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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 the YEARLY period ended March 31, 2001
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File number 0-22114
ASYST TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
California 94-2942251
(State or other jurisdiction (Federal employer
of incorporation or organization) identification No.)
48761 Kato Road, Fremont, California 94538
(Address of principal executive offices)
(510) 661-5000
(Registrant's telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
common stock, no par value.
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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 report), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
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 this Form 10-K [_]
There were 35,131,040 shares of common stock, no par value, outstanding as
of June 1, 2001. The aggregate market value of voting stock held by non-
affiliates of the registrant based upon the closing sales quotation of the
common stock on June 1, 2001 was approximately $654,139,965.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference in this
report:
Definitive Proxy Statement in connection with 2001 Annual Meeting of
Shareholders
(Part III of this Report)
The 2001 Proxy Statement shall be deemed to have been "filed" only to the
extent portions thereof are expressly incorporated by reference.
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PART I
FORWARD LOOKING STATEMENTS
Except for the historical information contained herein, the following
discussion includes forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, and Section 21E of the Securities Exchange
Act of 1934 that involve risks and uncertainties. We intend such forward-
looking statements to be covered by the safe harbor provisions for forward-
looking statements contained in the Private Securities Litigation Reform Act
of 1995, and we are including this statement for purposes of complying with
these safe harbor provisions. We have based these forward-looking statements
on our current expectations and projections about future events. Our actual
results could differ materially. These forward-looking statements are not
guarantees of future performance and are subject to risks, uncertainties and
assumptions, including those set forth in this section as well as those under
the caption, "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Words such as "expect," "anticipate," "intend," "plan," "believe,"
"estimate," "seek," "could," "predict," "continue," "future, "may," and
variations of such words and similar expressions are intended to identify such
forward-looking statements. We undertake no obligation to publicly update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise. In light of these risks, uncertainties and
assumptions, the forward-looking events discussed in this document might not
occur.
Asyst is our registered trademark. AXYS, Asyst-SMIF System, SMART-Traveler
System, SMIF-Pod, SMIF-FOUP, SMIF-Arms, SMIF-Indexer, SMIF-LPI, SMIF-LPO,
SMIF-LPT, SMIF-E, SMART-Tag, SMART-Comm, SMART-Storage Manager, SMART-Fab,
Substrate Management System, Retical Management System, Wafer Management
System, VersaPort 2200, Global Lot Server, FluoroTrac Auto ID System, AdvanTag
and SMART-Station are our trademarks. This report also contains registered
trademarks of other entities.
ITEM 1--Business
Overview
We are a leading provider of integrated automation systems for the
semiconductor manufacturing industry. We design systems that enable
semiconductor manufacturers to increase their manufacturing productivity and
protect their investment in silicon wafers during the manufacture of
integrated circuits, or ICs. We sell our systems directly to semiconductor
manufacturers, as well as to original equipment manufacturers, or OEMs, that
integrate our systems with their equipment for sale to semiconductor
manufacturers. We believe that our systems are becoming increasingly important
as the semiconductor manufacturing industry adopts integrated automation
technology in the production of ICs with smaller line widths on wafers with
larger diameters.
We are the only supplier with expertise in what we believe are the five key
elements required to provide the semiconductor manufacturing industry with
integrated automation systems: isolation systems, work-in-process materials
management, substrate-handling robotics, automated transport and loading
systems, and connectivity automation software. These systems help control
exposure to contamination and provide wafer level identification, tracking and
logistics management within the semiconductor manufacturing facility,
resulting in higher production yields and improved facility utilization.
Industry Background
In recent years, advances in semiconductor production equipment and
facilities have supported continuation of historical trends toward production
of ICs with ever smaller line widths on ever larger wafers. Currently, most
semiconductor manufacturing facilities, or fabs, process wafers with diameters
of 150mm or 200mm. However, several fabs are currently operating pilot
production lines utilizing 300mm wafers and a significant portion of new fabs
are expected to be configured for 300mm wafers. Concurrently, line widths for
ICs have decreased to
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0.13 micron and are expected to decrease further. Keeping pace with these
changes presents semiconductor manufacturers with a number of technical and
economic challenges.
As the complexity and cost of new fabs and state-of-the-art process
equipment, or tools, increases, semiconductor manufacturers have sought to
remain competitive by improving production yields and overall fab efficiency.
These manufacturers are utilizing minienvironment technology and manufacturing
automation systems to maximize tool utilization and to minimize wafer
mishandling, misprocessing and contamination. We believe that semiconductor
manufacturers will increase their commitments to these solutions in their
300mm fabs, given the significant value of work-in-process inventory, which
could exceed $1,000,000 per 25-wafer lot, and the ergonomic issues introduced
by the significantly increased weight and bulk of loaded 300mm pods.
As device dimensions decrease, the harmful effects of microscopic
contamination during the manufacturing process increase, heightening the need
for controlled environments around tools. Minienvironment technology allows
for control of the environment in the immediate vicinity of the in-process
wafers and the tools. Wafers are enclosed in sealed containers, or pods, which
provide additional environmental control during storage, transport and loading
and unloading of the tools. Pods holding wafers up to 200mm are known as
standard mechanical interface pods, or SMIF-Pods, and pods holding 300mm
wafers are known as front-opening unified pods, or FOUPs. Minienvironment
systems consist of enclosures with engineered airflows that encapsulate tools,
pods and robotics systems, which transfer wafers between pods and tools
through a portal. Automated transport and tool loading automation focuses on
assuring the timely delivery, loading and unloading of work-in-process wafers
to minimize idle time at process steps.
Manufacturing automation systems increase productivity by managing the flow
of wafers throughout the production process and are segmented by function as
follows:
. Portal Automation Systems. These systems use a standard interface,
such as SMIF, to transfer wafers and information between the tool
minienvironment and pods. The wafers are then transported in pods to
storage systems or to other tools. An integrated portal automation
system includes atmospheric robots, environmental control systems,
integrated input/output interfaces for loading wafers into and out
of tools, automated identification and tracking systems, pods and
connectivity automation software.
. Facility Automation Systems. These systems use robotics to manage
the transportation of wafers throughout the facility as they move
between tools. Facility automation systems also provide
work-in-process management systems that track and store wafers
throughout the manufacturing process. These systems include overhead
rail systems, automated storage and retrieval systems, hoist systems
and system control software.
. Tool-centric Automation Systems. These systems manage the movement
of wafers in the vacuum environment within the tool. Tool-centric
automation systems include robots, wafer handling systems,
environmental control software and thermal conditioning modules.
Semiconductor manufacturers are currently making, and are expected to
continue to make, significant investments in manufacturing capacity through
the construction of new 200mm wafer facilities and the upgrade of existing
200mm wafer facilities. Early stage investments are beginning to occur as the
industry transitions to 300mm wafer facilities. Dataquest, an independent
research group, estimated in April 2001 that semiconductor manufacturers spent
approximately $33.2 billion on wafer fab equipment in 2000 and that this
spending will grow to approximately $55.7 billion in 2005. Spending on 300mm
wafer fab equipment in 2000 was estimated to be between $2.0 billion and $2.5
billion. Additionally, Dataquest forecasts that 300mm equipment could
represent more than 60 percent of total industry wafer fab equipment shipments
by 2005.
A growing portion of the semiconductor capital equipment spending is
attributable to manufacturing automation systems. Dataquest estimated in April
2001 that semiconductor manufacturers spent approximately $2.1 billion,
including OEM sales, on manufacturing automation and control systems in 2000
and that this spending will grow to approximately $4.3 billion by the year
2005.
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The Asyst Solution
We are a leading provider of integrated automation systems for the
semiconductor manufacturing industry. We design systems that enable
semiconductor manufacturers to increase their manufacturing productivity and
protect their investment in silicon wafers during the manufacture of ICs. Our
systems provide the following key benefits to semiconductor manufacturers:
Comprehensive Solution. We are the only supplier with expertise in what we
believe are the five key elements required to provide the semiconductor
manufacturing industry with integrated facility automation solutions:
. isolation systems;
. work-in-process materials management;
. substrate-handling robotics;
. automated transport and loading systems; and
. connectivity automation software.
We believe we offer the most comprehensive line of integrated automation
processing systems for the semiconductor manufacturing automation market. Our
integrated solutions provide semiconductor manufacturers with several
advantages, including standard maintenance and training, a uniform user
interface and single vendor accountability.
Increased Manufacturing Productivity. We believe that semiconductor
manufacturers are able to attain a higher level of productivity and
performance from their equipment by integrating our products into their
manufacturing processes. In addition, our connectivity software provides
semiconductor manufacturers with facility ready automation capabilities,
resulting in faster implementation times and more efficient operational
productivity. With our automated transportation and loading solutions, tool
idle time is reduced and timely wafer delivery is improved, thereby increasing
equipment utilization and productivity. Our systems offer semiconductor
manufacturers the flexibility to add capacity while minimizing disruption of
ongoing production in their fab.
Value Assurance Through Wafer Protection. Increasingly sophisticated ICs
with smaller line widths have resulted in an increase in the value of a pod of
wafers. Currently, a pod of 200mm wafers can be worth as much as $200,000.
With 300mm wafers, the value can be as much as $450,000 per pod. Our isolation
technology, robotics solutions and automated transport and loading systems
provide semiconductor manufacturers with efficient contamination control
throughout the wafer manufacturing process and greater protection from wafer
mishandling, resulting in more rapid achievement of higher yields. Our work-
in-process materials management and connectivity software permits wafer level
identification, tracking and logistics management, and minimizes yield loss
due to misprocessing.
Strategy
Our overall strategy is to continue to build upon our success in the 150mm
and 200mm markets by capitalizing on the accelerating demand for integrated
automation systems in both 200mm and 300mm fabs. The principal elements of our
strategy are:
. Continue to Enhance our Leading Integrated Automation Systems for
the 200mm Market. We intend to continue to enhance our leadership
position and our technical expertise in the 200mm market by
developing increasingly efficient automation solutions for this
market. Historically, increased demand for ICs has led to the
construction of new 200mm fabs and upgrades of existing fabs. We
believe that this pattern will repeat itself with the next
semiconductor market upturn. In addition, we believe that there will
be new markets for our 200mm products, as evidenced by our recent
shipments of 200mm systems to Malaysia and the People's Republic of
China.
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. Leverage our Success in the 200mm Market to Capitalize on the
Transition to the 300mm Market. We have achieved market leadership
in SMIF-based systems for the 200mm wafer market. This experience in
portal automation and SMIF technology has enabled us to transition
our existing technology to the 300mm wafer market. Based on our
belief that new 300mm wafer facilities will incorporate portal
automation using similar technology, we have developed an integrated
line of 300mm automation processing systems. Some of these systems
are already being used in 300mm pilot lines.
. Further Increase Penetration of the Japanese Market. Dataquest
projects that Japan will account for approximately 23.0 percent of
worldwide semiconductor production for the years 2001 through 2004.
We believe Japanese semiconductor manufacturers will continue to
build new 200mm facilities, upgrade existing facilities and begin to
build new 300mm facilities. As a result, we believe that a
significant opportunity exists for our products in the Japanese
market. In 2000, we increased our ownership percentage of MECS
Corporation, a Japanese engineering and robotics company, to
95.3 percent. This acquisition has been the basis of our increased
presence in Japan during the past year. We intend to continue to
augment our ability to directly supply our products to Japanese
customers by further increasing our local engineering, manufacturing
and customer support presence in Japan.
. Focus on Portal Automation. Our portal automation solutions are
designed to integrate atmospheric robots, environmental control
systems, integrated input/output interfaces, auto identification and
tracking systems, pods and connectivity software. These solutions
are designed to allow OEMs to improve their productivity and
decrease total cost and time to market of their products. By
leveraging our existing relationships with OEMs and semiconductor
manufacturers, we will seek to capitalize on the increasing demand
for a standardized interface between the tool and the factory
environment.
. Leverage our Semiconductor Manufacturer Relationships to Stimulate
OEM Demand. The demand for our systems has been enhanced by the
strong relationships we have developed with our semiconductor
manufacturer customers. By working closely with these customers, we
are able to better understand their specific process requirements
and communicate to them the benefits of our systems. We believe this
interaction encourages semiconductor manufacturers to specify our
systems to OEMs as their preferred solution.
. Capitalize on Outsourcing Trend to Broaden Offerings of Products and
Services to OEMs. We intend to enhance our capabilities as an end-
to-end supplier for our OEM customers in order to earn more business
from these customers. The general industrial trend toward
outsourcing non-core competencies and the need to reduce the number
of suppliers provides an opportunity for us to become a supplier of
products and services that are ancillary to portal automation. In
February 2001, we acquired Advanced Machine Programming, Inc., or
AMP, and SemiFab, Inc. AMP specializes in providing precision
machined parts to the semiconductor equipment industry, principally
Applied Materials, Inc. SemiFab specializes in temperature and
humidity control enclosures and other mechanical and electro-
mechanical contract manufacturing services to the semiconductor
equipment industry.
. Strengthen the Software Elements of our Connectivity Offering. We
are currently a leader in providing systems for material tracking
and materials movement management. In May 2001, we acquired GW
Associates, Inc., the largest merchant provider of the industry-
standard software driver protocol for communications between tools
and fab host systems, known as SECS/GEM. We intend to combine GW's
leading technology with our existing software capabilities to
develop a broader and deeper industry-standard product set for
communications between tools and fab infrastructure systems.
Products
We design systems that enable semiconductor manufacturers to increase their
manufacturing productivity and protect their investment in silicon wafers
during the manufacture of ICs. We offer isolation systems,
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work-in-process materials management, substrate-handling robotics, automated
transport and loading systems, and connectivity automation software. We have
incorporated the technologies from these areas to create our Plus-Portal
System for OEMs.
Isolation Systems
The Asyst-SMIF System is designed to provide a continuous, ultraclean
environment for semiconductor wafers as they move through the fab. Asyst-SMIF
Systems can significantly reduce contamination by using minienvironments to
protect the in-process wafers and tools from exposure to contaminants caused
by the human handling of cassettes and the migration of contaminants from
elsewhere in the cleanroom.
The Asyst-SMIF System consists of three main components:
. SMIF-Pods and SMIF-FOUPs, used for storage and transport of 200mm
and 300mm wafers, respectively;
. SMIF-Enclosures, which reduce contamination by providing custom
minienvironment chambers built around tools; and
. input/output systems including SMIF-Arms, SMIF-Indexers, SMIF-LPIs,
SMIF-LPOs, SMIF-LPTs, Versaport 2200's, FL-300s, and related
products, each of which assists in the transfer of wafers from the
SMIF-Pod into the tool or SMIF-Enclosure, thereby preventing the
mishandling of wafers.
In addition to our standard Asyst-SMIF System products, we also offer our
advanced SMIF-E System, which provides the capability to store, transport and
transfer wafers in a controlled environment to reduce contamination by water
vapor, oxygen and airborne molecular contaminants. We also offer the Asyst-
SMIF System for the handling and isolation of reticles, which are templates
used to transfer circuit patterns onto wafer surfaces.
Work-in-Process Materials Management
The Asyst SMART-Traveler System allows semiconductor manufacturers to reduce
manufacturing errors by significantly decreasing the opportunities for
operator-associated misprocessing during the production process. The Asyst
SMART-Traveler System includes SMART-Tag, an electronic memory device that
combines display, logic and communication technologies to provide process
information, such as wafer lot number and next processing steps, regarding the
wafers inside the carrier. The FluoroTrac Auto ID System, or AdvanTag, uses a
radio-frequency based identification tag that can be attached to or embedded
into wafer carriers or storage boxes.
The Asyst SMART-Traveler System also includes the SMART-Comm, a multiplexing
and communication protocol converting device that increases operator and tool
efficiency in semiconductor facilities by optimizing communications and
minimizing hardware and software layers, and the SMART-Storage Manager, an
interactive system built around a personal computer and a network of
controllers and communication probes that provides work-in-process control and
management of wafers in storage racks or automated stockers.
Our substrate management systems, or sorters, are used to rearrange wafers
and reticles between manufacturing processes without operator handling, which
helps to increase fab yields. Sorters avoid the mishandling of wafers by
enabling the tracking and verification of each wafer throughout the production
process. Sorters also reduce scratches by automating the handling of wafers.
Substrate management systems utilize our input/output systems, auto
identification systems, robots, prealigners and minienvironment technology.
Substrate-Handling Robotics
We offer comprehensive robotic substrate-handling solutions to the
semiconductor industry. Our products are incorporated by OEMs for use outside
of the semiconductor process tool to transfer wafers between the pod, the tool
input/output system and the tool itself. These products include robots
specifically designed for
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atmospheric, harsh chemical or wet chemical process applications and
prealigners used to orient the wafer. We also use our robots and prealigners
in our Plus-Portal System and wafer sorter products.
Our AXYS robot family includes atmospheric robots used in metrology and
other clean room tools and harsh chemical robots used in chemical mechanical
polishing and plating processes. The SYNCHRUS robot family consists of
atmospheric and harsh chemical robots used in chemical mechanical polishing
tools to transport wafers through the processing sequence from input cassettes
through multiple polishing stages and wafer cleaning steps, and back to output
cassettes. Our prealigners are used to locate the exact center of a wafer and
to locate and orient a feature on the circumference of the wafer, both of
which are important steps in wafer processing.
Our MECS designed and manufactured families of substrate-handling and liquid
crystal display, or LCD, handling robotics span the range of atmospheric
robots, harsh environment robots, water-proof wafer handling robots and six-
axis robots. All of these robots are configurable for wafers up to 300mm.
Additionally, our atmospheric and vacuum robots can be configured for rigid
disk handling for the disk drive manufacturing industry. Our LCD handling
robots are scalable to handle all the major wafer sizes and varieties from
LCDs through plasma displays. MECS also designs and manufactures prealigners
for use with the above robotics as well as elevators and transfer systems for
LCD carriers.
Automated Transport and Loading Systems
Automated transport and loading systems move wafer containers into and out
of tools and between process locations in fabs. Our automated transport and
loading systems employ a unique concept referred to as continuous flow
technology, or CFT. Competing systems use monorail cars that can cause delays
in the fab when a monorail car is not available at the correct location to
move material. CFT, on the other hand, offers significant improvements in fab
efficiency over car-based monorail systems. CFT allows SMIF-Pods or FOUPs to
move asynchronously on our track-based transport system for transportation to
the next tool, eliminating the delays associated with moving empty or
partially filled monorail cars. The result is more predictable wafer delivery
times, making tool loading more efficient.
Until recently, transport automation systems were principally focused on
inter-bay transport and storage automation. Movement of the wafer lots from
the storage location to the tool was generally a manual process. As a result,
the implementation of the transport automation system was often a
facilitization matter and not related to process equipment or tool portal
decision making. However, due to the economic and human factors associated
with handling 300mm wafer lots, we believe tool loading automation for 300mm
will become a significant part of transport and loading automation decision
making.
Connectivity Automation Software
Our software services for equipment automation solutions provide improved
material control, line yield and cycle time abilities, as well as increased
overall equipment effectiveness. In addition to automating the processing of
each wafer lot during the manufacturing cycle, our customizable software links
directly to the facility host system, thereby providing users with the ability
to pre-schedule material movement to specific tools. Our SMART-Fab suite of
Windows NT-based products includes SMART-Station, which uses workflow and
distributed object technology to rapidly automate manufacturing equipment.
Other SMART-Fab products include SMART-Storage Manager and Global Lot Server.
These products provide material staging, work-in-process materials management
and global wafer lot location. With the acquisition of GW, we are now the
largest provider of SECS/GEM interface protocol drivers to OEMs.
Plus-Portal System
Our Plus-Portal System combines our expertise in isolation systems, work-in-
process materials management, substrate handling robotics and connectivity
automation software to provide a complete front-end for process equipment.
This system uses a standard interface, such as SMIF, to transfer wafers and
information
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between the tools, minienvironments and pods. An integrated portal automation
system includes atmospheric robots, environmental control systems, integrated
input/output interfaces, automated ID and tracking systems, pods and
connectivity automation software. With the acquisition of SemiFab, we now also
offer precision temperature and humidity control capabilities.
Customers
Historically, our customers have primarily been semiconductor manufacturers
that are either building new fabs or upgrading existing fabs. In fiscal 2001,
sales to semiconductor manufacturers represented 55 percent of our net sales.
As the industry migrates to 300mm wafer fabs, we believe that successful OEMs
will design their tools to include integrated automation systems. As a result,
sales which were historically made directly to semiconductor manufacturers may
now be made to OEMs. We believe that our historical relationships with
semiconductor manufacturers, coupled with our existing relationship with OEMs,
will enhance the likelihood that our systems will be designed into OEM 300mm
products. In addition, the customer base of our recently acquired companies is
heavily skewed to OEMs. Nevertheless, we expect that semiconductor
manufacturers will continue to represent a significant portion of our net
sales during the next several years.
Our net sales to any particular semiconductor manufacturer customer are
dependent on the number of fabs a semiconductor manufacturer is constructing
and the number of fab upgrades a semiconductor manufacturer undertakes. As
major projects are completed, the amount of sales to these customers will
decline unless they undertake new projects.
In fiscal year 2001, Taiwan Semiconductor Manufacturing Co., Ltd., or TSMC,
United MicroElectronics Corporation, or UMC, and Texas Instruments accounted
for approximately 8.5 percent, 7.1 percent and 6.6 percent of our net sales,
respectively. During fiscal year 2001, these three customers in aggregate
accounted for approximately 22.2 percent of our net sales and were the only
customers that individually accounted for more than 5 percent of net sales.
During fiscal year 2001, there were no customers that individually accounted
for more than 10 percent of net sales. In fiscal year 2000, TSMC and UMC
accounted for approximately 11.3 percent and 11.0 percent of our net sales,
respectively. During fiscal year 2000, these two customers in aggregate
accounted for approximately 22.3 percent of our net sales and were the only
customers that individually accounted for more than 10 percent of net sales.
During fiscal year 1999, Worldwide Semiconductor Manufacturing Company
accounted for 11.0 percent of our net sales and no other customer accounted
for more than 10 percent of net sales.
Our ten largest customers based on cumulative sales during fiscal years
1999, 2000 and 2001, arranged alphabetically, were:
Applied Materials TSMC
Chartered Semiconductor
Manufacturing, Ltd. Texas Instruments
KLA--Tencor Corporation UMC
Lam Research Corporation WaferTech LLC
Macronix International Co.,
Ltd. Worldwide Semiconductor Manufacturing Company
Sales and Marketing
We sell our products principally through a direct sales force in the United
States, Japan, Europe and the Asia/Pacific region. Our sales organization is
based in Northern California, and domestic field sales personnel are stationed
in Minnesota, Colorado, Arizona, Vermont, Washington and Texas. Japan is
supported by sales and service offices in Nagoya and Yokohama, Japan. The
European market is supported through offices near Horsham and Newport in the
United Kingdom and Dresden, Germany, and augmented by distributors based in
France, Germany, Israel and the United Kingdom. The Asia/Pacific region is
supported through sales and service offices in Hsin-Chu, Taiwan; Kuching and
Kulim, Malaysia; Singapore; Tianjin, People's Republic of China; and Seoul,
South Korea.
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International sales, which consist mainly of export sales from the United
States, accounted for approximately 51.0 percent, 60.0 percent and 60.9
percent of total sales for fiscal years 1999, 2000 and 2001, respectively.
Prior to fiscal year 2001, international sales were generally invoiced in U.S.
dollars and, accordingly, have not historically been subject to fluctuating
currency exchange rates. In fiscal 2001, approximately 20.9 percent of total
net sales originated from Asyst Japan, Inc., or AJI, and were typically
invoiced in Japanese yen or other regional currencies.
The sales cycle to new customers ranges from six months to 12 months from
initial inquiry to placement of an order, depending on the complexity of the
project and the time required to communicate the nature and benefits of our
systems. For sales to existing customers, the sales cycle is relatively short.
The sales cycle for follow-on orders by OEM customers can be as short as two
to three weeks.
An important part of our marketing strategy has been participation in key
industry organizations such as International SEMATECH and SEMI, as well as
attendance at events coordinated by the Semiconductor Industry Association. In
addition, we actively participate in industry trade shows and conferences and
have sponsored symposiums with technology and business experts from the
semiconductor industry.
Systems Integration
After a sales contract for our Asyst-SMIF System is finalized, our systems
integration and OEM applications organizations are responsible for the
engineering, procurement and manufacturing of SMIF-Enclosures and interfaces
necessary to integrate that system with the tool. Our systems integration
organization provides integration, installation, qualification of the Asyst-
SMIF System and other services associated with the Asyst-SMIF System.
Our systems integration and OEM applications organizations focus on
understanding our customer's manufacturing methodology and anticipated
production applications to develop customer-specific solutions. For
retrofitting and upgrading existing facilities with SMIF solutions, our
systems integration organization works with our customer's facilities and
manufacturing personnel to develop programs, schedules and solutions to
minimize disruption during the installation of our products into our
customer's fab. In the case of a new fab or tool design, our OEM applications
and systems integration organizations work with our customer's facility
planners and operations personnel, as well as with cleanroom designers,
architects and engineers.
In the case of OEM integration, our OEM applications organization designs
and integrates the SMIF components directly into the tool. Our OEM
applications organization works very closely with the OEM to understand the
process equipment and the processing requirements to provide our customer with
an optimized solution.
Research and Development
Research and development efforts are focused on enhancing our existing
products and developing and introducing new products in order to maintain
technological leadership and meet a wider range of customer needs. Our
research and development expenses were approximately $18.0 million, $21.6
million and $44.3 million during fiscal years 1999, 2000 and 2001,
respectively.
Our research and development employees are involved in mechanical and
electrical engineering, software development, micro-contamination control,
product documentation and support. Our central research and development
facilities include a prototyping lab and a cleanroom used for product
research, development and equipment demonstration purposes. These research and
development facilities are primarily located in Northern California. In
addition, we maintain a research and development facility in Austin, Texas,
which is used for our new efforts in the area of wafer sorting and reticle
handling.
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Manufacturing
Our manufacturing activities consist of assembling and testing components
and sub-assemblies, which are then integrated into finished systems. While we
use standard components whenever possible, most mechanical parts, metal
fabrications and castings are made to our specifications. Once our systems are
completed, we perform final tests on all electronic and electromechanical sub-
assemblies and cycle products before shipment. Much of the cleaning, assembly
and packaging of our SMIF-Pods is conducted in cleanroom environments.
We currently maintain manufacturing facilities for our Asyst-SMIF Systems,
SMART-Traveler System products, Plus-Portal Systems, automated transport
systems and software products and services in Fremont, California. We
fabricate our custom SMIF-Enclosures at both the Fremont facility and, in the
case of large system orders, near customer sites, where we lease temporary
space for the manufacture of SMIF-Enclosures. Our robotic products are
manufactured in our Sunnyvale, California and Nagoya, Japan facilities. Our
substrate and reticle handling systems products are assembled and integrated
in our principal Austin, Texas facility. Manufacturing of AMP products is
conducted in Morgan Hill, California and a secondary Austin, Texas location.
The products of SemiFab are manufactured in Hollister, California.
Competition
We currently face direct competition in all of our products. Many of our
competitors have extensive engineering, manufacturing and marketing
capabilities and potentially greater financial resources than those available
to us. The markets for our products are highly competitive and subject to
rapid technological change. Several companies, including Brooks Automation,
Inc. through its acquisition of Jenoptik Infab, Inc., offer one or more
products that compete with our Asyst-SMIF System and SMART-Traveler System
products. We compete primarily with Entegris, Inc. in the area of SMIF-Pods
and SMIF-FOUPS. We also compete with several competitors in the robotics area,
including, but not limited to, PRI Automation, Inc., Kensington Labs, now part
of Newport Corp., Rorze Corporation and Yaskawa--Super Mectronics Division.
While price is a competitive factor in the sale of robots, we believe that our
ability to deliver quality, reliability and on time shipments are the factors
which will largely impact our success over our competition in this area. In
the area of transport automation systems, our products face competition from
the main product line of PRI Automation, as well as from Daifuku Co., Ltd.,
Murata Co., Ltd., and Shinko, Ltd. Our products in the area of storage and
management of wafers and reticles compete primarily with products from Brooks
Automation and Recif, Inc.
Although most of our competitors currently do not compete with us across our
entire line of integrated automation systems, we expect that many will attempt
to do so in the future. In addition, the transition to 300mm wafers is likely
to draw new competitors to the facility automation market. In the 300mm wafer
market, we expect to face intense competition from a number of companies such
as PRI Automation and Brooks Automation, as well as potential competition from
semiconductor equipment and cleanroom construction companies.
We believe that the principal competitive factors in our market are the
technical capabilities and characteristics of systems and products offered,
technological experience and know how, product breadth, proven product
performance, quality and reliability, ease of use, flexibility, a global,
trained, skilled field service support organization, the effectiveness of
marketing and sales, and price. We believe that we compete favorably with
respect to the foregoing factors. We also believe our ability to provide a
more complete automation and wafer isolation solution provides a significant
competitive advantage with respect to most of our competitors.
We expect that our competitors will continue to improve the design and
performance of their products and to introduce new products with competitive
performance characteristics. We believe we will be required to maintain a high
level of investment in research and development and sales and marketing in
order to remain competitive.
10
Intellectual Property
We primarily pursue patent, trademark and copyright protection for our
minienvironment and Asyst-SMIF System technology, our SMART-Traveler products,
our software products, our semiconductor wafer transport technology and our
robotics and wafer sorter technologies. We currently hold 81 patents in the
United States and 64 foreign patents, have 31 pending patent applications in
process in the United States, 99 pending foreign patent applications in
process and intend to file additional patent applications as appropriate. Our
patents expire between 2005 and 2021. There can be no assurance that patents
will be issued from any of these pending applications or that any claims in
existing patents, or allowed from pending patent applications, will be
sufficiently broad to protect our technology.
There has been substantial litigation regarding patent and other
intellectual property rights in semiconductor-related industries. While we
intend to protect our intellectual property rights vigorously, there can be no
assurance that any of our patents will not be challenged, invalidated or
avoided, or that the rights granted thereunder will provide us with
competitive advantages. Litigation may be necessary to enforce our patents, to
protect our trade secrets or know how or to defend us against claimed
infringement of the rights of others or to determine the scope and validity of
the patents or other intellectual rights of others. Any such litigation could
result in substantial cost and divert the attention of management, which by
itself could have a material adverse effect on our financial condition and
operating results. Further, adverse determinations in such litigation could
result in our loss of intellectual property rights, subject us to significant
liabilities to third parties, require us to seek licenses from third parties
or prevent us from manufacturing or selling our products, any of which could
have a negative impact on our financial condition and results of operations.
For more information regarding litigation in which we are currently engaged,
please see "Item 3--Legal Proceedings" below.
We also rely on trade secrets and proprietary technology that we seek to
protect, in part, through confidentiality agreements with employees,
consultants and other parties. There can be no assurance that these agreements
will not be breached, that we will have adequate remedies for any breach, or
that our trade secrets will not otherwise become known to or independently
developed by others. Also, the laws of some foreign countries do not protect
our intellectual property rights to the same extent as the laws of the United
States.
Backlog
Our backlog was approximately $143.8 million and $119.6 million as of the
fiscal years ended March 31, 2000 and 2001, respectively. Ten customers with
orders on backlog totaling between $3.2 million to $16.3 million comprised
approximately 50 percent of the total backlog as of March 31, 2001. We include
in our backlog only orders for which a customer's purchase order has been
received and a delivery date within 12 months has been specified. In the
second half of fiscal year 2001, the demand for our products decreased
significantly as semiconductor manufacturers sharply reduced capital
expenditures, which led to slower bookings, significant push outs and
cancellations of orders in the fourth quarter of fiscal year 2001. As purchase
orders may be cancelled or delayed by customers with limited or no penalty,
our backlog is not necessarily indicative of future revenues or earnings.
Employees
As of May 26, 2001, we employed 1,543 persons on a full-time basis,
including 246 in research and development, 541 in manufacturing operations, 24
in system integration, 227 in sales and marketing, which includes customer
service, 32 in quality assurance, 135 in finance and administration, and 338
in international operations. Additionally, we employed 48 persons on a
temporary basis, including 18 in manufacturing operations. We have never had a
work stoppage or strike and no employees are represented by a labor union or
covered by a collective bargaining agreement. We consider our employee
relations to be good. Late in fiscal year 2001, we restructured certain
domestic and international operations in response to the drop in our net
sales. As a result of these restructuring activities, late in fiscal year 2001
we terminated the employment of approximately 144 full-time employees from our
operations in the United States and approximately 5 employees from our
international operations. Early in fiscal year 2002, also as part of these
restructuring activities, we terminated the employment of approximately 109
full-time employees from our operations in the United States and approximately
44 employees from our international operations.
11
Financial Information by Business Segment and Geographic Data
We operate in one reportable segment. We recognized approximately 60.9
percent of revenue from customers located outside the United States in fiscal
year 2001. Sales to Taiwan accounted for approximately 32.9 percent of our
revenues in fiscal year 2001. The information included in Note 9 of Notes to
the Consolidated Financial Statements, is incorporated herein by reference.
Risk Factors
This Annual Report on Form 10-K contains forward looking statements that
involve risk and uncertainties, including statements about our future plans,
objectives, intentions and expectations. Many factors, including those
described below, could cause actual results to differ materially from those
discussed in any forward looking statements.
. The semiconductor manufacturing industry is highly cyclical, and the
current substantial downturn is harming our operating results
Our business is entirely dependent upon the capital expenditures of
semiconductor manufacturers, which at any point in time are dependent on the
then-current and anticipated market demand for ICs, as well as products
utilizing ICs. The semiconductor industry is cyclical and has historically
experienced periodic downturns. These periodic downturns, whether the result
of general economic changes or capacity growth temporarily exceeding growth in
demand for ICs, are difficult to predict and have often had a severe adverse
effect on the semiconductor industry's demand for tools.
The industry is currently experiencing one of its periodic downturns due to
decreased worldwide demand for semiconductors. During this downturn, some of
our customers have implemented substantial reductions in capital expenditures
which has adversely impacted our business. For the fourth quarter of fiscal
2001, net sales declined by 10.1 percent from the third quarter of fiscal
2001. Additionally, we experienced slower bookings, significant push outs and
cancellations of orders during the fourth quarter of fiscal 2001.
The current downturn is impairing our ability to sell our systems and to
operate profitably. If demand for ICs and our systems remains depressed for an
extended period, it will seriously harm our business. The decline in our
profitability has been exacerbated by excess manufacturing capacity and
special charges associated with cost-cutting programs. Moreover, we have been
unable to reduce our expenses quickly enough to avoid incurring a loss. For
the three months ended March 31, 2001, our net loss was $16.2 million,
compared with net income of $9.8 million for the three months ended March 31,
2000. This net loss reflected the impact of the 10.1 percent decline in net
sales between the third and fourth quarters of fiscal year 2001, charges taken
in connection with write downs of excess and obsolete inventory and excess
purchase commitments, loss reserves on certain sales commitments and non-
recurring charges related to a reduction in our workforce and a facility
closure in Japan. We expect to undertake additional cost-cutting measures in
response to a continuation of the current downturn and, as a result, we may be
unable to continue to invest in marketing, research and development and
engineering at the levels we believe are necessary to maintain our competitive
position. Our failure to make these investments could seriously curtail our
long-term business prospects.
We believe that our future performance will continue to be affected by the
cyclical nature of the semiconductor industry and, as a result, be adversely
affected by such industry downturns.
. Because the semiconductor manufacturing industry is subject to rapid
demand shifts which are difficult to predict, our inability to
efficiently manage our manufacturing capacity in response to these rapid
shifts may cause a reduction in our gross margins, profitability and
market share
The rapid and significant downturn in the current business cycle has
resulted in falling demand for our products. Our ability to respond to falling
demand depends, in part, upon timely cost reductions associated with
12
our manufacturing capacity. However, we incur manufacturing overhead and other
costs, many of which are fixed in the short-term, based on projections of
anticipated customer demand. Our ability to quickly reduce our production
costs is impaired by manufacturing costs incurred as a result of projections
which, in turn, prevents us from operating profitably. Furthermore, we may not
be able to expand our manufacturing capacity when demand increases which could
lead to reduced profitability.
. We depend on large purchases from a few significant customers, and any
loss, cancellation, reduction or delay in purchases by, or failure to
collect receivables from, these customers could harm our business
The markets in which we sell our products are comprised of a relatively
small number of OEMs and semiconductor manufacturers. Large orders from a
relatively small number of customers account for a significant portion of our
revenues and makes our relationship with each customer critical to our
business. We may not be able to retain our largest customers or attract
additional customers, and our OEM customers may not be successful in selling
our systems. Our success will depend on our continued ability to develop and
manage relationships with significant customers. During the fourth quarter of
fiscal 2001, we experienced slower bookings, significant push outs and
cancellations of orders. In addition, our customers have in the past sought
price concessions from us and may continue to do so in the future. Further,
some of our customers may in the future shift their purchases of products from
us to our competitors. Additionally, the inability to successfully develop
relationships with additional customers or the need to provide future price
concessions would have a negative impact on our business.
If we are unable to collect a receivable from a large customer, our
financial results will be negatively impacted. In addition, since each
customer represents a significant percentage of net sales, the timing of the
completion of an order can lead to a fluctuation in our quarterly results. As
we complete projects for a customer, business from that customer will decline
substantially unless it undertakes additional projects incorporating our
products.
. Because we do not have long-term contracts with our customers, our
customers may cease purchasing our products at any time if we fail to
meet their needs
We 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.
Sales are typically made pursuant to individual purchase orders and product
delivery often occurs with extremely short lead times. If we are unable to
fulfill these orders in a timely manner, we could lose sales and customers.
. The timing of the transition to 300mm technology is uncertain and
competition may be intense
We have invested, and are continuing to invest, substantial resources to
develop new systems and technologies to automate the processing of 300mm
wafers. However, the timing of the industry's transition from the current,
widely used 200mm manufacturing technology to 300mm manufacturing technology
is uncertain, partly as a result of the recent period of reduced demand for
semiconductors. Delay in the adoption of 300mm manufacturing technology could
adversely affect our potential revenues.
Manufacturers implementing factory automation in 300mm pilot projects may
initially seek to purchase systems from multiple vendors. Competition,
including price competition, for these early 300mm orders could be vigorous. A
vendor whose system is selected for an early 300mm pilot project may have, or
be perceived to have, an advantage in competing for future orders, and thus
the award to a competitor of one or more early 300mm orders could cause our
stock price to fall.
13
. If we are unable to meet our customers' stringent specifications for the
Plus-Portal System our growth prospects could be negatively impacted
Our Plus-Portal System, which has been on the market for over a year, offers
our OEM customers a complete, automated interface between the OEM's tool and
the fab. Currently, many OEMs design and manufacture automated equipment
front-ends for their tools utilizing purchased components and in-house
engineering and manufacturing resources. The Plus-Portal System offers OEMs a
standard, outsourced alternative. The Plus-Portal System has not been widely
adopted by OEMs. OEMs have made limited purchases in order to evaluate our
ability to meet stringent design, reliability and delivery specifications. If
we fail to satisfy these expectations, whether based on limited or expanded
sales levels, OEMs will not adopt the Plus-Portal system. We believe that our
growth prospects in this area depend in large part upon our ability to gain
acceptance of the Plus-Portal System by a broader group of OEM customers.
Notwithstanding our solution, OEMs may purchase components to assemble
interfaces or invest in the development of their own complete interfaces. The
decision by an OEM to adopt the system for a large product line involves
significant organizational, technological and financial commitments by this
OEM. The market may not adopt the Plus-Portal System.
. If we are unable to develop and introduce new products and technologies
in a timely manner, our business could be negatively impacted
Semiconductor equipment and processes are subject to rapid technological
changes. The development of more complex ICs has driven the need for new
facilities, equipment and processes to produce these devices at an acceptable
cost. We believe that our future success will depend in part upon our ability
to continue to enhance our existing products to meet customer needs and to
develop and introduce new products in a timely manner. We often require long
lead times for development of our products, which requires us to expend
significant management effort and incur material development costs and other
expenses. During development periods we may not realize corresponding revenue
in the same period, or at all. We may not succeed with our product development
efforts and we may not respond effectively to technological change.
. We may not be able to effectively compete in a highly competitive
semiconductor equipment industry
The markets for our products are highly competitive and subject to rapid
technological change. We currently face direct competition with respect to all
of our products. Some of our competitors may have greater name recognition,
more extensive engineering, manufacturing and marketing capabilities and
substantially greater financial, technical and personnel resources than those
available to us.
Several companies, including Brooks Automation, offer one or more products
that compete with our Asyst-SMIF System and SMART-Traveler System products. We
compete primarily with Entegris in the area of SMIF-Pods and SMIF-FOUPS. We
also compete with several competitors in the robotics area, including, but not
limited to, PRI Automation, Kensington Labs, Rorze and Yaskawa--Super
Mectronics Division. In the area of transport automation systems, our products
face competition from the main product line of PRI Automation, as well as from
Daifuku, Murata and Shinko. Our products in the area of storage and management
of wafers and reticles compete primarily with products from Brooks Automation
and Recif.
In addition, the transition to 300mm wafers is likely to draw new
competitors to the facility automation market. In the 300mm wafer market, we
expect to face intense competition from a number of companies such as PRI
Automation and Brooks Automation, as well as potential competition from
semiconductor equipment and cleanroom construction companies.
We expect that our competitors will continue to develop new products in
direct competition with our systems, improve the design and performance of
their products and introduce new products with enhanced performance
characteristics. In order to remain competitive, we need to continue to
improve and expand our product line, which will require us to maintain a high
level of investment in research and development.
Ultimately, we may not be able to make the technological advances and
investments necessary to remain
competitive.
14
New products developed by our competitors or more efficient production of
their products could increase pricing pressure on our products. In addition,
companies in the semiconductor capital equipment industry have been facing
pressure to reduce costs. Either of these factors may require us to make
significant price reductions to avoid losing orders. Further, our current and
prospective customers continuously exert pressure on us to lower prices,
shorten delivery times and improve the capabilities of our products. Failure
to respond adequately to such pressures could result in a loss of customers or
orders.
. We may not be able to efficiently integrate the operations of our
acquisitions
We have made and, most likely, will continue to make additional acquisitions
of, or significant investments in, businesses that offer complementary
products, services, technologies or market access. Our recent acquisitions
include Hine Design Incorporated, or HDI, Progressive Systems Technologies,
Inc., or PST, PAT, AMP, SemiFab, GW and MECS. We subsequently merged MECS into
AJI.
We are likely to make additional acquisitions of, or significant investments
in, businesses that offer complementary products, services, technologies or
market access. If we are to realize the anticipated benefits of these
acquisitions, the operations of these companies must be integrated and
combined efficiently. The process of integrating supply and distribution
channels, computer and accounting systems and other aspects of operations,
while managing a larger entity, will present a significant challenge to our
management. In addition, it is not certain that we will be able to incorporate
different technologies into our integrated solution. We cannot assure that the
integration process will be successful or that the anticipated benefits of the
business combinations will be fully realized. The dedication of management
resources to such integration may detract attention from the day-to-day
business, and we may need to hire additional management personnel to
successfully rationalize our acquisitions. The difficulties of integration may
be increased by the necessity of combining personnel with disparate business
backgrounds and combining different corporate cultures. We are unable to
assure that there will not be substantial costs associated with such
activities or that there will not be other material adverse effects of these
integration efforts. Such effects could materially reduce our short-term
earnings. Consideration for future acquisitions could be in the form of cash,
common stock, rights to purchase stock or a combination thereof. Dilution to
existing shareholders and to earnings per share may result to the extent that
shares of common stock or other rights to purchase common stock are issued in
connection with any future acquisitions.
. We may be unable to protect our intellectual property rights and we may
become involved in litigation concerning the intellectual property rights
of others
We rely on a combination of patent, trade secret and copyright protection to
establish and protect our intellectual property. While we intend to protect
our patent rights vigorously, we cannot assure that our patents will not be
challenged, invalidated or avoided, or that the rights granted thereunder will
provide us with competitive advantages. We also rely on trade secrets that we
seek to protect, in part, through confidentiality agreements with employees,
consultants and other parties. We cannot assure that these agreements will not
be breached, that we will have adequate remedies for any breach, or that our
trade secrets will not otherwise become known to, or independently developed
by, others.
Intellectual property rights are uncertain and involve complex legal and
factual questions. We may unknowingly infringe on the intellectual property
rights of others and may be liable for that infringement, which could result
in significant liability for us. If we do infringe the intellectual property
rights of others, we could be forced to either seek a license to intellectual
property rights of others or alter our products so that they no longer
infringe the intellectual property rights of others. A license could be very
expensive to obtain or may not be available at all. Similarly, changing our
products or processes to avoid infringing the rights of others may be costly
or impractical or could detract from the value of our product.
15
There has been substantial litigation regarding patent and other
intellectual property rights in semiconductor-related industries. Litigation
may be necessary to enforce our patents, to protect our trade secrets or know
how, to defend Asyst against claimed infringement of the rights of others or
to 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 by itself could have an adverse
material effect on our financial condition and operating results. Further,
adverse determinations in any litigation could result in our loss of
intellectual property rights, subject us to significant liabilities to third
parties, require us to seek licenses from third parties or prevent us from
manufacturing or selling our products. Any of these effects could have a
negative impact on our financial condition and results of operations.
. Because of intense competition for highly skilled personnel, we may not
be able to recruit and retain necessary personnel
Our future success will depend in large part upon our ability to recruit and
retain highly skilled technical, manufacturing, managerial, financial and
marketing personnel. Our future performance depends substantially on the
continued service of our senior management team, in particular Dr. Mihir
Parikh, our Chairman of the Board and Chief Executive Officer, and Anthony
Bonora, our Executive Vice President, Chief Technical Officer and Asyst
Fellow. We do not have long term employment agreements with any of our senior
management team, except Dr. Parikh, and we do not maintain any key-man life
insurance policies.
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
cyclical peaks and troughs. Because of the industry downturn during fiscal
year 1999, we restructured our operations and terminated approximately 110
employees in the United States and approximately 30 employees internationally.
In fiscal year 2000, we hired a number of highly skilled employees, especially
in manufacturing, to meet customer demand. As our industry entered a downturn,
we terminated approximately 144 full-time employees in the United States and 5
full-time employees internationally in the fourth quarter of the 2001 fiscal
year, and a further 109 full-time employees in the United States and 44 full-
time employees internationally early in the first quarter of the 2002 fiscal
year. The labor markets in which we operate are highly competitive and as a
result, this type of employment cycle increases our risk of not being able to
retain and recruit key personnel. Moreover, our failure to maintain good
employee relations could negatively impact our operations.
If the current downturn ends suddenly, we may not have enough personnel to
promptly return to our previous production levels. If we are unable to expand
our existing manufacturing capacity to meet demand, a customer's placement of
a large order for the development and delivery of factory automation systems
during a particular period might deter other customers from placing similar
orders with us for the same period. It could be difficult for us to rapidly
recruit and train the substantial number of qualified engineering and
technical personnel who would be necessary to fulfill one or more large,
unanticipated orders. A failure to retain, acquire or adequately train key
personnel could have a material adverse impact on our performance.
. Because our quarterly operating results are subject to variability,
quarter to quarter comparisons may not be meaningful
Our revenues and operating results can fluctuate substantially from quarter
to quarter depending on factors such as:
. the timing of significant customer orders;
. the timing of product shipment and acceptance;
. variations in the mix of products sold;
. the introduction of new products;
. changes in customer buying patterns;
. fluctuations in the semiconductor equipment market;
16
. the availability of key components;
. pressure from competitors; and
. general trends in the semiconductor manufacturing industry,
electronics industry and overall economy.
The sales cycle to new customers ranges from six months to 12 months from
initial inquiry to placement of an order, depending on the complexity of the
project. This extended sales cycle makes the timing of customer orders uneven
and difficult to predict. A significant portion of the net sales in any
quarter is typically derived from a small number of long-term, multi-million
dollar customer projects involving upgrades of existing facilities or the
construction of new facilities. Generally, our customers may cancel or
reschedule shipments with limited or no penalty. These factors increase the
risk of unplanned fluctuations in net sales. Moreover, a shortfall in net
sales in a quarter as a result of these factors could negatively impact our
operating results for the quarter. Given these factors, we expect quarter to
quarter performance to fluctuate for the foreseeable future. In one or more
future quarters, our operating results are likely to be below the expectations
of public market analysts and investors, which may cause our stock price to
decline.
. Shortages of components necessary for our product assembly can delay our
shipments and can lead to increased costs which may negatively impact our
financial results
When demand for semiconductor manufacturing equipment is strong, as it was
during the first two quarters of fiscal 2001, our suppliers, both domestic and
international, strained to provide components on a timely basis and, in some
cases, on an expedited basis at our request. Although to date we have
experienced only minimal delays in receiving goods from our key suppliers,
disruption or termination of these sources could have a serious adverse effect
on our operations. Many of the components and subassemblies used in our
products are obtained from a single supplier or a limited group of suppliers.
We believe that, in time, alternative sources could be obtained and qualified
to supply these products in the ordinary course of business. However, a
prolonged inability to obtain some components could have an adverse effect on
our operating results and could result in damage to our customer
relationships. Shortages of components may also result in price increases for
components and as a result, could decrease our margins and negatively impact
our financial results.
. We face significant economic and regulatory risks because a majority of
our net sales are from outside the United States
A majority of our net sales for the fiscal years ended March 31, 2000 and
2001, were attributable to sales outside the United States, primarily in
Taiwan, Japan, Europe and Singapore. We expect that international sales will
continue to represent a significant portion of our total revenues in the
future. In particular, net sales to Taiwan represented 35.0 percent and 20.0
percent of our total net sales for the fiscal years ended March 31, 2000 and
2001, respectively. Net sales to Japan represented 13.6 percent and 20.9
percent of our total net sales for the fiscal years ended March 31, 2000 and
2001, respectively. This concentration increases our exposure to any risks in
this area. Sales to customers outside the United States are subject to various
risks, including:
. exposure to currency fluctuations;
. the imposition of governmental controls;
. the need to comply with a wide variety of foreign and U.S. export
laws;
. political and economic instability;
. trade restrictions;
. changes in tariffs and taxes;
. longer payment cycles typically associated with foreign sales;
17
. the greater difficulty of administering business overseas; and
. general economic conditions.
As of March 31, 2000 and 2001, a majority of our accounts receivable, net,
were due from international customers located primarily in Taiwan, Japan,
Singapore and Europe. Receivables collection and credit evaluation in new
geographic regions challenge our ability to avert international risks. In
addition, the laws of certain foreign countries may not protect our
intellectual property to the same extent as do the laws of the United States.
We invoice a majority of our international sales in United States dollars.
However, for sales in Japan, we invoice our sales in Japanese yen. We cannot
assure that our future results of operations will not be adversely affected by
currency fluctuations.
. Rising energy costs in California may result in increased operating
expenses and reduced net income
California is currently experiencing an energy crisis. As a result, energy
costs in California, including natural gas and electricity, may rise
significantly over the next year relative to the rest of the United States.
Because we maintain manufacturing facilities in California, our operating
expenses with respect to these locations may increase if this trend continues.
If we cannot pass along these costs to our customers, our profitability will
suffer.
. Anti-takeover provisions in our articles of incorporation, bylaws and our
shareholder rights plan may prevent or delay an acquisition of Asyst that
might be beneficial to our shareholders
Our articles of incorporation and bylaws include provisions that may have
the effect of deterring hostile takeovers or delaying changes in control or
management of Asyst. These provisions include certain advance notice
procedures for nominating candidates for election to our Board of Directors, a
provision eliminating shareholder actions by written consent and a provision
under which only our Board of Directors, our Chairman of the Board, our
President or shareholders holding at least 10 percent of the outstanding
common stock may call special meetings of the shareholders. We have entered
into agreements with our officers and directors indemnifying them against
losses they may incur in legal proceedings arising from their service to
Asyst, including losses associated with actions related to third-party
attempts to acquire Asyst.
We have adopted a share purchase rights plan, pursuant to which we have
granted to our shareholders rights to purchase shares of junior participating
preferred stock. Upon the earlier of (1) the date of a public announcement
that a person, entity, or group of associated persons has acquired 15 percent
of our common stock or (2) 10 business days following the commencement of, or
announcement of, a tender after or exchange offer, the rights granted to our
shareholders will become exercisable to purchase our common stock at a price
substantially discounted from the then applicable market price of our common
stock. These rights could generally discourage a merger or tender offer
involving the securities of Asyst that is not approved by our Board of
Directors by increasing the cost of effecting any such transaction and,
accordingly, could have an adverse impact on shareholders who might want to
vote in favor of such merger or participate in such tender offer.
In addition, our Board of Directors has authority to issue up to 4,000,000
shares of preferred stock and to fix the rights, preferences, privileges and
restrictions, including voting rights, of those shares without any future vote
or action by the shareholders. The issuance of preferred stock while providing
desirable flexibility in connection with possible acquisition and other
corporate purposes, could have the effect of making it more difficult for a
third party to acquire a majority of our outstanding voting stock, thereby
delaying, deferring or preventing a change in control of Asyst. Furthermore,
such preferred stock may have other rights, including economic rights senior
to the common stock, and as a result, the issuance thereof could have a
material adverse effect on the market value of the common stock. We have no
present plans to issue shares of preferred stock.
18
. Our stock price may fluctuate significantly which could be detrimental to
our shareholders
Our stock price has in the past fluctuated and will fluctuate in the future
in response to a variety of factors, including the following:
. quarterly fluctuations in results of operations;
. announcements of new products by Asyst or our competitors;
. changes in either our earnings estimates or investment
recommendations by stock market analysts;
. announcements of technological innovations;
. conditions or trends in the semiconductor manufacturing industry;
. announcements by Asyst or our competitors of acquisitions, strategic
partnerships or joint ventures;
. additions or departures of senior management; and
. other events or factors many of which are beyond our control.
In addition, in recent years, the stock market in general and shares of
technology companies in particular have experienced extreme price
fluctuations, and such extreme price fluctuations may continue. These broad
market and industry fluctuations may adversely affect the market price of our
common stock.
. We may not be able to secure additional financing to meet our future
capital needs
We currently anticipate that our available cash resources, which include
existing cash and cash equivalents, short-term investments, cash generated
from operations and other existing sources of working capital will be
sufficient to meet our anticipated needs for working capital and capital
expenditures through the fourth quarter of fiscal 2002. If we are unable to
generate sufficient cash flows from operations to meet our anticipated needs
for working capital and capital expenditures we may need to raise additional
funds after twelve months to develop new or enhanced products, respond to
competitive pressures or make acquisitions. We may be unable to obtain any
required additional financing on terms favorable to us, if at all. If adequate
funds are not available on acceptable terms, we may be unable to fund our
expansion, successfully develop or enhance products, respond to competitive
pressures or take advantage of acquisition opportunities, any of which could
have a material adverse effect on our business. If we raise additional funds
through the issuance of equity securities, our shareholders may experience
dilution of their ownership interest, and the newly-issued securities may have
rights superior to those of the common stock. If we raise additional funds by
issuing debt, we may be subject to limitations on our operations. As of March
31, 2001, AJI owes approximately $26.4 million in unsecured loans from banks,
which have been guaranteed by us, and secured bonds with interest rates
ranging between 1.4 percent to 2.0 percent per annum. This strain on our
capital resources could have a material adverse effect on our business.
ITEM 2--Properties
We are headquartered in Fremont, California. In Northern California, we
lease nine facilities consisting of approximately 408,100 square feet to
support administrative, manufacturing and research and development activities.
These leases expire between January 2002 and June 2009. In Austin Texas, we
lease two facilities to support administrative, manufacturing and research
development activities consisting of approximately 91,000 square feet. These
leases expire between September 2002 and November 2005. We also own a 66,500
square foot facility in Nagoya, Japan to support administrative, manufacturing
and research and development activities. Additionally, we lease approximately
eight offices in the United States, four in Japan, six in our Asia/Pacific
region and three in Europe to house sales and product support activities.
Effective as of June 30, 2000, we entered into a synthetic lease transaction
with ABN Amro Bank N.V., or ABN, as agent for certain lenders, to acquire and
finance certain unimproved real property in Fremont,
19
California. In connection with that transaction, we leased the real property,
committed to payments aggregating $38,295,000 plus interest over a five-year
lease period and agreed to construct a manufacturing and campus facility on
the property thereon. Effective February 21, 2001, we amended the agreement
with ABN to obtain ABN's commitment to fund an additional sum of approximately
$61,705,000 for construction of improvements to the property. Due to changes
in our infrastructure needs, we later determined not to proceed with
development of the property as required by the agreements, and effective May
30, 2001, amended our agreements with ABN and committed to purchase the
property for an aggregate purchase price of $38,295,000 plus interest and
other charges on or before December 31, 2001. Under these latest amendments,
we are, amongst other things, released from our obligation to improve the
property and ABN is released from its commitment to fund construction costs.
We identified some excess capacity in several of our leased facilities
located in Northern California and Austin, Texas and have subleased
approximately 39,300 square feet to third parties. We believe our remaining
facilities are suitable and adequate for our requirements.
ITEM 3--Legal Proceedings
In October 1996, we filed a lawsuit in the United States District Court for
the Northern District of California against Jenoptik A.G., Jenoptik-Infab,
Inc., or Infab, Emtrak, Inc. and Empak, Inc. alleging infringement of two
patents related to our SMART Traveler System. We amended our Complaint in
April 1997 to allege causes of action for breach of fiduciary duty against
Jenoptik and Meissner & Wurst, GmbH, and misappropriation of trade secrets and
unfair business practices against all defendants. Our Complaint seeks damages
and injunctive relief against further infringement. All defendants filed
counter claims, seeking a judgment declaring the patents invalid,
unenforceable and not infringed. Jenoptik, Infab, and Emtrak also alleged that
we had violated federal antitrust laws and engaged in unfair competition. We
denied these allegations. In May 1998, we and Empak stipulated to a dismissal,
without prejudice, of the respective claims and counter claims against each
other. In November 1998, the court granted defendants' motion for partial
summary judgment as to most of the patent infringement claims and invited
further briefing as to the remainder. In January 1999, the court granted our
motion for leave to seek reconsideration of the November summary judgment
order and also, pursuant to a stipulation of the parties, dismissed without
prejudice two of the three antitrust counter claims brought by the defendants.
Since then, the parties stipulated to, and the court has ordered, the
dismissal with prejudice of the defendants' unfair competition and remaining
antitrust counterclaim, and the breach of fiduciary duty, misappropriation of
trade secrets and unfair business practices claims. On June 4, 1999, the court
issued an order by which it granted us motion for reconsideration in the sense
that it considered the merits of our arguments, but decided that it would not
change its prior ruling on summary judgment and would also grant summary
judgment for defendants on the remaining patent infringement claim. We filed
an appeal with the United States Court of Appeals for the Federal Circuit and
the court heard oral arguments on May 10, 2001. We are awaiting the court's
ruling.
In March 2001, we filed suit against Fortrend Engineering Corporation in the
United States District Court for the Northern District of California, seeking
to have two patents declared invalid or not infringed. The two patents have
been asserted by Fortrend against our customers use of our Load Port Transfer
system. We also allege that the inventors named on the two patents should be
corrected to include an Asyst employee as a joint inventor. Our complaint also
includes claims for unfair competition, interference with contractual
relations, and intentional interference with prospective economic advantage.
In May 2001, Fortrend filed counterclaims asserting that we and fourteen of
our customers infringe the two patents. We have denied Fortrend's allegations.
We do not believe that either of these cases will have a material adverse
effect on our operations, financial condition or business.
ITEM 4--Submission of Matters to a Vote for Security Holders
Not applicable.
20
PART II
ITEM 5--Market for the Registrant's Common Equity and Related Shareholder
Matters
Since September 22, 1993, our common stock, no par value, has been traded on
the Nasdaq National Market under the symbol "ASYT." The price per share
reflected in the following table represents the range of high and low closing
prices for our common stock as reported on the Nasdaq National Market for the
periods indicated.
High Low
------ ------
April 1--June 30, 1999...................................... $14.97 $ 7.38
July 1--September 30, 1999.................................. $16.81 $12.38
October 1--December 31, 1999................................ $32.78 $14.88
January 1--March 31, 2000................................... $63.88 $34.38
April 1--June 30, 2000...................................... $58.13 $28.00
July 1--September 30, 2000.................................. $37.38 $17.31
October 1--December 31, 2000................................ $19.69 $10.73
January 1--March 31, 2001................................... $19.06 $11.19
There were approximately 339 record holders of our common stock as of March
31, 2001. We have not paid any cash dividends since our inception and do not
anticipate paying cash dividends in the foreseeable future.
21
ITEM 6--Selected Financial Data
We acquired companies in fiscal years 1999, 2000 and 2001 and our
implementation of SAB 101 has impacted the year over year comparability of the
selected financial data. The following table reflects selected summary
financial data (in thousands, except per share amounts):
Fiscal Year Ended March 31,
----------------------------------------------
1997 1998 1999 2000 2001
-------- -------- -------- -------- --------
Consolidated Statements of
Operations Data:
Net sales..................... $152,303 $182,290 $ 92,948 $225,554 $491,542
Gross profit.................. 60,702 79,898 33,053 103,055 185,746
In-process research and
development of acquired
businesses and product line.. 1,335 -- 7,100 4,884 --
Operating income (loss)....... 16,579 25,673 (39,475) 15,456 43,106
Income (loss) from continuing
operations before cumulative
effect of a change in
accounting principle......... 9,990 17,202 (26,931) 10,019 29,532
Cumulative effect of change in
accounting principle......... -- -- -- -- (2,506)
Net income (loss)............. (4,675) 15,362 (26,931) 10,019 27,026
Basic Earnings (Loss) Per
Share:
Income (loss) per share from
continuing operations
before Cumulative effect of
change in accounting
principle.................. $ 0.48 $ 0.75 $ (1.15) $ 0.36 $ 0.90
Income (loss) per share from
continuing operations after
Cumulative effect of change
in accounting principle.... 0.48 0.75 (1.15) 0.36 0.82
Net income (loss) per share. (0.23) 0.67 (1.15) 0.36 0.82
Shares used in per share
calculation................ 20,726 22,858 23,460 27,639 32,697
Diluted Earnings (Loss) Per
Share:
Income (loss) per share from
continuing operations
before Cumulative effect of
change in accounting
principle.................. $ 0.47 $ 0.71 $ (1.15) $ 0.32 $ 0.85
Income (loss) per share from
continuing operations after
Cumulative effect of change
in accounting principle.... 0.47 0.71 (1.15) 0.32 0.78
Net income (loss) per share. (0.22) 0.63 (1.15) 0.32 0.78
Shares used in per share
calculation................ 21,286 24,456 23,460 30,986 34,928
Consolidated Balance Sheet
Data:
Cash, cash equivalents and
short-term investments..... $ 14,739 $ 85,493 $ 35,762 $106,088 $ 37,749
Restricted cash equivalents
and short-term investments. -- -- -- -- 52,500
Working capital............. 56,835 122,535 72,484 171,550 179,154
Total assets................ 98,828 166,502 124,288 329,200 408,432
Shareholders' equity........ 68,376 129,250 96,634 233,106 302,463
22
ITEM 7--Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion of our financial condition and results of operations
should be read in conjunction with our consolidated financial statements and
the related notes included elsewhere in this Annual Report on Form 10-K. This
discussion contains forward looking statements which involve risk and
uncertainties. Our actual results could differ materially from those
anticipated in the forward looking statements as a result of certain factors,
including but not limited to those discussed in "Risk Factors" and elsewhere in
this Annual Report.
Overview
We are a leading provider of integrated automation systems for the
semiconductor and related electronics manufacturing industries. We design
systems that enable semiconductor manufacturers to increase their manufacturing
productivity and protect their investment in silicon wafers during the
manufacture of ICs. We sell our systems directly to semiconductor
manufacturers, as well as to OEMs that integrate our systems with their
equipment for sale to semiconductor manufacturers. Our sales are tied to
capital expenditures at fabs and as such are cyclical in nature. Fiscal years
1999, 2000 and 2001 have demonstrated the cyclical nature of our business, as
discussed below.
We use a dedicated direct sales force worldwide, which is supported by
distributors in Europe. Our functional currency is the U.S. dollar, except in
Japan where our functional currency is the Japanese yen. To date, the impact of
currency translation gains or losses has not been material to our sales or
results of operations.
During fiscal year 1999, we experienced a sharp downturn in our business in
response to a dramatic slowdown in the Asian economies and an over capacity of
memory chip manufacturing. In fiscal year 2000, we experienced significant
growth due to the dramatic growth in capital spending by semiconductor
manufacturers. The increase in capital spending was driven by the growth in
demand for both memory and logic chips in a broad variety of products,
particularly those of internet and telecommunications equipment manufacturers.
In the first half of fiscal year 2001, the demand for our products remained
strong, but in the second half of fiscal year 2001, the demand for our products
decreased significantly as semiconductor manufacturers sharply reduced capital
expenditures. This decrease in capital expenditures resulted in slower bookings
and significant order push outs and cancellations in the fourth quarter of
fiscal year 2001.
In addition to the changes in the business cycle impacting demand for our
products, we are beginning to see a shift from 150mm and 200mm to 300mm
products. In fiscal year 1999, 150mm and 200mm products comprised virtually all
of our net sales. These products generate higher gross profit than our new
300mm products. While 200mm products remain dominant in our product mix, the
contribution of 300mm products has increased from 3.5 percent of net sales in
the first quarter of fiscal year 2001 to 13.5 percent of net sales for the
fourth quarter of fiscal year 2001. This shift negatively impacted our gross
profit, particularly in the fourth quarter of fiscal year 2001. During fiscal
years 2000 and 2001, our customers added significant capacity in 150mm and
200mm and in response we increased production of our related products.
Meanwhile, we continued to develop updated versions of these products. As a
result, the severity and quickness of the recent downturn in the semiconductor
business cycle left us with substantial raw material and purchase commitments
for our older 150mm and 200mm products. We do not believe that our customers
will continue to purchase older versions of our 150mm and 200mm products when
capital spending resumes. During the fourth quarter of fiscal year 2001, we
recorded $15.0 million of inventory reserves and took an additional $4.0
million charge for purchase commitments related to 150mm and 200mm products
that we do not believe are going to be consumed in the next upturn. In May
2001, we announced our intention to discontinue production of our 150mm
products due to our belief that there will be limited future spending on 150mm
fabs.
Prior to fiscal year 2001, our revenue policy was to recognize revenue at the
time the customer took title to the product, generally at the time of shipment.
Revenue related to maintenance and service contracts was recognized ratably
over the duration of the contracts. We changed our revenue recognition policy
during fiscal year 2001, based on guidance provided in Securities and Exchange
Commission Staff Accounting Bulletin No. 101, or SAB 101, "Revenue Recognition
in Financial Statements." We now recognize revenue when
23
persuasive evidence of an arrangement exists, delivery has occurred or service
has been rendered, our price is fixed or determinable and collectability is
reasonably assured. Some of our products are large volume consumables that are
tested to industry and/or customer acceptance criteria prior to shipment.
Revenue for these types of products is recognized at shipment. Certain of our
product sales are accounted for as multiple-element arrangements. If we have
met defined customer acceptance experience levels with both the customer and
the specific type of equipment, we recognize the product revenue at the time
of shipment and transfer of title, with the remainder recognized when the
other elements, primarily installation, have been completed. Certain other
products are highly customized systems that cannot be completed or adequately
tested to customer specifications prior to shipment from the factory and we do
not recognize revenue until these products are formally accepted by the
customer. Revenue for spare parts sales is recognized on shipment. Revenue
related to maintenance and service contracts is recognized ratably over the
duration of the contracts. Unearned maintenance and service contract revenue
is not significant and is included in accrued liabilities and other.
We account for software revenue in accordance with the American Institute of
Certified Public Accountants' Statement of Position 97-2, "Software Revenue
Recognition." Revenues for integration software work are recognized on a
percentage of completion. Software license revenue, which is not material to
the consolidated financial statements, is recognized when we ship the
software, payment is due within one year, collectability is probable and there
are no significant obligations remaining.
The majority of our revenues in any single quarter are typically derived
from a few large customers, and our revenues will therefore fluctuate based on
a number of factors, including:
. the timing of significant customer orders;
. the timing of product shipment and acceptance;
. variations in the mix of products sold;
. the introduction of new products;
. changes in customer buying patterns;
. fluctuations in the semiconductor equipment market;
. the availability of key components;
. pressure from competitors; and
. general trends in the semiconductor manufacturing industry,
electronics industry and overall economy.
Acquisitions
During the three fiscal years ended March 31, 2001, we acquired the
following companies:
In June 1999, we acquired all of the shares of PST, which manufactures
wafer-sorting equipment used by semiconductor manufacturers. The acquisition
was accounted for using the pooling of interests method of accounting.
Accordingly, our consolidated financial statements for all periods presented
have been restated to include the financial statements of PST.
In July 1998, we acquired HDI, which develops robotics equipment used by
semiconductor manufacturers. The transaction was accounted for using the
purchase method of accounting.
In August 1999, we acquired PAT, which develops continuous flow transport
systems for use in semiconductor manufacturing facilities. The transaction was
accounted for using the purchase method of accounting.
24
In 2000, we increased our ownership percentage of MECS, a Japanese
engineering and robotics manufacturing company, to 95.3 percent. We
subsequently merged MECS into AJI. The transactions were accounted for using
the purchase method of accounting.
In February 2001, we acquired AMP, a manufacturer of precision parts. The
transaction was accounted for using the purchase method of accounting.
In February 2001, we acquired SemiFab, a manufacturer of environmental
control equipment and a contract manufacturer. The transaction was accounted
for using the purchase method of accounting.
Fiscal Years Ended March 31, 1999, 2000 and 2001
The following table sets forth the percentage of net sales represented by
certain consolidated statements of operations data for the periods indicated:
Fiscal Year Ended
March 31,
---------------------
1999 2000 2001
----- ----- -----
Net sales.............................................. 100.0 % 100.0 % 100.0 %
Cost of sales.......................................... 64.4 54.3 62.2
----- ----- -----
Gross profit......................................... 35.6 45.7 37.8
----- ----- -----
Operating expenses:
Research and development............................. 19.4 9.6 9.0
Selling, general and administrative.................. 43.3 24.9 18.4
In-process research and development of acquired
business and product line........................... 7.6 2.2 --
Amortization of acquired intangible assets........... 1.8 1.1 1.4
Non-recurring charges................................ 6.0 1.0 0.2
----- ----- -----
Total operating expenses............................. 78.1 38.8 29.0
----- ----- -----
Operating income (loss).............................. (42.5) 6.9 8.8
Other income (expense), net............................ 1.9 0.9 0.7
----- ----- -----
Income (loss) before provision (benefit) for income
Taxes and cumulative effect of change in accounting
principle............................................. (40.6) 7.8 9.5
Provision (benefit) for income taxes................... (11.6) 3.3 3.5
----- ----- -----
Income (loss) before effect of change in accounting
policy................................................ (29.0) 4.5 6.0
Cumulative effect of change in accounting principle,
net of tax benefit.................................... -- -- (0.5)
----- ----- -----
Net income (loss)...................................... (29.0)% 4.5 % 5.5 %
===== ===== =====
Net sales. Our net sales in the fiscal year ended March 31, 2000 increased
by 142.8 percent to $225.6 million from $92.9 million for the fiscal year
ended March 31, 1999. Net sales in the fiscal year ended March 31, 2001
increased 117.9 percent to $491.5 million. Our fiscal year 1999 net sales were
negatively impacted by reduced capital spending by semiconductor manufacturers
because of a slowdown in Asian economies and demand for semiconductor devices.
Fiscal year 2000, on the other hand, benefited from a sharp upturn in capital
spending by semiconductor manufacturers and our 200mm product market
leadership and positioning. Our increase in net sales in fiscal year 2001 over
fiscal year 2000 resulted from approximately $52.7 million of net sales
contributed by MECS, AMP and SemiFab, which were not part of our consolidated
results for fiscal year 2000, and continued growth in demand for our other
products. While we had sequential growth in net sales for the first three
quarters of fiscal year 2001, fourth quarter net sales declined by 10.1
percent from the third quarter. This decline resulted from a substantial
reduction in capital spending by semiconductor manufacturers
25
worldwide. We experienced a material decline in net sales of our 200mm
products, which was partially offset by increased sales of our 300mm products.
For the first quarter of fiscal year 2002, we currently expect that net sales
will be $65.0 to $70.0 million.
Our international sales, including the local revenues recorded at our
foreign locations, were as follows (dollars in millions):
Fiscal Year Ended March 31,
----------------------------------------
1999 2000 2001
------------ ------------ ------------
% of % of % of
$ Sales $ Sales $ Sales
------ ----- ------ ----- ------ -----
Taiwan............................... $ 31.1 33.5% $ 78.9 35.0% $ 98.3 20.0%
Japan................................ 8.1 8.7 30.7 13.6 102.8 20.9
Other................................ 4.2 4.5 17.9 7.9 58.3 11.9
------ ---- ------ ---- ------ ----
Total Asia......................... 43.4 46.7 127.5 56.5 259.4 52.8
Europe............................... 4.1 4.4 7.9 3.5 39.8 8.1
------ ---- ------ ---- ------ ----
Total International................ $ 47.5 51.1% $135.4 60.0% $299.2 60.9%
====== ==== ====== ==== ====== ====
Direct sales to international customers remain a substantial portion of our
net sales. The increase in Japan's share of our international net sales in
fiscal year 2001 is due to the $45.8 million contribution to net sales from
MECS products. During fiscal year 2001, we achieved our first sales in
Malaysia to two new semiconductor manufacturers, and our systems were shipped
to the People's Republic of China for a new semiconductor manufacturing
facility of a major U.S. electronics company. Net sales to our European
customers in fiscal year 2001 grew by approximately 406 percent compared to
fiscal year 2000 net sales. This increase was primarily the result of our
ability to leverage a successful retrofit of a Texas Instruments U.S.
semiconductor facility using SMIF technology to win a subsequent Texas
Instruments 200mm project in Germany. As 300mm products comprise a higher
percent of our net sales, over time we expect that U.S. sales will continue to
grow as a percent of total net sales. This is because most of our 300mm
products will be sold to OEMs, most of which are located in the United States
and Japan and, to a lesser extent, in Europe.
During fiscal year 2001, we had one reportable segment. The net sales by
product or service categories comprising our net sales for the three fiscal
years ended March 31, 1999, 2000 and 2001 were as follows (dollars in
thousands):
Fiscal Year Ended March 31,
----------------------------
1999 2000 2001
-------- --------- ---------
SMIF Systems.................................... $ 66,609 $ 175,363 $ 334,143
Robotics........................................ 6,323 14,191 73,976
SMART Traveler Systems.......................... 6,227 14,527 38,962
Non-SMIF Systems................................ 8,794 11,208 34,815
Services & other................................ 4,995 10,265 9,646
-------- --------- ---------
Total......................................... $ 92,948 $ 225,554 $ 491,542
======== ========= =========
Gross profit. Our gross profit was 35.6 percent, 45.7 percent and 37.8
percent of net sales for the fiscal years ended March 31, 1999, 2000 and 2001,
respectively. Gross profit in fiscal year 1999 was negatively impacted because
we were unable to reduce our manufacturing overhead to compensate for the 49.0
percent decrease in revenues compared to fiscal year 1998. We also increased
our inventory reserves by $2.3 million during fiscal year 1999 in response to
a rapid decline in sales activity during that period resulting in increased
excess and obsolete inventories. In addition, significant orders were received
and shipped near the end of each quarter requiring higher levels of overtime
by our employees. During fiscal year 2000, the increase in gross profit
resulted from the combined effect of materials cost reduction achieved through
product re-design efforts and the
26
dramatically increased rate of absorption of fixed costs resulting from the
142.8 percent increase in net sales over fiscal year 1999. The decrease in our
gross profit in fiscal year 2001 to 37.8 percent is primarily due to the
acquisition of a majority ownership interest in MECS in late March 2000, other
changes in product mix and the need to take substantial inventory and loss
reserves in the fourth quarter of fiscal year 2001. Since we acquired a
majority ownership interest in MECS, we have made substantial improvements in
the gross profit at MECS through cost reduction engineering efforts and
improved absorption of fixed manufacturing overhead through higher sales
volumes. However, the gross profit on MECS' products is significantly lower
than the average gross profit produced on our other products. Other changes in
product mix that negatively impacted our fiscal year 2001 gross profit include
the increase in the percent of net sales of 300mm products. As our 300mm
products are still very early in their product life cycle, the gross profit on
these products are significantly lower than on our 150mm and 200mm products.
In March 2001, we expensed $23.3 million for excess inventories, purchase
commitments and losses on system sales for which future revenue would not
cover our expected costs to complete. In the first quarter of fiscal year
2002, we currently expect that gross profit will be in the range of 25.0 to
28.0 percent of net sales.
Research and development. Research and development expenses were $18.0
million, $21.6 million and $44.3 million for the fiscal years ended March 31,
1999, 2000 and 2001, respectively, representing 19.4 percent, 9.6 percent and
9.0 percent of net sales for the respective periods then ended. We increased
research and development spending in both fiscal years 2000 and 2001 to
support ongoing product development needs of acquired companies. This increase
is also due to increased spending to support our new SMIF-300 product series,
Plus Portal, transport product technologies, robotic products and increased
expenditures for the development of automated material handling technology for
the 300mm market. Our research and development expenses as a percent of net
sales can vary significantly based on the level of net sales and our need to
continue investing in research and development activities to remain
competitive. We capitalize certain legal costs related to our patents. We have
not capitalized costs associated with software development because such costs
incurred to date that are eligible for capitalization have not been material.
We expect our research and development activities and related expenditures to
increase in absolute dollars in future periods.
Selling, general and administrative. Selling, general and administrative
expenses were $40.2 million, $56.2 million and $90.4 million for the fiscal
years ended March 31, 1999, 2000 and 2001, respectively, representing 43.3
percent, 24.9 percent and 18.4 percent of net sales for the respective periods
then ended. Selling, general and administrative expenses as a percent of net
sales are subject to significant variation with changes in net sales because
it consists of many activities that have costs which are either fixed or semi-
variable. Selling and marketing expenses were $14.7 million, $21.4 million and
$52.3 million for the fiscal years ended March 31, 1999, 2000 and 2001,
respectively, representing 15.8 percent, 9.5 percent and 10.6 percent of net
sales for the respective periods then ended. The increasing trend in selling
and marketing expenses in the fiscal years ended March 31, 1999, 2000 and 2001
is the result of our expanding presence in Europe, Japan and Asia. General and
administrative expenses were $25.5 million, $34.8 million and $38.1 million
for the fiscal years ended March 31, 1999, 2000 and 2001, respectively,
representing 27.5 percent, 15.4 percent and 7.8 percent of net sales for the
respective periods then ended. General and administrative expenses have
increased largely as a result of our acquisitions in fiscal years 2000 and
2001. In fiscal year 2000, we also increased our infrastructure to support the
142.8 percent increase in net sales. As a result of our acquisitions during
the last three years, we currently operate with a number of independent
systems. In order to position ourselves for future growth opportunities, we
will need to increase our investment in administrative systems and processes
which will increase the fixed costs associated with general and administrative
functions. While these investments should provide long-term productivity
improvements, our transition to new systems may result in increased expense
levels before expense reductions from any productivity improvements are
realized.
Amortization of acquired intangible assets. Amortization expenses relating
to acquired intangible assets were $1.6 million, 2.6 million and $7.0 million
for the fiscal years ended March 31, 1999, 2000 and 2001, respectively,
representing 1.8 percent, 1.1 percent and 1.4 percent of net sales for the
respective periods then ended. We amortize the acquired intangible assets over
periods ranging from four to fourteen years.
27
Non-recurring charges. In the fiscal year ended March 31, 1999 we underwent
significant restructuring of our operations to reduce our cost structure in
response to a 49.0 percent reduction in net sales. We also restructured
activities in Japan and Europe to reposition those activities to compete more
effectively. In addition, we repositioned or eliminated certain product
offerings. The restructuring resulted in terminating the employment of 110
U.S. employees and 30 international employees. During fiscal year 2000, we
decided to move to a purely direct sales channel in Japan, replacing a
distributorship arrangement. As a result, we paid a fee of $2.5 million to
cancel the distribution agreement. In the fourth quarter of fiscal 2001, in
response to the drop in net sales and new orders in the fourth quarter, we
reduced our workforce by approximately 149 regular full-time employees and
approximately 150 temporary employees and contractors primarily based in
Fremont, California, and shut down a small manufacturing facility in Japan.
The charge associated with these actions was $1.0 million.
In-process research and development of acquired businesses and product
line. Charges to in-process research and development of acquired businesses
and product line were $7.1 million and $4.9 million for the fiscal years ended
March 31, 1999 and 2000 respectively, representing 7.6 percent and 2.2 percent
of net sales for the respective periods then ended. There were no charges in
fiscal year 2001. During the fiscal year ended March 31, 1999, we completed
the acquisitions of the FluoroTrac product line and HDI. We accounted for the
acquisition of HDI using the purchase method of accounting during the quarter
ended September 30, 1998. In connection with the purchase price allocation of
FluoroTrac, we recorded a write-off of approximately $1.2 million of in-
process research and development costs in the quarter ended June 30, 1998. In
connection with the purchase price allocation of HDI, we recorded a write-off
of approximately $5.9 million of in-process research and development costs in
the quarter ended September 30, 1998. During the year ended March 31, 2000, we
completed the acquisition of PAT and a majority interest in MECS. The PAT
acquisition was accounted for using the purchase method of accounting during
the quarter ended September 30, 1999 and the MECS acquisition was accounted
for using the purchase method of accounting during the quarter ended March 31,
2000. In connection with the purchase price allocation of PAT, we recorded a
write-off of approximately $4.0 million of in-process research and development
costs in the quarter ended September 30, 1999. In connection with the purchase
price allocation of MECS we recorded a write-off of approximately $0.9 million
of in-process research and development costs in the quarter ended March 31,
2000. The decision to write-off these costs was primarily due to the fact that
the acquired in-process research and development related to the FluoroTrac
product line, HDI, PAT and MECS had not yet reached technological feasibility
and had no perceived alternative future uses. Actions and comments regarding
other companies from the Commission have indicated that they are reviewing the
current valuation methodology of purchased in-process research and development
relating to acquisitions. The Commission is concerned that some companies are
writing off more of the value of an acquisition than is appropriate. We
believe that we are in compliance with all of the rules and related guidance
as they currently exist. However, the Commission may seek to reduce the amount
of purchased in-process research and development we have previously expensed.
This would result in the restatement of our previously filed financial
statements and could have a material negative impact on the financial results
for the period subsequent to the particular acquisition.
Other income (expense), net. Other income (expense), net was $1.7 million,
$2.1 million and $3.7 million for the fiscal years ended March 31, 1999, 2000
and 2001, respectively, representing 1.9 percent, 0.9 percent and 0.7 percent
of net sales for the respective periods then ended. The decrease as a
percentage of net sales during fiscal year 2000 over fiscal year 1999 was
largely due to the 142.8 percent increase in net sales activity during fiscal
year 2000. The decrease as a percentage of net sales during fiscal year 2001
over fiscal year 2000 was largely due to the 117.9 percent increase in net
sales activity during fiscal year 2001. Although other income (expense), net,
has fluctuated over the past several years, other income (expense), net, has
increased primarily because of the increase in interest income on our
increasingly higher cash levels.
Provision (benefit) for income taxes. Provision (benefit) for income taxes
were ($10.8) million, $7.5 million, and $17.2 million for the fiscal years
ended March 31, 1999, 2000 and 2001, respectively, representing an effective
tax rate of 28.6 percent, 42.8 percent and 36.8 percent for the respective
periods then ended. In fiscal year 2001, we experienced a lower effective tax
rate compared to the prior year's effective tax rate of 42.8 percent due to
the impact of prior year non-deductible in-process research and development
write-offs related to the acquisition of PAT and MECS, respectively.
28
As of March 31, 2001, we have recorded a net deferred tax asset of
approximately $20.1 million, of which $4.3 million relates to net operating
loss carryforwards and tax credits generated by us and our domestic
subsidiaries. These net operating loss carryforwards and tax credits expire at
various dates through March 31, 2021. Included in this amount are pre-merger
Federal net operating loss carryforwards of approximately $3.5 million
generated by PAT, PST and SemiFab, which will expire at various dates through
March 31, 2021. The utilization of the net operating losses are subject to
annual limitations due to the "change in ownership" provisions of the Internal
Revenue Code. As of March 31, 2001, $7.3 million of the MECS deferred tax
asset related to pre-merger foreign net operating loss carryforwards, which
expire in 2005. The deferred tax asset related to these foreign net operating
loss carryforwards is included in the foreign deferred tax asset related to
MECS. The utilization of the foreign net operating loss carryforwards is
subject to the ability of MECS to generate future foreign taxable income. A
valuation allowance has been recorded related to pre-merger net operating
losses and other deferred tax assets of PST, AMP, SemiFab and MECS of
approximately $1.6 million, $0.1 million, $1.1 million and $10.2 million,
respectively. Realization of the net deferred tax asset is dependent on
generating sufficient future taxable income. Although realization is not
assured, management believes that it is more likely than not that the deferred
tax asset will be realized. Although the deferred tax asset is considered
realizable, actual amounts could be reduced if sufficient future taxable
income is not achieved.
Cumulative effect on an accounting change, net of tax. We recorded a non-
cash charge of $2.5 million, net of an income tax benefit of $1.3 million, or
a loss of $0.07 per diluted share, to reflect the cumulative effect of the
accounting change to comply with SAB 101 as of the beginning of the year.
Selected Quarterly Financial Data
The following table sets forth our unaudited consolidated statement of
operations for each of the eight quarterly periods ended March 31, 2001. The
data for the four quarterly periods for fiscal year 2000 show the pro forma
effect of applying SAB 101 throughout fiscal year 2000, and reconciles the
differences with those amounts previously reported. The data for the four
quarterly periods for fiscal year 2001 show the effect of restating the first
three quarters of fiscal year 2001 as if the provisions of SAB 101 had been
applied, and reconciles the differences with those amounts previously
reported. You should read this information in conjunction with our
consolidated financial statements and related notes appearing elsewhere in
this Annual Report. We have prepared this unaudited consolidated information
on a basis consistent with our audited consolidated financial statements,
reflecting all normal recurring adjustments that we consider necessary for a
fair presentation of our financial position and operating results for the
quarters presented. You should not draw any conclusions about our future
results from the operating results for any quarter.
29
The first three quarters of our fiscal year end on a Saturday, and thus the
actual date of the quarter-end is usually different from the quarter-end dates
used throughout this Form 10-K (in thousands, except for per share amounts):
Fiscal Quarter Ended Fiscal Quarter Ended
-------------------------------------- --------------------------------------
Jun. 30, Sep. 30, Dec. 31, Mar. 31, Jun. 30, Sep. 30, Dec. 31, Mar. 31,
1999 1999 1999 2000 2000 2000 2000 2001
-------- -------- -------- -------- -------- -------- -------- --------
Pro Pro Pro Pro Restated Restated Restated Restated
Forma Forma Forma Forma
Net Sales
As previously reported. $ 27,086 $ 40,696 $63,816 $93,956 $123,671 $126,922 $127,439 $115,079
Effect of change in
accounting principle.. (826) (474) (984) (2,752) (1,188) (922) 541 --
After the effect of SAB
101................... 26,260 40,222 62,832 91,204 122,483 126,000 127,980 115,079
Cost of Sales
As previously reported. 15,840 22,327 34,505 49,827 67,604 67,458 70,451 101,503
Effect of change in
accounting principle.. 10 13 32 1,213 (453) (301) (466) --
After the effect of SAB
101................... 15,830 22,314 34,473 48,614 67,151 67,157 69,985 101,503
Gross profit
As previously reported. 11,246 18,369 29,311 44,129 56,067 59,464 56,988 13,576
Effect of change in
accounting principle.. (816) (461) (952) (1,539) (735) (621) 1,007 --
After the effect of SAB
101................... 10,430 17,908 28,359 42,590 55,332 58,843 57,995 13,576
Operating Expenses:
Research and
development........... 4,235 4,456 5,298 7,595 9,721 10,851 12,042 11,649
Selling, general and
administrative........ 10,728 11,729 15,333 18,456 21,451 22,984 24,237 21,763
Amortization of
acquired intangible
assets................ 614 614 676 681 1,702 1,366 1,336 2,559
In-process research and
development of
acquired business..... -- 4,000 -- 884 -- -- -- --
Non-recurring charges.. -- -- -- 2,300 -- -- -- 979
Total operating
expenses.............. 15,577 20,799 21,307 29,916 32,874 35,201 37,615 36,950
Operating (loss) income
As previously reported. (4,331) (2,430) 8,004 14,213 23,193 24,263 19,373 (23,374)
Effect of change in
accounting principle.. (816) (461) (952) (1,539) (735) (621) 1,007 --
After the effect of SAB
101................... (5,147) (2,891) 7,052 12,674 22,458 23,642 20,380 (23,374)
Other income (expense),
net.................... (14) 299 803 983 1,311 1,648 469 227
Income (loss) before
provision for income
taxes
As previously reported. (4,345) (2,131) 8,807 15,196 24,504 25,911 19,842 (23,147)
Effect of change in
accounting principle.. (816) (461) (952) (1,539) (735) (621) 1,007 --
After the effect of SAB
101................... (5,161) (2,592) 7,855 13,657 23,769 25,290 20,849 (23,147)
Provision (benefit) for
income taxes
As previously reported. (1,477) 635 2,966 5,384 8,619 8,937 6,724 (6,906)
Effect of change in
accounting principle.. (274) (155) (319) (514) (239) (228) 322 --
After the effect of SAB
101................... (1,751) 480 2,647 4,870 8,380 8,709 7,046 (6,906)
Net income (loss)
As previously reported. (2,868) (2,766) 5,841 9,812 15,885 16,974 13,118 (16,241)
Effect of change in
accounting principle.. (542) (306) (633) (1,025) (496) (393) 685 --
Cumulative effect of
change in accounting
principle............. -- -- -- -- (2,506) -- -- --
Net income (loss)....... ($3,410) ($3,072) $ 5,208 $ 8,787 $ 12,883 $ 16,581 $ 13,803 $(16,241)
Basic Earnings (loss)
Per Share:
Earnings (loss) per
share before
cumulative effect of
change in accounting
principle
As previously reported. $ (0.12) $ (0.11) $ 0.20 $ 0.31 $ 0.49 $ 0.53 $ 0.40 $ (0.48)
Effect of change in
accounting principle.. $ (0.02) $ (0.01) $ (0.02) $ (0.03) $ (0.01) $ (0.02) $ 0.03 --
After the effect of SAB
101................... $ (0.14) $ (0.12) $ 0.18 $ 0.28 $ 0.48 $ 0.51 $ 0.43 $ (0.48)
Cumulative effect of
change in accounting
principle............. -- -- -- -- $ (0.08) -- -- --
Earnings after
cumulative effect of
change in accounting
principle............. $ (0.14) $ (0.12) $ 0.18 $ 0.28 $ 0.40 $ 0.51 $ 0.43 $ (0.48)
Diluted Earnings (loss)
Per Share:
Earnings (loss) per
share before
cumulative effect of
change in accounting
principle
As previously reported. $ (0.12) $ (0.11) $ 0.18 $ 0.27 $ 0.45 $ 0.49 $ 0.39 $ (0.48)
Effect of change in
accounting principle.. $ (0.02) $ (0.01) $ (0.02) $ (0.03) $ (0.02) $ (0.01) $ 0.02 --
After the effect of SAB
101................... $ (0.14) $ (0.12) $ 0.16 $ 0.24 $ 0.43 $ 0.48 $ 0.41 $ (0.48)
Cumulative effect of
change in accounting
principle............. -- -- -- -- $ (0.07) -- -- --
Earnings (loss) after
cumulative effect of
change in accounting
principle............. $ (0.14) $ (0.12) $ 0.16) $ 0.24 $ 0.36 $ 0.48 $ 0.41 $ (0.48)
Shares used in per share
calculation:
Basic.................. 24,456 25,656 28,964 31,345 32,162 32,308 32,416 33,901
Diluted................ 24,456 25,656 32,722 35,999 35,377 34,840 33,937 33,901
30
New Accounting Pronouncement
In June 2000, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards, or SFAS, No. 138, "Accounting for Certain
Derivative Instruments and Hedging Activities," an amendment of SFAS No. 133,
which is effective for all fiscal years beginning after June 15, 2000. SFAS
No. 138 establishes accounting and reporting standards requiring that every
derivative instrument be recorded in the balance sheet as either an asset or
liability measured at its fair value. The statement also requires that changes
in the derivative's fair value be recognized currently in earnings unless
specific hedge accounting criteria are met. Because we do not currently hold
any derivative instruments and do not currently engage in any material hedging
activities, we believe that the application of SFAS No. 138 will not have a
material impact on our financial position or results of operations.
Liquidity and Capital Resources
Since inception, we have funded our operations primarily through the private
sale of equity securities and public stock offerings, customer pre-payments,
bank borrowings and cash generated from operations. As of March 31, 2001, we
had approximately $34.7 million in cash and cash equivalents, $52.5 million in
restricted cash equivalents and short-term investments, $3.0 million in short-
term investments, $179.2 million in working capital and $5.5 million in long-
term debt and finance leases.
Cash flows from operating activities. Net cash provided by operating
activities in fiscal year 2001 was $31.0 million. The net cash provided by
operating activities in 2001 was primarily attributable to our net income of
$27.0 million and non-cash charges to net income including depreciation and
amortization of $16.4 million and inventory reserve adjustments of $16.5
million, partially offset by an increase in inventories of $34.6 million and a
decrease in accounts payable of $11.8 million.
Cash flows from investing activities. Net cash used in investing activities
in fiscal year 2001 was $9.0 million. We used $52.5 million in connection with
a synthetic lease for land and land improvements. In addition, we used $3.1
million in connection with the acquisition of additional ownership interest in
MECS, $20.7 million in connection with the acquisition of AMP and $5.2 million
in connection with the acquisition of SemiFab. We also used $17.9 million to
modify our facilities and purchase new equipment and furniture used in our
operations. The uses were partially offset by the sale of short-term
investments of $90.4 million, net.
Cash flows from financing activities. During fiscal year 2001, we made net
principal payments on short-term and long-term debt and finance leases of $4.5
million. During fiscal year 2001, we issued 568,380 shares of common stock in
connection with our employee stock programs for an aggregate of $4.6 million.
Effective as of June 30, 2000, we entered into a synthetic lease transaction
with ABN AMRO Bank N.V., or ABN, as agent for certain lenders, to acquire and
finance certain unimproved real property in Fremont, California. In connection
with that transaction, we leased the real property, committed to payments
aggregating $38,295,000 plus interest over a five-year lease period and agreed
to construct a manufacturing and campus facility on the property thereon.
Effective February 21, 2001, we amended the agreement with ABN to obtain ABN's
commitment to fund an additional sum of approximately $61,705,000 for
construction of improvements to the property, of which $2.6 million was
advanced by the syndicate for certain engineering costs incurred in
preparation for making leasehold improvements to the land. Due to changes in
our infrastructure needs, we later determined not to proceed with development
of the property as required by the agreements, and effective May 30, 2001,
amended our agreements with ABN and committed to purchase the property for an
aggregate purchase price of $38,295,000 plus interest and other charges on or
before December 31, 2001. Under these latest amendments, we are, among other
things, released from our obligation to improve the property and ABN is
released from its commitment to fund construction costs. We have not yet
determined whether to sell the property or hold it for future development or
sale. we believe that the current fair market value of the land is
substantially less than the original purchase price due to a decline in the
real estate market in the Freemont area. If sold in today's market, we
estimate that proceeds from the sale would be in the range of $10 to 20
million less than the amount due to the bank syndicate. We also believe that
we will be required to record an impairment charge or other reserve with
respect to the land during the quarter ending June 30, 2001, the exact size of
which has not yet been determined.
31
We anticipate that operating expenses will constitute a material use of our
cash resources. In addition, we may utilize cash resources to fund
acquisitions or investments in other businesses, technologies or product
lines. The cyclical nature of the semiconductor industry makes it very
difficult for us to predict future liquidity requirements with certainty.
However, we believe that our available cash and cash equivalents will be
sufficient to meet our working capital and operating expense requirements
until the end of fiscal year 2002. At some point in the future we may require
additional funds to support our working capital and operating expense
requirements or for other purposes and may seek to raise these additional
funds through public or private debt or equity financings. Such financing may
not be available to us on a timely basis if at all or, if available, on terms
acceptable to us and not dilutive to our shareholders. If we fail to obtain
acceptable additional financing, we may be required to reduce planned
expenditures or forego acquisition opportunities which could reduce our
revenues, increase our losses, and harm our business.
ITEM 7A--Quantitative and Qualitative Disclosures Regarding Market Risks
Interest Rate Risk. Our exposure to market risk for changes in interest
rates relate primarily to the investment portfolio. We do not use derivative
financial instruments in our investment portfolio. Our investment portfolio
consists of short-term fixed income securities and by policy is limited by the
amount of credit exposure to any one issuer. As stated in our investment
policy, we ensure the safety and preservation of our invested principal funds
by limiting default risk, market risk and reinvestment risk. We mitigate
default risk by investing in safe and high-credit quality securities and by
constantly positioning its portfolio to respond appropriately to a significant
reduction in a credit rating of any investment issuer, guarantor or
depository. The portfolio includes only marketable securities with active
secondary or resale markets to ensure portfolio liquidity. These securities,
like all fixed income instruments, carry a degree of interest rate risk. Fixed
rate securities have their fair market value adversely affected due to rise in
interest rates.
The table below presents principal amounts and related weighted average
interest rates for the investment portfolio at March 31, 2001. All investments
mature, by policy, in twelve months or less (dollars in thousands). Restricted
cash equivalents and restricted short-term investments represent amounts that
are restricted as to their use in accordance with a lease agreement more fully
described in Note 8 to our financial statements.
Average
Carrying Interest
Amount Rate
-------- --------
CASH EQUIVALENTS:
U.S. corporate debt securities............................ $ 10,150 3.98%
Debt securities issued by States of the United States and
Political subdivisions of the States..................... 4,000 3.68%
-------- ----
Total Cash Equivalents.................................. $ 14,150 3.90%
======== ====
SHORT-TERM INVESTMENTS:
U.S. corporate debt securities............................ $ 3,000 7.38%
RESTRICTED CASH EQUIVALENTS:
U.S. corporate debt securities............................ $ 9,750 4.12%
Debt securities issued by States of the United States and
Political subdivisions of the States..................... $ 6,400 3.64%
-------- ----
Total Restricted Cash Equivalents....................... $ 16,150 3.93%
======== ====
RESTRICTED SHORT-TERM INVESTMENTS:
U.S. corporate debt securities............................ $ 21,100 4.55%
Debt securities issued by States of the United States and
Political subdivisions of the States..................... 15,250 4.09%
-------- ----
Total Restricted Short-Term Investments................. $ 36,350 4.36%
======== ====
32
Foreign Currency Exchange Risk. We engage in international operations and
transact business in various foreign countries. The primary foreign currency
cash flows are located in Japan, Europe, Singapore and Taiwan. Although we and
our subsidiaries operate and sell products in various global markets,
substantially all sales are denominated in the U.S. dollar, except in Japan,
therefore reducing the foreign currency risk factor. In March 2001, we began
to employ a foreign currency hedge program utilizing foreign currency forward
exchange contracts in Japan. To date, the foreign currency transactions and
exposure to exchange rate volatility have not been significant. There can be
no assurance that foreign currency risk will not be a material impact on our
financial position, results of operations or cash flow in the future.
ITEM 8--Financial Statements and Supplementary Data
Our Financial Statements and notes thereto and Financial Statement Schedules
appear on pages 38-65 of this Form 10-K.
ITEM 9--Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
33
PART III
ITEM 10--Directors and Executive Officers of the Registrant
The information required by this item concerning our directors and executive
officers is incorporated by reference from our Definitive Proxy Statement
filed not later than 120 days following the close of the fiscal year.
ITEM 11--Executive Compensation
The information required under this item is hereby incorporated by reference
from our Definitive Proxy Statement.
ITEM 12--Security Ownership of Certain Beneficial Owners and Management
The information required under this item is hereby incorporated by reference
from our Definitive Proxy Statement.
ITEM 13--Certain Relationships and Related Transactions
The information required under this item is hereby incorporated by reference
from our Definitive Proxy Statement.
34
PART IV
ITEM 14--Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) (1) Index to Financial Statements
The Financial Statements required by this item are submitted in a
separate section beginning on page of this report.
Page
----
Report of Independent Public Accountants.............................. 38
Report of Independent Auditor's of PST................................ 39
Report of Independent Public Accounts of MECS......................... 40
Consolidated Balance Sheets........................................... 41
Consolidated Statements of Operations................................. 42
Consolidated Statements of Shareholders' Equity....................... 43
Consolidated Statements of Cash Flows................................. 44
Notes to Consolidated Financial Statements............................ 45
(2) Schedule II Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable or the
required information is shown in the Financial Statements or the notes
thereto.
(3) Exhibits.
Exhibit
Number Description of Document
-------- -----------------------
2.1 (1) Stock Purchase Agreement among the Company, Hine Design Incorporated
and the Shareholders of Hine Design Incorporated, dated July 2,
1998.
2.2 (2) Agreement and Plan of Merger and Reorganization among the Company,
PSTI Merger SubAcquisition Corp., Progressive System Technologies,
Inc., Advent International Investor 11, Envirotech Fund I and Global
Private Equity Fund 11, dated as of June 2, 1999.
2.3 (3) Stock Purchase Agreement among the Company, Palo Alto Technologies,
Inc. ("PAT"), the Shareholders of PAT and the option holders of PAT,
dated August 27, 1999.
2.4 (4) Agreement for Sale and Purchase of Common Stock between the Company
and MECS Corporation, dated September 27, 1999.
2.5 (5) Amendment Agreement between the Company and MECS Corporation, dated
March 23, 2000.
2.6 (6) Agreement and Plan of Merger and Reorganization, dated as of
December 7, 2000, among Asyst Technologies, Inc., Ramp Acquisition
Corp., Advanced Machine Programming, Inc., New AMP LLC, Matlock
Charles Rowe & Company and the Selling Shareholders.
2.7 (7) Agreement and Plan of Merger and Reorganization, dated as of
December 7, 2000, among Asyst Technologies, Inc., Tin Man
Acquisition Corp., SemiFab, Inc. and certain principal shareholders
of SemiFab.
2.8 Agreement and Plan of Merger and Reorganization, dated as of May 22,
2001, among Asyst Technologies, Inc., Gem Acquisition Corp., GW
Associates, Inc. and John S. Ghiselli.
3.1 (8) Amended and Restated Articles of Incorporation of the Company.
3.2 (8) Bylaws of the Company.
3.3 (3) Certificate of Amendment of the Amended and Restated Articles of
Incorporation, filed September 24, 1999.
3.4 (9) Second Certificate of Amendment of the Amended and Restated Articles
of Incorporation, filed October 5, 2000.
4.1 (10) Rights Agreement among the Company and Bank of Boston, N. A., as
Rights Agent, dated June 25, 1998.
35
Exhibit
Number Description of Document
-------- -----------------------
4.2 (2) Common Stock Purchase Agreement, dated as of May 26, 1999.
10.1 (8) Form of Indemnity Agreement entered into between the Company and its
directors and officers.
10.2 (11) Company's 1993 Stock Option Plan and related form of stock option
agreement.
10.3 (8) Company's 1993 Employee Stock Purchase Plan and related offering
document.
10.4 (8) Company's 1993 Non-Employee Directors' Stock Option Plan and related
offering document.
10.5 (8) Hewlett-Packard SMIF License Agreement dated June 6, 1984.
10.6 (12) Lease Agreement between the Company and the Kato Road Partners dated
February 16, 1995.
10.7 (13) Asset Purchase Agreement between Palo Alto Technologies, Inc., the
Company and Asyst Automation, Inc., dated September 30, 1997.
10.8 (14) Loan Agreement A, between the Company and Terry Moshier, and the
Promissory Note Secured by Deed of Trust, all dated August 1, 1997.
10.9 (14) Loan Agreement B and Loan Pledge Agreement, between the Company and
Terry Moshier, and Promissory Note, all dated August 1, 1997.
10.10(15) Secured Promissory Note between the Company and Dennis Riccio, Dated
November 16, 1998.
10.11(15) Secured Promissory Note between the Company and Dennis Riccio, Dated
February 1, 1999.
10.12(16) Employment and Compensation Agreement between the Company and Mihir
Parikh, dated April 1, 1999.
10.13 (3) Lease Agreement between Aetna Life Insurance Company and Hine
Design, Incorporated, dated August 4, 1995.
10.14 (3) Industrial Space Lease Agreement between the Company and PEN
Associates, dated November 13, 1995.
10.15 (3) Lease Agreement between SL-6 Partners, Ltd. and Progressive System
Technologies, Inc. dated November 20, 1995.
10.16 (3) Sublease Agreement between Progressive System Technologies, Inc. and
Group, Inc., dated December 3, 1996.
10.17 (3) Industrial Space Lease Agreement between the Company and PEN
Associates, dated December 14, 1997.
10.18 (3) Separation Agreement between the Company and William B. Leckonby,
dated November 9, 1998.
10.19 (3) Amendment to Lease Agreement between the Company and the Kato Road
Partners, dated July 30, 1999.
10.20 (3) Cooperation Agreement between the Company and MECS Corporation,
dated August 5, 1999.
10.21(17) Lease agreement between the Company and Exar Corporation, dated
October 18, 1999.
10.22(18) Employment Agreement between the Company and James C. Mitchener,
Ph.D., dated March 28, 2000.
10.23(19) Employment Agreement between the Company and Pat Boudreau, dated May
25, 2000.
10.24(19) Master Lease between the Company and Lease Plan North America, Inc.,
dated June 30, 2000.
10.25 Second Amended and Restated Participation Agreement among the
Company, Lease Plan North America, Inc., ABN Amro Bank N.V., and
Certain Other Banks and Financial Institutions, dated February 21,
2001
10.26 First Amendment to Second Amended and Restated Participation
Agreement and Other Operative Documents and Termination of Certain
Operative Documents, dated May 25, 2001.
10.27 Employment Agreement between the Company and Stephen S. Schwartz,
Ph.D., dated January 11, 2001.
21.1 Subsidiaries of the Company.
23.1 Consent of Arthur Andersen LLP, Independent Public Accountants.
23.2 Consent of Ernst and Young LLP, Independent Auditors.
23.3 Consent of Deloitte and Touche Tohmatsu, Independent Public
Accountants.
99.1 (20) Palo Alto Technologies, Inc. 1997 Stock Plan and related stock
option agreement.
99.2 (20) Progressive System Technologies, Inc. 1995 Stock Option/Stock
Issuance Plan and related notice document.
36
(c) See Exhibits listed under Item 14 (a)(3).
(d) The Financial Statement schedules required by this item are listed
under Item 14 (a)(2).
- --------
(1) Previously filed as an Exhibit to our Current Report on Form 8-K, filed
with the Securities Exchange Commission on August 14, 1998, and
incorporated herein by reference.
(2) Previously filed as an Exhibit to our Current Report on Form 8-K, filed
with the Securities Exchange Commission on June 18, 1999, and
incorporated herein by reference.
(3) Previously filed as an Exhibit to our Quarterly Report on Form 10-Q for
the quarter ended September 30, 1999, filed with the Securities Exchange
Commission on October 21, 1999, and incorporated herein by reference.
(4) Previously filed as an Exhibit to our Registration Statement on Form S-
3/A, File No. 333-89489, filed with the Securities Exchange Commission on
October 29, 1999, and incorporated herein by reference.
(5) Previously filed as an Exhibit to our Current Report on Form 8-K/A, filed
with the Securities Exchange Commission on June 6, 2000, and incorporated
herein by reference.
(6) Previously filed as an Exhibit to our Registration Statement on Form S-3,
File No. 333-54924, filed with the Securities Exchange Commission on
February 2, 2001, and incorporated herein by reference.
(7) Previously filed as an Exhibit to our Registration Statement on Form S-3,
File No. 333-56068, filed with the Securities Exchange Commission on
February 23, 2001, and incorporated herein by reference.
(8) Previously filed as an Exhibit to our Registration Statement on Form S-1,
as amended, File No. 333-66184, filed with the Securities Exchange
Commission on July 19,1993, and incorporated herein by reference.
(9) Previously filed with our Definitive Proxy Statement for the 2000 Annual
Meeting of Shareholders, filed with the Securities Exchange Commission on
July 31, 2000, and incorporated herein by reference.
(10) Previously filed as an Exhibit to our Current Report on Form 8-K, filed
with the Securities Exchange Commission on June 29, 1998, and
incorporated herein by reference.
(11) Previously filed as an Exhibit to our Registration Statement on Form S-1,
File No. 333-88246, filed with the Securities Exchange Commission on
February 13, 1995, and incorporated herein by reference.
(12) Previously filed as an Exhibit to our Annual Report on Form 10-K for the
fiscal year ended March 31, 1995, filed with the Securities Exchange
Commission on July 19, 1995, and incorporated herein by reference.
(13) Previously filed as an Exhibit to our Quarterly Report on Form 10-Q for
the quarter ended September 30, 1997, filed with the Securities Exchange
Commission on November 10, 1997 (confidential treatment granted), and
incorporated herein by reference.
(14) Previously filed as an Exhibit to our Annual Report on Form 10-K for the
fiscal year ended March 31, 1998, filed with the Securities Exchange
Commission on June 29, 1998, and incorporated herein by reference.
(15) Previously filed as an Exhibit to our Annual Report on Form 10-K for the
fiscal year ended March 31, 1999, filed with the Securities Exchange
Commission on June 29, 1999, and incorporated herein by reference.
(16) Previously filed as an Exhibit to our Quarterly Report on Form 10-Q for
the quarter ended June 30, 1999, filed with the Securities Exchange
Commission on August 16, 1999, and incorporated herein by reference.
(17) Previously filed as an Exhibit to our Quarterly Report on Form 10-Q for
the quarter ended December 31, 1999, filed with the Securities Exchange
Commission on February 14, 2000, and incorporated herein by reference.
(18) Previously filed as an Exhibit to our Annual Report on Form 10-K for the
fiscal year ended March 31, 2000, filed with the Securities Exchange
Commission on June 29, 2000, and incorporated herein by reference.
(19) Previously filed as an Exhibit to our Quarterly Report on Form 10-Q for
the quarter ended June 30, 2000, filed with the Securities Exchange
Commission on August 14, 2000, and incorporated herein by reference.
(20) Previously filed as an Exhibit to our Registration Statement on Form S-8,
File No. 333-94619, filed with the Securities Exchange Commission on
January 13, 2000, and incorporated herein by reference.
37
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Asyst Technologies, Inc.:
We have audited the accompanying consolidated balance sheets of Asyst
Technologies, Inc. (a California corporation) and subsidiaries (the "Company")
as of March 31, 2001 and 2000, and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the three years in
the period ended March 31, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits. We did not audit
the consolidated balance sheet of MECS Corporation (a Japanese corporation)
and subsidiaries ("MECS"), a company acquired on March 23, 2000 in a
transaction accounted for using the purchase method of accounting, as
discussed in Note 15. Such balance sheet is included in the consolidated
balance sheet of the Company as of March 31, 2000 and reflects total assets of
12 percent (before giving effect to purchase accounting). We also did not
audit the consolidated statement of operations, shareholders' equity and cash
flows of Progressive System Technologies, Inc. (a Texas corporation) and
subsidiary ("PST") for the year ended December 31, 1998. PST was acquired on
June 2, 1999 in a transaction accounted for as a pooling of interests, as
discussed in Note 13. Such statements are included in the consolidated
financial statements of the Company and reflect total revenues of 10 percent
of the consolidated statement of operations for the year ended March 31, 1999.
These statements were audited by other auditors whose report has been
furnished to us, and our opinion, insofar as it relates to amounts included
for PST and MECS, is based solely upon the report of the other auditors.
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 and the
reports of other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material
respects, the financial position of Asyst Technologies, Inc. as of March 31,
2001 and 2000, and the results of their operations and their cash flows for
each of the three years in the period ended March 31, 2001, in conformity with
the accounting principles generally accepted in the United States.
As discussed in Note 2 to the consolidated financial statements, effective
April 1, 2000, the Company changed its method of accounting for revenue
recognition in accordance with guidance provided in SEC Accounting Bulletin
No. 101 (SAB 101) " Revenue Recognition in Financial Statements".
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed under Item 14(a) is
presented for the purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied to our audits
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
San Jose, California
April 27, 2001
38
REPORT OF INDEPENDENT AUDITORS OF PST
To Board of Directors and Stockholders
Progressive System Technologies, Inc.
We have audited the accompanying consolidated balance sheets of Progressive
System Technologies, Inc. and its subsidiary as of December 31, 1998 and the
related consolidated statements of operations, stockholders' equity (deficit)
and cash flows for the year ended December 31, 1998 (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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 and the report of other
auditors provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements present fairly, in all
material respects, the consolidated financial statement position of
Progressive System Technologies, Inc. and its subsidiary as of December 31,
1998 and the results of their operations and their cash flows for the year
ended December 31, 1998 in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared assuming
that Progressive System Technologies, Inc. will continue as a going concern.
As more fully described in Note 10, the Company has sustained operating losses
and has a working capital deficiency. In addition, the Company has not
complied with certain covenants of loan agreements with banks. These
conditions raise substantial doubt about the Company's ability to continue as
a going concern. The consolidated financial statements do not include any
adjustments to reflects the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the outcome of this uncertainty.
ERNST & YOUNG LLP
Austin, Texas
May 7, 1999
39
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS OF MECS
To the Board of Directors and Stockholders of
MECS Corporation:
Nagoya, Japan
We have audited the accompanying consolidated historical cost balance sheet
(without giving effect to purchase accounting) of MECS Corporation and
subsidiary (the "Company") as of March 31, 2000 (expressed in Japanese yen).
This financial statement is the responsibility of the Company's management.
Our responsibility is to express an opinion on this financial statement based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
balance sheet is free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
balance sheet. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall balance sheet presentation. We believe that our audit of the balance
sheet provides a reasonable basis for our opinion.
In our opinion, such consolidated balance sheet presents fairly, in all
material respects, the financial position of the Company as of March 31, 2000
in conformity with generally accepted accounting principles in the United
States of America.
DELOITTE TOUCHE TOHMATSU
Nagoya, Japan
April 28, 2000
40
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
March 31,
------------------
2001 2000
-------- --------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................ $ 34,749 $ 12,638
Restricted cash equivalents and short-term investments... 52,500 --
Short-term investments................................... 3,000 93,450
Accounts receivable, net of allowances for doubtful
accounts of $3,795 and $2,809 in 2001 and 2000,
respectively............................................ 77,660 74,278
Inventories.............................................. 76,972 49,482
Deferred tax asset....................................... 20,068 20,501
Prepaid expenses and other............................... 16,017 15,368
-------- --------
Total current assets................................... 280,966 265,717
-------- --------
PROPERTY AND EQUIPMENT:
Land..................................................... 1,985 2,391
Buildings................................................ 4,708 5,941
Leasehold improvements................................... 10,365 5,398
Machinery and equipment.................................. 24,370 18,830
Office equipment, furniture and fixtures................. 29,799 18,446
-------- --------
71,227 51,006
Less--Accumulated depreciation and amortization.......... (31,067) (23,694)
-------- --------
40,160 27,312
INTANGIBLE AND OTHER ASSETS, net of accumulated
amortization of $12,875 and $5,296 in 2001 and 2000,
respectively.............................................. 87,306 36,171
-------- --------
$408,432 $329,200
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term loans, notes payable and cash overdraft....... $ 28,776 $ 22,816
Current portion of long-term debt and finance leases..... 1,791 5,285
Accounts payable......................................... 29,560 38,638
Accrued liabilities and other............................ 36,495 27,428
Deferred revenue......................................... 5,190 --
-------- --------
Total current liabilities.............................. 101,812 94,167
-------- --------
LONG-TERM LIABILITIES
Long-term debt and finance leases, net of current
portion................................................. 3,683 910
Other long-term liabilities.............................. 474 1,017
-------- --------
Total long-term liabilities............................ 4,157 1,927
-------- --------
COMMITMENTS AND CONTINGENCIES (see Notes 8 and 18)
SHAREHOLDERS' EQUITY:
Common Stock, no par value
Authorized shares--300,000,000
Outstanding shares--34,602,343 and 31,957,090 shares in
2001 and 2000, respectively........................... 282,925 240,594
Retained earnings (deficit).............................. 19,538 (7,488)
-------- --------
Total shareholders' equity............................. 302,463 233,106
-------- --------
$408,432 $329,200
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
41
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Fiscal Year Ended March 31,
-------------------------------
2001 2000 1999
--------- --------- ---------
NET SALES..................................... $491,542 $225,554 $ 92,948
COST OF SALES................................. 305,796 122,499 59,895
--------- --------- ---------
Gross profit................................ 185,746 103,055 33,053
--------- --------- ---------
OPERATING EXPENSES:
Research and development.................... 44,263 21,584 18,027
Selling, general and administrative......... 90,435 56,246 40,231
Amortization of acquired intangible assets.. 6,963 2,585 1,628
Non-recurring charges....................... 979 2,300 5,542
In-process research & development of
acquired business and product line......... -- 4,884 7,100
--------- --------- ---------
Total operating expenses.................. 142,640 87,599 72,528
--------- --------- ---------
Operating income (loss)................... 43,106 15,456 (39,475)
OTHER INCOME (EXPENSE):
Interest income............................. 4,924 2,590 2,627
Interest expense............................ (497) 145 (872)
Other income................................ (772) (664) (18)
--------- --------- ---------
Other income, net......................... 3,655 2,071 1,737
--------- --------- ---------
Income (Loss) Before Provision (Benefit)
for Income Taxes and Cumulative Effect of
Change in Accounting Principle........... 46,761 17,527 (37,738)
PROVISION (BENEFIT) FOR INCOME TAXES.......... 17,229 7,508 (10,807)
--------- --------- ---------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE............... 29,532 10,019 (26,931)
Cumulative Effect of Change in Accounting
Principle, Net of Tax Benefit of $1,326...... (2,506) -- --
--------- --------- ---------
NET INCOME (LOSS)............................. $ 27,026 $ 10,019 $(26,931)
========= ========= =========
BASIC EARNINGS (LOSS) PER SHARE:
Income (loss) before cumulative effect of
change in accounting principle............. $ 0.90 $ 0.36 $ (1.15)
Cumulative effect of change in accounting
principle, net of tax...................... (0.08) -- --
--------- --------- ---------
Basic net income (loss) per share........... $ 0.82 $ 0.36 $ (1.15)
========= ========= =========
DILUTED EARNINGS (LOSS) PER SHARE:
Income (loss) before cumulative effect of
change in accounting principle............. $ 0.85 $ 0.32 $ (1.15)
Cumulative effect of change in accounting
principle, net of tax...................... (0.07) -- --
--------- --------- ---------
Diluted net income (loss) per share......... $ 0.78 $ 0.32 $ (1.15)
========= ========= =========
SHARES USED IN THE PER SHARE CALCULATION:
Basic....................................... 32,697 27,639 23,460
========= ========= =========
Diluted..................................... 34,928 30,986 23,460
========= ========= =========
Pro forma amounts with the change in
accounting principle related to revenue
applied retroactively (unaudited):
Net sales................................... N/A $220,518 *
Net income.................................. N/A $ 7,513 *
Net income per share:
Basic..................................... N/A $ 0.27 *
Diluted................................... N/A $ 0.24 *
- --------
* Data is not available in sufficient detail to provide pro forma information
for the fiscal year ended March 31, 1999.
The accompanying notes are an integral part of these consolidated financial
statements.
42
ASYST TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except share data)
Common Stock Repurchased Shares Retained Total
------------------- -------------------- Earnings Shareholders'
Shares Amount Shares Amount (Deficit) Equity
---------- -------- ---------- -------- --------- -------------
BALANCE, MARCH 31, 1998. 24,269,204 $115,934 -- $ -- $ 13,316 $129,250
Repurchased common
stock................ -- -- (1,731,600) (11,472) -- (11,472)
Exercise of common
stock options........ 51,370 178 369,634 2,450 (1,499) 1,129
Stock options issued
in acquisition....... -- 1,900 -- -- -- 1,900
Employee stock
purchase plan........ 135,046 725 103,744 687 (103) 1,309
Issuance of PST
warrants............. -- 337 -- -- -- 337
Tax benefit realized
from activity in
employee stock option
plans................ -- 1,112 -- -- -- 1,112
Net loss.............. -- -- -- -- (26,931) (26,931)
---------- -------- ---------- -------- -------- --------
BALANCE, MARCH 31, 1999. 24,455,620 120,186 (1,258,222) (8,335) (15,217) 96,634
Exercise of common
stock options........ 2,011,150 11,457 8,222 55 -- 11,512
Stock issues in
exchange of PST
redeemable preferred
stock and redeemable
preferred
stock warrants....... 369,398 5,000 -- -- -- 5,000
Common stock issued in
exchange of PST long-
term debt............ 450,260 5,066 -- -- -- 5,066
Employee stock
purchase plan........ 156,344 1,649 -- -- -- 1,649
Tax benefit realized
from activity in
employee stock option
plans................ -- 9,934 -- -- -- 9,934
Board of Directors'
compensation......... 26,314 125 -- -- -- 125
Common stock issued in
secondary offering... 4,458,000 84,098 -- -- -- 84,098
Common stock issued in
private placement.... -- 2,689 1,250,000 8,280 -- 10,969
Stock issued in
acquisition of PAT... 30,004 390 -- -- -- 390
Adjustment to conform
year end of pooled
business............. -- -- -- -- (2,290) (2,290)
Net income............ -- -- -- -- 10,019 10,019
---------- -------- ---------- -------- -------- --------
BALANCE, MARCH 31, 2000. 31,957,090 240,594 -- -- (7,488) 233,106
Exercise of common
stock options........ 435,576 2,491 -- -- -- 2,491
Employee stock
purchase plan........ 132,804 2,140 -- -- -- 2,140
Tax benefit realized
from activity in
employee stock option
plans................ -- 4,970 -- -- -- 4,970
Shares awarded to
Board of Directors
and employees........ 4,720 326 -- -- -- 326
Stock issued in
acquisition of AMP... 1,081,261 19,000 -- -- -- 19,000
Stock issued in
acquisition of
SemiFab.............. 990,892 13,404 -- -- -- 13,404
Net income............ -- -- -- -- 27,026 27,026
---------- -------- ---------- -------- -------- --------
BALANCE, MARCH 31, 2001. 34,602,343 $282,925 -- $ -- $ 19,538 $302,463
========== ======== ========== ======== ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
43
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Fiscal Year Ended March
31,
----------------------------
2001 2000 1999
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................. $ 27,026 $ 10,019 $(26,931)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Cumulative effect of change in accounting
principle, net of tax benefit.................. 2,506 -- --
Adjustments to conform year end of pooled
business....................................... -- (2,290) --
Changes in net current assets of discontinued
operations..................................... -- -- 1,438
Depreciation and amortization................... 16,424 8,331 7,825
Shares awarded to Board of Directors and
employees...................................... 326 125 --
Shares issued for accrued interest on PST long-
term debt...................................... -- 166 --
Discount on accretion on bank debt.............. -- -- 148
Change in provision for doubtful accounts....... 2,279 744 (133)
Non-cash restructuring expense.................. -- -- 784
Write-down of inventories....................... 16,457 -- 1,837
Tax benefit realized from activity in employee
stock option plans............................. 4,970 9,934 1,112
Change in provision for contract loss reserves.. 5,551 -- --
Purchased in-process research and development... -- 4,884 7,100
Changes in assets and liabilities, net of
acquisitions:
Accounts receivable............................. (1,975) (50,502) 16,722
Inventories..................................... (34,635) (21,283) 5,488
Deferred tax asset.............................. 433 (1,092) (11,445)
Prepaid expenses and other...................... 46 (11,126) 194
Other assets, net............................... (1,957) 4,452 (605)
Accounts payable................................ (11,756) 22,411 (5,674)
Accrued liabilities and other................... 2,571 11,653 (4,664)
Deferred revenue................................ 2,684 -- --
-------- -------- --------
Net cash provided by (used in) operating
activities.................................... 30,950 (13,574) (6,804)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments.............. (49,350) (158,891) (38,680)
Sale or maturity of short-term investments...... 139,800 96,138 79,787
Purchase of restricted cash equivalents and
short-term investments......................... (52,500) -- --
Purchase of property and equipment, net......... (17,918) (10,440) (5,032)
Purchase of other long-term investment.......... -- (600) --
Net cash used in the acquisition of the
FluoroTrac(R) product line..................... -- -- (2,794)
Net cash used in the acquisition of Hine Design,
Inc............................................ -- -- (12,433)
Net cash used in the acquisition of Palo Alto
Technologies, Inc.............................. -- (4,249) --
Net cash used in the acquisition of MECS
Corporation.................................... (3,095) (10,190) --
Net cash used in the acquisition of Advanced
Machine Programming, Inc....................... (20,704) -- --
Net cash used in the acquisition of SemiFab,
Inc............................................ (5,196) -- --
-------- -------- --------
Net cash (used in) provided by investing
activities.................................... (8,963) (88,232) 20,848
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net principal payments on short-term and long-
term debt and finance leases................... (4,507) (1,016) (14,561)
Issuance of common stock........................ 4,631 108,228 2,438
Cash used to repurchase common stock............ -- -- (11,472)
Borrowings under line of credit agreements...... -- -- 15
Proceeds from issuance of subordinated debt and
note payable to bank........................... -- 850 912
-------- -------- --------
Net cash provided by (used in) financing
activities.................................... 124 108,062 (22,668)
-------- -------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.. 22,111 6,256 (8,624)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR...... 12,638 6,382 15,006
-------- -------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR............ $ 34,749 $ 12,638 $ 6,382
======== ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
44
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION OF THE COMPANY:
The accompanying consolidated financial statements include the accounts of
Asyst Technologies, Inc. (the "Company") which was incorporated in California
on May 31, 1984, and its subsidiaries. The Company designs, develops,
manufactures and markets isolation systems, work-in-process materials
management, substrate-handling robotics, automated transport and loading
systems, and connectivity automation software utilized primarily in clean
rooms for semiconductor manufacturing. In June, 1999, the Company acquired
Progressive Systems Technologies, Inc. ("PST") in a transaction accounted for
as a pooling-of-interests. Accordingly, the accompanying consolidated
financial statements of the Company have been restated to give retroactive
effect of the merger with PST. (See Note 13)
In July 1998, the Company acquired 100 percent of the common stock of Hine
Design Inc. ("HDI"), a California corporation, in a transaction accounted for
using the purchase method of accounting. (See Note 12)
In August 1999, the Company acquired 100 percent of the common stock of Palo
Alto Technologies, Inc. ("PAT"), a California corporation, in a transaction
accounted for using the purchase method of accounting. (See Note 14)
In transactions occurring between October 1999 and October 2000 the Company
acquired a total of 95.3 percent of the common stock of MECS Corporation
("MECS"), a Japanese company. The acquisition was accounted for using the
purchase method of accounting in March 2000 when a majority interest of MECS
was obtained. (See Note 15)
In February 2001, the Company acquired 100 percent of the equity of Advanced
Machine Programming Inc. ("AMP"), a Delaware company and SemiFab Inc.
("SemiFab"), a Delaware company. Both transactions, which were unrelated, were
accounted for using the purchase method of accounting. (See Notes 16 and 17)
2. SIGNIFICANT ACCOUNTING POLICIES:
Basis of Preparation
The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated. The preparation of financial statements in
conformity with generally accepted accounting principles in the United States
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. Actual results could
differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less from the date of purchase to be cash
equivalents. The carrying value of the cash equivalents approximates their
current fair market value.
Short-term Investments
As of March 31, 2001 and 2000, the Company's short-term investments consist
of liquid debt investments with maturities, at the time of purchase, greater
than three months and less than one year. All such investments have been
classified as "available-for-sale" and are carried at fair value. Unrealized
holding gains and losses, net of taxes reported, have not been material to
date and are reported as a separate component of shareholders' equity. The
cost of the debt security is adjusted for amortization of premiums and
accretion of discounts to
45
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
maturity. Such amortization, interest income, realized gains and losses and
declines in value that are considered to be other than temporary, are included
in other income (expense), net, on the accompanying consolidated statements of
operations. There have been no declines in value that are considered to be
other than temporary for any of the three years in the period ended March 31,
2001. The cost of investments sold is based on specific identification. The
Company does not intend to hold the individual securities for greater than one
year.
Short-term investments by security type are as follows (dollars in
thousands):
March 31,
--------------
2001 2000
------ -------
U.S. corporate debt securities............................... $3,000 $25,650
Debt securities issued by States of the United States and
Political subdivisions of the States........................ -- 67,684
Foreign equity securities.................................... -- 116
------ -------
Total...................................................... $3,000 $93,450
====== =======
Restricted Cash Equivalents and Restricted Short-term Investments
Restricted cash equivalents and restricted short-term investments represent
amounts that are restricted as to their use in accordance with a lease
agreement more fully described in Note 8.
Restricted short-term investments by security type are as follows (dollars
in thousands):
March 31,
-------------
2001 2000
------- -----
U.S. corporate debt securities................................ $21,100 $ --
Debt securities issued by States of the United States and
Political subdivisions of the States......................... 15,250 --
------- -----
Total....................................................... $36,350 $ --
======= =====
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market
and include materials, labor and manufacturing overhead costs. Provisions,
when required, are made to reduce excess and obsolete inventories to their
estimated net realizable values. Inventories consisted of the following
(dollars in thousands):
March 31,
---------------
2001 2000
------- -------
Raw materials............................................... $50,490 $33,432
Work-in-process and finished goods.......................... 26,482 16,050
------- -------
Total..................................................... $76,972 $49,482
======= =======
Property and Equipment
Property and equipment are recorded at cost or in the case of property and
equipment purchased through corporate acquisitions at fair value based upon
the allocated purchase price on the acquisition date. Depreciation and
amortization are computed using the straight-line and double declining balance
methods over the estimated
46
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
useful lives of the assets (or over the lease term if it is shorter for
leasehold improvements) which range from two to five years.
Software Development Costs
The Company capitalizes eligible software development costs upon the
establishment of technological feasibility, which the Company has defined as
completion of a working model. For fiscal years 2001, 2000 and 1999, costs
which were eligible for capitalization, after consideration of factors such as
realizable value, were insignificant and, thus, the Company has charged all
software development costs to research and development expense in the
accompanying consolidated statements of operations.
Intangible and other assets
Intangible and other assets consisted of the following (dollars in
thousands):
March 31,
---------------
2001 2000
------- -------
Intangible assets............................................ $79,264 $33,025
Other assets................................................. 8,042 3,146
------- -------
Total...................................................... $87,306 $36,171
======= =======
Accrued liabilities and other
Accrued liabilities and other consisted of the following (dollars in
thousands):
March 31,
---------------
2001 2000
------- -------
Accrued warranty costs...................................... $ 2,264 $ 1,236
Accrued payroll and payroll related costs................... 16,004 8,095
Customer deposits........................................... 3,646 8,144
Income taxes payable........................................ 2,368 4,990
Other accrued liabilities................................... 12,213 4,963
------- -------
Total..................................................... $36,495 $27,428
======= =======
Revenue Recognition
The Company changed its revenue recognition policy effective April 1, 2000,
based on guidance provided in Securities and Exchange Commission Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements." The Company recognizes revenue when persuasive evidence of an
arrangement exists, delivery has occurred or service has been rendered, the
seller's price is fixed or determinable and collectibality is reasonably
assured. Some of the Company's products are large volume consumables that are
tested to industry and/or customer acceptance criteria prior to shipment.
Revenue for these types of products is recognized at shipment. Certain of the
Company's product sales are accounted for as multiple-element arrangements. If
the Company has met defined customer acceptance experience levels with both
the customer and the specific type of equipment, the Company recognizes the
product revenue at the time of shipment and transfer of title, with the
remainder when the other elements, primarily installation, have been
completed. Other products of the Company are highly customized systems that
cannot be completed or adequately tested to customer specifications prior to
shipment from the factory. The Company does not recognize revenue for these
47
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
products until formal acceptance by the customer. Revenue for spare parts
sales is recognized on shipment. Revenue related to maintenance and service
contracts is recognized ratably over the duration of the contracts. Unearned
maintenance and service contract revenue is not significant and is included in
accrued liabilities and other.
During the year ended, March 31, 2001, the Company recorded a non-cash
charge of $2.5 million, net of an income tax benefit of $1.3 million or a loss
of $0.07 per diluted share, to reflect the cumulative effect of the change in
accounting principle, as of the beginning of the year, in accordance with the
guidance provided in SAB 101.
Prior to the year ended March 31, 2001, the Company's revenue policy was to
recognize revenue at the time the customer takes title to the product,
generally at the time of shipment. Revenue related to maintenance and service
contracts was recognized ratably over the duration of the contracts.
The Company accounts for software revenue in accordance with the American
Instituted of Certified Public Accountants' Statement of Position 97-2,
"Software Revenue Recognition." Revenues for integration software work are
recognized on a percentage of completion. Software license revenue, which is
not material to the consolidated financial statements, is recognized when the
software is shipped; payment is due within one year; collectibality is
probable and there are no significant obligations remaining.
Warranty Reserve
The Company generally provides warranty on its products for either 12 or 24
months from date of shipment for material and labor to repair and service the
system. A provision for the estimated cost of warranty is recorded when the
revenue is recognized.
Contract Loss Reserve
The Company routinely evaluates the contractual commitments with its
customers and suppliers to determine if it is probable that a loss exists that
can be estimated in fulfillment of the contractual commitment. If so, a loss
reserve is recorded and included in accrued liabilities and other. At March
31, 2001 and 2000, the Company had a loss reserve of approximately $5.6
million and $1.8 million, respectively, which is included in accrued
liabilities and other in the accompanying consolidated balance sheets.
Comprehensive Income
Comprehensive income is defined as the change in equity of a company during
a period from transactions and other events and circumstances excluding
transactions resulting from investments by owners and distributions to owners
and is to include unrealized gains and losses that have historically been
excluded from net income (loss) and reflected instead in equity. The Company
has not had any such transactions or events during the periods, which are
material to the consolidated financial statements. Therefore comprehensive
income (loss) is the same as the net income (loss) reported in the
consolidated financial statements.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to a
concentration of credit risk principally consist of cash investments and
accounts receivable. The Company has a cash investment policy that limits cash
investments to short-term, low risk investments. As of March 31, 2001 and
2000, approximately 41.6 percent and 51.0 percent, respectively, of accounts
receivable, net, were concentrated with ten customers. In addition, as of
March 31, 2001 and 2000, approximately 55.9 percent and 53.0 percent,
respectively, of accounts receivable,
48
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
net, respectively were due from customers located in Japan, Singapore, Taiwan
and the United Kingdom. As of March 31, 2001, approximately 15.6 percent and
14.0 percent of the total accounts receivable, net, were due from two
customers located in Taiwan. The Company performs ongoing credit evaluations
of its customers' financial condition and, generally, does not require
collateral on accounts receivable as the majority of the Company's customers
are large, well established companies. The allowance for non-collection of
accounts receivable is based upon the expected collectability of all accounts
receivable.
Patents
The Company capitalizes the direct costs associated with obtaining patents.
The costs, which are included in intangible and other assets, net, in the
accompanying consolidated balance sheets, are being amortized using the
straight-line method over the expected useful lives of the patents of 10
years. Accumulated amortization was approximately $0.3 million and $0.9
million during the year ended March 31, 2001 and 2000, respectively.
Foreign Currency Translation
In general, the functional currency of the Company's foreign subsidiaries is
the U.S. dollar. Accordingly, foreign translation and foreign exchange gains
and losses, which have not been material, are reflected in other income
(expense) in the accompanying consolidated statements of operations. For
foreign subsidiaries, using their local currency as their functional currency,
asset and liabilities of operations are translated into U.S. dollars using the
current exchange rate. At March 31, 2001, the effect of foreign currency
translation adjustments were insignificant.
Intangible Assets
The reliability of intangible assets (See Note 11, 12, 14, 15, 16 and 17),
which are included in intangible and other assets, net, in the accompanying
consolidated balance sheets, is evaluated periodically as events or
circumstances indicate a possible inability to recover the net carrying
amount. Such evaluation is based on various analyses, including cash flow and
profitability projections that incorporate, as applicable, the impact on
existing lines of business. The analyses involve a significant level of
management judgment in order to evaluate the ability of the Company to perform
within projections.
Reclassifications
Certain prior year amounts in the consolidated financial statements and the
notes thereto have been reclassified where necessary to conform to the year
ended March 31, 2001.
Earnings Per Share
Basic earnings per share has been computed using the weighted average number
of actual common shares outstanding, while diluted earnings per share has been
computed using the weighted average number of common and common equivalent
shares outstanding. Common equivalent shares used in the computation of
diluted earnings per share result from the assumed exercise of stock options
and warrants, using the treasury stock method and the conversion of the
redeemable convertible preferred stock. For the year ended March 31, 1999, the
number of shares used in the computation of diluted earnings (loss) per share
was the same as those used for the computation of basic earnings (loss) per
share due to potentially dilutive securities of 1,491,530 being not included
in the computation of diluted earnings (loss) per common share because to do
so would reduce the loss per share.
49
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The reconciliation of the numerators and denominators of the basic and
diluted earnings per share computations are as follows (in thousands, except
per share amounts):
Income Per
(Loss) Shares Share
(Numerator) (Denominator) Amount
----------- ------------- ------
FOR YEAR ENDED MARCH 31, 1999
Basic loss Per Share:
Net Loss................................. $(26,931) 23,460 $(1.15)
======
Common shares issuable upon exercise of
stock options using the treasury method. -- --
-------- ------
Diluted loss Per Share:
Net Loss................................. $(26,931) 23,460 $(1.15)
======== ====== ======
FOR YEAR ENDED MARCH 31, 2000
Basic Earnings Per Share:
Net Income............................... $ 10,019 27,639 $ 0.36
======
Common shares issuable upon exercise of
stock options using the treasury method. -- 3,347
-------- ------
Diluted Earnings Per Share:
Net Income............................... $ 10,019 30,986 $ 0.32
======== ====== ======
FOR YEAR ENDED MARCH 31, 2001
Basic Earnings Per Share:
Net Income............................... $ 27,026 32,697 $ 0.82
======
Common shares issuable upon exercise of
stock options using the treasury method. -- 2,231
-------- ------
Diluted Earnings Per Share:
Net Income............................... $ 27,026 34,928 $ 0.78
======== ====== ======
New Accounting Standards
In June 2000, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 138, "Accounting for Certain
Derivative Instruments and Hedging Activities," an amendment of SFAS No. 133,
which is effective for all fiscal years beginning after June 15, 2000. SFAS
No. 138 establishes accounting and reporting standards requiring that every
derivative instrument be recorded in the balance sheet as either an asset or
liability measured at its fair value. The statement also requires that changes
in the derivative's fair value be recognized currently in earnings unless
specific hedge accounting criteria are met. Because the Company does not
currently hold any derivative instruments and does not currently engage in any
material hedging activities, management believes that the application of SFAS
No. 138 will not have a material impact on the Company's financial position or
results of operations.
50
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
3. SUPPLEMENTAL STATEMENTS OF CASH FLOWS DISCLOSURES:
Cash paid for interest and domestic and foreign income taxes was as follows
(dollars in thousands):
Fiscal Year Ended
March 31,
--------------------
2001 2000 1999
------- ------ -----
Interest.............................................. $ 636 $ 167 $ 658
Income taxes.......................................... $11,064 $ 39 $ 536
Non-cash transactions (dollars in thousands):
Stock issued to retire long term debt................. $ -- $5,066 $ --
Stock issued in exchange for PST redeemable preferred
stock and redeemable preferred stock warrants........ $ -- $5,000 $ --
Stock issued to acquire PAT........................... $ -- $ 390 $ --
Stock issued to acquire SemiFab....................... $13,404 $ -- $ --
Stock issued to acquire AMP........................... $19,000 $ -- $ --
Stock awarded to board of directors and employees..... $ 326 $ 125 $ --
4. NON-RECURRING CHARGES:
In the fourth quarter of the year ended March 31, 2001, in response to a
decrease in net sales and new orders, the Company incurred $0.5 million
relating to the reduction in its employed workforce by 149 regular full-time
employees and approximately 150 temporary employees primarily in Fremont,
California. . In addition, as of March 31, 2001, the Company had accrued $0.5
million relating to a plan to close a small manufacturing facility in Japan.
The Company had communicated the plan to the affected employees prior to
March, 2001.
In the year ended March 31, 2000, in connection with the decision to move to
a purely direct sales channel in Japan, the Company paid $2.5 million to
cancel an agreement previously entered into to sell products in the Japanese
market. Additionally, during the year ended March 31, 2000, a reduction of
$0.2 million was made to the restructuring reserve balance to adjust for
revised estimates related to restructuring activities. The net amount of $2.3
million is reported in the accompanying consolidated statement of operations.
51
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In the year ended March 31, 1999, the Company underwent significant
restructuring of its operations to reduce its cost structure in response to
the 49.0 percent reduction in net sales. The Company also underwent a process
of restructuring activities in Japan and Europe to reposition its activities
to compete more effectively. In addition, the Company repositioned certain of
its product offerings to eliminate low margin products and software services
that have high risks of failure. The following table summarizes the 1999
restructuring charges by geographic region (dollars in thousands):
Ending Ending
Expensed Cash outlays Reclassifications Accrual Accrual
as of as of of and Reductions as of as of
March, 31 March, 31 in Reserve March, 31 March, 31
1999 2000 Balance 2000 2001
--------- ------------ ----------------- --------- ---------
Europe:
Severance.... $1,732 $ 913 $(819) $ -- $ --
Facilities... 336 235 (101) -- --
Other........ 437 212 (225) -- --
Japan:
Severance.... 150 75 (75) -- --
Other........ 35 1 (34) -- --
US:
Severance.... 700 1,232 532 -- --
Facilities... 550 417 (133) -- --
Other........ 1,002 1,857 855 -- --
Non-cash....... 600 -- (200) -- --
------ ------ ----- ----- -----
Total........ $5,542 $4,942 $(200) $ -- $ --
====== ====== ===== ===== =====
The 1999 restructuring resulted in terminating the employment of 110 U.S.
employees and 30 international employees. Management had formal plans for each
of the activities undertaken and all affected employees were notified of the
actions. As of March 31, 2000, all of the employees affected were terminated
and facilities impacted by these restructuring activities vacated. Other costs
included expenses incurred for consultants and legal services, equipment or
service buy-out cost and any estimated incremental costs associated with the
closure of facilities or completion of other contractual obligations.
5. SHORT-TERM AND LONG-TERM DEBT:
The Company had Japanese Yen 3,608 million ($28.8 million) and Japanese Yen
2,374 million ($22.8 million) at March 31, 2001 and 2000, respectively of
short-term debt from banks in Japan. As of March 31, 2001, the interest rate
ranged from 1.4 percent to 2.0 percent (interest from 1.5 percent to 2.25
percent at March 31, 2000).
Long-term debt consisted of the following (dollars in thousands):
March 31,
---------------
2001 2000
------ -------
Unsecured loans from banks.................................. $ 558 $ 1,581
Secured straight bonds...................................... 1,596 4,614
------ -------
Total Long-term debt...................................... 2,154 6,195
Less: Current portion of long-term debt..................... (404) (5,285)
------ -------
Long-term debt, net of current portion...................... $1,750 $ 910
====== =======
52
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
At March 31, 2001, maturities of all long-term debt are as follows (dollars
in thousands):
Fiscal Year
Ending March 31,
----------------
2002.................................................................. $ 404
2003.................................................................. 404
2004.................................................................. 377
2005.................................................................. 292
2006 and thereafter................................................... 677
------
$2,154
======
Unsecured loans from banks
The Company had Japanese Yen 69.9 million ($0.6 million) and Japanese Yen
165.2 million ($1.6 million) of unsecured loans with a bank in Japan at March
31, 2001 and 2000, respectively, with interest ranging from 1.7 percent to 2.0
percent (interest from 1.5 percent to 2.0 percent at March 31, 2000). The
loans are to be repaid between fiscal years 2002 through 2005.
Secured straight bonds
The Company had Japanese Yen 200.0 million ($1.6 million) and Japanese Yen
483.5 million ($4.6 million) of secured straight bonds from a bank in Japan at
March 31, 2001 and 2000, respectively. The bonds bore interest at 2.3 percent
and 1.4 percent as of March 31, 2001 and 2000, respectively and mature in
fiscal year 2008. Certain of the Company's assets in Japan have been pledged
as security for short-term debt and secured straight bonds. As of March 31,
2001, pledged assets consist of land and other property and equipment, net of
accumulated depreciation, and time deposits totaling approximately $12.9
million. The pledged assets secure $1.6 million in secured straight bonds and
$21.8 million in other short-term debts.
6. REDEEMABLE CONVERTIBLE PREFERRED STOCK:
PST has authorized the issuance of up to 5,000,000 shares of preferred stock
and has designated 4,504,505 of the preferred stock to be Series A preferred
stock. In January 1996, PST issued the Series A preferred stock to outside
investors for consideration of $5.0 million. The Series A preferred stock was
convertible at any time into PST common stock on a one-for-one basis subject
to certain antidilution provisions. At March 31, 1999, such conversion rate
equaled one-for-one. In connection with the merger with PST, all outstanding
shares of redeemable preferred stock plus 842,632 common stock warrants,
attached to subordinated promissory notes issued by PST, were converted into
5,347,137 shares of PST common stock, which were then converted into 369,398
shares of the Company's common stock. In June 1999, $4.5 million of
subordinated promissory notes, and $0.4 million of additional funding and
accrued interest were converted into 450,260 shares of Company common stock.
7. COMMON STOCK:
As of March 31, 2001, the following shares of Company common stock were
available for issuance:
Employee Stock Option Plans...................................... 1,470,396
Employee Stock Purchase Plan..................................... 211,958
---------
1,682,354
=========
53
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Private Placements
In May 1999, the Company completed a private placement of 1,250,000 shares
of its common stock to eight institutional investors. The private placement
was priced at $9.00 per share, generating net proceeds of approximately $11.0
million. The purpose of the private placement was to untaint shares of common
stock to obtain pooling of interests accounting treatment for the acquisition
of PST completed in June 1999 (see note 13). The proceeds were used for
general corporate purposes.
Secondary Offering
In November 1999, the Company completed a secondary public offering of
4,458,000 shares of common stock at an offering price of $20.25 per share,
less $1.22 per share underwriting discount, or $19.03 per share. Of the
4,458,000 shares offered, 458,000 shares were issued and sold by the Company
pursuant to underwriters' over-allotment provision. Proceeds from the
offering, net of issuance costs of $0.8 million amounted to $84.1 million. The
proceeds were used for the acquisition of MECS, capital expenditures, working
capital and other general corporate purposes.
Common Stock Split
On December 30, 1999, and July 22, 1997, the Board of Directors declared a
two-for-one stock split of the Company's common stock in the form of a 100
percent stock dividend. The stock dividends were paid on February 4, 2000 and
August 22, 1997 to the holders of record on January 7, 2000 and August 1, 1997
respectively. All share and per share data, including common stock
equivalents, have been adjusted to give effect to the stock split.
Stock Repurchase Program
In June 1998, the Board of Directors of the Company, authorized a stock
repurchase program whereby up to 4,000,000 shares of its Common Stock may be
repurchased by the Company, from time-to-time at market prices, and as market
and business conditions warrant, in the open market, or in negotiated
transactions, using existing cash. The Company utilized a portion of the
reacquired shares for common stock required by the Employee Stock Option and
Employee Stock Purchase Plan activity. The Company used the first-in, first-
out method and the excess of repurchase cost over reissuance price, if any,
was treated as a reduction of retained earnings. On April 19, 1999, the
Company rescinded the stock repurchase program. As of March 31, 1999, and up
to the date the stock repurchase program was rescinded, the Company had
repurchased 1,731,600 shares of common stock at an aggregate cost of
approximately $11.5 million. As of March 31, 2000, all the repurchased shares
of common stock had been sold to other shareholders. 1,250,000 shares were
sold in private placement, 103,744 shares were used in the employee stock
purchase plan, and the remaining 377,856 shares were used for the employee
stock option plans.
Stock Option Plans
The Company has five stock option plans; the 1986 Employee Stock Option
Plan, the 1993 Employee Stock Option Plan (the "93 Plan"), the 1993 Non-
Employee Directors' Stock Plan, the 2001 Non-Officer Equity Plan ( the "2001
Plan") and the SemiFab Inc. 1993 Flexible Stock Incentive Plan ("SemiFab
Plan"). Under all the Company's stock option plans, options are granted for
ten year periods and become exercisable ratably over a vesting period of four
years or as determined by the Board of Directors.
The 1986 Plan was terminated in 1994, and there are no further options
available for issuance.
54
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Under the 93 Plan, as amended, 11,900,696 shares of common stock are reserved
for issuance. The 93 Plan provides for the grant of both incentive stock
options and non-qualified stock options to key employees and consultants of the
Company. In fiscal 2001, the Company began granting non-employee directors
stock options pursuant to the 93 Plan. Under the 93 Plan, options may be
granted at prices not less than the fair market value of the Company's common
stock at grant date (85.0 percent for non-qualified options).
The 1993 Non-Employee Directors' Stock Plan was terminated in 1999, and there
are no further options available for issuance.
Under the 2001 Plan, adopted in January 2001, 1,500,000 shares of common
stock are reserved for issuance. The 2001 Plan provides for the grant of only
non-qualified stock options to employees (other than officers or directors) and
consultants (not including directors). Under the 2001 Plan, options may be
granted at prices not less than the fair market value of the Company's common
stock at grant date.
The SemiFab Plan was acquired with the acquisition of SemiFab in February
2001. In connection with the acquisition of SemiFab by the Company, options are
no longer granted from the SemiFab plan and any options outstanding that were
initially granted under the SemiFab plan are exercisable into Company common
stock.
Activity in the Company's stock option plans is summarized as follows (prices
are weighted average prices):
Fiscal Year Ended March 31,
------------------------------------------------------
2001 2000 1999
------------------ ------------------ ----------------
Shares Price Shares Price Shares Price
---------- ------ ---------- ------ --------- -----
Options outstanding,
beginning of year...... 6,193,219 $11.13 6,725,686 $ 6.05 3,582,546 $6.98
Granted................. 3,536,097 22.30 2,683,315 17.99 3,860,256 4.94
Exercised............... (435,576) 5.93 (2,019,372) 5.70 (421,004) 2.77
Cancelled............... (1,099,450) 32.75 (1,196,410) 7.32 (296,112) 7.49
---------- ------ ---------- ------ --------- -----
Options outstanding, end
of year................ 8,194,290 $13.47 6,193,219 $11.13 6,725,686 $6.05
========== ====== ========== ====== ========= =====
Exercisable, end of
year................... 3,373,002 $ 8.89 2,446,609 $ 6.89 2,985,898 $6.30
========== ====== ========== ====== ========= =====
The following table summarizes the stock options as of March 31, 2001 (prices
and contractual life are weighted averages):
Options Outstanding Exercisable Options
-------------------------------- --------------------
Remaining
Actual Range of Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
------------------------ ----------- ----------- -------- ----------- --------
$ 0.0066-$ 0.0066.... 15,606 0.98 $ 0.0066 15,606 $ 0.0066
0.4200- 3.4375.... 955,588 7.37 3.2605 374,809 3.0761
3.8750- 6.5000.... 976,214 5.99 5.6326 864,871 5.6598
6.6563- 6.8750.... 937,076 7.48 6.8449 930,670 6.8460
7.0800- 10.3750.... 847,230 6.77 9.4691 515,647 9.4239
10.5650- 12.4375.... 831,110 8.13 11.1916 308,457 11.3190
12.8125- 14.1875.... 1,041,058 9.63 13.9271 17,596 13.3517
14.2500- 19.9375.... 836,556 8.35 17.6179 119,627 16.4720
20.0625- 24.2500.... 1,024,711 8.88 22.8897 106,080 22.7329
28.0000- 73.0648.... 729,141 8.83 34.8235 119,639 38.5788
---------------------- --------- ---- -------- --------- --------
$ 0.0066-$73.0648.... 8,194,290 7.93 $13.4735 3,373,002 $ 8.8949
====================== ========= ==== ======== ========= ========
55
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Company accounts for its stock option plans under APB Opinion No. 25.
Had compensation cost for these plans been determined consistent with SFAS No.
123, "Accounting for Stock-Based Compensation," the Company's net income
(loss) and per share information would have been adjusted to the following pro
forma amounts, for the years ended March 31, (dollars in thousands, except per
share amounts):
2001 2000 1999
------- ------- --------
Net income (loss)...................... As reported $27,026 $10,019 $(26,931)
Pro forma $13,843 $ 2,557 $(35,002)
Basic net income (loss) per share...... As reported $ 0.82 $ 0.36 $ (1.15)
Pro forma $ 0.42 $ 0.09 $ (1.49)
Diluted net income (loss) per share.... As reported $ 0.78 $ 0.32 $ (1.15)
Pro forma $ 0.40 $ 0.09 $ (1.49)
The weighted-average grant date fair value of options during 2001, 2000 and
1999 was $13.47, 11.13, and $12.10, respectively. The fair value of each
option grant is estimated on the date of grant using the Black-Scholes option
pricing model with the following weighted average assumptions used for grants
in 2001, 2000, and 1999; risk-free interest rate of 4.89 percent, 6.4 percent
and 5.1 percent, respectively; expected dividend yields of 0.0 percent;
expected lives of 4.80 years, 4.81 years and 3.95 years, respectively;
expected volatility of 81 percent, 74 percent, and 73 percent, respectively.
Because the SFAS No. 123 method of accounting has not been applied to options
granted prior to fiscal 1996, the resulting pro forma compensation cost may
not be representative of that to be expected in future years.
Employee Stock Purchase Plan
Under the 1993 Employee Stock Purchase Plan (the "Plan"), as amended,
1,400,000 shares of common stock are reserved for issuance to eligible
employees. The Plan permits employees to purchase common stock through payroll
deductions, which may not exceed 10 percent of an employee's compensation, at
a price not less than 85 percent of the market value of the stock on specified
dates. As of March 31, 2001, 1,188,042 shares had been purchased by employees
under the Plan.
8. COMMITMENTS:
The Company leases various facilities under non-cancelable finance and
operating leases. At March 31, 2001, the future minimum commitments under
these leases are as follows (dollars in thousands):
Fiscal Year Finance Operating
Ending March 31, Lease Lease
---------------- ------- ---------
2002.................................................... $ 1,591 $ 11,968
2003.................................................... 1,361 11,064
2004.................................................... 396 10,343
2005.................................................... 319 10,044
2006 and thereafter..................................... 301 60,839
------- --------
$ 3,968 $104,258
========
Less interest........................................... (648)
-------
Present value of minimum lease payments................. $ 3,320
Less: current portion of finance leases................. (1,387)
-------
Finance lease, net of current portion................... $ 1,933
=======
Rent expense under the Company's operating leases was approximately $7.5
million and $3.5 million for the years ended March 31, 2001 and 2000,
respectively.
56
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Company leases (i) a certain parcel of land in Fremont California under
a synthetic lease agreement dated June 30, 2000, and (ii) a building (together
with the land, the "Property") that is to be constructed on the land under a
synthetic lease agreement dated February 21, 2001. The leases expire in
February 2007, with an option to extend the lease term for two successive
periods of one year each. The lease contains a purchase option, whereby the
Company can purchase the building for $62.0 million, and the land for
$43.1million. The lease also contains a remarketing option, whereby the
Company must arrange for the sale of the Property to a third party. In
connection with the sale of the Property pursuant to the remarketing option,
the Company retains the obligation to the owner for the first $52.1 million
decrease in the fair value of the Property, subject to the certain provisions
of the lease. See Note 20.
9. REPORTABLE SEGMENTS:
In 1999, the Company adopted SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS 131 supersedes SFAS 14, "Financial
Reporting for Segments of a Business Enterprise," replacing the "industry
segment" approach with the "management" approach. SFAS 131 designates the
internal organization that is used by management for making decisions,
evaluating performance and allocating resources of the enterprise, as the
source of the Company's reportable segments. SFAS 131 also requires
disclosures about products and services, geographic areas and major customers.
The adoption of SFAS 131 did not impact the results of operations or financial
position but did affect the disclosures of segment information. The Company's
main decision making body is the Executive Staff, comprised of the Chairman
and Chief Executive officer, Executive Vice President and Chief Technical
Officer, Senior Vice President and Chief Financial Officer, Senior Vice
President Product Groups and Operations and Senior Vice President Global
Customer Operations. The Executive Staff allocates resources and assesses the
performance of the Company.
The Company offers a family of products and related services to provide a
front-end automation and isolation system for wafer handling in semiconductor
manufacturing facilities. All of the Company's activities are aggregated into
a single operating segment. As a result, no operating segment information is
required.
Net sales by geography were as follows (dollars in thousands):
Fiscal Year Ended March
31,
-------------------------
2001 2000 1999
-------- -------- -------
United States................................... $192,362 $ 90,204 $45,379
Taiwan.......................................... 98,305 78,913 31,121
Japan........................................... 102,784 30,646 8,118
Europe.......................................... 39,766 7,854 4,123
Other Asia (excluding Japan and Taiwan)......... 58,325 17,937 4,207
-------- -------- -------
Total......................................... $491,542 $225,554 $92,948
======== ======== =======
The net sales by product or service categories comprising the Company's net
sales for the fiscal year ended March 31, were as follows (dollars in
thousands):
Fiscal Year Ended March
31,
-------------------------
2001 2000 1999
-------- -------- -------
SMIF Systems..................................... $334,143 $175,363 $66,609
Non-SMIF Systems................................. 34,815 11,208 8,794
SMART Traveler Systems........................... 38,962 14,527 6,227
Robotics......................................... 73,976 14,191 6,323
Services & other................................. 9,646 10,265 4,995
-------- -------- -------
Total.......................................... $491,542 $225,554 $92,948
======== ======== =======
57
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In year ended March 31, 2001, three customers in aggregate accounted for
approximately 22.2 percent of net sales and no one customer individually
accounted for more than 10 percent of net sales. In the year ended March 31,
2000, two customers in aggregate accounted for approximately 22.0 percent of
net sales and were the only customers that individually accounted for more
than 10.0 percent of net sales. In the year ended March 31, 1999, one customer
accounted for 11.0 percent of net sales and was the only customer that
accounted for more than 10 percent of net sales.
Property and equipment, net, by geographical location are as follows
(dollars in thousands):
March 31,
---------------
2001 2000
------- -------
United States.............................................. $30,411 $16,932
Japan...................................................... 9,109 9,761
Other...................................................... 640 619
------- -------
Total.................................................... $40,160 $27,312
======= =======
10. INCOME TAXES:
The provision (benefit) for income taxes is based upon income (loss) before
income taxes as follows (dollars in thousands):
Fiscal Year Ended March
31,
------------------------
2001 2000 1999
------- ------- --------
Domestic........................................... $39,679 $15,202 $(41,377)
Foreign............................................ 7,082 2,325 3,639
------- ------- --------
$46,761 $17,527 $(37,738)
======= ======= ========
The provision (benefit) for income taxes consisted of (dollars in
thousands):
Fiscal Year Ended March
31,
------------------------
2001 2000 1999
------- ------ --------
Current:
Federal.......................................... $16,674 $5,079 $ 64
State............................................ 861 396 456
Foreign.......................................... 123 674 118
------- ------ --------
Total current.................................. 17,658 6,149 638
------- ------ --------
Deferred:
Federal.......................................... (12) 96 (11,020)
State............................................ (417) 1,263 (425)
------- ------ --------
Total deferred................................. (429) 1,359 (11,445)
------- ------ --------
$17,229 $7,508 $(10,807)
======= ====== ========
58
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The provision for income taxes is reconciled with the Federal statutory rate
as follows (dollars in thousands):
Fiscal Year Ended March
31,
-------------------------
2001 2000 1999
------- ------ --------
Provision computed at Federal statutory rate..... $16,366 $6,134 $(13,211)
State taxes, net of Federal benefit.............. 2,287 785 30
Foreign income and withholding taxes in excess of
statutory rate.................................. 569 (233) 635
In-process research and development.............. -- 1,928 --
Non-deductible expenses and other................ 665 88 196
Foreign sales corporation benefit................ (1,714) (636) --
Change in valuation allowance.................... (1,500) -- 2,262
Goodwill amortization............................ 1,777 -- --
Tax exempt income................................ (1,221) (558) (719)
------- ------ --------
$17,229 $7,508 $(10,807)
======= ====== ========
Effective income tax rate........................ 37% 43% 29%
======= ====== ========
The components of the net deferred tax asset are as follows (dollars in
thousands):
March 31,
------------------
2001 2000
-------- --------
Accounts receivable allowances.......................... $ 1,416 $ 939
Inventory reserves...................................... 8,680 4,056
Accrued vacation........................................ 1,271 696
Accrued warranty........................................ 1,498 537
Depreciation and amortization........................... 2,978 4,956
Capitalized research and development and other
carryforwards.......................................... 797 1,441
Net operating loss carryforwards........................ 3,548 10,699
Foreign Deferred Tax Asset (MECS)....................... 10,791 12,603
Other temporary differences............................. 2,113 866
-------- --------
Deferred tax asset..................................... 33,092 36,793
-------- --------
Restructuring reserve................................... -- (46)
Capitalized patent costs................................ -- (506)
-------- --------
Deferred tax liability................................. -- (552)
-------- --------
Valuation allowance for net deferred tax asset.......... (13,024) (15,740)
-------- --------
Net deferred tax asset................................. $ 20,068 $ 20,501
======== ========
The Company has recorded a net deferred tax asset of approximately $20.1
million, of which approximately $4.3 million relates to net operating loss
carryforwards and tax credits generated by the Company and its domestic
subsidiaries, which expire at various dates through March 31, 2021. Included
in this amount is pre-merger Federal net operating loss carryforwards of
approximately $3.5 million generated by PAT, PST and SemiFab, which will
expire at various dates through March 31, 2021. The utilization of the net
operating loss carryforwards are subject to annual limitations due to the
"change in ownership" provisions of the Internal Revenue Code. As of March 31,
2001, $7.3 million of the MECS deferred tax asset relates to pre-merger
foreign net operating loss carryforwards, which expire in 2005. The
utilization of the foreign net operating loss carryforwards is subject to the
ability of MECS to generate future foreign taxable income. The deferred tax
asset
59
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
related to the MECS foreign net operating loss carryforwards is included in
the foreign deferred tax asset related to MECS. A valuation allowance has been
recorded related to pre-merger net operating loss carryforwards and other
deferred tax assets of PST, AMP, SemiFab and MECS of approximately $1.6
million, $0.1 million, $1.1 million and $10.2 million, respectively.
Realization of the net deferred tax asset is dependent on generating
sufficient future taxable income. Although realization is not assured,
management believes that it is more likely than not that the net deferred tax
asset will be realized. Although the net deferred tax asset is considered
realizable, actual amounts could be reduced if sufficient future taxable
income is not achieved.
11. ACQUISITION OF THE FLUOROTRAC(R) PRODUCT LINE:
In April 1998, the Company entered into an agreement with Fluoroware, a
supplier of materials management solutions, to acquire Fluoroware's
FluoroTrac(R) automated radio frequency identification ("RFID") technology for
automated work-in-progress tracking in semiconductor factories. Under the
terms of the agreement, the Company acquired all of the FluoroTrac(R)
intellectual property including RFID tracking solutions, inventory and
installed-base opportunities from Fluoroware in consideration for
approximately $2.8 million consisting of cash and liabilities assumed by the
Company.
In connection with the acquisition, approximately $1.2 million of the
intangible assets acquired consisted of in-process research and development.
Because there can be no assurance that the Company will be able to
successfully complete the development of FluoroTrac products or that the
technology has any alternative future use, such in-process research and
development was charged as an expense during the year ended March 31, 1999. As
a result of the purchase price allocation, approximately $0.3 million was
assigned to intangible assets related to existing product technology, the
assembled workforce and the excess purchase price over the net assets
acquired. These intangibles are being amortized over a three to five year
period. Management believes that the unamortized balance of these assets
totaling $0.1 million at March 31, 2001, which is included in intangible and
other assets, net, in the accompanying consolidated balance sheets, is
recoverable.
12. ACQUISITION OF HINE DESIGN, INC.:
On July 31, 1998, the Company completed its acquisition of 100% of the
outstanding capital stock of HDI, a supplier of wafer-handling robots for
semiconductor processing tools. Under the terms of the agreement, the Company
acquired all of the outstanding capital stock of HDI for approximately $12.4
million in cash and assumed debt of approximately $12.5 million. In addition,
the Company exchanged outstanding options to acquire HDI common stock and
deferred compensation units for identical options of the Company. The value of
the options substituted was approximately $1.9 million. The acquisition was
accounted for using the purchase method of accounting. Accordingly, results of
HDI's operations have been combined with those of the Company's since the date
of acquisition.
In connection with the acquisition, a portion of the purchase price was
allocated to the net liabilities acquired based on their estimated fair
values. The fair values of the tangible assets acquired and liabilities
assumed were approximately $4.4 million and $14.4 million, respectively. As a
result of the purchase price allocation, approximately $18.4 million was
assigned to intangible assets related to existing product technology, the
assembled workforce and the excess purchase price over the net assets
acquired. These intangibles are being amortized over a four to fourteen year
period. Management believes that the unamortized balance of these assets
totaling $12.0 million at March 31, 2001, which is included in intangible and
other assets, net, in the accompanying consolidated balance sheets, is
recoverable. In addition, approximately $5.9 million of the intangible assets
acquired consisted of in-process research and development. Because there can
be no assurance that the Company will be able to successfully complete the
development of HDI products or that the technology has any alternative future
use, such in-process research and development was charged as an expense in the
year ended March 31, 1999.
60
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Comparative pro forma information reflecting the acquisition of HDI has not
been presented because the operations of HDI are not material to the Company's
financial statements.
13. ACQUISITION OF PROGRESSIVE SYSTEM TECHNOLOGIES, INC.:
On June 2, 1999, the Company completed its acquisition of 100 percent of the
common stock of PST, in exchange for 549,620 shares of common stock of the
Company. In addition to the exchange of common stock in the merger, 450,380
shares of common stock of the Company were issued in exchange for cancellation
of $4.9 million of PST debt and accrued interest. PST manufactures wafer-
sorting equipment used by semiconductor manufacturers. The acquisition has
been accounted for using the pooling of interest method of accounting.
Accordingly, the accompanying consolidated financial statements have been
restated for all periods prior to the business combination. All material
intercompany transactions between the Company and PST have been eliminated.
Costs associated with the PST merger, which were not material, consist
primarily of transaction costs and were expensed in the period incurred. PST's
fiscal year end was December 31. For the purposes of the restatement, PST's
restated year ended December 31, 1999, was combined with the Company's year
ended March 31, 2000, and PST's year ended December 31, 1998 was combined with
the Company's year ended March 31, 1999. As a result, the net sales of $1.5
million and net loss of $2.3 million to account for the excluded net loss of
PST for this three month period has been made to the accumulated deficit in
the year ended March 31, 2000. Conforming PST's accounting practices to the
Company's resulted in no adjustments to net income (loss) or shareholders'
equity. Net sales and net income (loss) for the individual companies reported
prior to the merger, net of all material intercompany transactions between the
Company and PST, were as follows (dollars in thousands):
Year Ended
March 31, 1999
--------------
Net sales:
Asyst Technologies, Inc. ................................... $ 84,154
PST......................................................... 8,794
--------
Total..................................................... $ 92,948
========
Net loss:
Asyst Technologies, Inc. ................................... $(20,979)
PST......................................................... (5,952)
--------
Total..................................................... $(26,931)
========
14. ACQUISITION OF PALO ALTO TECHNOLOGIES, INC.:
On August 27, 1999, the Company acquired all of the shares of PAT, a company
formed in 1997 to develop and market a new concept wafer transport system for
use in semiconductor manufacturing facilities, for $4.6 million consisting
primarily of cash and Company common stock. Approximately $4.6 million of the
purchase price in excess of the value of the net liabilities assumed was
allocated to various intangible assets including $4.0 million allocated to in-
process research and development which was expensed in the three-month period
ended September 30, 1999. The remaining $0.6 million was assigned to
intangible and other assets and is being amortized over a 5 year period. Dr.
Mihir Parikh, the Company's Chairman and Chief Executive Officer, and Mr.
Anthony Bonora, the Company's Executive Vice President, Chief Technology
Officer and Asyst Fellow, were shareholders of PAT and Dr. Mihir Parikh was
the Chairman of the Board of Directors of PAT.
61
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
15. ACQUISITION OF MECS CORPORATION:
During the year ended March 31, 2000, the Company acquired a 78.6 percent
ownership interest of MECS, a Japan based manufacturer of robotic systems used
to automate sophisticated semiconductor and flat panel display manufacturing
equipment in exchange for $12.4 million of cash. In the quarter ended
September 30, 2000, the Company purchased an additional 12.9 percent interest
in MECS in exchange for $3.1 million in cash. On October 1, 2000, the Company
merged Asyst Japan, Inc. into MECS increasing its ownership interest in MECS
to approximately 95.3 percent of its common stock. The acquisition was
accounted for using the purchase method of accounting. Accordingly, results of
MECS operations have been combined with those of the Company's since the date
a majority interest was acquired on March 23, 2000.
In connection with the acquisition, a portion of the purchase price was
allocated to the net assets acquired based on their estimated fair values.
Approximately $18.7 million of the purchase price (including a reduction of
approximately $3.8 million in December 2000 related to recognition of a tax
loss carryforward that had been reserved at the date of acquisition) was
assigned to intangible assets related to existing product technology, the
assembled workforce and the excess of purchase price over the net assets
acquired. These intangible assets are being amortized over a seven year
period. Management believes that the unamortized balance of these assets
totaling $15.5 million at March 31, 2001, which is included in intangible
assets and other assets, net, in the accompanying consolidated balance sheets,
is recoverable. In addition, approximately $0.9 million of the purchase price
was assigned to in-process research and development. Because there was no
assurance that the Company would be able to successfully complete the
development of MECS products or that the technology had any alternative future
use, such in-process research and development was charged as an expense in the
year ended March 31, 2000.
The following pro-forma consolidated results of operations are presented as
if the acquisition of MECS had been made at April 1, 1998 (unaudited; dollars
in thousands, except per share amounts).
Years Ended March
31,
-----------------
2000 1999
-------- --------
Net sales................................................. $278,733 $131,311
Net income (loss)......................................... 4,685 (40,893)
Basic earnings (loss) per share........................... 0.17 (1.74)
Diluted earnings (loss) per share......................... 0.15 (1.74)
16. ACQUISITION OF ADVANCED MACHINE PROGRAMMING, INC.:
On February 2, 2001, the Company acquired 100% of outstanding capital stock
of AMP, a manufacturer of precision machined parts for the semiconductor
equipment industry, for $20.9 million of cash and 1,081,261 shares of the
Company's common stock valued at $19.0 million. The acquisition was accounted
for using the purchase method of accounting. Accordingly the results of AMP
have been combined with those of the Company's since the date of acquisition.
Approximately $35.9 million of the purchase price, in excess of the net assets
of $4.0 million acquired, was allocated to various intangible assets. These
intangible assets consist of developed technology and know how, assembled
workforce and excess purchase price of the net assets acquired that are being
amortized over lives ranging from three to six years. Management believes that
the unamortized balance of these assets totaling $34.8 million at March 31,
2001, which is included in intangible and other assets, net, in the
accompanying consolidated balance sheet, is recoverable.
Comparative pro forma information reflecting the acquisition of AMP has not
been presented because the operations of AMP are not material to the Company's
consolidated financial statements.
62
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
17. ACQUISITION OF SEMIFAB INC.:
On February 12, 2001, the Company acquired 100% of the outstanding capital
stock of SemiFab and assumed all options to purchase SemiFab shares, a
manufacturer of environmental control equipment and a contract manufacturer
for the semiconductor equipment industry, for $6.3 million of cash and assumed
debt, and 990,892 shares of the Company's common stock and the option to
purchase 55,500 of the Company's common stock. Total initial consideration was
$19.7 million. In addition, the Company issued 445,891 shares of its common
stock into escrow to be awarded if certain operating results are achieved over
the next twelve months. Since the outcomes of the contingencies are not
determinable beyond a reasonable doubt at March 31, 2001, these shares have
not been included in the purchase price. The acquisition was accounted for
using purchase method of accounting. Accordingly the results of SemiFab have
been combined with those of the Company's since the date of acquisition.
Approximately $16.0 million of the purchase price in excess of the net assets
of $2.7 million acquired was allocated to various intangible assets. These
intangible assets consist of customer base developed technology and know how,
assembled workforce and excess purchase price of the net assets acquired that
are being amortized over lives ranging from three to six years. Management
believes that the unamortized balance of these assets totaling $15.6 million
at March 31, 2001, which is included in intangible and other assets, net, in
the accompanying consolidated balance sheets, is recoverable.
Comparative pro forma information reflecting the acquisition of SemiFab has
not been presented because the operations of SemiFab are not material to the
Company's consolidated financial statements.
18. LEGAL PROCEEDINGS:
In October 1996, the Company filed a lawsuit in the United States District
Court for the Northern District of California against Jenoptik A.G.
("Jenoptik"), Jenoptik-Infab, Inc. ("Infab"), Emtrak, Inc. ("Emtrak") and
Empak, Inc. ("Empak") alleging infringement of two patents related to our
SMART Traveler System. The Company amended its Complaint in April 1997 to
allege causes of action for breach of fiduciary duty against Jenoptik and
Meissner & Wurst, GmbH, and misappropriation of trade secrets and unfair
business practices against all defendants. The Complaint seeks damages and
injunctive relief against further infringement. All defendants filed counter
claims, seeking a judgment declaring the patents invalid, unenforceable and
not infringed. Jenoptik, Infab, and Emtrak also alleged that the Company have
violated federal antitrust laws and engaged in unfair competition. The Company
denied these allegations. In May 1998, the Company along with Empak stipulated
to a dismissal, without prejudice, of the respective claims and counter claims
against each other. In November 1998, the court granted defendants' motion for
partial summary judgment as to most of the patent infringement claims and
invited further briefing as to the remainder. In January 1999, the court
granted our motion for leave to seek reconsideration of the November summary
judgment order and also, pursuant to a stipulation of the parties, dismissed
without prejudice two of the three antitrust counter claims brought by the
defendants. Since then, the parties stipulated to, and the court has ordered,
the dismissal with prejudice of the defendants' unfair competition and
remaining antitrust counterclaim, and our breach of fiduciary duty,
misappropriation of trade secrets and unfair business practices claims. On
June 4, 1999, the court issued an order by which it granted a motion for
reconsideration in the sense that it considered the merits of the Company's
arguments, but decided that it would not change its prior ruling on summary
judgment and would also grant summary judgment for defendants on the remaining
patent infringement claim. The Company appealed and the trial date has since
been vacated. The parties have submitted appellate briefs and the court heard
oral argument. The Company is waiting for the court's ruling.
In March 2001, the Company filed suit against Fortrend Engineering
Corporation in the United States District Court for the Northern District of
California, seeking to have two patents declared invalid or not infringed. The
two patents have been asserted by Fortrend against our customers use of our
Load Port Transfer system. We also allege that the inventors named on the two
patents should be corrected to include an Asyst employee as a joint inventor.
Our complaint also includes claims for unfair competition, interference with
63
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
contractual relations, and intentional interference with prospective economic
advantage. In May 2001, Fortrend filed counterclaims asserting that the
Company and fourteen of its customers infringe the two patents. The Company
has denied Fortrend's allegations
19. RELATED PARTY TRANSACTIONS:
At March 31, 2001, the Company held two notes receivable from an executive
officer totaling $0.8 million and five separate notes receivable from other
employees totaling $1.1 million. At March 31, 2000, the Company held three
separate notes receivable from one executive officer and a former executive
officer totaling $1.1 million and one note receivable from another employee of
the Company with a balance of $0.2 million. Loans were extended to these
individuals to assist them in their relocation to California. Each of the
notes receivable are secured by second deeds of trust on certain real property
and certain pledged securities of the Company owned by the employees.
20. SUBSEQUENT EVENTS (UNAUDITED):
On May 22, 2001 the Company acquired GW Associates Inc. ("GW"), a Delaware
Corporation, a developer of factory integration software used by electronics
manufacturers, for a total purchase price of $32.0 million. The initial
consideration consists of $8.0 million of cash and approximately 450,000
shares of the Company's common stock. An additional $16.0 million in
consideration will be paid one year from the purchase date in a combination of
cash and the Company's common stock. The acquisition will be accounted for
using the purchase method of accounting. We have determined that the purchase
of GW is not be material and therefore pro forma information is not provided.
On May 30, 2001, the Company amended its lease agreement for land and
buildings in Fremont, California with a syndicate of financial institutions.
Under the amendment, the Company has committed to purchase the land for $38.3
million plus interest and other charges on or before December 31, 2001. The
Company is also released from its obligation to improve the property and the
syndicate of financial institutions is released from its commitment to fund
construction costs. In addition, the Company agreed to pay $2.6 million to the
syndicate for certain engineering costs incurred in preparation for making
leasehold improvements to the land. The Company has not yet determined whether
to sell the property or hold it for future development or sale. The Company
believes that the current fair market value of the land is substantially less
than the original purchase price due to a decline in the real estate market in
the Freemont area. If sold in today's market, the Company estimates that
proceeds from the sale would be in the range of $10 to 20 million less than
the amount due to the bank syndicate. The Company also believes that it will
be required to record an impairment charge or other reserve with respect to
the land during the quarter ending June 30, 2001, the exact size of which has
not yet been determined.
64
SCHEDULE II
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Balance Charged to/ Balance
Beginning Recovery End
of Year of Expenses Deductions Acquired of Year
--------- ----------- ---------- -------- -------
Accounts Receivable:
March 31, 1999
Reserve for doubtful
accounts................ $1,370 $ 840 $ (263) $ -- $1,947
March 31, 2000
Reserve for doubtful
accounts................ $1,947 $1,533 $ (671) $ -- $2,809
March 31, 2001
Reserve for doubtful
accounts................ $2,809 $2,279 $(1,533) $ 240 $3,795
Restructuring:
March 31, 1999
Reserve for restructuring
activity................ $ -- $5,542 $(2,992) $ -- $2,550
March 31, 2000
Reserve for restructuring
activity................ $2,550 $ (200) $(2,350) $ -- $ --
65
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report on Form 10-K to
be signed on its behalf by the undersigned, thereunto duly authorized on the
19th day of June 2001.
Asyst Technologies, Inc.
/s/ Mihir Parikh
By: _________________________________
Mihir Parikh
Chairman and Chief Executive
Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Mihir Parikh Chairman of the Board, June 15, 2001
______________________________________ Chief Executive Officer
Mihir Parikh and Director (Principal
Executive Officer)
/s/ Douglas J. McCutcheon Senior Vice President and June 15, 2001
______________________________________ Chief Financial Officer
Douglas J. McCutcheon (Principal Financial and
Accounting Officer)
/s/ P. Jackson Bell Director June 14, 2001
______________________________________
P. Jackson Bell
/s/ Stanley Grubel Director June 13, 2001
______________________________________
Stanley Grubel
/s/ Robert A. McNamara Director June 14, 2001
______________________________________
Robert A. McNamara
/s/ Anthony E. Santelli Director June 13, 2001
______________________________________
Anthony E. Santelli
/s/ Walter W. Wilson Director June 16, 2001
______________________________________
Walter W. Wilson
66