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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event
reported):
August 20, 2001
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Brooks Automation, Inc.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
000-25434 04-3040660
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(Commission File Number) (I.R.S. Employer Identification No.)
15 Elizabeth Drive, Chelmsford, MA 01824
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(978) 262-2400
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(Registrant's Telephone Number, Including Area Code)
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ITEM 5. OTHER EVENTS
This Current Report on Form 8-K gives information relating to the Company's
acquisition of Progressive Technologies, Inc. ("PTI") and the Company's
acquisition of Auto-Soft Corporation ("ASC") and AutoSimulations, Inc. ("ASI").
On July 12, 2001, the Company acquired PTI in a transaction to be accounted for
as a pooling of interests. This Current Report on Form 8-K provides audited
supplementary consolidated financial information of the Registrant, giving
effect to this transaction on the Registrant's financial position and results of
operations.
The supplementary consolidated financial statements of the Company and its
subsidiaries have been prepared to give retroactive effect to the merger with
PTI, which occurred on July 12, 2001. Generally accepted accounting principles
proscribe giving effect to a consummated business combination accounted for by
the pooling of interests method in financial statements that do not include the
date of consummation. These financial statements do not extend through the date
of consummation; however, they will become the historical consolidated financial
statements of the Company and subsidiaries after financial statements covering
the date of consummation of the business combination are issued.
Prior to its acquisition by the Company, PTI's fiscal year-end was December 31.
Accordingly, the Company's supplementary consolidated balance sheets as of
September 30, 2000 and 1999 include PTI's balance sheets as of December 31, 2000
and 1999, respectively. The Company's Supplementary Consolidated Statements of
Operations, Supplementary Consolidated Statements of Changes in Stockholders'
Equity and Supplementary Consolidated Statements of Cash Flows for the years
ended September 30, 2000, 1999 and 1998, include PTI's results of operations for
the years ended December 31, 2000, 1999 and 1998, respectively. The Company's
Supplementary Consolidated Statement of Operations for the nine months ended
June 30, 2000, includes the results of PTI for the nine months ended September
30, 2000. As a result of conforming dissimilar year-ends, PTI's results of
operations for the three months ended December 31, 2000, are included in the
Company's fiscal year 2000 and will be included in the Company's fiscal year
2001. An amount equal to PTI's net income attributable to common stockholders
for the three months ended December 31, 2000, was eliminated from consolidated
retained earnings for the nine months ended June 30, 2001. PTI's net income and
accretion on preferred stock for that quarter were $536,000 and $30,000,
respectively.
(a) The supplementary financial information included herein is as follows:
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 LLP
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
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
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(b) The supplementary financial information included herein is as follows:
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
(c) The Company acquired ASC and ASI on January 6, 2000. The following
unaudited pro forma financial information gives effect to the acquisition
of ASC and ASI as if the transaction had occurred on October 1, 1999
Unaudited Pro Forma Combined Condensed Statement of Operations for the year
ended September 30, 2000
Notes to Unaudited Pro Forma Combined Condensed Financial Statements
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Item 5(a).
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Certain statements in this report on Form 8-K constitute "forward-looking
statements" which involve know risks, uncertainties, and other factors which may
cause the actual results, performance, or achievements of Brooks to be
materially different from any future results, performance, or achievements
expressed or implied by such forward-looking statements. Such factors include
the factors that may affect future results set forth in Management's Discussion
and Analysis of Financial Condition and Results of Operations, which is included
in this report. Precautionary statements made herein should be read as being
applicable to all related forward-looking statements whenever they appear in
this report.
OVERVIEW
The predecessor Brooks was organized in February 1989 and acquired the
semiconductor wafer handling business of the Brooks Automation Division of
Aeronca Electronics, Inc., a subsidiary of Fleet Aerospace Corporation, in March
1989.
Brooks is a leading supplier of tool and factory hardware and software
automation solutions for the global semiconductor, data storage, and flat panel
display manufacturing industries. Brooks has distinguished itself as a
technology and market leader, particularly in the demanding cluster-tool
vacuum-processing environment and in integrated factory automation software
applications. The Company's offerings have evolved from individual robots used
to optimize fab performance. In 1998 and 1999 the Company diversified and
entered the factory automation market, beginning with the acquisition of FASTech
Integration, Inc. Through a recent series of acquisitions Brooks has emerged as
one of the leading suppliers of factory automation software and hardware
solutions to end users in these markets.
In 1992, the Company introduced the family of vacuum central wafer handling
systems and modules that forms the foundation of the Company's current business.
In 1994, the Company introduced a similar family of systems and modules for flat
panel display substrates, including a next-generation magnetically driven vacuum
transfer robot. In 1996, the Company acquire Techware Systems Corporation
("Techware"), a designer and supplier of integrated equipment control software
for the semiconductor and related industries, expanding its software and control
capability. In 1997, the Company introduced a line of products for the
atmospheric handling market, including in-line and controlled environment
systems, robots, aligners and traversers. In 1998, the Company acquired FASTech
Integration, Inc. ("FASTech"), a designer and supplier of top-to-bottom
integrated Manufacturing Execution Systems ("MES") software solutions. Both of
these acquisitions were accounted for under the pooling of interests methods.
The Company made several acquisitions during fiscal year 1999. On April 21,
1999, the Company completed the acquisition of Hanyon Technology, Inc.
("Hanyon"). Hanyon, based in Korea, provides MES systems integration services
and cell control automation solutions to the semiconductor and liquid crystal
display industries in Korea and Taiwan. On June 30, 1999, the Company completed
the acquisition of substantially all the assets and certain liabilities of
Domain Manufacturing Corporation ("Domain"). Domain is a leading developer of
process development, data analysis and advanced process control software. These
acquisitions were accounted for using the purchase method of accounting.
Accordingly, the Company's consolidated Statements of Operations and of Cash
Flows include the results of Hanyon and Domain for the periods subsequent to
their respective dates of acquisition.
On August 31, 1999, the Company completed the acquisition of Smart Machines Inc.
("Smart Machines"). Smart Machines produces process tool automation components
for semiconductor manufacturers. This acquisition was accounted for as a pooling
of interests.
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On September 30, 1999, the Company completed the acquisition of certain assets
of the Infab Division ("Infab") of Jenoptik AG, a leading supplier of advanced
factory interface systems. This acquisition was accounted for using the purchase
method of accounting. Accordingly, the Company's Consolidated Statements of
Operations and Cash Flows contain the results of Infab for the periods
subsequent to the date of its acquisition.
On January 6, 2000, the Company completed the acquisition of the businesses of
Auto-Soft Corporation ("ASC") and AutoSimulations, Inc. ("ASI") from Daifuku
America Corporation ("Daifuku America"), a U.S. subsidiary of Daifuku Co., Ltd.
of Japan. ASC is a material handling software and systems integration company.
ASC is a robotic and material handling simulation, schedule and real time
dispatching software company. The acquisition was accounted for using the
purchase method of accounting. Accordingly, the Company's Consolidated
Statements of Operations and of Cash Flows for the year ended September 30, 2000
include the results of ASC and ASI for the period subsequent to their
acquisition.
On May 5, 2000, the Company acquired Irvine Optical Company LLC ("Irvine
Optical"). Irvine Optical is a manufacturer of micro/macro inspection, wafer
handling, and sorting and control equipment, primarily for the semiconductor
industry. The transaction was accounted for as a pooling of interests.
Accordingly, the Company's consolidated financial statements and notes thereto
have been restated to include the financial position and results of operations
of Irvine Optical for all periods prior to the acquisition.
On June 23, 2000, the Company acquired the assets of MiTeX Solutions ("MiTeX"),
a provider of run-to-run control technology. The acquisition was accounted for
using the purchase method of accounting. The Company's Consolidated Statements
of Operations and of Cash Flows for the year ended September 30, 2000 include
the results of MiTeX for the period from July 1, 2000 to September 30, 2000. The
results of operations of MiTeX for the period from acquisition to June 30, 2000,
are not material to the consolidated results of the Company.
On July 12, 2001 the Company acquired Progressive Technologies, Inc. ("PTI").
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 transaction was accounted for as a pooling of interests.
Accordingly, the Company's consolidated financial statements and notes thereto
have been restated on a supplementary basis to include the financial position
and results of operations of PTI for all periods prior to their acquisition.
In June 1999, the Company formed a joint venture in Korea with Samsung
Electronics. This joint venture is 70% owned by the Company and 30% owned by
Samsung, and has been organized to design, develop, and manufacture atmospheric
flat panel display loaders along with other products. The Company consolidated
fully the financial position and results of operations of the joint venture and
accounts for the minority interest in the financial statements.
The Company's product revenues include sales of hardware and software products.
The Company's service revenues are primarily comprised of tool control
application consulting services, consulting, software customization and spare
parts sales.
Many of the Company's customers purchase the Company's vacuum transfer robots
and other modules before purchasing the Company's vacuum central wafer handling
systems. The Company believes that once a customer has selected the Company's
products for a process tool, the customer is likely to rely on those products
for the life of that process tool model, which can be in excess of five years.
Conversely, losing a bid for a manufacturing execution system ("MES") does not
preclude the Company from securing optimization products to fit with a
competitor's MES.
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A significant portion of the Company's revenues have been generated by sales to
customers in the United States, although the Company believes that a significant
portion of these customers incorporate the Company's products into equipment
sold to their foreign customers. The Company's foreign sales have occurred
principally in Asia and Europe. Sales in Asia have occurred primarily in Japan
and South Korea, and, to a lesser extent, in Taiwan and Singapore.
The Company's foreign revenues are generally denominated in United States
dollars. Accordingly, foreign currency fluctuations have not had a significant
impact on the comparison of the results of operations for the periods presented.
The costs and expenses of the Company's international subsidiaries are generally
denominated in currencies other than the United States dollar. However, since
the functional currency of the Company's international subsidiaries are the
local currency, foreign currency translation adjustments are reflected as a
component of stockholders' equity under the caption "Accumulated other
comprehensive income (loss)". To the extent that the Company expands its
international operations or changes its pricing practices to denominate prices
in foreign currencies, the Company will be exposed to increased risk of currency
fluctuation.
The Company's business is highly dependent upon the capital expenditures of
semiconductor and flat panel display manufacturers which historically have been
cyclical, and the Company's ability to develop, manufacture and sell new
products and product enhancements. The Company's revenues grew substantially in
fiscal 2000 compared to fiscal 1999 due in large part to high levels of capital
expenditures of semiconductor manufacturers. The Company cannot guarantee that
these levels of expenditure will be sustained in fiscal 2001. The Company's
results will also be affected, especially when measured on a quarterly basis, by
the volume, composition and timing of orders, conditions in industries served by
the Company, competition and general economic conditions.
RESULTS OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 2000, COMPARED TO YEAR ENDED SEPTEMBER 30, 1999
The Company reported net income of $15.1 million for the year ended September
30, 2000, compared to a net loss of $9.5 million in the previous year. The
Company's net income attributable to common stockholders 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
original equipment manufacturer ("OEM") and end user markets and incremental
revenue from acquisitions. This Company experienced growth in all of the
geographic regions in which it operates. Both the automation systems segment and
the factory automation solutions segment increased from the prior year, by
155.0% and 252.6%, respectively.
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.
This growth is primarily attributable to the overall strength in the OEM and End
User markets and acquisitions.
Service revenues increased $31.3 million, or 146.0%, to $52.8 million. This
increase is primarily attributable to internal growth and the Company's
acquisitions.
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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. 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 increased to 47.7% for the year ended September 30, 2000, compared
to 44.9% for the previous year. The Company's automation systems segment gross
margin increased to 40.8% in the year ended September 30, 2000, from 36.9% in
the prior year, and is primarily the result of operational efficiencies and
change in product mix. This increase was partially offset by a decrease in gross
margin of the Company's factory automation solutions segment, to 68.0% in the
year ended September 30, 2000, from 77.4% in the prior year. This segment's
gross margin decline is primarily attributable to the acquired service business
of ASC, which has a historically lower margin structure than that of the
segment. In future years, gross margin may be adversely affected by changes in
product mix and/or price competition.
Gross margin on product revenues was 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, combined with ASC's historically lower margin structure. Included
in the cost of service revenues are global customer support costs, consisting
primarily of personnel costs and travel expenses.
RESEARCH AND DEVELOPMENT
Research and development expenses for the year ended September 30, 2000, were
$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 the result of the research and development efforts related
to the Company's recent acquisitions as well as incremental spending associated
with the launch of new atmospheric products and the transition to the next
generation vacuum wafer handling products, partially offset by the elimination
of redundant research and development programs. The Company plans to invest in
research and development to enhance existing and develop new tool and factory
hardware and software automation solutions for the semiconductor, data storage
and flat panel display manufacturing industries.
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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 recently
completed acquisitions and infrastructure improvements, while the improvement of
these costs as a percentage of revenues reflects the Company's efforts at
expanding its product offerings and customer base. The Company expects that
future expenditure levels will continue at or above current levels to support
its worldwide sales and administrative organizations.
AMORTIZATION OF ACQUIRED INTANGIBLE ASSETS
Amortization expense for acquired intangible assets totaled $18.5 million for
the year ended September 30, 2000, and relates to acquired intangible assets
from the June 23, 2000 Mitex acquisition, the January 6, 2000 ASC and ASI
acquisition, the Infab, Domain and Hanyon acquisitions, all of which occurred
during the second half of fiscal 1999 and Irvine Optical's acquisition of a
corporation in March 1997. Amortization expense for acquired intangible assets
was $0.6 million in the year ended September 30, 1999, and relates to the Domain
and Hanyon acquisitions and Irvine Optical.
ACQUISITION-RELATED AND RESTRUCTURING COSTS
Acquisition-related charges of $0.6 million in the year ended September 30,
2000, relate primarily to transaction costs in connection with the acquisition
of Irvine Optical. In fiscal 1999, the Company incurred acquisition-related and
restructuring costs of $3.1 million, comprised of $1.2 million for transaction
costs related to the Smart Machines acquisition, $0.3 million for severance
costs and $1.6 million for the write-off of certain fixed assets.
INTEREST INCOME AND EXPENSE
Interest income increased by $6.6 million, to $9.7 million, in the year ended
September 30, 2000, compared to the previous year. This increase is due
primarily to higher cash and investment asset balances which resulted from the
Company's public offering of shares of common stock in March 2000. Interest
expense of $1.3 million and $1.6 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 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.
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YEAR ENDED SEPTEMBER 30, 1999, COMPARED TO YEAR ENDED SEPTEMBER 30, 1998
The Company reported a net loss of $9.5 million for the year ended September 30,
1999 (including $0.6 million of amortization of acquired intangible assets and
$5.3 million of acquisition-related and restructuring charges and other costs),
compared to a net loss of $23.3 million in the previous year (including $0.2
million of amortization of acquired intangible assets and $11.8 million of
acquisition-related and restructuring charges and other costs). The Company
reported net losses attributable to common stockholders (after dividends and
accretion on preferred stock) of $10.3 million and $24.8 million for the years
ended September 30, 1999 and 1998, respectively.
REVENUES
The Company reported revenues of $123.0 million in the year ended September 30,
1999, compared to $123.5 million in the previous year. However, excluding the
results of Irvine Optical, revenues increased 5.2%, to $111.9 million in the
year ended September 30, 1999, from $106.4 million in the previous year. The
decrease in total revenue is attributable to the automation systems segment,
which includes Irvine Optical, partially offset by an increase in the factory
automation solutions segment's revenue.
Product revenues decreased $2.6 million, or 2.5%, to $101.5 million in the year
ended September 30, 1999, from $104.1 million in the previous fiscal year. The
decline is the net result of Irvine Optical's lower revenues, partially offset
by improving 200mm revenues.
Service revenues increased $2.1 million, or 10.7%, to $21.5 million. This
increase is primarily attributable to the Company's acquisitions and the impact
of those acquisitions on consulting services associated with factory automation.
Revenues outside the United States were $53.1 million, or 43.2% of revenues, and
$55.0 million, or 44.5% of revenues, in the years ended September 30, 1999 and
1998, respectively.
GROSS MARGIN
Gross margin increased to 44.9% for the year ended September 30, 1999, compared
to 30.2% for the previous year. Both of the Company's segments showed improved
gross margin performance. The Company's automation systems segment gross margin
increased to 36.9% in the year ended September 30, 1999, from 24.5% in the prior
year. This increase is primarily the result of improved manufacturing capacity
utilization. The Company's factory automation solutions segment gross margin was
77.4% in the year ended September 30, 1999, an increase from 66.8% in the
previous year. This increase is primarily due to the acquisition of higher
margin software product businesses.
Gross margin on product revenues increased to 46.6% for the year ended September
30, 1999, from 28.3% in the previous year. Included in the cost of product
revenues for the years ended September 30, 1999 and 1998 are charges of $1.6
million and $6.6 million, respectively, for acquisition-related, restructuring
and other costs. The fiscal 1999 charges are comprised of a $1.0 million charge
to provide additional reserves for slow-moving and obsolete inventories and $0.6
million of additional depreciation expense, while the fiscal 1998 charge was
comprised of $6.2 million to provide additional reserves for slow-moving and
obsolete inventories, $0.3 million for additional depreciation costs and $0.1
million for severance costs. Excluding these costs, gross margin on product
revenues was 48.2% and 34.6% for the years ended September 30, 1999 and 1998,
respectively.
Gross margin on service revenues decreased to 36.8% for the year ended September
30, 1999, from 40.5% in the previous year. Included in the cost of service
revenues are global customer support costs, consisting primarily of personnel
costs and travel expenses.
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RESEARCH AND DEVELOPMENT
Research and development expenses for the year ended September 30, 1999 were
$24.5 million, a decrease of $3.1 million, from $27.6 million in the previous
year. Research and development expenses also decreased as a percentage of
revenues, to 19.9% in the year ended September 30, 1999, compared to 22.3% in
the previous year. The spending decrease was the effect of reduced personnel
costs and other related spending associated with the changing mix of supported
technologies.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses increased by 10.8%, to $38.8
million for the year ended September 30, 1999, compared to $35.0 million in the
previous year. Selling, general and administrative expenses also increased as a
percentage of revenues, to 31.5% in the year ended September 30, 1999, from
28.3% in the previous year. Fiscal 1999 expenses included $0.2 million for
additional depreciation expense and fiscal 1998 expenses included $1.0 million
for additional accounts receivable reserves and additional depreciation expense.
The spending increase is due to expanded sales and marketing activities as well
as increased general and administration support costs associated with the
Company's acquisitions and infrastructure improvements completed in 1999.
AMORTIZATION OF ACQUIRED INTANGIBLE ASSETS
Amortization expense for acquired intangible assets totaled $0.6 million for the
year ended September 30, 1999, and relates to the Infab, Domain and Hanyon
acquisitions, all of which occurred during the second half of fiscal 1999 and
Irvine Optical's acquisition of a corporation in March 1997. Amortization
expense for acquired intangible assets was $0.2 million for the year ended
September 30, 1998, and is attributable to Irvine Optical.
ACQUISITION-RELATED AND RESTRUCTURING COSTS
In fiscal 1999, the Company incurred acquisition-related and restructuring costs
of $3.1 million, comprised of $1.2 million for transaction costs related to the
Smart Machines acquisition, $0.3 million for severance costs and $1.6 million
for the write-off of certain fixed assets. The fiscal 1998 acquisition-related
and restructuring costs of $3.7 million were comprised of $1.4 million to exit
duplicate facilities, $1.0 million for legal, accounting and other transaction
costs related to the FASTech acquisition and $1.3 million for severance costs.
INTEREST INCOME AND EXPENSE
Interest income decreased by 13.2%, to $3.2 million, in the year ended September
30, 1999, compared to $3.6 million in the previous year, due primarily to lower
cash and investment asset balances. Interest expense decreased by 34.1%, to $1.6
million in the year ended September 30, 1999, from $2.3 million in the previous
year. Fiscal 1998 interest expense includes $0.3 million to retire debt in
conjunction with the acquisition of FASTech. The decrease is primarily
attributable to reduced borrowings and the aforementioned fiscal 1998 debt
retirement charge.
INCOME TAX BENEFIT
The Company recorded net tax benefits of $0.9 million and $4.6 million in the
years ended September 30, 1999 and 1998, respectively. These tax benefits are
primarily due to anticipated future tax benefit of domestic net operating losses
and research and development credits, which were partially offset by $1.6
million and $3.8 million increases in the deferred tax asset valuation allowance
in fiscal 1999 and fiscal 1998, respectively.
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LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $133.6 million at September 30, 2000, an increase
of $66.6 million from September 30, 1999. The Company realized proceeds, net of
issuance costs, of $220.5 million from a public offering of shares of its common
stock in March 2000. In connection with its acquisition of ASC and ASI on
January 6, 2000, the Company paid Daifuku America $27.0 million in cash and
issued Daifuku America a note in the amount of $16.0 million, which is due on
January 6, 2001. The Company has invested net $103.0 million of excess cash in
short- and long-term marketable securities. At September 30, 2000, $88.0 million
was invested in marketable securities with maturities of one year or less and
$15.0 million in marketable securities which will mature October 1, 2001 or
later.
Cash used in operations was $11.2 million, and is primarily attributable to
increases in accounts receivable, inventories and prepaid expenses and other
current assets of $50.7 million, $28.0 million and $7.7 million, respectively,
partially offset by depreciation and amortization of $30.4 million, and
increases of $12.8 million in accounts payable, $8.4 million in deferred
revenue, $9.7 million in accrued compensation and benefits and $8.6 million in
accrued expenses and other current liabilities. The increase in accounts
receivable and inventories is primarily attributable to the Company's recent
rapid growth. The Company's increased sales, particularly in Asia, combined with
a greater number of long-term contracts, have also contributed to the increase
in accounts receivable.
Cash used in investing activities was $142.1 million, and was principally
comprised of $118.0 million for the purchase of marketable securities, partially
offset by $15.0 million of marketable securities sold/matured, $24.4 million
used for the purchase of businesses, net of cash acquired (primarily the
acquisition of ASC and ASI) and $13.9 million used for capital additions,
primarily in its telecommunications systems infrastructure and for computer
requirements, including expenditures needed to accommodate the Company's
expanding capacity needs, such as the completion this year of its additional
facility in Chelmsford, Massachusetts.
Cash provided by financing activities was $220.1 million, comprised of $220.5
million of proceeds from the public offering of common stock, net of $12.9
million of issuance costs, and $5.4 million of proceeds from the exercise of
common stock options and the employee stock purchase plan. The total proceeds of
$225.9 million from the issuance of common stock were partially offset by $5.3
million for net repayments on the revolving credit facility of an acquired
entity and $0.6 million for the payment of long-term debt of the Company.
While the Company has no significant capital commitments, as it expands its
product offerings and prepares for expected growth, the Company anticipates that
it will continue to make capital expenditures to support its business. The
Company may also use its resources to acquire companies, technologies or
products that complement the business of the Company.
The Company terminated its $30.0 million unsecured revolving credit facility and
entered into a $10.0 million uncommitted demand promissory note facility with
ABN AMRO Bank N.V. ("ABN AMRO") on May 2, 2000. The Company transferred all of
its outstanding letters of credit, totaling approximately $1.1 million, to the
new facility. ABN AMRO is not obligated to extend loans or issue letters of
credit under this new facility. At September 30, 2000, $1.3 million of the
facility was in use, all of it for letters of credit.
The Company believes that its existing resources will be adequate to fund the
Company's currently planned working capital and capital expenditure requirements
for at least the next twelve months. The sufficiency of the Company's resources
to fund its needs for capital is subject to known and unknown risks,
uncertainties and other factors which may have a material adverse effect on the
Company's business, including without limitation, the factors discussed under
"Factors That May Affect Future Results."
12
RECENT ACCOUNTING PRONOUNCEMENTS
In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44 ("FIN 44"), "Accounting for Certain Transactions Involving
Stock Compensation - an interpretation of APB Opinion No. 25". FIN 44 clarifies
the application of APB Opinion No. 25 ("APB 25"), including the following: the
definition of an employee for purposes of applying APB 25; the criteria for
determining whether a plan qualifies as a non-compensatory plan; the accounting
consequences of various modifications to the terms of previously fixed stock
options or awards; and the accounting for an exchange of stock compensation
awards in a business combination. FIN 44 is effective July 1, 2000, but certain
conclusions in FIN 44 cover specific events that occurred after either December
15, 1998 or January 12, 2000. Application of this pronouncement has not had a
material impact on the Company's financial position or results of operations.
In December 1999, the U.S. Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements". SAB 101 summarizes the SEC's views in applying generally accepted
accounting principles to selected revenue recognition issues in financial
statements. In June 2000, the SEC issued Staff Accounting Bulletin No. 101B, an
amendment to SAB 101, which delays the implementation of SAB 101. The
application of the guidance in SAB 101 will now be required in the Company's
fourth quarter of fiscal 2001. The Company does not anticipate the adoption of
SAB 101 to have a significant impact on financial results in fiscal 2001.
In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("FAS 133"). This
statement was amended by the issuance of Statement No. 137, "Deferral of the
Effective Date of FASB Statement No. 133", which changed the effective date of
FAS 133 to all fiscal years beginning after June 15, 2000 (fiscal 2001 for the
Company) and requires that all derivative instruments be recorded on the balance
sheet at their fair value. This statement was further amended by Statement No.
138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities - an Amendment of FASB Statement No. 133". Changes in the fair value
of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part of
a hedge transaction and, if it is, the type of hedge transaction. The Company's
management anticipates that the adoption of FAS 133 will not have a significant
effect on the Company's results or operations or financial position, as the
Company currently does not utilize derivative instruments.
FACTORS THAT MAY AFFECT FUTURE RESULTS
From time to time, information provided by Brooks or statements made by its
employees may contain forward-looking information that involves substantial
known and unknown risks and uncertainties such as those described below that
could cause actual results to differ materially from targets or projected
results.
You should carefully consider the risks described below and the other
information in this report before deciding to invest in shares of our common
stock. While these are the risks and uncertainties we believe are most important
for you to consider, you should know that they are not the only risks or
uncertainties facing us or which may adversely affect our business. If any of
the following risks or uncertainties actually occur, our business, financial
condition and operating results would likely suffer. In that event, the market
price of our common stock could decline and you could you lose all or part of
the money you paid to buy our common stock.
13
RISKS RELATING TO OUR OPERATIONS
THE CYCLICAL DEMAND OF SEMICONDUCTOR MANUFACTURERS AFFECTS OUR OPERATING
RESULTS. Our business is significantly dependent on capital expenditures by
semiconductor manufacturers. The level of semiconductor manufacturers' capital
expenditures is dependent on the current and anticipated market demand for
semiconductors. Demand for semiconductors is cyclical and has historically
experienced periodic downturns. During these downturns, our revenues have
dropped, and we have incurred losses. We believe that downturns in the
semiconductor manufacturing industry will occur in the future and will result in
decreased demand for our products. Despite the addition of our factory
automation business in fiscal 1999, our financial results will continue to be
dependent on capital expenditures by semiconductor manufacturers. Downturns in
the semiconductor business, when fewer new facilities are being built, could
harm our financial results as have downturns in the past.
OUR SALES VOLUME DEPENDS ON THE SALES VOLUME OF OUR ORIGINAL EQUIPMENT
MANUFACTURER CUSTOMERS. We sell a majority of our tool automation products to
original equipment manufacturers who incorporate our products into their
equipment. Therefore, our revenues are directly dependent on the ability of
these customers to develop and market their equipment in a timely,
cost-effective manner.
WE RELY ON A SMALL NUMBER OF CUSTOMERS FOR A LARGE PORTION OF OUR REVENUES. We
receive a significant portion of our revenues in each fiscal period from a
limited number of customers. The loss of one or more of these major customers,
or a decrease in orders by one or more customers, would adversely affect our
business. Sales to our ten largest customers accounted for approximately 41% and
49% of total revenues in the years ended September 30, 2000 and 1999,
respectively. Sales to Lam Research Corporation, our largest customer, accounted
for approximately 11% and 12% of total revenues in the years ended September 30,
2000 and 1999, respectively.
DELAYS IN SHIPMENT OF A FEW OF OUR LARGE ORDERS COULD SUBSTANTIALLY DECREASE OUR
REVENUES. Historically, a substantial portion of our quarterly and annual
revenues came from sales of a small number of large orders. These orders consist
of products with high selling prices compared to our other products. As a
result, the timing of the recognition of revenue from one of these large orders
can have a significant impact on our total revenues and operating results for a
particular period. Our operating results could be harmed if orders for even a
small number of large orders are canceled or rescheduled by customers or cannot
be filled due to delays in manufacturing, testing, shipping or product
acceptance.
WE HAVE SIGNIFICANT FIXED COSTS WHICH ARE NOT EASILY REDUCED IF REVENUES FALL
BELOW EXPECTATIONS. Our expense levels are based in part on our future revenue
expectations. Many of our expenses, particularly those relating to capital
equipment and manufacturing overhead, are relatively fixed. If we do not meet
our sales goals we may be unable to rapidly reduce these fixed costs. Our
ability to reduce expenses is further constrained because we must continue to
invest in research and development to maintain our competitive position to
maintain service and support for our existing global customer base. Accordingly,
if we suffer an unexpected downturn in revenue, our inability to reduce fixed
costs rapidly could increase the adverse impact on our results of operations.
14
OUR LENGTHY SALES CYCLE REQUIRES US TO INCUR SIGNIFICANT EXPENSES WITH NO
ASSURANCE THAT WE WILL GENERATE REVENUE. Our tool automation products are
generally incorporated into original equipment manufacturer equipment at the
design stage. To obtain new business from our original equipment manufacturer
customers, we must develop products for selection by a potential customer at the
design stage. This often requires us to make significant expenditures, without
any assurance of success. The original equipment manufacturer's design decisions
often precede the generation of volume sales, if any, by a year or more. We also
must complete successfully a lengthy evaluation period before we can achieve
volume sales of our manufacturing execution system software and process
optimization software to our factory automation customers. We cannot guarantee
that we will continue to achieve design wins or satisfy evaluations by our
factory automation customers of our software. We cannot guarantee that the
equipment manufactured by our original equipment manufacturing customers will be
commercially successful. If we or our original equipment manufacturing customers
fail to develop and introduce new products successfully and in a timely manner,
our business and financial results will suffer.
OUR INTERNATIONAL BUSINESS OPERATIONS EXPOSE US TO A NUMBER OF DIFFICULTIES IN
COORDINATING OUR ACTIVITIES ABROAD AND IN DEALING WITH MULTIPLE REGULATORY
ENVIRONMENTS. Approximately 48% and 43% of our total revenues were derived from
customers located outside North America in the years ended September 30, 2000
and 1999, respectively. We anticipate that international sales will continue to
account for a significant portion of our revenues. Our vendors are located in
several different foreign countries. As a result of our international business
operations, we are subject to various risks, including:
- difficulties in staffing and managing operations in multiple locations
in many countries;
- challenges presented by collecting trade accounts receivable in
foreign jurisdictions;
- possible adverse tax consequences;
- governmental currency controls;
- changes in various regulatory requirements;
- political and economic changes and disruptions; and
- export/import controls and tariff regulations.
To support our international customers, we maintain locations in several
countries, including Canada, Germany, Japan, Malaysia, Singapore, South Korea,
Taiwan, France and the United Kingdom. We cannot guarantee that we will be able
to manage these operations effectively. We cannot assure you that our investment
in these international operations will enable us to compete successfully in
international markets or to meet the service and support needs of our customers,
some of whom are located in countries where we have no infrastructure.
Although our international sales are primarily denominated in U.S. dollars,
changes in currency exchange rates can make it more difficult for us to compete
with foreign manufacturers on price. If our international sales increase
relative to our total revenues, these factors could have a more pronounced
effect on our operating results.
WE MUST CONTINUALLY IMPROVE OUR TECHNOLOGY TO REMAIN COMPETITIVE. Technology
changes rapidly in the semiconductor, data storage and flat panel display
manufacturing industries. We believe our success will depend upon our ability to
enhance our existing products and to develop and market new products to meet
customer needs. We cannot guarantee that we will identify and adjust to changing
market conditions or succeed in introducing commercially rewarding products or
product enhancements. The success of our product development and introduction
depends on a number of factors, including:
- accurately identifying and defining new products;
- completing and introducing new product designs in a timely manner;
- market acceptance of our products and our customers' products; and
- determining a comprehensive, integrated product strategy.
15
WE FACE SIGNIFICANT COMPETITION WHICH COULD RESULT IN DECREASED DEMAND FOR OUR
PRODUCTS OR SERVICES. The markets for our products are intensely competitive and
we may not be able to compete successfully. We believe that our primary
competition in the tool automation market is from integrated original equipment
manufacturers that satisfy their semiconductor and flat panel display handling
needs themselves rather than by purchasing systems or modules from an
independent supplier like us. Many of these original equipment manufacturers
have substantially greater resources than we do. Applied Materials, Inc., the
leading process equipment original equipment manufacturer, develops and
manufactures its own central wafer handling systems and modules. We may not be
successful in selling our products to original equipment manufacturers that
currently satisfy their wafer or substrate handling needs themselves, regardless
of the performance or the price of our products. Moreover, integrated original
equipment manufacturers may begin to commercialize their handling capabilities
and become our competitors.
We believe that the primary competitive factors in the end-user semiconductor
manufacturer market for factory automation software and process control software
are product functionality, price/performance, ease of use, hardware and software
platform compatibility, vendor reputation and financial stability. The relative
importance of these competitive factors may change over time. We directly
compete in this market with various competitors, including Applied
Materials-Consilium, PRI-Promis, IBM-Poseidon and numerous small, independent
software companies. We also compete with the in-house software staffs of
semiconductor manufacturers like NEC. Most of those manufacturers have
substantially greater resources than us.
We believe that the primary competitive factors in the factory interface market
are technical and technological capabilities, reliability, price/performance,
ease of integration and global sales and support capability. In this market, we
compete directly with Asyst, Fortrend, Kensington and Rorze. Some of these
competitors have substantial financial resources and extensive engineering,
manufacturing and marketing capabilities.
MUCH OF OUR SUCCESS AND VALUE LIES IN OUR OWNERSHIP AND USE OF INTELLECTUAL
PROPERTY AND OUR FAILURE TO PROTECT THAT PROPERTY COULD ADVERSELY AFFECT OUR
FUTURE GROWTH. Our ability to compete is heavily affected by our ability to
protect our intellectual property. We rely primarily on trade secret laws,
confidentiality procedures, patents, copyrights, trademarks and licensing
arrangements to protect our intellectual property. The steps we have taken to
protect our technology may be inadequate. Existing trade secret, trademark and
copyright laws offer only limited protection. Our patents could be invalidated
or circumvented. The laws of certain foreign countries in which our products are
or may be developed, manufactured or sold may not fully protect our products or
intellectual property rights. This may make the possibility of piracy of our
technology and products more likely. We cannot guarantee that the steps we have
taken to protect our intellectual property will be adequate to prevent
misappropriation of our technology. There has been substantial litigation
regarding patent and other intellectual property rights in semiconductor-related
industries. We may engage in litigation to:
- enforce our patents;
- protect our trade secrets or know-how;
- defend ourselves against claims we infringe on the rights of others;
or
- determine the scope and validity of the patents or intellectual
property rights of others.
Any litigation could result in substantial cost to us and divert the attention
of our management, which could harm our operating results.
16
OUR OPERATIONS COULD INFRINGE ON THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS.
Particular aspects of our technology could be found to infringe on the
intellectual property rights or patents of others. Other companies may hold or
obtain patents on inventions or may otherwise claim proprietary rights to
technology necessary to our business. We cannot predict the extent to which we
may be required to seek licenses or alter our products so that they no longer
infringe on the rights of others. We cannot guarantee that the terms of any
licenses we may be required to seek will be reasonable. Similarly, changing our
products or processes to avoid infringing on the rights of others may be costly
or impractical or could detract from the value of our products.
OUR BUSINESS MAY BE HARMED BY INFRINGEMENT CLAIMS OF GENERAL SIGNAL OR APPLIED
MATERIALS. We received notice from General Signal Corporation alleging
infringements of its patent rights by certain of our products. The notification
advised us that General Signal was attempting to enforce its rights to those
patents in litigation against Applied Materials, and that, at the conclusion of
that litigation, General Signal intended to enforce its rights against us and
others. According to a press release issued by Applied Materials in November
1997, Applied Materials settled its litigation with General Signal by acquiring
ownership of five General Signal patents. Although not verified by us, these
five patents would appear to be the patents referred to by General Signal in its
prior notice to us. Applied Materials has not contacted us regarding these
patents.
WE DO NOT HAVE LONG-TERM CONTRACTS WITH OUR CUSTOMERS AND OUR CUSTOMERS MAY
CEASE PURCHASING OUR PRODUCTS AT ANY TIME. We generally do not have long-term
contracts with our customers. As a result, our agreements with our customers do
not provide any assurance of future sales. Accordingly:
- our customers can cease purchasing our products at any time without
penalty;
- our customers are free to purchase products from our competitors;
- we are exposed to competitive price pressure on each order; and
- our customers are not required to make minimum purchases.
OUR FUTURE GROWTH RELIES IN PART ON THE COMMERCIAL ADOPTION OF 300MM WAFER
TECHNOLOGY, WHICH IS PROGRESSING MORE SLOWLY THAN EXPECTED, AND COMPETITION FOR
300MM ORDERS MAY BE INTENSE. Our future growth relies in part on the adoption of
new systems and technologies to automate the processing of 300mm wafers.
However, the industry transition from the current, widely used 200mm
manufacturing technology to 300mm manufacturing technology is occurring more
slowly than expected. Any significant delay in the adoption of 300mm
manufacturing technology, or the failure of the industry to adopt 300mm
manufacturing technology, could significantly reduce our opportunities for
future growth. Moreover, continued delay in transition to 300mm technology could
permit our competitors to introduce competing or superior 300mm products.
Competition, including price competition, for such 300mm orders could be
vigorous and could harm our results of operations.
RISKS RELATING TO OUR GROWTH
RAPID GROWTH IS STRAINING OUR OPERATIONS AND REQUIRING US TO INCUR COSTS TO
UPGRADE OUR INFRASTRUCTURE. During the last year, we have experienced extremely
rapid growth in our operations, the number of our employees, our product
offerings and the geographic area of our operations. Our growth places a
significant strain on our management, operations and financial systems. Our
future operating results will be dependent in part on our ability to continue to
implement and improve our operating and financial controls and management
information systems. If we fail to manage our growth effectively, our financial
condition, results of operations and business could be materially adversely
affected.
17
OUR OPERATING RESULTS WOULD BE HARMED IF ONE OF OUR KEY SUPPLIERS FAILS TO
DELIVER COMPONENTS FOR OUR PRODUCTS. We currently procure many of our components
on an as needed, purchase order basis. We do not carry significant inventories
or have any long-term supply contracts with our vendors. With the recent
increased demand for semiconductor manufacturing equipment, our suppliers are
facing significant challenges in providing components on a timely basis. Our
inability to obtain components in required quantities or of acceptable quality
could result in significant delays or reductions in product shipments. This
would materially and adversely affect our operating results.
OUR BUSINESS COULD BE HARMED IF WE FAIL TO ADEQUATELY INTEGRATE THE OPERATIONS
OF OUR ACQUISITIONS. Our management must devote substantial time and resources
to the integration of the operations of our acquired businesses with our
business and with each other. If we fail to accomplish this integration
efficiently, we may not realize the anticipated benefits of our acquisitions.
The process of integrating supply and distribution channels, research and
development initiatives, computer and accounting systems and other aspects of
the operation of our acquired businesses, presents a significant challenge to
our management. This is compounded by the challenge of simultaneously managing a
larger entity. We have completed a number of acquisitions in a short period of
time. These businesses have operations and personnel located in Asia, Europe and
the United States and present a number of additional difficulties of
integration, including:
- difficulties in the assimilation of products and designs into
integrated solutions;
- difficulties in informing customers, suppliers and distributors of the
effects of the acquisitions and integrating them into our overall
operations;
- difficulties integrating personnel with disparate business backgrounds
and cultures;
- difficulties in defining and executing a comprehensive product
strategy;
- difficulties in managing geographically remote units;
- difficulties associated with managing the risks of entering markets or
types of businesses in which we have limited or no direct experience;
and
- difficulties in minimizing the loss of key employees of the acquired
businesses.
If we delay integrating or fail to integrate an acquired business or experience
other unforeseen difficulties, the integration process may require a
disproportionate amount of our management's attention and financial and other
resources. Our failure to adequately address these difficulties could harm our
business and financial results.
OUR BUSINESS MAY BE HARMED BY ACQUISITIONS WE COMPLETE IN THE FUTURE. We plan to
continue to pursue additional acquisitions of related businesses. Our
identification of suitable acquisition candidates involves risks inherent in
assessing the values, strengths, weaknesses, risks and profitability of
acquisition candidates, including the effects of the possible acquisition on our
business, diversion of our management's attention and risks associated with
unanticipated problems or latent liabilities. If we are successful in pursuing
future acquisitions, we will be required to expend significant funds, incur
additional debt or issue additional securities, which may negatively affect our
results of operations and be dilutive to our stockholders. If we spend
significant funds or incur additional debt, our ability to obtain financing for
working capital or other purposes could decline and we may be more vulnerable to
economic downturns and competitive pressures. We cannot guarantee that we will
be able to finance additional acquisitions or that we will realize any
anticipated benefits from acquisitions that we complete. Should we successfully
acquire another business, the process of integrating acquired operations into
our existing operations may result in unforeseen operating difficulties and may
require significant financial resources that would otherwise be available for
the ongoing development or expansion of our existing business.
18
WE MAY NOT BE ABLE TO RECRUIT AND RETAIN NECESSARY PERSONNEL BECAUSE OF INTENSE
COMPETITION FOR HIGHLY SKILLED PERSONNEL. We need to hire and retain substantial
numbers of employees with technical backgrounds for both our hardware and
software engineering and support staffs. The market for these employees is
intensely competitive, and we have occasionally experienced delays in hiring
these personnel. Due to the cyclical nature of the demand for our products, we
have had to reduce our workforce and then rebuild our workforce as our business
has gone through downturns followed by upturns. We currently need to hire a
number of highly skilled employees, especially in manufacturing, to meet
customer demand. Due to the competitive nature of the labor markets in which we
operate, this type of employment cycle increases our risk of not being able to
retain and recruit key personnel. Our inability to recruit, retain and train
adequate numbers of qualified personnel on a timely basis could adversely affect
our ability to develop, manufacture, install and support our products.
RISKS RELATING TO OUR COMMON STOCK
OUR OPERATING RESULTS FLUCTUATE SIGNIFICANTLY, WHICH COULD NEGATIVELY IMPACT OUR
BUSINESS AND OUR STOCK Price. Our margins, revenues and other operating results
can fluctuate significantly from quarter to quarter depending upon a variety of
factors, including:
- the level of demand for semiconductors in general;
- cycles in the market for semiconductor manufacturing equipment and
automation software;
- the timing and size of orders from our customer base;
- our ability to manufacture, test and deliver products in a timely and
cost-effective manner;
- our success in winning competitions for orders;
- the timing of our new product announcements and releases and those of
our competitors;
- the mix of products sold by us;
- competitive pricing pressures; and
- the level of automation required in fab extensions, upgrades and new
facilities.
We entered into the factory automation software business in fiscal 1999. We
believe a portion of our revenues from this business is dependent on achieving
project milestones. As a result, our revenue from this business will be subject
to fluctuations depending upon a number of factors, including whether we can
achieve project milestones on a timely basis, if at all, as well as the timing
and size of projects.
THE VOLATILITY OF OUR STOCK PRICE COULD ADVERSELY AFFECT AN INVESTMENT IN OUR
STOCK. The market price of our common stock has fluctuated widely. For example,
between April 14, 2000 and April 28, 2000, the closing price of our common stock
rose from approximately $62.38 to $89.69 per share. Between April 28, 2000 and
May 31, 2000, the price of our common stock dropped from approximately $89.69 to
$39.75 per share. Consequently, the current market price of our common stock may
not be indicative of future market prices, and we may not be able to sustain or
increase the value of an investment in our common stock. Factors affecting our
stock price may include:
- variations in operating results from quarter to quarter;
- changes in earnings estimates by analysts or our failure to meet
analysts' expectations;
- changes in the market price per share of our public company customers;
- market conditions in the industry;
- general economic conditions;
- low trading volume of our common stock; and
- the number of firms making a market in our common stock.
In addition, the stock market has recently experienced extreme price and volume
fluctuations. These fluctuations have particularly affected the market prices of
the securities of high technology companies like us. These market fluctuations
could adversely affect the market price of our common stock.
19
PROVISIONS OF OUR CERTIFICATE OF INCORPORATION, BYLAWS AND CONTRACTS MAY
DISCOURAGE TAKEOVER OFFERS AND MAY LIMIT THE PRICE INVESTORS WOULD BE WILLING TO
PAY FOR OUR COMMON STOCK. Our certificate of incorporation and bylaws contain
provisions that may make an acquisition of us more difficult and discourage
changes in our management. These provisions could limit the price that certain
investors might be willing to pay in the future for shares of our common stock.
In addition, we have adopted a rights plan. In many potential takeover
situations, rights issued under the plan become exercisable to purchase our
common stock at a price substantially discounted from the then applicable market
price of our common stock. Because of its possible dilutive effect to a
potential acquirer, the rights plan would generally discourage third parties
from proposing a merger with or initiating a tender offer for us that is not
approved by our board of directors. Accordingly, the rights plan could have an
adverse impact on our stockholders who might want to vote in favor of the merger
or participate in the tender offer. In addition, shares of our preferred stock
may be issued upon terms the board of directors deems appropriate without
stockholder approval. Our ability to issue preferred stock in such a manner
could enable our board of directors to prevent changes in our management or
control.
20
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Brooks Automation, Inc.
In our opinion, based upon our audits and the reports of other auditors, the
accompanying supplementary consolidated balance sheets and the related
supplementary consolidated statements of operations, of changes in stockholders'
equity and of cash flows present fairly, in all material respects, the financial
position of Brooks Automation, Inc. and its subsidiaries at September 30, 2000
and 1999, and the results of their operations and their cash flows for each of
the three years in the period ended September 30, 2000, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the financial statements of Progressive
Technologies, Inc., which statements reflect total assets of $6,658,000 and
$3,501,000 at December 31, 2000 and 1999, respectively, and total revenues of
$16,085,000, $8,002,000 and $6,169,000 for the years ended December 31, 2000,
1999 and 1998, respectively. We also did not audit the financial statements as
of December 31, 1999 and for each of the two years in the period ended December
31, 1999, of Irvine Optical Company, LLC, a wholly owned subsidiary of the
Company acquired through a pooling of interests during the year ended September
30, 2000, which statements reflect total assets of $16,492,000 at December 31,
1999, and total revenues of $11,049,000 and $17,038,000 for the years ended
December 31, 1999 and 1998, respectively. Those statements were audited by other
auditors whose reports thereon have been furnished to us, and our opinion
expressed herein, insofar as it relates to the amounts included for Progressive
Technologies, Inc., and for Irvine Optical Company, LLC as of December 31, 1999
and for each of the two years in the period ended December 31, 1999, is based
solely on the reports 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 reports of other auditors provide a reasonable basis for our
opinion.
As described in Note 2, on July 12, 2001 Brooks Automation, Inc. merged with
Progressive Technologies, Inc. in a transaction accounted for as a pooling of
interests. The accompanying supplementary consolidated financial statements give
retroactive effect to the merger of Brooks Automation, Inc. with Progressive
Technologies, Inc. Accounting principles generally accepted in the United States
of America proscribe giving effect to a consummated business combination
accounted for by the pooling of interests method in financial statements that do
not include the date of consummation. These financial statements do not extend
through the date of consummation; however, they will become the historical
consolidated financial statements of
21
Brooks Automation, Inc. and subsidiaries after financial statements covering the
date of consummation of the business combination are issued.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
November 15, 2000,
except as to the pooling of interests with
Progressive Technologies, Inc. which is as of July 12, 2001
22
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Members
Irvine Optical Company, LLC
We have audited the balance sheets of Irvine Optical Company, LLC (the Company)
as of December 31, 1999 and 1998, and the related statements of operations,
members' deficit, and cash flows for the years then ended (not presented
separately herein). These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of December 31,
1999 and 1998, and the results of its operations and its cash flows for the
years then ended, in conformity with accounting principles generally accepted in
the United States.
The financial statements have been prepared assuming that the Company will
continue as a going concern. As more fully described in Note 1 to the financial
statements, the Company's ability to generate sufficient revenue and ultimately
achieve profitable operations is uncertain. The Company's future prospects
depend upon its ability to demonstrate sustained product sales and to generate
sufficient working capital through new financing and/or operating cash flows,
all of which raise substantial doubt about the Company's ability to continue as
a going concern. Management's plans in regard to these matters are also
described in Note 1. The financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
assets or amounts and classification of liabilities that may result from the
outcome of this uncertainty.
/s/ Ernst & Young LLP
March 3, 2000, except for Note 4
as to which the date is March 31, 2000
23
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of
Progressive Technologies, Inc.
We have audited the consolidated balance sheets of Progressive Technologies,
Inc. (a Massachusetts corporation) and subsidiary as of December 31, 2000 and
1999 and the related consolidated statements of operations, stockholders' equity
and cash flows for each of the three years in the period ended December 31, 2000
(not presented herein). These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Progressive
Technologies, Inc. and subsidiary as of December 31, 2000 and 1999 and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2000 in conformity with accounting principles
generally accepted in the United States.
/s/ Arthur Andersen LLP
Boston, Massachusetts
February 19, 2001
24
BROOKS AUTOMATION, INC.
SUPPLEMENTARY CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30,
2000 1999
---- ----
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
Current assets
Cash and cash equivalents $ 133,636 $ 67,031
Marketable securities 88,034 --
Accounts receivable, net, including related party receivables of $6,820 and
$3,384, respectively 94,756 37,517
Inventories 58,607 38,767
Prepaid expenses and other current assets 8,464 3,678
Deferred income taxes 18,220 6,542
--------- ---------
Total current assets 401,717 153,535
Fixed assets, net 25,152 18,382
Intangible assets, net 60,335 16,942
Long-term marketable securities 15,000 --
Deferred income taxes 13,361 4,192
Other assets 4,221 4,249
--------- ---------
Total assets $ 519,786 $ 197,300
========= =========
LIABILITIES , MINORITY INTERESTS, CONVERTIBLE REDEEMABLE PREFERRED
STOCK, MEMBERS' CAPITAL AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable $ 16,000 $ 232
Revolving line of credit 350 5,951
Current portion of long-term debt and capital lease obligations 524 544
Accounts payable 23,096 13,869
Deferred revenue 17,018 6,879
Accrued compensation and benefits 14,407 4,909
Accrued acquisition-related and restructuring costs 538 3,868
Accrued income taxes payable 9,188 2,093
Accrued expenses and other current liabilities 13,760 8,387
--------- ---------
Total current liabilities 94,881 46,732
Long-term debt and capital lease obligations 332 854
Senior subordinated note payable -- 5,878
Deferred income taxes 5,064 174
Other long-term liabilities 438 878
--------- ---------
Total liabilities 100,715 54,516
--------- ---------
Commitments and contingencies (see Note 14)
Minority interests 1,186 1,460
--------- ---------
Series A convertible redeemable preferred stock, $0.01 par value,
90,000 shares authorized, issued and outstanding 2,601 2,481
--------- ---------
Members' capital - 10,000 units issued and 1,000 units outstanding at
September 30, 1999 -- 930
--------- ---------
Stockholders' equity
Preferred stock, $0.01 par value, 1,000,000 shares authorized, none
issued and outstanding -- --
Common stock, $0.01 par value, 43,000,000 shares authorized, 17,588,911
and 13,110,313 shares issued and outstanding, respectively 176 131
Additional paid-in capital 433,249 168,954
Deferred compensation (35) (65)
Accumulated other comprehensive loss (2,942) (1,093)
Accumulated deficit (15,164) (30,014)
--------- ---------
Total stockholders' equity 415,284 137,913
--------- ---------
Total liabilities, minority interests, convertible redeemable
preferred stock, members' capital and stockholders' equity $ 519,786 $ 197,300
========= =========
The accompanying notes are an integral part of these
supplementary consolidated financial statements.
25
BROOKS AUTOMATION, INC.
SUPPLEMENTARY CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED SEPTEMBER 30,
2000 1999 1998
---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues
Product, including related party revenues of $36,934,
$15,255 and $15,913, respectively $ 284,366 $ 101,488 $ 104,063
Services 52,818 21,469 19,396
--------- --------- ---------
Total revenues 337,184 122,957 123,459
--------- --------- ---------
Cost of revenues
Product 141,088 54,239 74,641
Services 35,371 13,566 11,538
--------- --------- ---------
Total cost of revenues 176,459 67,805 86,179
--------- --------- ---------
Gross profit 160,725 55,152 37,280
--------- --------- ---------
Operating expenses
Research and development 44,147 24,526 27,568
Selling, general and administrative 77,410 38,763 34,973
Amortization of acquired intangible assets 18,506 565 207
Acquisition-related and restructuring charges 578 3,120 3,722
--------- --------- ---------
Total operating expenses 140,641 66,974 66,470
--------- --------- ---------
Income (loss) from operations 20,084 (11,822) (29,190)
Interest income 9,707 3,150 3,629
Interest expense 1,345 1,553 2,347
Other income (expense) (2) (223) (9)
--------- --------- ---------
Income (loss) before income taxes and minority interests 28,444 (10,448) (27,917)
Income tax provision (benefit) 13,609 (874) (4,649)
--------- --------- ---------
Income (loss) before minority interests 14,835 (9,574) (23,268)
Minority interests in loss of consolidated subsidiaries (274) (40) --
--------- --------- ---------
Net income (loss) 15,109 (9,534) (23,268)
Accretion and dividends on preferred stock (120) (774) (1,540)
--------- --------- ---------
Net income (loss) attributable to common stockholders $ 14,989 $ (10,308) $ (24,808)
========= ========= =========
Earnings (loss) per share
Basic $ 0.96 $ (0.89) $ (2.32)
Diluted $ 0.88 $ (0.89) $ (2.32)
Shares used in computing earnings (loss) per share
Basic 15,661 11,542 10,687
Diluted 17,192 11,542 10,687
The accompanying notes are an integral part of these
supplementary consolidated financial statements.
26
BROOKS AUTOMATION, INC.
SUPPLEMENTARY CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
Nonredeemable
convertible Common Additional
preferred stock at paid-in Deferred
stock par value capital compensation
------------- --------- --------- ------------
BALANCE SEPTEMBER 30, 1997 $ 6,619 $105 $120,354 $(416)
Shares issued under stock option and
purchase plans (112,694 shares) 1 806
Common stock issued in acquisitions
(697,695 shares) (152) 7 10,900
Deferred compensation (208) 208
Amortization of deferred compensation 89
Accretion and dividends on preferred stock
Revaluation of members' capital
Income tax adjustment from stock options (301)
Comprehensive loss:
Net loss
Currency translation adjustments
Comprehensive loss
Elimination of FASTech net loss for the
three months ended December 31, 1997
--------- --------- --------- ---------
BALANCE SEPTEMBER 30, 1998 6,467 113 131,551 (119)
Shares issued under stock option and
purchase plans (341,877 shares) 4 1,679
Common stock issued in acquisitions
(1,410,926 shares) (6,467) 14 35,594
Amortization of deferred compensation 54
Accretion and dividends on preferred stock
Revaluation of members' capital
Income tax benefit from stock options 130
Comprehensive loss:
Net loss
Currency translation adjustments
Comprehensive loss
Elimination of Smart Machines net loss
for the three months ended December 31, 1998
--------- --------- --------- ---------
BALANCE SEPTEMBER 30, 1999 -- 131 168,954 (65)
Shares issued under stock option and purchase
plans and warrants (558,195 shares) 6 5,418
Common stock offering (3,070,500 shares) 31 220,445
Common stock issued in acquisitions (849,903 shares) 8 21,829
Amortization of deferred compensation 30
Accretion and dividends on preferred stock
Income tax benefit from stock options 6,738
Income tax benefit from acquisition 9,865
Comprehensive income:
Net income
Currency translation adjustments
Comprehensive income
Elimination of Irvine Optical net income for the
three months ended December 31, 1999
--------- --------- --------- ---------
BALANCE SEPTEMBER 30, 2000 $ -- $176 $433,249 $(35)
========= ========= ========= =========
Accumulated Retained
other earnings
Comprehensive comprehensive (accumulated
income (loss) income (loss) deficit) Total
------------- ------------- ------------ --------
BALANCE SEPTEMBER 30, 1997 $(106) $1,165 $127,721
Shares issued under stock option and
purchase plans (112,694 shares) 807
Common stock issued in acquisitions
(697,695 shares) 147 10,902
Deferred compensation --
Amortization of deferred compensation 89
Accretion and dividends on preferred stock (1,540) (1,540)
Revaluation of members' capital (939) (939)
Income tax adjustment from stock options (301)
Comprehensive loss:
Net loss $(23,268) (23,268) (23,268)
Currency translation adjustments (430) (430) (430)
---------
Comprehensive loss $(23,698)
=========
Elimination of FASTech net loss for the
three months ended December 31, 1997 2,753 2,753
--------- --------- --------
BALANCE SEPTEMBER 30, 1998 (536) (21,682) 115,794
Shares issued under stock option and
purchase plans (341,877 shares) 1,683
Common stock issued in acquisitions
(1,410,926 shares) 29,141
Amortization of deferred compensation 54
Accretion and dividends on preferred stock (774) (774)
Revaluation of members' capital 377 377
Income tax benefit from stock options 130
Comprehensive loss:
Net loss $(9,534) (9,534) (9,534)
Currency translation adjustments (557) (557) (557)
---------
Comprehensive loss $(10,091)
=========
Elimination of Smart Machines net loss
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 and warrants (537,997 shares) 5,424
Common stock offering (3,070,500 shares) 220,476
Common stock issued in acquisitions (849,903 shares) 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 acquisition 9,865
Comprehensive income:
Net income $15,109 15,109 15,109
Currency translation adjustments (1,849) (1,849) (1,849)
---------
Comprehensive income $13,260
=========
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
========= ========= ========
The accompanying notes are an integral part of these
supplementary consolidated financial statements.
27
BROOKS AUTOMATION, INC.
SUPPLEMENTARY CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED SEPTEMBER 30,
2000 1999 1998
---- ---- ----
(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 15,109 $ (9,534) $(23,268)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization 30,400 11,766 9,631
Compensation expense related to common stock options 30 54 89
Deferred income taxes (8,801) (3,017) (4,779)
Minority interests (274) (40) --
(Gain) loss on disposal of long-lived assets (142) -- --
Changes in operating assets and liabilities:
Accounts receivable (50,655) (5,799) 15,143
Inventories (27,981) (2,321) 5,323
Prepaid expenses and other current assets (7,702) 1,054 (1,390)
Accounts payable 12,779 7,038 (6,259)
Deferred revenue 8,385 1,763 398
Accrued compensation and benefits 9,684 858 517
Accrued acquisition-related and restructuring costs (680) 1,724 2,254
Accrued expenses and other current liabilities 8,641 1,638 (757)
--------- -------- --------
Net cash provided by (used in) operating activities (11,207) 5,184 (3,098)
--------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of fixed assets (13,879) (6,100) (4,725)
Acquisition of businesses, net of cash acquired (24,399) (4,476) --
Purchases of marketable securities (118,034) -- --
Sale/maturity of marketable securities 15,000 -- --
Proceeds from sale of long-lived assets 735 -- --
Increase in other assets (1,550) (732) (795)
--------- -------- --------
Net cash used in investing activities (142,127) (11,308) (5,520)
--------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (repayments of) borrowings under lines of credit (1) 1,253 703
Net increase (decrease) in short-term borrowings (5,263) (280) 825
Proceeds from issuance of convertible notes -- -- 2,500
Proceeds from issuance of senior subordinated debt -- -- 2,500
Payments of long-term debt and capital lease obligations (562) (1,183) (4,023)
Issuance of long-term debt -- 1,154 --
Proceeds from issuance of common stock, net of issuance costs 225,900 1,683 807
--------- -------- --------
Net cash provided by financing activities 220,074 2,627 3,312
--------- -------- --------
Elimination of net cash activities of Irvine Optical for the three
months ended December 31, 1999 14 -- --
--------- -------- --------
Elimination of net cash activities of Smart Machines for
the three months ended December 31, 1998 -- (63) --
--------- -------- --------
Elimination of net cash activities of FASTech for the three
months ended December 31, 1997 -- -- (1,761)
--------- -------- --------
Effects of exchange rate changes on cash and cash
equivalents (149) 326 (310)
--------- -------- --------
Net increase (decrease) in cash and cash equivalents 66,605 (3,234) (7,377)
Cash and cash equivalents, beginning of period 67,031 70,265 77,642
--------- -------- --------
Cash and cash equivalents, end of period $ 133,636 $ 67,031 $ 70,265
========= ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for interest $ 1,432 $ 1,166 $ 1,692
Cash paid during the year for income taxes, net of refunds $ 10,450 $ 1,085 $ 251
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING AND
INVESTING ACTIVITIES
Deferred compensation related to stock options $ -- $ -- $ (208)
Accretion and dividends on preferred stock $ 120 $ 774 $ 1,540
The Company utilized available funds, issued common stock and issued a note in
connection with certain business combinations during the years ended September
30, 2000 and 1999. The fair values of the assets and liabilities of the acquired
companies are presented as follows:
Assets acquired $ 14,166 $ 30,218 $ --
Liabilities assumed (17,364) (8,414) --
--------- -------- --------
Net assets acquired (liabilities assumed) $ (3,198) $ 21,804 $ --
========= ======== ========
The acquisitions were funded as follows:
Cash consideration $ 27,300 $ 10,447 $ --
Common stock 15,027 22,473 --
Note issued to seller 16,000 -- --
Transaction costs 2,874 1,891 --
Cash received (5,775) (7,862) --
--------- -------- --------
$ 55,426 $ 26,949 $ --
========= ======== ========
The accompanying notes are an integral part of these
supplementary consolidated financial statements.
28
BROOKS AUTOMATION, INC.
NOTES TO SUPPLEMENTARY CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF THE BUSINESS
Brooks Automation, Inc. ("Brooks" or the "Company") is a leading supplier
of integrated tool and factory automation solutions for the global
semiconductor and related industries such as the data storage and flat
panel display manufacturing industries. The Company's product revenues
include sales of hardware and software products. The Company's service
revenues are primarily comprised of tool control application consulting
services, software customization and spare parts sales.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Basis of Presentation
The supplementary consolidated financial statements include the accounts
of the Company and all majority-owned subsidiaries. All significant
intercompany accounts and transactions are eliminated.
The supplementary consolidated financial statements of the Company and its
subsidiaries have been prepared to give retroactive effect to the merger
with Progressive Technologies, Inc. ("PTI"), which occurred on July 12,
2001. Generally accepted accounting principles proscribe giving effect to a
consummated business combination accounted for by the pooling of interests
method in financial statements that do not include the date of
consummation. These financial statements do not extend through the date of
consummation; however, they will become the historical consolidated
financial statements of the Company and subsidiaries after financial
statements covering the date of consummation of the business combination
are issued.
During 2001, the Company entered into a definitive agreement to merge with
PTI. On July 12, 2001, PTI and its operating subsidiary were merged with
and into the Company. Under terms of the merger agreement, each share of
PTI common stock and preferred stock was exchanged for 3.106 and 3.484
shares, respectively, of the Company's common stock. A total of 715,004
shares of the Company's common stock were exchanged for all of the
outstanding stock of PTI. Prior to its acquisition by the Company, PTI's
fiscal year-end was December 31. The Company's Supplementary Consolidated
Balance Sheets as of September 30, 2000 and 1999 include PTI's balance
sheets as of December 31, 2000 and 1999, respectively, and the Company's
Supplementary Consolidated Statements of Operations, Cash Flows and Changes
in Stockholders' Equity for the years ended September 30, 2000, 1999 and
1998 include PTI's results of operations for the years ended December 31,
2000, 1999, and 1998, respectively.
On June 23, 2000, the Company acquired the assets of MiTeX Solutions
("MiTeX"). The acquisition was accounted for using the purchase method of
accounting. The Company's Supplementary Consolidated Statements of
Operations and of Cash Flows for the year ended September 30, 2000 include
the results of MiTeX for the period from July 1, 2000 to September 30,
2000. The results of operations for MiTeX for the period from acquisition
to June 30, 2000, are not material to the consolidated results of the
Company.
On May 5, 2000, the Company acquired Irvine Optical Company LLC ("Irvine
Optical") in a transaction accounted for as a pooling of interests.
Accordingly, the Company's supplementary consolidated financial statements
and notes thereto have been restated to include the financial position and
results of operations of Irvine Optical for all periods prior to the
acquisition. Prior to its acquisition by the Company, Irvine Optical's
fiscal year-end was December 31. Accordingly, the Company's Supplementary
Consolidated Balance Sheet as of September 30, 1999, includes Irvine
Optical's balance sheet as of December 31, 1999, and the Company's
Supplementary Consolidated Statements of Operations for the years ended
September 30, 1999 and 1998, include Irvine Optical's results of operations
for the years ended December 31, 1999 and 1998, respectively. As a result
of conforming dissimilar year-ends, Irvine Optical's results of operations
for the three months ended December 31, 1999, are included in both of the
Company's fiscal years 2000 and 1999. An amount equal to Irvine Optical's
net income for the three months ended December 31, 1999, was eliminated
from consolidated retained earnings for the year ended September 30, 2000.
Irvine Optical's revenues and net income for that quarter were $4.1 million
and $0.1 million, respectively.
On January 6, 2000, the Company completed the acquisition of the businesses
of Auto-Soft Corporation ("ASC") and AutoSimulations, Inc. ("ASI") from
Daifuku America Corporation ("Daifuku America"), a U.S. subsidiary of
Daifuku Co., Ltd. of Japan. The acquisition was accounted for using the
purchase method of accounting. Accordingly, the Company's Supplementary
Consolidated Statements of Operations and of Cash Flows for the year ended
September 30, 2000 include the results of ASC and ASI for the period
subsequent to their acquisition.
On August 31, 1999 the Company completed the acquisition of Smart Machines
Inc. ("Smart Machines"). The acquisition was accounted for as a pooling of
interests. Accordingly, the results of operations and
29
financial position of Smart Machines are included in the Company's
supplementary consolidated results for all periods presented.
The Company made several acquisitions during the year ended September 30,
1999, which were accounted for using the purchase method of accounting: the
Infab Division ("Infab") of Jenoptik AG on September 30, 1999; Domain
Manufacturing Corporation ("Domain") on June 30, 1999 and Hanyon
Technology, Inc. ("Hanyon") on April 21, 1999. Accordingly, the Company's
Supplementary Consolidated Statements of Operations and of Cash Flows
include the results of these acquired entities for all periods subsequent
to their acquisition.
In June 1999 the Company formed a joint venture in Korea with Samsung
Electronics ("Samsung"). This joint venture is 70% owned by the Company and
30% owned by Samsung. The Company consolidates fully the financial position
and results of operations of the joint venture and accounts for the
minority interest in the supplementary consolidated financial statements.
Certain amounts in previously issued financial statements have been
reclassified to conform to current presentation.
30
BROOKS AUTOMATION, INC.
NOTES TO SUPPLEMENTARY CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Significant estimates include revenues and
costs under long-term contracts, collectibility of accounts receivable,
recoverability of depreciable assets, intangibles and deferred tax assets
and the adequacy of acquisition-related and restructuring reserves.
Although the Company regularly assesses these estimates, actual results
could differ from those estimates. Changes in estimates are recorded in the
period in which they become known.
Foreign Currency Translation
For non-U.S. subsidiaries, which operate in a local currency environment,
assets and liabilities are translated at period-end exchange rates, and
income statement items are translated at the average exchange rates for the
period. The local currency for all foreign subsidiaries is considered to be
the functional currency and accordingly, translation adjustments are
reported in Accumulated other comprehensive income (loss). To date, foreign
currency translation adjustments are the only component added to the
Company's net income (loss) in the calculation of comprehensive net income
(loss).
Cash and Cash Equivalents
Cash and cash equivalents include cash and highly liquid investments with
original maturities of three months or less. At both September 30, 2000 and
1999, all cash equivalents were classified as available-for-sale and are
held at amortized cost, which approximates fair value.
Marketable Securities
The Company invests its excess cash in marketable debt and equity
securities. The Company records these securities in accordance with
Financial Accounting Standards Board Statement No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" ("FAS 115"). Under FAS
115, investments in debt and equity securities classified as available for
sale are reported at fair value, while investments in debt securities
classified as held to maturity are reported at unamortized cost. Marketable
securities reported as current assets represent investments that mature
within one year. Long-term marketable securities represent investments with
maturity dates greater than one year from the balance sheet date. At the
time that the maturity dates of these investments become one year or less,
the values will be reclassified to current assets. At September 30, 2000,
the Company's marketable securities include U.S. Government and corporate
debt securities with maturities not exceeding 14 months.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration
of credit risk consist primarily of trade receivables and temporary and
long-term cash investments in repurchase agreements, treasury bills,
certificates of deposit and commercial paper. The Company restricts its
investments to repurchase agreements with major banks, U.S. government and
corporate securities, and mutual funds that invest in U.S. government
securities, which are subject to minimal credit and market risk. The
Company's customers are concentrated in the semiconductor industry, and
relatively few customers account for a significant portion of the Company's
revenues. The Company regularly monitors the creditworthiness of its
customers and believes that it has adequately provided for exposure to
potential credit losses.
Inventories
Inventories are stated at the lower of cost or market, cost being
determined using the first-in, first-out method. The Company provides
inventory reserves for excess, obsolete or damaged inventory based on
changes in customer demand, technology and other economic factors.
31
BROOKS AUTOMATION, INC.
NOTES TO SUPPLEMENTARY CONSOLIDATED FINANCIAL STATEMENTS (Continued)
While the Company often uses sole source suppliers for certain key
components and common assemblies to achieve quality control and the
benefits of economies of scale, the Company believes that these parts and
materials are readily available from several supply sources.
Fixed Assets
Property, plant and equipment are stated at cost less accumulated
depreciation. Depreciation is computed principally by use of the
straight-line method. Depreciable lives are summarized below:
Buildings 20 years
Computer equipment and software 2 - 6 years
Machinery and equipment 2 - 7 years
Furniture and fixtures 3 - 10 years
Equipment held under capital leases is recorded at the lower of the fair
market value of the equipment or the present value of the minimum lease
payments at the inception of the leases. Leasehold improvements and
equipment held under capital leases are amortized over the shorter of their
estimated useful lives or the term of the respective leases. Equipment used
for demonstrations to customers is included in machinery and equipment and
is depreciated over its estimated useful life. Repair and maintenance costs
are expensed as incurred.
Intangible Assets
Patents include capitalized direct costs associated with obtaining patents
as well as assets that were acquired as a part of purchase business
combinations. Capitalized patent costs are amortized using the
straight-line method over the shorter of seven years or the estimated
economic life of the patents. The fair value of acquired patents are
amortized over three years using the straight-line method. As of September
30, 2000 and 1999, the net book value of the Company's patents was $4.2
million and $6.2 million, respectively.
Costs incurred in the research and development of the Company's products
are expensed as incurred, expect for certain software development costs.
Software development costs are expensed prior to establishing technological
feasibility and capitalized thereafter until the product is available for
general release to customers. Capitalized software development costs are
amortized to cost of sales on a product-by-product basis over the estimated
lives of the related products. As of both September 30, 2000 and 1999, the
net book value of the Company's capitalized software was $0.6 million.
Goodwill represents the excess of purchase price over the fair value of net
tangible and identifiable intangible assets of businesses the Company has
acquired. As of September 30, 2000 and 1999, the net book value of goodwill
was $43.4 million and $10.1 million, respectively.
Amortization expense for all intangible assets was $19.6 million and $1.4
million for the years ended September 30, 2000 and 1999, respectively.
Whenever events or changes in circumstances indicate that the carrying
amount of an intangible asset may not be recoverable, the Company evaluates
the carrying value of intangible assets to determine if impairment exists.
This evaluation is based upon estimated undiscounted future cash flows, net
of taxes, over the remaining useful life of the assets. The impairment, if
any, will be measured by the difference between carrying value and
estimated discounted future cash flows, net of taxes, and will be charged
to expense in the period identified.
32
BROOKS AUTOMATION, INC.
NOTES TO SUPPLEMENTARY 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 5 years
License agreements 5 years
Trademarks and trade names 5 years
Non-competition agreements 5 years
Assembled workforces 3 years
Customer relationships 4 years
Goodwill 3 - 15 years
Revenue Recognition
Revenue from product sales and software license sales is recorded upon
transfer of title and risk of loss to the customer provided that no
significant obligations remain and collection of the related receivable is
probable. A provision for product warranty costs is recorded to estimate
costs associated with such warranty liabilities. In the event significant
post-shipment obligations or uncertainties remain, revenue is deferred and
recognized when such obligations are fulfilled by the Company or the
uncertainties are resolved.
Revenue from services is recognized as the services are rendered. Revenue
from fixed fee application consulting contracts is recognized using the
percentage-of-completion method of contract accounting based on the ratio
that costs incurred to date bear to estimated total costs at completion.
Revisions in revenue and cost estimates are recorded in the periods in
which the facts that require such revisions become known. Losses, if any,
are provided for in the period in which such losses are first identified by
management. For maintenance contracts, service revenue is recognized
ratably over the term of the maintenance contract.
Stock-Based Compensation
The Company's employee stock compensation plans are accounted for in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," ("APB 25") and related interpretations. Under
this method, no compensation expense is recognized as long as the exercise
price equals the market price of the underlying stock on the date of the
grant. The Company elected the disclosure-only alternative permitted under
statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," ("FAS 123") for fixed stock-based awards to
employees. All non-employee stock-based awards are accounted for in
accordance with FAS 123.
Income Taxes
Deferred income tax assets and liabilities are recognized for the expected
future tax consequences, utilizing current tax rates, of temporary
differences between the carrying amounts and the tax bases of assets and
liabilities. Deferred tax assets are recognized, net of any valuation
allowance, for the estimated future tax effects of deductible temporary
differences and tax operating loss and credit carryforwards. Deferred
income tax expense or benefit represents the change in the net deferred tax
asset and liability balances.
Earnings (Loss) Per Share
Basic earnings (loss) per share is calculated based on the weighted average
number of common shares outstanding during the period. Diluted earnings per
share is calculated based on the weighted average number of common shares
and dilutive common equivalent shares assumed outstanding during the
period. Shares used to compute diluted earnings per share in loss years
exclude common share equivalents, as their inclusion would have an
anti-dilutive effect. The Company's net income (loss), for purposes of
calculating
33
BROOKS AUTOMATION, INC.
NOTES TO SUPPLEMENTARY CONSOLIDATED FINANCIAL STATEMENTS (Continued)
basic and diluted earnings per share, has been adjusted by dividends and
accretion related to the Company's preferred stock.
Fair Value of Financial Instruments
The Company's financial instruments consist of cash and cash equivalents,
investments in long- and short-term debt securities and long- and
short-term debt. The carrying amounts reported in the balance sheets for
cash and cash equivalents, investments debt securities classified as
available for sale and the Company's long- and short-term debt approximate
their fair value at both September 30, 2000 and 1999. The carrying amounts
reported for investments in debt securities classified as held-to-maturity
are reported at unamortized cost, which equals fair value, as the debt
securities are not discounted upon purchase.
Recent Accounting Pronouncements
In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44 ("FIN 44"), "Accounting for Certain Transactions
Involving Stock Compensation - an interpretation of APB Opinion No. 25".
FIN 44 clarifies the application of APB Opinion No. 25 ("APB 25"),
including the following: the definition of an employee for purposes of
applying APB 25; the criteria for determining whether a plan qualifies as a
non-compensatory plan; the accounting consequences of various modifications
to the terms of previously fixed stock options or awards; and the
accounting for an exchange of stock compensation awards in a business
combination. FIN 44 is effective July 1, 2000, but certain conclusions in
FIN 44 cover specific events that occurred after either December 15, 1998
or January 12, 2000. Application of this pronouncement has not had a
material impact on the Company's financial position or results of
operations.
In December 1999, the U.S. Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition
in Financial Statements". SAB 101 summarizes the SEC's views in applying
generally accepted accounting principles to selected revenue recognition
issues in financial statements. In June 2000, the SEC issued Staff
Accounting Bulletin No. 101B, an amendment to SAB 101, which delays the
implementation of SAB 101. The application of the guidance in SAB 101 will
now be required in the Company's fourth quarter of fiscal 2001. The Company
does not anticipate the adoption of SAB 101 to have a significant impact on
financial results in fiscal 2001.
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS
133"). This statement was amended by the issuance of Statement No. 137,
"Deferral of the Effective Date of FASB Statement No. 133", which changed
the effective date of FAS 133 to all fiscal years beginning after June 15,
2000 (fiscal 2001 for the Company) and requires that all derivative
instruments be recorded on the balance sheet at their fair value. This
statement was further amended by Statement No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities - an Amendment of
FASB Statement No. 133". Changes in the fair value of derivatives are
recorded each period in current earnings or other comprehensive income,
depending on whether a derivatives is designated as part of a hedge
transaction and, if it is, the type of hedge transaction. The Company's
management anticipates that the adoption of FAS 133 will not have a
significant effect on the Company's results or operations or financial
position, as the Company currently does not utilize derivative instruments.
34
BROOKS AUTOMATION, INC.
NOTES TO SUPPLEMENTARY CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. BUSINESS ACQUISITIONS
PTI
On July 12, 2001, the Company acquired PTI in exchange for shares of
Brook'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. (Note 2)
The results of operations previously reported by the separate companies and
the combined amounts presented in the accompanying Supplementary
Consolidated Statements of Operations are as follows:
Years ended September 30,
2000 1999 1998
-------- -------- ---------
Revenues
Brooks Automation, Inc. $321,099 $114,955 $117,290
Progressive Technologies, Inc. 16,085 8,002 6,169
-------- -------- --------
$337,184 $122,957 $123,459
Net income (loss)
Brooks Automation, Inc. $ 12,753 $ (9,842) $(23,315)
Progressive Technologies, Inc. 2,356 308 47
-------- -------- --------
$ 15,109 $ (9,534) $(23,268)
Net income (loss) attributable
to common stockholders
Brooks Automation, Inc. $12,753 $(10,496) $(24,735)
Progressive Technologies, Inc. 2,236 188 (73)
------- -------- --------
$14,989 $(10,308) $(24,808)
MiTeX
On June 23, 2000, the Company acquired substantially all of the assets of
MiTeX. MiTeX, located in Canton, Michigan, provides run-to-run controller
technology. In consideration, the Company paid $300,000 cash, 5,486 shares
of its common stock and the potential for an additional amount
("royalties") of up to $5.0 million in the aggregate over the next five
years. The royalties will be calculated at the end of each fiscal year
based on net revenue and gross margin performance of the MiTeX business
unit. These royalties will be recorded to Cost of product revenues in the
year that the costs are incurred. Amounts recorded to Cost of product
revenues in the year ended September 30, 2000 were immaterial. The
acquisition was accounted for using the purchase method of accounting in
accordance with Accounting Principles Board Opinion No. 16, "Business
Combinations" ("APB 16").
Irvine Optical
On May 5, 2000, the Company acquired Irvine Optical in exchange for 309,013
shares of Brooks common stock. The acquisition was accounted for as a
pooling of interests. Irvine Optical is engaged principally in the design,
engineering and manufacturing of wafer handling and inspection equipment
for sale primarily to the semiconductor industry. In connection with this
acquisition, the Company incurred $0.6 million of costs, consisting
primarily of transaction costs to effect the acquisition.
The accompanying supplementary 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 supplementary 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.
The results of operations previously reported by the separate companies and
the combined amounts presented in the accompanying Supplementary
Consolidated Statements of Operations are as follows (in thousands):
Six months
ended
March 31, Year ended September 30,
2000 1999 1998
---- ---- ----
Revenues
Brooks Automation, Inc. $130,512 $ 111,908 $ 106,421
Irvine Optical LLC 10,663 11,049 17,038
-------- --------- ---------
$141,175 $ 122,957 $ 123,459
======== ========= =========
35
Net income (loss)
Brooks Automation, Inc. $ 5,301 $ (7,576) $ (22,516)
Irvine Optical LLC 560 (1,958) (752)
-------- --------- ---------
$ 5,861 $ (9,534) $ (23,268)
======== ========= =========
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
36
BROOKS AUTOMATION, INC.
NOTES TO SUPPLEMENTARY CONSOLIDATED FINANCIAL STATEMENTS (Continued)
and sells robotic and material handling simulation, scheduling and real
time dispatching software for the semiconductor industry. At closing, the
Company paid $27.0 million in cash, issued 535,404 shares of Brooks common
stock with a value of $14.7 million and issued a $16.0 million promissory
note payable in one year, bearing interest at a rate of 4.0% per annum. The
acquisition was accounted for using the purchase method of accounting in
accordance with APB 16.
A summary of the acquisition follows (in thousands):
Consideration:
Cash, net of cash acquired of $5,775 $21,225
Common stock 14,727
Promissory note 16,000
Transaction costs 2,498
-------
Total consideration 54,450
Estimated fair value of net liabilities assumed 3,198
-------
Excess of purchase price over fair value of net liabilities assumed $57,648
=======
The excess of purchase price over the fair value of net liabilities assumed
and identifiable intangible assets has been recorded based on a preliminary
purchase price allocation. Finalization of the allocation of the purchase
price to assets acquired and liabilities assumed will be made after
analysis of their fair values. Any reduction in purchase price resulting
from this analysis will be recognized at the time of settlement.
A portion of the excess of purchase price over fair value of net
liabilities assumed was allocated to certain identifiable intangible assets
based on the report of an independent appraiser. The balance of the excess
was recorded as goodwill. The allocation of the $57.6 million of excess of
purchase price over the fair value of net liabilities assumed to specific
intangible assets and their estimated useful lives is as follows (dollars
in thousands):
Estimated
Allocation useful life
Completed technology $ 4,505 5 years
Customer relationships 1,305 4 years
Trademarks and trade names 1,564 5 years
Non-competition agreement 1,033 5 years
Assembled workforces 5,880 3 years
Goodwill 43,361 3 years
-------
$57,648
=======
The following pro forma results of operations have been prepared as though
the acquisition had occurred as of the beginning of the fiscal year prior
to the acquisition. This pro forma financial information does not purport
to be indicative of the results of operations that would have been attained
had the acquisition been made as of those dates or of results of operations
that may occur in the future (in thousands except per share data):
(Unaudited)
Year ended September 30,
2000 1999
---- ----
Revenues $343,076 $171,534
Net income (loss) $ 7,910 $(30,817)
37
Net income (loss) attributable to common stockholders $ 7,790 $(31,591)
Net income (loss) per share attributable to common stockholders $ 0.46 $ (2.62)
38
BROOKS AUTOMATION, INC.
NOTES TO SUPPLEMENTARY CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Infab
On September 30, 1999, the Company acquired certain assets of Infab in
exchange for 914,286 shares of the Company's common stock. Infab is a
worldwide supplier of advanced factory automation systems headquartered in
Germany. The assets purchased principally included fixed assets, inventory,
receivables, patents and intellectual property.
A summary of the acquisition follows:
Consideration:
Common stock $22,473
Transaction costs 1,127
-------
Total consideration 23,600
Fair value of net tangible assets acquired 12,033
Fair value of identifiable intangible assets 5,154
-------
Excess of purchase price over fair value of net tangible and
identifiable intangible assets acquired $ 6,413
=======
As part of the preliminary purchase price allocation recorded at September
30, 1999, the Company had established an accrual of $2.7 million related
primarily to severance costs and costs to exit certain duplicate
facilities. During the year ended September 30, 2000, review of these
accruals determined that the accruals were not required due to changed
conditions and circumstances subsequent to the preliminary purchase price
allocation. Accordingly, these accruals were reversed and recorded as a
purchase accounting adjustment to goodwill. Additionally, during the year
ended September 30, 2000, the Company finalized its evaluation of the fair
value of assets acquired and liabilities assumed. This evaluation resulted
in a reduction to the value of net tangible assets acquired of $7.1
million, primarily related to inventories and accounts receivable, and
resulting in an increase to goodwill for the same amount.
Smart Machines
On August 31, 1999, the Company acquired Smart Machines and issued 496,640
shares of common stock in exchange for all of the outstanding common and
preferred shares of Smart Machines Inc. ("Smart Machines"). The transaction
was accounted for as a pooling of interests. Smart Machines is located in
San Jose, California, and manufactures direct drive Selectively Compliant
Assembly Robot Arm ("SCARA") atmospheric and vacuum robots. In connection
with this acquisition, the Company incurred $1.2 million of costs,
consisting primarily of transaction costs to affect the acquisition. As a
result of conforming dissimilar year-ends, Smart Machines' results of
operations for the three months ended December 31, 1998, are included in
both of the Company's fiscal years 1999 and 1998. Accordingly, an amount
equal to Smart Machines' net loss applicable to common stockholders for the
three months ended December 31, 1998, was eliminated from 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.
FASTech
On September 30, 1998, the Company acquired FASTech and issued 852,428
shares of common stock in exchange for all of the outstanding common and
preferred shares of FASTech. In connection with this
39
BROOKS AUTOMATION, INC.
NOTES TO SUPPLEMENTARY CONSOLIDATED FINANCIAL STATEMENTS (Continued)
acquisition, the Company incurred $2.4 million of costs, consisting
primarily of transaction costs to effect the acquisition and costs to exit
duplicate facilities. As a result of conforming dissimilar year-ends,
FASTech's results of operations for the three months ended December 31,
1997 (including revenues, operating loss and net loss of $5.0 million, $1.0
million and $2.8 million, respectively), are included in both of the
Company's fiscal years 1998 and 1997. Accordingly, an amount equal to
FASTech's net loss for the three months ended December 31, 1997, was
eliminated from supplementary consolidated retained earnings for the year
ended September 30, 1998.
4. EARNINGS (LOSS) PER SHARE
The following table is a summary of net income (loss) applicable to common
stockholders used in the calculation of basic and diluted earnings (loss)
per share (in thousands):
Year ended September 30,
2000 1999 1998
---- ---- ----
Net income (loss) $ 15,109 (9,534) $(23,268)
Accretion and dividends on preferred stock (120) (774) (1,540)
-------- -------- --------
Net income (loss) applicable to common
stockholders $ 14,989 $(10,308) $ 24,808
======== ======== ========
The following table is a summary of shares used in calculating basic and
diluted earnings (loss) per share (in thousands):
Year ended September 30,
2000 1999 1998
---- ---- ----
Weighted average shares used in computing
basic earnings (loss) per share 15,661 11,542 10,687
Dilutive securities:
Convertible redeemable preferred stock 314 -- --
Common stock options and warrants 1,217 -- --
------ ------ ------
Shares used in computing diluted earnings
(loss) per share 17,192 11,542 10,687
====== ====== ======
Options to purchase approximately 291,000 shares of common stock were
excluded from the computation of diluted income per share for the year
ended September 30, 2000, as their effect would be anti-dilutive. However,
these options could become dilutive in future periods. Options and warrants
to purchase approximately 887,000 and 764,000 shares of common stock and
314 shares of Preferred Stock were excluded from the computation of diluted
loss per share for the years ended September 30, 1999 and 1998,
respectively, as their effect would be anti-dilutive.
40
BROOKS AUTOMATION, INC.
NOTES TO SUPPLEMENTARY CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. INCOME TAXES
The components of the income tax provision (benefit) are as follows (in
thousands):
Year ended September 30,
2000 1999 1998
-------- ------- -------
Current:
Federal $ 9,685 $ 397 $ (858)
State 1,237 82 8
Foreign 7,737 1,664 (212)
-------- ------- -------
18,659 2,143 (1,062)
-------- ------- -------
Deferred:
Federal (5,206) (2,403) (3,031)
State 55 (429) (554)
Foreign 101 (185) (2)
-------- ------- -------
(5,050) (3,017) (3,587)
-------- ------- -------
$ 13,609 $ (874) $(4,649)
======== ======= =======
The components of income (loss) before income taxes, but including
minority interests, are as follows (in thousands):
Year ended September 30,
2000 1999 1998
-------- -------- --------
Domestic $ 21,930 $(12,601) $(27,553)
Foreign 6,514 2,153 (364)
-------- -------- --------
$ 28,444 $(10,448) $(27,917)
======== ======== ========
The significant components of the net deferred tax asset are as follows
(in thousands):
Year ended September 30,
2000 1999 1998
------- ------- -------
Reserves not currently deductible $20,624 $ 7,417 $ 4,983
Federal and state tax credits 8,203 5,195 4,515
Capitalized research and development 1,895 2,894 1,953
Net operating loss carryforwards 6,407 6,525 6,255
Other -- -- 444
------- ------- -------
Gross deferred tax asset 37,129 22,031 18,150
------- ------- -------
Depreciation and amortization 5,088 174 888
Other 119 -- 34
------- ------- -------
Gross deferred tax liability 5,207 174 922
------- ------- -------
Valuation reserve 5,548 11,297 9,681
------- ------- -------
Net deferred tax asset $26,374 $10,560 $ 7,547
======= ======= =======
The differences between the income tax provision (benefit) and income
taxes computed using the
41
BROOKS AUTOMATION, INC.
NOTES TO SUPPLEMENTARY CONSOLIDATED FINANCIAL STATEMENTS (Continued)
applicable U.S. statutory federal tax rate are as follows (in thousands):
Year ended September 30,
2000 1999 1998
-------- ------- -------
Taxes computed at federal statutory rate $ 10,051 $(3,658) $(9,770)
State income taxes, net of federal tax
benefit 813 (245) (496)
Research and development tax credits (1,085) (544) (840)
Foreign sales corporation tax benefit (582) (36) (1)
Foreign income taxed at different rates 1,157 (81) 266
Nondeductible transaction expenses 379 371 195
Change in deferred tax asset valuation
allowance (553) 1,616 3,830
Permanent differences 307 7 96
Elimination of Acquisition Corp's -- 893 1,562
provision
Nondeductible amortization of goodwill 3,751 -- --
Foreign tax credit carryforwards (2,754) -- --
Withholding taxes 2,125 -- --
Other -- 803 509
-------- ------- -------
$ 13,609 $ (874) $(4,649)
======== ======= =======
The Company does not provide for U.S. income taxes applicable to
undistributed earnings of its foreign subsidiaries since these earnings
are indefinitely reinvested. A valuation allowance has been established
for certain of the future domestic income tax benefits primarily related
to Research and Development and Foreign Tax Credits based on management's
assessment that it is more likely than not that such benefits will not be
realized. The Company's valuation allowance decreased $5.7 million to $5.5
million at September 30, 2000.
As of September 30, 2000, the Company had federal and state net operating
losses of approximately $22.0 million and federal and state research and
development tax credit carryforwards of approximately $4.2 million and
foreign tax credit carryforwards of approximately $4.0 million available
to reduce future tax liabilities, which expire at various dates through
2020. The ultimate realization of the remaining loss carryforwards is
dependent upon the generation of sufficient taxable income in respective
jurisdictions.
6. FINANCING ARRANGEMENTS
On January 7, 2000, the Company entered into an agreement for an unsecured
revolving credit facility with ABN AMRO Bank N.V. ("ABN AMRO") and other
lending institutions. The two-year facility provided for borrowings and
letters of credit of up to $30.0 million. The Company replaced this
facility with a $10.0 million uncommitted demand promissory note credit
facility with ABN AMRO on May 2, 2000. The new facility is payable on
demand or on December 31, 2001, whichever occurs first. ABN AMRO is not
obligated to extend loans or issue letters of credit under this facility.
The interest rates for borrowings and letters of credit under the facility
are expressed in relation to LIBOR and a margin of 1.75%, or at 0.75%
above ABN AMRO's base rate. Approximately $1.1 million in face amount of
letters of credit outstanding under the original facility were transferred
to the replacement facility. At September 30, 2000, $1.3 million of the
facility was in use, all of it for letters of credit.
42
BROOKS AUTOMATION, INC.
NOTES TO SUPPLEMENTARY CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In connection with the acquisition of ASC and ASI, the Company issued a
promissory note to Daifuku America in the amount of $16.0 million, bearing
interest at 4.0% per annum. The interest on the note is being paid
quarterly, with the principal payment of $16.0 million due on January 6,
2001.
Long-term debt consists of the following (in thousands):
September 30,
2000 1999
------ ------
Senior subordinated note payable $ -- $5,878
Credit facility for working capital borrowings at 8.92% per
annum, secured by assets 775 1,209
Capital lease obligations at rates of 5.0% to 21.0% per
annum, secured by certain fixed assets, expiring at
various dates through November 2000 26 136
Other 55 53
------ ------
856 7,276
Less current portion 524 544
------ ------
Long-term debt $ 332 $6,732
====== ======
In 1997, Irvine Optical issued a senior subordinated note payable to a
private lender in the amount of $3.2 million. The senior subordinated note
was subsequently amended several times. At the time of its acquisition by
the Company, Irvine Optical's outstanding balance on the senior
subordinated note payable was $5.9 million. This outstanding balance was
converted into the Company's common stock on May 5, 2000, in conjunction
with the acquisition of Irvine Optical.
In November 1998, Smart Machines entered into a loan and security
agreement with a leasing company. The agreement allowed for working
capital borrowings of up to $2.0 million and equipment loans of up to $0.5
million. The ability to borrow against this facility expired on December
31, 1999. All borrowings are collateralized by Smart Machines' assets and
have stated interest rates of 8.92% and 8.63% per year for working capital
borrowings and equipment loans, respectively. At September 30, 2000, the
Company had working capital loans of $0.8 million outstanding, maturing
through April 2002. The loans are payable in monthly installments of
principal and interest, with a 10.0% principal payback due at the time of
the final payment. Annual principal payments due under these notes are
$0.5 million and $0.3 million in the years ended September 30, 2001 and
2002, respectively.
7. POSTRETIREMENT BENEFITS
The Company sponsors defined contribution plans that meet the requirements
of Section 401(k) of the Internal Revenue Code. All United States
employees of the Company who meet minimum age and service requirements are
eligible to participate in the plan. The plan allows employees to invest,
on a pre-tax basis, a percentage of their annual salary subject to
statutory limitations. The Company's contribution expense was $1.1
million, $0.2 million and $0.2 million in the years ended September 30,
2000, 1999 and 1998, respectively.
43
BROOKS AUTOMATION, INC.
NOTES TO SUPPLEMENTARY CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. STOCKHOLDERS' EQUITY AND CONVERTIBLE REDEEMABLE PREFERRED STOCK
Preferred Stock
At September 30, 2000 and 1999, there were one million shares of preferred
stock, $0.01 par value per share authorized; however, none were issued or
outstanding. Preferred stock may be issued at the discretion of the Board
of Directors without stockholder approval with such designations, rights
and preferences as the Board of Directors may determine.
Restricted Common Stock
In connection with the acquisition of PTI by the Company, the Company
acquired 9,208 shares of restricted common stock. The PTI restricted
common stock is nonvoting and is convertible into PTI common stock. The
restricted common shares have the same preferences, powers,
qualifications, special or relative rights, and privileges, with the
exception of voting privileges, as the PTI common shares.
Convertible Redeemable Preferred Stock
In connection with the acquisition of PTI, the Company acquired 90,000
shares of Series A Convertible Redeemable Preferred Stock. The preferred
stock is subject to certain transfer restrictions, including the Company's
right to repurchase any shares offered for sale. The conversion ratio is
1:3.48 preferred shares to the Company's common shares and was converted
to the Company's common shares on July 12, 2001 in connection with the
acquisition of PTI by the Company. The redemption price is $4.79 per share
for a total of $1,500,000 plus accrued and unpaid dividends.
Common Stock Offering
On March 7, 2000, the Company completed a public offering of 3,250,000
shares of its common stock, of which 2,750,000 shares were offered by the
Company and 500,000 were offered by selling stockholders. The Company
realized proceeds, net of $12.9 million of issuance costs, of $220.5
million on the sale of the initial 2,750,000 shares and the additional
320,500 shares purchased by the underwriters from the Company on March 23,
2000 to cover over-allotments of shares. The Company did not receive any
proceeds from the sale of shares by the selling stockholders.
Warrants
In connection with the acquisition of PTI, the Company assumed 10,000
warrants to purchase PTI common stock. These warrants remained outstanding
at September 30, 2000 and 1999. These warrants were exercised prior to the
acquisition of PTI by the Company.
In connection with debt it had issued prior to its acquisition by the
Company, Smart Machines had issued warrants to purchase 10,000 shares of
its Series C preferred stock, 57,182 shares of its Series D preferred
stock, 961,234 shares of its Series E stock and 42,658 shares of its
common stock. These warrants were converted into warrants to purchase the
Company's common stock on August 31, 1999, in conjunction with the
acquisition of Smart Machines. As of September 30, 2000, there were 84,691
warrants outstanding at an exercise price of $25.56 per share, all of
which expire on May 30, 2001. At September 30, 1999, and 93,220 warrants
were outstanding, of which 699 were exercisable at $42.67 per share and
92,521 were exercisable at $25.56 per share.
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
44
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
45
BROOKS AUTOMATION, INC.
NOTES TO SUPPLEMENTARY CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1,000,000 shares of common stock were reserved for issuance under the 2000
Plan. Of these shares, 388,206 shares are outstanding and 611,794 shares
remain available for grant as of September 30, 2000.
1998 Employee Equity Incentive Plan
The purposes of the 1998 Employee Equity Incentive Plan (the "1998 Plan"),
adopted by the Board of Directors of the Company in April 1998, are to
attract and retain employees and provide an incentive for them to assist
the Company in achieving long-range performance goals, and to enable them
to participate in the long-term growth of the Company. All employees of
the Company, other than its officers and directors, (including
contractors, consultants, service providers or others) who are in a
position to contribute to the long-term success and growth of the Company,
are eligible to participate in the 1998 Plan. A total of 2,300,000 shares
of common stock have been reserved for issuance under the 1998 Plan. Of
these shares, options on 1,931,325 shares are outstanding and 285,438
shares remain available for grant as of September 30, 2000. In order to
align the 1998 Plan with its current practices, in January 2000, the Board
of Directors amended the 1998 Plan to eliminate the Company's ability to
award nonqualified stock options with exercise prices at less than fair
market value.
1995 Employee Stock Purchase Plan
On February 22, 1996, the stockholders approved the 1995 Employee Stock
Purchase Plan (the "1995 Plan") which enables eligible employees to
purchase shares of the Company's common stock. Under the 1995 Plan,
eligible employees may purchase up to an aggregate of 750,000 shares
during six-month offering periods commencing on January 1 and July 1 of
each year at a price per share of 85% of the lower of the market price per
share on the first or last day of each six-month offering period.
Participating employees may elect to have up to 10% of base pay withheld
and applied toward the purchase of such shares. The rights of
participating employees under the 1995 Plan terminate upon voluntary
withdrawal from the plan at any time or upon termination of employment. As
of September 30, 2000, 201,277 shares of common stock have been purchased
under the 1995 Plan and 548,723 remain available for purchase.
1993 Non-Employee Director Stock Option Plan
The purpose of the 1993 Non-Employee Director Stock Option Plan (the
"Directors Plan") is to attract and retain the services of experienced and
knowledgeable independent directors of the Company for the benefit of the
Company and its stockholders and to provide additional incentives for such
independent directors to continue to work for the best interests of the
Company and its stockholders through continuing ownership of its common
stock. Each director who is not an employee of the Company or any of its
subsidiaries is eligible to receive options under the Directors Plan.
Under the Directors Plan, each eligible director receives an automatic
grant of an option to purchase 10,000 shares of common stock upon becoming
a director of the Company and an option to purchase 5,000 shares on July 1
each year thereafter. Options granted under the Directors Plan generally
vest over a period of five years and generally expire ten years from the
date of grant. A total of 190,000 shares of common stock has been reserved
for issuance under the Directors Plan. Of these shares, options on 71,000
shares are outstanding and 71,000 shares remain available for grant as of
September 30, 2000.
1992 Combination Stock Option Plan
Under the Company's 1992 Stock Option Plan (the "1992 Plan"), the Company
may grant both incentive stock options ("incentive stock options")
intended to qualify under Section 422 of the Internal Revenue Code of
1986, as amended, and other options which are not qualified as incentive
stock options ("nonqualified stock options"). Incentive stock options may
only be granted to persons who are employees of the Company at the time of
grant, which may include officers and directors who are also employees.
Nonqualified stock options may be granted to persons who are officers,
directors or employees of or consultants or advisors to the Company or
persons who are in a position to contribute to the long-term
46
BROOKS AUTOMATION, INC.
NOTES TO SUPPLEMENTARY CONSOLIDATED FINANCIAL STATEMENTS (Continued)
success and growth of the Company at the time of grant. Options granted
under the 1992 Plan generally vest over a period of four years and
generally expire ten years from the date of grant. A total of 1,950,000
shares of common stock has been reserved for issuance under the 1992 Plan.
Of these shares, options on 898,172 shares are outstanding and 56,514
shares remain available for grant as of September 30, 2000.
STOCK OPTIONS OF ACQUIRED COMPANY
In connection with the acquisition of PTI, the Company assumed a stock
option plan that was adopted by PTI on October 10, 1991. The board of
directors of PTI determined all option grants, options prices, and vesting
periods. The Company does not intend to issue any additional shares under
the PTI stock option plan. As of September 30, 2000, 82,346 options to
purchase the Company's common stock are outstanding.
In connection with the acquisition of FASTech, the Company assumed 80,351
options in September 1998. These assumed options were granted at prices
equal to the fair value at the date of grant, become exercisable in
installments (generally ratably over five years) and expire ten years from
the date of grant. The Company does not intend to issue any additional
options under the FASTech stock option plans. As of September 30, 2000,
26,710 options are outstanding.
STOCK OPTION ACTIVITY AND PRO FORMA INFORMATION
Aggregate stock option activity for all plans for the years ended September
30, 2000, 1999 and 1998, is as follows:
Year Ended September 30,
----------------------------------------------------------------------------
2000 1999 1998
------------------------ ---------------------- ----------------------
Weighted Weighted Weighted
Average Average Average
Shares Price Shares Price Shares Price
--------- -------- --------- -------- --------- --------
Options outstanding at
beginning of year 2,057,828 $ 14.77 1,157,038 $ 7.87 1,361,252 $ 7.76
Granted 2,094,033 $ 35.61 1,333,300 $ 18.29 192,908 $ 16.06
Exercised (509,010) $ 8.52 (298,948) $ 3.77 (70,229) $ 3.01
Canceled (243,538) $ 25.73 (133,562) $ 14.81 (326,893) $ 13.30
--------- --------- ---------
Options outstanding at
end of year 3,399,313 $ 27.75 2,057,828 $ 14.77 1,157,038 $ 7.87
========= ========= =========
Options exercisable at
end of year 425,615 $ 14.00 512,540 $ 6.76 589,575 $ 4.49
========= ========= =========
Weighted average fair
value of options
granted during the
period $ 25.97 $13.06 $ 8.75
Options available for
future grant 1,117,968
=========
Pro forma information regarding net income and earnings per share is
required by FAS 123, and has been calculated as if the Company had
accounted for its employee stock options and stock purchase plan under the
fair value method of that Statement. The fair value of each option grant
was estimated on the date of grant; the fair value of each employee stock
purchase was estimated on the commencement date of each offering period
using the Black-Scholes option pricing model with the following
assumptions:
Year ended September 30,
------------------------------------------------
2000 1999 1998
------------ ------------ -----------
Risk-free interest rate 6.3% - 6.6% 5.5% - 6.3% 5.5% - 6.3%
Volatility 103% 100% 100%
Expected life (years) - options 4.0 4.0 4.0
Expected life (years) - Employee
Stock Purchase Plan 0.5 0.5 0.5
Dividend yield 0% 0% 0%
47
BROOKS AUTOMATION, INC.
NOTES TO SUPPLEMENTARY CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions including the
expected stock price volatility. Because the Company's employee stock
options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of
the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The
Company's pro forma information follows (in thousands, except earnings per
share information):
Year ended September 30,
2000 1999 1998
---------- ---------- ----------
Pro forma net income (loss) $ 10,700 $ (12,601) $ (25,795)
Pro forma net income (loss) per share
Basic $ 0.68 $ (1.16) $ (2.56)
Diluted $ 0.62 $ (1.16) $ (2.56)
Because most options vest over several years and additional option grants
are expected to be made subsequent to September 30, 2000, the results of
applying the fair value method may have a materially different effect on
pro forma net income in future years.
The following table summarizes information about stock options outstanding
at September 30, 2000:
Options Outstanding Options Exercisable
------------------------------------------------- ------------------------------
Weighted-Average
Remaining
Contractual Weighted- Weighted-
Range of Life Average Average
Exercise Prices Shares (Years) Exercise Price Shares Exercise Price
--------------- ------ ------- -------------- ------ --------------
$ 0.8330 - $ 1.6700 100,650 6.27 $ 1.5283 66,857 $ 1.4110
$ 2.2100 - $ 2.2130 53,250 3.89 $ 2.2129 53,250 $ 2.2129
$ 4.7070 - $ 10.5000 212,646 7.93 $ 9.6174 29,309 $ 9.5611
$ 11.0000 120,417 5.82 $11.0000 75,392 $11.0000
$ 11.7500 - $ 14.6250 365,631 7.95 $14.1106 51,873 $13.6968
$ 14.7500 - $ 21.7500 438,056 8.75 $19.8078 61,929 $21.1136
$ 21.8750 - $ 27.2500 300,065 8.55 $26.9264 71,291 $26.8925
$ 27.7500 - $ 30.2500 936,612 9.26 $30.1238 1,000 $27.8125
$ 31.4375 - $ 39.7500 478,219 7.20 $39.2836 -- $ --
$ 40.0000 - $ 68.0000 354,367 7.25 $53.1650 14,714 $45.7138
$ 69.2500 - $ 78.8750 39,100 9.43 $74.4512 -- $ --
$ 83.3750 300 6.55 $83.3750 -- $ --
--------- ---- -------- ------- --------
$ 0.8330 - $83.3750 3,399,313 8.11 $27.7509 425,615 $13.9972
========= =======
10. ACQUISITION-RELATED AND RESTRUCTURING COSTS AND ACCRUALS
During the year ended September 30, 2000, the Company recorded
acquisition-related costs of $0.6 million, primarily for legal, accounting
and other costs associated with acquiring Irvine Optical.
During the year ended September 30, 1999, the Company recorded
acquisition-related and restructuring
48
BROOKS AUTOMATION, INC.
NOTES TO SUPPLEMENTARY CONSOLIDATED FINANCIAL STATEMENTS (Continued)
costs of $3.1 million, including $1.2 million of legal, accounting and
other costs associated with acquiring Smart Machines. In addition, the
Company approved and implemented a restructuring program designed to
integrate its fiscal 1999 acquisitions. These actions involved 7
employees, all of whom were terminated prior to September 30, 1999, and
the write-off of certain fixed assets prior to September 30, 1999.
Accordingly, during fiscal 1999, the Company recorded a charge of $1.9
million related to the restructuring program. The Company also recorded
$2.9 million of costs in purchase accounting transactions consisting of
$2.0 million for severance costs principally related to former Infab
employees, $0.6 million to exit certain duplicate facilities and $0.3
million for other related costs.
During the year ended September 30, 1998, the Company approved and
implemented a restructuring program designed to align the Company's cost
structure with lower revenue levels indicative of the decline in that
period in demand for semiconductor equipment. These actions involved
approximately 120 employees, all of whom were terminated prior to
September 30, 1998. Accordingly, the Company recorded a charge of $1.3
million for employee severance costs. The Company also recorded charges of
$2.4 million in connection with its acquisition of FASTech. This charge is
comprised of $1.4 million to exit duplicate facilities, principally,
FASTech's former headquarters facility, and $1.0 million for legal,
accounting and other costs in connection with the acquisition.
The activity related to the Company's acquisition-related and
restructuring accruals is below (in thousands):
Fiscal 2000 Activity
------------------------------------------------------------------------------------------
New Initiatives
Balance ---------------------------- Balance
September 30, Purchase September 30,
1999 Expense Accounting Utilization 2000
---- ------- ---------- ----------- ----
Facilities $1,325 $-- $ (450) $ (368) $507
Depreciable assets -- -- -- -- --
Workforce-related 2,332 -- (2,000) (312) 20
Other 211 578 (200) (578) 11
------ ------- ------- ------- ----
$3,868 $ 578 $(2,650) $(1,258) $538
====== ======= ======= ======= ====
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
====== ====== ======= ======= ======
49
BROOKS AUTOMATION, INC.
NOTES TO SUPPLEMENTARY CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Fiscal 1998 Activity
------------------------------------------------------------------------------------------
New Initiatives
Balance ---------------------------- Balance
September 30, Purchase September 30,
1997 Expense Accounting Utilization 1998
---- ------- ---------- ----------- ----
Facilities $ -- $1,400 $ -- $ (106) $1,294
Depreciable assets -- -- -- -- --
Workforce-related -- 1,300 -- (1,062) 238
Other -- 1,022 -- (300) 722
---- ------ ---- ------- ------
$ -- $3,722 $ -- $(1,468) $2,254
==== ====== ==== ======= ======
11. SEGMENT AND GEOGRAPHIC INFORMATION
The Company has two reportable segments: automation systems and factory
automation solutions. The automation systems segment provides a full
complement of semiconductor wafer and flat panel display substrate
handling systems. Automation systems revenue is comprised of factory
hardware, including factory interface hardware products, tool control
software products, spare parts sales and tool control application
consulting services. The factory automation solutions segment provides
software products for the semiconductor manufacturing execution system
("MES") market, including consulting and software customization.
The Company evaluates performance and allocates resources based on
revenues and operating income. Operating income for each segment includes
selling, general and administrative expenses directly attributable to the
segment. Amortization of acquired intangible assets and
acquisition-related and restructuring costs are excluded from the
segments' operating income. The Company's non-allocable overhead costs,
which include corporate general and administrative expenses, but exclude
amortization of acquired intangible assets and acquisition-related and
restructuring costs, are allocated between the segments based upon segment
revenues. Segment assets exclude deferred taxes, acquired intangible
assets, all assets of the Company's Securities Corporation subsidiary and
investments in subsidiaries.
Financial information for the Company's business segments is as follows
(in thousands):
Factory
Automation Automation
Systems Solutions Total
------- --------- -----
Year ended September 30, 2000
Revenues $ 251,895 $ 85,289 $ 337,184
Gross profit $ 102,756 $ 57,969 $ 160,725
Operating income $ 33,896 $ 5,272 $ 39,168
Depreciation $ 7,830 $ 2,988 $ 10,818
Assets $ 177,501 $ 43,965 $ 221,466
Year ended September 30, 1999
Revenues $ 98,770 $ 24,187 $ 122,957
50
Gross profit $ 36,442 $ 18,710 $ 55,152
Operating loss $ (5,806) $ (2,331) $ (8,137)
Depreciation $ 6,160 $ 1,327 $ 7,487
Assets $ 102,670 $ 18,930 $ 121,600
51
BROOKS AUTOMATION, INC.
NOTES TO SUPPLEMENTARY CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Factory
Automation Automation
Systems Solutions Total
Year ended September 30, 1998
Revenues $ 106,837 $ 16,622 $ 123,459
Gross profit $ 26,181 $ 11,099 $ 37,280
Operating loss $ (19,505) $ (5,756) $ (25,261)
Depreciation $ 6,616 $ 1,812 $ 8,428
Assets $ 118,057 $ 7,000 $ 125,057
A reconciliation of the Company's reportable segment operating income and
segment assets to the corresponding supplementary consolidated amounts as
of and for the years ended September 30, 2000, 1999 and 1998 is as follows
(in thousands):
As of and for the year ended September 30,
2000 1999 1998
-------- --------- ---------
Segment operating income (loss) $ 39,168 $ (8,137) $ (25,261)
Amortization of acquired intangibles 18,506 565 207
Acquisition-related and restructuring costs 578 3,120 3,722
-------- --------- ---------
Total operating income (loss) $ 20,084 $ (11,822) $ (29,190)
======== ========= =========
Segment assets $221,466 $ 121,600 $ 125,057
Deferred tax asset 31,581 10,734 8,462
Acquired intangible assets 58,405 15,327 2,725
Securities Corporation assets 208,334 49,639 23,899
-------- --------- ---------
Total assets $519,786 $ 197,300 $ 160,143
======== ========= =========
Net revenues by geographic area are as follows (in thousands):
Year ended September 30,
2000 1999 1998
-------- -------- --------
North America $175,874 $ 69,889 $ 69,948
Asia/Pacific 114,302 40,128 38,424
Europe 47,008 12,940 15,087
-------- -------- --------
$337,184 $122,957 $123,459
======== ======== ========
52
Long-lived assets, including property, plant and equipment and intangible
assets are as follows (in thousands):
September 30,
2000 1999 1998
------- ------- -------
North America $74,569 $23,266 $23,610
Asia/Pacific 4,948 2,965 772
Europe 5,970 9,093 14
------- ------- -------
$85,487 $35,324 $24,396
======= ======= =======
53
BROOKS AUTOMATION, INC.
NOTES TO SUPPLEMENTARY CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. SIGNIFICANT CUSTOMERS AND RELATED PARTY INFORMATION
One of the Company's directors is also a director of one of the Company's
customers. Net revenue recognized from this customer was $36.9 million,
$15.3 million and $15.9 million in the years ended September 30, 2000,
1999 and 1998, respectively. These amounts comprised 11.5%, 13.3% and
13.6% of revenues in the aforementioned years, respectively. Amounts due
from this customer included in accounts receivable at September 30, 2000
and 1999 were $6.8 million and $3.4 million, respectively. Related party
amounts included in accounts receivable are on standards terms and manner
of settlement. The Company had no other customer who accounted for more
than 10% of the Company's revenues in any of the years ended September 30,
2000, 1999 or 1998.
13. OTHER BALANCE SHEET INFORMATION
Components of other selected captions in the Supplementary Consolidated
Balance Sheets follow (in thousands):
September 30,
2000 1999
------- -------
Accounts receivable $96,745 $39,302
Less allowances 1,989 1,785
------- -------
$94,756 $37,517
======= =======
Inventories
Raw materials and purchased parts $35,189 $23,410
Work-in-process 13,938 10,299
Finished goods 9,480 5,058
------- -------
$58,607 $38,767
======= =======
Fixed assets
Computer equipment and software $23,525 $18,829
Machinery and equipment 21,238 12,589
Furniture and fixtures 7,089 6,168
Buildings and land 1,573 --
Leasehold improvements 9,226 6,638
------- -------
62,651 44,224
Less accumulated depreciation and amortization 37,499 25,842
------- -------
$25,152 $18,382
======= =======
54
BROOKS AUTOMATION, INC.
NOTES TO SUPPLEMENTARY CONSOLIDATED FINANCIAL STATEMENTS (Continued)
September 30,
2000 1999
------- -------
Intangible assets
Patents $ 7,448 $ 7,753
Capitalized software 1,805 1,420
Completed technology 4,505 --
License agreements 678 --
Trademarks and trade names 1,564 --
Non-competition agreements 1,033 --
Assembled workforces 5,880 --
Customer relationships 1,305 --
Goodwill 58,638 10,991
------- -------
82,856 20,164
Less accumulated amortization 22,521 3,222
------- -------
$60,335 $16,942
======= =======
The fixed asset balance includes computer equipment and software and
machinery and equipment aggregating $2.9 million as of both September 30,
2000 and 1999, acquired under capital leases. Accumulated amortization on
fixed assets under capital lease was $3.2 million and $3.0 million at
September 30, 2000 and 1999, respectively. Amortization expense for fixed
assets under capital leases was $0.1 million, $0.2 million and $0.7
million for the years ended September 30, 2000, 1999 and 1998,
respectively. Depreciation expense was $10.7 million, $10.1 million and
$8.0 million for the years ended September 30, 2000, 1999 and 1998,
respectively.
14. COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company leases manufacturing and office facilities and certain
equipment under operating and capital leases that expire through 2010.
Rental expense under operating leases for the years ended September 30,
2000, 1999 and 1998 was $5.8 million , $4.9 million and $5.3 million,
respectively. Future minimum lease commitments on noncancelable operating
leases and sublease income are as follows (in thousands):
Operating Sublease
Leases Income
------ ------
Year ended September 30,
2001 $6,847 $698
2002 5,841 552
2003 5,156 368
2004 4,659 --
2005 4,645 --
Thereafter 15,172 --
------- ------
Total minimum lease payments $42,320 $1,618
======= ======
55
These future minimum lease commitments include approximately $1.5 million
related to a facility the Company has elected to abandon in connection
with its restructuring and acquisition-related initiatives. The Company
has subleased this facility through the remaining lease period for an
equivalent amount, which is included in the future sublease income
reported above.
As of September 30, 2000, the Company's only remaining capital lease
obligation was a payment of approximately $26,000, due in the first
quarter of fiscal 2001.
56
BROOKS AUTOMATION, INC.
NOTES TO SUPPLEMENTARY CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Contingency
There has been substantial litigation regarding patent and other
intellectual property rights in the semiconductor and related industries.
The Company has received notice from a third party alleging infringements
of such party's patent rights by certain of the Company's products. The
Company believes the patents claimed may be invalid. In the event of
litigation with respect to this claim, the Company is prepared to
vigorously defend its position. However, because patent litigation can be
extremely expensive and time consuming, the Company may seek to obtain a
license to one or more of the disputed patents. Based upon currently
available information, the Company would only do so if such license fees
would not be material to the Company's supplementary 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.
57
ITEM 5(b).
BROOKS AUTOMATION, INC.
SUPPLEMENTARY CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
June 30, September 30,
2001 2000
----------- -------------
(unaudited)
Assets
Current assets
Cash and cash equivalents $ 197,275 $ 133,636
Marketable securities 24,714 88,034
Accounts receivable, net, including related
party receivables of $265 and $6,820 at
June 30, 2001 and September 30, 2000,
respectively (See Note 6) 114,707 94,756
Inventories 66,519 58,607
Prepaid expenses and other current assets 12,217 8,464
Deferred income taxes 19,129 18,220
--------- ---------
Total current assets 434,561 401,717
Property, plant and equipment
Buildings and land 31,389 1,573
Computer equipment and software 35,134 23,525
Machinery and equipment 16,594 20,747
Furniture and fixtures 10,845 7,089
Leasehold improvements 9,621 9,226
Construction in progress 5,872 491
--------- ---------
109,455 62,651
Less: Accumulated depreciation and amortization (49,075) (37,499)
--------- ---------
Net property, plant and equipment 60,380 25,152
Intangible assets, net 109,693 60,335
Long-term marketable securities 111,717 15,000
Deferred income taxes 18,525 13,361
Other assets 6,051 4,221
--------- ---------
Total assets $ 740,927 $ 519,786
========= =========
LIABILITIES, MINORITY INTERESTS, CONVERTIBLE
REDEEMABLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY
Current liabilities
Notes payable $ 16,912 $ 16,000
Revolving line of credit 350 350
Current portion of long-term debt and capital
lease obligations 478 524
Accounts payable 16,764 23,096
Deferred revenue 18,935 17,018
Accrued compensation and benefits 16,497 14,407
Accrued acquisition-related and restructuring costs 401 538
Accrued income taxes payable 18,015 9,188
Accrued expenses and other current liabilities 20,915 13,760
--------- ---------
Total current liabilities 109,267 94,881
Convertible subordinated notes 175,000 --
Long-term debt and capital lease obligations 85 332
Deferred income taxes 4,636 5,064
Other long-term liabilities 652 438
--------- ---------
Total liabilities 289,640 100,715
--------- ---------
Contingencies (See Note 10)
Minority interests 924 1,186
--------- ---------
Series A convertible redeemable preferred
stock, $0.01 par value, 90,000 shares
authorized, issued and outstanding 2,661 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, 18,512,775 and 17,588,911 shares
issued and outstanding, respectively 182 176
Additional paid-in capital 466,031 433,249
Deferred compensation (12) (35)
Accumulated other comprehensive loss (6,180) (2,942)
Accumulated deficit (12,319) (15,164)
--------- ---------
Total stockholders' equity 447,702 415,284
--------- ---------
Total liabilities, minority interests, convertible
redeemable preferred stock and stockholders'
equity $ 740,927 $ 519,786
========= =========
The accompanying notes are an integral part of these supplementary consolidated
financial statements.
58
BROOKS AUTOMATION, INC.
SUPPLEMENTARY CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except per share data)
NINE MONTHS ENDED
JUNE 30,
2001 2000
--------- ---------
Revenues
Product, including related party revenues of $13,934
for the period from October 1, 2000 through
January 23, 2001, and $25,453 for the nine months
ended June 30, 2000 (See Note 6) $ 253,731 $ 196,695
Services 66,461 37,357
--------- ---------
Total revenues 320,192 234,052
--------- ---------
Cost of revenues
Product 128,196 100,279
Services 47,443 22,990
--------- ---------
Total cost of revenues 175,639 123,269
--------- ---------
Gross profit 144,553 110,783
--------- ---------
Operating expenses
Research and development 45,543 30,317
Selling, general and administrative 71,648 52,614
Amortization of acquired intangible assets 20,479 10,614
Acquisition-related charges 1,717 677
--------- ---------
Total operating expenses 139,387 94,222
--------- ---------
Income from operations 5,166 16,561
Interest income 9,124 5,479
Interest expense 1,342 1,137
Other income (expense) (451) (135)
--------- ---------
Income before income taxes and minority interests 12,497 20,768
Income tax provision 9,318 11,834
--------- ---------
Income before minority interests 3,179 8,934
Minority interests in loss of consolidated subsidiary (262) (249)
--------- ---------
Net income 3,441 9,183
Accretion and dividends on preferred stock (90) (90)
--------- ---------
Net income attributable to common stockholders $ 3,351 $ 9,093
========= =========
Earnings per share attributable to common stockholders
Basic $ 0.19 $ 0.61
Diluted $ 0.18 $ 0.55
Shares used in computing earnings per share attributable
to common stockholders
Basic 17,739 15,027
Diluted 18,898 16,564
The accompanying notes are an integral part of these supplementary consolidated
financial statements.
59
BROOKS AUTOMATION, INC.
SUPPLEMENTARY CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
NINE MONTHS ENDED
JUNE 30,
2001 2000
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,441 $ 9,183
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization 31,534 18,472
Compensation expense related to common stock options 23 23
Deferred income taxes (8,969) 851
Amortization of debt discount 4 --
Minority interests (262) (249)
(Gain) loss on disposal of long-lived assets 75 (61)
Changes in operating assets and liabilities:
Accounts receivable (11,031) (40,541)
Inventories (7,273) (19,621)
Prepaid expenses and other current assets (3,259) (4,582)
Accounts payable (5,620) 11,305
Deferred revenue (631) 6,442
Accrued acquisition-related and restructuring costs (137) (512)
Accrued expenses and other current liabilities 13,488 2,345
--------- ---------
Net cash provided by (used in) operating activities 11,383 (16,945)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (43,409) (10,647)
Purchase of businesses, net of cash acquired (32,131) (24,661)
Purchase of marketable securities (133,655) --
Sale of marketable securities 100,258 --
Proceeds from sale of long-lived assets 8 430
Decrease in other assets 2,118 94
--------- ---------
Net cash used in investing activities (106,811) (34,784)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in short-term borrowings (16,000) --
Net repayments of borrowings under lines of credit -- (5,263)
Proceeds from issuance of convertible subordinated notes,
net of issuance cost 169,543 --
Payments of long-term debt and capital lease obligations (394) (390)
Proceeds from issuance of common stock, net of issuance costs 7,299 224,858
--------- ---------
Net cash provided by financing activities 160,448 219,205
--------- ---------
Elimination of net cash activities of Progressive
Technologies, Inc. for the three months ended
December 31, 2000 (1,119) --
--------- ---------
Elimination of net cash activities of Irvine Optical for
the three months ended December 31, 1999 -- 14
--------- ---------
Effects of exchange rate changes on cash and cash
equivalents (262) 56
--------- ---------
Net increase in cash and cash equivalents 63,639 167,546
Cash and cash equivalents, beginning of period 133,636 67,031
--------- ---------
Cash and cash equivalents, end of period $ 197,275 $ 234,577
========= =========
The accompanying notes are an integral part of these supplementary consolidated
financial statements.
60
BROOKS AUTOMATION, INC.
NOTES TO SUPPLEMENTARY CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1. BASIS OF PRESENTATION
The unaudited supplementary consolidated financial statements of Brooks
Automation, Inc. and its subsidiaries ("Brooks" or the "Company") included
herein have been prepared to give retroactive effect to the merger with
Progressive Technologies, Inc. ("PTI"), which occurred on July 12, 2001.
Generally accepted accounting principles proscribe giving effect to a
consummated business combination accounted for by the pooling of interests
method in financial statements that do not include the date of
consummation. These financial statements do not extend through the date of
consummation; however, they will become the historical consolidated
financial statements of the Company and its subsidiaries after financial
statements covering the date of consummation of the business combination
are issued.
During the nine months ended June 30, 2001, the Company entered into a
definitive agreement to merge with PTI. On July 12, 2001, PTI and its
operating subsidiary were merged with and into the Company. Under terms of
the merger agreement, each share of PTI common stock and preferred stock
was exchanged for 3.106 and 3.484 shares, respectively, of the Company's
common stock. A total of 715,004 shares of the Company's common stock were
exchanged for all of the outstanding stock of PTI. Prior to its acquisition
by the Company, PTI's fiscal year-end was December 31. The Company's
Supplementary Consolidated Balance Sheet as of September 30, 2000, includes
PTI's balance sheet as of December 31, 2000, and the Company's
Supplementary Consolidated Statement of Operations for the nine months
ended June 30, 2000, includes the results of PTI for the nine months ended
September 30, 2000. As a result of conforming dissimilar year-ends, PTI's
results of operations for the three months ended December 31, 2000, are
included in the Company's fiscal year 2000 and will be included in the
Company's fiscal year 2001. An amount equal to PTI's net income
attributable to common stockholders for the three months ended December 31,
2000, was eliminated from consolidated retained earnings for the nine
months ended June 30, 2001. PTI's net income and accretion on preferred
stock for that quarter were $536,000 and $30,000, respectively. The results
of operations previously reported by the separate companies and the
combined amounts in the accompanying Supplementary Consolidated Statements
of Operations are as follows (in thousands):
Nine months ended June 30,
2001 2000
-------- --------
Revenues
Brooks Automation, Inc. $310,085 $221,780
Progressive Technologies, Inc. 10,107 12,272
-------- --------
$320,192 $234,052
======== ========
Net income
Brooks Automation, Inc. $ 2,580 $ 7,363
Progressive Technologies, Inc. 861 1,820
-------- --------
$ 3,441 $ 9,183
======== ========
Net income attributable to common stockholders
Brooks Automation, Inc. $ 2,580 $ 7,363
Progressive Technologies, Inc. 771 1,730
-------- --------
$ 3,351 9,093
======== ========
The accompanying financial information should be read in conjunction with
the supplementary consolidated financial statements and notes thereto
contained in the Company's Current Report on Form 8-K, filed with the
United States Securities and Exchange Commission on August 20, 2001.
On June 26, 2001, the Company completed the purchase of KLA-Tencor, Inc.'s
e-Diagnostics product line infrastructure ("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. These transactions
were recorded using the purchase method of accounting in accordance with
Accounting Principles Board Opinion No. 16, "Business Combinations" ("APB
16"). The results of operations for the e-Diagnostics product line and CCST
for the periods from their respective acquisitions to June 30, 2001 are not
material to the consolidated results of the Company.
On May 15, 2001, Brooks 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
services distributor in Japan. These transactions were recorded using the
purchase method of accounting in accordance with APB 16. Accordingly, the
Company' Supplementary Consolidated Statements of Operations and of Cash
Flows for the nine months ended June 30, 2001, include the results of these
acquired entities for the periods subsequent to their respective
acquisitions.
The Company made several 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 Supplementary Consolidated Statements of Operations and of
Cash Flows include the results of these entities for the periods subsequent
to their respective acquisitions.
61
BROOKS AUTOMATION, INC.
NOTES TO SUPPLEMENTARY CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Continued
Certain amounts in previously issued financial statements have been
reclassified to conform to current presentation.
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 is currently assessing the impact of FAS
142 on its financial position and results of operations.
In December 1999, the U.S. Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition
in Financial Statements". SAB 101 summarizes the SEC's views in applying
generally accepted accounting principles to selected revenue recognition
issues in financial statements. In June 2000, the SEC issued Staff
Accounting Bulletin No. 101B, an amendment to SAB 101, which delays the
implementation of SAB 101. The application of the guidance in SAB 101 will
now be required in the Company's fourth quarter of fiscal 2001. The Company
does not anticipate the adoption of SAB 101 to have a significant impact on
financial results in the current fiscal year.
2. BUSINESS ACQUISITIONS
On June 26, 2001, the Company completed the purchase of KLA-Tencor, Inc.'s
("KLA-Tencor") e-Diagnostics product line infrastructure. 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. 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. 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.
There is also the potential for additional purchase consideration (an
"earnout") of up to $8.0 million in the aggregate over the next three
years, contingent upon meeting certain performance objectives. The earnout
will be recorded as an addition to the purchase price at the time it
becomes probable 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 at the time it becomes probable that a payment will be
required and the amount can be reasonably estimated. The earnout and
royalties are payable in cash or Brooks common stock, or any combination
thereof, at the Company's discretion. The excess of purchase price over net
assets acquired of $33.8 million has been recorded as goodwill, based on a
preliminary purchase price allocation. Finalization of the allocation of
the purchase price to tangible and identifiable intangible assets acquired
will be made after the completion of analyses of their fair values. The
Company anticipates that the weighted average useful life of the acquired
intangible assets will be three years. The 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 due to the recent commercialization of the technology.
62
BROOKS AUTOMATION, INC.
NOTES TO SUPPLEMENTARY CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Continued
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. The preliminary estimate of excess of
purchase price over net assets acquired of $5.1 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 CCST
acquisition as the amounts are immaterial compared to the Company's
historical results.
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 $750,000 at the time
of issuance and provided for additional purchase consideration (an
"earnout") of up to $900,000 in the aggregate through September 2002,
contingent upon meeting certain performance objectives. The earnout 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 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 preliminary estimate of excess of purchase price over net
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.
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 value of $2.7 million. The
transaction was recorded using the purchase method of accounting in
accordance with APB 16. The excess of purchase price over net assets
acquired of $33.3 million has been recorded as goodwill based on a
preliminary purchase price allocation. Finalization of the allocation of
the purchase price to tangible and identifiable intangible assets acquired
will be made after the completion of analyses of their fair values. The
Company anticipates that the weighted average useful life of the acquired
intangible assets will be three years. The assets are being amortized using
the straight-line method.
The following pro forma results of operations have been prepared as though
the acquisition had occurred as of the beginning of the fiscal year prior
to the acquisition. This pro forma financial information does not purport
to be indicative of the results of operations that would have been attained
had the acquisition been made as of that date or of results of operations
that may occur in the future (in
63
BROOKS AUTOMATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - Continued
thousands except per share data):
Nine months ended
June 30,
2001 2000
-------- --------
Revenues $328,113 $246,850
Net income $ 1,261 $ 4,385
Net income attributable to common stockholders
$ 1,171 $ 4,295
Earnings per share attributable to common
stockholders (diluted) $ 0.06 $ 0.26
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
Company had acquired ASI from Daifuku America Corporation ("Daifuku
America"), a U.S. subsidiary of Daifuku, on January 6, 2000. Upon its
acquisition ASI-Japan was integrated into the Company's subsidiary in
Japan. 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 excess of purchase price over net assets
acquired of $1.0 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.
The Company received an aggregate of $6.0 million in cash payments as
settlements for shortfalls in the net asset values acquired relative to two
recent acquisitions. As a result, the Company recorded reductions of $5.1
million and $0.9 million to acquired intangible assets in the three months
ended March 31, 2001 and December 31, 2000, respectively.
64
BROOKS AUTOMATION, INC.
NOTES TO SUPPLEMENTARY CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Continued
3. EARNINGS PER SHARE
Below is a reconciliation of earnings per share and weighted average common
shares outstanding for purposes of calculating basic and diluted earnings
per share attributable to common stockholders (in thousands, except per
share data):
Nine months ended
June 30,
2001 2000
-------- --------
Basic earnings per share:
Net income $ 3,441 $ 9,183
Accretion and dividends on preferred stock (90) (90)
-------- --------
Net income attributable to common stockholders
$ 3,351 $ 9,093
======== ========
Weighted average common shares outstanding
17,739 15,027
======== ========
Basic earnings per share attributable to
common stockholders $ 0.19 $ 0.61
======== ========
Diluted earnings per share:
Net income $ 3,441 $ 9,183
After-tax equivalent of interest expense on
notes payable 2 --
-------- --------
Net income for purposes of computing diluted
earnings per share attributable to common
stockholders $ 3,443 $ 9,183
======== ========
Weighted average common shares outstanding
17,739 15,027
Dilutive stock options and warrants 835 1,223
Weighted average assumed conversion of
convertible redeemable preferred stock 314 314
Weighted average assumed conversion of notes
payable 10 --
-------- --------
Weighted average common shares outstanding for
purposes of computing diluted earnings per share
attributable to common stockholders 18,898 16,564
======== ========
Diluted earnings per share attributable to
common stockholders $ 0.18 $ 0.55
======== ========
Options to purchase and assumed conversions totaling approximately
2,221,000 shares of common stock were excluded from the computation of
diluted earnings per share for the nine months ended June 30, 2001, as
their effect would be anti-dilutive. Options to purchase approximately
205,000 shares of common stock were excluded from the computation of
diluted earnings per share for the nine months ended June 30, 2000, as
their effect would be anti-dilutive. However, these options and conversions
could become dilutive in future periods.
65
BROOKS AUTOMATION, INC.
NOTES TO SUPPLEMENTARY CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Continued
4. COMPREHENSIVE INCOME
Comprehensive income for the Company is computed as the sum of net income
and the change in the cumulative translation adjustment, which is the only
component of the Company's accumulated other comprehensive loss. The
Company's comprehensive income for the nine month periods ended June 30,
2001 and 2000 was $203,000 and $8,364,000, respectively.
5. 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 minienvironments 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 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.
The Company had two reportable segments in the prior year. Additionally,
during the three months ended June 30, 2001, the Company transferred one of
its business units from the factory interface solutions segment to the tool
automation systems segment to more accurately reflect that business unit's
current and projected revenues. At the same time, the Company transferred
one of its business units from the factory automation solutions segment to
the tool automation systems segment in order capitalize on synergies within
the tool automation systems segment and enhance the activities of that
business unit. Accordingly, all prior period amounts have been restated to
reflect these changes and conform to current presentation.
Financial information for the Company's business segments is as follows (in
thousands):
Tool Factory Factory
Automation Interface Automation
Systems Solutions Solutions Total
---------- --------- ---------- --------
NINE MONTHS ENDED JUNE 30, 2001
-------------------------------
Revenues $150,737 $ 82,795 $ 86,660 $320,192
Gross margin $ 54,914 $ 32,755 $ 56,884 $144,553
Operating income (loss) $ 21,060 $ 6,619 $ (317) $ 27,362
NINE MONTHS ENDED JUNE 30, 2000
-------------------------------
Revenues $119,348 $ 58,865 $ 55,839 $234,052
Gross margin $ 49,481 $ 22,500 $ 38,802 $110,783
Operating income $ 17,537 $ 5,046 $ 5,269 $ 27,852
ASSETS
------
June 30, 2001 $216,656 $ 52,484 $ 51,683 $320,823
September 30, 2000 $128,713 $ 54,895 $ 37,858 $221,466
66
BROOKS AUTOMATION, INC.
NOTES TO SUPPLEMENTARY CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Continued
A reconciliation of the Company's reportable segment operating income to
the corresponding consolidated amounts for the nine month periods ended
June 30, 2001 and 2000 is as follows (in thousands):
Nine months ended
June 30,
2001 2000
------- -------
Segment operating income $27,362 $27,852
Amortization of acquired intangible assets 20,479 10,614
Acquisition-related charges 1,717 677
------- -------
Total operating income (loss) $ 5,166 $16,561
======= =======
A reconciliation of the Company's reportable segment assets to the
corresponding consolidated amounts as of June 30, 2001 and September 30,
2000 is as follows (in thousands):
June 30, September 30,
2001 2000
-------- -------------
Segment assets $320,823 $221,466
Deferred tax asset 37,654 31,581
Acquired intangible assets 107,066 58,405
Securities Corporation assets 275,384 208,334
-------- --------
$740,927 $519,786
======== ========
Net revenues by geographic area are as follows (in thousands):
Nine months ended
June 30,
2001 2000
-------- --------
North America $167,176 $119,678
Asia/Pacific 96,899 73,818
Europe 56,117 40,556
-------- --------
$320,192 $234,052
======== ========
6. 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
nine months ended June 30, 2000 were $25.5 million, or 10.9% of revenues.
Revenues from this customer for the nine month period ended June 30, 2001
did not comprise more than 10% of revenues. The amount due from this
customer included in accounts receivable at September 30, 2000 was $6.8
million. The Company had no other customers that accounted for more than
10% of revenues in the nine month periods ended June 30, 2001 and 2000.
67
BROOKS AUTOMATION, INC.
NOTES TO SUPPLEMENTARY CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Continued
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 will be considered a related party
for the period subsequent to June 11, 2001. Revenues from this customer for
the period from June 11, 2001 through June 30, 2001 are not material to the
consolidated results of the Company. The amount due from this customer
included in accounts receivable at June 30, 2001 was $0.3 million.
Related party amounts included in accounts receivable are on standard terms
and manner of settlement.
7. ACQUISITION-RELATED AND RESTRUCTURING LIABILITIES
The activity related to the Company's acquisition-related and restructuring
liabilities during the nine months ended June 30, 2001, is below (in
thousands):
Balance Balance
September 30, June 30,
2000 Utilization 2001
------------- ----------- --------
Facilities $ 507 $(117) $ 390
Workforce-related 20 (20) --
Other 11 -- 11
----- ----- -----
$ 538 $(137) $ 401
===== ===== =====
8. CONVERTIBLE SUBORDINATED NOTES
On May 23, 2001, the Company completed the private placement of $175.0
million aggregate principal amount of 4.75% Convertible Subordinated Notes
due 2008. The amount sold includes $25.0 million principal amount of notes
purchased by the initial purchasers 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 on or after June
6, 2004, or earlier if the price of the Company's common stock reaches the
prices described in the offering circular. 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 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.
68
BROOKS AUTOMATION, INC.
NOTES TO SUPPLEMENTARY CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Continued
9. OTHER BALANCE SHEET INFORMATION
Components of other selected captions in the Consolidated Balance Sheets
follow (in thousands):
June 30, September 30,
2001 2000
-------- -------------
Accounts receivable $118,046 $ 96,745
Less allowances 3,339 1,989
-------- --------
$114,707 $ 94,756
======== ========
Inventories
Raw materials and purchased parts $ 48,419 $ 35,189
Work-in-process 13,595 13,938
Finished goods 4,505 9,480
-------- --------
$ 66,519 $ 58,607
======== ========
Intangible assets
Patents $ 4,877 $ 7,448
Capitalized software 3,129 1,805
Completed technology 4,505 4,505
License agreements 678 678
Trademarks and trade names 1,564 1,564
Non-competition agreements 1,033 1,033
Assembled workforces 5,880 5,880
Customer relationships 1,305 1,305
Goodwill 127,736 58,638
-------- --------
150,707 82,856
Less accumulated amortization 41,014 22,521
-------- --------
$109,693 $ 60,335
======== ========
10. CONTINGENCY
There has been substantial litigation regarding patent and other
intellectual property rights in the semiconductor and related industries.
In 1992, the Company received notice from a third party alleging
infringements of such party's patent rights by certain of the Company's
products. The Company believes the patents claimed may be invalid. In the
event of litigation with respect to this claim, the Company is prepared to
vigorously defend its position. However, because patent litigation can be
extremely expensive and time consuming, the Company may seek to obtain a
license to one or more of the disputed patents. Based upon currently
available information, the Company would only do so if such license fees
would not be material to the Company's consolidated financial statements.
Currently, the Company does not believe it is probable that the future
events related to this threatened matter would have an adverse effect on
the Company's business.
69
BROOKS AUTOMATION, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
Certain statements in this supplementary report 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.
Many of the Company's customers purchase the Company's vacuum transfer robots
and other modules before purchasing the Company's vacuum central wafer handling
systems. The Company believes that once a customer has selected the Company's
products for a process tool, the customer is likely to rely on those products
for the life of that process tool model, which can be in excess of five years.
Conversely, losing a bid for a manufacturing execution system ("MES") does not
preclude the Company from securing optimization products to fit with a
competitor's MES.
A significant portion of the Company's revenues have been generated by sales to
customers in the United States, although the Company believes that a significant
portion of these customers incorporate the Company's products into equipment
sold to their foreign customers. The Company's foreign sales have occurred
principally in Asia and Europe. Sales in Asia have occurred primarily in Japan ,
South Korea and Taiwan, and, to a lesser extent, in Singapore.
The Company's foreign revenues are generally denominated in United States
dollars. Accordingly, foreign currency fluctuations have not had a significant
impact on the comparison of the results of operations for the periods presented.
The costs and expenses of the Company's international subsidiaries are generally
denominated in currencies other than the United States dollar. However, since
the functional currency of the Company's international subsidiaries is the local
currency, foreign currency translation adjustments are reflected as a component
of stockholders' equity under the caption "Accumulated other comprehensive
income (loss)". To the extent that the Company expands its international
operations or changes its pricing practices to denominate prices in foreign
currencies, the Company will be exposed to increased risk of currency
fluctuation.
70
BROOKS AUTOMATION, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - Continued
BASIS OF PRESENTATION
The unaudited supplementary consolidated financial statements of Brooks
Automation, Inc. and its subsidiaries ("Brooks" or the "Company") included
herein have been prepared to give retroactive effect to the merger with
Progressive Technologies, Inc. ("PTI"), which occurred on July 12, 2001.
Generally accepted accounting principles proscribe giving effect to a
consummated business combination accounted for by the pooling of interests
method in financial statements that do not include the date of consummation.
These financial statements do not extend through the date of consummation;
however, they will become the historical consolidated financial statements of
the Company and its subsidiaries after financial statements covering the date of
consummation of the business combination are issued.
During 2001, the Company entered into a definitive agreement to merge with PTI.
On July 12, 2001, PTI and its operating subsidiary were merged with and into the
Company. Under terms of the merger agreement, each share of PTI common stock and
preferred stock was exchanged for 3.107 and 3.484 shares, respectively, of the
Company's common stock. A total of 715,004 shares of the Company's common stock
were exchanged for all of the outstanding stock of PTI. Prior to its acquisition
by the Company, PTI's fiscal year-end was December 31. The Company's
Supplementary Consolidated Balance Sheet as of September 30, 2000, includes
PTI's balance sheet as of December 31, 2000, and the Company's Supplementary
Consolidated Statement of Operations for the nine months ended June 30, 2000,
includes the results of PTI for the nine months ended September 30, 2000. As a
result of conforming dissimilar year-ends, PTI's results of operations for the
three months ended December 31, 2000, are included in the Company's fiscal year
2000 and will be included in the Company's fiscal year 2001. An amount equal to
PTI's net income attributable to common stockholders for the three months ended
December 31, 2000, was eliminated from consolidated retained earnings for the
nine months ended June 30, 2001. PTI's net income and accretion on preferred
stock for that quarter were $536,000 and $30,000, respectively.
On June 26, 2001, the Company completed the purchase of KLA-Tencor, Inc.'s
e-Diagnostics product line infrastructure ("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. These transactions were recorded using the purchase
method of accounting in accordance with Accounting Principles Board Opinion No.
16, "Business Combinations" ("APB 16"). The results of operations for the
e-Diagnostics product line infrastructure and CCST for the periods from their
respective acquisitions to June 30, 2001, are not material to the consolidated
results of the Company.
On May 15, 2001, Brooks 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 services distributor in Japan. These
transactions were recorded using the purchase method of accounting in accordance
with APB 16. Accordingly, the Company's Supplementary Consolidated Statements of
Operations and of Cash Flows for the nine months ended June 30, 2001, include
the results of these acquired entities for the periods subsequent to their
respective acquisitions.
The Company made several acquisitions during fiscal year 2000 which were
accounted for using the purchase method of accounting in accordance with APB16:
MiTeX Solutions ("MiTeX") on June 23, 2000 and Auto-Soft Corporation ("ASC") and
AutoSimulations, Inc. ("ASI") on January 6, 2000. The Company's Supplementary
Consolidated Statements of Operations and of Cash Flows include the results of
these entities for the periods subsequent to their respective acquisitions.
71
BROOKS AUTOMATION, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - Continued
RESULTS OF OPERATIONS
The Company's business is significantly dependent on capital expenditures by
semiconductor manufacturers, 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. As a
result, the Company anticipates lower shipments of its products in the next few
quarters, compared to the quarter ended June 30, 2001. In the quarter ended
March 31, 2001, the Company had taken selective cost reduction actions in many
areas of its business in response to this downturn. However, during the current
quarter, the Company began to implement additional steps to manage costs,
including further 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.
NINE MONTHS ENDED JUNE 30, 2001, COMPARED TO NINE MONTHS ENDED JUNE 30, 2000
The Company reported net income of $3.4 million and $9.2 million for the nine
month periods ended June 30, 2001 and 2000, respectively. The Company reported
net income attributable to common stockholders of $3.3 million and $9.1 million,
after accretion on preferred stock, for the nine months ended June 30, 2001 and
2000, respectively.
The results for the nine months ended June 30, 2001 include $20.5 million of
amortization of acquired intangible assets and $1.7 million of
acquisition-related costs; included in the prior year period results is $10.6
million of amortization of acquired intangible assets and $0.7 million of
acquisition-related costs.
The reduced earnings in the current fiscal year also are partially attributable
to the effect of the goodwill amortization recorded for the acquisition of ASC
and ASI, which is non-deductible for purposes of the Company's income tax
provision. As pre-tax earnings have declined due to the overall downturn in the
semiconductor industry, the effective tax rate has increased due to the
significant amount of goodwill amortization that cannot be deducted.
REVENUES
The Company reported revenues of $320.2 million in the nine months ended June
30, 2001. This compares to revenues of $234.1 million in the same prior year
period. The increase in revenues is principally attributable to incremental
revenue from acquisitions and the strength earlier in the fiscal year in both
the original equipment manufacturer ("OEM") and end user markets.
The Company's tool automation systems segment reported revenues of $150.7
million in the nine months ended June 30, 2001, an increase of 26.3% from the
same prior year period. This increase is primarily attributable to growth in the
vacuum business area earlier in the fiscal year. The Company's factory interface
solutions segment reported an increase of 40.7%, to $82.8 million in the nine
months ended June 30, 2001, compared to the same prior year period, reflecting
in part the strong growth in the Company's SMIF product line. The Company's
factory automation solutions segment reported revenues of $86.7 million in the
nine months ended June 30, 2001, principally due to internal growth, the
acquisition of SEMY on February 16, 2001, and the acquisition of ASC and ASI on
January 6, 2000.
72
BROOKS AUTOMATION, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - Continued
Product revenues increased $57.0 million, or 29.0%, to $253.7 million, in the
nine months ended June 30, 2001, compared to $196.7 million in the nine months
ended June 30, 2000. This growth is primarily attributable to acquisitions and
internal growth, including increased 300mm sales.
Service revenues for the nine months ended June 30, 2001 were $66.5 million, an
increase of $29.1 million, or 77.9%, from the nine months ended June 30, 2000.
This increase is primarily attributable to the Company's acquisitions and
internal growth.
Foreign revenues were $153.4 million, or 47.9% of revenues, and $114.5 million,
or 48.9% of revenues, in the nine month periods ended June 30, 2001 and 2000,
respectively. The absolute increase is primarily the result of the Company's
expanded global presence from its recent acquisitions and expanded sales and
marketing activities. The Company expects that foreign revenues will continue to
account for a significant portion of total revenues.
GROSS MARGIN
Gross margin for the nine months ended June 30, 2001 was 45.2%, a decrease from
47.3% for the comparable prior year period.
The Company's tool automation systems segment gross margins decreased to 36.4%
in the nine month period ended June 30, 2001, compared to 41.5% in the same
prior year period. This decrease is primarily attributable to change in product
mix and newer products which have not yet achieved their optimal manufacturing
volume, coupled with the effects of the current downturn in the semiconductor
industry. Gross margin for the Company's factory interface solutions segment was
39.6% for the nine months ended June 30, 2001, an increase from 38.2% in the
comparable period of the prior year. The increase is primarily the result of
product and services mix. The Company's factory automation solutions gross
margin for the nine months ended June 30, 2001 decreased, to 65.6%, compared to
69.5% for the nine months ended June 30, 2000. The decrease is primarily
attributable to product and services mix.
Gross margin on product revenues was 49.5% for the nine months ended June 30,
2001, an increase from 49.0% for the same prior year period. The increase is
principally attributable to product mix.
Gross margin on service revenues decreased to 28.6% in the nine months ended
June 30, 2001, from 38.5% in the same prior year period. The decrease is
primarily the result of business mix.
RESEARCH AND DEVELOPMENT
Research and development expenses for the nine months ended June 30, 2001 were
$45.5 million, an increase of $15.2 million, compared to $30.3 million in the
nine months ended June 30, 2000. Research and development expenses also
increased as a percentage of revenues, to 14.2% in the nine months ended June
30, 2001, compared to 13.0% in the same prior year period. The increase in
absolute spending is the result of the research and development related to the
Company's recent acquisitions as well as incremental spending associated with
the launch of new atmospheric products and the transition to the next generation
vacuum wafer handling products, partially offset by the elimination of redundant
research and development programs. The increase in these expenditures as a
percentage of revenues for this three month period is attributable in part to
the downturn currently affecting the semiconductor industry, which began to
impact the Company during the previous quarterly period. 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.
73
BROOKS AUTOMATION, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - Continued
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses increased $19.0 million, or 36.2%,
to $71.6 million in the nine months ended June 30, 2001, from $52.6 million in
the nine months ended June 30, 2000. However, selling, general and
administrative expenses decreased slightly as a percentage of revenues in the
nine months ended June 30, 2001, to 22.4%, from 22.5% in the same prior year.
The increase in absolute spending is the result of expanded sales and marketing
activities as well as general and administration support costs associated with
the Company's recently completed acquisitions and infrastructure improvements,
while the improvement of these costs as a percentage of revenues reflects the
Company's efforts at expanding its product offerings and customer base.
AMORTIZATION OF ACQUIRED INTANGIBLE ASSETS
Amortization expense for acquired intangible assets totaled $20.5 million in the
nine months ended June 30, 2001, and relates to the intangible assets recorded
by the Company for the acquisitions of SimCon, SEMY and ASI-Japan in the current
fiscal year; ASC, ASI and MiTeX in the prior fiscal year; Infab, Domain and
Hanyon in the fiscal year ended September 30, 1999 and Irvine Optical's
acquisition of a corporation in March 1997. Amortization expense for acquired
intangible assets was $10.6 million in the nine month period ended June 30,
2000.
ACQUISITION-RELATED CHARGES
The Company reported $1.7 million and $0.7 million of acquisition-related
charges in the nine month periods ended June 30, 2001 and 2000, respectively.
INTEREST INCOME AND EXPENSE
Interest income increased by $3.6 million, to $9.1 million, in the nine months
ended June 30, 2001, from the comparable prior year period. This increase is due
primarily to higher cash and investment asset balances which resulted from the
Company's recently completed private placement of $175.0 million aggregate
Convertible Subordinated Notes and the public offering of shares of its common
stock in March 2000. Interest expense for the nine months ended June 30, 2001
was $1.3 million, an increase of $0.2 million from the same prior year period.
Interest expense primarily relates to the Company's Convertible Subordinated
Notes 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 period primarily relates to Irvine Optical's debt,
which was paid by Brooks subsequent to the Company's acquisition of Irvine
Optical, and the Company's note payable to Daifuku America. The Company
anticipates increased interest expense in subsequent periods as a result of the
outstanding Convertible Subordinated Notes, as well as imputed interest expense
on the notes payable related to the Company's recent acquisitions of the
e-Diagnostics infrastructure and SimCon.
INCOME TAX PROVISION
The Company recorded net income tax expense of $9.3 million and $11.8 million
for the nine months ended June 30, 2001 and 2000, respectively. The tax
provision is attributable to federal, state, foreign and withholding taxes. As
discussed above, the effect of the non-deductible goodwill amortization recorded
for the acquisition of ASC and ASI has a material effect on the income tax
provision. As pre-tax earnings have declined due to the overall downturn in the
semiconductor industry, the effective tax rate has increased due to the
significant amount of goodwill amortization that cannot be deducted.
Federal and state taxes have been reduced for net operating losses, research and
development and foreign tax credits and an extraterritorial income benefit which
replaced the foreign sales corporation benefit.
74
BROOKS AUTOMATION, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - Continued
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $197.3 million at June 30, 2001, an increase of
$63.6 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' private placement of Convertible Subordinated Notes completed
on May 23, 2001, partially offset by payment of net cash consideration of $34.7
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, and the purchase of the Company's
headquarters complex on January 29, 2001 for approximately $29 million in cash.
Cash provided by operations was $11.4 million for the nine months ended June 30,
2001, and is primarily attributable to net income and the adjustment to net
income of $31.5 million for depreciation and amortization and an increase in
accrued expenses and other current liabilities of $13.5 million, partially
offset by increases in accounts receivable, inventories and the Company's net
deferred tax asset of $11.0 million, $7.3 million and $9.0 million,
respectively, and a $5.6 million decrease in accounts payable. The Company's
increased sales, particularly in Asia, combined with a greater number of
long-term project contracts, have contributed to the increase in accounts
receivable.
Cash used in investing activities was $106.8 million for the nine months ended
June 30, 2001, and was principally comprised of $133.7 million invested in
marketable securities, $34.7 million for the purchase of SEMY, net of cash
acquired, $3.4 million of cash payments for other acquisitions, net of cash
acquired, $43.4 million used for capital additions, including $28.9 million for
the purchase of the Company's headquarters complex located in Chelmsford,
Massachusetts and $14.3 million used for the purchase of other assets. These
expenditures were partially offset by the sale of $100.3 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 $160.4 million for the nine months
ended June 30, 2001, and is primarily comprised of $169.5 million, net of costs,
received from the private placement of Convertible Subordinated Notes and $7.3
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 to retire the Company's note
payable to Daifuku America in connection with the acquisition of ASC and ASI and
$0.4 million for the payment of long-term debt.
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. In addition, assuming none of the Convertible Subordinated Notes
are converted into common stock, the Company expects to expend approximately $8
million per year on interest related to these notes. 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
of its outstanding letters of credit, totaling approximately $1.1 million, to
the new facility. ABN AMRO is not obligated to extend loans or issue letters of
credit under this new facility. At June 30, 2001, approximately $0.3 million of
the facility was in use, all of it for letters of credit.
The Company believes that its existing resources will be adequate to fund the
Company's currently planned working capital and capital expenditure requirements
for at least the next twelve months. The sufficiency of the Company's resources
to fund its needs for capital is subject to known and unknown risks,
uncertainties and other factors which may have a material adverse effect on the
Company's business, including, without limitation, the factors discussed under
"Factors That May Affect Future Results."
75
BROOKS AUTOMATION, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - Continued
RECENTLY ENACTED ACCOUNTING PRONOUNCEMENTS
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 off
goodwill will cease. The Company is currently assessing the impact of FAS 142 on
its financial position and results of operations.
In December 1999, the U.S. Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements". SAB 101 summarizes the SEC's views in applying generally accepted
accounting principles to selected revenue recognition issues in financial
statements. In June 2000, the SEC issued Staff Accounting Bulletin No. 101B, an
amendment to SAB 101, which delays the implementation of SAB 101. The
application of the guidance in SAB 101 will now be required in the Company's
fourth quarter of fiscal 2001. The Company does not anticipate the adoption of
SAB 101 to have a significant impact on financial results in the current fiscal
year.
76
BROOKS AUTOMATION, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - Continued
FACTORS THAT MAY AFFECT FUTURE RESULTS
You should carefully consider the risks described below and the other
information in this report before deciding to invest in shares of our common
stock. While these are the risks and uncertainties we believe are most important
for you to consider, you should know that they are not the only risks or
uncertainties facing us or which may adversely affect our business. If any of
the following risks or uncertainties actually occur, our business, financial
condition and operating results would likely suffer. In that event, the market
price of our common stock could decline and you could lose all or part of the
money you paid to buy our common stock.
RISK FACTORS RELATING TO OUR OPERATIONS
THE CYCLICAL DEMAND OF SEMICONDUCTOR MANUFACTURERS AFFECTS OUR OPERATING
RESULTS.
Our business is significantly dependent on capital expenditures by semiconductor
manufacturers. The level of semiconductor manufacturers' capital expenditures is
dependent on the current and anticipated market demand for semiconductors. The
semiconductor industry is cyclical and is currently experience a downturn. We
anticipate we will have lower shipments of our products during the next few
quarters. Despite this expected reduced volume, we plan to continue to invest in
those areas which we believe are important to our long-term growth, such as our
infrastructure, customer support and new products. As a result, consistent with
our experience with downturns in the past, we believe the existing industry
downturn will lead to reduced revenues for us and may cause us to incur losses.
OUR SALES VOLUME DEPENDS ON THE SALES VOLUME OF OUR ORIGINAL EQUIPMENT
MANUFACTURER CUSTOMERS AND ON INVESTMENT IN MAJOR CAPITAL EXPANSION PROGRAMS BY
SEMICONDUCTOR MANUFACTURING COMPANIES.
We sell a majority of our tool automation products to original equipment
manufacturers that incorporate our products into their equipment. Therefore, our
revenues are directly dependent on the ability of these customers to develop,
market and sell their equipment in a timely, cost-effective manner. We also
generate significant revenue in large orders from semiconductor manufacturing
companies that build new plants or invest in major automation retrofits. Our
revenue is dependent, in part, on continued capital investment of semiconductor
manufacturing companies.
WE RELY ON A SMALL NUMBER OF CUSTOMERS FOR A LARGE PORTION OF OUR REVENUES.
We receive a significant portion of our revenues in each fiscal period from a
limited number of customers. The loss of one or more of these major customers,
or a decrease in orders by one or more customers, would adversely affect our
business. Sales to our ten largest customers accounted for approximately 42% of
our total revenues in the nine months ended June 30, 2001 and 41% of total
revenues in fiscal 2000. Sales to Lam Research Corporation, our largest
customer, accounted for approximately 9% of our total revenues for the nine
months ended June 30, 2001 and 11% of our total revenues for the fiscal year
ended September 30, 2000.
DELAYS IN OR CANCELLATION OF SHIPMENT OF A FEW OF OUR LARGE ORDERS COULD
SUBSTANTIALLY DECREASE OUR REVENUES.
Historically, a substantial portion of our quarterly and annual revenues has
come from sales of a small number of large orders. These orders consist of
product with high selling process compared to our other products. As a result,
the timing of when we recognize revenue from one of these large orders can have
a significant impact on our total revenues and operating results for a
particular period. Our operating results could be harmed if 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.
77
BROOKS AUTOMATION, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - Continued
WE HAVE SIGNIFICANT FIXED COSTS WHICH ARE NOT EASILY REDUCED IF REVENUES FALL
BELOW EXPECTATIONS.
Our expense levels are based in part on our future revenue expectations. Many of
our expenses, particularly those relating to capital equipment and manufacturing
overhead, are relatively fixed. If we do not meet our sales goals we may be
unable to rapidly reduce these fixed costs. Our ability to reduce expenses is
further constrained because we must continue to invest in research and
development to maintain our competitive position and to maintain service and
support for our existing global customer base. Accordingly, if we suffer an
unexpected downturn in revenue, our inability to reduce fixed costs rapidly
could increase the adverse impact on our operations.
OUR LENGTHY SALES CYCLE REQUIRES US TO INCUR SIGNIFICANT EXPENSES WITH NO
ASSURANCE THAT WE WILL GENERATE REVENUE.
Our tool automation products are generally incorporated into original equipment
manufacturer equipment at the design stage. To obtain new business from our
original equipment manufacturer customers, we must develop products for
selection by a potential customer at the design stage. This often requires us to
make significant expenditures, without any assurance of success. The original
equipment manufacturer's design decisions often precede the generation of volume
sales, if any, by a year or more. We also must complete successfully a lengthy
evaluation and proposal process before we can achieve volume sales of our
factory automation software to our factory automation customers. We cannot
guarantee that we will continue to achieve design wins or satisfy evaluations by
our end-use customers of our software. We cannot guarantee that the equipment
manufactured by our original equipment manufacturing customers will be
commercially successful. If we or our original equipment manufacturing customers
fail to develop and introduce new products successfully and in a timely manner,
our business and financial results will suffer.
OUR INTERNATIONAL BUSINESS OPERATIONS EXPOSE US TO A NUMBER OF DIFFICULTIES IN
COORDINATING OUR ACTIVITIES ABROAD AND IN DEALING WITH MULTIPLE REGULATORY
ENVIRONMENTS.
Approximately 48% of our total revenues in both the nine months ended June 30,
2001, and in fiscal 2000, were derived from customers located outside North
America. We anticipate that international sales will continue to account for a
significant portion of our revenues. Our vendors are located in several
different foreign countries. As a result of our international business
operations, we are subject to various risks, including:
- difficulties in staffing and managing operations in multiple locations
in many countries;
- challenges presented by collecting trade accounts receivable in
foreign jurisdictions;
- possible adverse tax consequences;
- governmental currency controls;
- changes in various regulatory requirements;
- political and economic changes and disruptions; and
- export/import controls and tariff regulations.
78
BROOKS AUTOMATION, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - Continued
To support our international customers, we maintain locations in several
countries, including Canada, Germany, Japan, Malaysia, Singapore, South Korea,
Taiwan and the United Kingdom. We cannot guarantee that we will be able to
manage these operations effectively. We cannot assure you that our investment in
these international operations will enable us to compete successfully in
international markets or to meet the service and support needs of our customers,
some of whom are located in countries where we have no infrastructure.
Although our international sales are primarily denominated in U.S. dollars,,
changes in currency exchange rates can make it more difficult for us to compete
with foreign manufacturers on price. If our international sales increase
relative to our total revenues, these factors could have a more pronounced
effect on our operating results.
WE MUST CONTINUALLY IMPROVE OUR TECHNOLOGY TO REMAIN COMPETITIVE.
Technology changes rapidly in the semiconductor, data storage and flat panel
display manufacturing industries. We believe our success depends in part upon
our ability to enhance our existing products and to develop and market new
products to meet customer needs. We cannot guarantee that we will identify and
adjust to changing market conditions or succeed in introducing commercially
rewarding products or product enhancements. The success of our product
development and introduction depends on a number of factors, including:
- accurately identifying and defining new market opportunities and
products;
- completing and introducing new product designs in a timely manner;:
- market acceptance of our products and our customers' products
- development of a comprehensive, integrated product strategy; and
- efficient implementation and installation services.
WE FACE SIGNIFICANT COMPETITION WHICH COULD RESULT IN DECREASED DEMAND FOR OUR
PRODUCTS OR SERVICES.
The markets for our products are intensely competitive and we may be unable to
compete successfully. We believe that our primary competition in the tool
automation market is from integrated original equipment manufacturers that
satisfy their semiconductor and flat panel display handling needs internally
rather than by purchasing systems or modules from an independent supplier like
us. Many of these original equipment manufacturers have substantially greater
resources than we do. Applied Materials, Inc., the leading process equipment
original equipment manufacturer, develops and manufactures its own central wafer
handling systems and modules. We may not be successful in selling our products
to original equipment manufacturers that internally satisfy their wafer or
substrate handling needs, regardless of the performance or the price of our
products. Moreover, integrated original equipment manufacturers may begin to
commercialize their handling capabilities and become our competitors.
We believe that the primary competitive factors in the end-user semiconductor
manufacturer market for factory automation software and process control software
are product functionality, price/performance, ease of use, ease of integration,
hardware and software platform compatibility, vendor reputation and financial
stability. The relative importance of these competitive factors may change over
time. We directly compete in this market with various competitors, including
Applied Materials-Consilium, PRI, IBM and numerous small, independent software
companies. We also compete with the in-house software staffs of semiconductor
manufacturers like NEC. Most of those manufacturers have substantially greater
resources than we do.
79
BROOKS AUTOMATION, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - Continued
We believe that the primary competitive factors in the factory interface market
are technical and technological capabilities, reliability, price/performance,
ease of integration and global sales and support capability. In this market, we
compete directly with Asyst, Fortrend, Kensington and Rorze. Some of these
competitors have substantial financial resources and extensive engineering,
manufacturing and marketing capabilities.
MUCH OF OUR SUCCESS AND VALUE LIES IN OUR OWNERSHIP AND USE OF INTELLECTUAL
PROPERTY AND OUR FAILURE TO PROTECT THAT PROPERTY COULD ADVERSELY AFFECT OUR
FUTURE GROWTH.
Our ability to compete is heavily affected by our ability to protect our
intellectual property. We rely primarily on trade secret laws, confidentiality
procedures, patents, copyrights, trademarks and licensing arrangements to
protect our intellectual property. The steps we have taken to protect our
technology may be inadequate. Existing trade secret, trademark and copyright
laws offer only limited protection. Our patents could be invalidated or
circumvented. The laws of certain foreign countries in which our products are or
may be developed, manufactured or sold may not fully protect our products or
intellectual property rights. This may make the possibility of piracy of our
technology and products more likely. We cannot guarantee that the steps we have
taken to protect our intellectual property will be adequate to prevent
misappropriation of our technology. There has been substantial litigation
regarding patent and other intellectual property rights in semiconductor-related
industries. We may engage in litigation to:
- enforce our patents;
- protect our trade secrets or know-how;
- defend ourselves against claims alleging we infringe the rights of
others; or
- determine the scope and validity of the patents or intellectual
property rights of others.
Any litigation could result in substantial cost to us and divert the attention
of our management, which could harm our operating results and our ability to
grow.
OUR OPERATIONS COULD INFRINGE ON THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS.
Particular aspects of our technology could be found to infringe on the
intellectual property rights or patents of others. Other companies may hold or
obtain patents on inventions or may otherwise claim proprietary rights to
technology necessary to our business. We cannot predict the extent to which we
may be required to seek licenses or alter our products so that they no longer
infringe the rights of others. We cannot guarantee that the terms of any
licenses we may be required to seek will be reasonable. Similarly, changing our
products or processes to avoid infringing the rights of others may be costly or
impractical or could detract from the value of our products.
OUR BUSINESS MAY BE HARMED BY INFRINGEMENT CLAIMS OF GENERAL SIGNAL OR APPLIED
MATERIALS.
We received notice from General Signal Corporation alleging certain of our
products infringed its patent rights. The notification advised us that General
Signal was attempting to enforce its rights to those patents in litigation
against Applied Materials, and that, at the conclusion of that litigation,
General Signal intended to enforce its rights against us and others. According
to a press release issued by Applied Materials in November 1997, Applied
Materials settled its litigation with General Signal by acquiring ownership of
five General Signal patents. Although not verified by us, these five patents
would appear to be the patents referred to by General Signal in its prior notice
to us. Applied Materials has not contacted us regarding these patents.
80
BROOKS AUTOMATION, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - Continued
WE DO NOT HAVE LONG-TERM CONTRACTS WITH OUR CUSTOMERS AND OUR CUSTOMERS MAY
CEASE PURCHASING OUR PRODUCTS AT ANY TIME.
We generally do not have long-term contracts with our customers. As a result,
our agreements with our customers do not provide any assurance of future sales.
Accordingly:
- our customers can cease purchasing our products at any time without
penalty;
- our customers are free to purchase products from our competitors;
- we are exposed to competitive price pressure on each order; and
- our customers are not required to make minimum purchases.
OUR OPERATING RESULTS WOULD BE HARMED IF ONE OF OUR KEY SUPPLIERS FAILS TO
DELIVER COMPONENTS FOR OUR PRODUCTS.
We currently obtain many of our components on an as needed, purchase order
basis. We do not have any long-term supply contracts with our vendors. When
demand for semiconductor manufacturing equipment increases, our suppliers face
significant challenges in providing components on a timely basis. Our inability
to obtain components in required quantities or of acceptable quality could
result in significant delays or reductions tin product shipments. This would
materially and adversely affect our operating results.
RISING ENERGY COSTS IN CALIFORNIA MAY RESULT IN INCREASED OPERATING EXPENSES AND
REDUCED NET INCOME.
California is currently experiencing an energy crisis. As a result, energy costs
in California, including natural gas and electricity, may rise significantly
over the next several months relative to the rest of the United States. Because
we maintain one of our manufacturing facilities in Southern California, our
operating expenses with respect to that facility may increase if this trend
continues. If we cannot pass along these costs to our customers, our margins
will suffer and our net income could decrease.
OUR FUTURE GROWTH COULD BE HARMED IF THE COMMERCIAL ADOPTION OF 300MM WAFER
TECHNOLOGY CONTINUES TO PROGRESS SLOWLY OR IS NOT ADOPTED BY THE INDUSTRY.
Our future growth relies in part on the adoption of new systems and technologies
to automate the processing of 300mm wafers. However, the industry transition
from the current, widely used 200mm manufacturing technology to 300mm
manufacturing technology is occurring more slowly than expected. A significant
delay in the adoption of 300mm manufacturing technology, or the failure of the
industry to adopt 300mm manufacturing technology, could significantly reduce our
opportunities for future growth. Moreover, continued delay in transition to
300mm technology could permit our competitors to introduce competing or superior
300mm products are more competitive prices. As a result of these factors,
competition for 300mm orders could become vigorous and could harm our results of
operations.
81
BROOKS AUTOMATION, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - Continued
OUR RECENT RAPID GROWTH IS STRAINING OUR OPERATIONS AND REQUIRING US TO INCUR
COSTS TO UPGRADE OUR INFRASTRUCTURE.
During the last calendar year and through March 31, 2001, we had experienced
extremely rapid growth in our operations, the number of our employees, our
product offerings and the geographic area of our operations. Our growth has
placed a significant strain on our management, operations and financial systems.
Our future operating results will be dependent in part on our ability to
continue to implement and improve our operating and financial controls and
management information systems. If we fail to manage our growth effectively, our
financial condition, results of operations and business could be harmed.
WE MAY BE UNABLE TO RECRUIT AND RETAIN NECESSARY PERSONNEL BECAUSE OF INTENSE
COMPETITION FOR HIGHLY SKILLED PERSONNEL.
We need to retain a substantial number of employees with technical backgrounds
for both our hardware and software engineering and support staffs. The market
for these employees is intensively competitive, and we have occasionally
experienced delays in hiring these personnel. Due to the cyclical nature of the
demand for our products and the current downturn in the semiconductor market, we
recently reduced our workforce by approximately 4% as a cost reduction measure.
If the semiconductor market experiences an upturn, we may need to rebuild our
workforce. Due to the competitive nature of the labor markets in which we
operate, this type of employment cycle increases our risk of not being able to
retain and recruit key personnel. Our inability to recruit, retain and train
adequate numbers of qualified personnel on a timely basis could adversely affect
our ability to develop, manufacture, install and support our products.
OUR SYSTEMS INTEGRATION SERVICES BUSINESS HAS GROWN SIGNIFICANTLY RECENTLY AND
OUR POOR EXECUTION OF THOSE SERVICES COULD ADVERSELY IMPACT OUR OPERATING
RESULTS.
The number of projects we are pursuing for our systems integration services
business has grown significantly recently. This business consists of integrating
combinations of our software and hardware products to provide more comprehensive
solutions for our end-user customers. The delivery of these services typically
is complex, requiring that we coordinate personnel with varying technical
backgrounds in performing substantial amounts of services in accordance with
timetables. We are in the early stages of developing this business and we are
subject to the risks attendant to entering a business in which we have limited
direct experience. In addition, our ability to supply these services and
increase our revenues is limited by our ability to retain, hire and train
systems integration personnel. We believe that there is significant competition
for these personnel with the advanced skills and technical knowledge that we
need. Some of our competitors may have greater resources to hire personnel with
that skill and knowledge. Our operating margins could be adversely impacted if
we do not effectively hire and train additional personnel or deliver systems
integration services to our customers on a satisfactory and timely basis
consistent with our budgets.
CHANGES IN ACCOUNTING STANDARDS AND RULES COULD ADVERSELY AFFECT THE TIME OF
WHEN WE RECOGNIZE REVENUE.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101, or SAB 101, "Revenue Recognition in Financial Statements". SAB
101 provides guidance on applying generally accepted accounting principles to
revenue recognition issues in financial statements. While we have not fully
assessed the impact on us of the adoption of SAB 101, it may require a portion
of our quarterly revenues to be deferred. Any change in our revenue recognition
policy resulting from the implementation of SAB 101 would be reported as a
change in accounting principle in the quarter in which we implemented SAB 101,
with a cumulative adjustment that quarter to reflect the effect of the change.
As a result, while SAB 101 would not affect the fundamental aspects of our
operations as measured by our shipments and cash flows, implementation of SAB
101 could have an adverse effect on our reported results of operations in the
quarter that SAB 101 is implemented.
82
BROOKS AUTOMATION, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - Continued
RISK FACTORS RELATING TO OUR ACQUISITIONS
OUR BUSINESS COULD BE HARMED IF WE FAIL TO ADEQUATELY INTEGRATE THE OPERATIONS
OF OUR ACQUISITIONS.
Our management must devote substantial time and resources to the integration of
the operations of our acquired businesses with our core business and with each
other. If we fail to accomplish this integration efficiently, we may not realize
the anticipated benefits of our acquisitions. The process of integrating supply
and distribution channels, research and development initiatives, computer and
accounting system and other aspects of the operation of our acquired business,
presents a significant challenge to our management. This is compounded by the
challenge of simultaneously managing a larger entity. We have completed a number
of acquisitions in a short period of time. These business 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 our overall operations;
- integrating personnel with disparate business backgrounds and cultures
- defining and executing a comprehensive product strategy;
- managing geographically remote unites;
- managing the risks of entering markets or types of businesses in which
we have limited or no direct experience; and
- minimizing the loss of key employees of the acquired businesses.
If we delay the integration or fail to integrate an acquired business or
experience other unforeseen difficulties, the integration process may require a
disproportionate amount of our management's attention and financial and other
resources. Our failure to adequately address these difficulties could harm our
business and financial results.
OUR BUSINESS MAY BE HARMED BY ACQUISITIONS WE COMPLETE IN THE FUTURE.
We plan to continue to pursue additional acquisitions of related businesses. Our
identification of suitable acquisition candidates involves risks inherent in
assessing the values, strengths, weaknesses, risks and profitability of
acquisition candidates, including the effects of the possible acquisition on our
business, diversion of our management's attention and risks associated with
unanticipated problems or latent liabilities. If we are successful in pursuing
future acquisitions, we will be required to expend significant funds, incur
additional debt or issue additional securities, which may negatively affect our
results of operations and be dilutive to our stockholders. If we spend
significant funds or incur additional debt, our ability to obtain financing for
working capital or other purposes could decline and we may be more vulnerable to
economic downturns and competitive pressures. We cannot guarantee that we will
be able to finance additional acquisitions or that we will realize any
anticipated benefits from acquisitions that we complete. Should we successfully
acquire another business, the process of integrating acquired operations into
our existing operations may result in unforeseen operating difficulties and may
require significant financial resources that would otherwise be available for
the ongoing development or expansion of our existing business.
83
BROOKS AUTOMATION, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - Continued
RISK FACTORS RELATING TO OUR COMMON STOCK
OUR OPERATING RESULTS FLUCTUATE SIGNIFICANTLY, WHICH COULD NEGATIVELY IMPACT OUR
BUSINESS AND OUR STOCK PRICE.
Our margins, revenues and other operating results can fluctuate significantly
from quarter to quarter depending upon a variety of factors, including:
- the level of demand for semiconductors in general;
- cycles in the market for semiconductor manufacturing equipment and
automation software;
- our ability to manufacture, test and deliver products in a timely and
cost-effective manner;
- our success in winning competitions for orders;
- the timing of our new product announcements and releases and those of
our competitors;
- the mix of products we sell;
- competitive pricing pressures; and
- the level of automation required in fab extensions, upgrades and new
facilities.
We entered the factory automation software business in fiscal 1999. We believe a
substantial portion of our revenues from this business will be dependent on
achieving project milestones. As a result, our revenue from this business will
be subject to fluctuations depending upon a number of factors, including whether
we can achieve project milestones on a timely basis, if at all, as well as the
timing and size of projects.
OUR STOCK PRICE IS VOLATILE.
The market price of our common stock has fluctuated widely. For example, between
April 2, 2001 and April 30, 2001, the closing price of our common stock rose
from approximately $36.69 to $62.61 per share and between July 17, 2000 and
August 10, 2000, the price of our common stock dropped from approximately $68.00
to $35.38 per share. Consequently, the current market price of our common stock
may not be indicative of future market prices, and we may be unable to sustain
or increase the value of an investment in our common stock. Factors affecting
our stock price may include:
- variations in operating results from quarter to quarter;
- changes in earnings estimates by analysts or our failure to meet
analysts' expectations;
- changes in the market price per share of our public company customers;
- market conditions in the industry;
- general economic conditions;
- low trading volume of our common stock;
- the number of firms making a market in our common stock.
84
BROOKS AUTOMATION, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - Continued
In addition, the stock market has recently experienced extreme price and volume
fluctuations. These fluctuations have particularly affected the market prices of
the securities of high technology companies like us. These market fluctuations
could adversely affect the market price of our common stock.
BECAUSE A LIMITED NUMBER OF STOCKHOLDERS, INCLUDING A MEMBER OF OUR MANAGEMENT
TEAM, OWN A SUBSTANTIAL NUMBER OF OUR SHARES AND ARE PARTIES TO VOTING
AGREEMENTS, DECISIONS MADE BY THEM MAY BE DETRIMENTAL TO YOUR INTERESTS.
By virtue of their stock ownership and voting agreements, Robert J. Therrien,
our president and chief executive officer, Jenoptik AG and Daifuku America
Corporation have the power to significantly influence our affairs and are able
to influence the outcome of matters required to be submitted to stockholders for
approval, including the election of our directors, amendments to our certificate
of incorporation, mergers, sales of assets and other acquisitions or sales. We
cannot assure you that these stockholders will not exercise their influence over
us in a manner detrimental to your interests. As of May 9, 2001, Mr. Therrien
holds approximately 5.8% of our common stock, M+W Zander Holding GmbH, a
subsidiary of Jenoptik AG, holds approximately 4.5% of our common stock and
Daifuku America Corporation, the U.S. affiliate of Daifuku Co. Ltd. of Japan,
holds approximately 1.6% of our common stock. Collectively, these stockholders
hold approximately 11.9% of our outstanding common stock.
On September 30, 1999 we entered into a stockholders agreement with Mr.
Therrien, M+W Zander Holding GmbH and Jenoptik AG. This agreement was amended on
October 16, 2000. Under the amended agreement M+W Zander Holding GmbH agreed to
vote all of its shares on all matters in accordance with the recommendation of a
majority of our board of directors.
On January 6, 2000, in connection with our acquisition of Auto-Soft Corporation
and AutoSimulations, Inc. from Daifuku America Corporation, we entered into a
stockholders agreement with Daifuku America Corporation and Daifuku Co., Ltd.
Under the stockholders agreement, Daifuku agreed to vote all of its shares of
our common stock at each meeting of our stockholders in accordance with the
recommendation of our board of directors.
PROVISIONS OF OUR CERTIFICATE OF INCORPORATION, BYLAWS AND CONTRACTS MAY
DISCOURAGE TAKEOVER OFFERS AND MAY LIMIT THE PRICE INVESTORS WOULD BE WILLING TO
PAY FOR OUR COMMON STOCK.
Our certificate of incorporation and bylaws contain provisions that may make an
acquisition of us more difficult and discourage changes in our management. These
provisions could limit the price that certain investors might be willing to pay
in the future for shares of our common stock. In addition, we have adopted a
rights plan. In many potential takeover situations, rights issued under the plan
become exercisable to purchase our common stock at a price substantially
discounted from the then applicable market price of our common stock. Because of
its possible dilutive effect to a potential acquirer, the rights plan would
generally discourage third parties from proposing a merger with or initiating a
tender offer for us that is not approved by our board of directors. Accordingly,
the rights plan could have an adverse impact of our stockholders who might want
to vote in favor of the merger or participate in the tender offer. In addition,
shares of our preferred stock may be issued upon terms the board of directors
deems appropriate without stockholder approval. Our ability to issue preferred
stock in such a manner could enable our board of directors to prevent changes in
our management or control. . Finally, upon a change of control of us, we may be
required to purchase the 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 purchase of the notes. Such a repurchase of the notes would
represent a substantial expense; accordingly, the repayment of the notes upon a
change of control of us could discourage third parties from proposing a merger
with, initiating a tender offer for or otherwise attempting to gain control of
us.
85
BROOKS AUTOMATION, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - Continued
RISK FACTORS RELATING TO THE NOTES
THE NOTES ARE SUBORDINATED.
The notes are unsecured and subordinated in right of payment to all of our
existing and future senior indebtedness. The indenture defines senior
indebtedness as all of our indebtedness other than any indebtedness that
expressly states that it is subordinated to the notes. The terms of the notes do
not limit the amount of additional indebtedness, including secured indebtedness,
that we can create, incur, assume or guarantee. In the event of our bankruptcy,
liquidation or reorganization or upon acceleration of the notes due to an event
of default under the indenture and in certain other events, our assets will be
available to pay obligations on the notes only after all senior indebtedness has
been paid. In addition, the subordination provisions of the indenture provide
that payments with respect to the notes will be blocked in the event of a
payment default on senior indebtedness and may be blocked for up to 179 days
each year in the event of certain non-payment defaults on senior indebtedness.
As a result, there may be insufficient assets remaining to pay amounts due on
any or all of the outstanding notes. In addition, under the subordination
provisions of the indenture, payments that would otherwise be made to holders of
the notes will instead be paid to holders of senior indebtedness under certain
circumstances. As a result of these provisions, our other creditors (including
trade creditors) that are not holders of senior indebtedness may recover more,
ratably, than the holders of the notes. The notes are structurally subordinated
to all liabilities, including trade payables, of our subsidiaries. The indenture
governing the notes does not limit our or our subsidiaries' ability to incur
debt, including senior indebtedness. Any right of ours to receive assets of any
subsidiary upon its liquidation or reorganization, and the consequent right of
the holders of the notes to participate in the assets will be subject to the
claims of that subsidiary's creditors. If we or our subsidiaries were to incur
additional debt or liabilities, our ability to pay our obligations on the notes
could be adversely affected.
WE MAY BE UNABLE TO MEET THE REDEMPTION REQUIREMENTS UPON A CHANGE IN CONTROL.
Upon a change in control, the holders of our notes may require us to
purchase all or a portion of the notes. If a change in control were to occur, we
may not have enough funds to pay the purchase price for all tendered notes.
Future agreements relating to our indebtedness might contain provisions that
prohibit the repurchase of the notes upon a change in control. If a change in
control occurs at a time when we are prohibited from purchasing the notes, we
could seek the consent of our lenders to purchase the notes or could attempt to
refinance this debt. If we do not obtain consent, we could not purchase the
notes. Our failure to purchase tendered notes would constitute an event of
default under the indenture. In such circumstances, or if a change in control
would constitute an event of default under our senior indebtedness, the
subordination provisions of the indenture would restrict payments to the holders
of the notes. The term "change in control" is limited to certain specified
transactions and may not include other events that might harm our financial
condition. Our obligation to offer to purchase the notes upon a change in
control would not necessarily afford the note holders protection in the event of
a highly leveraged transaction, reorganization, merger or similar transaction
involving us.
A PUBLIC MARKET MAY NOT DEVELOP FOR THE NOTES.
Since the issuance of the notes, the initial purchasers have made a market
in the notes. However, the initial purchasers are not obligated to make a market
and may discontinue this market making activity at any time without notice. In
addition, market-making activity by the initial purchasers will be subject to
the limits imposed by the Securities Act and the Exchange Act. As a result, we
cannot assure the holders of the notes that any market for the notes will
develop or, if one does develop, that it will be maintained. If an active market
for the notes fails to develop or be sustained, the trading price of the notes
could decline significantly.
86
BROOKS AUTOMATION, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - Continued
BECAUSE OF OUR SUBSTANTIAL INDEBTEDNESS, WE MAY BE UNABLE TO ADJUST OUR STRATEGY
TO MEET CHANGING CONDITIONS IN THE FUTURE.
As of June 30, 2001, we had long-term debt obligations of approximately
$175 million due to the issuance of the 4.75% Convertible Subordinated Notes due
2008. This indebtedness could have several important consequences for our future
operations. Specifically,
- we may be unable to obtain additional financing for capital
expenditures, acquisitions or general corporate purposes;
- we may be unable to withstand changing competitive pressures, economic
conditions or government regulations; and
- we may be unable to otherwise take advantage of significant business
opportunities that may arise.
87
Item 5(c).
UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS
The following unaudited Pro Forma Condensed Statements of Operations for the
year ended September 30, 2000 have been prepared to reflect the effect of the
acquisition by the Company of Auto-Soft Corporation ("ASC") and AutoSimulations,
Inc. ("ASI") from Daifuku America Corporation ("Daifuku America"), a U.S.
subsidiary of Daifuku Co., Ltd. of Japan. ASC is a leading material handling
software and systems integration company focusing on manufacturing and
distribution of logistic systems for the semiconductor industry. ASI is a world
leader in robotic and material handling simulation, scheduling and real time
dispatching software for the semiconductor industry.
The pro forma information assumes that the acquisition occurred at October 1,
1999, for purposes of the statement of operations. The pro forma information is
based on the historical statements of the Company and the combined historical
statements of ASC and ASI, giving effect to the transaction under the purchase
method of accounting and the assumptions and adjustments in the accompanying
notes to the pro forma financial information.
The pro forma information does not purport to be indicative of the financial
position or results of operations that would have been attained had the
combination been in effect on the dates indicated nor of future results of
operations of the Company.
88
BROOKS AUTOMATION, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS(1)
FOR THE YEAR ENDED SEPTEMBER 30, 2000
(IN THOUSANDS, EXCEPT SHARE DATA)
Combined
Historical
Historical Auto-Soft and Pro forma Pro forma
Brooks(A) AutoSimulations adjustments combined
---------- --------------- ----------- ---------
Revenues $ 337,184 $ 5,892 $ -- $ 343,076
Cost of revenues 176,459 3,999 -- 180,458
--------- --------- --------- ---------
Gross profit 160,725 1,893 -- 162,618
OPERATING EXPENSES
Research and development 44,147 1,512 -- 45,659
Selling, general and administrative 77,410 4,839 (1,774)(2) 80,475
Amortization of acquired intangible assets 18,506 -- 4,052 (3) 22,558
Acquisition-related and restructuring charges 578 -- -- 578
--------- --------- --------- ---------
Total operating expenses 140,641 6,351 2,278 148,270
OPERATING INCOME (LOSS) 20,084 (4,458) (2,278) 13,348
OTHER (INCOME) EXPENSE
Interest (income) expense, net (8,362) (54) 498 (4)(5) (7,918)
Other (income) expense, net 2 18 -- 20
--------- --------- --------- ---------
Total other (income) expense (8,360) (36) 498 (7,898)
Income (loss) before income taxes and
minority interests 28,444 (4,422) (2,776) 21,246
Income tax provision(benefit) 13,609 (1,712) 510 (6) 12,407
--------- --------- --------- ---------
INCOME(LOSS) BEFORE MINORITY INTERESTS 14,835 (2,710) (3,285) 8,840
Minority interests in loss of consolidated subsidiary (274) -- -- (274)
--------- --------- --------- ---------
NET INCOME (LOSS) 15,109 (2,710) (3,285) 9,114
Accretion and dividends on preferred stock (120) -- -- (120)
--------- --------- --------- ---------
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON
STOCKHOLDERS $ 14,989 $ (2,710) $ (3,285) $ 8,994
========= ========= ========= =========
Earnings (loss) per share attributable to common
stockholders:
Basic $ 0.96 $ 0.56
Diluted $ 0.88 $ 0.51
Shares used to compute earnings (loss) per share:
Basic 15,661 16,196
Diluted 17,192 17,727
See Notes to Pro Forma Combined Condensed Financial Statements
(A) As filed in the supplementary financial statements included in this
Current Report on Form 8-K.
89
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(1) The Pro Forma Combined Condensed Statement of Operations has been prepared
based on the Company's audited consolidated statement of operations for the
year ended September 30, 2000, and ASC's and ASI's unaudited consolidated
statements of operations for the period from October 1, 1999 through the
date of acquisition. The results of ASC and ASI are included in the
Company's audited statement of operations for the period subsequent to
their acquisition. Accordingly, the combined historical results of ASC and
ASI and the pro forma adjustments relate only to the portion of the fiscal
year prior to their acquisition by the Company. In consideration for the
acquisition of ASC and ASI, the Company paid Daifuku America $27.0 million
in cash, 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. Additionally, the Company
accrued $3.5 million for transaction fees and recorded a $1.2 million
receivable from Daifuku to reimburse the Company for the difference between
the value of net tangible assets acquired and net tangible assets as
defined in the Agreement and Plan of Merger dated December 15, 1999, by and
among Brooks Automation, Inc., ASC Merger Corp., ASI Merger Corp., Daifuku
America Corporation and Daifuku Co., Ltd. ("Merger Agreement").
(2) To eliminate amortization expense related to goodwill recorded by ASC and
ASI prior to their acquisition by the Company. Under purchase accounting,
these goodwill assets are eliminated; accordingly, the expense to amortize
these intangible assets is also eliminated.
(3) To record amortization expense for the intangible assets which represent
the excess of purchase price over net tangible assets acquired established
as part of the Company's purchase accounting for the acquisition. The
weighted average useful life of the acquired intangible assets is
approximately three years. The assets are amortized using the straight-line
method.
(4) To record the reduction in the Company's interest income resulting from the
$27.0 million payment at the time of closing. The reduction to the
Company's interest income recorded for the period from October 1, 1999
through the date of acquisition is $0.3 million, at an interest rate of
5.0% per annum.
(5) To record interest expense on the $16.0 million promissory note issued to
Daifuku America. Interest expense recorded on the note, which bears an
interest rate of 4.0%, was $0.2 million for the period from October 1, 1999
through the date of acquisition.
(6) To record the income tax effect of the pro forma adjustments to interest
income and expense and the amortization expense related to goodwill
recorded by ASC and ASI prior to their acquisition by the Company. The
adjustments to the income tax provision (benefit) were recorded at a 40.0%
tax rate. The amortization expense related to the intangible assets
established as part of the Company's purchase accounting were not
tax-effected, since this expense is not deductible.
90
ITEM 7. EXHIBITS
Item No. Description
-------- -----------
23.01 Consent of PricewaterhouseCoopers LLP
23.02 Consent of Ernst & Young LLP
23.03 Consent of Arthur Andersen LLP
91
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: August 20, 2001 BROOKS AUTOMATION, INC.
By: /s/ Ellen B. Richstone
----------------------
Ellen B. Richstone
Senior Vice President of Finance and
Administration and Chief Financial Officer
92
EXHIBIT INDEX
Item No. Description
-------- -----------
23.01 Consent of PricewaterhouseCoopers LLP
23.02 Consent of Ernst & Young LLP
23.03 Consent of ArthurAndersen LLP