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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 2 TO FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR FISCAL YEAR ENDED SEPTEMBER 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM TO .
COMMISSION FILE NUMBER: 0-25434
BROOKS AUTOMATION, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 04-3040660
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
15 ELIZABETH DRIVE, CHELMSFORD, MASSACHUSETTS 01824
(Address of Principal Executive Offices) (Zip Code)
978-262-2400
(Registrant's Telephone Number, Including Area Code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $0.01 PAR VALUE
RIGHTS TO PURCHASE COMMON STOCK
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Rule
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. [ ]
The aggregate market value of the registrant's Common Stock, $0.01 par
value, held by nonaffiliates of the registrant as of November 30, 2001, was
$576,558,732.75 based on the closing price per share of $36.75 on that date on
the Nasdaq Stock Market. As of November 30, 2001, 19,913,483 shares of the
registrant's Common Stock, $0.01 par value, were outstanding.
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PART I
ITEM 1. BUSINESS
Brooks Automation, Inc. ("Brooks" or the "Company") is a leading supplier
of integrated tool and factory automation solutions for the global semiconductor
and related industries such as the data storage and flat panel display
manufacturing industries. Brooks has distinguished itself as a technology and
market leader, particularly in the demanding cluster-tool vacuum-processing
environment and in integrated factory automation software applications. The
Company's offerings have grown from individual robots used to transfer
semiconductor wafers in advanced production equipment to fully integrated
automation solutions that control the flow of resources in the factory from
process tools to factory scheduling and dispatching. In 1998, the Company began
an aggressive program of investment and acquisition. By the close of fiscal year
2000, Brooks had emerged as one of the leading suppliers of factory and tool
automation solutions for semiconductor and original equipment manufacturers.
During fiscal 2001, the Company continued its program of strategic investment
and acquisitions designed to broaden the depth and breadth of its offerings and
market position.
INDUSTRY BACKGROUND
Fabrication of semiconductors and flat panel displays requires a large
number of complex process steps in which electrically insulating or conductive
materials are deposited and etched into patterns on the surface of a substrate
or wafer. A simplified production sequence consists of deposition,
photolithography and etch processes. In deposition, one or more layers of a film
of material are deposited on a substrate or wafer. Then, with photolithography,
the desired circuit pattern is imaged on the deposited material. Finally, in the
etch process, the material not covered with the pattern is selectively removed.
Each deposition, photolithography or etch process requires the use of one or
more process tools. This basic sequence is repeated up to 25 times for complex
semiconductor devices. To become fully processed a bare silicon wafer will pass
through as many as 400 or more process steps.
State-of-the-art semiconductor manufacturing creates on-chip features 1,000
times narrower than a human hair, and it must control the dimensions of those
features to within 10%. A fabrication facility, or "fab", contains hundreds of
manufacturing tools. Wafer fabs process wafers in lots of 25. A flat panel
display substrate may contain as few as two laptop computer displays, while a
wafer may contain more than 500 semiconductor chips.
One manufacturing facility could at any moment be processing wafers that
will result in hundreds of different end products. The slightest drift or
malfunction in any of the tools at any of the process steps can cause a process
deviation. A manufacturing problem or deviation in a wafer fabrication plant can
ruin an entire lot of 25 wafers, or multiple lots. One lot of 300mm (i.e. about
12 inches in diameter) wafers can be worth up to $7 million.
As a result, semiconductor manufacturing has become and continues to be
increasingly automated. Today, almost every aspect of processing includes
automation, from material handling to tracking work-in-process to process
control and scheduling. Factory and tool automation directly impacts factory
performance. Factory performance, in turn, drives semiconductor manufacturers'
ability to:
- get to market first when product profitability is greatest; and
- drive manufacturing costs down to remain competitive in the face of
constant downward price pressure.
TOOL AUTOMATION SYSTEMS
Semiconductor and flat panel display substrates must be processed in
ultra-clean environments. This means that manufacturing is either in a clean
room at atmospheric pressure levels, a nitrogen purged atmospheric environment,
or in a vacuum environment. Semiconductor and flat panel display process tools
generally use vacuum environments for deposition and etch processes, and
atmospheric environments for photolithography and other processes. Vacuum
equipment is typically designed as cluster tools and atmospheric equipment is
typically designed as in-line handling systems.
Cluster tool handling systems typically link together multiple processes
such as deposition, etch and heating/cooling of the substrate around a transfer
robot located in a central vacuum chamber. In a cluster tool, a standard
cassette of up to 25 wafers enters the vacuum environment through a vacuum
cassette elevator load lock. The load lock is sealed and pumped to vacuum and
then opened to the central wafer handling system. A central transfer robot then
carries the wafers between the cassette and the different process and
conditioning modules through the central vacuum chamber. After all the wafers
have been processed within the cluster tool and returned to the cassette in the
load lock, the load lock is sealed from the vacuum central chamber and vented to
atmospheric pressure. The cassette of wafers is then removed from the cluster
tool through the load lock. Vacuum cluster tools often employ two load locks,
with the wafers from one load lock being actively transferred, conditioned and
processed while wafers in the other load lock are being brought to or removed
from vacuum conditions.
In-line handling systems often link together multiple processes such as
photo resist processing, using a transfer robot located on an atmospheric
horizontal traverser. In these systems, the process modules are lined up rather
than clustered around an automation handling system. Robotic traversers in these
systems move substrates back and forth across the line of process modules. The
in-line architecture is now emerging in the stripping, etch, cleaning and
chemical mechanical polishing process markets. Some in-line architectures have
their Process Modules loaded directly by an atmospheric robot (chemical
mechanical polishing ("CMP"), track). Others utilize a transport mechanism in a
vacuum load lock to load the process module (etch, rapid thermal processing
("RTP"), ashing).
FACTORY INTERFACE SOLUTIONS
Semiconductor manufacturers with 300mm, as well as advanced 200mm, projects
utilize mini-environment technology for their factories. Mini-environment
technology permits a factory to cost-effectively maintain the wafers in an
environment that is 1,000 times cleaner than one that is typically found in a
surgical operating room. The interface between a mini-environment that surrounds
a tool and the outside factory is a critical element of a factory's total
automation solution. Material handling automation includes sorters (moving
wafers within and between carriers), interbay (moving wafer carriers between
manufacturing areas), intrabay (moving wafer carriers from tool to tool within a
manufacturing area) and tool-level automation. Tool-level automation uses robot
arms or tracks to handle wafers or cassettes of wafers between lot box and
processing chamber, or between consecutive processing chambers.
FACTORY AUTOMATION SOLUTIONS
Driven by increased global competition, shorter product lifecycles, and
downward price pressures, semiconductor manufacturers are turning their
attention to reducing manufacturing costs by improving the operational
efficiencies of their manufacturing processes. This is evidenced by the
continued investment, even in a down market, in 300mm manufacturing facilities
on the basis of cost reduction. It is also supported by the strong push for more
and better-advanced process control, equipment performance tracking and other
optimization and manufacturing control applications.
Semiconductor manufacturers require factory automation systems that
document, control and report on the movement of material through the automated
factory. To achieve this requires a high degree of integration of the many
automation components. For example, the factory systems must simultaneously
setup and run processing equipment automatically, route work-in-process
dynamically based on the current state of the factory, collect process data,
modify process variables, monitor semiconductor processing equipment performance
and control the dispatching of work-in-process, to keep the factory at
acceptable performance levels.
As automation requirements have grown, semiconductor manufacturers'
automation solutions have changed from add-on systems that have evolved over
time, to full solutions that are specified, in detail, at the beginning of the
factory planning process. The increasing requirement for automation makes it
critical to semiconductor manufacturers that the automation systems they select
work together in an integrated fashion at the time of deployment.
2
Semiconductor and flat panel display manufacturers use a wide variety of
hardware and software systems to automate and control their operations. To
improve factory performance, they use factory automation systems. Almost all
fabs apply statistical process control to their processes and equipment.
Manufacturing execution system ("MES") applications coordinate and track the
activities of manufacturing resources, including equipment, material, operators,
engineers and software applications. Many fabs use sensors and software
applications to monitor equipment performance, modify process parameters
automatically, provide automated notification of out-of-control conditions and
supply on-line help for troubleshooting. In addition, many fabs use automated
tracking systems to collect large amounts of data about process and product
conditions, equipment maintenance and operation history, lot production history
and yield results. Engineers use applied statistical tools to analyze large
volumes of data from multiple sources in order to identify and correct problems
that negatively impact yields, equipment utilization and throughput. Finally,
capacity planning and scheduling solutions are used to manage all the
constraints in the factory, from limited resources during shift changes to
factors effecting machine efficiency. These solutions help increase throughput,
improve utilization of resources and reduce in-process inventory.
PRODUCTS
TOOL AUTOMATION SYSTEMS
Brooks provides vacuum and atmospheric tool automation systems for the
semiconductor, MEMS (Micro-electronic Machines Systems), opto-electronic, flat
panel display and data storage markets. Brooks has developed comprehensive
product lines that encompass automation modules, handling systems and integrated
software and controls. Brooks uses a common architectural foundation in the
design and production of systems, robots and modules. Shared technologies and
common software controls enable Brooks to respond to changing industry demands,
such as processing larger diameter 300mm semiconductor wafers and the larger,
fourth generation flat panel display substrates.
Brooks provides components to customers who build their own systems and
integrated systems to those customers who do not.
FACTORY INTERFACE SOLUTIONS
Brooks provides mini-environment and factory interface solutions that
support 200mm Standard Mechanical Interface Facilities ("SMIF"), as well as
solutions for 300mm factories, which utilize Brooks' Front Opening Unified Pod
("FOUP") technology. Brooks' Equipment Front-End Modules ("EFEMs") are compact
interface solutions that provide the equipment supplier with an integrated
system that consists of a mini-environment, load port(s), atmospheric robot(s),
tool control and software interface modules.
Brooks offers multi-cassette sorting systems. These sorters are often used
for the random sampling of wafers for statistical process control routines,
which, when coupled with metrology inspection, help assure the quality of the
process tool and the materials used in the fabrication process. Brooks also
provides advanced lot tracking that enables semiconductor manufacturers to
monitor the exact location of every wafer in the factory. Brooks believes that
its factory interface solutions enhance return on investment in new fabs,
retrofit projects, as well as in process tools, by providing integrated
automation solutions to manage the complex logistics of advanced semiconductor
factories.
FACTORY AUTOMATION SOLUTIONS
Electronics manufacturing often requires software systems for decision
support (reporting, planning, scheduling, dispatching, simulation, process
development), tracking/management (work in process ("WIP"), durables (i.e.
reticles and carriers), equipment, operators, recipes, maintenance, inventory),
equipment or cell control (process equipment, measurement equipment, material
handling systems, storage systems) and analysis (statistical process control,
advanced process control, engineering data analysis, yield management, equipment
performance tracking). As a result of the complexity of their processes and
intolerance of even minor deviations from those processes, semiconductor fabs
lead the way in driving the requirements for
3
manufacturing automation software systems, often referred to as computer
integrated manufacturing ("CIM") system. The heart of this system is the MES.
Brooks offers a CIM solution that provides a unifying framework for factory
automation. Brooks' MES software provides decision support and WIP tracking and
management either stand-alone or as part of the CIM solution. Brooks' equipment
integration products connect the manufacturing equipment to the advanced process
control, factory automation, and other control applications. Brooks' solutions
provide integrated applications for material control and durables management,
WIP tracking and process optimization, maintenance management and equipment
performance tracking, advanced process control and process optimization, factory
scheduling and real-time dispatching, recipe management and engineering data
collection, and engineering data analysis and statistical process control. These
applications integrate, coordinate and track the activities of manufacturing
resources, including equipment, material, operators, engineers and software
applications.
Brooks' solutions may be both process-specific and facility-wide. Brooks
may deliver these solutions as a stand-alone product or as part of an
integrated, CIM solution including systems integration services. Brooks'
offerings address the automation software requirements for hi-tech manufacturing
markets including semiconductor fab assembly and test areas, liquid crystal
display, or LCD, MEMS, opto-electronics and data storage markets.
The following table lists the Company's primary product offerings within
each of the markets it serves:
SEGMENT PRODUCT LINES
------- -------------
TOOL AUTOMATION SYSTEMS
Vacuum Intra-Tool Automation Central Wafer Handling Systems
Transfer Robots
Thermal Conditioning Modules (Cooling)
Cassette Elevator Load Locks
Aligners
Atmospheric Intra-Tool Automation Wafer Handling Systems
Transfer Robots
Thermal Conditioning Modules (Cooling)
Aligners
Flat Panel Display Products Indexers
Substrate Handling Systems
Transfer Robots
Cassette Elevator Load Locks
Tool Communications Software 200mm/300mm Communications Software
200mm/300mm Test Software
e-Diagnostics Tool Interface Software
Tool Automation Software Material Handling Control Software
Cluster Tool Control Software
EFEM Control Software
Equipment Controllers
Integration and Consulting Solutions
4
SEGMENT PRODUCT LINES
------- -------------
FACTORY INTERFACE SOLUTIONS
Factory Interfaces and Wafer Sorters Standard Mechanical Interfaces (SMIF)
300mm Front Opening Unified Pod (FOUP)
Interfaces
Mini-environments
Pressure and Flow Controllers
Equipment Front End Modules (EFEM)
Sorters, Indexers
Carrier Tracking Systems
FACTORY AUTOMATION SOLUTIONS
CIM solutions FABready Suite for 300mm, FABready Suite for LCD
Manufacturing Execution Software ("MES") FACTORYworks
Reticle Management and Lithography PhotoStation, ReticleTrax
Automation Software
Scheduling and Dispatching Advanced Productivity Family
Material Control and Tracking CLASS MCS
Equipment and Cell Control STATIONworks, CELLworks
Engineering Data Analysis RS/Series, Cornerstone
Maintenance Management Xsite
Equipment Performance and Monitoring SEARAMS, Sentinel, iConnect
Process Development Starfire
Statistical Process Control SPACE inside Brooks
Advanced Process Control Patterns, ARRC, SMC, APCbuilder
CUSTOMERS
Brooks' customers for tool automation systems are primarily original
equipment manufacturers ("OEMs") and semiconductor manufacturers who are
constructing new and/or retrofitting existing vacuum and atmospheric automation
process equipment or developing advanced process equipment for internal use.
Brooks' customers for factory automation software and factory interface
solutions are primarily semiconductor manufacturers. The Company's customers are
primarily located in the United States, Japan, South Korea, Europe, Taiwan and
Southeast Asia. Brooks markets its developing family of atmospheric central
wafer handling equipment to its existing customers in the vacuum and flat panel
display markets and to potential new customers.
Relatively few customers account for a substantial portion of Brooks'
revenues. In fiscal 2000 and fiscal 1999, Lam Research Corporation ("Lam") was
the Company's largest customer. In fiscal 2001, Novellus Systems, Inc.
("Novellus") was the Company's largest customer. Sales to Novellus, Lam and the
Company's ten largest customers, including Novellus and Lam, as a percentage of
total sales, are as follows:
YEAR ENDED SEPTEMBER 30,
-------------------------
2001 2000 1999
----- ----- -----
Ten largest customers 37% 40% 49%
Novellus Systems, Inc. 10% 7% 9%
Lam Research Corporation 7% 11% 12%
A reduction or delay in orders from Novellus, Lam or other significant
customers could have a material adverse effect on Brooks' results of operations.
See Note 11, "Segment and Geographic Information," of the consolidated financial
statements for further discussion of the Company's sales by geographic region
and revenues, income and assets by financial reporting segment.
5
Brooks derives a significant amount of its total revenues from direct
foreign sales. Revenues outside the United States were approximately 50%, 48%
and 43% of total revenues for the years ended September 30, 2001, 2000 and 1999,
respectively.
The Company expects foreign revenues to continue to represent a significant
percentage of total revenues in the foreseeable future. Brooks cannot guarantee
that geographical revenue rates in the foreseeable future will be comparable to
those achieved in recent years. See "Factors That May Affect Future
Results -- Brooks' international business operations expose it to a number of
difficulties in coordinating its activities abroad and in dealing with multiple
regulatory environments" for a discussion of additional factors which could
adversely affect foreign revenues."
MARKETING, SALES AND CUSTOMER SUPPORT
Brooks markets and sells its tool and factory automation hardware and
software solutions for factory performance optimization in the United States,
Europe, Japan, South Korea, Southeast Asia and Taiwan through its direct sales
and marketing organization. The selling process for Brooks' products is often
multilevel, involving a team comprised of individuals from sales, marketing,
engineering, operations and senior management. Each significant customer is
assigned a team that engages the customer at different organization levels to
provide planning and product customization and to assure open communication and
support. Brooks also utilizes a network of value-added integration partners to
provide implementation and integration services for its factory automation
software products.
The Company's marketing activities also include participation in trade
shows, publication of articles in trade journals, seminars, participation in
industry forums and distribution of sales literature. To enhance this
communication and support, particularly with its international customers, Brooks
maintains technology and implementation centers in the United States, British
Columbia, Japan, South Korea, Taiwan, Singapore, Malaysia, the United Kingdom
and Germany. These facilities, together with Brooks' headquarters, maintain
demonstration equipment for customers to evaluate. Customers are also encouraged
to discuss the features and applications of Brooks' demonstration equipment with
Brooks' engineers located at these facilities. The Company maintains a number of
regional sales and service centers throughout the world.
In 1998, Brooks developed a new sales and marketing tool, a process tool
throughput simulator, to enable the evaluation of various wafer handling system
configurations to identify the preferred tool configuration for a specific
application. This tool simulates the movement of wafers with execution times,
scheduling algorithms, and flow sequences similar to those of actual process
tools and outputs this information visually. This tool is capable of comparing
multiple tool configurations simultaneously for preferred fit comparisons.
Brooks provides support to its customers with:
- Telephone technical support access 24 hours a day, 365 days a year;
- Direct training programs; and
- Operating manuals and other technical support information for Brooks'
products.
The Company maintains spare parts inventories in most of its locations to
enable its personnel to serve Brooks' customers and repair their products more
efficiently.
COMPETITION
The semiconductor and flat panel display process equipment manufacturing
industries are highly competitive and characterized by continual change and
improvements in technology. Although other independent companies sell vacuum and
atmospheric wafer and flat panel display substrate handling automation systems
and vacuum transfer robots to original equipment manufacturers, Brooks believes
that its primary competition is from the larger, integrated semiconductor and
flat panel display original equipment manufacturers that satisfy their substrate
handling needs in-house rather than by purchasing handling systems or modules
from an independent source, such as Brooks. Such original equipment
manufacturers comprise the majority of Brooks' current and potential customers
in this segment. Many of the companies in these
6
industries have significantly greater research and development, clean room
manufacturing, marketing and financial resources than Brooks. Applied Materials,
Inc., the leading process equipment original equipment manufacturer, develops
and manufactures its own central wafer handling systems and modules.
Brooks believes its customers will only purchase Brooks' products if Brooks
can demonstrate improved product performance, as measured by throughput,
reliability, contamination control and accuracy, at an acceptable price. Brooks
believes that it competes favorably with original equipment manufacturers and
other independent suppliers with respect to all of these factors. However,
Brooks cannot guarantee that it will be successful in selling its products to
original equipment manufacturers that currently satisfy their wafer and flat
panel handling needs in-house or from other independent suppliers, regardless of
the performance or the price of Brooks' products.
Brooks' sale of its products for the flat panel display process equipment
market is heavily dependent upon its penetration of the Japanese market. Brooks
continues to expand its presence in the Japanese semiconductor process equipment
market. In addressing the Japanese markets, Brooks may be at a competitive
disadvantage to Japanese suppliers, many of which have long-standing
collaborative relationships with Japanese semiconductor and flat panel display
process equipment manufacturers. The Japanese semiconductor and flat panel
display process equipment markets are difficult for foreign companies to
penetrate.
Brooks believes that the competitive factors in the factory interface
solutions market are technical and technological capabilities, reliability,
price/performance, ease of integration and global sales and support capability.
Brooks believes that its solutions compete favorably with respect to all these
factors. In this market, Brooks encounters direct competition from Asyst, Rorze,
Fortrend, Newport, TDK, Yasakawa and Hirata. Some of these competitors have
extensive engineering, manufacturing and marketing capabilities.
Brooks believes that the primary competitive factors in the end-user market
for factory automation software and process control solutions software are
product functionality, degree of integration, price/performance, ease of
implementation and installation, hardware and software platform compatibility,
costs to support and maintain, vendor reputation and financial stability. Brooks
believes its products currently compete favorably with other systems on the
primary factors listed above. Brooks also believes that the relative importance
of these competitive factors may change over time. Brooks experiences direct
competition in the semiconductor factory automation market industry from various
competitors, including Applied Materials-Consilium, IBM, Si-view, Compaq, TRW,
Camstar and numerous small independent software companies.
RESEARCH AND DEVELOPMENT
Brooks' research and development efforts are focused on developing new
products for the semiconductor, data storage and flat panel display process
equipment industries and further enhancing the functionality, degree of
integration, reliability and performance of existing products. Brooks'
engineering, marketing, operations and management personnel have developed close
collaborative relationships with many of their counterparts in customer
organizations and have used these relationships to identify market demands and
target Brooks' research and development to meet those demands. Brooks' current
research and development efforts include the continued development and
enhancement of Brooks' semiconductor and flat panel display products, including
Gemini Express vacuum central wafer handling systems and modules, fourth
generation flat panel display substrate handling systems and modules, 300mm
loadport modules, integrated equipment front-end modules, atmospheric handling
systems and modules, manufacturing execution system, station control software,
advanced tool control solutions, advanced process control solutions, factory
scheduling and dispatching solutions and material handling control software.
Furthermore, the Company is investing in a common information systems framework
to provide ease of integration across these applications. The Company also
maintains relationships with integrated circuit manufacturers and equipment
suppliers to define hardware and software solutions for equipment front-end
automation, contamination control, logistic management, material tracking and
equipment integration.
7
MANUFACTURING
Brooks' manufacturing operations consist primarily of product assembly,
integration, and testing. Brooks has adopted stringent quality assurance
procedures that include standard design practices, component selection
procedures, vendor control procedures and comprehensive reliability testing and
analysis to assure the performance of its products. The Company's facilities in
Chelmsford, Massachusetts; Jena, Germany; Kiheung, Korea and Livingston,
Scotland are ISO 9001 certified.
Brooks employs a just-in-time manufacturing strategy for a large portion of
its manufacturing process. Brooks believes that this strategy, coupled with the
outsourcing of non-critical subassemblies, reduces fixed operating costs,
improves working capital efficiency, reduces manufacturing cycle times and
improves flexibility to rapidly adjust its production capacities. While Brooks
often uses single source suppliers for certain key components and common
assemblies to achieve quality control and the benefits of economies of scale,
Brooks believes that these parts and materials are readily available from other
supply sources. Brooks also believes that its software development and
manufacturing facilities are more than adequate to service foreseeable needs.
PATENTS AND PROPRIETARY RIGHTS
Brooks relies upon trade secret laws, confidentiality procedures, patents,
copyrights, trademarks and licensing agreements to protect its technology. Due
to the rapid technological change that characterizes the semiconductor and flat
panel display process equipment industries, Brooks believes that the improvement
of existing technology, reliance upon trade secrets and unpatented proprietary
know-how and the development of new products may be more important than patent
protection in establishing and maintaining a competitive advantage. To protect
trade secrets and know-how, it is Brooks' policy to require all technical and
management personnel to enter into nondisclosure agreements. Brooks cannot
guarantee that these efforts will meaningfully protect its trade secrets.
Brooks has obtained patents and will continue to make efforts to obtain
patents, when available, in connection with its product development program.
Brooks cannot guarantee that any patent obtained will provide protection or be
of commercial benefit to Brooks. Despite these efforts, others may independently
develop substantially equivalent proprietary information and techniques. As of
September 30, 2001, Brooks had obtained 116 United States patents and had 34
United States patent applications pending on its behalf. In addition, Brooks had
obtained 152 foreign patents and had 199 foreign patent applications pending on
its behalf. Brooks' United States patents expire at various times from May 2004
to July 2019. Brooks cannot guarantee that its pending patent applications or
any future applications will be approved, or that any patents will not be
challenged by third parties. Others may have filed and in the future may file
patent applications that are similar or identical to those of Brooks. These
patent applications may have priority over patent applications filed by Brooks.
There has been substantial litigation regarding patent and other
intellectual property rights in the semiconductor related industries. Brooks has
in the past been, and may in the future be, notified that it may be infringing
intellectual property rights possessed by other third parties. Any patent
litigation would be costly and could divert the efforts and attention of Brooks'
management and technical personnel, which could have a material adverse effect
on Brooks' business, financial condition and results of operations. Brooks
cannot guarantee that infringement claims by third parties or other claims for
indemnification by customers or end users of Brooks' products resulting from
infringement claims will not be asserted in the future or that such assertions,
if proven to be true, will not materially and adversely affect Brooks' business,
financial condition and results of operations. If any such claims are asserted
against Brooks' intellectual property rights, the Company may seek to enter into
a royalty or licensing arrangement. Brooks cannot guarantee, however, that a
license will be available on reasonable terms or at all. Brooks could decide in
the alternative to resort to litigation to challenge such claims or to design
around the patented technology. Such actions could be costly and could divert
the efforts and attention of Brooks' management and technical personnel, which
could materially and adversely affect Brooks' business, financial condition and
results of operations.
8
Brooks had received notice from General Signal Corporation twice in 1992
and once in 1994, alleging infringement of patents then owned by General Signal,
relating to cluster tool architecture, by certain of Brooks' products. The
notification advised Brooks that General Signal was attempting to enforce its
rights to those patents in litigation against Applied Materials. According to a
press release issued by Applied Materials in November 1997, Applied Materials
settled its litigation with General Signal by acquiring ownership of five
General Signal patents. Although not verified, these five patents would appear
to be the patents referred to by General Signal in its prior notice to Brooks.
Applied Materials has not contacted Brooks regarding these patents.
On October 10, 2001, the United States Court of Appeals for the Federal
Circuit ("CAFC") issued an order in Asyst Technologies, Inc. v. Empak, Inc., and
Emtrak, Inc., Jenoptik AG, Jenoptik Infab, Inc., Jenoptik GMBH and Infab U.S.
Operations, Inc,. and Meissner & Wurst (the "Asyst litigation"), that may
ultimately affect certain products sold by Brooks. The product that may be
affected is a transport system known as IridNet, which was acquired by Brooks as
part of the purchase of the assets of the Infab division of Jenoptik AG on
September 30, 1999. Asyst had filed suit against Jenoptik AG and other parties
(collectively the "defendants") in the Northern District of California charging
the defendants with infringing Asyst's U.S. Patent Nos. 4,974,166 and 5,097,421.
The District Court granted certain motions for summary judgment in favor of the
defendants and Asyst appealed. The order from the CAFC reversed the grant of
summary judgment and remanded the case to the District Court for further
proceedings regarding claim construction, infringement and invalidity of the
Asyst patents. Brooks has received notice that Asyst may amend its complaint to
name Brooks as an additional defendant. Based on Brooks' investigation of
Asyst's allegations, Brooks does not believe it is infringing any claims of
Asyst's patents. Brooks intends to continue to support Jenoptik to argue
vigorously, among other things, the position that the IridNet system does not
infringe the Asyst patents. If Asyst prevails in its case, Asyst may seek to
prohibit Brooks from developing, marketing and using the IridNet product without
a license. Brooks cannot guarantee that a license will be available to it on
reasonable terms, if at all. If a license from Asyst is not available Brooks
could be forced to incur substantial costs to reengineer the IridNet product,
which could diminish its value. In any case, Brooks may face litigation with
Asyst. Jenoptik has indemnified Brooks for losses Brooks may incur in this
action.
BACKLOG
Backlog for Brooks' products as of September 30, 2001 and 2000, totaled
$102.7 million and $119.6 million, respectively. Backlog consists of purchase
orders for which a customer has scheduled delivery within the next 12 months.
Backlog for the Company's tool automation systems segment, factory interface
solutions segment and factory automation solutions segment was $37.4 million,
$24.5 million and $40.8 million, respectively, at September 30, 2001. Orders
included in the backlog may be cancelled or rescheduled by customers without
significant penalty. During fiscal 2001, $11.1 million of backlog orders were
cancelled. Backlog as of any particular date should not be relied upon as
indicative of Brooks' revenues for any future period. A substantial percentage
of current business generates no backlog because the Company delivers its
products and services in the same period in which the order is received.
EMPLOYEES
At September 30, 2001, Brooks had approximately 1,900 employees. Brooks
believes its future success will depend in large part on its ability to attract
and retain highly skilled employees. Approximately 140 employees in the
Company's Jena, Germany facility are covered by a collective bargaining
agreement. Brooks considers its relationships with its employees to be good.
9
ITEM 2. PROPERTIES
Brooks corporate headquarters and primary manufacturing facility is located
in two buildings, comprising the Brooks campus, in Chelmsford, Massachusetts,
which the Company purchased in January 2001. This purchase included a third
building located at the same campus. The Company currently leases the third
building to an unrelated party. The term of that lease concludes in November
2002. Prior to its purchase, the Company had leased its facilities in
Chelmsford. Brooks maintains additional manufacturing facilities which are
described in the table below:
SQUARE FOOTAGE
LOCATION FUNCTIONS (APPROX.) LEASE EXPIRATION
-------- --------- -------------- ----------------
Chelmsford, Massachusetts Corporate headquarters, 131,000 Owned
manufacturing, training, software
development
Chelmsford, Massachusetts Manufacturing, R&D-hardware and 80,000 Owned
software
Sylmar, California Manufacturing, R&D hardware 67,000 September 2011
Salt Lake City, Utah Software development, training, 45,900 September 2006
systems
Richmond, Canada Manufacturing, training 41,000 October 2002
Burbank, California Manufacturing, sales and support, 41,000 January 2002
R&D-hardware
Tewksbury, Massachusetts Manufacturing, R&D-hardware 35,100 December 2005
Kiheung, Korea Manufacturing, R&D hardware 28,400 September 2003
Jena, Germany Manufacturing 22,000 December 2002
Phoenix, Arizona Manufacturing, R&D hardware and 19,500 Owned
software
San Jose, California Manufacturing, R&D-hardware and 15,000 Month-to-month
software
Colorado Springs, Colorado Manufacturing, training, 14,000 April 2004
R&D-hardware and software
Tempe, Arizona Manufacturing 10,000 January 2002
The Company's tool automation systems and factory interface solutions
segments utilize the manufacturing facilities in Massachusetts, Arizona,
California, Colorado, Germany, Korea and Canada. The Company's factory
automation solutions segment utilizes the manufacturing facilities in Arizona,
Utah, and Chelmsford.
Brooks maintains additional sales and support service offices in Florida,
Indiana, Massachusetts, Michigan, New Mexico, New York, Oregon, Pennsylvania,
Texas, France, Germany, Malaysia, Singapore, Japan, South Korea, Taiwan, China,
and the United Kingdom. Training is also provided at the majority of these
sites. The sales, service and training locations serve all of the Company's
segments.
The Company is in the process of renegotiating its lease in San Jose. The
operations in the Burbank facility are expected to relocate to Sylmar. The Tempe
facility operations are transferring to Valencia, California, the facility
occupied by General Precision Inc., which the Company acquired on October 5,
2001, upon the expiration of the Tempe lease.
ITEM 3. LEGAL PROCEEDINGS
Brooks is not a party to any material pending legal proceedings. See
"Patents and Proprietary Rights," in Part I, Item 1, "Business," for a
description of certain potential patent disputes.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the quarter ended September 30, 2001, no matters were submitted to a
vote of security holders through the solicitation of proxies or otherwise.
10
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is traded on the Nasdaq National Market under
the symbol "BRKS". The following table sets forth, for the periods indicated,
the high and low close prices per share of the Company's common stock, as
reported by the Nasdaq National Market:
HIGH LOW
------ ------
Fiscal year ended September 30, 2001
First quarter $31.25 $20.25
Second quarter $44.39 $27.56
Third quarter $62.61 $35.45
Fourth quarter $52.25 $26.59
Fiscal year ended September 30, 2000
First quarter $34.25 $16.69
Second quarter $83.25 $29.75
Third quarter $91.88 $37.00
Fourth quarter $69.38 $29.63
NUMBER OF HOLDERS
As of November 28, 2001, there were 364 holders on record of the Company's
Common Stock.
DIVIDEND POLICY
Other than dividends paid by one of our subsidiaries prior to its
acquisition by Brooks, Brooks has never paid or declared any cash dividends on
its capital stock and does not plan to pay any cash dividends in the foreseeable
future. Brooks' current policy is to retain all of its earnings to finance
future growth.
ISSUANCE OF UNREGISTERED COMMON STOCK
On February 16, 2001, the Company acquired SEMY Engineering, Inc. in
exchange for cash and 73,243 shares of Brooks common stock. The common stock
issued in this transaction was sold in reliance upon the exemption from
registration set forth in Section 4(2) of the Securities Act relating to sales
by an issuer not involving any public offering. The shares issued in this
transaction have been registered pursuant to an effective registration statement
on Form S-3.
On May 15, 2001, the Company acquired SimCon N.V. in exchange for cash and
13,741 shares of Brooks common stock. Under the acquisition agreement, Brooks is
also obligated to make a future payment of Brooks common stock worth $750,000 on
May 15, 2002. The common stock issued and to be issued in the future in this
transaction was sold in reliance upon the exemptions from registration set forth
in Section 4(2) of the Securities Act relating to sales by an issuer not
involving any public offering and Regulation S promulgated thereunder. The
shares issued in this transaction have been registered pursuant to an effective
registration statement on Form S-3.
On June 25, 2001, the Company completed the acquisition of CCS Technology,
Inc. in exchange for cash and 78,475 shares of Brooks common stock. The common
stock issued in this transaction was sold in reliance upon the exemptions from
registration set forth in Section 4(2) of the Securities Act relating to sales
by an issuer not involving any public offering. The shares issued in this
transaction have been registered pursuant to an effective registration statement
on Form S-3.
On June 26, 2001, the Company completed the acquisition of KLA-Tencor,
Inc.'s e-Diagnostics product business in exchange for a note payable and 331,153
shares of Brooks common stock. At the option of Brooks, the note payable may be
paid in cash or in an equivalent amount of Brooks common stock. There is also
the
11
potential for additional purchase consideration of up to $8.0 million in the
aggregate, contingent upon meeting certain performance objectives. At the option
of Brooks, any additional purchase price consideration may be paid in an
equivalent amount of Brooks common stock. The common stock issued and that may
be issued in the future in this transaction was sold in reliance upon the
exemption from registration set forth in Section 4(2) of the Securities Act
relating to sales by an issuer not involving any public offering. The shares
issued in this transaction have been registered pursuant to an effective
registration statement on Form S-3.
On July 12, 2001, the Company completed the acquisition of Progressive
Technologies, Inc. in exchange for 715,004 shares of Brooks common stock. The
common stock issued in this transaction was sold in reliance upon the exemptions
from registration set forth in Section 4(2) of the Securities Act relating to
sales by an issuer not involving any public offering. The shares issued in this
transaction have been registered pursuant to a registration statement on Form
S-3 which has not been declared effective as of the date of this report.
12
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial data set forth below should be read in
conjunction with our consolidated financial statements and notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," appearing elsewhere in this report.
YEAR ENDED SEPTEMBER 30, 2001(4) 2000(1)(2) 1999(1)(3) 1998(1) 1997(1)
------------------------ -------- ---------- ----------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues $381,716 $337,184 $122,957 $123,459 $133,827
Gross profit $152,384 $160,725 $ 55,152 $ 37,280 $ 56,739
Income (loss) from operations $(43,904) $ 20,084 $(11,822) $(29,190) $ (1,362)
Income (loss) before income taxes and
minority interests $(36,523) $ 28,444 $(10,448) $(27,917) $ (2,857)
Net income (loss) $(29,660) $ 15,109 $ (9,534) $(23,268) $ (3,324)
Accretion and dividends on preferred
stock $ 90 $ 120 $ 774 $ 1,540 $ 1,125
Net income (loss) attributable to
common stockholders $(29,750) $ 14,989 $(10,308) $(24,808) $ (4,449)
Basic earnings (loss) per share $ (1.65) $ 0.96 $ (0.89) $ (2.32) $ (0.54)
Diluted earnings (loss) per share $ (1.65) $ 0.88 $ (0.89) $ (2.32) $ (0.54)
Shares used in computing basic earnings
(loss) per share 18,015 15,661 11,542 10,687 8,230
Shares used in computing diluted
earnings (loss) per share 18,015 17,192 11,542 10,687 8,230
AS OF SEPTEMBER 30, 2001 2000(1) 1999(1) 1998(1) 1997(1)
------------------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Total assets $703,831 $519,786 $197,300 $160,143 $181,967
Working capital $288,036 $306,836 $106,803 $105,210 $120,067
Notes payable and revolving credit
facilities $ 17,122 $ 16,350 $ 6,183 $ 4,717 $ 4,070
Current portion of long-term debt and
capital lease obligations $ 392 $ 524 $ 544 $ 523 $ 1,379
Convertible subordinated notes $175,000 $ -- $ -- $ -- $ --
Long-term debt and capital lease
obligations (less current portion) and
senior subordinated note $ 31 $ 332 $ 6,732 $ 9,118 $ 6,264
Redeemable convertible preferred stock $ -- $ 2,601 $ 2,481 $ 5,923 $ 15,270
Members' capital $ -- $ -- $ 930 $ 1,134 $ 195
Stockholders' equity $424,169 $415,284 $137,913 $115,794 $127,722
FIRST SECOND THIRD FOURTH
YEAR ENDED SEPTEMBER 30, 2001 QUARTER(1) QUARTER(1) QUARTER(1) QUARTER
----------------------------- ---------- ---------- ---------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues $111,391 $111,987 $96,814 $ 61,524
Gross profit $ 50,619 $ 48,866 $45,068 $ 7,831
Net income (loss) $ 5,515 $ (2,592) $ 518 $(33,101)
Net income (loss) attributable to common
stockholders $ 5,485 $ (2,622) $ 488 $(33,101)
Diluted earnings (loss) per share $ 0.30 $ (0.15) $ 0.03 $ (1.76)
13
FIRST SECOND THIRD FOURTH
YEAR ENDED SEPTEMBER 30, 2000 QUARTER(1) QUARTER(1) QUARTER(1) QUARTER(1)
----------------------------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues $57,632 $83,543 $92,877 $103,132
Gross profit $28,588 $38,880 $43,315 $ 49,942
Net income $ 3,434 $ 2,427 $ 3,322 $ 5,926
Net income attributable to common stockholders $ 3,404 $ 2,397 $ 3,292 $ 5,896
Diluted earnings per share $ 0.24 $ 0.15 $ 0.17 $ 0.31
---------------
(1) Amounts have been restated to reflect the acquisition of Progressive
Technologies, Inc. in a pooling of interests transaction effective July 12,
2001.
(2) Amounts include results of operations of the Infab Division of Jenoptik AG
(acquired September 30, 1999); Auto-Soft Corporation and AutoSimulations,
Inc. (acquired January 6, 2000) and MiTeX Solutions (acquired June 23, 2000)
for the periods subsequent to their respective acquisitions.
(3) Amounts include results of operations of Domain Manufacturing Corporation
(acquired June 30, 1999) and Hanyon Technology, Inc. (acquired April 21,
1999) for the periods subsequent to their respective acquisitions.
(4) Amounts include results of operations of SEMY Engineering, Inc. (acquired
February 16, 2001), the KLA e-Diagnostics product business (acquired June
26, 2001), CCS Technology, Inc. (acquired June 25, 2001) and SimCon N.V.
(acquired May 15, 2001) for the periods subsequent to their respective
acquisitions.
14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Certain statements in this Annual Report on Form 10-K constitute
"forward-looking statements" which involve known risks, uncertainties, and other
factors which may cause the actual results, performance, or achievements of
Brooks to be materially different from any future results, performance, or
achievements expressed or implied by such forward-looking statements. Such
factors include the factors that may affect future results set forth in
Management's Discussion and Analysis of Financial Condition and Results of
Operations, which is included in this report. Precautionary statements made
herein should be read as being applicable to all related forward-looking
statements whenever they appear in this report.
OVERVIEW
Brooks Automation, Inc. ("Brooks" or the "Company") is a leading supplier
of integrated tool and factory automation solutions for the global semiconductor
and related industries, such as the data storage and flat panel display
manufacturing industries. Brooks has distinguished itself as a technology and
market leader, particularly in the demanding cluster-tool vacuum-processing
environment and in integrated factory automation software applications. The
Company's offerings have grown from individual robots used to transfer
semiconductor wafers in advanced production equipment to fully integrated
automation solutions that control the flow of resources in the factory from
process tools to factory scheduling and dispatching. In 1998, the Company began
an aggressive program of investment and acquisition. By the close of fiscal year
2000, Brooks had emerged as one of the leading suppliers of factory and tool
automation solutions for semiconductor and original equipment manufacturers.
During the fiscal year 2001, the Company continued its program of strategic
investment and acquisitions designed to broaden the depth and breadth of its
offerings and market position.
The Company's revenues are generally distributed equally between the United
States and foreign countries. The Company's foreign sales have occurred
primarily in Europe, Japan, Korea, Taiwan and Singapore.
BASIS OF PRESENTATION
On July 12, 2001, the Company acquired Progressive Technologies, Inc.
("PTI") in a transaction accounted for as a pooling of interests initiated prior
to June 30, 2001. Accordingly, the Company's consolidated financial statements
and notes thereto have been restated to include the financial position and
results of operations of PTI for all periods prior to the acquisition. PTI is
engaged in the development, production and distribution of air-flow regulation
systems for clean room and process equipment in the semiconductor industry.
Prior to its acquisition by the Company, PTI's fiscal year-end was December 31.
Accordingly, the Company's consolidated balance sheet as of September 30, 2000,
includes PTI's balance sheet as of December 31, 2000, and the Company's
consolidated statements of operations for the years ended September 30, 2000 and
1999 include PTI's results of operations for the years ended December 31, 2000
and 1999, respectively. As a result of conforming dissimilar year-ends, PTI's
results of operations for the three months ended December 31, 2000, are included
in both of the Company's fiscal years 2001 and 2000. An amount equal to PTI's
net income attributable to common stockholders for the three months ended
December 31, 2000 was eliminated from consolidated accumulated deficit for the
year ended September 30, 2001. PTI's revenues, net income and net income
attributable to common stockholders for that quarter were $3.8 million, $536,000
and $506,000, respectively.
On June 26, 2001, the Company completed the purchase of KLA-Tencor, Inc.'s
e-Diagnostics product business ("e-Diagnostics"). The e-Diagnostics programs
enable service and support teams to remotely access their tools in customer fabs
in real-time to diagnose and resolve problems quickly and cost-effectively. On
June 25, 2001, the Company acquired CCS Technology, Inc. ("CCST"), a supplier of
300mm automation test and certification software located in Williston, Vermont.
On May 15, 2001, the Company acquired SimCon N.V. ("SimCon"), a value-added
reseller for the Company's simulation, scheduling, production analysis and
dispatching software headquartered in Belgium. On February 16, 2001, the Company
acquired SEMY Engineering, Inc. ("SEMY"), a provider of advanced process and
equipment control systems for the
15
semiconductor industry located in Phoenix, Arizona. On December 13, 2000, the
Company acquired substantially all of the assets of a scheduling and simulation
software and service distributor in Japan. These transactions were recorded
using the purchase method of accounting in accordance with Accounting Principles
Board Opinion No. 16, "Business Combinations" ("APB 16"). Accordingly, the
Company's Consolidated Statements of Operations and of Cash Flows for the year
ended September 30, 2001, include the results of these acquired entities for the
periods subsequent to their respective acquisitions.
On May 5, 2000, the Company completed the acquisition of Irvine Optical
Company LLC ("Irvine Optical") in a transaction accounted for as a pooling of
interests. Accordingly, the results of operations and financial position of
Irvine Optical are included in the Company's consolidated results for all
periods presented. Prior to its acquisition by the Company, Irvine Optical's
fiscal year-end was December 31. As a result of conforming dissimilar year-ends,
Irvine Optical's results of operations for the three months ended December 31,
1999, are included in both of the Company's fiscal years 2000 and 1999. An
amount equal to Irvine Optical's net income for the three months ended December
31, 1999, was eliminated from consolidated accumulated deficit for the year
ended September 30, 2000. Irvine Optical's revenues and net income for that
quarter were $4.1 million and $0.1 million, respectively.
The Company completed two acquisitions during fiscal year 2000 which were
accounted for using the purchase method of accounting in accordance with APB 16:
MiTeX Solutions ("MiTeX") on June 23, 2000 and Auto-Soft Corporation ("ASC") and
AutoSimulations, Inc. ("ASI") on January 6, 2000. The Company's Consolidated
Statements of Operations and of Cash Flows include the results of these entities
for the periods subsequent to their respective acquisitions.
On August 31, 1999, the Company completed the acquisition of Smart Machines
Inc. ("Smart Machines"). The acquisition was accounted for as a pooling of
interests. Accordingly, the results of operations and financial position of
Smart Machines are included in the Company's consolidated results for all
periods presented.
The Company completed several acquisitions during the year ended September
30, 1999, which were accounted for using the purchase method of accounting in
accordance with APB 16: the Infab Division ("Infab") of Jenoptik AG on September
30, 1999; Domain Manufacturing Corporation ("Domain") on June 30, 1999 and
Hanyon Technology, Inc. ("Hanyon") on April 21, 1999. Accordingly, the Company's
Consolidated Statements of Operations and of Cash Flows include the results of
these acquired entities for all periods subsequent to their respective
acquisitions.
In June 1999, the Company formed a joint venture in Korea. This joint
venture is 70% owned by the Company and 30% owned by third parties unaffiliated
with the Company. The Company consolidates fully the financial position and
results of operations of the joint venture and accounts for the minority
interest in the consolidated financial statements.
RECENT DEVELOPMENTS
On December 13, 2001, the Company acquired the Automation Systems Group of
Zygo Corporation in exchange for approximately $11 million of cash, net of
closing adjustments aggregating approximately $2 million. The Automation Systems
Group, located in Florida, is a manufacturer of reticle automation systems,
including reticle sorters, reticle macro inspection systems and reticle handling
solutions for the semiconductor industry. The transaction will be accounted for
as a purchase of assets.
On October 23, 2001, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") to acquire PRI Automation, Inc. ("PRI").
Pursuant to the Merger Agreement and subject to the terms and conditions
contained therein, holders of each share of PRI common stock will receive 0.52
shares of the Company's common stock.
The Merger, which is expected to close in the first calendar quarter of
2002, is contingent upon the fulfillment of certain conditions as provided in
the Merger Agreement including, but not limited to, all required regulatory
approvals, the approval of the Merger by the stockholders of PRI and the
approval of the issuance of the Company's common stock in the Merger by the
stockholders of the Company.
16
PRI supplies advanced factory automation systems, software, and services
that optimize the productivity of semiconductor and precision electronics
manufacturers, as well as OEM process tool manufacturers.
On October 9, 2001, the Company acquired 90% of the capital stock of
Tec-Sem A.G., a Swiss company ("Tec-Sem") in exchange for $12.9 million in cash
and 131,750 shares of Brooks common stock, which had a value of approximately $4
million at the time of issuance, subject to post-closing adjustments. At the
same time, the Company obtained an option to acquire, and one of the selling
stockholders was given a put to sell, the remaining 10% of the stock of Tec-Sem
for $1.1 million in cash and 23,250 shares of Brooks common stock. The Company
also made stock grants to certain key non-owner employees of Tec-Sem. Tec-Sem is
a manufacturer of bare reticle stockers, tool buffers and batch transfer systems
for the semiconductor industry. The transaction will be accounted for as a
purchase of assets.
On October 5, 2001, the Company acquired substantially all of the assets of
General Precision, Inc. ("GPI"), in exchange for 850,000 shares of Brooks common
stock, with a market value of approximately $26 million at the time of issuance,
subject to post-closing adjustments. GPI, located in Valencia, California, is a
supplier of high-end mini-environment solutions for the semiconductor industry.
RESULTS OF OPERATIONS
The Company's business is significantly dependent on capital expenditures
by semiconductor manufacturers and OEMs, which are, in turn, dependent on the
current and anticipated market demand for semiconductors. The Company's revenues
grew substantially in fiscal 2000 compared to fiscal 1999 due in large part to
high levels of capital expenditures of semiconductor manufacturers. Demand for
semiconductors is cyclical and has historically experienced periodic downturns.
The semiconductor industry is currently experiencing such a downturn, which
began to significantly affect the Company in the second half of fiscal 2001 when
the demand for the Company's products and services decreased significantly as
semiconductor manufacturers sharply reduced capital expenditures. This downturn
impacted all of the Company's business segments in the second half of fiscal
2001, affecting revenues and gross margins due to pricing pressure and
underabsorbed costs. As a result of this downturn, the Company anticipates lower
shipments of its products in the next year, which may result in lower revenues
compared to the year ended September 30, 2001. During fiscal 2001, the Company
has taken selective cost reduction actions in many areas of its business in
response to this ongoing downturn. These cost management initiatives include
reductions to headcount, salary and wage reductions and reduced spending.
Although the Company will continue to take a proactive approach to cost
management in response to this downturn, it will continue to invest in those
areas which it believes are important to the long-term growth of the Company,
such as its infrastructure, customer support and new products.
YEAR ENDED SEPTEMBER 30, 2001, COMPARED TO YEAR ENDED SEPTEMBER 30, 2000
The Company reported a net loss of $29.7 million for the year ended
September 30, 2001, compared to net income of $15.1 million in the previous
year. The results for the year ended September 30, 2001, include $30.2 million
of amortization of acquired intangible assets, $9.3 million of restructuring and
acquisition-related charges and $17.2 million of other charges. These other
charges, recorded in the fourth quarter, include $13.7 million recorded to cost
of product sales, comprised of $13.1 million for reserves for excess and
obsolete: inventories, demonstration equipment removed from service and physical
inventory adjustments and $0.6 million for additional warranty reserves; $1.0
million of accelerated amortization of research and development expense; and
$2.5 million of sales, general and administrative expense for additional
accounts receivable allowances.
The Company fully reserves for inventories deemed obsolete. Obsolete
inventory is disposed of on a periodic basis through the use of third party
asset reclamation firms. The Company performs periodic reviews of all inventory
items to identify excess inventories on hand. The Company performs an analysis
comparing on-hand balances to anticipated usage using recent historical activity
as well as anticipated or forecasted demand, based upon sales and marketing
inputs through its planning systems, in an effort to estimate excess quantities
on hand. Because of the significant decline in revenues in the last half of
fiscal 2001 and the
17
expected continuation of depressed demand in the first half of fiscal 2002, the
Company projected a shortfall in usage and recorded the resulting charge in the
fourth quarter of fiscal 2001. The reserve for excess and obsolete inventories
recorded in the fourth quarter was $9.4 million, which included approximately
$1.5 million for non-cancelable purchase order obligations for items deemed
excess or obsolete. This inventory affected was across several hardware product
lines in the tool automation and factory interface segments. During the quarter
ended September 30, 2001, the Company reviewed all open purchase orders with the
affected vendors across the various segments of the Company and cancelled orders
where possible. The Company had provided $2.3 million for excess inventories in
the first three quarters of fiscal 2001 as a result of the periodic reviews
performed by the Company.
The Company performs an annual physical inventory at all locations holding
inventory. As a result of the physical inventory count and reconciliation, the
Company recorded an adjustment of $2.5 million to reduce the carrying value of
its inventories. Included in the process of the physical count is the review of
demonstration equipment inventory. As a result of this review, the Company
recorded an adjustment of $1.2 million for excess and idle demonstration
equipment inventory.
The Company accrues for warranty obligations related to its hardware
products. The Company's warranty period ranges from 12 to 24 months depending
upon the product line or specific customer obligations. The required reserve is
derived from customer return and repair data along with past shipment data for
the related product lines. Due to increased warranty return repair costs during
the second half of fiscal 2001 of certain products under warranty, the Company
determined that additional warranty reserves of $0.6 million were required,
which it recorded in the fourth quarter of the fiscal 2001.
The Company capitalized certain costs related to in-house software
development during the first half of the reported year consistent with Statement
of Position 98-1, "Accounting for the Costs of Computer Software Developed for
Internal Use." Consistent with SOP 98-1, the Company performed a review at
fiscal year-end of the projects for which the Company capitalized costs. Based
upon this review, the Company determined that the related projects, particularly
in considering the industry slowdown in the second half of the year and the
expected continuing slowdown no longer provided the Company with incremental and
substantial benefit and were cancelled. As a result, $1.0 million of capitalized
costs were expensed.
The Company has experienced a continued deterioration across both its end
user and OEM customer base in its receivable aging and a resultant increase in
its day sales outstanding, driven by the overall slowdown in the industry. The
Company has increased its reserves against receivables due to collection issues
caused by the slowdown.
The results for the previous year include $18.5 million of amortization of
acquired intangible assets and $0.6 million of acquisition-related charges.
After accretion and dividends on preferred stock of $0.1 million in each year,
the Company reported a net loss attributable to common stockholders of $29.8
million in the year ended September 30, 2001 and net income attributable to
common stockholders of $15.0 million in the year ended September 30, 2000.
REVENUES
The Company has adopted the recommendations of Staff Accounting Bulletin
101, "Revenue Recognition in Financial Statements" ("SAB 101"), effective
October 1, 2000. The adoption of SAB 101 did not have any impact on the
Company's results of operations or financial position.
The Company reported revenues of $381.7 million in the year ended September
30, 2001, compared to $337.2 million in the previous year, a 13.2% increase. The
increase in revenues is principally attributable to incremental revenue from
acquisitions and the strength in the first half of fiscal 2001 in both the
original equipment manufacturer ("OEM") and end user markets, partially offset
by lower revenues in the second half of the fiscal year. The Company's net
revenues, excluding the impact of acquisitions, increased 10.8% in the year
ended September 30, 2001, compared to the prior year.
The Company's tool automation systems segment reported revenues of $171.3
million in the year ended September 30, 2001, an increase of 2.1% from the prior
year. This increase is primarily attributable to growth
18
in the vacuum business area earlier in fiscal 2001, partially offset by lower
revenues in the last two quarters of fiscal 2001. The Company's factory
interface solutions segment reported an increase in revenues of 11.1%, to $97.8
million, in the year ended September 30, 2001, compared to the prior year,
reflecting in part the strong growth in the Company's Standard Mechanical
Interface Facilities ("SMIF") and Front Opening Uniform Pod ("FOUP") product
lines, partially offset by lower revenues at PTI. The Company's fiscal 2001
acquisitions did not materially affect either its tool automation systems
segment or its factory interface solutions segment. The Company's factory
automation solutions segment reported revenues of $112.6 million in the year
ended September 30, 2001, an increase of $31.1 million, or 38.3%, from the prior
year. This growth is principally attributable to internal growth, the
acquisition of ASC and ASI on January 6, 2000 and the acquisition of SEMY on
February 16, 2001. Net revenues for the factory automation solutions segment,
excluding the impact of fiscal 2001 acquisitions, increased by $23.5 million, or
28.9%, in fiscal 2001, compared to fiscal 2000.
Product revenues increased $7.4 million, to $291.7 million, in the year
ended September 30, 2001, from $284.4 million in the previous fiscal year. This
growth is directly attributable to the Company's recent acquisitions. Excluding
acquisitions, combined product revenues remained flat from fiscal 2000 to fiscal
2001, due primarily to the slowdown in the semiconductor industry in the second
half of fiscal 2001. Service revenues increased $37.2 million, or 70.4%, to
$90.0 million. This increase is primarily attributable to internal growth, the
acquisition of ASC and ASI on January 6, 2000, which accounted for approximately
$14 million of the increase in service revenues over fiscal year 2000, and
increased spare parts sales to both end user and OEM customers.
Revenues outside the United States were $191.6 million, or 50.2% of
revenues, and $161.5 million, or 47.9% of revenues, in the years ended September
30, 2001 and 2000, respectively. The absolute increase in revenues outside the
United States is primarily the result of the Company's expanded global presence
from its recent acquisitions, while the increase as a percentage of the
Company's revenues reflects lower sales in the United States, in particular OEM
sales in the second half of fiscal 2001, relative to the rest of the world. The
Company expects that foreign revenues will continue to account for a significant
portion of total revenues. However, the Company cannot guarantee that foreign
revenues, particularly from Asia, will remain a strong component of the
Company's total revenues.
GROSS MARGIN
Gross margin decreased to 39.9% for the year ended September 30, 2001,
compared to 47.7% for the previous year. Excluding other charges of $13.7
million referred to above, the Company's gross margin was 43.5% for the year
ended September 30, 2001. This change is primarily a result of increased
services revenues related to end user sales combined with lower software product
revenues and increased unabsorbed manufacturing costs. The Company's tool
automation systems segment gross margin decreased to 31.4% in the year ended
September 30, 2001, from 42.1% in the prior year. Excluding other charges of
$4.9 million, gross margin for the tool automation systems segment in the year
ended September 30, 2001 was 34.3%. The decrease is primarily the result of
product and customer mix, coupled with the effects of the current downturn in
the semiconductor industry and the resultant impacts of excess manufacturing
capacity. Gross margin for the Company's factory interface solutions segment was
26.4% for the year ended September 30, 2001, a decrease from 39.0% in the prior
year. Excluding other charges of $8.1 million, gross margin for this segment was
34.6%. The decrease is primarily due to inefficiencies for new products,
combined with excess manufacturing capacity resulting from the current downturn
in the semiconductor industry. The Company's factory automation solutions gross
margin for the year ended September 30, 2001 decreased to 64.6%, compared to
68.6% in the prior year. Excluding other charges of $0.7 million, gross margin
for the year ended September 30, 2001 was 65.3%. The decrease is primarily
attributable to product and services mix; specifically, a decrease in higher
margin software product license revenues partially offset by increased lower
margin service revenues.
Gross margin on product revenues was 42.9% for the year ended September 30,
2001, compared to 50.4% for the prior year. Excluding other charges aggregating
$13.7 million, gross margin on product revenues was 47.6% for the year ended
September 30, 2001. The decrease is primarily attributable to lower software
license
19
product revenues and increased field support personnel associated with end user
projects, coupled with the effects of the current downturn in the semiconductor
industry, which impact pricing and cause lower absorption of manufacturing fixed
costs.
Gross margin on service revenues decreased to 30.2% for the year ended
September 30, 2001, from 33.0% in the previous year. The decrease is primarily a
result of business mix, combined with the pricing pressure of the end user
services business and the effects of the current downturn in the semiconductor
industry on the Company's fixed cost absorption.
In future years, gross margin may be adversely affected by changes in
product mix and/or price competition.
RESEARCH AND DEVELOPMENT
Research and development expenses for the year ended September 30, 2001,
were $60.9 million, an increase of $16.8 million, compared to $44.1 million in
the previous year. Research and development expenses also increased as a
percentage of revenues, to 16.0%, from 13.1% in the prior year. Excluding other
charges of $1.0 million, research and development expenses were 15.7% of
revenues in the current year. The increase in absolute spending is the result of
research and development expense aggregating $3.7 million related to the
Company's fiscal 2001 acquisitions, as well as incremental spending associated
with the launch of new products. The increase in these expenditures as a
percentage of revenues is attributable in part to the downturn currently
affecting the semiconductor industry, which began to impact the Company during
the quarterly period ended March 31, 2001. To a lesser extent, this increase is
attributable to higher spending levels associated with the Company's recent
acquisitions. The Company plans to continue to invest in research and
development to enhance existing and develop new tool and factory hardware and
software automation solutions for the semiconductor, data storage and flat panel
display manufacturing industries.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses were $95.9 million for the
year ended September 30, 2001, an increase of $18.5 million, compared to $77.4
million in the previous year. Selling, general and administrative expenses
increased as a percentage of revenues, to 25.1% in the year ended September 30,
2001, from 23.0% in the previous year. Excluding other charges of $2.5 million,
selling, general and administrative expenses were 24.5% of revenues in the year
ended September 30, 2001. The increase in absolute spending is the result of
expanded sales and marketing activities as well as general and administration
support costs of $3.4 million associated with the Company's recently completed
acquisitions, and infrastructure improvements, while the increase as a
percentage of revenues is attributable primarily to the downturn currently
affecting the semiconductor industry. The Company expects that future
expenditure levels will continue at or above current levels to support its
worldwide sales and administrative organizations.
AMORTIZATION OF ACQUIRED INTANGIBLE ASSETS
Amortization expense for acquired intangible assets totaled $30.2 million
for the year ended September 30, 2001, and relates to acquired intangible assets
from the acquisitions of the e-Diagnostics product business, CCST, SimCon and
SEMY in the current year, the acquisitions of MiTeX, ASC and ASI in fiscal 2000,
the Infab, Domain and Hanyon acquisitions in the second half of fiscal 1999 and
Irvine Optical's acquisition of a corporation in March 1997. For the year ended
September 30, 2000, amortization expense for acquired intangible assets was
$18.5 million, and relates to the fiscal 2000 and fiscal 1999 acquisitions and
the Irvine Optical acquisition discussed above.
ACQUISITION-RELATED AND RESTRUCTURING COSTS
The Company recorded $9.3 million of acquisition-related and restructuring
charges during the year ended September 30, 2001, comprised of $3.9 million of
acquisition-related costs and $5.4 million of restructuring charges. The
acquisition-related costs relate to transaction costs, principally legal,
accounting and investment banking fees, incurred for acquisitions, comprised of
$2.0 million for the July 12, 2001
20
acquisition of PTI and $1.9 million for aborted acquisitions. On September 5,
2001, the Company's Board of Directors approved a formal plan of restructure in
response to the current downturn in the semiconductor industry. To that effect,
the Company recorded restructuring charges of $5.4 million in the fourth quarter
of the fiscal year. Of this amount, $2.0 million is related to workforce
reductions of approximately 140 employees which is expected to be paid in 2002
and $3.4 million for the consolidation and strategic focus realignment of
several facilities, of which $0.1 million was paid in 2001, $1.7 million is
expected to be paid in 2002 and $1.6 million in the subsequent years. These
measures were largely intended to align the Company's capacity and
infrastructure to anticipated customer demand. Workforce charges, consisting
principally of severance costs, were recorded based on specific identification
of employees to be terminated, along with their job classifications or functions
and their locations. The charges for the Company's excess facilities were
recorded to recognize the lower of the amount of the remaining lease
obligations, net of any sublease rentals, or the expected lease settlement
costs. These costs have been estimated from the time when the space is expected
to be vacated and there are no plans to utilize the facility in the future.
Costs incurred prior to vacating the facilities will be charged to operations.
Acquisition-related charges of $0.6 million in the year ended September 30,
2000, relate primarily to transaction costs in connection with the acquisition
of Irvine Optical.
The activity related to the Company's acquisition-related and restructuring
accruals is below (in thousands):
FISCAL 2001 ACTIVITY
-------------------------------------------------------------------
NEW INITIATIVES
BALANCE -------------------- BALANCE
SEPTEMBER 30, PURCHASE SEPTEMBER 30,
2000 EXPENSE ACCOUNTING UTILIZATION 2001
-------------- ------- ---------- ----------- -------------
Facilities $507 $3,369 $-- $ (567) $3,309
Workforce-related 20 2,000 -- (68) 1,952
Other 11 3,945 -- (3,956) --
---- ------ -- ------- ------
$538 $9,314 $-- $(4,591) $5,261
==== ====== == ======= ======
INTEREST INCOME AND EXPENSE
Interest income increased by $2.8 million, to $12.5 million, in the year
ended September 30, 2001, compared to an increase of $6.6 million to $9.7
million the previous year. This increase is due primarily to higher cash and
investment asset balances which resulted from investing the proceeds from the
Company's private placement of $175.0 million aggregate Convertible Subordinated
Notes in May 2001 and the public offering of shares of its common stock in March
2000. Interest expense of $4.1 million for the year ended September 30, 2001,
relates primarily to the 4.75% Convertible Subordinated Notes, imputed interest
on notes payable related to the e-Diagnostics and SimCon acquisitions and the
Company's note payable to Daifuku America in connection with the acquisition of
ASC and ASI, which was discharged on January 5, 2001. Interest expense in the
prior year primarily relates to Irvine Optical's debt, which was paid by Brooks
subsequent to the Company's acquisition of Irvine Optical, and the note payable
to Daifuku America.
INCOME TAX PROVISION (BENEFIT)
The Company recorded a net income tax benefit of $6.4 million in the year
ended September 30, 2001 and net income tax expense of $13.6 million in the year
ended September 30, 2000. The tax benefit recorded in fiscal 2001 is primarily
due to anticipated future tax benefit of domestic net operating losses and
research and development credits, partially offset by provisions for taxes on
overseas earnings. The fiscal 2000 tax provision is attributable to federal,
state, foreign and withholding taxes. Federal and state taxes have been reduced
for net operating losses, research and development tax credits and a foreign
sales corporation benefit.
The Company has recorded a deferred tax asset of $38.9 million. Realization
is dependent on generating sufficient taxable income prior to expiration of loss
carryforwards, which will expire at various dates through 2021. Although
realization is not assured, the Company believes it is more likely than not that
all of the deferred tax assets will be realized. The Company has considered both
positive and negative available evidence
21
in its determination that the deferred tax asset will be realized. While current
economic conditions, including a current year book loss, provide evidence that
the deferred tax assets may not be fully realized, the cyclical nature of the
industry sector and recent historical experience of income provide objective
positive evidence that the deferred tax assets are recoverable. The Company
believes that its efforts to right-size the business in the fourth quarter of
fiscal 2001 will be an important factor in achieving future profitability. The
amount of the deferred tax asset considered realizable, however, could be
reduced in the near term if estimates of future taxable income during the
carryforward period are reduced. The Company estimates that the significant net
reversing temporary difference will be available for use through 2022.
Additionally, other significant reversing temporary differences will be
available for use through 2036. Therefore, the Company estimates that its annual
future taxable income must average $2.3 million per year during the carryforward
period to fully realize the benefit of the net deferred tax assets.
YEAR ENDED SEPTEMBER 30, 2000, COMPARED TO YEAR ENDED SEPTEMBER 30, 1999
The Company reported net income of $15.1 million for the year ended
September 30, 2000, compared to a net loss of $9.5 million in the previous year.
Net income attributable to common shareholders for the year ended September 30,
2000 include $18.5 million of amortization of acquired intangible assets, $0.6
million of acquisition-related charges and $0.1 million of accretion and
dividends on preferred stock. The Company's net loss attributable to common
stockholders in the previous year includes $0.6 million of amortization of
acquired intangible assets, $5.3 million of acquisition-related and
restructuring charges and other costs and $0.8 million of accretion and
dividends on preferred stock.
REVENUES
The Company reported revenues of $337.2 million in the year ended September
30, 2000, compared to $123.0 million in the previous year, a 174.2% increase.
The overall increase is principally attributable to the strength in both the OEM
and end user markets resulting from a continued recovery within the
semiconductor capital equipment industry and incremental revenue from
acquisitions. Revenues from recent acquisitions accounted for approximately 55%
of the aggregate increase in revenues. The Company experienced growth in all of
the geographic regions in which it operates. Revenues for each of the Company's
segments increased from the prior year. Revenues for the tool automation systems
segment more than doubled, to $167.8 million, from $79.1 million in the prior
year. This was primarily driven by the industry's upturn and customer design
wins associated with new atmospheric products, as well as the transition to the
next generation vacuum wafer handling products. The Company's factory interface
solutions segment reported revenues of $88.1 million in the year ended September
30, 2000, more than four times the $19.6 million reported in the prior year.
Revenues from Infab comprised approximately 70% of the growth in the segment, as
fiscal 2000 was the first year Infab was included in Brooks' operating results.
Revenues for the factory automation solutions segment were $81.4 million, more
than triple the $24.2 million reported in the prior year. The Company's
acquisitions of fiscal 2000 accounted for approximately 58% of the growth, with
the remainder derived from continued end user customer penetration of its core
products.
Product revenues increased $182.9 million, or 180.2%, to $284.4 million in
the year ended September 30, 2000, from $101.5 million in the previous fiscal
year. Approximately 55% of this growth was the result of products offered by the
Company's fiscal 2000 acquisitions. The Company continued to benefit from its
overall strength in the OEM and end user markets.
Service revenues increased $31.3 million, or 146.0%, to $52.8 million. This
increase is primarily attributable the Company's acquisitions of ASC and ASI in
January 2000, which accounted for approximately $19 million of service revenues
in the period subsequent to their acquisition, along with continued internal
growth.
Revenues outside the United States were $161.5 million, or 47.9% of
revenues, and $53.1 million, or 43.2% of revenues, in the years ended September
30, 2000 and 1999, respectively. The increase is primarily the result of the
Company's expanded global presence from its recent acquisitions.
22
GROSS MARGIN
Gross margin increased to 47.7% for the year ended September 30, 2000,
compared to 44.9% for the previous year. The Company's tool automation systems
segment gross margin increased to 42.1% in the year ended September 30, 2000,
from 33.8% in the prior year, and is primarily the result of operational
efficiencies along with improved manufacturing capacity resulting from the
recovery from the semiconductor industry downturn. This increase was partially
offset by decreases in gross margins for the Company's other segments. Gross
margin for the Company's factory interface solutions segment decreased to 39.0%,
from 49.4% in the prior year, while the factory automation solutions gross
margin decreased to 68.6%, from 77.4% in the prior year. The decline in the
factory interface solutions segment is primarily the result of change in product
mix, while the factory automation solutions segment is primarily attributable to
the acquired service business of ASC, which has a historically lower margin
structure than that of the segment.
Gross margin on product revenues was 50.4% for the year ended September 30,
2000. Gross margin on product revenues for the year ended September 30, 1999,
which included charges aggregating $1.6 million, comprised of $1.0 million to
provide additional reserves for slow-moving and obsolete inventories and $0.6
million of additional depreciation expense, was 46.6%. Excluding these charges,
gross margin for the year ended September 30, 1999, was 48.2%. The increase is
primarily attributable to improvements in manufacturing capacity utilization and
the acquisition of higher margin software product businesses, partially offset
by the Infab operations' historically lower margin structure.
Gross margin on service revenues decreased to 33.0% for the year ended
September 30, 2000, from 36.8% in the previous year. The decrease is primarily a
result of business mix, driven by the Company's acquisition of ASC, which has a
historically lower margin structure. Included in the cost of service revenues
are global customer support costs, consisting primarily of personnel costs and
travel expenses, as well as the cost of associated spare parts revenues.
RESEARCH AND DEVELOPMENT
Research and development expenses for the year ended September 30, 2000,
were $44.1 million, an increase of $19.6 million, compared to $24.5 million in
the previous year. However, research and development expenses decreased as a
percentage of revenues, to 13.1%, from 19.9% in fiscal 1999. The increase in
absolute spending is primarily attributable to the Company's acquisitions.
Acquired companies included in fiscal 2000 operating results accounted for
approximately 70% of the aggregate increase of $19.6 million. In addition, the
launch of new atmospheric products and the transition to the next generation
vacuum wafer handling products caused an incremental increase in research and
development expenses, partially offset by the elimination of redundant research
and development programs.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses were $77.4 million for the
year ended September 30, 2000, an increase of $38.6 million, compared to $38.8
million in the previous year. However, selling, general and administrative
expenses decreased as a percentage of revenues, to 23.0% in the year ended
September 30, 2000, from 31.5% in the previous year. The increase in absolute
spending is the result of expanded sales and marketing activities as well as
general and administration support costs associated with the Company's
acquisitions and infrastructure improvements necessary to integrate the acquired
companies. The improvement of these costs as a percentage of revenues reflects
the Company's efforts at expanding its product offerings and customer base. The
businesses acquired in fiscal 2000 accounted for approximately 38% of the
increase in the absolute spending change from the prior year.
AMORTIZATION OF ACQUIRED INTANGIBLE ASSETS
Amortization expense for acquired intangible assets totaled $18.5 million
for the year ended September 30, 2000, and relates to acquired intangible assets
from the June 23, 2000 MiTeX acquisition, the January 6, 2000 ASC and ASI
acquisition, the Infab, Domain and Hanyon acquisitions, all of which occurred
during the second half of fiscal 1999 and Irvine Optical's acquisition of a
corporation in March 1997.
23
Amortization expense for acquired intangible assets was $0.6 million in the year
ended September 30, 1999, and relates to the Domain and Hanyon acquisitions and
Irvine Optical's acquisition.
ACQUISITION-RELATED AND RESTRUCTURING COSTS
Acquisition-related charges of $0.6 million in the year ended September 30,
2000, relate primarily to transaction costs in connection with the acquisition
of Irvine Optical. In fiscal 1999, the Company incurred acquisition-related and
restructuring costs of $3.1 million, comprised of $1.2 million for transaction
costs related to the Smart Machines acquisition, $0.3 million for severance
costs and $1.6 million for the write-off of certain fixed assets.
INTEREST INCOME AND EXPENSE
Interest income increased by $6.6 million, to $9.7 million, in the year
ended September 30, 2000, compared to the previous year. This increase is due
primarily to higher cash and investment asset balances that resulted from the
Company's public offering of shares of common stock in March 2000. Interest
expense of $1.3 million and $1.6 million for the years ended September 30, 2000
and 1999, respectively, relates primarily to Irvine Optical's debt, which was
discharged on May 6, 2000. Fiscal 2000 interest expense also includes interest
on the Company's note payable to Daifuku America issued as part of the
consideration for the Company's acquisition of ASC and ASI.
INCOME TAX PROVISION (BENEFIT)
The Company recorded net income tax expense of $13.6 million for the year
ended September 30, 2000, and net income tax benefits of $0.9 million for the
year ended September 30, 1999. The fiscal 2000 tax provision is attributable to
federal, state, foreign and withholding taxes. Federal and state taxes have been
reduced for net operating losses, research and development tax credits and a
foreign sales corporation benefit. The tax benefit recorded in fiscal 1999 is
primarily due to anticipated future tax benefit of domestic net operating losses
and research and development credits, partially offset by a $1.6 million
increase in the deferred tax asset valuation allowance.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2001, the Company had cash, cash equivalents and
marketable securities aggregating $329.7 million. This amount was comprised of
$160.2 million of cash and cash equivalents, $43.6 million of investments in
short-term marketable securities and $125.9 million of investments in long-term
marketable securities.
Cash and cash equivalents were $160.2 million at September 30, 2001, an
increase of $26.6 million from September 30, 2000. This increase in cash and
cash equivalents is primarily the result of proceeds of $169.5 million, net of
costs, from the Company's private placement of 4.75% Convertible Subordinated
Notes completed on May 23, 2001, partially offset by payment of net cash
consideration of $34.5 million for SEMY on February 16, 2001, payment of the
Company's $16.0 million note payable to Daifuku America on January 5, 2001 in
connection with its January 2000 acquisition of ASC and ASI, the purchase of the
Company's headquarters complex on January 29, 2001 for $28.9 million in cash and
net purchases of marketable securities of $66.4 million.
Cash provided by operations was $20.7 million for the year ended September
30, 2001, and is primarily attributable to a decrease in accounts receivable of
$3.7 million and an increase in gross inventories of $4.9 million, offset by
additional inventory valuation adjustments aggregating $15.4 million. Gross
inventory for the year increased by $4.9 million over the prior year as a result
of acquisitions and an accentuated slowdown in demand and sales associated with
certain products, resulting in increased inventory levels on hand at fiscal
year-end. This increase was offset by higher inventory reserves of $2.3 million
recorded through the year and $13.1 million recorded in the fourth quarter of
fiscal 2001. The Company's net loss of $29.7 million included depreciation and
amortization of $45.0 million, and an increase to the Company's net deferred tax
24
asset of $14.1 million. The decrease in accounts receivable is primarily the
result of lower sales in the second half of the fiscal year due to the economic
downturn currently affecting the semiconductor industry.
The increase in the Company's days sales outstanding ("DSO") in fiscal 2001
was primarily a result of the significant decrease in revenues in the third and
fourth quarters coupled with delayed customer payments resulting from the
semiconductor industry downturn. The downturn in the semiconductor industry has
also impacted the Company's days sales in inventory ("DSI"). The Company's
products contain certain components which require significant production time by
the suppliers. Once these orders are placed with the Company's suppliers, they
cannot be postponed or cancelled. As product sales have declined due to the
industry downturn, receipt of inventory related to these orders has adversely
affected DSI. The Company is continuing its efforts to collect accounts
receivable and to maintain appropriate inventory levels. The Company continues
to review its internal inventory management practices. The Company will continue
to provide for anticipated excess and obsolete inventories and uncollectable
debts in accordance with its internal review and policies.
Cash used in investing activities was $153.7 million for the year ended
September 30, 2001, and was principally comprised of $181.4 million invested in
marketable securities, $34.5 million for the purchase of SEMY on February 16,
2001, net of cash acquired, $4.7 million of cash payments for other
acquisitions, net of cash acquired and $53.7 million used for capital additions,
including $28.9 million for the purchase on January 29, 2001 of the Company's
headquarters complex located in Chelmsford, Massachusetts. These expenditures
were partially offset by the sale of $115.0 million of the Company's investments
in marketable securities and $6.0 million in cash payments to the Company for
settlements related to previous acquisitions the Company had made.
Cash provided by financing activities was $161.8 million for the year ended
September 30, 2001, and is primarily comprised of $169.5 million, net of costs,
received from the private placement of 4.75% Convertible Subordinated Notes on
May 23, 2001 and $9.1 million from the issuance of stock under the Company's
employee stock purchase plan and the exercise of options to purchase the
Company's common stock. These amounts were partially offset by $16.0 million
paid on January 5, 2001 to retire the Company's note payable to Daifuku America
in connection with the acquisition of ASC and ASI, $0.4 million for the
repayment of PTI's revolving credit facility and $0.5 million for the payment of
long-term debt.
In connection with the acquisition of the e-Diagnostics product business,
the Company issued a $17.0 million one-year note payable to the selling
stockholders. The note is payable in cash or common stock, or any combination
thereof, at the Company's discretion. The Company currently intends to settle
this note in common stock; however, if the Company elects to settle all or a
portion of the note in cash, up to $17.0 million would be required for payment
in June of 2002. Additional cash payments aggregating a maximum of $8.0 million
over the next three years could be required for payment of consideration
contingent upon meeting certain performance objectives, if the Company elected
to settle any or all potential contingent payments in cash.
In connection with its acquisition of SimCon, the Company issued a note
payable to the selling stockholders for $750,000, payable in one year. This note
will be settled with shares of the Company's common stock. No cash payment will
be required.
On May 23, 2001, the Company completed the private placement of $175.0
million aggregate principal amount of 4.75% Convertible Subordinated Notes due
in 2008. The amount sold includes $25.0 million principal amount of notes
purchased by the initial purchaser upon exercise in full of their 30-day option
to purchase additional notes. The Company received net proceeds of $169.5
million from the sale.
Interest on the notes will be paid on June 1 and December 1 of each year,
with the first interest payment due on December 1, 2001. The notes will mature
on June 1, 2008. The Company may redeem the notes at stated premiums on or after
June 6, 2004, or earlier if the price of the Company's common stock reaches
certain prices. Holders may require the Company to repurchase the notes upon a
change in control of the Company in certain circumstances. The notes are
convertible at any time prior to maturity, at the option of the holders, into
shares of the Company's common stock, at a conversion price of $70.23 per share,
subject to
25
certain adjustments. The notes are subordinated to the Company's senior
indebtedness and structurally subordinated to all indebtedness and other
liabilities of the Company's subsidiaries.
While the Company has no significant capital commitments, as it expands its
product offerings, the Company anticipates that it will continue to make capital
expenditures to support its business and improve its computer systems
infrastructure. The Company may also use its resources to acquire companies,
technologies or products that complement the business of the Company.
The Company terminated its $30.0 million unsecured revolving credit
facility and replaced it with a $10.0 million uncommitted demand promissory note
facility with ABN AMRO Bank N.V. ("ABN AMRO") on May 2, 2000. The Company
transferred all outstanding letters of credit, totaling approximately $1.1
million, to the new facility. ABN AMRO is not obligated to extend loans or issue
letters of credit under this new facility. At September 30, 2001, approximately
$1.2 million of the facility was in use, all of it for letters of credit.
The Company believes that its existing resources will be adequate to fund
the Company's currently planned working capital and capital expenditure
requirements for at least the next twelve months. The cyclical nature of the
semiconductor industry makes it very difficult for the Company to predict future
liquidity requirements with certainty. In addition, the Company may experience
unforeseen capital needs in connection with both its recently completed
acquisitions and its planned acquisition of PRI. The sufficiency of the
Company's resources to fund its needs for capital is subject to known and
unknown risks, uncertainties and other factors which may have a material adverse
effect on the Company's business, including, without limitation, the factors
discussed under "Factors That May Affect Future Results."
RECENT ACCOUNTING PRONOUNCEMENTS
In October 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 144 ("FAS 144"), "Accounting for the
Impairment or Disposal of Long-Lived Assets." FAS 144 supersedes FASB Statement
No. 121 ("FAS 121") "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of." FAS 144 applies to all long-lived assets
and consequently amends Accounting Principles Board Opinion No. 30 ("APB 30"),
"Reporting Results of Operations -- Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions." FAS 144 is effective for financial statements issued
for fiscal years beginning after December 15, 2001. Management is currently
evaluating the effect, if any, FAS 144 will have on its financial position and
results of operations.
In July 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141 ("FAS 141"), "Business Combinations" and
No. 142 ("FAS 142"), "Goodwill and Other Intangible Assets" effective for fiscal
years beginning after December 15, 2001. FAS 141 requires business combinations
initiated after June 30, 2001 to be accounted for using the purchase method of
accounting, and broadens the criteria for recording intangible assets separate
from goodwill. FAS 142 requires that goodwill and identifiable intangible assets
determined to have an indefinite life no longer be amortized, but instead be
tested for impairment at least annually.
The Company is required to adopt FAS 142 in the fiscal year beginning
October 1, 2002, at which time amortization of goodwill will cease. The Company
has evaluated the impact of adoption of FAS 142 in respect of acquisitions
accounted for as purchase transactions and completed prior to June 30, 2001. The
application of the separate recognition criteria for intangible assets and the
cessation of amortization of goodwill will result in goodwill of approximately
$67 million at September 30, 2001 being subject to an annual impairment test,
unless interim indicators indicate a need for an interim test, and a resulting
expected reduction of goodwill amortization expense of approximately $32
million, $22 million and $11 million in fiscal 2002, 2003 and 2004,
respectively.
26
FACTORS THAT MAY AFFECT FUTURE RESULTS
From time to time, information provided by Brooks or statements made by its
employees may contain forward-looking information that involves substantial
known and unknown risks and uncertainties such as those described below that
could cause actual results to differ materially from targets or projected
results.
You should carefully consider the risks described below and the other
information in this report before deciding to invest in shares of our common
stock. These are the risks and uncertainties we believe are most important for
you to consider. Additional risks and uncertainties not presently known to us,
which we currently deem immaterial or which are similar to those faced by other
companies in our industry or business in general, may also impair our business
operations. If any of the following risks or uncertainties actually occur, our
business, financial condition and operating results would likely suffer. In that
event, the market price of our common stock could decline and you could lose all
or part of the money you paid to buy our common stock.
RISK FACTORS RELATING TO BROOKS' INDUSTRY
THE CYCLICAL DEMAND OF SEMICONDUCTOR MANUFACTURERS AFFECTS BROOKS' OPERATING
RESULTS AND THE ONGOING DOWNTURN IN THE INDUSTRY COULD SERIOUSLY HARM BROOKS'
OPERATING RESULTS.
Brooks' business is significantly dependent on capital expenditures by
semiconductor manufacturers. The level of semiconductor manufacturers' capital
expenditures is dependent on the current and anticipated market demand for
semiconductors. The semiconductor industry is highly cyclical and is currently
experiencing a downturn. Brooks anticipates the downturn will continue during
the next few quarters. Despite these industry conditions, Brooks plans to
continue to invest in those areas which Brooks believes are important to its
long-term growth, such as its infrastructure and information technology system,
customer support, supply chain management and new products. As a result,
consistent with its experience in downturns in the past, Brooks believes the
current industry downturn will lead to reduced revenues for it and may cause it
to incur losses.
INDUSTRY CONSOLIDATION AND OUTSOURCING OF THE MANUFACTURE OF SEMICONDUCTORS TO
FOUNDRIES COULD REDUCE THE NUMBER OF AVAILABLE CUSTOMERS.
The substantial expense of building or expanding a semiconductor
fabrication facility is leading increasing numbers of semiconductor companies to
contract with foundries, which manufacture semiconductors designed by others. As
manufacturing is shifted to foundries, the number of Brooks' potential customers
could decrease, which would increase its dependence on its remaining customers.
Recently, consolidation within the semiconductor manufacturing industry has
increased. If semiconductor manufacturing is consolidated into a small number of
foundries and other large companies, Brooks' failure to win any significant bid
to supply equipment to those customers could seriously harm its reputation and
materially and adversely affect its revenue and operating results.
RISK FACTORS RELATING TO BROOKS' OPERATIONS
BROOKS' SALES VOLUME SUBSTANTIALLY DEPENDS ON THE SALES VOLUME OF BROOKS'
ORIGINAL EQUIPMENT MANUFACTURER CUSTOMERS AND ON INVESTMENT IN MAJOR CAPITAL
EXPANSION PROGRAMS, RETROFITS AND UPGRADES BY END USER SEMICONDUCTOR
MANUFACTURING COMPANIES.
Brooks sells a majority of its tool automation products to original
equipment manufacturers that incorporate Brooks' products into their equipment.
Therefore, Brooks' revenues depend on the ability of these customers to develop,
market and sell their equipment in a timely, cost-effective manner.
Approximately 56% of Brooks' total revenue in fiscal 2001 comes from sales to
original equipment manufacturers.
Brooks also generates significant revenues from large orders from
semiconductor manufacturing companies that build new plants or invest in major
automation retrofits and upgrades. Brooks' revenues depend, in part, on
continued capital investment by semiconductor manufacturing companies.
Approximately 44% of Brooks' total revenue in fiscal 2001 comes from sales to
semiconductor manufacturing companies.
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BROOKS RELIES ON A RELATIVELY LIMITED NUMBER OF CUSTOMERS FOR A LARGE PORTION OF
ITS REVENUES AND BUSINESS.
Brooks receives a significant portion of its revenues in each fiscal period
from a relatively limited number of customers. The loss of one or more of these
major customers, or a decrease in orders by one or more customers, could
adversely affect Brooks' revenue, business and reputation. Sales to Brooks' ten
largest customers accounted for approximately 37% of total revenues in fiscal
2001 and 40% of total revenues in fiscal 2000.
DELAYS IN OR CANCELLATION OF SHIPMENTS OF A FEW OF BROOKS' LARGE ORDERS COULD
SUBSTANTIALLY DECREASE ITS REVENUES OR REDUCE ITS STOCK PRICE.
Historically, a substantial portion of Brooks' quarterly and annual
revenues has come from sales of a small number of large orders. Some of Brooks'
products have high selling prices compared to Brooks' other products. As a
result, the timing of when Brooks recognizes revenue from one of these large
orders can have a significant impact on its total revenues and operating results
for a particular period and reduce its stock price because its sales in that
fiscal period could fall significantly below the expectations of financial
analysts and investors. This could cause the value of its common stock to fall.
Brooks' operating results could be harmed if a small number of large orders are
canceled or rescheduled by customers or cannot be filled due to delays in
manufacturing, testing, shipping or product acceptance.
DEMAND FOR BROOKS' PRODUCTS FLUCTUATES RAPIDLY AND UNPREDICTABLY, WHICH MAKES IT
DIFFICULT TO MANAGE ITS BUSINESS EFFICIENTLY AND CAN REDUCE ITS GROSS MARGINS
AND PROFITABILITY.
Brooks' expense levels are based in part on its expectations for future
demand. Many expenses, particularly those relating to capital equipment and
manufacturing overhead, are relatively fixed. The rapid and unpredictable shifts
in demand for Brooks' products make it difficult to plan manufacturing capacity
and business operations efficiently. If demand is significantly below
expectations, Brooks may be unable to rapidly reduce these fixed costs, which
can diminish gross margins and cause losses. A sudden downturn may also leave
Brooks with excess inventory, which may be rendered obsolete as products evolve
during the downturn and demand shifts to newer products. Brooks' ability to
reduce expenses is further constrained because it must continue to invest in
research and development to maintain its competitive position and to maintain
service and support for its existing global customer base. Conversely, in sudden
upturns, Brooks sometimes incurs significant expenses to rapidly expedite
delivery of components, procure scarce components and outsource additional
manufacturing processes. These expenses could reduce its gross margins and
overall profitability. Any of these results could seriously harm Brooks'
business.
BROOKS' LENGTHY SALES CYCLE REQUIRES IT TO INCUR SIGNIFICANT EXPENSES WITH NO
ASSURANCE THAT BROOKS WILL GENERATE REVENUE.
Brooks' tool automation products are generally incorporated into original
equipment manufacturer equipment at the design stage. To obtain new business
from its original equipment manufacturer customers, Brooks must develop products
for selection by a potential customer at the design stage. This often requires
Brooks to make significant expenditures without any assurance of success. The
original equipment manufacturer's design decisions often precede the generation
of volume sales, if any, by a year or more. Brooks cannot guarantee that the
equipment manufactured by its original equipment manufacturing customers will be
commercially successful. If Brooks or its original equipment manufacturing
customers fails to develop and introduce new products successfully and in a
timely manner, Brooks' business and financial results will suffer.
Brooks also must complete successfully a costly evaluation and proposal
process before Brooks can achieve volume sales of Brooks factory automation
software to customers. These undertakings are major decisions for most
prospective customers and typically involve significant capital commitments and
lengthy evaluation and approval processes. Brooks cannot guarantee that it will
continue to satisfy evaluations by its end-user customers.
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BROOKS' OPERATING RESULTS WOULD BE HARMED IF ONE OF ITS KEY SUPPLIERS FAILS TO
DELIVER COMPONENTS FOR BROOKS' PRODUCTS.
Brooks currently obtains many of its components on an as needed, purchase
order basis. Generally, Brooks does not have any long-term supply contracts with
its vendors and believes many of its vendors have been taking cost containment
measures in response to the industry downturn. When demand for semiconductor
manufacturing equipment increases, Brooks' suppliers face significant challenges
in delivering components on a timely basis. Brooks' inability to obtain
components in required quantities or of acceptable quality could result in
significant delays or reductions in product shipments. This could create
customer dissatisfaction, cause lost revenue and otherwise materially and
adversely affect Brooks' operating results. Delays on Brooks' part could also
cause it to incur contractual penalties for late delivery.
BROOKS MAY EXPERIENCE DELAYS AND TECHNICAL DIFFICULTIES IN NEW PRODUCT
INTRODUCTIONS AND MANUFACTURING, WHICH CAN ADVERSELY AFFECT ITS REVENUES, GROSS
MARGINS AND NET INCOME.
Because Brooks' systems are complex, there can be a significant lag between
the time Brooks introduces a system and the time it begins to produce that
system in volume. As technology in the semiconductor industry becomes more
sophisticated, Brooks is finding it increasingly difficult to design and
integrate complex technologies into its systems, to procure adequate supplies of
specialized components, to train its technical and manufacturing personnel and
to make timely transitions to high-volume manufacturing. Many customers also
require customized systems, which compound these difficulties. Brooks sometimes
incurs substantial unanticipated costs to ensure that its new products function
properly and reliably early in their life cycle. These costs could include
greater than expected installation and support costs or increased materials
costs as a result of expedited changes. Brooks may not be able to pass these
costs on to its customers. In addition, Brooks has experienced, and may continue
to experience, difficulties in both low and high volume manufacturing. Any of
these results could seriously harm Brooks' business.
Moreover, on occasion Brooks has failed to meet its customers' delivery or
performance criteria, and as a result Brooks incurred late delivery penalties
and had higher warranty and service costs. These failures could continue and
could also cause Brooks to lose business from those customers and suffer
long-term damage to its reputation.
BROOKS MAY BE UNABLE TO RECRUIT AND RETAIN NECESSARY PERSONNEL BECAUSE OF
INTENSE COMPETITION FOR HIGHLY SKILLED PERSONNEL.
Brooks needs to retain a substantial number of employees with technical
backgrounds for both its hardware and software engineering, manufacturing, sales
and support staffs. The market for these employees is intensively competitive,
and Brooks has occasionally experienced delays in hiring qualified personnel.
Due to the cyclical nature of the demand for its products and the current
downturn in the semiconductor market, Brooks recently reduced its workforce as a
cost reduction measure. If the semiconductor market experiences an upturn,
Brooks may need to rebuild its workforce. Due to the competitive nature of the
labor markets in which Brooks operates, this type of employment cycle increases
Brooks' risk of being unable to retain and recruit key personnel. Brooks'
inability to recruit, retain and train adequate numbers of qualified personnel
on a timely basis could adversely affect its ability to develop, manufacture,
install and support its products and may result in lost revenue and market share
if customers seek alternative solutions.
BROOKS' INTERNATIONAL BUSINESS OPERATIONS EXPOSE IT TO A NUMBER OF DIFFICULTIES
IN COORDINATING ITS ACTIVITIES ABROAD AND IN DEALING WITH MULTIPLE REGULATORY
ENVIRONMENTS.
Sales to customers outside North America accounted for approximately 50% of
Brooks' total revenues in fiscal 2001, 48% in fiscal 2000 and 43% in fiscal
1999. Brooks anticipates that international sales will continue
29
to account for a significant portion of its revenues. Many of Brooks' vendors
are located in foreign countries. As a result of its international business
operations, Brooks is subject to various risks, including:
- difficulties in staffing and managing operations in multiple locations in
many countries;
- difficulties in managing distributors, representatives and third party
systems integrators;
- challenges presented by collecting trade accounts receivable in foreign
jurisdictions;
- longer sales-cycles;
- possible adverse tax consequences;
- fewer legal protections for intellectual property;
- governmental currency controls and restrictions on repatriation of
earnings;
- changes in various regulatory requirements;
- political and economic changes and disruptions; and
- export/import controls and tariff regulations.
To support its international customers, Brooks maintains locations in
several countries, including Belgium, Canada, China, Germany, Japan, Malaysia,
Singapore, South Korea, Switzerland, Taiwan and the United Kingdom. Brooks
cannot guarantee that it will be able to manage these operations effectively.
Brooks cannot assure you that its investment in these international operations
will enable it to compete successfully in international markets or to meet the
service and support needs of its customers, some of whom are located in
countries where Brooks has no infrastructure.
Although Brooks' international sales are primarily denominated in U.S.
dollars, changes in currency exchange rates can make it more difficult for
Brooks to compete with foreign manufacturers on price. If Brooks' international
sales increase relative to its total revenues, these factors could have a more
pronounced effect on Brooks' operating results.
BROOKS MUST CONTINUALLY IMPROVE ITS TECHNOLOGY TO REMAIN COMPETITIVE.
Technology changes rapidly in the semiconductor, data storage and flat
panel display manufacturing industries. Brooks believes its success depends in
part upon its ability to enhance its existing products and to develop and market
new products to meet customer needs, even in industry downturns. For example, as
the semiconductor industry transitions from 200mm manufacturing technology to
300mm technology, Brooks believes it is important to its future success to
develop and sell new products that are compatible with 300mm technology. If
competitors introduce new technologies or new products, Brooks' sales could
decline and its existing products could lose market acceptance. Brooks cannot
guarantee that it will identify and adjust to changing market conditions or
succeed in introducing commercially rewarding products or product enhancements.
The success of Brooks' product development and introduction depends on a number
of factors, including:
- accurately identifying and defining new market opportunities and
products;
- completing and introducing new product designs in a timely manner;
- market acceptance of Brooks' products and its customers' products;
- timely and efficient software development, testing and process;
- timely and efficient implementation of manufacturing and assembly
processes;
- product performance in the field;
- development of a comprehensive, integrated product strategy; and
- efficient implementation and installation and technical support services.
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Because Brooks must commit resources to product development well in advance
of sales, its product development decisions must anticipate technological
advances by leading semiconductor manufacturers. Brooks may not succeed in that
effort. Its inability to select, develop, manufacture and market new products or
enhance its existing products could cause it to lose its competitive position
and could seriously harm its business.
BROOKS FACES SIGNIFICANT COMPETITION WHICH COULD RESULT IN DECREASED DEMAND FOR
BROOKS' PRODUCTS OR SERVICES.
The markets for Brooks' products are intensely competitive. Brooks may be
unable to compete successfully. Brooks believes the primary competitive factors
in the tool automation systems segment are throughput, reliability,
contamination control, accuracy and price/performance. Brooks believes that its
primary competition in the tool automation market is from integrated original
equipment manufacturers that satisfy their semiconductor and flat panel display
handling needs internally rather than by purchasing systems or modules from an
independent supplier like Brooks. Many of these original equipment manufacturers
have substantially greater resources than Brooks does. Applied Materials, Inc.,
the leading process equipment original equipment manufacturer, develops and
manufactures its own central wafer handling systems and modules. Brooks may not
be successful in selling its products to original equipment manufacturers that
internally satisfy their wafer or substrate handling needs, regardless of the
performance or the price of Brooks products. Moreover, integrated original
equipment manufacturers may begin to commercialize their handling capabilities
and become Brooks competitors.
Brooks believes that the primary competitive factors in the end-user
semiconductor manufacturer market for factory automation and process control
solutions are product functionality, price/performance, ease of use, ease of
integration and installation, hardware and software platform compatibility,
costs to support and maintain, vendor reputation and financial stability. The
relative importance of these competitive factors may change over time. Brooks
directly competes in this market with various competitors, including Applied
Materials-Consilium, IBM, Si-view, Compaq, TRW, Camstar and numerous small,
independent software companies. Brooks also competes with the in-house software
staffs of semiconductor manufacturers like NEC, Texas Instruments and Intel.
Most of those manufacturers have substantially greater resources than Brooks
does.
Brooks believes that the primary competitive factors in the factory
interface market are technical and technological capabilities, reliability,
price/performance, ease of integration and global sales and support capability.
In this market, Brooks competes directly with Asyst, Rorze, Fortrend, Newport,
TOK, Yasakawa and Hirata. Some of these competitors have substantial financial
resources and extensive engineering, manufacturing and marketing capabilities.
MUCH OF BROOKS' SUCCESS AND VALUE LIES IN ITS OWNERSHIP AND USE OF INTELLECTUAL
PROPERTY, AND BROOKS' FAILURE TO PROTECT THAT PROPERTY COULD ADVERSELY AFFECT
ITS FUTURE OPERATIONS.
Brooks' ability to compete is heavily affected by its ability to protect
its intellectual property. Brooks relies primarily on trade secret laws,
confidentiality procedures, patents, copyrights, trademarks and licensing
arrangements to protect its intellectual property. The steps Brooks has taken to
protect its technology may be inadequate. Existing trade secret, trademark and
copyright laws offer only limited protection. Brooks' patents could be
invalidated or circumvented. The laws of certain foreign countries in which
Brooks products are or may be developed, manufactured or sold may not fully
protect Brooks' products. This may make the possibility of piracy of Brooks'
technology and products more likely. Brooks cannot guarantee that the steps
Brooks has taken to protect its intellectual property will be adequate to
prevent misappropriation of its technology. Other companies could independently
develop similar or superior technology without violating Brooks' proprietary
rights. There has been substantial litigation regarding patent and other
intellectual property rights in semiconductor-related industries. Brooks may
engage in litigation to:
- enforce its patents;
- protect its trade secrets or know-how;
31
- defend itself against claims alleging it infringes the rights of others;
or
- determine the scope and validity of the patents or intellectual property
rights of others.
Any litigation could result in substantial cost to Brooks and divert the
attention of Brooks' management, which could harm its operating results and its
future operations. A party making such a claim could secure a judgment against
Brooks that requires it to pay substantial damages. A judgment could also
include an injunction or other court order that could prevent Brooks from
selling its products. Any of these events could seriously harm Brooks' business.
BROOKS' OPERATIONS COULD INFRINGE ON THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS.
Particular aspects of Brooks' technology could be found to infringe on the
intellectual property rights or patents of others. Other companies may hold or
obtain patents on inventions or may otherwise claim proprietary rights to
technology necessary to Brooks' business. Brooks cannot predict the extent to
which it may be required to seek licenses or alter its products so that they no
longer infringe the rights of others. Brooks cannot guarantee that the terms of
any licenses it may be required to seek will be reasonable. Similarly, changing
Brooks' products or processes to avoid infringing the rights of others may be
costly or impractical or could detract from the value of its products.
BROOKS' BUSINESS MAY BE HARMED BY INFRINGEMENT CLAIMS OF GENERAL SIGNAL OR
APPLIED MATERIALS.
Brooks received notice from General Signal Corporation twice in 1992 and
once in 1994, alleging certain of Brooks' tool automation systems products that
Brooks sells to semiconductor process tool manufacturers infringed General
Signal's patent rights. The notification advised Brooks that General Signal was
attempting to enforce its rights to those patents in litigation against Applied
Materials, and that, at the conclusion of that litigation, General Signal
intended to enforce its rights against us and others. According to a press
release issued by Applied Materials in November 1997, Applied Materials settled
its litigation with General Signal by acquiring ownership of five General Signal
patents. Although not verified by Brooks, these five patents would appear to be
the patents referred to by General Signal in its prior notice to Brooks. Applied
Materials has not contacted Brooks regarding these patents. Brooks cannot
guarantee that it would prevail in any litigation by Applied Materials seeking
damages or expenses from Brooks or to enjoin Brooks from selling its products on
the basis of the alleged patent infringement, or that a license for any of the
alleged infringed patents will be available to Brooks on reasonable terms, if at
all. A substantial portion of Brooks' revenues for fiscal 2001 derive from the
products that General Signal originally alleged to infringe its patent rights.
BROOKS DOES NOT HAVE LONG-TERM CONTRACTS WITH ITS CUSTOMERS AND BROOKS'
CUSTOMERS MAY CEASE PURCHASING BROOKS' PRODUCTS AT ANY TIME.
Brooks generally does not have long-term contracts with its customers. As a
result, Brooks' agreements with its customers do not provide any assurance of
future sales. Accordingly:
- Brooks' customers can cease purchasing its products at any time without
penalty;
- Brooks' customers are free to purchase products from Brooks' competitors;
- Brooks is exposed to competitive price pressure on each order; and
- Brooks' customers are not required to make minimum purchases.
BROOKS' SOFTWARE PRODUCTS MAY CONTAIN ERRORS OR DEFECTS THAT COULD RESULT IN
LOST REVENUE, DELAYED OR LIMITED MARKET ACCEPTANCE OR PRODUCT LIABILITY CLAIMS
WITH SUBSTANTIAL LITIGATION COSTS.
Complex software products like Brooks' can contain errors or defects,
particularly when Brooks first introduces new products or when it releases new
versions or enhancements. Any defects or errors could result in lost revenue or
a delay in market acceptance, which would seriously harm Brooks' business and
operating results. Brooks has occasionally discovered software errors in its new
software products and new releases after
32
their introduction, and Brooks expects that this will continue. Despite internal
testing and testing by current and potential customers, Brooks' current and
future products may contain serious defects.
Because many of Brooks' customers use their products for business-critical
applications, any errors, defects or other performance problems could result in
financial or other damage to Brooks' customers and could significantly impair
their operations. Brooks' customers could seek to recover damages from Brooks
for losses related to any these issues. A product liability claim brought
against Brooks, even if not successful, would likely be time-consuming and
costly to defend and could adversely affect Brooks' marketing efforts.
BROOKS' FUTURE OPERATIONS COULD BE HARMED IF THE COMMERCIAL ADOPTION OF 300MM
WAFER TECHNOLOGY CONTINUES TO PROGRESS SLOWLY OR IS HALTED.
Brooks' future operations depend in part on the adoption of new systems and
technologies to automate the processing of 300mm wafers. However, the industry
transition from the current, widely used 200mm manufacturing technology to 300mm
manufacturing technology is occurring more slowly than expected. A significant
delay in the adoption of 300mm manufacturing technology, or the failure of the
industry to adopt 300mm manufacturing technology, could significantly impair
Brooks' operations. Moreover, continued delay in transition to 300mm technology
could permit Brooks' competitors to introduce competing or superior 300mm
products at more competitive prices. As a result of these factors, competition
for 300mm orders could become vigorous and could harm Brooks' results of
operations.
BROOKS' RECENT RAPID GROWTH IS STRAINING ITS OPERATIONS AND REQUIRING IT TO
INCUR COSTS TO UPGRADE ITS INFRASTRUCTURE.
During fiscal 2000 and 2001, Brooks experienced extremely rapid growth in
its operations, its product offerings and the geographic area of its operations.
The proposed merger with PRI will continue this trend. Brooks' growth has placed
a significant strain on its management, operations and financial systems.
Brooks' future operating results will depend in part on its ability to continue
to implement and improve its operating and financial controls and management
information systems. If Brooks fails to manage its growth effectively, its
financial condition, results of operations and business could be harmed.
BROOKS' SYSTEMS INTEGRATION SERVICES BUSINESS HAS GROWN SIGNIFICANTLY RECENTLY
AND POOR EXECUTION OF THOSE SERVICES COULD ADVERSELY IMPACT BROOKS' OPERATING
RESULTS.
The number of projects Brooks is pursuing for its systems integration
services business has grown significantly recently. This business consists of
integrating combinations of Brooks software and hardware products to provide
more comprehensive solutions for Brooks' end-user customers. The delivery of
these services typically is complex, requiring that Brooks coordinate personnel
with varying technical backgrounds in performing substantial amounts of services
in accordance with timetables. Brooks is in the early stages of developing this
business and it is subject to the risks attendant to entering a business in
which it has limited direct experience. In addition, Brooks' ability to supply
these services and increase its revenues is limited by its ability to retain,
hire and train systems integration personnel. Brooks believes that there is
significant competition for personnel with the advanced skills and technical
knowledge that it needs. Some of Brooks' competitors may have greater resources
to hire personnel with those skills and knowledge. Brooks' operating margins
could be adversely impacted if it does not effectively hire and train additional
personnel or deliver systems integration services to its customers on a
satisfactory and timely basis consistent with its budgets.
THE EFFECT OF TERRORIST THREATS ON THE GENERAL ECONOMY COULD DECREASE BROOKS'
REVENUES.
On September 11, 2001, the United States was subject to terrorist attacks
at the World Trade Center buildings in New York City and the Pentagon in
Washington, D.C. The potential near- and long-term impact these attacks may have
in regards to Brooks' suppliers and customers, markets for their products and
the U.S. economy are uncertain. There may be other potential adverse effects on
Brooks' operating results due to this significant event that Brooks cannot
foresee.
33
BROOKS' BUSINESS MAY BE HARMED BY INFRINGEMENT CLAIMS OF ASYST TECHNOLOGIES,
INC.
Brooks acquired certain assets, including a transport system known as
IridNet, from the Infab division of Jenoptik AG on September 30, 1999. Asyst
Technologies, Inc. had previously filed suit against Jenoptik AG and other
parties (collectively, the "defendants"), claiming that products of the
defendants, including IridNet, infringe Asyst's patents. This ongoing litigation
may ultimately affect certain products sold by Brooks. Brooks has received
notice that Asyst may amend its complaint to name Brooks as an additional
defendant. Based on Brooks' investigation of Asyst's allegations, Brooks does
not believe it is infringing any claims of Asyst's patents. Brooks intends to
continue to support Jenoptik to argue vigorously, among other things, the
position that the IridNet system does not infringe the Asyst patents. If Asyst
prevails in prosecuting its case, Asyst may seek to prohibit Brooks from
developing, marketing and using the Iridnet product without a license. Because
patent litigation can be extremely expensive, time-consuming, and its outcome
uncertain, Brooks may seek to obtain licenses to the disputed patents. Brooks
cannot guarantee that licenses will be available to it on reasonable terms, if
at all. If a license from Asyst is not available, Brooks could be forced to
incur substantial costs to reengineer the IridNet product, which could diminish
its value. In any case, Brooks may face litigation with Asyst. Such litigation
could be costly and would divert Brooks management's attention and resources. In
addition, even though sales of IridNet comprised less than 1% of total revenues
for fiscal 2001, if Brooks does not prevail in such litigation, Brooks could be
forced to pay damages or amounts in settlement. Jenoptik has indemnified Brooks
for losses Brooks may incur in this action.
RISK FACTORS RELATING TO BROOKS' ACQUISITIONS
BROOKS HAS ANNOUNCED A MERGER WITH PRI, AND UNCERTAINTY REGARDING THE MERGER MAY
DISRUPT BROOKS' OPERATIONS AND ADVERSELY AFFECT ITS BUSINESS.
On October 24, 2001, Brooks announced its proposed merger with PRI
Automation, Inc. Brooks cannot guarantee that the merger will occur. The merger
will happen only if stated conditions are met, including approval of the
issuance of shares in the merger by Brooks' stockholders, approval of the merger
by PRI's stockholders, clearance of the merger under United States and foreign
antitrust laws, and the absence of any material adverse change in the business
of Brooks or PRI. Many of the conditions are outside the control of Brooks and
PRI, and both parties also have stated rights to terminate the merger agreement.
Accordingly, there may be uncertainty regarding the completion of the merger.
This uncertainty may cause customers, suppliers and channel partners to delay or
defer decisions concerning Brooks, which could negatively affect its business.
Customers, suppliers and channel partners may also seek to change existing
agreements with Brooks as a result of the merger. Any delay or deferral of those
decisions or changes in existing agreements could have a material adverse effect
on Brooks' business, regardless of whether the merger is ultimately completed.
Many costs related to the merger, such as legal, accounting, financial advisor
and financial printing fees, must be paid by Brooks regardless of whether the
merger is completed. If the merger is not completed for any reason, Brooks may
be subject to a number of risks, including a decline in the market price of
Brooks common stock, to the extent that the relevant current market price
reflects a market assumption that the merger will be completed, and substantial
disruption to Brooks' business and distraction of its workforce and management
team. In addition, employees who are uncertain about their future with the
combined company or who do not wish to work for the combined company may seek
employment elsewhere, which could impair Brooks' ability to operate its
business.
BROOKS' BUSINESS COULD BE HARMED IF BROOKS FAILS TO ADEQUATELY INTEGRATE THE
OPERATIONS OF THE BUSINESSES IT HAS ACQUIRED.
Brooks has completed a number of acquisitions in a short period of time.
Brooks' management must devote substantial time and resources to the integration
of the operations of its acquired businesses with its core businesses and with
each other. If Brooks fails to accomplish this integration efficiently, Brooks
may not realize the anticipated benefits of its acquisitions. The process of
integrating supply and distribution channels, research and development
initiatives, computer and accounting systems and other aspects of the operation
of its acquired businesses, presents a significant challenge to Brooks'
management. This is compounded by the
34
challenge of simultaneously managing a larger entity. These businesses have
operations and personnel located in Asia, Europe and the United States and
present a number of additional difficulties of integration, including:
- assimilating products and designs into integrated solutions;
- informing customers, suppliers and distributors of the effects of the
acquisitions and integrating them into Brooks' overall operations;
- integrating personnel with disparate business backgrounds and cultures;
- defining and executing a comprehensive product strategy;
- managing geographically remote units;
- managing the risks of entering markets or types of businesses in which
Brooks has limited or no direct experience; and
- minimizing the loss of key employees of the acquired businesses.
If Brooks delays the integration or fails to integrate an acquired business
or experiences other unforeseen difficulties, the integration process may
require a disproportionate amount of Brooks management's attention and financial
and other resources. Brooks' failure to adequately address these difficulties
could harm its business and financial results.
BROOKS' BUSINESS MAY BE HARMED BY ACQUISITIONS BROOKS COMPLETES IN THE FUTURE.
Brooks plans to continue to pursue additional acquisitions of related
businesses. Brooks' identification of suitable acquisition candidates involves
risks inherent in assessing the values, strengths, weaknesses, risks and
profitability of acquisition candidates, including the effects of the possible
acquisition on Brooks' business, diversion of Brooks management's attention and
risks associated with unanticipated problems or latent liabilities. If Brooks is
successful in pursuing future acquisitions, Brooks may be required to expend
significant funds, incur additional debt or issue additional securities, which
may negatively affect Brooks' results of operations and be dilutive to its
stockholders. If Brooks spends significant funds or incurs additional debt,
Brooks' ability to obtain financing for working capital or other purposes could
decline, and Brooks may be more vulnerable to economic downturns and competitive
pressures. Brooks cannot guarantee that it will be able to finance additional
acquisitions or that it will realize any anticipated benefits from acquisitions
that Brooks completes. Should Brooks successfully acquire another business, the
process of integrating acquired operations into Brooks' existing operations may
result in unforeseen operating difficulties and may require significant
financial resources that would otherwise be available for the ongoing
development or expansion of Brooks' existing businesses.
RISK FACTORS RELATING TO BROOKS' COMMON STOCK
BROOKS' OPERATING RESULTS FLUCTUATE SIGNIFICANTLY, WHICH COULD NEGATIVELY IMPACT
ITS BUSINESS AND ITS STOCK PRICE.
Brooks' revenues, margins and other operating results can fluctuate
significantly from quarter to quarter depending upon a variety of factors,
including:
- the level of demand for semiconductors in general;
- cycles in the market for semiconductor manufacturing equipment and
automation software;
- the timing, rescheduling, cancellation and size of orders from Brooks'
customer base;
- Brooks' ability to manufacture, test and deliver products in a timely and
cost-effective manner;
- Brooks' success in winning competitions for orders;
- the timing of Brooks' new product announcements and releases and those of
its competitors;
- the mix of products it sells;
35
- the timing of any acquisitions and related costs;
- competitive pricing pressures; and
- the level of automation required in fab extensions, upgrades and new
facilities.
Brooks entered the factory automation software business in fiscal 1999.
Brooks believes a substantial portion of its revenues from this business will
depend on achieving project milestones. As a result, Brooks' revenue from this
business will be subject to fluctuations depending upon a number of factors,
including whether Brooks can achieve project milestones on a timely basis, if at
all, as well as the timing and size of projects.
BROOKS' STOCK PRICE IS VOLATILE.
The market price of Brooks' common stock has fluctuated widely. For
example, between April 4, 2001 and April 30, 2001, the closing price of Brooks'
common stock rose from approximately $35.45 to $62.61 per share and between
August 28, 2001 and September 28, 2001, the price of Brooks' common stock
dropped from approximately $48.15 to $26.59 per share. Consequently, the current
market price of Brooks' common stock may not be indicative of future market
prices, and Brooks may be unable to sustain or increase the value of an
investment in its common stock. Factors affecting Brooks' stock price may
include:
- variations in operating results from quarter to quarter;
- changes in earnings estimates by analysts or Brooks' failure to meet
analysts' expectations;
- changes in the market price per share of Brooks' public company
customers;
- market conditions in the industry;
- general economic conditions;
- low trading volume of Brooks common stock; and
- the number of firms making a market in Brooks common stock.
In addition, the stock market has recently experienced extreme price and
volume fluctuations. These fluctuations have particularly affected the market
prices of the securities of high technology companies like Brooks. These market
fluctuations could adversely affect the market price of Brooks' common stock.
BECAUSE A LIMITED NUMBER OF STOCKHOLDERS, INCLUDING A MEMBER OF BROOKS'
MANAGEMENT TEAM, OWNS A SUBSTANTIAL NUMBER OF SHARES OF BROOKS COMMON STOCK AND
ARE PARTIES TO VOTING AGREEMENTS, THEIR DECISIONS MAY BE DETRIMENTAL TO YOUR
INTERESTS.
By virtue of their stock ownership and voting agreements, Robert J.
Therrien, Brooks' president and chief executive officer, and Jenoptik AG have
the power to significantly influence Brooks' affairs and are able to influence
the outcome of matters required to be submitted to stockholders for approval,
including the election of Brooks' directors, amendments to Brooks' certificate
of incorporation, mergers, sales of assets and other acquisitions or sales.
These stockholders may exercise their influence over Brooks in a manner
detrimental to your interests. As of December 7, 2001, Mr. Therrien and M+W
Zander Holding GmbH, a subsidiary of Jenoptik AG, beneficially owned
approximately 9.7% of Brooks' common stock.
Brooks has a stockholders agreement with Mr. Therrien, M+W Zander Holding
GmbH and Jenoptik AG under which M+W Zander Holding GmbH agreed to vote all of
its shares on all matters in accordance with the recommendation of a majority of
Brooks' board of directors.
36
PROVISIONS OF BROOKS' CERTIFICATE OF INCORPORATION, BYLAWS, CONTRACTS AND 4.75%
CONVERTIBLE SUBORDINATED NOTES DUE 2008 MAY DISCOURAGE TAKEOVER OFFERS AND MAY
LIMIT THE PRICE INVESTORS WOULD BE WILLING TO PAY FOR BROOKS' COMMON STOCK.
Brooks' certificate of incorporation and bylaws contain provisions that may
make an acquisition of Brooks more difficult and discourage changes in Brooks'
management. These provisions could limit the price that investors might be
willing to pay for shares of Brooks' common stock. In addition, Brooks has
adopted a shareholder rights plan. In many potential takeover situations, rights
issued under the plan become exercisable to purchase Brooks common stock at a
price substantially discounted from the then applicable market price of Brooks
common stock. Because of its possible dilutive effect to a potential acquirer,
the rights plan would generally discourage third parties from proposing a merger
with or initiating a tender offer for us that is not approved by Brooks' board
of directors. Accordingly, the rights plan could have an adverse impact on
Brooks' stockholders who might want to vote in favor of a merger or participate
in a tender offer. In addition, Brooks may issue shares of preferred stock upon
terms the board of directors deems appropriate without stockholder approval.
Brooks' ability to issue preferred stock in such a manner could enable its board
of directors to prevent changes in its management or control. Finally, upon a
change of control of Brooks, Brooks may be required to repurchase convertible
subordinated notes at a price equal to 100% of the principal outstanding amount
thereof, plus accrued and unpaid interest, if any, to the date of the
repurchase. Such a repurchase of the notes would represent a substantial
expense; accordingly, the repayment of the notes upon a change of control of
Brooks could discourage third parties from proposing a merger with, initiating a
tender offer for or otherwise attempting to gain control of Brooks.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE EXPOSURE
Based on Brooks' overall interest exposure at September 30, 2001, including
all interest rate-sensitive instruments, a near-term change in interest rates
within a 95% confidence level based on historical interest rate movements would
not materially affect the consolidated results of operations or financial
position.
CURRENCY RATE EXPOSURE
Brooks' foreign revenues are generally denominated in United States
dollars. Accordingly, foreign currency fluctuations have not had a significant
impact on the comparison of the results of operations for the periods presented.
The costs and expenses of Brooks' international subsidiaries are generally
denominated in currencies other than the United States dollar. However, since
the functional currency of Brooks' international subsidiaries is the local
currency, foreign currency translation adjustments do not impact operating
results, but instead are reflected as a component of stockholders' equity under
the caption "Accumulated other comprehensive income (loss)". To the extent
Brooks expands its international operations or changes its pricing practices to
denominate prices in foreign currencies, Brooks will be exposed to increased
risk of currency fluctuation.
37
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Accountants........................... 39
Report of Independent Auditors.............................. 40
Consolidated Balance Sheets as of September 30, 2001 and
2000...................................................... 41
Consolidated Statements of Operations for the three years
ended September 30, 2001, 2000 and 1999................... 42
Consolidated Statements of Changes in Stockholders' Equity
for the three years ended September 30, 2001, 2000 and
1999...................................................... 43
Consolidated Statements of Cash Flows for the three years
ended September 30, 2001, 2000 and 1999................... 44
Notes to Consolidated Financial Statements.................. 46
Financial Statement Schedule:
Schedule II -- Valuation and Qualifying Accounts and
Reserves............................................... 74
38
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
Brooks Automation, Inc.:
In our opinion, based on our audits and the report of other auditors, the
accompanying consolidated balance sheets and the related consolidated statements
of operations, of changes in stockholders' equity and of cash flows present
fairly, in all material respects, the financial position of Brooks Automation,
Inc. and its subsidiaries at September 30, 2001 and 2000, and the results of
their operations and their cash flows for each of the three years in the period
ended September 30, 2001 in conformity with accounting principles generally
accepted in the United States of America. In addition, in our opinion, the
financial statement schedule listed in the accompanying index presents fairly,
in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. These financial
statements and financial statement schedule are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits. We
did not audit the financial statements of Irvine Optical Company LLC, a wholly
owned subsidiary acquired through a pooling of interests during the year ended
September 30, 2000, which statements reflect total revenues of $11,049,000 for
the year ended December 31, 1999. Those statements were audited by other
auditors whose report thereon has been furnished to us, and our opinion
expressed herein, insofar as it relates to the amounts included for Irvine
Optical Company LLC, is based solely on the report of the other auditors. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
November 14, 2001, except for the first paragraph
of Note 15, as to which the date is December 13, 2001.
39
REPORT OF INDEPENDENT AUDITORS
To the Members
Irvine Optical Company, LLC
We have audited the balance sheets of Irvine Optical Company, LLC (the
Company) as of December 31, 1999 and 1998, and the related statements of
operations, members' deficit, and cash flows for the years then ended (not
presented separately herein). These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of December
31, 1999 and 1998, and the results of its operations and its cash flows for the
years then ended, in conformity with accounting principles generally accepted in
the United States.
The financial statements have been prepared assuming that the Company will
continue as a going concern. As more fully described in Note 1 to the financial
statements, the Company's ability to generate sufficient revenue and ultimately
achieve profitable operations is uncertain. The Company's future prospects
depend upon its ability to demonstrate sustained product sales and to generate
sufficient working capital through new financing and/or operating cash flows,
all of which raise substantial doubt about the Company's ability to continue as
a going concern. Management's plans in regard to these matters are also
described in Note 1. The financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
assets or amounts and classification of liabilities that may result from the
outcome of this uncertainty.
/s/ Ernst & Young LLP
Woodland Hills, California
March 3, 2000, except for Note 4
as to which the date is March 31, 2000
40
BROOKS AUTOMATION, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30,
---------------------
2001 2000
--------- ---------
(IN THOUSANDS, EXCEPT
SHARE DATA)
ASSETS
Current assets
Cash and cash equivalents $160,239 $133,636
Marketable securities 43,593 88,034
Accounts receivable, net, including related party
receivables of $32 and $6,820, respectively 93,565 94,756
Inventories 49,295 58,607
Prepaid expenses and other current assets 9,836 8,464
Deferred income taxes 26,608 18,220
-------- --------
Total current assets 383,136 401,717
Property, plant and equipment
Buildings and land 31,910 1,573
Computer equipment and software 38,497 23,525
Machinery and equipment 17,349 20,747
Furniture and fixtures 11,240 7,089
Leasehold improvements 10,069 9,226
Construction in progress 11,026 491
-------- --------
120,091 62,651
Less: Accumulated depreciation and amortization (53,632) (37,499)
-------- --------
66,459 25,152
Long-term marketable securities 125,887 15,000
Intangible assets, net 100,916 60,335
Deferred income taxes 19,280 13,361
Other assets 8,153 4,221
-------- --------
Total assets $703,831 $519,786
======== ========
LIABILITIES, MINORITY INTERESTS, CONVERTIBLE REDEEMABLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY
Current liabilities
Notes payable $ 17,122 $ 16,000
Revolving line of credit -- 350
Current portion of long-term debt 392 524
Accounts payable 18,595 23,096
Deferred revenue 15,507 17,018
Accrued compensation and benefits 12,835 14,407
Accrued acquisition-related and restructuring costs 3,702 538
Accrued income taxes payable 7,691 9,045
Deferred income taxes 423 143
Accrued expenses and other current liabilities 18,833 13,760
-------- --------
Total current liabilities 95,100 94,881
Long-term debt 175,031 332
Deferred income taxes 6,546 5,064
Accrued long-term restructuring 1,559 --
Other long-term liabilities 664 438
-------- --------
Total liabilities 278,900 100,715
-------- --------
Commitments and contingencies (Note 14)
Minority interests 762 1,186
-------- --------
Series A convertible redeemable preferred stock, $0.01 par
value -- Authorized, issued and outstanding: none and
90,000 shares in 2001 and 2000, respectively -- 2,601
-------- --------
Stockholders' equity
Preferred stock, $0.01 par value, 1,000,000 shares
authorized, none issued and outstanding -- --
Common stock, $0.01 par value, 43,000,000 shares
authorized, 18,903,165 and 17,588,911 shares issued and
outstanding at September 30, 2001 and 2000, respectively 189 176
Additional paid-in capital 471,991 433,249
Deferred compensation (5) (35)
Accumulated other comprehensive loss (2,586) (2,942)
Accumulated deficit (45,420) (15,164)
-------- --------
Total stockholders' equity 424,169 415,284
-------- --------
Total liabilities, minority interests, convertible
redeemable preferred stock and stockholders' equity $703,831 $519,786
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
41
BROOKS AUTOMATION, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED SEPTEMBER 30,
---------------------------------------
2001 2000 1999
----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues
Product, including related party revenues of $13,966,
$36,934 and $15,255, respectively $291,727 $284,366 $101,488
Services 89,989 52,818 21,469
-------- -------- --------
Total revenues 381,716 337,184 122,957
-------- -------- --------
Cost of revenues
Product 166,471 141,088 54,239
Services 62,861 35,371 13,566
-------- -------- --------
Total cost of revenues 229,332 176,459 67,805
-------- -------- --------
Gross profit 152,384 160,725 55,152
-------- -------- --------
Operating expenses
Research and development 60,868 44,147 24,526
Selling, general and administrative 95,919 77,410 38,763
Amortization of acquired intangible assets 30,187 18,506 565
Acquisition-related and restructuring charges 9,314 578 3,120
-------- -------- --------
Total operating expenses 196,288 140,641 66,974
-------- -------- --------
Income (loss) from operations (43,904) 20,084 (11,822)
Interest income 12,534 9,707 3,150
Interest expense 4,063 1,345 1,553
Other expense, net (1,090) (2) (223)
-------- -------- --------
Income (loss) before income taxes and minority interests (36,523) 28,444 (10,448)
Income tax provision (benefit) (6,439) 13,609 (874)
-------- -------- --------
Income (loss) before minority interests (30,084) 14,835 (9,574)
Minority interests in loss of consolidated subsidiaries (424) (274) (40)
-------- -------- --------
Net income (loss) (29,660) 15,109 (9,534)
Accretion and dividends on preferred stock (90) (120) (774)
-------- -------- --------
Net income (loss) attributable to common stockholders $(29,750) $ 14,989 $(10,308)
======== ======== ========
Earnings (loss) per share
Basic $ (1.65) $ 0.96 $ (0.89)
Diluted $ (1.65) $ 0.88 $ (0.89)
Shares used in computing earnings (loss) per share
Basic 18,015 15,661 11,542
Diluted 18,015 17,192 11,542
The accompanying notes are an integral part of these consolidated financial
statements.
42
BROOKS AUTOMATION, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
NONREDEEMABLE
COMMON CONVERTIBLE ADDITIONAL
COMMON STOCK STOCK AT PREFERRED PAID-IN DEFERRED COMPREHENSIVE
SHARES PAR VALUE STOCK CAPITAL COMPENSATION INCOME (LOSS)
------------ --------- ------------- ---------- ------------ -------------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
BALANCE SEPTEMBER 30, 1998 11,357,510 $113 $ 6,467 $131,551 $(119)
Shares issued under stock option
and purchase plans 341,877 4 -- 1,679 --
Common stock issued in acquisitions 1,410,926 14 (6,467) 35,594 --
Amortization of deferred
compensation -- -- -- 54
Accretion and dividends on
preferred stock -- -- -- --
Revaluation of members' capital -- -- -- --
Income tax benefit from stock
options -- -- 130 --
Comprehensive loss:
Net loss -- -- -- -- $ (9,534)
Currency translation adjustments -- -- -- -- (557)
--------
Comprehensive loss -- -- -- -- $(10,091)
========
Elimination of Smart Machines net
loss attributable to common
stockholders for the three months
ended December 31, 1998 -- -- -- --
---------- ---- ------- -------- -----
BALANCE SEPTEMBER 30, 1999 13,110,313 131 -- 168,954 (65)
Shares issued under stock option
and purchase plans 558,195 6 -- 5,418 --
Common stock offering 3,070,500 31 -- 220,445 --
Common stock issued in acquisitions 849,903 8 -- 21,829 --
Amortization of deferred
compensation -- -- -- 30
Accretion and dividends on
preferred stock -- -- -- --
Income tax benefit from stock
options -- -- 6,738 --
Income tax benefit from
acquisitions -- -- 9,865 --
Comprehensive income:
Net income -- -- -- -- $ 15,109
Currency translation adjustments -- -- -- -- (1,849)
--------
Comprehensive income -- -- -- -- $ 13,260
========
Elimination of Irvine Optical net
income for the three months ended
December 31, 1999 -- -- -- --
---------- ---- ------- -------- -----
BALANCE SEPTEMBER 30, 2000 17,588,911 176 -- 433,249 (35)
Shares issued under stock option
and purchase plans and exercise
of warrants 470,239 5 -- 9,079 --
Common stock issued in acquisitions 844,015 8 -- 25,968 --
Amortization of deferred
compensation -- -- -- 30
Accretion and dividends on
preferred stock -- -- -- --
Income tax benefit from stock
options -- -- 3,695 --
Comprehensive loss:
Net loss -- -- -- -- $(29,660)
Currency translation adjustments -- -- -- -- 356
--------
Comprehensive loss -- -- -- -- $(29,304)
========
Elimination of Progressive
Technologies net income
attributable to common
stockholders for the three months
ended December 31, 2000 -- -- -- --
---------- ---- ------- -------- -----
BALANCE SEPTEMBER 30, 2001 18,903,165 $189 $ -- $471,991 $ (5)
========== ==== ======= ======== =====
ACCUMULATED
OTHER
COMPREHENSIVE ACCUMULATED
INCOME (LOSS) DEFICIT TOTAL
------------- ----------- --------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
BALANCE SEPTEMBER 30, 1998 $ (536) $(21,682) $115,794
Shares issued under stock option
and purchase plans -- -- 1,683
Common stock issued in acquisitions -- -- 29,141
Amortization of deferred
compensation -- -- 54
Accretion and dividends on
preferred stock -- (774) (774)
Revaluation of members' capital -- 377 377
Income tax benefit from stock
options -- -- 130
Comprehensive loss:
Net loss -- (9,534) (9,534)
Currency translation adjustments (557) -- (557)
Comprehensive loss -- -- --
Elimination of Smart Machines net
loss attributable to common
stockholders for the three months
ended December 31, 1998 -- 1,599 1,599
------- -------- --------
BALANCE SEPTEMBER 30, 1999 (1,093) (30,014) 137,913
Shares issued under stock option
and purchase plans -- -- 5,424
Common stock offering -- -- 220,476
Common stock issued in acquisitions -- -- 21,837
Amortization of deferred
compensation -- -- 30
Accretion and dividends on
preferred stock -- (120) (120)
Income tax benefit from stock
options -- -- 6,738
Income tax benefit from
acquisitions -- -- 9,865
Comprehensive income:
Net income -- 15,109 15,109
Currency translation adjustments (1,849) -- (1,849)
Comprehensive income -- -- --
Elimination of Irvine Optical net
income for the three months ended
December 31, 1999 -- (139) (139)
------- -------- --------
BALANCE SEPTEMBER 30, 2000 (2,942) (15,164) 415,284
Shares issued under stock option
and purchase plans and exercise
of warrants -- -- 9,084
Common stock issued in acquisitions -- -- 25,976
Amortization of deferred
compensation -- -- 30
Accretion and dividends on
preferred stock -- (90) (90)
Income tax benefit from stock
options -- -- 3,695
Comprehensive loss:
Net loss -- (29,660) (29,660)
Currency translation adjustments 356 -- 356
Comprehensive loss -- -- --
Elimination of Progressive
Technologies net income
attributable to common
stockholders for the three months
ended December 31, 2000 -- (506) (506)
------- -------- --------
BALANCE SEPTEMBER 30, 2001 $(2,586) $(45,420) $424,169
======= ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
43
BROOKS AUTOMATION, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED SEPTEMBER 30,
--------------------------------
2001 2000 1999
--------- --------- --------
(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (29,660) $ 15,109 $ (9,534)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 45,041 30,400 11,766
Compensation expense related to common stock options 30 30 54
Provision for losses on accounts receivable 4,691 540 199
Reserves for excess and obsolete inventories 15,426 2,611 1,705
Deferred income taxes (14,050) (8,801) (3,017)
Amortization of debt discount 214 -- --
Minority interests (424) (274) (40)
(Gain) loss on disposal of long-lived assets 1,524 (142) --
Changes in operating assets and liabilities:
Accounts receivable 3,734 (51,195) (5,998)
Inventories (4,897) (30,592) (4,026)
Prepaid expenses and other current assets (760) (7,702) 1,054
Accounts payable (5,514) 12,779 7,038
Deferred revenue (3,743) 8,385 1,763
Accrued compensation and benefits (3,318) 9,684 858
Accrued acquisition-related and restructuring costs 4,723 (680) 1,724
Accrued expenses and other current liabilities 7,668 8,641 1,638
--------- --------- --------
Net cash provided by (used in) operating activities 20,685 (11,207) 5,184
--------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of fixed assets (53,652) (13,879) (6,100)
Acquisition of businesses, net of cash acquired (33,142) (24,399) (4,476)
Purchases of marketable securities (181,402) (118,034) --
Sale/maturity of marketable securities 114,956 15,000 --
Proceeds from sale of long-lived assets 224 735 --
Increase in other assets (728) (1,550) (732)
--------- --------- --------
Net cash used in investing activities (153,744) (142,127) (11,308)
--------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (repayments of) borrowings under lines of credit and
revolving credit facilities (350) (1) 1,253
Proceeds from short-term borrowings -- 1,660 --
Payments of short-term borrowings (16,000) (6,923) (280)
Proceeds from issuance of convertible notes, net of
issuance costs 169,543 -- --
Payments of long-term debt and capital lease obligations (490) (562) (1,183)
Issuance of long-term debt -- -- 1,154
Proceeds from issuance of common stock, net of issuance
costs 9,106 225,900 1,683
--------- --------- --------
Net cash provided by financing activities 161,809 220,074 2,627
--------- --------- --------
Elimination of net cash activities on pooling of interest
transactions (1,119) 14 (63)
--------- --------- --------
Effects of exchange rate changes on cash and cash
equivalents (1,028) (149) 326
--------- --------- --------
44
YEAR ENDED SEPTEMBER 30,
--------------------------------
2001 2000 1999
--------- --------- --------
(IN THOUSANDS)
Net increase (decrease) in cash and cash equivalents 26,603 66,605 (3,234)
Cash and cash equivalents, beginning of year 133,636 67,031 70,265
--------- --------- --------
Cash and cash equivalents, end of year $ 160,239 $ 133,636 $ 67,031
========= ========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for interest $ 193 $ 1,432 $ 1,166
Cash paid during the year for income taxes, net of refunds $ 5,876 $ 10,450 $ 1,085
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING AND INVESTING
ACTIVITIES
Accretion and dividends on preferred stock $ 90 $ 120 $ 774
The Company utilized available funds, issued common stock and issued notes in connection with
certain business combinations during the years ended September 30, 2001, 2000 and 1999. The
fair values of the assets and liabilities of the acquired companies are presented as
follows:
Assets acquired $ 11,682 $ 14,166 $ 30,218
Liabilities assumed (9,585) (17,364) (8,414)
--------- --------- --------
Net assets acquired (liabilities assumed) $ 2,097 $ (3,198) $ 21,804
========= ========= ========
The acquisitions were funded as follows:
Cash consideration $ 33,274 $ 27,300 $ 10,447
Common stock 23,363 15,027 22,473
Notes issued to sellers 16,906 16,000 --
Transaction costs 1,665 2,874 1,891
Cash received (1,797) (5,775) (7,862)
--------- --------- --------
$ 73,411 $ 55,426 $ 26,949
========= ========= ========
The accompanying notes are an integral part of these consolidated financial
statements.
45
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF THE BUSINESS
Brooks Automation, Inc. ("Brooks" or the "Company") is a leading supplier
of integrated tool automation, factory interface and factory automation
solutions for the global semiconductor and related industries such as the data
storage and flat panel display manufacturing industries. The Company's product
revenues include sales of hardware and software products. The Company's service
revenues are primarily comprised of tool control application consulting
services, software customization and spare parts sales.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company
and all majority-owned subsidiaries. All significant intercompany accounts and
transactions are eliminated.
On July 12, 2001, the Company acquired Progressive Technologies, Inc.
("PTI") in a transaction accounted for as a pooling of interests initiated prior
to June 30, 2001. Accordingly, the Company's consolidated financial statements
and notes thereto have been restated to include the financial position and
results of operations of PTI for all periods prior to the acquisition. Prior to
its acquisition by the Company, PTI's fiscal year-end was December 31.
Accordingly, the Company's consolidated balance sheet as of September 30, 2000,
includes PTI's balance sheet as of December 31, 2000, and the Company's
consolidated statements of operations for the years ended September 30, 2000 and
1999 include PTI's results of operations for the years ended December 31, 2000
and 1999, respectively. As a result of conforming dissimilar year-ends, PTI's
results of operations for the three months ended December 31, 2000, are included
in both of the Company's fiscal years 2001 and 2000. An amount equal to PTI's
net income for the three months ended December 31, 2000 was eliminated from
consolidated accumulated deficit for the year ended September 30, 2001. PTI's
revenues, net income and net income attributable to common shareholders for that
quarter were $3.8 million, $536,000 and $506,000, respectively.
On June 26, 2001, the Company completed the purchase of KLA-Tencor, Inc.'s
e-Diagnostics product business ("e-Diagnostics"). The e-Diagnostics programs
enable service and support teams to remotely access their tools in customer fabs
in real-time to diagnose and resolve problems. On June 25, 2001, the Company
acquired CCS Technology, Inc. ("CCST"), a supplier of 300mm automation test and
certification software located in Williston, Vermont. On May 15, 2001, the
Company acquired SimCon N.V. ("SimCon"), a value-added reseller for the
Company's simulation, scheduling, production analysis and dispatching software
headquartered in Belgium. On February 16, 2001, the Company acquired SEMY
Engineering, Inc. ("SEMY"), a provider of advanced process and equipment control
systems for the semiconductor industry located in Phoenix, Arizona. On December
13, 2000, the Company acquired substantially all of the assets of a scheduling
and simulation software and service distributor in Japan. These transactions
were recorded using the purchase method of accounting in accordance with
Accounting Principles Board Opinion No. 16, "Business Combinations" ("APB 16").
Accordingly, the Company's Consolidated Statements of Operations and of Cash
Flows for the year ended September 30, 2001 include the results of these
acquired entities for the periods subsequent to their respective acquisitions.
On May 5, 2000, the Company completed the acquisition of Irvine Optical
Company LLC ("Irvine Optical") in a transaction accounted for as a pooling of
interests. Accordingly, the results of operations and financial position of
Irvine Optical are included in the Company's consolidated results for all
periods presented. Prior to its acquisition by the Company, Irvine Optical's
fiscal year-end was December 31. As a result of conforming dissimilar year-ends,
Irvine Optical's results of operations for the three months ended December 31,
1999, are included in both of the Company's fiscal years 2000 and 1999. An
amount equal to Irvine Optical's net income for the three months ended December
31, 1999, was eliminated from consolidated
46
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
accumulated deficit for the year ended September 30, 2000. Irvine Optical's
revenues and net income for that quarter were $4.1 million and $0.1 million,
respectively.
The Company completed two acquisitions during fiscal year 2000 which were
accounted for using the purchase method of accounting in accordance with APB 16:
MiTeX Solutions ("MiTeX") on June 23, 2000 and Auto-Soft Corporation ("ASC") and
AutoSimulations, Inc. ("ASI") on January 6, 2000. The Company's Consolidated
Statements of Operations and of Cash Flows include the results of these entities
for the periods subsequent to their respective acquisitions.
On August 31, 1999, the Company completed the acquisition of Smart Machines
Inc. ("Smart Machines"). The acquisition was accounted for as a pooling of
interests. Accordingly, the results of operations and financial position of
Smart Machines are included in the Company's consolidated results for all
periods presented.
The Company completed three acquisitions during the year ended September
30, 1999, which were accounted for using the purchase method of accounting in
accordance with APB 16: the Infab Division ("Infab") of Jenoptik AG on September
30, 1999; Domain Manufacturing Corporation ("Domain") on June 30, 1999 and
Hanyon Technology, Inc. ("Hanyon") on April 21, 1999. Accordingly, the Company's
Consolidated Statements of Operations and of Cash Flows include the results of
these acquired entities for all periods subsequent to their respective
acquisitions.
In June 1999, the Company formed a joint venture in Korea. This joint
venture is 70% owned by the Company and 30% owned by third parties unaffiliated
with the Company. The Company consolidates fully the financial position and
results of operations of the joint venture and accounts for the minority
interests in the consolidated financial statements.
Certain amounts in previously issued financial statements have been
reclassified to conform to current presentation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Significant estimates include revenues and costs under
long-term contracts, collectibility of accounts receivable, obsolescence of
inventory, recoverability of depreciable assets, intangibles and deferred tax
assets and the adequacy of acquisition-related and restructuring reserves.
Although the Company regularly assesses these estimates, actual results could
differ from those estimates. Changes in estimates are recorded in the period in
which they become known.
FOREIGN CURRENCY TRANSLATION
For non-U.S. subsidiaries, which operate in a local currency environment,
assets and liabilities are translated at period-end exchange rates, and income
statement items are translated at the average exchange rates for the period. The
local currency for all foreign subsidiaries is considered to be the functional
currency and accordingly, translation adjustments are reported in "Accumulated
other comprehensive income (loss)." To date, foreign currency translation
adjustments are the only component added to the Company's net income (loss) in
the calculation of comprehensive net income (loss).
47
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash and highly liquid investments with
original maturities to the Company of three months or less. At both September
30, 2001 and 2000, all cash equivalents were classified as available-for-sale
and held at amortized cost, which approximates fair value.
MARKETABLE SECURITIES
The Company invests its excess cash in marketable debt securities and
records them as available-for-sale. The Company records these securities at fair
value in accordance with Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" ("FAS 115").
For all periods presented, unrealized gains and losses are immaterial.
Marketable securities reported as current assets represent investments that
mature within one year. Long-term marketable securities represent investments
with maturity dates greater than one year from the balance sheet date. At the
time that the maturity dates of these investments become one year or less, the
values will be reclassified to current assets. At September 30, 2001, the
Company's marketable securities were comprised entirely of corporate debt
securities aggregating $169.5 million, with maturities to the Company not
exceeding three years. At September 30, 2000, the Company's marketable
securities were comprised of U.S. Government securities aggregating $53.3
million and corporate debt securities aggregating $49.7 million.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentration
of credit risk consist primarily of trade receivables and temporary and
long-term cash investments in treasury bills, certificates of deposit and
commercial paper. The Company restricts its investments to repurchase agreements
with major banks, U.S. government and corporate securities, and mutual funds
that invest in U.S. government securities, which are subject to minimal credit
and market risk. The Company's customers are concentrated in the semiconductor
industry, and relatively few customers account for a significant portion of the
Company's revenues. The Company regularly monitors the creditworthiness of its
customers and believes that it has adequately provided for exposure to potential
credit losses.
INVENTORIES
Inventories are stated at the lower of cost or market, cost being
determined using the first-in, first-out method. The Company provides inventory
reserves for excess, obsolete or damaged inventory based on changes in customer
demand, technology and other economic factors.
While the Company often uses sole source suppliers for certain key
components and common assemblies to achieve quality control and the benefits of
economies of scale, the Company believes that these parts and materials are
readily available from other supply sources.
FIXED ASSETS
Property, plant and equipment are stated at cost less accumulated
depreciation. Depreciation is computed using the straight-line method.
Depreciable lives are summarized below:
Buildings 20 - 40 years
Computer equipment and software 2 - 6 years
Machinery and equipment 2 - 10 years
Furniture and fixtures 3 - 10 years
Equipment held under capital leases is recorded at the fair market value of
the equipment at the inception of the leases. Leasehold improvements and
equipment held under capital leases are amortized over the shorter
48
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of their estimated useful lives or the term of the respective leases. Equipment
used for demonstrations to customers is included in machinery and equipment and
is depreciated over its estimated useful life. Repair and maintenance costs are
expensed as incurred.
The Company periodically evaluates the recoverability of long-lived assets,
including intangibles, whenever events and changes in circumstances indicate
that the carrying amount of an asset may not be fully recoverable. When
indicators of impairment are present, the carrying values of the asset are
evaluated in relation to the operating performance and future undiscounted cash
flows of the underlying business. The net book value of the underlying asset is
adjusted to fair value if the sum of the expected discounted cash flows is less
than book value. Fair values are based on estimates of market prices and
assumptions concerning the amount and timing of estimated future cash flows and
assumed discount rates, reflecting varying degrees of perceived risk.
INTANGIBLE ASSETS
Patents include capitalized direct costs associated with obtaining patents
as well as assets that were acquired as a part of purchase business
combinations. Capitalized patent costs are amortized using the straight-line
method over the shorter of seven years or the estimated economic life of the
patents. The fair values of acquired patents are amortized over three to five
years using the straight-line method. As of September 30, 2001 and 2000, the net
book values of the Company's patents were $2.2 million and $4.1 million,
respectively.
Costs incurred in the research and development of the Company's products
are expensed as incurred, except for certain software development costs.
Software development costs are expensed prior to establishing technological
feasibility and capitalized thereafter until the product is available for
general release to customers. Capitalized software development costs are
amortized to cost of sales on a product-by-product basis over the estimated
lives of the related products, typically three years. As of September 30, 2001,
the Company's capitalized software costs had been fully amortized and written
off. As of September 30, 2000, the net book value of the Company's capitalized
software costs were $0.6 million.
Goodwill represents the excess of purchase price over the fair value of net
tangible and identifiable intangible assets of businesses the Company has
acquired and has accounted for under the purchase method in accordance with APB
16. As of September 30, 2001 and 2000, the net book values of goodwill were
$60.1 million and $43.4 million, respectively.
The net book values of goodwill based on useful life are as follows (in
thousands):
SEPTEMBER 30,
-----------------
2001 2000
------- -------
Three years $54,803 $36,585
Five years 3,187 4,484
Fifteen years 2,138 2,354
------- -------
$60,128 $43,423
======= =======
Amortization expense for all intangible assets was $31.6 million, $19.6
million and $1.4 million for the years ended September 30, 2001, 2000 and 1999,
respectively.
49
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The amortizable lives of intangible assets, including those identified as a
result of purchase accounting, are summarized as follows:
Patents 3 - 7 years
Completed technology 4 - 5 years
License agreements 5 years
Trademarks and trade names 2 - 5 years
Non-competition agreements 3 - 5 years
Assembled workforces 3 - 4 years
Customer relationships 4 years
Goodwill 3 - 15 years
REVENUE RECOGNITION
The Company has adopted the recommendations of Staff Accounting Bulletin
101, "Revenue Recognition in Financial Statements," ("SAB 101") effective
October 1, 2000. The adoption of SAB 101 did not have any impact on the
Company's results of operations or financial position.
Revenue from product sales are recorded upon transfer of title and risk of
loss to the customer provided there is evidence of an arrangement, fees are
fixed or determinable, no significant obligations remain, collection of the
related receivable is reasonably assured and customer acceptance criteria have
been successfully demonstrated. Customer acceptance provisions include final
testing and acceptance carried out prior to shipment. These pre-shipment testing
and acceptance procedures ensure that the product meets the published
specification requirements before the product is shipped. Shipping terms are
customarily FOB shipping point. Revenue from software licenses is recorded
provided there is evidence of an arrangement, fees are fixed or determinable, no
significant obligations remain, collection of the related receivable is
reasonably assured and customer acceptance criteria have been successfully
demonstrated. Costs incurred for shipping and handling are included in cost of
sales. A provision for product warranty costs is recorded to estimate costs
associated with such warranty liabilities. In the event significant
post-shipment obligations or uncertainties remain, revenue is deferred and
recognized when such obligations are fulfilled by the Company or the
uncertainties are resolved.
The Company enters into two types of significant multi-element
arrangements; tailored software arrangements, described below, and software
sales with post-contract support. Revenue for the undelivered support on
multi-element software sales with post-contract support is deferred based on
vendor specific objective evidence of the value of the support.
Revenue from services is recognized as the services are rendered. Revenue
from fixed fee tailored software consulting contracts and long-term contracts
are recognized using the percentage-of-completion method of contract accounting
based on the ratio that costs incurred to date bear to estimated total costs at
completion. Revisions in revenue and cost estimates are recorded in the periods
in which the facts that require such revisions become known. Losses, if any, are
provided for in the period in which such losses are first identified by
management. For tailored software contracts, the Company provides significant
consulting services to tailor the software to the customer's environment. The
Company utilizes the percentage-of-completion method due to the significance of
the service effort. If the development is uncertain or experimental in nature,
completed contract accounting is applied. Generally, the terms of long-term
contracts provide for progress billing based on completion of certain phases of
work. For maintenance contracts, service revenue is recognized ratably over the
term of the maintenance contract. Deferred revenue primarily relates to those
services and maintenance arrangements.
50
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In transactions that include multiple products and/or services, the Company
allocates the sales value among each of the deliverables based on their relative
fair values.
STOCK-BASED COMPENSATION
The Company's employee stock compensation plans are accounted for in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," ("APB 25") and related interpretations. Under this
method, no compensation expense is recognized as long as the exercise price
equals or exceeds the market price of the underlying stock on the date of the
grant. The Company elected the disclosure-only alternative permitted under
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," ("FAS 123") for fixed stock-based awards to employees. All non-
employee stock-based awards are accounted for in accordance with FAS 123.
INCOME TAXES
Deferred income tax assets and liabilities are recognized for the expected
future tax consequences, utilizing current tax rates, of temporary differences
between the carrying amounts and the tax bases of assets and liabilities.
Deferred tax assets are recognized, net of any valuation allowance, for the
estimated future tax effects of deductible temporary differences and tax
operating loss and credit carryforwards.
EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is calculated based on the weighted average
number of common shares outstanding during the period. Diluted earnings per
share is calculated based on the weighted average number of common shares and
dilutive common equivalent shares assumed outstanding during the period. Shares
used to compute diluted earnings per share exclude common share equivalents if
their inclusion would have an anti-dilutive effect.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and cash equivalents,
investments in long- and short-term debt securities, accounts receivable,
accounts payable, accrued expenses and long- and short-term debt. The carrying
amounts reported in the balance sheets approximate their fair values at both
September 30, 2001 and 2000.
RECENT ACCOUNTING PRONOUNCEMENTS
In October 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 144 ("FAS 144"), "Accounting for the
Impairment or Disposal of Long-Lived Assets." FAS 144 supercedes FASB Statement
No. 121 ("FAS 121") "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of." FAS 144 applies to all long-lived assets
and consequently amends Accounting Principles Board Opinion No. 30 ("APB 30"),
"Reporting Results of Operations -- Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions." FAS 144 is effective for financial statements issued
for fiscal years beginning after December 15, 2001. Management is currently
evaluating the effect, if any, FAS 144 will have on its financial position and
results of operations.
In July 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141 ("FAS 141"), "Business Combinations" and
No. 142 ("FAS 142"), "Goodwill and Other Intangible Assets" effective for fiscal
years beginning after December 15, 2001. FAS 141 requires business combinations
initiated after June 30, 2001 to be accounted for using the purchase method of
accounting, and broadens the criteria for recording intangible assets separate
from goodwill. FAS 142 requires that goodwill
51
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and identifiable intangible assets determined to have an indefinite life no
longer be amortized, but instead be tested for impairment at least annually. The
Company is required to adopt FAS 142 in the fiscal year beginning October 1,
2002, at which time amortization of goodwill on purchase transactions prior to
July 1, 2001 will cease. The application of the separate recognition criteria
for intangible assets and the cessation of amortization of goodwill and result
in goodwill of approximately $67 million at September 30, 2001 being subject to
an annual impairment test, unless interim indicators indicate a need for an
interim test, and a resulting reduction of goodwill amortization expense of
approximately $32 million, $22 million and $11 million in fiscal 2002, 2003 and
2004, respectively.
3. BUSINESS ACQUISITIONS
POOLING OF INTERESTS TRANSACTIONS
PTI
On July 12, 2001, the Brooks acquired PTI in a transaction accounted for as
a pooling of interests initiated prior to June 30, 2001 in exchange for 715,004
shares of the Company's common stock. The acquisition has been accounted for as
a pooling of interests. PTI is engaged in the development, production and
distribution of air-flow regulation systems for clean room and process equipment
in the semiconductor industry.
The accompanying consolidated financial statements and notes thereto have
been restated to include the financial position and results of operations for
PTI for all periods prior to the acquisition. As a result of conforming
dissimilar year-ends, PTI's results of operations for the three months ended
December 31, 2000, are included in both of the Company's fiscal years 2001 and
2000. Accordingly, an amount equal to PTI's net income for the three months
ended December 31, 2000, was eliminated from consolidated retained earnings for
the year ended September 30, 2001. PTI's revenues, net income and net income
attributable to common stockholders for that quarter were $3.8 million, $536,000
and $506,000, respectively.
Irvine Optical
On May 5, 2000, the Company acquired Irvine Optical in exchange for 309,013
shares of Brooks common stock. The acquisition was accounted for as a pooling of
interests. Irvine Optical is engaged principally in the design, engineering and
manufacturing of wafer handling and inspection equipment for sale primarily to
the semiconductor industry. In connection with this acquisition, the Company
incurred $0.6 million of costs, consisting primarily of transaction costs to
effect the acquisition.
The accompanying consolidated financial statements and notes thereto have
been restated to include the financial position and results of operations for
Irvine Optical for all periods prior to the acquisition. As a result of
conforming dissimilar year-ends, Irvine Optical's results of operations for the
three months ended December 31, 1999, are included in both of the Company's
fiscal years 2000 and 1999. Accordingly, an amount equal to Irvine Optical's net
income for the three months ended December 31, 1999, was eliminated from
consolidated retained earnings for the year ended September 30, 2000. Irvine
Optical's revenues and net income for that quarter were $4.1 million and $0.1
million, respectively.
52
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The results of operations previously reported by the separate companies
prior to their respective acquisitions and the combined amounts presented in the
accompanying Consolidated Statements of Operations are as follows (in
thousands):
NINE MONTHS SIX MONTHS
ENDED ENDED YEAR ENDED SEPTEMBER 30,
JUNE 30, MARCH 31, ------------------------
2001 2000 2000 1999
----------- ----------- ---------- ----------
(UNAUDITED) (UNAUDITED)
Revenues
Brooks Automation, Inc. $310,085 $123,290 $310,436 $103,906
Irvine Optical LLC -- 10,663 10,663 11,049
Progressive Technologies, Inc. 10,107 7,222 16,085 8,002
-------- -------- -------- --------
$320,192 $141,175 $337,184 $122,957
======== ======== ======== ========
Net income (loss)
Brooks Automation, Inc. $ 2,580 $ 4,317 $ 12,193 $ (7,884)
Irvine Optical LLC -- 560 560 (1,958)
Progressive Technologies, Inc. 861 984 2,356 308
-------- -------- -------- --------
$ 3,441 $ 5,861 $ 15,109 $ (9,534)
======== ======== ======== ========
Smart Machines
On August 31, 1999, the Company acquired Smart Machines and issued 496,640
shares of common stock in exchange for all of the outstanding common and
preferred shares of Smart Machines. The transaction was accounted for as a
pooling of interests. Smart Machines is located in San Jose, California, and
manufactures direct drive Selectively Compliant Assembly Robot Arm ("SCARA")
atmospheric and vacuum robots. In connection with this acquisition, the Company
incurred $1.2 million of costs, consisting primarily of transaction costs to
affect the acquisition. As a result of conforming dissimilar year-ends, Smart
Machines' results of operations for the three months ended December 31, 1998,
are included in both of the Company's fiscal years 1999 and 1998. Accordingly,
an amount equal to Smart Machines' net loss applicable to common stockholders
for the three months ended December 31, 1998, was eliminated from supplementary
consolidated retained earnings for the year ended September 30, 1999. Smart
Machines' revenues, net loss and net loss applicable to common stockholders for
that quarter were $0.2 million, $1.4 million and $1.6 million, respectively.
PURCHASE TRANSACTIONS
e-Diagnostics
On June 26, 2001, the Company completed the purchase of KLA-Tencor's
e-Diagnostics product business. The e-Diagnostics programs enable service and
support teams to remotely access their tools in customer fabs in real-time to
diagnose and resolve problems. The acquisition was recorded using the purchase
method of accounting in accordance with APB 16. In consideration, the Company
issued 331,153 shares of Brooks common stock with a market value of $16.0
million at the time of issuance, and issued a $17.0 million one-year,
interest-free note payable to the selling stockholders. The note is payable in
cash or common stock, or any combination thereof, at the Company's discretion.
In addition, the Company issued 50,000 shares of its common stock, with certain
trading restrictions, to employees of the acquired business. These shares had a
market value of $2.2 million at the time of issuance. There is also purchase
consideration of up to $8.0 million in the aggregate over the next three years,
contingent upon meeting certain performance objectives. The contingent
consideration will be recorded as an addition to the purchase price at the time
it becomes probable
53
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
that a payment will be required and the amount can be reasonably estimated. In
addition, there is also the potential for royalty payments by the Company to
KLA-Tencor over the next four years, contingent upon meeting certain revenue
levels. The royalties will be recorded as costs of sales as earned. The
contingent consideration and royalties are payable in cash or Brooks common
stock, or any combination thereof, at the Company's discretion. At September 30,
2001, no amounts had been paid or were due under the royalty or contingent
consideration arrangements.
A portion of the excess of purchase price over fair value of net assets
acquired was allocated to certain identifiable intangible assets. The balance of
the excess was recorded as goodwill. The allocation of the $34.1 million of
excess purchase price over the fair value of net tangible assets acquired to
specific intangible assets and their estimated useful lives is as follows
(dollars in thousands):
ESTIMATED
ALLOCATION USEFUL LIFE
---------- -----------
Completed technology $ 7,890 5 years
Assembled workforces 1,130 4 years
Goodwill 25,118 3 years
-------
$34,138
=======
The intangible assets are being amortized using the straight-line method.
Pro forma results of operations are not presented as the amounts are not
material compared to the Company's historical results.
CCST
On June 25, 2001, the Company acquired CCST, a supplier of 300mm automation
test and certification software located in Williston, Vermont. The acquisition
was recorded using the purchase method of accounting in accordance with APB 16.
In consideration, the Company paid $1.2 million of cash and issued 78,475 shares
of Brooks common stock with a market value of $4.0 million at the time of
issuance.
A portion of the excess of purchase price over fair value of net
liabilities assumed was allocated to certain identifiable intangible assets. The
balance of the excess was recorded as goodwill. The allocation of the $7.4
million of excess purchase price over the fair value of net liabilities assumed
to specific intangible assets and their estimated useful lives is as follows
(dollars in thousands):
ESTIMATED
ALLOCATION USEFUL LIFE
---------- -----------
Completed technology $4,580 4 years
Trademarks and trade names 60 2 years
Assembled workforces 480 4 years
Goodwill 2,235 3 years
------
$7,355
======
The intangible assets are being amortized using the straight-line method.
Pro forma results of operations are not presented as the amounts are not
material compared to the Company's historical results.
SimCon
On May 15, 2001, Brooks acquired SimCon, a privately-held value-added
reseller for the Company's simulation, scheduling, production analysis and
dispatching software, headquartered in Belgium. The acquisition was recorded
using the purchase method of accounting in accordance with APB 16. In
consideration, the Company paid $1.1 million of cash, issued 13,741 shares of
Brooks common stock with a market value of
54
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$750,000 at the time of issuance and provided for additional purchase
consideration of up to $900,000 in the aggregate through September 2002,
contingent upon meeting certain performance objectives. The contingent
consideration will be recorded as an addition to purchase price at the time it
becomes probable that a payment will be required and the amount can be
reasonably estimated. In addition, the Company issued an interest-free note
payable to the selling stockholders for shares of Brooks common stock with a
market value of $750,000, due one year from the transaction closing date. The
Company has discounted and recorded the note payable at 4.75%, to $714,375, for
accounting purposes and is amortizing the resulting discount to interest expense
through the note's maturity date. The number of shares to be issued will be
based upon the market value of the Company's common stock at the time of
maturity. The excess of purchase price over net tangible assets acquired of $2.1
million has been recorded as goodwill and will be amortized over three years
using the straight-line method. Pro forma results of operations are not
presented for the SimCon acquisition as the amounts are not material compared to
the Company's historical results. At September 30, 2001 there were no amounts
earned or due under contingent consideration.
SEMY
On February 16, 2001, the Company acquired SEMY, a wholly owned subsidiary
of Semitool, Inc. SEMY, located in Phoenix, Arizona, is a provider of advanced
process and equipment control systems for the semiconductor industry. In
consideration, the Company paid $36.0 million cash and issued 73,243 shares of
Brooks common stock with a market value of $2.7 million at the time of issuance.
The transaction was recorded using the purchase method of accounting in
accordance with APB 16.
A portion of the excess of purchase price over fair value of net assets
acquired was allocated to certain identifiable intangible assets. The balance of
the excess was recorded as goodwill. The allocation of the $33.6 million of
excess purchase price over the fair value of net assets acquired to specific
intangible assets and their estimated useful lives is as follows (dollars in
thousands):
ESTIMATED
ALLOCATION USEFUL LIFE
---------- -----------
Patents $ 300 5 years
Completed technology 14,600 5 years
Trademarks and trade names 700 5 years
Non-competition agreements 1,100 3 years
Assembled workforces 3,100 4 years
Goodwill 13,808 3 years
-------
$33,608
=======
The assets are being amortized using the straight-line method.
ASI-Japan
On December 13, 2000, the Company acquired substantially all of the assets
of the business unit which acts as a distributor for ASI's software products
("ASI-Japan"), from Daifuku Co., Ltd. of Japan ("Daifuku"). The ASI-Japan
business unit provides direct sales and support for ASI's integrated factory
automation solutions to simulation and scheduling customers in Japan. In
consideration, the Company paid $1.1 million cash. The transaction was recorded
using the purchase method of accounting in accordance with APB 16. The estimate
of the excess of purchase price over net assets acquired of $1.1 million was
recorded as goodwill and is being amortized over three years using the
straight-line method. Pro forma results of operations are not presented for the
ASI-Japan acquisition as the amounts are immaterial compared to the Company's
historical results.
55
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
MiTeX
On June 23, 2000, the Company acquired substantially all of the assets of
MiTeX. MiTeX, located in Canton, Michigan, provides run-to-run controller
technology. In consideration, the Company paid $300,000 cash, 5,486 shares of
Brooks common stock with a market value of $0.3 million at the time of issuance
and the potential for an additional amount ("royalties") of up to $5.0 million
in the aggregate over the next five years. The royalties are calculated at the
end of each fiscal year based on net revenue and gross margin performance of the
MiTeX business unit. These royalties will be recorded to Cost of product
revenues in the year that the costs are incurred. Amounts recorded to Cost of
product revenues in the years ended September 30, 2001 and 2000 were immaterial.
The acquisition was accounted for using the purchase method of accounting in
accordance with APB 16.
ASC/ASI
On January 6, 2000, the Company completed the acquisition of the businesses
of ASC and ASI from Daifuku America. ASC is a material handling software and
systems integration company focusing on manufacturing and distribution of
logistic systems for the semiconductor industry. ASI develops, markets and sells
robotic and material handling simulation, scheduling and real time dispatching
software for the semiconductor industry. At closing, the Company paid $27.0
million in cash, issued 535,404 shares of Brooks common stock with a value of
$14.7 million and issued a $16.0 million promissory note payable in one year,
bearing interest at a rate of 4.0% per annum. The note was discharged on January
5, 2001. The acquisition was accounted for using the purchase method of
accounting in accordance with APB 16.
The excess of purchase price over the fair value of net liabilities assumed
and identifiable intangible assets was recorded based upon analyses of their
fair values by an independent appraiser. The balance of the excess was recorded
as goodwill. In January 2001, the Company received $0.9 million of cash from the
selling stockholders as settlement for the shortfall in the net asset values
acquired. The Company recorded the cash receipt with a corresponding reduction
to acquired intangible assets.
Infab
On September 30, 1999, the Company acquired certain assets of Infab in
exchange for 868,572 shares of Brooks common stock in a purchase transaction.
Infab is a worldwide supplier of advanced factory automation systems
headquartered in Germany. The assets purchased principally included fixed
assets, inventory, receivables, patents and intellectual property.
As part of the preliminary purchase price allocation recorded at September
30, 1999, the Company had established an accrual of $2.7 million related
primarily to severance costs and costs to exit certain duplicate facilities.
During the year ended September 30, 2000, review of these accruals determined
that the accruals were not required due to changed conditions and circumstances
subsequent to the preliminary purchase price allocation. Accordingly, these
accruals were reversed and recorded as a purchase accounting adjustment to
decrease goodwill. Additionally, during the year ended September 30, 2000, the
Company finalized its evaluation of the fair value of assets acquired and
liabilities assumed. This evaluation resulted in a reduction to the value of net
tangible assets acquired of $7.1 million, primarily related to inventories and
accounts receivable, and resulting in an increase to goodwill for the same
amount. As settlement of this shortfall during fiscal 2001, the Company received
$5.1 million of cash from the sellers and recorded a corresponding reduction to
acquired intangible assets. In addition, the Company adjusted goodwill by $1.1
million in the year ended September 30, 2001 in relation to 45,714 shares of its
common stock which had been held in escrow pending the post-closing review of
the assets purchased.
The following pro forma results of operations have been prepared as though
the acquisitions of SEMY and of ASC and ASI had occurred as of the beginning of
the fiscal year in which the respective acquisitions
56
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
occurred. Pro forma results of the other companies acquired during the years
ended September 30, 2001 and 2000 were not material compared to the Company's
historical results. This pro forma financial information does not purport to be
indicative of the results of operations that would have been attained had the
acquisitions been made as of the beginning of the periods presented or of
results of operations that may occur in the future (in thousands, except per
share data):
YEAR ENDED
SEPTEMBER 30,
-------------------
2001 2000
-------- --------
(UNAUDITED)
Revenues $389,637 $362,474
Net income (loss) $(31,321) $ 5,181
Net income (loss) attributable to common stockholders $(31,411) $ 5,061
Net income (loss) per share attributable to common
stockholders $ (1.74) $ 0.28
4. EARNINGS (LOSS) PER SHARE
Below is a reconciliation of earnings (loss) per share and weighted average
common shares outstanding for purposes of calculating basic and diluted earnings
(loss) per share (in thousands, except per share data):
YEAR ENDED SEPTEMBER 30,
-----------------------------
2001 2000 1999
-------- ------- --------
Basic earnings (loss) per share:
Net income (loss) $(29,660) $15,109 $ (9,534)
Accretion and dividends on preferred stock (90) (120) (774)
-------- ------- --------
Net income (loss) attributable to common stockholders $(29,750) $14,989 $(10,308)
======== ======= ========
Weighted average common shares outstanding 18,015 15,661 11,542
======== ======= ========
Basic earnings (loss) per share attributable to
common stockholders $ (1.65) $ 0.96 $ (0.89)
======== ======= ========
Diluted earnings (loss) per share:
Net income (loss) used to compute diluted earnings
(loss) per share $(29,750) $15,109 $(10,308)
======== ======= ========
Weighted average common shares outstanding 18,015 15,661 11,542
Dilutive stock options, warrants and preferred stock
conversions -- 1,531 --
-------- ------- --------
Weighted average common shares outstanding for
purposes of computing diluted earnings (loss) per
share 18,015 17,192 11,542
======== ======= ========
Diluted earnings (loss) per share $ (1.65) $ 0.88 $ (0.89)
======== ======= ========
Options to purchase and assumed conversions totaling approximately
3,921,000 shares of common stock were excluded from the computation of diluted
loss per share attributable to common stockholders for the year ended September
30, 2001, as their effect would be anti-dilutive. Options and warrants to
purchase approximately 291,000 shares of common stock were excluded from the
computation of diluted earnings per share attributable to common stockholders
for the year ended September 30, 2000, as their effect would be anti-dilutive.
Options and warrants to purchase approximately 887,000 shares of common stock
and 300,000 shares of preferred stock were excluded from the computation of
diluted loss per share attributable to common
57
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
stockholders for the year ended September 30, 1999, as their effect would be
anti-dilutive. However, these options, warrants and conversions could become
dilutive in future periods.
5. INCOME TAXES
The components of the income tax provision (benefit) are as follows (in
thousands):
YEAR ENDED SEPTEMBER 30,
------------------------------
2001 2000 1999
-------- ------- -------
Current:
Federal $ -- $ 9,685 $ 397
State 343 1,237 82
Foreign 7,268 7,737 1,664
-------- ------- -------
7,611 18,659 2,143
-------- ------- -------
Deferred:
Federal (11,916) (5,206) (2,403)
State (2,134) 55 (429)
Foreign -- 101 (185)
-------- ------- -------
(14,050) (5,050) (3,017)
-------- ------- -------
$ (6,439) $13,609 $ (874)
======== ======= =======
The components of income (loss) before income taxes, but including minority
interests, are as follows (in thousands):
YEAR ENDED SEPTEMBER 30,
-------------------------------
2001 2000 1999
-------- ------- --------
Domestic $(47,342) $21,930 $(12,601)
Foreign 10,819 6,514 2,153
-------- ------- --------
$(36,523) $28,444 $(10,448)
======== ======= ========
The significant components of the net deferred tax asset are as follows (in
thousands):
YEAR ENDED SEPTEMBER 30,
-----------------------------
2001 2000 1999
------- ------- -------
Reserves not currently deductible $35,770 $20,624 $ 7,417
Federal and state tax credits 11,721 8,203 5,195
Capitalized research and development 1,340 1,895 2,894
Net operating loss carryforwards 5,314 6,407 6,525
------- ------- -------
Deferred tax asset 54,145 37,129 22,031
------- ------- -------
Depreciation and amortization 5,780 5,088 174
Other 1,189 119 --
------- ------- -------
Deferred tax liability 6,969 5,207 174
------- ------- -------
Valuation reserve 8,257 5,548 11,297
------- ------- -------
Net deferred tax asset $38,919 $26,374 $10,560
======= ======= =======
58
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Reserves not currently deductible consist primarily of temporary
differences related to amortization of goodwill and other intangibles, accrued
expenses, depreciation, allowances for doubtful accounts and inventory reserves.
The differences between the income tax provision (benefit) and income taxes
computed using the applicable U.S. statutory federal tax rate are as follows (in
thousands):
YEAR ENDED SEPTEMBER 30,
------------------------------
2001 2000 1999
-------- ------- -------
Income tax provision (benefit) computed at federal
statutory rate $(12,783) $ 9,955 $(3,658)
State income taxes, net of federal taxes (benefit) (1,164) 813 (245)
Research and development tax credits (1,700) (1,085) (544)
Foreign sales corporation tax benefit (205) (582) (36)
Foreign income taxed at different rates 1,910 1,157 (81)
Nondeductible transaction expenses 1,004 379 371
Change in deferred tax asset valuation allowance 2,708 (553) 1,616
Permanent differences 86 307 7
Elimination of Acquisition
Corporation's provision -- -- 893
Nondeductible amortization of goodwill 5,057 3,751 --
Foreign tax credit carryforwards (2,708) (2,754) --
Withholding taxes 1,207 2,125 --
Other 149 96 803
-------- ------- -------
$ (6,439) $13,609 $ (874)
======== ======= =======
The Company does not provide for U.S. income taxes applicable to
undistributed earnings of its foreign subsidiaries since these earnings are
indefinitely reinvested. A valuation allowance has been established for certain
of the future domestic income tax benefits primarily related to Research and
Development and Foreign Tax Credits based on management's assessment that it is
more likely than not that such benefits will not be realized.
As of September 30, 2001, the Company had federal and state net operating
loss carryforwards of approximately $18.5 million and federal and state research
and development tax credit carryforwards of approximately $7.6 million and
foreign tax credit carryforwards of approximately $4.1 million available to
reduce future tax liabilities, which expire at various dates through 2021. The
ultimate realization of the remaining loss carryforwards is dependent upon the
generation of sufficient taxable income in respective jurisdictions. Although
realization is not assured, the Company believes it is more likely than not that
all of the deferred tax assets will be realized. The amount of the deferred tax
asset considered realizable, however, could be reduced in the near term if
estimates of future taxable income during the carryforward period are reduced.
6. FINANCING ARRANGEMENTS
On May 23, 2001, the Company completed the private placement of $175.0
million aggregate principal amount of 4.75% Convertible Subordinated Notes due
in 2008. The amount sold includes $25.0 million principal amount of notes
purchased by the initial purchaser upon exercise in full of their thirty day
option to purchase additional notes. The Company received net proceeds of $169.5
million from the sale. Interest on the notes will be paid on June 1 and December
1 of each year, with the first interest payment due on December 1, 2001. The
notes will mature on June 1, 2008. The Company may redeem the notes at a premium
of 14.2% on or after June 6, 2004, or earlier if the price of the Company's
common stock reaches certain prices. Holders
59
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
may require the Company to repurchase the notes upon a change in control of the
Company in certain circumstances. The notes are convertible at any time prior to
maturity, at the option of the holders, into shares of the Company's common
stock, at a conversion price of $70.23 per share, subject to certain
adjustments. The notes are subordinated to the Company's senior indebtedness and
structurally subordinated to all indebtedness and other liabilities of the
Company's subsidiaries.
The Company has a $10.0 million uncommitted demand promissory note credit
facility with ABN AMRO on May 2, 2000. The facility is payable on demand or on
December 31, 2001, whichever occurs first. ABN AMRO is not obligated to extend
loans or issue letters of credit under this facility. The interest rates for
borrowings and letters of credit under the facility are expressed in relation to
LIBOR and a margin of 1.75%, or at 0.75% above ABN AMRO's base rate.
Approximately $1.1 million in face amount of letters of credit outstanding under
the original facility were transferred to the replacement facility. At September
30, 2001, $1.2 million of the facility was in use, all of it for letters of
credit.
In connection with the acquisition of the e-Diagnostics product line
business, the Company issued a $17.0 million one-year note payable to the
selling stockholders. The note becomes due on June 25, 2002 and is payable in
cash or common stock, or any combination thereof, at the Company's discretion.
The Company has discounted the note payable using an imputed interest rate of
4.75%, to $16.2 million, for accounting purposes, and is amortizing the
resulting discount to interest expense through the note's maturity date.
In connection with the acquisition of SimCon, the Company issued a note
payable to the selling stockholders for $750,000, payable in one year. The note
becomes due on May 14, 2002 and is payable in common stock. The Company has
discounted the note payable using an imputed interest rate of 4.75%, to
$714,375, for accounting purposes and is amortizing the resulting discount to
interest expense through the notes maturity date.
In connection with the acquisition of ASC and ASI, the Company issued a
promissory note to Daifuku America in the amount of $16.0 million, bearing
interest at 4.0% per annum. The interest on the note was paid quarterly and the
note was repaid on January 5, 2001.
Debt consists of the following (in thousands):
SEPTEMBER 30,
-------------------
2001 2000
-------- -------
Convertible subordinated notes at 4.75%, due on June 1, 2008 $175,000 $ --
Notes payable 17,122 16,000
Revolving line of credit -- 350
Credit facility for working capital borrowings at 8.92% per
annum, collateralized by assets 325 775
Capital lease obligations at rates of 5.0% to 21.0% per
annum, collateralized by certain fixed assets, expired
November 2000 -- 26
Other 98 55
-------- -------
192,545 17,206
Less current portion 17,514 16,874
-------- -------
Long-term debt $175,031 $ 332
======== =======
At September 30, 2001, the Company had working capital loans of $0.3
million outstanding, maturing through April 2002. In November 1998, Smart
Machines entered into a loan and security agreement with a leasing company. The
agreement allowed for working capital borrowings of up to $2.0 million and
equipment loans of up to $0.5 million. The ability to borrow against this
facility expired on December 31, 1999. The loans are payable in monthly
installments of principal and interest, with a 10.0% principal payback due at
the time of
60
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the final payment. Annual principal payments due under these notes are $0.3
million in the year ended September 30, 2002 after which the loans will be paid
in full. All borrowings are collateralized by Smart Machines' assets.
7. POSTRETIREMENT BENEFITS
The Company sponsors defined contribution plans that meet the requirements
of Section 401(k) of the Internal Revenue Code. All United States employees of
the Company who meet minimum age and service requirements are eligible to
participate in the plan. The plan allows employees to invest, on a pre-tax
basis, a percentage of their annual salary subject to statutory limitations.
The Company's contribution expense for worldwide defined contribution plans
was $2.2 million, $1.1 million and $0.2 million in the years ended September 30,
2001, 2000 and 1999, respectively.
8. STOCKHOLDERS' EQUITY AND CONVERTIBLE REDEEMABLE PREFERRED STOCK
PREFERRED STOCK
At September 30, 2001 and 2000, there were one million shares of preferred
stock, $0.01 par value per share authorized; however, none were issued or
outstanding. Preferred stock may be issued at the discretion of the Board of
Directors without stockholder approval with such designations, rights and
preferences as the Board of Directors may determine.
RESTRICTED COMMON STOCK
In connection with the acquisition of PTI by the Company, the Company
acquired 9,208 shares of PTI restricted common stock. The PTI restricted common
stock was nonvoting and was convertible into PTI common stock, and was
subsequently converted into Brooks common stock upon its acquisition by the
Company.
CONVERTIBLE REDEEMABLE PREFERRED STOCK
In connection with the acquisition of PTI, the Company acquired 90,000
shares of PTI Series A Convertible Redeemable Preferred Stock. The conversion
ratio was 1:3.48 PTI preferred shares to Brooks common shares. These shares were
converted into common shares of the Company upon the acquisition of PTI.
COMMON STOCK OFFERING
On March 7, 2000, the Company completed a public offering of 3,250,000
shares of its common stock, of which 2,750,000 shares were offered by the
Company and 500,000 were offered by selling stockholders. The Company realized
proceeds, net of $12.9 million of issuance costs, of $220.5 million on the sale
of the initial 2,750,000 shares and the additional 320,500 shares purchased by
the underwriters from the Company on March 23, 2000 to cover over-allotments of
shares. The Company did not receive any proceeds from the sale of shares by the
selling stockholders.
WARRANTS
Prior to its acquisition by the Company, PTI had issued warrants to
purchase 10,000 shares of PTI common stock at an exercise price of $1.60 per
share. These warrants were excercised for shares of PTI common stock on July 12,
2001 immediately prior to the acquisition of PTI by the Company. These shares
were then exchanged for approximately 31,000 shares of the Company's common
stock in connection with the acquisition. At September 30, 2001, there were no
warrants outstanding.
61
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In connection with debt it had issued prior to its acquisition by the
Company, Smart Machines had issued warrants to purchase 10,000 shares of its
Series C preferred stock, 57,182 shares of its Series D preferred stock, 961,234
shares of its Series E stock and 42,658 shares of its common stock. These
warrants were converted into warrants to purchase the Company's common stock on
August 31, 1999, in conjunction with the acquisition of Smart Machines. The
outstanding warrants expired on May 31, 2001. At September 30, 2000, warrants to
acquire 84,691 shares of common stock were outstanding, at an exercise price of
$25.56 per share.
RIGHTS DISTRIBUTION
In July 1997, the Board of Directors declared a dividend of one preferred
purchase right (a "right") for each share of common stock outstanding on August
12, 1997. Each right entitles the registered holder to purchase from the
Company, upon certain triggering events, one one-thousandth of a share of Series
A Junior Participating Preferred Stock (the "Series A Preferred Shares"), par
value $0.01 per share, of the Company, at a purchase price of $135.00 per one
one-thousandth of a Series A Preferred Share, subject to adjustment. Redemption
of the rights could generally discourage a merger or tender offer involving the
securities of the Company that is not approved by the Company's Board of
Directors by increasing the cost of effecting any such transaction and,
accordingly, could have an adverse impact on stockholders who might want to vote
in favor of such merger or participate in such tender offer. The rights will
expire on the earlier of July 31, 2007, or the date on which the rights are
redeemed. The terms of the rights may generally be amended by the Board of
Directors without the consent of the holders of the rights.
9. STOCK PLANS
2000 COMBINATION STOCK OPTION PLAN
The purposes of the 2000 Combination Stock Option Plan (the "2000 Plan"),
adopted by the Board of Directors of the Company in February 2000, are to
attract and retain employees and to provide an incentive for them to assist the
Company to achieve long-range performance goals and to enable them to
participate in the long-term growth of the Company. Under the 2000 Plan the
Company may grant (i) incentive stock options intended to qualify under Section
422 of the Internal Revenue Code of 1986, as amended; and (ii) options that are
not qualified as incentive stock options ("nonqualified stock options"). All
employees of the Company or any affiliate of the Company are eligible to
participate in the 2000 Plan. Options under the 2000 Plan generally vest over
four years and expire seven years from the date of grant. A total of 1,000,000
shares of common stock were reserved for issuance under the 2000 Plan. Of these
shares, options to purchase 644,600 shares are outstanding and 355,400 shares
remain available for grant as of September 30, 2001.
1998 EMPLOYEE EQUITY INCENTIVE PLAN
The purposes of the 1998 Employee Equity Incentive Plan (the "1998 Plan"),
adopted by the Board of Directors of the Company in April 1998, are to attract
and retain employees and provide an incentive for them to assist the Company in
achieving long-range performance goals, and to enable them to participate in the
long-term growth of the Company. All employees of the Company, other than its
officers and directors, (including contractors, consultants, service providers
or others) who are in a position to contribute to the long-term success and
growth of the Company, are eligible to participate in the 1998 Plan. A total of
3,550,000 shares of common stock have been reserved for issuance under the 1998
Plan. Of these shares, options on 2,701,782 shares are outstanding and 602,645
shares remain available for grant as of September 30, 2001. Options under the
1998 Plan generally vest over a period of four years and generally expire ten
years from the date of grant. In order to align the 1998 Plan with its current
practices, in January 2000, the Board of Directors amended the 1998 Plan to
eliminate the Company's ability to award nonqualified stock options with
exercise prices at less than fair market value.
62
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1995 EMPLOYEE STOCK PURCHASE PLAN
On February 22, 1996, the stockholders approved the 1995 Employee Stock
Purchase Plan (the "1995 Plan") which enables eligible employees to purchase
shares of the Company's common stock. Under the 1995 Plan, eligible employees
may purchase up to an aggregate of 750,000 shares during six-month offering
periods commencing on January 1 and July 1 of each year at a price per share of
85% of the lower of the market price per share on the first or last day of each
six-month offering period. Participating employees may elect to have up to 10%
of base pay withheld and applied toward the purchase of such shares. The rights
of participating employees under the 1995 Plan terminate upon voluntary
withdrawal from the plan at any time or upon termination of employment. As of
September 30, 2001, 296,675 shares of common stock have been purchased under the
1995 Plan and 453,325 remain available for purchase.
1993 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The purpose of the 1993 Non-Employee Director Stock Option Plan (the
"Directors Plan") is to attract and retain the services of experienced and
knowledgeable independent directors of the Company for the benefit of the
Company and its stockholders and to provide additional incentives for such
independent directors to continue to work for the best interests of the Company
and its stockholders through continuing ownership of its common stock. Each
director who is not an employee of the Company or any of its subsidiaries is
eligible to receive options under the Directors Plan. Under the Directors Plan,
each eligible director receives an automatic grant of an option to purchase
10,000 shares of common stock upon becoming a director of the Company and an
option to purchase 5,000 shares on July 1 each year thereafter. Options granted
under the Directors Plan generally vest over a period of five years and
generally expire ten years from the date of grant. A total of 190,000 shares of
common stock have been reserved for issuance under the Directors Plan. Of these
shares, options on 96,000 shares are outstanding and 41,000 shares remain
available for grant as of September 30, 2001.
1992 COMBINATION STOCK OPTION PLAN
Under the Company's 1992 Stock Option Plan (the "1992 Plan"), the Company
may grant both incentive stock options and nonqualified stock options. Incentive
stock options may only be granted to persons who are employees of the Company at
the time of grant, which may include officers and directors who are also
employees. Nonqualified stock options may be granted to persons who are
officers, directors or employees of or consultants or advisors to the Company or
persons who are in a position to contribute to the long-term success and growth
of the Company at the time of grant. Options granted under the 1992 Plan
generally vest over a period of four years and generally expire ten years from
the date of grant. A total of 1,950,000 shares of common stock have been
reserved for issuance under the 1992 Plan. Of these shares, options on 693,288
shares are outstanding and 62,001 shares remain available for grant as of
September 30, 2001.
STOCK OPTIONS OF ACQUIRED COMPANY
In connection with the acquisition of PTI, the Company assumed a stock
option plan that was adopted by PTI on October 10, 1991. At acquisition, 32,018
options to purchase PTI common stock were outstanding and converted in 99,470
options to purchase the Company's common stock. The Company does not intend to
issue any additional options under the PTI stock option plan.
63
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
STOCK OPTION ACTIVITY AND PRO FORMA INFORMATION
Aggregate stock option activity for all plans for the years ended September
30, 2001, 2000 and 1999 is as follows:
YEAR ENDED SEPTEMBER 30,
------------------------------------------------------------------
2001 2000 1999
-------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- -------- --------- -------- --------- --------
Options outstanding at beginning of
year 3,399,313 $27.75 2,057,828 $14.77 1,157,038 $ 7.87
Granted 1,564,893 $31.73 2,094,033 $35.61 1,333,300 $18.29
Exercised (371,972) $18.14 (509,010) $ 8.52 (298,948) $ 3.77
Canceled (336,706) $30.37 (243,538) $25.73 (133,562) $14.81
--------- --------- ---------
Options outstanding at end of year 4,255,528 $29.85 3,399,313 $27.75 2,057,828 $14.77
========= ========= =========
Options exercisable at end of year 882,651 $24.95 425,615 $14.00 512,540 $ 6.76
========= ========= =========
Weighted average fair value of
options granted during the period $23.28 $25.97 $13.06
Options available for future grant 1,061,046
=========
The following table summarizes information about stock options outstanding
at September 30, 2001:
OPTIONS OUTSTANDING
-----------------------------------------
WEIGHTED- OPTIONS EXERCISABLE
AVERAGE ------------------------
REMAINING WEIGHTED- WEIGHTED-
RANGE OF CONTRACTUAL AVERAGE AVERAGE
EXERCISE PRICES SHARES LIFE (YEARS) EXERCISE PRICE SHARES EXERCISE PRICE
--------------- --------- ------------ -------------- ------- --------------
$ 0.5151 - $ 2.2100 91,377 5.95 $ 1.6285 71,957 $ 1.5815
$ 2.2130 - $ 9.6250 190,184 6.78 $ 8.3784 64,245 $ 7.1278
$ 9.8750 - $13.2500 191,400 5.67 $11.8749 139,250 $11.5454
$13.3750 - $23.3750 510,696 7.47 $17.6832 133,458 $18.0106
$23.5351 - $27.2500 338,168 7.25 $26.6704 124,449 $27.0718
$27.5630 870,950 6.26 $27.5630 0 $ 0.0000
$27.7500 - $30.1250 524,289 8.24 $30.0376 96,181 $30.0300
$30.2500 - $39.5000 420,909 7.44 $33.3293 43,267 $30.3667
$39.7500 442,750 6.19 $39.7500 110,686 $39.7500
$39.9600 - $52.1719 430,405 6.74 $43.3071 35,720 $44.7105
$53.7500 - $78.8750 244,100 6.80 $61.0640 63,363 $60.9617
$83.3750 300 5.55 $83.3750 75 $83.3750
------------------- --------- ---- -------- ------- --------
$ 0.5151 - $83.3750 4,255,528 6.91 $29.8478 882,651 $24.9477
========= =======
Pro forma information regarding net income (loss) is required by FAS 123,
and has been calculated as if the Company had accounted for its employee stock
options and stock purchase plan under the fair value method of that Statement.
The fair value of each option grant was estimated on the date of grant; the fair
64
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
value of each employee stock purchase was estimated on the commencement date of
each offering period using the Black-Scholes option-pricing model with the
following assumptions:
YEAR ENDED SEPTEMBER 30,
-------------------------------------
2001 2000 1999
----------- ---------- ----------
Risk-free interest rate 3.2% - 5.95% 6.3% - 6.6% 5.5% - 6.3%
Volatility 100% 103% 100%
Expected life (years) -- options 4.0 4.0 4.0
Dividend yield 0% 0% 0%
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows (in thousands, except per share information):
YEAR ENDED SEPTEMBER 30,
------------------------------
2001 2000 1999
-------- ------ --------
Pro forma net income (loss) $(43,056) $7,938 $(12,601)
Pro forma net income (loss) per share
Basic $ (2.39) $ 0.51 $ (1.09)
Diluted $ (2.39) $ 0.46 $ (1.09)
Because most options vest over several years and additional option grants
are expected to be made subsequent to September 30, 2001, the results of
applying the fair value method may have a materially different effect on pro
forma net income in future years.
10. ACQUISITION-RELATED AND RESTRUCTURING COSTS AND ACCRUALS
The Company recorded $9.3 million of acquisition-related and restructuring
charges during the year ended September 30, 2001, comprised of $3.9 million of
acquisition-related costs and $5.4 million of restructuring charges. Of the $3.9
million of acquisition-related transaction costs, $2.0 million relates to the
Company's pooling with PTI primarily for investment banking fees, legal fees and
accounting fees; $1.3 million relates to legal fees and costs to perform due
diligence incurred for the initial failed merger attempt with PRI, and $0.6
million relates to costs incurred for the failed acquisition of an unrelated
party, primarily related to legal fees and costs incurred in performing due
diligence reviews.
On September 5, 2001, the Company's Board of Directors approved a formal
plan of restructure in response to the current downturn in the semiconductor
industry. To that effect, the Company recorded restructuring charges of $5.4
million in the fourth quarter of the fiscal year. Of this amount, $2.0 million
is related to workforce reductions of approximately 140 employees, and is
expected to be paid in 2002 and $3.4 million is for the consolidation and
strategic focus realignment of several facilities, of which $0.1 million was
paid in fiscal 2001, $1.7 million is expected to be paid in fiscal 2002 and $1.6
million is expected to be paid in subsequent years. These measures were largely
intended to align the Company's capacity and infrastructure to anticipated
customer demand. Workforce charges, consisting principally of severance costs,
were recorded based on specific identification of employees to be terminated,
along with their job classifications or functions and their locations. The
employees terminated were across all functional areas of the business. The
charges for the Company's excess facilities were recorded to recognize the lower
of the amount of the remaining lease obligations, net of any sublease rentals,
or the expected lease settlement costs. These costs have been estimated from the
time when the space is expected to be vacated and there are no plans to utilize
the facility in the future. Costs incurred prior to vacating the facilities will
be charged to operations.
65
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
During the year ended September 30, 2000, the Company recorded
acquisition-related costs of $0.6 million, primarily for legal, accounting and
other costs associated with acquiring Irvine Optical.
During the year ended September 30, 1999, the Company recorded
acquisition-related and restructuring charges of $3.1 million, including $1.2
million for legal, accounting and other costs associated with acquiring Smart
Machines. In addition, the Company approved and implemented a restructuring
program designed to integrate its fiscal 1999 acquisitions. These actions
involved 7 employees, all of whom were terminated prior to September 30, 1999,
which resulted in a charge of $0.3 million, and the write-off of certain fixed
assets prior to September 30, 1999. The Company identified an impairment of its
fixed assets related to design and testing equipment. The impairment resulted
from the Company's acquisitions of Smart Machines and Infab in fiscal 1999, when
the Company solidified its strategic plan to focus its developmental efforts on
the technologies of these acquired companies. This decision rendered certain
equipment obsolete from a developmental standpoint. As a result the Company
recorded a $1.6 million charge to acquisition-related and restructuring charges
for the write-off of the net book value of its fixed assets related to the
discontinued development efforts. Accordingly, during fiscal 1999, the Company
recorded a charge of $1.9 million related to the restructuring program.
Also for the year ended September 30, 1999, as part of the preliminary
purchase price allocation recorded at September 30, 1999 associated with the
acquisition of Infab, the Company had established an accrual of $2.9 million
consisting of $2.0 million for severance costs principally related to former
Infab employees, $0.6 million to exit certain duplicate facilities and $0.3
million for other related costs. Brooks secured the services of an outside
consultant to assist in quantifying employee related costs associated with the
business reorganization and to give consideration to German labor laws and the
workers' union at the German facilities affected. Severance costs were
determined based upon a review by the outside consultant and were based upon the
aggregation of German labor laws and Company's liability as related to
employees.
Brooks was unable to secure acceptable changes in staffing with the union
and abandoned its efforts to reorganize. This was a critical element in the
fulfillment of the plan. During the timeframe of the aborted negotiations the
demand for the products produced by the operation as well as the other
operations in the Company increased significantly and accordingly the staffing
reductions and the facility plans were not exercised.
As a result, accruals related to the reorganization of the acquired
entities were reversed in the following fiscal year.
The activity related to the Company's acquisition-related and restructuring
accruals is below (in thousands):
FISCAL 2001 ACTIVITY
------------------------------------------------------------------
NEW INITIATIVES
BALANCE -------------------- BALANCE
SEPTEMBER 30, PURCHASE SEPTEMBER 30,
2000 EXPENSE ACCOUNTING UTILIZATION 2001
------------- ------- ---------- ----------- -------------
Facilities $507 $3,369 $-- $ (567) $3,309
Workforce-related 20 2,000 -- (68) 1,952
Other 11 3,945 -- (3,956) --
---- ------ -- ------- ------
$538 $9,314 $-- $(4,591) $5,261
==== ====== == ======= ======
66
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FISCAL 2000 ACTIVITY
------------------------------------------------------------------
NEW INITIATIVES
BALANCE -------------------- BALANCE
SEPTEMBER 30, PURCHASE SEPTEMBER 30,
1999 EXPENSE ACCOUNTING UTILIZATION 2000
------------- ------- ---------- ----------- -------------
Facilities $1,325 $ -- $ (450) $ (368) $507
Workforce-related 2,332 -- (2,000) (312) 20
Other 211 578 (200) (578) 11
------ ---- ------- ------- ----
$3,868 $578 $(2,650) $(1,258) $538
====== ==== ======= ======= ====
FISCAL 1999 ACTIVITY
------------------------------------------------------------------
NEW INITIATIVES
BALANCE -------------------- BALANCE
SEPTEMBER 30, PURCHASE SEPTEMBER 30,
1998 EXPENSE ACCOUNTING UTILIZATION 1999
------------- ------- ---------- ----------- -------------
Facilities $1,294 $ -- $ 630 $ (599) $1,325
Depreciable assets -- 1,628 20 (1,648) --
Workforce-related 238 332 2,000 (238) 2,332
Other 722 1,160 200 (1,871) 211
------ ------ ------ ------- ------
$2,254 $3,120 $2,850 $(4,356) $3,868
====== ====== ====== ======= ======
11. SEGMENT AND GEOGRAPHIC INFORMATION
The Company has three reportable segments: tool automation systems, factory
interface solutions and factory automation solutions. The tool automation
systems segment provides a full complement of semiconductor wafer and flat panel
display substrate handling systems, products and components and products for
data storage. The factory interface solutions segment provides hardware and
software solutions, including mini-environments and automated transfer
mechanisms, to isolate the semiconductor wafer from the production environment.
The factory automation segment provides software products for the semiconductor
manufacturing execution system ("MES") market, including consulting and software
customization.
The Company evaluates performance and allocates resources based on revenues
and operating income (loss). Operating income (loss) for each segment includes
selling, general and administrative expenses directly attributable to the
segment. Amortization of acquired intangible assets and acquisition-related and
restructuring charges are excluded from the segments' operating income (loss).
The Company's non-allocable overhead costs, which include corporate general and
administrative expenses, are allocated between the segments based upon segment
revenues. Segment assets exclude deferred taxes, acquired intangible assets, all
assets of the Company's Securities Corporation and investments in subsidiaries.
67
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Financial information for the Company's business segments is as follows (in
thousands):
TOOL FACTORY FACTORY
AUTOMATION INTERFACE AUTOMATION
SYSTEMS SOLUTIONS SOLUTIONS TOTAL
---------- --------- ---------- --------
Year ended September 30, 2001
Revenues
Product $153,212 $93,218 $ 45,297 $291,727
Services 18,139 4,578 67,272 89,989
-------- ------- -------- --------
$171,351 $97,796 $112,569 $381,716
======== ======= ======== ========
Gross margin $ 53,822 $25,799 $ 72,763 $152,384
Operating income (loss) $ 10,874 $(7,980) $ (7,297) $ (4,403)
Depreciation $ 9,790 $ 837 $ 2,792 $ 13,419
Assets $194,299 $41,608 $ 44,832 $280,739
Year ended September 30, 2000
Revenues
Product $153,598 $87,758 $ 43,010 $284,366
Services 14,161 294 38,363 52,818
-------- ------- -------- --------
$167,759 $88,052 $ 81,373 $337,184
======== ======= ======== ========
Gross margin $ 70,572 $34,299 $ 55,854 $160,725
Operating income $ 24,416 $ 9,715 $ 5,037 $ 39,168
Depreciation $ 6,540 $ 1,290 $ 2,988 $ 10,818
Assets $128,713 $54,895 $ 37,858 $221,466
Year ended September 30, 1999
Revenues
Product $ 69,890 $19,635 $ 11,963 $101,488
Services 9,245 -- 12,224 21,469
-------- ------- -------- --------
$ 79,135 $19,635 $ 24,187 $122,957
======== ======= ======== ========
Gross margin $ 26,735 $ 9,707 $ 18,710 $ 55,152
Operating loss $ (5,064) $ (742) $ (2,331) $ (8,137)
Depreciation $ 7,604 $ 725 $ 1,794 $ 10,123
Assets $ 82,260 $20,410 $ 18,930 $121,600
68
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of the Company's reportable segment operating income and
segment assets to the corresponding consolidated amounts as of and for the year
ended September 30, 2001, 2000 and 1999 is as follows (in thousands):
AS OF AND FOR THE
YEAR ENDED SEPTEMBER 30,
------------------------------
2001 2000 1999
-------- -------- --------
Segment operating income (loss) $ (4,403) $ 39,168 $ (8,137)
Amortization of acquired intangibles 30,187 18,506 565
Acquisition-related and restructuring costs 9,314 578 3,120
-------- -------- --------
Total operating income (loss) $(43,904) $ 20,084 $(11,822)
======== ======== ========
Segment assets $280,739 $221,466 $121,600
Deferred tax asset 45,888 31,581 10,734
Acquired intangible assets 99,056 58,405 15,327
Securities Corporation assets 278,148 208,334 49,639
-------- -------- --------
Total assets $703,831 $519,786 $197,300
======== ======== ========
Net revenues by geographic area are as follows (in thousands):
YEAR ENDED SEPTEMBER 30,
------------------------------
2001 2000 1999
-------- -------- --------
North America $191,992 $175,874 $ 69,889
Asia/Pacific 122,000 114,302 40,128
Europe 67,724 47,008 12,940
-------- -------- --------
$381,716 $337,184 $122,957
======== ======== ========
It is impractical to disclose a breakdown of revenues between products and
services on a geographic basis due to the fact that the Company does not
maintain customer-level information at that level of detail in its financial
systems.
Long-lived assets, including property, plant and equipment and intangible
assets are as follows (in thousands):
SEPTEMBER 30,
----------------------------
2001 2000 1999
-------- ------- -------
North America $158,086 $74,569 $23,266
Asia/Pacific 5,052 4,948 2,965
Europe 4,237 5,970 9,093
-------- ------- -------
$167,375 $85,487 $35,324
======== ======= =======
12. SIGNIFICANT CUSTOMERS AND RELATED PARTY INFORMATION
One of the Company's directors had previously also been a director of one
of the Company's customers. On January 23, 2001, this individual resigned his
position with the Company's customer. Accordingly, this customer is not
considered a related party in subsequent reporting periods. Revenues recognized
from this customer in the current fiscal year through January 23, 2001 were
$13.9 million. Revenues recognized from this customer in the years ended
September 30, 2000 and 1999 were $36.9 million and $15.3 million, or 11.0% and
12.4% of revenues, respectively.
69
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company had no customer that accounted for more than 10% of revenues in
the year ended September 30, 2001 and no other customer that accounted for more
than 10% of revenues in the years ended September 30, 2000 or 1999.
On June 11, 2001, the Company appointed a new member to its Board of
Directors. This individual is also a director of one of the Company's customers.
Accordingly, this customer is considered a related party for the period
subsequent to June 11, 2001. Revenues from this customer for the period from
June 11, 2001 through September 30, 2001 were approximately $32,000. The amount
due from this customer included in accounts receivable at September 30, 2001 was
approximately $32,000.
Related party transactions and amounts included in accounts receivable are
on standard pricing and contractual terms and manner of settlement for products
and services of similar types and at comparable volumes.
13. OTHER BALANCE SHEET INFORMATION
Components of other selected captions in the Consolidated Balance Sheets
follow (in thousands):
SEPTEMBER 30,
------------------
2001 2000
-------- -------
Accounts receivable $ 99,679 $96,745
Less allowances 6,114 1,989
-------- -------
$ 93,565 $94,756
======== =======
Inventories
Raw materials and purchased parts $ 35,021 $35,189
Work-in-process 12,099 13,938
Finished goods 2,175 9,480
-------- -------
$ 49,295 $58,607
======== =======
The Company fully reserves inventories deemed obsolete. Obsolete inventory
is disposed of on a periodic basis. The Company performs periodic reviews of all
inventory items to identify excess inventories on hand. The Company performs an
analysis comparing on-hand balances to anticipated usage using recent historical
activity as well as anticipated or forecasted demand, based upon sales and
marketing inputs through its planning systems, in an effort to estimate excess
quantities on hand. Because of the significant decline in revenues in the last
half of fiscal 2001 and the expected continuation of depressed demand in the
first half of fiscal 2002, the Company projected a shortfall in usage and
recorded the resulting charge in the fourth quarter of fiscal 2001. The reserve
for excess and obsolete inventories recorded in the fourth quarter was $9.4
million, which included approximately $1.5 million for non-cancelable purchase
order obligations for items deemed excess or obsolete. The inventory affected
was across all hardware product lines in the tool automation and factory
interface segments. During the quarter ended September 30, 2001, the Company's
personnel responsible for inventory control and management reviewed all open
purchase orders with the affected vendors across the various segments of the
Company and cancelled orders where possible. The Company had provided $2.3
million for excess inventories in the first three quarters of fiscal 2001 as a
result of periodic reviews performed by the Company. The Company's products are
highly engineered and as such any inventories at customer locations are the
property of the customer and are non-returnable to the Company. The Company does
not sell product through a distributor channel.
The Company performs an annual physical inventory at all locations holding
inventory. As a result of the physical inventory count and reconciliation, the
Company recorded an adjustment of $2.5 million to reduce the carrying value of
its inventories. Included in the process of the physical count is the review of
70
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
demonstration equipment inventory. As a result of this review, the Company
recorded an adjustment of $1.2 million for excess and idle demonstration
equipment inventory. The balance of demonstration equipment included in
inventory at September 30, 2001 and 2000 was $1.2 million and $1.5 million,
respectively.
SEPTEMBER 30,
------------------
2001 2000
-------- -------
Intangible assets
Patents $ 4,579 $ 7,448
Capitalized software -- 1,805
Completed technology 31,575 4,505
License agreements 678 678
Trademarks and trade names 2,426 1,564
Non-competition agreements 2,133 1,033
Assembled workforces 10,590 5,880
Customer relationships 1,305 1,305
Goodwill 96,858 58,638
-------- -------
150,144 82,856
Less accumulated amortization 49,228 22,521
-------- -------
$100,916 $60,335
======== =======
The fixed asset balance includes computer equipment and software and
machinery and equipment aggregating $2.9 million as of both September 30, 2001
and 2000 acquired under capital leases. These fixed assets were fully amortized
at both September 30, 2001 and 2000. Amortization expense for fixed assets under
capital leases was $0.1 million and $0.2 million for the years ended September
30, 2000 and 1999, respectively. Depreciation expense was $13.4 million, $10.8
million and $10.1 million for the years ended September 30, 2001, 2000 and 1999,
respectively.
14. COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS
The Company leases manufacturing and office facilities and certain
equipment under operating leases that expire through 2011. Rental expense under
operating leases for the years ended September 30, 2001, 2000 and 1999 was $4.8
million, $5.8 million and $4.9 million, respectively. Future minimum lease
commitments on non-cancelable operating leases, lease income and sublease income
are as follows (in thousands):
LEASE AND
OPERATING SUBLEASE
LEASES INCOME
--------- ---------
Year ended September 30,
2002 $ 7,812 $781
2003 4,725 130
2004 3,250 --
2005 2,822 --
2006 2,117 --
Thereafter 3,750 --
------- ----
Total minimum lease payments $24,476 $911
======= ====
71
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
These future minimum lease commitments include approximately $3.3 million
related to a facility the Company has elected to abandon in connection with its
restructuring initiatives.
On January 29, 2001 the Company purchased three buildings, two of which are
used as Brooks' corporate headquarters and primary manufacturing facility, and
the third is currently leased to an unrelated party. The term of that lease
concludes in November 2002.
As of September 30, 2001, the Company did not have any capital lease
obligations.
CONTINGENCY
There has been substantial litigation regarding patent and other
intellectual property rights in the semiconductor and related industries. The
Company has received notice from a third party alleging infringements of such
party's patent rights by certain of the Company's products. The Company believes
the patents claimed are invalid. In the event of litigation with respect to this
claim, the Company is prepared to vigorously defend its position. However,
because patent litigation can be extremely expensive and time consuming, the
Company may seek to obtain a license to one or more of the disputed patents.
Based upon currently available information, the Company would only do so if such
license fees would not be material to the Company's consolidated financial
statements. Currently, the Company does not believe it is probable that the
future events related to this threatened matter would have an adverse effect on
the Company's business.
15. SUBSEQUENT EVENTS
On December 13, 2001, the Company acquired the Automation Systems Group of
Zygo Corporation in exchange for approximately $11 million of cash, net of
closing adjustments aggregating approximately $2 million. The Automation Systems
Group, located in Florida, is a manufacturer of reticle automation systems,
including reticle sorters, reticle macro inspection systems and reticle handling
solutions for the semiconductor industry. The transaction will be accounted for
as a purchase of assets.
On October 23, 2001, the Company and PRI Automation, Inc. ("PRI") entered
into an Agreement and Plan of Merger (the "Merger Agreement"). PRI supplies
advanced factory automation systems, software, and services that optimize the
productivity of semiconductor and precision electronics manufacturers, as well
as OEM process tool manufacturers. Pursuant to the Merger Agreement and subject
to the terms and conditions contained therein, PRI common stockholders will
receive 0.52 shares of the Company's common stock for each share of PRI common
stock.
The Merger, which is expected to close in the first calendar quarter of
2002, is contingent upon the fulfillment of certain conditions, including, but
not limited to, all required regulatory approvals, the approval of the Merger by
the stockholders of the Company and the stockholders of PRI and the approval of
the issuance of the Company's Common Stock in the Merger by the stockholders of
the Company. The Merger would be accounted for as a purchase of assets.
On October 9, 2001, the Company acquired 90% of the capital stock of
Tec-Sem A.G., a Swiss company ("Tec-Sem") in exchange for $12.9 million in cash
and 131,750 shares of Brooks common stock with a market value of approximately
$4 million at the time of issuance, subject to post-closing adjustments. At the
same time, the Company obtained an option to acquire, and one of the selling
stockholders was given an option to sell, the remaining 10% of the stock of
Tec-Sem for $1.1 million in cash and 23,250 shares of Brooks common stock.
Pursuant to the terms of the share purchase agreement, the Company granted
25,000 shares of common stock to certain key non-owner employees of Tec-Sem.
These grants will be accounted for as additional purchase price. Tec-Sem is a
leading manufacturer of bare reticle stockers, tool buffers and batch transfer
systems for the semiconductor industry. The transaction will be accounted for as
a purchase of assets.
72
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On October 5, 2001, the Company acquired substantially all of the assets of
General Precision, Inc. ("GPI"), in exchange for 850,000 shares of Brooks common
stock, with a market value of approximately $25 million at the time of issuance,
subject to post-closing adjustments. GPI, located in Valencia, California, is a
leading supplier of high-end environmental solutions for the semiconductor
industry. The transaction will be accounted for as a purchase of assets.
73
BROOKS AUTOMATION, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
ADDITIONS
------------------------
BALANCE AT CHARGED TO CHARGED TO DEDUCTIONS BALANCE AT
BEGINNING COSTS AND OTHER AND END OF
OF YEAR EXPENSES ACCOUNTS(A) WRITE-OFFS YEAR
---------- ---------- ----------- ---------- ----------
(DOLLARS IN THOUSANDS)
Allowance for doubtful accounts
Year ended September 30,
2001 $ 1,989 $ 4,691 $ 6 $ (572) $ 6,114
2000 $ 1,785 $ 540 $ 256 $ (592) $ 1,989
1999 $ 2,087 $ 199 $ -- $ (501) $ 1,785
Reserves for excess and obsolete
inventories
Year ended September 30,
2001 $ 8,311 $15,426 $ 246 $(7,020) $16,963
2000 $ 7,740 $ 2,611 $ (567) $(1,473) $ 8,311
1999 $ 9,175 $ 1,705 $ -- $(3,140) $ 7,740
Deferred tax asset valuation allowance
Year ended September 30,
2001 $ 5,548 $ 3,603 $ -- $ (894) $ 8,257
2000 $11,297 $ 2,754 $1,242 $(9,745) $ 5,548
1999 $ 9,405 $ 1,892 $ -- $ -- $11,297
---------------
(A)Includes purchase accounting and foreign currency translation adjustments.
74
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON FINANCIAL ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information with respect to the
directors and executive officers of Brooks. When used below, positions held with
Brooks include positions held with Brooks' predecessors and subsidiaries.
NAME AGE POSITION DIRECTOR SINCE
---- --- -------- --------------
Robert J. Therrien...... 67 Director, President and Chief Executive Officer, Brooks
1989
Roger D. 62 Director, Brooks
Emerick(1)(2).........
1993
Amin J. Khoury(1)(2).... 62 Director, Brooks
1994
Juergen Giessmann....... 55 Director, Brooks
1999
Joseph R. Martin(2)..... 52 Director, Brooks
2001
Charles M. McKenna...... 56 Executive Vice President, Automation Systems Division
N/A
Michael W. Pippins...... 41 Senior Vice President, Factory Interface Division
N/A
Ellen B. Richstone...... 50 Senior Vice President, Finance and Administration and
Chief Financial Officer N/A
Jeffrey A. Cassis....... 48 Senior Vice President, Factory Automation Software
Division N/A
---------------
(1) Member of the Brooks compensation committee.
(2) Member of the Brooks audit committee.
Mr. Robert J. Therrien has been the president, chief executive officer and
a director of Brooks since its incorporation in 1989 when he initiated the
acquisition of the Brooks Automation Division of Aeronca Electronics, Inc. From
1983 to 1989, Mr. Therrien served as a consultant to Brooks and other firms in
the semiconductor industry. From 1972 until its sale to Schlumberger Industries
in 1983, Mr. Therrien cofounded and served as chairman and president of Accutest
Corporation, a semiconductor automatic test equipment company. Mr. Therrien is
currently a director of MKS Instruments, Inc., a supplier of measurement and
control components for laboratory and industrial applications throughout the
microelectronics industry. Mr. Therrien is also a director of Accent Optical
Technologies, Inc., a leading supplier of optoelectronics and silicon process
control systems, and All Wet Technologies, Inc., a manufacturer of advanced wet
processing systems for the wafer fabrication industry.
Mr. Roger D. Emerick has been a director of Brooks since October 1993. Mr.
Emerick served as a director of Lam Research Corporation, a semiconductor
equipment supplier, from 1982 until January 2001, and as chairman of the board
of directors of Lam from 1984 to 1997. Mr. Emerick served as president of Lam
from 1982 to 1989, and as its chief executive officer from 1982 to August 1997.
See "Item 13 -- Certain Relationships and Related Transactions -- Lam Research
Corporation." Mr. Emerick is also a director of Electroglas, Inc., a
manufacturer of automatic wafer probing equipment.
Mr. Amin J. Khoury has been a director of Brooks since July 1994. Since
1987, Mr. Khoury has served as chairman of the board of B/E Aerospace, Inc., a
designer, manufacturer and marketer of airline interior furnishings. Mr. Khoury
is also chairman of the board of Applied Extrusion Technologies, Inc., a
manufacturer of oriented polypropylene films and extruded polymer nets. In
addition, Mr. Khoury is a member of the board of directors of Synthes-Stratec
Inc., the world's leading orthopedic trauma company.
75
Mr. Juergen Giessmann has been a director of Brooks since October 1999. Mr.
Giessmann became a director pursuant to a stockholder agreement in connection
with Brooks' acquisition of the Infab division of Jenoptik AG. See "Item
13 -- Certain Relationships and Related Transactions -- Jenoptik Stockholder
Agreement." Since 1981, Mr. Giessmann has served M+W Zander Holding AG, a
company active in the semiconductor and pharmaceutical markets, in a variety of
positions. In 1992 he became its managing director, in charge of sales and
marketing, human resources and purchasing divisions. Mr. Giessmann has also
served as a member of the Jenoptik AG board of management since M+W's
acquisition by Jenoptik AG in October 1994, and in this capacity has been
responsible for the Jenoptik Group's semiconductor activities. In January 2000,
he was appointed chief executive officer of M+W Zander Holdings AG.
Mr. Joseph R. Martin has been a director of Brooks since June 2001. Mr.
Martin is executive vice president and chief financial officer of Fairchild
Semiconductor International, Inc., a global supplier of multi-market products
for electronic devices. He began his career at Fairchild in 1979 as manager of
financial planning and analysis for the Logic Division and subsequently held
various senior financial positions. Prior to becoming executive vice president
and chief financial officer of Fairchild, Mr. Martin was vice president of
finance, worldwide operations, for National Semiconductor, with responsibilities
for all operating divisions, manufacturing sites, and corporate financial
planning. See "Item 13 -- Certain Relationships and Related
Transactions -- Fairchild Semiconductor International, Inc." Previously, Mr.
Martin was senior vice president and chief financial officer of VTC
Incorporated. In addition to his position as a director of Brooks, Mr. Martin is
also a member of the board of directors of Fairchild Semiconductor
International, Inc. and ChipPAC, Incorporated.
Mr. Charles M. McKenna, Ph.D., joined Brooks in July 2000 as executive vice
president, automation systems division. From April 1999 until January 2000, Mr.
McKenna was chief operating officer and chief technology officer for Varian
Semiconductor Equipment Associates, a spin-off of Varian Associates, a
manufacturer of semiconductor production equipment. Prior to this, Mr. McKenna
served in a variety of positions at Varian Associates' Ion Implant Systems
business, including general manager from April 1989 to March 1999. From March
1981 to January 1984, Mr. McKenna held various positions at Hughes Research
Laboratory. Prior to 1981, Mr. McKenna held various positions at IBM
Corporation, Aitken Industries and Commonwealth Scientific Corporation.
Mr. Michael W. Pippins has served as senior vice president, factory
interface division since June 2000. From October 1998 to June 2000, Mr. Pippins
served as Brooks' vice president, global operations and business development.
Mr. Pippins joined Brooks in March 1992 as its director of sales and marketing
and in June 1993 was promoted to vice president, sales and marketing. From 1989
to 1992, Mr. Pippins served as strategic marketing manager for Varian
Associates.
Ms. Ellen B. Richstone joined Brooks in November 1998 as senior vice
president, finance and administration, and chief financial officer. From 1997 to
November 1998, Ms. Richstone served as executive vice president and chief
financial officer of The Frontier Group, a start-up health care provider. From
1992 to 1996, Ms. Richstone served as vice president and chief financial officer
of Augat, Inc., a manufacturer of telecommunications, electronics and automotive
products. In 1992, Ms. Richstone also served Rohr Inc. as senior vice president
and chief financial officer. From 1989 to 1992, Ms. Richstone served as
executive vice president and chief financial officer of Honeywell Bull
Information Systems, and from 1981 to 1989 she served in various management
positions and finally as vice president and treasurer of Data General
Corporation.
Mr. Jeffrey A. Cassis is the former vice president of worldwide sales and
marketing for FASTech Integration, Inc. Since the acquisition of FASTech by
Brooks in September 1998, Mr. Cassis has assumed all responsibility for the
factory automation software division within Brooks as the senior vice president.
Before joining FASTech, Mr. Cassis was director of sales and marketing for
Intellution, Inc., an industrial automation software company. From 1987 to 1989,
Mr. Cassis had marketing responsibility for the industrial automation division
at Analog Devices, and prior to that, product marketing management
responsibility at The Foxboro Company.
Each director holds office until the next annual election of directors and
until his successor is chosen and qualified or until he sooner dies, resigns, is
removed, or becomes disqualified. Each officer generally holds
76
office until the first meeting of the directors after the next annual election
of directors and until his successor is chosen and qualified or until he sooner
dies, resigns, is removed, or becomes disqualified.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Brooks'
executive officers and directors, and persons who own more than 10% of Brooks'
common stock, to file reports of ownership and changes in ownership on Forms 3,
4 and 5 with the SEC. Executive officers, directors and greater than 10%
stockholders are required to furnish Brooks with copies of all Forms 3, 4 and 5
they file.
Based solely on Brooks' review of the copies of such forms it has received
and written representations from certain reporting persons that they were not
required to file Forms 5 for the fiscal year ended September 30, 2001, Brooks
believes that all of its executive officers, directors and greater than 10%
stockholders complied with all Section 16(a) filing requirements applicable to
them during Brooks' fiscal year ended September 30, 2001.
ITEM 11. EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth the compensation during
the last three fiscal years of each of the chief executive officer, the
executive vice president, and the five other most highly compensated executive
officers of Brooks.
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------- -----------------
OTHER ANNUAL SECURITIES ALL OTHER
YEAR COMPENSATION UNDERLYING OPTION COMPENSATION
NAME AND PRINCIPAL POSITION ENDED SALARY($) BONUS($) ($)(1) (#)(2) ($)(3)
--------------------------- ------- --------- -------- ------------ ----------------- ------------
Robert J. Therrien............................. 9/30/01 467,662 -- 42,722 100,000 81,863
Chief Executive Officer and 9/30/00 421,108 218,000 40,309 270,000 47,750
President(5) 9/30/99 356,605 95,172 27,513 115,000 35,418
Charles M. McKenna............................. 9/30/01 271,095 -- 9,000 15,000 17,580
Executive Vice President, 9/30/00 56,058 27,500 2,063 60,000 1,843
Automation Systems Division(4) 9/30/99 -- -- -- -- --
Michael W. Pippins............................. 9/30/01 216,253 -- 11,663 20,000 10,420
Senior Vice President, Factory 9/30/00 204,615 63,000 12,309 27,800 9,857
Interface Division 9/30/99 177,500 33,250 10,587 17,000 7,264
Ellen B. Richstone............................. 9/30/01 263,967 -- 15,000 30,000 22,720
Senior Vice President, Finance and 9/30/00 246,298 114,000 26,182 41,000 19,673
Administration and Chief Financial 9/30/99 192,115 58,150 12,958 60,000 49,322
Officer(5)
Jeffrey A. Cassis.............................. 9/30/01 210,077 -- 8,850 30,000 16,838
Senior Vice President, Factory 9/30/00 -- -- -- -- --
Automation Software Division(6) 9/30/99 -- -- -- -- --
James A. Pelusi................................ 9/30/01 254,978 -- 12,500 15,000 13,607
Assistant to President(7) 9/30/00 239,039 100,000 13,399 85,000 13,811
9/30/99 189,940 45,000 9,538 49,000 6,610
David R. Beaulieu.............................. 9/30/01 211,571 -- 11,688 20,000 14,681
Vice President and General 9/30/00 204,615 63,000 15,231 27,800 13,861
Manager, Vacuum Business 9/30/99 178,269 33,250 9,890 19,000 10,617
Unit(8)
---------------
(1) Represents lease and insurance payments made for automobiles used by Messrs.
Therrien, Beaulieu, and Pippins, and automobile allowances for Messrs.
Cassis, McKenna and Pelusi and Ms. Richstone. Represents reimbursement of
interest and associated tax costs related to security transactions for Mr.
Beaulieu, Mr. Pelusi and Ms. Richstone in fiscal 2000. Represents tax return
preparation fees paid on
77
behalf of Mr. Therrien and Ms. Richstone in fiscal 2000 and Messrs.
Therrien, Beaulieu, Cassis, Pelusi and Pippins in fiscal 2001.
(2) Brooks did not make any restricted stock awards, grant any stock
appreciation rights or make any long-term incentive payments to the
executive officers named in the table above during fiscal 1999, 2000 or
2001.
(3) "All Other Compensation" above consists of the following:
YEAR ENDED SEPTEMBER 30,
----------------------------
2001 2000 1999
-------- ------- -------
Robert J. Therrien
401(k) matching contributions................ $ 5,063 $ 2,196 $ 1,639
Life insurance premiums...................... 76,800 45,554 33,779
-------- ------- -------
$ 81,863 $47,750 $35,418
Charles M. McKenna
401(k) matching contributions................ $ 3,250 $ -- --
Life insurance premiums...................... 14,330 43 --
Consulting fees.............................. -- 1,800 --
-------- ------- -------
$ 17,580 $ 1,843 --
Michael W. Pippins
401(k) matching contributions................ $ 5,518 $ 4,926 $ 2,319
Life insurance premiums...................... 4,902 4,931 4,945
-------- ------- -------
$ 10,420 $ 9,857 $ 7,264
Ellen B. Richstone
401(k) matching contributions................ $ 5,028 $ 3,489 $ 1,243
Life insurance premiums...................... 17,692 16,184 8,079
Signing bonus (see "Employment Contracts")... -- -- 40,000
-------- ------- -------
$ 22,720 $19,673 $49,322
Jeffrey A. Cassis
401(k) matching contributions................ $ 5,702 -- --
Life insurance premiums...................... 11,136 -- --
-------- ------- -------
$ 16,838 -- --
James A. Pelusi
401(k) matching contributions................ $ 4,990 $ 5,173 $ 2,271
Life insurance premiums...................... 8,617 8,638 4,339
-------- ------- -------
$ 13,607 $13,811 $ 6,610
David R. Beaulieu
401(k) matching contributions................ $ 5,498 $ 5,507 $ 2,674
Life insurance premiums...................... 9,183 8,354 7,943
-------- ------- -------
$ 14,681 $13,861 $10,617
(4) Mr. McKenna joined Brooks in July 2000.
(5) See "Employment Contracts" below. Ms. Richstone's $10,000 guaranteed annual
bonus was paid ratably over the fiscal year with her salary.
(6) Mr. Cassis was promoted to senior vice president of factory automation
software division on July 2, 2001. Prior to his promotion, Mr. Cassis was
not considered an executive officer of Brooks, and therefore his
compensation for that period is not provided, except that Brooks has
disclosed Mr. Cassis' compensation for all of fiscal 2001.
(7) Mr. Pelusi assumed a reduced role and a change in title at Brooks on July 2,
2001.
(8) Mr. Beaulieu assumed a reduced role with Brooks on August 13, 2001.
78
COMPENSATION OF DIRECTORS
Nonemployee directors of Brooks receive $1,000 cash compensation annually,
in addition to expenses reasonably incurred, for service on the board.
Nonemployee directors who are members of the audit or compensation committees
receive $4,000 per year for their services on each committee. If the merger with
PRI is approved, the annual cash compensation for nonemployee directors will
increase to $20,000 for service on the board, and $5,000 for service on each
committee. Each nonemployee director is granted options to purchase 10,000
shares of Brooks common stock on the date he is first elected a director and
options to purchase 5,000 shares of common stock on July 1 of each year
thereafter pursuant to Brooks' 1993 nonemployee director stock option plan. The
board of directors has amended the directors plan to increase the initial and
annual grants thereunder to 25,000 and 10,000 shares, of Brooks common stock,
respectively, and to provide an additional one-time grant of 15,000 shares to
existing nonemployee directors, subject to stockholder approval. Employee
directors may elect to participate in Brooks' 1995 employee stock purchase plan
and may be granted options under Brooks' 1992 combination stock option plan or
Brooks' 2000 combination stock option plan. Nonemployee directors may be granted
options under the 1992 combination stock option plan.
INDEMNIFICATION AGREEMENTS
Brooks has entered into indemnification agreements with each of its
directors and anticipates that it will enter into similar agreements with any
future directors. Generally, the indemnification agreements attempt to provide
the maximum protection permitted by Delaware law with respect to indemnification
of the director.
The indemnification agreements provide that Brooks will pay certain amounts
incurred by a director in connection with any civil or criminal action or
proceeding, specifically including actions by or in the name of Brooks
(derivative suits) where the individual's involvement is by reason of the fact
that he is or was a director or officer. Such amounts include, to the maximum
extent permitted by law, attorney's fees, judgments, civil or criminal fines,
settlement amounts, and other expenses customarily incurred in connection with
legal proceedings. Under the indemnification agreements, a director will receive
indemnification unless he is found not to have acted in good faith and in a
manner he reasonably believed to be in the best interests of Brooks.
EMPLOYMENT CONTRACTS
Robert J. Therrien. Effective October 1, 2001, Brooks entered into an
employment agreement with Robert J. Therrien, its president and chief executive
officer, that replaced Mr. Therrien's former agreement, which expired on
September 30, 2001. Under the agreement, Mr. Therrien will continue in his role
as president and chief executive officer of Brooks for four years. If Mr.
Therrien identifies his successor as president and chief executive officer, then
Mr. Therrien may become chairman of the board of directors.
The agreement entitles Mr. Therrien to a minimum annual salary of $500,000.
Mr. Therrien's minimum salary will increase to $615,000 upon completion of the
proposed merger with PRI. The agreement entitles Mr. Therrien to annual
discretionary bonuses determined by the compensation committee.
The agreement provides that Mr. Therrien will receive monthly supplemental
retirement benefits equal to Mr. Therrien's monthly salary in effect as of the
date he terminates employment with Brooks. The monthly supplemental retirement
benefits will be paid for a period equal to one and one-half times the number of
months Mr. Therrien serves Brooks after October 1, 1994. For purposes of
calculating these benefits the contract generally provides that Mr. Therrien's
annual salary will be no less than $500,000 ($41,667 monthly). As of September
30, 2001, Mr. Therrien had seven years, or 84 months, of credited service. In
the event of Mr. Therrien's death or permanent disability, he or his estate has
the option of receiving his supplemental retirement compensation over a period
of not less than four years. If the merger with PRI is completed, Mr. Therrien's
minimum annual salary for purposes of calculating his supplemental retirement
benefits will increase to $615,000 ($51,250 monthly) and his supplemental
retirement benefit will be paid in a single, lump-sum payment on the first day
of the month following the termination of his employment.
79
The table below describes the annual supplemental retirement benefits Mr.
Therrien would receive given different assumptions regarding his minimum annual
salary and time of service after October 1, 1994.
SUMMARY RETIREMENT BENEFITS TABLE
MONTHS OF SERVICE SINCE 10/1/94
-------------------------------
86 MONTHS 96 MONTHS 108 MONTHS 120 MONTHS
ANNUAL SALARY AT (MINIMUM AS OF
TIME OF RETIREMENT 11/30/01)
------------------------------------------------------------------------------------------------------------------------
$500,000 $41,667 $41,667 $41,667 $41,667
(minimum as of payable for 129 months payable for 144 months payable for 162 months payable for 180 months
10/1/01)
$550,000 $45,833 $45,833 $45,833 $45,833
payable for 129 months payable for 144 months payable for 162 months payable for 180 months
$600,000 $50,000 $50,000 $50,000 $50,000
payable for 129 months payable for 144 months payable for 162 months payable for 180 months
$615,000 $51,250 $51,250 $51,250 $51,250
(minimum if merger is payable for 129 months payable for 144 months payable for 162 months payable for 180 months
completed)
$650,000 $54,167 $54,167 $54,167 $54,167
payable for 129 months payable for 144 months payable for 162 months payable for 180 months
Brooks has established a rabbi trust in connection with Mr. Therrien's
supplemental retirement benefits and purchased two insurance policies to fund
the payment of the supplemental retirement benefits. Currently, the rabbi trust
holds two whole life insurance policies with combined death benefits of
$5,000,000 and a combined cash surrender value of approximately $2,300,000. The
rabbi trust assets are unsecured and subject to the claims of creditors.
In addition, Mr. Therrien will participate in all employee welfare and
benefit plans normally offered to other Brooks executives, except that he will
not participate in any retirement plan other than Brooks' 401(k) plan and will
only receive the supplemental retirement benefits. Mr. Therrien is entitled to
the use of an automobile during the term of his agreement.
The employment agreement provides that if Mr. Therrien's employment is
terminated without "cause," or if Mr. Therrien terminates his employment for
"good reason," he will be entitled to receive his annual salary and bonus for
the remaining term of the agreement, continued life insurance coverage until
October 1, 2005 and medical, dental and vision insurance for life. The
employment agreement provides that cause means Mr. Therrien has: (i) habitually
neglected his material duties under the agreement; (ii) perpetrated fraud or
embezzlement; or (iii) been finally adjudicated to have committed a felony. The
agreement provides that good reason means Mr. Therrien has suffered, without his
consent, a reduction in his status at Brooks either through a demotion in his
duties or a change in his title.
If Mr. Therrien is terminated for cause, he will only be entitled to
receive his then accrued salary and accrued vacation days and will forfeit all
benefits payable under the supplemental retirement benefit.
In addition, if Mr. Therrien's employment is terminated or he resigns
following a change of control, as defined in the agreement, then Brooks is
obligated to pay Mr. Therrien a lump sum severance payment equal to three times
his base salary and bonus. Mr. Therrien is also entitled to receive payment of
Mr. Therrien's earned but unpaid salary and pro rata bonus, an amount equal to
his accrued vacation pay, and his supplemental retirement benefits, as well as
benefits including continuation of life insurance coverage until October 1, 2005
and medical, dental and vision insurance for life.
In the event of Mr. Therrien's termination or resignation following a
change of control, his resignation for good reason or his termination without
cause, his stock options will immediately vest and remain exercisable until the
earlier of 24 months following his termination or the expiration of the option
term. However, the extension of the option exercise period will not apply to any
options granted prior to September 30, 2001, if such extension would result in a
charge to earnings or other adverse accounting consequence.
80
Mr. Therrien is entitled to reimbursement of any "parachute" excise tax
imposed on payments under the employment agreement.
Mr. Therrien's employment agreement also contains noncompetition,
nonsolicitation and confidentiality provisions. The noncompetition and
nonsolicitation provisions prohibit Mr. Therrien from directly or indirectly
competing with, or soliciting employees of, Brooks so long as he is an employee
of Brooks and for a period of two years thereafter.
Ellen B. Richstone. In October 1998, Brooks entered into an employment
agreement with Ellen B. Richstone, its Senior Vice President, Finance and
Administration and Chief Financial Officer, which entitles Ms. Richstone to a
base salary of $225,000 per year, and to participation in the discretionary
executive bonus program, as well as a guaranteed annual bonus of $10,000 and a
one-time "signing" bonus of $40,000. In the event Ms. Richstone's employment
with Brooks is terminated for reasons other than cause, the agreement provides
that Ms. Richstone will receive either one year of her then current base salary
or $250,000, whichever is greater, and the acceleration of all of her
outstanding options.
The agreement also provides Ms. Richstone with certain other benefits,
including an automobile allowance of $15,000 per year, the opportunity to
participate in insurance plans, and other employment benefits as may be
generally available to senior executives of Brooks. Brooks has entered into an
indemnification agreement with Ms. Richstone on the same terms as Brooks'
directors. See "-- Indemnification Agreements."
CHANGE IN CONTROL ARRANGEMENTS
On November 11, 1999, Brooks entered into change of control agreements with
certain key employees, including each of its named executive officers other than
Mr. Therrien, whose employment contract offers change of control benefits. The
board of directors determined that it was in the best interests of Brooks and
its stockholders to assure that Brooks have the continued dedication of these
persons, notwithstanding the possibility, threat, or occurrence of a change in
control of Brooks. The purpose of the agreements is to diminish the inevitable
distraction for these persons caused by the personal uncertainties and risks
created by a pending or threatened change of control and to encourage their full
attention and dedication to Brooks currently and in the event of any threatened
or pending change of control. The agreements have terms of five years and
automatically renew in five-year increments unless a party to the agreement
objects in writing in advance of the renewal. The agreements provide that in the
event of a change of control these persons will retain their then current
compensation and benefits for the lesser of one year or until terminated for
cause. The agreements also provide that the position of such person upon a
change of control shall be at least commensurate with the highest position held
by such person prior to the change of control, after completion of a six month
transitional period. Under the agreements, if the employee is terminated other
than for cause, disability or death or if the employee resigns for good reason
the employee is entitled to one year of salary in a lump sum payment and the
continuation of certain benefits for 18 months. Under Ms. Richstone's change of
control agreement, all of her options will vest immediately and she will receive
a lump sum payment equal to the greater of $250,000 or her then current base
salary if she is terminated other than for cause, disability or death or resigns
for good reason in connection with a change of control of Brooks. For purposes
of the agreements, cause means willful acts of dishonesty, repeated breaches by
the employee of the agreement or the conviction of a felony involving moral
turpitude. Good reason includes diminution of the responsibility or position of
the employee, Brooks' breach of the agreement or the involuntary relocation of
the employee.
INDEMNIFICATION AGREEMENTS
In February 2000, Brooks entered into indemnification agreements with each
of its executive officers not previously covered by such agreements. The
indemnification agreements provide that Brooks will pay certain amounts incurred
by an officer in connection with any civil or criminal action or proceeding,
specifically including actions by or in the name of Brooks where the
individual's involvement is by reason of the fact that he is or was an officer.
Such amounts include, to the maximum extent permitted by law, attorney's fees,
judgments, civil or criminal fines, settlement amounts, and other expenses
customarily incurred in connection
81
with legal proceedings. Under the indemnification agreements, an officer will
receive indemnification unless he or she is found not to have acted in good
faith and in a manner he or she reasonably believed to be in the best interests
of Brooks.
BONUS PLAN
Brooks maintains a bonus program for employees, including executive
officers, under which such employees may be awarded cash bonuses based upon
Brooks' overall financial performance.
STOCK PURCHASE PLAN
In February 1996, Brooks adopted the 1995 employee stock purchase plan to
provide employees of Brooks with additional incentives by permitting them to
acquire an equity interest in Brooks through the purchase of shares of Brooks
common stock. The stock purchase plan is intended to qualify as an "employee
stock purchase plan" under Section 423 of the Internal Revenue Code.
STOCK OPTION PLANS
The following tables set forth certain information with respect to the
stock options granted to and exercised by the named executive officers during
fiscal 2001 and the aggregate number of and value of options exercisable and
unexercisable held by the named executive officers during fiscal 2001.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
NUMBER OF PERCENT OF RATES OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO TERM($)(2)
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION -----------------------
GRANTED(#)(1) FISCAL YEAR PRICE DATE 5% 10%
------------- ---------------- --------- ---------- ---------- ----------
($/SHARE)
Robert J. Therrien.... 100,000 6.5 27.563 1/2/08 1,122,091 2,614,949
Charles M. McKenna.... 15,000 1.0 27.563 1/2/08 168,314 392,242
Michael W. Pippins.... 20,000 1.3 27.563 1/2/08 224,418 522,990
Ellen B. Richstone.... 30,000 1.9 27.563 1/2/08 336,627 784,485
Jeffrey A. Cassis..... 10,000 0.6 40.030 7/16/11 251,747 637,975
20,000 1.3 27.563 1/2/08 224,418 522,990
James A. Pelusi....... 15,000 1.0 27.563 1/2/08 168,314 392,242
David R. Beaulieu..... 20,000 1.3 27.563 1/2/08 224,418 522,990
---------------
(1) Stock options become exercisable at the rate of 25% per year over a four
year period commencing one year from the date of grant.
(2) The 5% and 10% assumed rates of annual compounded stock price appreciation
are mandated by the rules of the SEC and do not represent Brooks' estimate
or projection of future prices of its common stock.
82
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT 9/30/01(#) 9/30/01($)(2)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------------- ----------- ------------- ----------- -------------
Robert J. Therrien... 40,500 577,939 58,250 360,000 -- 687,988
Charles M. McKenna... -- -- 15,000 60,000 -- --
Michael W. Pippins... 10,000 345,370 40,550 49,350 624,629 101,703
Ellen B. Richstone... 2,000 88,325 23,250 90,750 173,420 400,200
Jeffrey A. Cassis.... 9,309 253,803 11,250 72,628 169,650 339,300
James A. Pelusi...... 16,997 585,516 31,269 103,538 116,818 379,006
David R. Beaulieu.... 12,737 564,995 20,930 52,600 198,052 144,808
---------------
(1) The "value realized" reflects the appreciation on the date of exercise
(based on the excess of the fair market value of the Brooks common stock on
the date of exercise over the exercise price). However, because the named
executive officers may keep the shares they acquired upon the exercise of
the options (or sell them at a different price), these amounts do not
necessarily reflect cash realized upon the sale of those shares.
(2) Based on the closing price of the Brooks common stock on September 28, 2001
on the Nasdaq National Market of $26.59, minus the respective option
exercise prices.
1992 COMBINATION STOCK OPTION PLAN
Under Brooks' 1992 combination stock option plan, which is administered by
the compensation committee of the Brooks board of directors, Brooks may grant
both incentive stock options intended to qualify under Section 422 of the
Internal Revenue Code, and other options which are not qualified as incentive
stock options. Incentive stock options may only be granted to persons who are
employees of Brooks at the time of grant, which may include officers and
directors who are also employees. Nonqualified stock options may be granted to
persons who are officers, directors or employees of or consultants or advisors
to Brooks, or persons who are in a position to contribute to the long-term
success and growth of Brooks at the time of grant. Options granted under the
1992 plan generally vest over a period of four years. A total of 1,950,000
shares of Brooks common stock were reserved for issuance under the 1992 plan. Of
these shares, options on 727,305 shares have been granted and are outstanding
and 1,884 shares remain available for grant as of December 7, 2001. In order to
align the 1992 plan with its current practices, in January 2000 the board of
directors amended the 1992 plan to eliminate Brooks' ability to grant restricted
stock under the 1992 plan and to require that all options be granted with
exercise prices not less than fair market value.
1993 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
The purpose of the 1993 nonemployee director stock option plan is to
attract and retain the services of experienced and knowledgeable independent
directors of Brooks for the benefit of Brooks and its stockholders and to
provide additional incentives for such independent directors to continue to work
for the best interests of Brooks and its stockholders.
1998 EMPLOYEE EQUITY INCENTIVE PLAN
The purpose of the 1998 employee equity incentive plan, adopted by the
board of directors of Brooks in April 1998, is to attract and retain employees
and provide an incentive for them to assist Brooks to achieve long-range
performance goals, and to enable them to participate in the long-term growth of
Brooks. All employees of Brooks, other than its officers and directors,
(including contractors, consultants, service providers or others) who are in a
position to contribute to the long-term success and growth of Brooks, are
eligible to participate in the 1998 plan. As of September 30, 2001, 3,550,000
shares of Brooks common stock were reserved for issuance under the 1998 plan. On
October 1, 2001, the board amended the 1998 plan to increase
83
the total number of shares reserved for issuance thereunder to 4,750,000. On
that date, the board granted options to purchase 1,605,440 shares under the 1998
plan. Of the shares reserved for issuance under the 1998 plan, options on
4,243,859 shares have been granted and are outstanding and 248,419 shares remain
available for grant as of December 7, 2001. In order to align the 1998 plan with
its current practices, in January 2000, the board of directors amended the 1998
plan to eliminate Brooks' ability to award nonqualified stock options with
exercise prices at less than fair market value.
2000 COMBINATION STOCK OPTION PLAN
The purposes of the 2000 combination stock option plan are to attract and
retain employees and to provide an incentive for them to assist Brooks to
achieve long-range performance goals and to enable them to participate in the
long-term growth of Brooks. Under the 2000 plan Brooks may grant (i) incentive
stock options intended to qualify under Section 422 of the Internal Revenue
Code, and (ii) options that are not qualified as incentive stock options.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee of the board of directors consists of Messrs.
Emerick and Khoury. Neither Mr. Emerick nor Mr. Khoury is or was formerly an
officer or employee of Brooks. Mr. Therrien, the president and chief executive
officer of Brooks, has been delegated the authority to grant options to purchase
not more than 9,000 shares of Brooks common stock per employee per fiscal year
to employees who are not executive officers on terms that are consistent with
the 1992 plan, the 1998 plan and the 2000 plan. Mr. Therrien granted options to
purchase an aggregate of 6,750 shares of Brooks common stock in fiscal 2001.
Prior to November 1994, all decisions regarding compensation of executive
officers were made by the entire board of directors.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides information regarding the beneficial ownership
of Brooks common stock as of December 7, 2001 by:
- each director of Brooks;
- each nominee for director of Brooks;
- each person known by Brooks to be the beneficial owner of more than 5% of
its common stock;
- Brooks' named executive officers;
- all current executive officers and directors of Brooks as a group; and
- each of Mitchell G. Tyson and Kenneth M. Thompson (if the merger with PRI
is completed, Brooks plans to appoint Messrs. Tyson and Thompson to its
board of directors).
Beneficial ownership is determined according to the rules of the SEC.
Except as indicated by footnotes and subject to community property laws, where
applicable, the persons named below have sole voting and investment power with
respect to all shares shown as beneficially owned by them. The "right to
acquire" column reflects beneficial ownership of shares subject to options that
may be exercised within 60 days after December 7, 2001.
The percentage beneficially owned by each person is based upon 19,923,724
shares of Brooks common stock outstanding as of December 7, 2001. The shares
that a person has the right to acquire are deemed to be outstanding solely for
purposes of calculating that person's percentage ownership.
The current directors and executive officers of Brooks have entered into
voting agreements with PRI in which they agreed to vote all of their shares of
Brooks common stock in favor of the approval and adoption of the merger
agreement and have executed irrevocable proxies with respect to their shares in
favor of PRI. Likewise, the current directors and executive officers of PRI have
entered into voting agreements with Brooks in which they agreed to vote all of
their shares of PRI common stock in favor of the approval and adoption of the
merger agreement and have executed irrevocable proxies with respect to their
shares in favor of Brooks.
84
Unless otherwise noted below, the address of each person listed in the
table is c/o Brooks Automation, Inc., 15 Elizabeth Drive, Chelmsford,
Massachusetts 01824.
NUMBER OF SHARES BENEFICIALLY OWNED
------------------------------------ PERCENTAGE
RIGHT TO BENEFICIALLY
NAME OF BENEFICIAL OWNER OUTSTANDING ACQUIRE TOTAL OWNED
------------------------ ----------- -------- --------- ------------
Robert J. Therrien.............................. 1,013,848 121,250 1,135,098 5.7%
Charles M. McKenna.............................. 561 18,750 19,311 *
Michael W. Pippins(1)........................... 40,815 34,800 75,615 *
Ellen B. Richstone.............................. 8,567 52,000 60,567 *
Jeffrey A. Cassis............................... 205 32,500 32,705 *
James A. Pelusi................................. 17,545 51,269 68,814 *
David R. Beaulieu............................... 712 35,680 36,392 *
Roger D. Emerick................................ 9,000 31,000 40,000 *
Amin J. Khoury.................................. 0 10,000 10,000 *
Juergen Giessmann(2)............................ 0 5,000 5,000 *
Joseph R. Martin................................ 0 0 0 *
Mitchell G. Tyson(3)............................ 91,542 97,858 189,400 *
Kenneth M. Thompson(4).......................... 0 13,000 13,000 *
Mellon Financial Corporation (5)................ 1,346,922 0 1,346,922 6.8%
One Mellon Center
Pittsburgh, PA 15258
Kopp Investment Advisors, Inc.(6)............... 1,228,897 0 1,228,897 6.2%
7701 France Avenue South, Suite 500
Edina, Minnesota 55435
T. Rowe Price Associates, Inc.(7)............... 1,026,600 0 1,026,600 5.2%
100 East Pratt Street
Baltimore, Maryland 21202
All directors and executive officers as a
group(1)(2)(3)(4)(15 persons)................. 1,193,023 530,732 1,723,755 8.4%
---------------
* Represents beneficial ownership of less than 1%.
(1) Includes 700 shares held by Mr. Pippins' minor children.
(2) Excludes 791,072 shares held by M+W Zander Holding GmbH, as to which Mr.
Giessmann disclaims beneficial ownership. Mr. Giessmann is the chief
executive officer of M+W Zander.
(3) For purposes of determining beneficial ownership, assumes the merger is
completed, that therefore each share of PRI common stock held by Mr. Tyson
is converted to 0.52 shares of Brooks common stock and that options to
purchase PRI common stock held by Mr. Tyson have been assumed by Brooks and
are exercisable for shares of Brooks common stock. The percentage
beneficially owned continues to be based upon 19,923,724 shares of Brooks
common stock and does not give effect to the completion of the merger.
(4) For purposes of determining beneficial ownership, assumes the merger is
completed and that therefore options to purchase PRI common stock held by
Mr. Thompson have been assumed by Brooks and are exercisable for shares of
Brooks common stock. The percentage beneficially owned continues to be based
upon 19,923,724 shares of Brooks common stock and does not give effect to
the completion of the merger.
(5) Mellon Financial Corporation filed a Schedule 13G with the SEC on January
19, 2001 on behalf of itself and Mellon Bank N.A. indicating beneficial
ownership of this amount. Mellon Financial Corporation has sole voting power
with respect to 1,273,639 shares and shared voting power with respect to
58,583 shares. It has sole dispositive power with respect to 1,329,939
shares and shared dispositive power with respect to 16,983 shares. Mellon
Bank N.A. has sole voting power with respect to 878,239 shares, sole
dispositive power with respect to 884,639 shares, and shared voting and
dispositive power with respect to 13,483 shares.
85
(6) Kopp Investment Advisors, Inc. filed a Schedule 13G with the SEC on January
31, 2001 on behalf of itself, Kopp Holding Company and LeRoy C. Kopp
indicating beneficial ownership of this amount. Of this amount, Kopp
Investment Advisors has sole voting power with respect to 450,200 shares and
sole dispositive power with respect to 260,000 shares. It exercises
investment discretion as to 865,897 shares, although it does not own such
shares. Kopp Investment Advisors is wholly owned by Kopp Holding Company,
which is wholly owned by LeRoy C. Kopp. Mr. Kopp has sole voting and
dispositive power with respect to 103,000 shares.
(7) T. Rowe Price Associates, Inc. filed a Schedule 13G with the SEC on February
6, 2001 indicating beneficial ownership of this amount. Of this amount, T.
Rowe Price Associates, Inc. has sole voting power as to 174,900 shares and
sole dispositive power as to 1,026,600 shares.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
LAM RESEARCH CORPORATION
Purchases by Lam accounted for approximately 12%, 11% and 7% of Brooks'
revenues during fiscal 1999, 2000 and 2001, respectively. From 1982 until
January 2001, Roger D. Emerick, who serves on Brooks' board of directors, served
as a director on Lam's board of directors. There is no agreement or arrangement
requiring the election of Mr. Emerick or any other representative of Lam to
serve as a director of Brooks.
Sales to Lam have been made in the ordinary course of Brooks' business, and
Brooks believes that the terms of its transactions with Lam have not been less
favorable to Brooks than could have been obtained from a party unaffiliated with
Brooks purchasing products of similar types and at comparable volumes.
FAIRCHILD SEMICONDUCTOR INTERNATIONAL, INC.
On June 11, 2001, Brooks appointed Joseph Martin to its board of directors.
Mr. Martin also serves on the board of Fairchild Semiconductor International, a
customer of Brooks. Revenues generated from Fairchild Semiconductor for the
period from June 11, 2001 through September 30, 2001 were not material to
Brooks' consolidated results for fiscal 2001. There is no agreement or
arrangement requiring the election of Mr. Martin or any other representative of
Fairchild Semiconductor to serve as a director of Brooks.
Sales to Fairchild Semiconductor have been made in the ordinary course of
Brooks' business, and Brooks believes that the terms of the transactions with
Fairchild Semiconductor have not been less favorable to Brooks than could have
been obtained from a party unaffiliated with Brooks purchasing products of
similar types and at comparable volumes.
JENOPTIK STOCKHOLDER AGREEMENT
On September 30, 1999, Brooks acquired substantially all of the assets and
assumed certain of the liabilities of the Infab Division of Jenoptik AG in
exchange for 914,286 shares of Brooks common stock issued to Jenoptik's
subsidiary M+W, subject to a 5% holdback and to adjustment. As part of this
acquisition, Brooks appointed Juergen Giessmann, a member of the board of
directors of Jenoptik, to Brooks' board of directors pursuant to a stockholder
agreement dated September 30, 1999 among Brooks, Jenoptik, M+W, and Robert J.
Therrien. Under the stockholder agreement, until Jenoptik no longer holds all
its shares purchased from Brooks in this transaction, or until September 30,
2004, whichever occurs first, Brooks agreed to nominate a reasonably acceptable
candidate of Jenoptik to Brooks' board of directors in each election of Brooks'
directors, and Robert J. Therrien agreed to vote all his shares in favor of such
nominees for election to the board of directors. These voting obligations of
Brooks and Mr. Therrien expired in fiscal 2001 when Jenoptik sold some of its
shares of Brooks common stock. Jenoptik agreed to cause M+W to vote in favor of
the other candidates to Brooks' board of directors nominated by Brooks' existing
board. Jenoptik also agreed to cause M+W to vote for other matters in accordance
with the recommendation of a majority of the Brooks board. Jenoptik agreed not
to buy or sell shares of the common stock except in specified circumstances.
Jenoptik further agreed to share certain information with Brooks regarding
upcoming factory automation projects, to give Brooks a right of first refusal as
a supplier and to award Brooks an exclusive supply contract with guaranteed,
minimum gross margin of at least $15 million in connection with an upcoming
project.
86
Jenoptik and Brooks also entered into a one year transitional services
agreement, pursuant to which Jenoptik agreed to allow Brooks to occupy space at
its Jena, Germany manufacturing facility and to receive support services from
Jenoptik. Brooks agreed to reimburse Jenoptik for the provision of space and
support services at cost. This transitional services agreement was extended
through December 2002. Brooks has paid Jenoptik a total of $1.6 million through
December 31, 2001 under this agreement, of which $1.1 million was attributable
to the leasing of warehousing and manufacturing facilities.
On October 16, 2000, the parties amended the agreement to permit the
removal of the transfer restrictions with respect to an aggregate of 868,572
shares of Brooks common stock held by Jenoptik, and the grant by Brooks of
certain registration rights under the Securities Act of 1933, as amended, with
respect to such shares. In consideration for a payment of $5.1 million, Brooks
released certain claims for indemnification against Jenoptik and agreed as soon
as commercially reasonable after January 15, 2001 to register 434,286 shares of
Brooks common stock held by Jenoptik. Brooks has further agreed to register an
additional 434,286 shares as soon as commercially reasonable after October 15,
2002. The amendment released Jenoptik from the requirement to award Brooks the
exclusive contract with guaranteed gross margins and Jenoptik released its
claims to the 5% holdback.
DAIFUKU STOCKHOLDER AGREEMENT
On January 6, 2000, Brooks completed the acquisition of Auto-Soft
Corporation and AutoSimulations, Inc. from their sole stockholder, Daifuku
America Corporation, the U.S. affiliate of Daifuku Co., Ltd., for $27 million in
cash, 535,404 shares of Brooks common stock and issuance of a note in the amount
of $16 million which was repaid on January 5, 2001. The note was unsecured and
bore interest at 4% per year. As part of the transaction, Daifuku America
Corporation and Daifuku Co., Ltd. entered into a stockholder agreement with
Brooks under which they agreed to take such action as may be required so that
all voting securities of Brooks owned by them and their affiliates (i) are
represented at all meetings and (ii) are voted in accordance with the
recommendation of Brooks' board of directors. The stockholder agreement also
restricted Daifuku from buying or selling shares of Brooks common stock except
in specified circumstances. A separate registration rights agreement granted
Daifuku certain registration rights for the stock it received in the
transaction. The parties also entered into a series of technology
cross-licensing arrangements related to the technology of the two acquired
companies and Daifuku which, in some cases, provide most favored customer terms.
Daifuku America Corporation has sold all its shares of Brooks common stock.
PART IV
ITEM 14. EXHIBITS
(a) 1. and 2. FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
The consolidated financial statements of the Company and Schedule II
Valuation and Qualifying Accounts and Reserves of the Company are listed in the
index under Part II, Item 8, in this Form 10-K.
Other financial statement schedules are omitted because of the absence of
conditions under which they are required or because the required information is
given in the consolidated financial statements or notes thereto.
87
(b) 3. EXHIBITS
EXHIBIT
NO. DESCRIPTION REFERENCE
------- ----------- ---------
2.01 Agreement and Plan of Merger dated September 21, 1998 A**
relating to the combination of FASTech Integration, Inc.
with the Company.
2.02 Stock for Cash Purchase Agreement dated March 31, 1999 B**
relating to the acquisition of Hanyon Tech. Co., Ltd. by the
Company.
2.03 Assets for Cash Purchase Agreement dated June 23, 1999 C**
relating to the acquisition of substantially all the assets
of Domain Manufacturing Corporation and its subsidiary
Domain Manufacturing SARL by the Company.
2.04 Agreement and Plan of Merger dated July 7, 1999 relating to D**
the combination of Smart Machines Inc. with the Company.
2.05 Master Purchase Agreement dated September 9, 1999 relating E**
to the acquisition of substantially all of the assets of the
Infab Division of Jenoptik by the Company.
2.06 Agreement and Plan of Merger dated January 6, 2000 relating F**
to the combination of AutoSimulations, Inc. and Auto-Soft
Corporation with the Company.
2.07 Interests for Stock Purchase Agreement dated May 5, 2000 G**
relating to the acquisition of Irvine Optical Company LLC by
the Company, as amended.
2.08 Stock Purchase Agreement dated as of February 16, 2001 H**
relating to the acquisition of SEMY Engineering, Inc. by the
Company.
2.09 Asset Purchase Agreement dated June 26, 2001 relating to the I**
acquisition of assets of the e-diagnostic infrastructure of
KLA-Tencor Corporation and its subsidiary KLA-Tencor
Technologies Corporation.
2.10 Agreement and Plan of Merger dated June 27, 2001 relating to J**
the combination of Progressive Technologies Inc. with the
Company.
2.11 Asset Purchase Agreement dated October 5, 2001 relating to K**
the acquisition of substantially all of the assets of
General Precision, Inc. and GPI-Mostek, Inc. by the Company.
2.12 Share Purchase Agreement dated October 9, 2001 relating to L**
the acquisition of Tec-Sem AG by the Company.
2.13 Agreement and Plan of Merger dated October 23, 2001 relating M**
to the acquisition of PRI Automation, Inc. by the Company.
3.01 Certificate of Incorporation, as amended, of the Company. N**
3.02 Bylaws of the Company. O**
3.03 Certificate of Designation of Series A Junior Participating P**
Preferred Stock.
4.01 Specimen Certificate for shares of the Company's common O**
stock.
4.02 Description of Capital Stock (contained in the Certificate N**
of Incorporation of the Company, filed as Exhibit 3.01).
4.03 Rights Agreement dated July 23, 1997. EE**
4.04 Amendment to Rights Agreement between the Company and Bank +
Boston, N.A. as Rights Agent.
4.05 Registration Rights Agreement dated January 6, 2000. +
4.06 Shareholder Agreement dated January 6, 2000 by and among the F**
Company, Daifuku America Corporation and Daifuku Co., Ltd.
4.07 Stockholders Agreement dated September 30, 1999 by and among E**
the Company, Jenoptik AG, M+W Zander Holding GmbH and Robert
J. Therrien.
4.08 Indenture dated as of May 23, 2001 between the Company and R**
State Street Bank and Trust Company (as Trustee).
88
EXHIBIT
NO. DESCRIPTION REFERENCE
------- ----------- ---------
4.09 Registration Rights Agreement dated May 23, 2001 among the R**
Company and Credit Suisse First Boston Corporation and SG
Cowen Securities Corporation (as representatives of several
purchasers).
4.10 Form of 4.75% Convertible Subordinated Note of the Company R**
in the principal amount of $175,000,000 dated as of May 23,
2001.
4.11 Stock Purchase Agreement dated June 20, 2001 relating to the S**
acquisition of CCS Technology, Inc. by the Company.
10.01 Employment Agreement between the Company and Robert J. +
Therrien dated as of September 30, 2001.
10.02 Form of Indemnification Agreement for directors and officers O* **
of the Company.
10.03 Employment Agreement between the Company and Ellen B. T* **
Richstone.
10.04 Stockholder Agreement dated September 30, 1999 by and among E**
the Company, Jenoptik AG, M+W Zander Holding GmbH and Robert
J. Therrien relating to the acquisition of substantially all
of the assets of the Infab Division of Jenoptik AG by the
Company (filed as Exhibit 4.06).
10.05 Form of Agreement between Executive Officers and the Company U* **
Relating to Change of Control.
10.06 Agreement dated November 11, 1999 between Ellen B. Richstone U* **
and the Company Relating to Change of Control.
10.07 Lease Agreement dated February 24, 1999 between the Company U**
and Clearfield Investments, LLC for the Company's Colorado
manufacturing facility.
10.08 Transitional Services Agreement dated September 30, 1999 U**
between the Company and Jenoptik AG relating to the
Company's German manufacturing facility.
10.09 Lease Agreement dated June 7, 1995 between a subsidiary of U**
the Company and Montague Oaks Phase I & II for the Company's
California manufacturing facility.
10.10 Shareholder Agreement dated January 6, 2000 by and among the F**
Company, Daifuku America Corporation and Daifuku Co., Ltd.
relating to the acquisition of the businesses of Auto-Soft
Corporation and AutoSimulations, Inc. from Daifuku America
Corporation by the Company.
10.11 Corporate Noncompetition and Proprietary Information F**
Agreement dated January 6, 2000 by and among the Company,
Daifuku America Corporation and Daifuku Co., Ltd. relating
to the acquisition of the businesses of Auto-Soft
Corporation and AutoSimulations, Inc. from Daifuku America
Corporation by the Company.
10.12 Demand Promissory Note Agreement dated as of May 2, 2000, N**
between the Company and ABN AMRO Bank N.V.
10.13 Stockholder Agreement between the Company and M+W Zander W**
Holding AG.
10.14 Retention Agreement for J. Pelusi dated June 16, 2000. X* **
10.15 Purchase Agreement for the Company's headquarters dated Y**
January 17, 2001.
10.16 Lease between the Company and the Nasr Family Trust for K**
25000 Avenue Stanford, Valencia, California.
10.17 1993 Nonemployee Director Stock Option Plan. Z* **
10.18 1992 Combination Stock Option Plan. AA* **
10.19 1995 Employee Stock Purchase Plan, as amended. N* **
10.20 1998 Employee Equity Incentive Option Plan. N* **
10.21 2000 Combination Stock Option Plan. N* **
10.22 2001 Restricted Stock Purchase Plan for KLA Product Line BB* **
Acquisition.
89
EXHIBIT
NO. DESCRIPTION REFERENCE
------- ----------- ---------
10.23 Progressive Technologies Inc. 1991 Stock Option and Stock CC* **
Purchase Plan.
10.24 Form of Voting Agreement between certain PRI Automation, DD**
Inc. stockholders and the Company dated as of October 23,
2001.
10.25 Lease dated May 30, 2001 between Silver Oaks, LLC and the +
Company for 13931 Balboa Boulevard, Sylmar, California.
10.26 Lease dated July 18, 2000 by and between Progressive +
Technologies Inc. and Ames Pond LLC for 200 Ames Pond,
Tewksbury, MA.
10.27 Lease between Bentall Properties LTD and Westminster +
Management Corporation and Brooks Automation (Canada) Corp.
for Crestwood Corporate Centre, Richmond, B.C.
10.28 Asset Purchase Agreement by and among Brooks Automation, +
Inc., NexStar Corporation, and Zygo Corporation dated
December 13, 2001
12.01 Calculation of Ratio of Earnings to Fixed Charges +
21.01 Subsidiaries of the Company. +
23.01 Consent of PricewaterhouseCoopers LLP. Filed herewith
23.02 Consent of Ernst & Young LLP, Independent Auditors. Filed herewith
---------------
+ Previously filed.
A. Incorporated by reference to the Company's registration
statement on Form S-4 (Registration No. 333-64037) filed on
September 23, 1998.
B. Incorporated by reference to the Company's current report on
Form 8-K filed on May 6, 1999.
C. Incorporated by reference to the Company's current report on
Form 8-K filed on July 14, 1999.
D. Incorporated by reference to the Company's current report on
Form 8-K filed on September 15, 1999, and amended on
September 29, 2000
E. Incorporated by reference to the Company's current report on
Form 8-K filed on October 15, 1999.
F. Incorporated by reference to the Company's current report on
Form 8-K filed on January 19, 2000.
G. Incorporated by reference to the Company's registration
statement on Form S-3 (Registration No. 333-42620) filed on
July 31, 2000.
H. Incorporated by reference to the Company's current report on
Form 8-K filed on March 1, 2001.
I. Incorporated by reference to the Company's current report on
Form 8-K filed on July 9, 2001.
J. Incorporated by reference to the Company's current report on
Form 8-K filed on July 24, 2001.
K. Incorporated by reference to the Company's current report on
Form 8-K filed on October 19, 2001.
L. Incorporated by reference to the Company's current report on
Form 8-K filed on October 22, 2001.
M. Incorporated by reference to the Company's current report on
Form 8-K filed on October 26, 2001.
N. Incorporated by reference to the Company's quarterly report
on Form 10-Q filed on May 15, 2000 for the quarterly period
ended March 31, 2000.
O. Incorporated by reference to the Company's registration
statement on Form S-1 (Registration No. 33-87296) filed on
December 13, 1994.
P. Incorporated by reference to the Company's registration
statement on Form S-3 (Registration No. 333-34487) filed on
August 27, 1997.
Q. Incorporated by reference to the Company's current report on
Form 8-K filed on January 19, 2000 and amended on February
14, 2000.
R. Incorporated by reference to the Company's current report on
Form 8-K filed on May 29, 2001.
S. Incorporated by reference to the Company's registration
statement on Form S-8 (Registration No. 333-67432) filed on
August 13, 2001.
90
T. Incorporated by reference to the Company's annual report on
Form 10-K filed on December 30, 1998 for the year ended
September 30, 1998.
U. Incorporated by reference to the Company's annual report on
Form 10-K filed on December 29, 1999 for the annual period
ended September 30, 1999.
V. Incorporated by reference to the Company's quarterly report
on Form 10-Q filed on February 14, 2000 for the quarterly
period ended December 31, 1999.
W. Incorporated by reference to the Company's annual report on
Form 10-K filed on December 22, 2000 for the annual period
ended September 30, 2000.
X. Incorporated by reference to the Company's quarterly report
on Form 10-Q filed on February 14, 2001 for the quarterly
period ended December 31, 2000.
Y. Incorporated by reference to the Company's quarterly report
on Form 10-Q filed on May 11, 2001 for the quarterly period
ended March 31, 2001.
Z. Incorporated by reference to the Company's registration
statement on Form S-8 (Registration No. 333-22717) filed on
March 4, 1997.
AA. Incorporated by reference to the Company's registration
statement on Form S-8 (Registration No. 333-07313) filed on
July 1, 1996.
BB. Incorporated by reference to the Company's registration
statement on Form S-8 (Registration No. 333-61928) filed on
May 30, 2001.
CC. Incorporated by reference to the Company's registration
statement on Form S-8 (Registration No. 333-67432) filed on
August 13, 2001.
DD. Incorporated by reference to the Schedule 13D filed by the
Company on November 2, 2001 with respect to certain shares
of PRI Automation, Inc.
EE. Incorporated by reference to the Company's current report on
Form 8-K filed on August 7, 1997.
* Management contract or compensatory plan or arrangement.
** In accordance with Rule 12b-32 under the Securities Exchange
Act of 1934, as amended, reference is made to the documents
previously filed with the Securities and Exchange
Commission, which documents are hereby incorporated by
reference.
(c) REPORTS ON FORM 8-K
The following reports on Form 8-K were filed during the quarterly period
ended September 30, 2001:
(1) Current Report on Form 8-K filed on August 21, 2001 relating to the
Company's acquisition of Progressive Technologies, Inc. ("PTI") on July
12, 2001 and the Company's acquisition of Auto-Soft Corporation ("ASC")
and AutoSimulations, Inc. ("ASI") on January 6, 2000.
(i) The following supplementary financial information, restated to give
effect to the Company's acquisition of PTI in a pooling of
interests transaction effective July 12, 2001, was filed with the
Form 8-K:
- Management's Discussion and Analysis of Financial Condition and
Results of Operations for the three years ended September 30, 2000,
1999 and 1998
- Report of Independent Accountants -- PricewaterhouseCoopers LLP
- Report of Independent Auditors -- Ernst & Young
- Report of Independent Public Accountants -- Arthur Andersen LLP
- Supplementary Consolidated Balance Sheets as of September 30, 2000
and 1999
- Supplementary Consolidated Statements of Operations for the years
ended September 30, 2000, 1999 and 1998
91
- Supplementary Consolidated Statements of Changes in Stockholders'
Equity for the years ended September 30, 2000, 1999 and 1998
- Supplementary Consolidated Statements of Cash Flows for the years
ended September 30, 2000, 1999 and 1998
- Notes to Supplementary Consolidated Financial Statements for the
three years ended September 30, 2000, 1999 and 1998
(ii) The following supplementary financial information, restated to
give effect to the Company's acquisition of PTI in a pooling of
interests transaction effective July 12, 2001, was filed with the
Form 8-K:
- Supplementary Consolidated Balance Sheets as of June 30, 2001
(unaudited) and September 30, 2000
- Supplementary Consolidated Statements of Operations for the nine
months ended June 30, 2001 and 2000 (unaudited)
- Supplementary Consolidated Statements of Cash Flows for the nine
months ended June 30, 2001 and 2000 (unaudited)
- Notes to Supplementary Consolidated Financial Statements for the
nine months ended June 30, 2001 and 2000 (unaudited)
- Management's Discussion and Analysis of Financial Condition and
Results of Operations for the nine months ended June 30, 2001 and
2000
(iii) The following unaudited pro forma financial information giving
effect to the acquisition of ASC and ASI as if the transaction had
occurred on October 1, 1999, restated to give effect to the
Company's acquisition of PTI in a pooling of interests transaction
effective July 12, 2001, was filed with the Form 8-K:
- Unaudited Pro Forma Combined Condensed Statement of Operations for
the year ended September 30, 2000
- Notes to Unaudited Pro Forma Combined Condensed Financial
Statements
(2) Current Report on Form 8-K filed on July 24, 2001 relating to the
Company's acquisition of PTI on July 12, 2001.
(3) Current Report on Form 8-K filed on July 9, 2001 relating to the
Company's acquisition of the e-Diagnostics product business from
KLA-Tencor, Inc.
92
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this amended report to be
signed on its behalf by the undersigned, thereunto duly authorized.
BROOKS AUTOMATION, INC.
Date: April 3, 2002 /s/ ELLEN B. RICHSTONE
--------------------------------------------------------
Ellen B. Richstone
Senior Vice President of
Finance and Administration
and Chief Financial Officer
93