMATION
Components of other selected captions in the Consolidated Balance Sheets
follow (in thousands):
SEPTEMBER 30,
------------------
2000 1999
------- -------
Accounts receivable $94,709 $37,306
Less allowances 1,930 1,736
------- -------
$92,779 $35,570
======= =======
Inventories
Raw materials and purchased parts $33,827 $23,062
Work-in-process 13,668 10,154
Finished goods 9,480 5,058
------- -------
$56,975 $38,274
======= =======
Fixed assets
Computer equipment and software $23,525 $18,527
Machinery and equipment 20,449 11,916
Furniture and fixtures 6,665 6,096
Buildings and land 1,573 --
Leasehold improvements 9,169 6,589
------- -------
61,381 43,128
Less accumulated depreciation and amortization 36,482 24,943
------- -------
$24,899 $18,185
======= =======
Intangible assets
Patents $ 6,781 $ 7,127
Capitalized software 1,805 1,420
Completed technology 4,505 --
License agreements 678 --
Trademarks and trade names 1,564 --
Non-competition agreements 1,033 --
Assembled workforces 5,880 --
Customer relationships 1,305 --
Goodwill 58,638 10,991
------- -------
82,189 19,538
Less accumulated amortization 21,926 2,696
------- -------
$60,263 $16,842
======= =======
The fixed asset balance includes computer equipment and software and
machinery and equipment aggregating $2.9 million as of both September 30, 2000
and 1999, acquired under capital leases. Accumulated amortization on fixed
assets under capital lease was $2.9 million and $2.7 million at September 30,
2000 and 1999, respectively. Amortization expense for fixed assets under capital
leases was $0.1 million, $0.2 million and
68
70
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$0.6 million for the years ended September 30, 2000, 1999 and 1998,
respectively. Depreciation expense was $10.6 million, $10.0 million and $7.9
million for the years ended September 30, 2000, 1999 and 1998, respectively.
14. COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS
The Company leases manufacturing and office facilities and certain
equipment under operating and capital leases that expire through 2010. Rental
expense under operating leases for the years ended September 30, 2000, 1999 and
1998 was $5.4 million, $4.4 million and $4.9 million, respectively. Future
minimum lease commitments on noncancelable operating leases and sublease income
are as follows (in thousands):
OPERATING SUBLEASE
LEASES INCOME
--------- --------
YEAR ENDED SEPTEMBER 30,
2001 $ 6,009 $ 698
2002 5,003 552
2003 4,322 368
2004 3,809 --
2005 3,795 --
Thereafter 15,172 --
------- ------
Total minimum lease payments $38,110 $1,618
======= ======
These future minimum lease commitments include approximately $1.5 million
related to a facility the Company has elected to abandon in connection with its
restructuring and acquisition-related initiatives. The Company has subleased
this facility through the remaining lease period for an equivalent amount, which
is included in the future sublease income reported above.
As of September 30, 2000, the Company's only remaining capital lease
obligation was a payment of approximately $26,000, due in the first quarter of
fiscal 2001.
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 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 it is probable that the
future events related to this threatened matter would have an adverse effect on
the Company's business.
69
71
BROOKS AUTOMATION, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
ADDITIONS
------------------------
BALANCE AT CHARGED TO CHARGED TO DEDUCTIONS BALANCE AT
BEGINNING COSTS AND OTHER AND END
OF YEAR EXPENSES ACCOUNTS WRITE-OFFS OF YEAR
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
Allowance for doubtful accounts
Year ended September 30,
2000 $ 1,736 $ 530 $ 256 $ (592) $ 1,930
1999 $ 2,049 $ 188 $ -- $ (501) $ 1,736
1998 $ 833 $1,389 $ -- $ (173) $ 2,049
Deferred tax asset valuation
allowance
Year ended September 30,
2000 $10,993 $2,754 $1,242 $(9,441) $ 5,548
1999 $ 9,405 $1,588 $ -- $ -- $10,993
1998 $ 5,610 $3,795 $ -- $ -- $ 9,405
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON FINANCIAL 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 b filed by the Company
within 120 days after the close of its fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PART IV
ITEM 14. EXHIBITS
(a) 1. and 2. FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The consolidated financial statements of the Company and Schedule II
Valuation and Qualifying Accounts and Reserves of the Company are listed in the
index under Part II, Item 8, in this Form 10-K.
Other financial statement schedules are omitted because of the absence of
conditions under which they are required or because the required information is
given in the consolidated financial statements or notes thereto.
(a) 3. EXHIBITS
EXHIBIT NO. REFERENCE
- ----------- ------------------------------------------------------------
2.01 Intentionally Omitted
2.02 Agreement and Plan of Merger relating to the combination of
FASTech Integration, Inc. with the Registrant L**
2.03 Stock for Cash Purchase Agreement relating to the
acquisition of Hanyon Technology, Inc. with the Registrant N**
2.04 Assets for Cash Purchase Agreement relating to the
acquisition of substantially all of the assets of Domain
Manufacturing Corporation and its subsidiary Domain
Manufacturing SARL by the Registrant O**
2.05 Agreement and Plan of Merger relating to the combination of
Smart Machines Inc. with the Registrant P**
2.06 Master Purchase Agreement relating to the acquisition of
substantially all of the assets of the Infab Division of
Jenoptik AG by the Registrant Q**
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73
EXHIBIT NO. REFERENCE
- ----------- ------------------------------------------------------------
2.07 Agreement and Plan of Merger by and among Brooks, Daifuku
America Corporation and Daifuku Co., Ltd. relating to the
acquisition of the businesses of Auto-Soft Corporation and
AutoSimulations, Inc. from Daifuku America Corporation by
Registrant T**
2.08 Interests for Stock Purchase Agreement, as amended, relating
to the acquisition of Irvine Optical Company LLC W**
3.01 Certificate of Incorporation of the Registrant, as amended V**
3.02 Bylaws of the Registrant A**
3.03 Certificate of Designation of Series A Junior Participating
Preferred Stock H**
4.01 Specimen Certificate for shares of the Registrant's Common
Stock A**
4.02 Description of Capital Stock (contained in the Certificate
of Incorporation A**
of the Registrant, filed as Exhibit 3.01)
4.03 Rights Agreement dated July 23, 1997 I**
10.01 Intentionally Omitted
10.02 Employment Agreement between the Registrant and Robert J.
Therrien dated as of October 1, 1994 A* **
10.03 Intentionally Omitted
10.04 Intentionally Omitted
10.05 Intentionally Omitted
10.06 Form of Indemnification Agreement for Directors and Officers
of the Registrant A**
10.07 Intentionally Omitted
10.12 Intentionally Omitted
10.13 Intentionally Omitted
10.14 Intentionally Omitted
10.18 Lease Extension Agreement C**
10.19 Headquarters Lease B**
10.20 Intentionally Omitted
10.21 Intentionally Omitted
10.22 Intentionally Omitted
10.23 Intentionally Omitted
10.24 Intentionally Omitted
10.25 Intentionally Omitted
10.26 Intentionally Omitted
10.27 Intentionally Omitted
10.28 Employment Agreement between the Registrant and Ellen
Richstone* M* **
10.29 Stockholder Agreement between Jenoptik AG, M+W Zander
Holding GmbH, Robert Q**
Therrien and the Registrant relating to the acquisition of
substantially all
of the assets of the Infab Division of Jenoptik AG by the
Registrant
10.30 Form of Agreement between Executive Officers and Registrant
Relating to Change of Control R* **
10.31 Agreement between Ellen Richstone and Registrant Relating to
Change of Control R* **
10.32 Lease Agreement between the Registrant and Clearfield
Investments, LLC for the Registrant's Colorado manufacturing
facility R**
72
74
EXHIBIT NO. REFERENCE
- ----------- ------------------------------------------------------------
10.33 Transitional Services Agreement between the Registrant and
Jenoptik AG relating to the Registrant's German
manufacturing facility R**
10.34 Lease Agreement between a subsidiary of the Registrant and
Montague Oaks Phase I & II for the Registrant's California
manufacturing facility R**
10.35 Revolving Credit Agreement dated as of January 7, 2000 among
Brooks Automation, Inc., ABN AMRO BANK N.V., the other
lending institution and ABN AMBRO BANK N.V., as Agent S**
10.36 Revolving Credit Note to ABN AMRO BANK N.V. S**
10.37 Lease Agreement between W9/TIB Real Estate Limited
Partnership, as landlord, and Brooks Automation, Inc., as
tenant, for 15 Elizabeth Drive, Chelmsford, MA S**
10.38 Lease Agreement between W9/TIB Real Estate Limited
Partnership, as landlord, and Brooks Automation, Inc., as
tenant, for 16 Elizabeth Drive, Chelmsford, MA S**
10.39 Stockholder Agreement by and among Brooks, Daifuku America
Corporation and Daifuku Co., Ltd. relating to the
acquisition of the businesses of Auto-Soft Corporation and
AutoSimulations, Inc. from Daifuku America Corporation by
Registrant T**
10.40 Corporate Noncompetition and Proprietary Information
Agreement by and among Brooks, Daifuku America Corporation
and Daifuku Co., Ltd. relating to the acquisition of the
businesses of Auto-Soft Corporation and AutoSimulations,
Inc. from Daifuku America Corporation by Registrant T**
10.41 Demand Promissory Note Agreement dated as of May 2, 2000,
between Registrant and ABN AMRO Bank N.V. V**
10.42 Stockholder Agreement between the Registrant and M+W Zander
Holding AG Filed
herewith
21.01 Subsidiaries of the Registrant Filed
herewith
23.01 Consent of PricewaterhouseCoopers LLP Filed
herewith
23.02 Consent of Ernst & Young LLP Filed
herewith
27.01 Financial Data Schedule as of and for the year ended
September 30, 2000 Filed
herewith
27.02 Financial Data Schedule as of and for the year ended
September 30, 1999 Filed
herewith
27.03 Financial Data Schedule as of and for the year ended
September 30, 1998 Filed
herewith
99.01 1993 Nonemployee Director Stock Option Plan J* **
99.02 1992 Combination Stock Option Plan K* **
99.03 1995 Employee Stock Purchase Plan, as amended V* **
99.04 1998 Employee Equity Incentive Plan V* **
99.05 Form of Selling Stockholder Agreement U**
99.06 Intentionally Omitted
99.07 2000 Combination Stock Option Plan V* **
- ---------------
A Incorporated by reference to the Registrant's registration statement of Form
S-1 (Registration No. 33-87296). The number set forth herein is the number of
the Exhibit in said registration statement.
73
75
B Incorporated by reference to the Registrant'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.
C Incorporated by reference to the Registrant'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.
H Incorporated by reference in the Registrant'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 Registrant's current report on Form 8-K
filed on August 7, 1997.
J Incorporated by reference to the Registrant'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 Registrant'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.
L Incorporated by reference to the Registrant's current report on Form 8-K
filed on October 15, 1998.
M Incorporated by reference to the Registrant's annual report on Form 10-K for
the year ended September 30, 1998. The number assigned to the Exhibit is the
same as the number assigned to the Exhibit in said annual report.
N Incorporated by reference to the Registrant's current report on Form 8-K
filed on May 6, 1999.
O Incorporated by reference to the Registrant's current report on Form 8-K
filed on July 14, 1999.
P Incorporated by reference to the Registrant's current report on Form 8-K
filed on September 15, 1999
Q Incorporated by reference to the Registrant's current report on Form 8-K
filed on October 15, 1999.
R Incorporated by reference to the Registrant's annual report on Form 10-K for
the year ended September 30, 1999. The number assigned to the Exhibit is the
same as the number assigned to the Exhibit in said annual report.
S Incorporated by reference to the Registrant's quarterly report on Form 10-Q
for the quarterly period ended December 31, 1999.
T Incorporated by reference to the Registrant's current report on Form 8-K
filed on January 19, 2000.
U Incorporated by reference to the Registrant's registration statement on Form
S-3 (Registration No. 333-30282.
V Incorporated by reference to the Registrant's quarterly report on Form 10-Q
for the quarterly period ended March 31, 2000.
W Incorporated by reference to the Registrant's registration statement on Form
S-3 (Registration No. 333-42620).
* 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.
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76
(b) REPORTS ON FORM 8-K
The following reports on Form 8-K were filed during the quarterly period
ended September 30, 2000:
(1) Current report on Form 8-K filed on July 5, 2000, relating to the
acquisition of Irvine Optical Company LLC from Ronald A. McIntyre,
Christopher G. McIntyre and The Peninsula Fund Limited Partnership.
The following supplemental financial information was filed with the
Form 8-K:
Combined Consolidated Balance Sheets as of March 31, 2000
Combined Consolidated Balance Sheets as of September 30, 1999
Combined Consolidated Statements of Operations for the six months ended
March 31, 2000
Combined Consolidated Statements of Operations for the three months
ended March 31, 2000
Combined Consolidated Statements of Operations for the three months
ended December 31, 1999
Combined Consolidated Statements of Operations for the year ended
September 30, 1999, the nine months ended June 30, 1999, the six months
ended March 31, 1999 and the three months ended December 31, 1998
Combined Consolidated Statements of Operations for the three months
ended September 30, 1999
Combined Consolidated Statements of Operations for the three months
ended June 30, 1999
Combined Consolidated Statements of Operations for the three months
ended March 31, 1999
Combined Consolidated Statements of Operations for the three months
ended December 31, 1998
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77
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 12, 2000 /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 12, 2000
- --------------------------------------------------- (Principal Executive
Robert J. Therrien Officer)
/s/ ELLEN B. RICHSTONE Senior Vice President and December 12, 2000
- --------------------------------------------------- Chief Financial Officer
Ellen B. Richstone (Principal Financial
Officer)
/s/ STEVEN E. HEBERT Principal Accounting Officer December 12, 2000
- ---------------------------------------------------
Steven E. Hebert
/s/ ROGER D. EMERICK Director December 12, 2000
- ---------------------------------------------------
Roger D. Emerick
/s/ AMIN J. KHOURY Director December 12, 2000
- ---------------------------------------------------
Amin J. Khoury
/s/ JUERGEN GIESSMANN Director December 12, 2000
- ---------------------------------------------------
Juergen Giessmann