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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(Mark One)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the YEARLY period ended March 31, 1999
or
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period from April 1, 1998 to March 31, 1999
Commission File number 0-22114
ASYST TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
California 94-2942251
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) identification No.)
</TABLE>
48761 Kato Road, Fremont, California 94538
(Address of principal executive offices)
(510) 661-5000
(Registrant's telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such report), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [X]
There were 12,181,752 shares of No Par Value Common Stock outstanding as of
June 15, 1999. The aggregate market value of voting stock held by non-
affiliates of the registrant based upon the closing sales quotation of the
Common Stock on June 15, 1999 was approximately $328,907,304.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference in this
report:
Definitive Proxy Statement in connection with 1999 Annual Meeting of
Shareholders
(Part III of this Report)
The 1999 Proxy Statement shall be deemed to have been "filed" only to the
extent portions thereof are expressly incorporated by reference.
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PART I
ITEM 1--Business
Except for the historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially. Factors
that could cause or contribute to such differences include, but are not
limited to, those discussed in this section as well as those under the
caption, "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Introduction
Asyst Technologies, Inc. ("Asyst" or the "Company") develops, manufactures
and markets systems utilizing isolation technology, material tracking
products, and factory automation solutions used primarily in cleanrooms for
semiconductor manufacturing. These systems are designed to reduce
contamination on in-process wafers by isolating processing equipment and
wafers in ultraclean (better than Class 1) minienvironments within a cleanroom
production facility. Controlling contamination in this manner enables
semiconductor manufacturers to increase yields and, in many cases, reduce
cleanroom construction and operating costs. In recent years, state-of-the-art
factory automation has emerged as a critical path in helping chipmakers meet
both their technology and manufacturing goals.
Most of the Company's minienvironment systems are based on the utilization
of Standard Mechanical InterFace ("SMIF"). SMIF is an industry standard mating
"port" that, when implemented, creates a common methodology for transferring
products between minienvironments and sealed containers. The SMIF standard was
originally proposed by Hewlett-Packard Company in 1984. Asyst, which was
formed in 1984, was one of the pioneers of the early development of SMIF
technology for the semiconductor industry.
The Company's Asyst-SMIF(TM) System family of isolation technology products
is an integrated system consisting of sealed wafer cassette containers,
processing equipment enclosures (minienvironments) and related robotic
transfer equipment. The Company also offers the SMART-Traveler(TM) System,
which includes software and electronic display and communications devices and
enables semiconductor manufacturers to track wafers and reduce misprocessing
and misrouting during the production of integrated circuits ("ICs"). In
addition, the Company's family of software products enable material management
and control, equipment automation and integration with semiconductor
facility's automation solutions.
The Company provides complete tool-centric automation solutions in the areas
of wafer handling robotics, SMIF, minienvironment technology, work in process
("WIP") tracking, lot validation, and factory automation software. The Company
also offers automated radio frequency identification ("RFID") technology, an
optimized tracking solution at non-SMIF manufacturing facilities in order to
automate WIP tracking for both SMIF and non-SMIF facilities. With the addition
of wafer handling robotics to Asyst's portfolio of minienvironment, isolation
technology and software products, Asyst believes it has the building blocks
necessary to provide OEMs with a single-source for automation-enabling tool
front ends.
Advances in electronics technology in recent years have resulted in
increasingly sophisticated ICs based on submicron geometries and complex
manufacturing processes. In order to produce these semiconductors at
acceptable yields, manufacturers must meet increasingly stringent requirements
for cleanliness and material control in the semiconductor production facility.
Semiconductor manufacturers generally have sought to meet these requirements
through the increasingly costly process of improving the uniform level of
cleanliness of the entire cleanroom. Asyst, however, believes that its
minienvironment approach, by focusing on control of the environment in the
immediate vicinity of the in-process wafers and the processing equipment,
provides semiconductor manufacturers with an efficient and cost-effective way
to achieve very high levels of cleanliness. A minienvironment-based cleanroom,
for example, requires less air handling equipment and therefore can be
constructed at a significantly lower cost than a conventional cleanroom. In
addition, semiconductor
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manufacturers are able to more effectively respond to changing product and
process requirements in a minienvironment-based cleanroom, as equipment can be
added or modified with less disruption of ongoing production processing.
The Company sells its products worldwide directly to semiconductor
manufacturers who are either upgrading existing manufacturing facilities or
who are constructing new facilities. The Company's principal customers include
Chartered Semiconductor Manufacturing, Ltd. ("Chartered"), Macronix
International, Ltd., International Business Machines Corporation ("IBM"),
SubMicron Systems, Inc., National Semiconductor, Taiwan Semiconductor
Manufacturing Company Ltd. ("TSMC"), LAM Research Corporation, Tokyo Electron
Ltd., WaferTech LLC and Worldwide Semiconductor Manufacturing Company
("WSMC"). In addition, the Company provides software products and services to
assist original equipment manufacturers ("OEMs") with the integration of SMIF
material handling and automated material identification systems. The Company
distributes its products in Japan through an agreement with Innotech. See "--
Customers" and "--Sales and Marketing."
Background
A decade ago, ICs generally incorporated feature sizes of three microns or
more and were typically manufactured with processes involving approximately
100 steps. Today, semiconductor companies manufacture much more complex ICs by
incorporating feature sizes of 0.25 micron and smaller and using more
sophisticated processes with up to 500 steps or more. In addition, recently
developed IC design and verification techniques have enabled semiconductor
companies to rapidly design and manufacture semi-custom and custom products
addressing specific customer requirements. Instead of producing high volumes
of a small number of standard products, many of today's facilities are
typically required to produce varying volumes of a large number of products
and to adapt readily to changing customer and market requirements.
As the costs and complexity of semiconductor production have increased,
certain aspects of the semiconductor manufacturing process have become
increasingly important.
Need for Higher Levels of Cleanliness and Contamination Control
Semiconductors must be manufactured in a clean environment in order to
prevent contamination by particles as wafers are processed into finished
product. Particles on the wafer surface can result in defective devices,
adversely affecting the manufacturer's overall yield (the percentage of the
original ICs processed that are of sufficient quality to be sold). As feature
sizes shrink and as chip densities and the number of process steps increase,
the risks posed by particle contamination become much greater. During the
1980s, semiconductor manufacturers could typically satisfy their contamination
level requirements with cleanrooms certified as Class 100 (i.e., no more than
100 particles of 0.1 micron diameter or larger per cubic foot of air) or
higher. The cleanrooms required to manufacture today's most advanced ICs
generally must achieve Class 1 cleanliness level (i.e., no more than 1
particle of 0.1 micron diameter or larger per cubic foot of air), or better,
as well as maintain stringent control of temperature and humidity. In
addition, certain advanced semiconductor manufacturing processes require not
only control of particulate contamination, but also control of contamination
caused by water vapor, oxygen and trace chemicals that are present in normal
cleanroom air.
Semiconductor manufacturers have generally addressed the increased need for
cleanliness and contamination control through the construction of more
advanced cleanrooms, which improve the uniform level of cleanliness within the
entire cleanroom. Such advanced facilities typically require the isolation of
manufacturing personnel in expensive and highly constraining cleanroom
garments that reduce, but do not completely eliminate, the generation of
particles and other contamination from human activity. Some utilize varying
degrees of automation to further minimize operator activity and related
contamination. Despite advances in cleanroom technology, however, the presence
of production personnel and the conduct of activity within a facility continue
to result in the introduction of contaminants during the production process,
typically in sudden events referred to as "particle bursts." These particle
bursts are often generated in the vicinity of in-process
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wafers in connection with manual loading and unloading of wafer cassettes into
and out of processing equipment and can cause temporary contamination levels
of Class 1000 or greater at the wafer surface level. Although high levels of
cleanliness can in principle be obtained in a state-of-the-art cleanroom,
control of contamination at the wafer surface level remains difficult due to
such locally generated contamination. Minimizing the adverse effects of these
events and controlling the generation of contaminants within the cleanroom
present an increasing challenge for semiconductor manufacturers.
Need to Improve Facility Utilization
The rapid pace of advances in semiconductor technology has led to shorter
semiconductor product and production facility life cycles. Semiconductor
manufacturing facilities constructed in the mid-1980s to process a limited
number of standard products with three micron geometries must be substantially
refurbished in order to produce numerous, sub-micron products at acceptable
yields. Such refurbishment typically requires the entire manufacturing
facility to be shut down for weeks or months, thereby resulting in a loss of
revenue to the manufacturer. In addition, the introduction of new products and
processes to address new market conditions can require the manufacturer to
halt production temporarily while it adjusts its manufacturing flow and
processes in response to shifting product mix and surges in customer demand.
Faced with the prospect of continuing advances in semiconductor technology,
most semiconductor manufacturers need the ability to upgrade existing
facilities and construct new facilities in a manner that allows for better
ongoing facility utilization.
Need for Greater Manufacturing Control
As the manufacturing process has become more complicated and ICs have become
more complex, the possibility and cost of human error has increased. The Very
Large Scale Integration, Inc. ("VLSI") fabrication process typically requires
human operators to move batches of silicon wafers carried in cassettes through
over one hundred pieces of processing equipment in which over 500 different
processing steps are performed during a four to twelve week period. In
addition, semiconductor manufacturers are increasingly producing multiple ICs
in the same manufacturing facility, thereby requiring more sophisticated
methods of precise wafer control. Examples of human error range from
misplacing a cassette, thereby delaying processing, to incorrectly processing
a cassette of wafers, thereby ruining the wafers. The cost of misprocessing
errors can be significant, given that a typical cassette of 25 wafers being
processed in a state-of-the-art facility can contain finished product worth
from $25,000 to $500,000 or more.
Need to Control Escalating Cleanroom Costs
The cost of construction of cleanrooms has increased dramatically from
approximately $500 per square foot in the early 1980s to over $2,000 per
square foot currently. This cost increase is due significantly to increased
costs associated with the infrastructure and equipment required for moving and
environmentally conditioning millions of cubic feet of air every minute. For
example, a typical 40,000 square foot Class 1 cleanroom requires the
circulation and filtration of over four million cubic feet of air every
minute. Total construction costs alone for such a cleanroom are often in
excess of $100 million, and operating costs for air handling typically exceed
$1 million per year.
Asyst's Products
Asyst addresses the requirements for increased levels of cleanliness,
facility utilization, control and cost-effectiveness in semiconductor
manufacturing through its Asyst-SMIF minienvironment system, its SMART-
Traveler material control system, robotics and its family of automation
software products and solutions.
Asyst-SMIF System
The Asyst-SMIF System is designed to provide a continuous, ultraclean
environment for semiconductor products while they move through the
manufacturing facility. The Company believes that its Asyst-SMIF
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System, by focusing on control of the environment in the immediate vicinity of
the in-process wafers and the processing equipment, provides semiconductor
manufacturers with an efficient and cost-effective way to achieve very high
levels of cleanliness. Through sealed containers that encapsulate wafer
cassettes (SMIF-Pods), enclosures with engineered airflows that surround
process equipment (SMIF-Enclosures) and robotic systems that transfer wafer
cassettes into and out of process equipment (SMIF-Arms), a minienvironment
system is created which maintains and controls cleanliness and which is
essentially independent of the external room environment. Asyst believes that
its minienvironment approach offers several advantages to semiconductor
manufacturers.
First, Asyst-SMIF Systems can significantly reduce contamination by using
minienvironments to protect the in-process wafers and processing equipment
from exposure to particle bursts caused by human handling of cassettes and
migration of contaminants from elsewhere in the cleanroom. Thus, rather than
attempt to achieve and maintain uniformly high levels of cleanliness and
contamination control throughout the entire facility, the Asyst-SMIF
minienvironment system provides ultraclean contamination control in the
immediate vicinity of the wafers and the process equipment.
Second, the Asyst-SMIF solution affords manufacturers the opportunity to
significantly reduce capital expenditures associated with the construction of
new cleanrooms or the upgrade of existing cleanrooms. A minienvironment-based
cleanroom requires less air handling equipment and therefore can be
constructed at a significantly lower cost than a conventional cleanroom. In
the case of an existing cleanroom, the Asyst solution makes it possible to
upgrade the cleanroom to state-of-the-art cleanliness with minimal disruption
of production, at much lower expense than would be required for a complete
retrofit or the construction of a new cleanroom.
Third, an Asyst-SMIF System can reduce the cost of operating the
semiconductor manufacturing facility both by reducing the amount of clean air
volume required to maintain acceptable contamination levels in the cleanroom
and by reducing costs associated with the gowning of operating personnel.
Finally, the Asyst-SMIF System enhances facility flexibility. Semiconductor
manufacturers are able to more effectively respond to changing product and
process requirements, as equipment can be added or modified with much less
disruption of ongoing production processing within the cleanroom. This
mitigates the need to shut down the entire facility in order to add or
rearrange equipment.
The Asyst-SMIF System consists of three main components: (i) the SMIF-
Pod(TM), used for storage and transport of wafer cassettes; (ii) the SMIF-
Enclosure(TM), which provides an ultra clean minienvironment via a custom
chamber built around the processing equipment; and (iii) the SMIF-I/O(TM)
("input/output") products including Arms, Indexers, LPI/LPT and related
products, which transfer the cassette from the SMIF-Pod into the process tool
and/or SMIF-Enclosure. In addition to its standard Asyst-SMIF System products,
the Company also offers its advanced SMIF-E(TM) System, which provides the
capability to store, transport and transfer the product in an inert gas. The
Company has developed a library of Asyst-SMIF System configurations to cover
nearly 500 different models of processing equipment. A fully-equipped
semiconductor manufacturing facility with an output of 20,000 wafers per month
would typically include approximately 2,000 SMIF-Pods, 300 SMIF-I/Os and 200
SMIF-Enclosures, with an aggregate price to the customer of between $5 million
and $10 million.
. SMIF-Pod
The Asyst SMIF-Pod is a sealed polycarbonate container for products,
typically cassettes of wafers, which provides contamination control (Class 1
or better) during transport and storage. A WaferLock(TM) protects the wafers
against movement or vibration during transport. The SMIF-Pod components are
constructed from materials chosen specifically for their low particulate
generation and low organic outgassing. The Company's SMIF-Pod family currently
includes SMIF-Pods for 125 mm, 150 mm, 200 mm and 300 mm wafers, reticles
(single and multiple), flat panel displays ("FPD") and rigid disks. SMIF-Pods
are typically priced between $200 and $400, depending upon the model.
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. SMIF-Enclosure
The SMIF-Enclosure is a specially constructed chamber that surrounds a
particular piece of process equipment in the wafer fabrication facility.
Options include a dedicated fan filter unit for air handling, as well as a
temperature and humidity control system. For most facilities, the SMIF-
Enclosures are typically floor-mounted and include dedicated air handling
units. SMIF-Enclosures are typically priced between $3,000 and $100,000,
depending on the level of complexity.
. SMIF-Arm
The SMIF-Arm is a fully automated robotic transfer system designed to remove
a cassette from a SMIF-Pod and load it into the processing equipment without
exposing the cassette to ambient facility air. The SMIF-Arm is available for
the processing of 100 mm, 125 mm, 150 mm and 200 mm wafers. In addition, the
Company offers an advanced version of the SMIF-Arm, the LPT/LPI, which extends
SMIF-based particle control and automation capabilities to loadlock production
equipment with recessed process chambers, such as chemical vapor deposition
and ion implant equipment. SMIF-Arms are typically priced between $22,000 and
$55,000, depending on the model.
Another part of the SMIF-Arm group of products is the SMIF-Indexer INX-
2200(TM) and SMIF-LPO(TM) which are OEM products that enable process equipment
manufacturers to integrate SMIF-Pod-based cassette loading and unloading into
their semiconductor processing equipment. The SMIF-Indexer integrates a SMIF
port with an indexer function; it enables process equipment with Z-axis
picking mechanisms to load and unload wafers with random access capability.
With its laser-based wafer detector features, improperly seated wafers within
a cassette are automatically reseated before cassettes are loaded into the
SMIF-Pod. The SMIF-Indexer and SMIF-LPO also have built in SMART-Traveler
capability. The SMIF-Indexer prices range between $8,500 and $18,000,
depending on the model.
. SMIF-E
The Asyst SMIF-E System is an inert gas encapsulation version of the Asyst-
SMIF System. The Company believes that as semiconductor device geometries
continue to shrink, there will be more and more applications which can benefit
from the encapsulation of the wafers in an inert gas environment. The standard
SMIF-Pod is inter-changeable in conventional (clean-air) SMIF and SMIF-E
applications. The SMIF-Arm family of products are modified with a patented gas
injection and control system capability to enable SMIF-E functionality at
specific locations as needed. The SMIF-Enclosure may also be modified with
inert gas recirculating, monitoring and control capability to enable SMIF-E
functionality within specific processing equipment enclosures. SMIF-E
capability can add between $15,000 to $50,000 to SMIF-Arm and SMIF-Enclosure
selling prices, depending on features.
. SMIF-300(TM)
The Asyst SMIF-Pod 300 is a 25 wafer capacity front-opening unified pod
("FOUP") which maintains a better than Class 1 wafer environment for all SEMI
standard 300 mm FOUPs. The SMIF-300FL S2 wafer mapping option will determine
wafer location and cross slotted wafers with no impact on tool's throughput.
The wafer mapping option for the SMIF 300FL graphically displays the mapping
results.
In addition, Asyst offers the Asyst SMIF-300 Wafer Management System(TM)
("WMS"). All 300 mm systems are compatible with both 13 wafer and 25 wafer
FOUPs, provide a better-than-Class 1 at 0.1 micron wafer environment, and
comply with all SEMI standards and I300I guidelines.
SMART-Traveler System
In conventional cleanrooms, semiconductor manufacturers typically track
batches of wafers by attaching lot-cards, bar-code tags or paper travelers to
a wafer carrier, such as a SMIF-Pod or lot box. The Asyst SMART-
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Traveler System is designed to provide automated manufacturing floor control
of wafers by replacing the paper travelers and bar code systems with an
intelligent electronic memory device (SMART-Tag(TM)) and radio frequency
automated identification tags (FluoroTrac Auto ID System MicroTag).
The Asyst SMART-Traveler System allows semiconductor manufacturers to reduce
manufacturing errors by significantly decreasing the opportunities for
operator-associated misprocessing during the production process. Conventional
paper traveler and bar-code based systems rely on operator interpretation and
input, and thus are prone to human error. Reliance on operator control is
substantially reduced by the SMART-Traveler System, thereby improving factory
yields.
The SMART-Traveler System also improves manufacturing efficiency by
providing real-time information to the operator on the manufacturing floor
about the disposition and destination of the wafers inside each SMIF-Pod.
Unlike paper travelers or bar-code based systems, operators are not required
to manually enter or obtain process information from computer terminals prior
to loading the process equipment. Operator efficiency is improved because the
SMART-Traveler System provides lot identification and location information to
the fab computer integrated manufacturing ("CIM") to enable automatic
verification that the SMIF-Pod and lot are at the correct processing location.
. SMART-Tag
The SMART-Tag combines the latest display, logic and communication
technologies to provide a versatile electronic run card for semiconductor
fabs. SMART-Tags replace paper lot travelers and run cards by automatically
communicating the lot ID upon arrival at a tool and providing the operator
with detailed lot, processing and routing information to the operator on the
Liquid Crystal Display ("LCD").
Attached directly to a SMIF-Pod or lot box, the SMART-Tag carries
information relevant to the wafers inside the carrier, including wafer
identification, lot identification, process specifications and next process
step information. The information included in the SMART-Tag's memory
automatically compares each process equipment to the factory host computer
system to ensure the lot is at the right process tool with the correct recipe.
After each process step the SMART-Tag is automatically updated with the next
process step.
. FluoroTrac Auto ID System (MicroTag(TM))
The FluoroTrac Auto ID System uses a radio-frequency based read/write
identification tag (MicroTag) that can be attached to or embedded into wafer
carriers, storage boxes, and other fab assets. The MicroTag when embedded in
plastic is impervious to most chemicals and abrasion. The system provides an
optimized tracking solution at non-SMIF semiconductor facilities ("fab") in
order to automate WIP tracking.
. SMART-Comm(TM)
The SMART-Comm is a multiplexing and communication protocol converting
device that increases operator and tool efficiency in semiconductor fabs by
optimizing communications and minimizing hardware and software layers. The
SMART-Comm connects process equipment, SMIF I/Os, automated material and
operator identification systems, signal towers and other devices to the
Manufacturing Enterprise System ("MES") and the Local Area Network ("LAN")
using High-Speed SECS Messaging Services (SECS). The SMART-Comm is used by
SMIF and non-SMIF fabs as well as OEMs to provide connectivity and protocol
converting solutions. The SMART-Comm is priced at approximately $3,700.
. SMART-Storage(TM)Manager
SMART-Storage Manager is an interactive system built around a personal
computer and a network of controllers and communication probes that provides
work-in-process control and management of lots in storage racks or automated
stockers. It monitors the physical storage locations of production cassettes
and obtains
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information from SMART-Tags and MicroTags to create a real-time database.
SMART-Storage Manager is priced at approximately $20,000 and up per system.
The management of SMIF-Pods in storage occurs through a system that involves
nesting areas called Storage-Tray(TM). Storage-Trays have infrared sensors and
are connected to a Storage-Controller and personal computer running software
that communicates with the host system and with the SMART-Tag attached to each
SMIF-Pod.
The Company has interfaced the SMART-Traveler System to several host
systems, including systems marketed by PROMIS Systems Corporation, Consilium
and IBM's proprietary host Factory Control Systems. A typical SMART-Traveler
System for a 20,000 square foot fab has an aggregate price ranging from $2
million to $3 million.
Software Services
Software services for equipment automation solutions provide improved
material control, line yield and cycle time abilities, as well as increased
overall equipment effectiveness. In addition to automating the processing of
each lot during the manufacturing cycle, the customizable software links
directly to the fab host system, thereby providing users with the ability to
pre-schedule material movement to specific process equipment. The Company's
new SMART-Fab(TM) suite of Windows NT-based products focuses on the unique
requirements of the semiconductor fab. This suite includes SMART-Station(TM),
which uses workflow and distributed object technology to rapidly automate fab
equipment. Other SMART-Fab suite products include SMART-Storage Manager and
Global Lot Server(TM), which provide material staging, WIP management and
global lot location. These products are designed to comply with existing and
emerging industry standards that are currently being used around the world.
Asyst Robotics
On July 31, 1998, Asyst acquired Hine Design Incorporated ("HDI"), a
supplier of wafer handling robots for semiconductor process tools. Through the
acquisition of HDI, the Company offers comprehensive robotic wafer handling
solutions to the semiconductor and FPD industries. Wafer handling solutions
now offered by Asyst include: MESC compatible vacuum robotic arms which
address 3-inch to 12-inch wafer sizes and 20-inch FPDs with customer-specified
reach, class 1, cleanroom compatible atmospheric robotic arms, and harsh
environment compatible robotic arms for handling silicon wafers up to
300 millimeters. The Company also manufactures atmospheric compatible non-SMIF
indexers, vacuum indexer and the Hine-Align wafer pre-aligners, a unique, one-
step solution for finding the exact center and orientation of a wafer. Asyst's
robotic solutions are designed to meet a wide range of wafer handling
requirements for vacuum, atmospheric and corrosive wafer processing
environments.
Customers
The Company's customers are primarily semiconductor manufacturers who are
either constructing new manufacturing facilities or upgrading existing
manufacturing facilities. The Company considers repeat business to be
important to its success and strives to maintain close relationships with its
customers. In addition to generating revenue for the Company through their
repeat purchases, these customers can serve as reference accounts for
potential new customers. The Company has completed an installation at one of
its major customers' facilities, in which an older version of the Company's
SMIF products were replaced with the Company's new LPTs, as well as other
related products in order to upgrade the existing capacity and efficiency of
the facility. The Company believes that repeat, replacement and upgrade
product sales present future market opportunities relative to both current and
new customers.
As major customer projects are completed, the Company's business from such
customers will decline substantially unless these customers undertake
additional projects incorporating the Company's products. During
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fiscal 1999, Worldwide Semiconductor Manufacturing Company accounted for
approximately 12 percent of the Company's net sales. During fiscal years 1997,
1998 and 1999, sales to TSMC accounted for approximately 14 percent, 31
percent and 6 percent, respectively, of the Company's net sales. If additional
projects are not initiated by existing customers, the performance of the
Company will depend on securing business from new customers. While the Company
attempts to pursue new customers, there can be no assurance that the Company
will be successful in its sales and marketing efforts, and any significant
weakening in customer demand would have a material adverse effect on the
Company.
The Company's ten largest U.S. and international customers based on
cumulative sales during fiscal 1997, 1998 and 1999 were:
Chartered Semiconductor Manufacturing, Taiwan Semiconductor Manufacturing
Ltd. Co. Ltd.
Macronix International Lam Research Corporation
International Business Machines Tokyo Electron Ltd.
Corporation WaferTech LLC
SubMicron Systems, Inc. Worldwide Semiconductor
National Semiconductor Manufacturing Company
Although the companies listed above represent Asyst's largest customers
during the periods, and have all purchased products from the Company during
the past twelve months, there can be no assurance that such companies will
make significant purchases of the Company's products in the future. See "Risk
Factors--Our Net Sales are Derived From a Concentration of a Few Larch
Customers," "--We Are Dependent on Global Acceptance of Isolation and
Minienvironment Technology by Our Customers," "--We Are Dependent on the
Semiconductor Industry," "--We Face Additional risks Because a Majority of Our
Net Sales Are From Sales Outside the United States" and Note 2 of "Notes to
Consolidated Financial Statements."
Sales and Marketing
The Company sells its products principally through its direct sales force in
the United States and other parts of the world. The Company markets its
products to semiconductor manufacturers in Japan through its distributor
relationship with Innotech. The Company's sales organization is based in
Northern California, and domestic field sales personnel are stationed in
Pennsylvania, Arizona, Washington and Texas.
International sales, which consist mainly of export sales from the U.S.,
have accounted for approximately 57 percent, 64 percent and 52 percent of
total sales for fiscal 1997, 1998 and 1999, respectively. The European market
is supported through offices in the vicinity of Newport, Wales and Dresden,
Germany. The Asia/Pacific Region is supported through sales and service
offices in Hsin-Chu, Taiwan, Singapore, Yokohama, Japan and Seoul, South
Korea. (See Note 7 of "Notes to Consolidated Financial Statements" for a
summary of international revenue by geographic area). The Company's
international sales are invoiced in U.S. dollars and, accordingly, have not
historically been subject to fluctuating currency exchange rates. The
Company's international sales, however, are subject to certain other risks
common to many technology export activities, such as the imposition of
governmental controls, the need to comply with a variety of foreign and U.S.
export laws, political and economic instability, trade restrictions, changes
in tariffs and taxes, the greater difficulty in administering business
overseas and general economic conditions. See "Risk Factors--We Face
Additional Risks Because a Majority of Our Net Sales Are From Sales Outside
the United States."
The sales cycle for a significant purchase of the Company's products is
typically six to twelve months or longer and generally follows a lengthy
evaluation, budgeting and approval process. An important element of the sales
cycle consists of persuading potential customers that Asyst's solutions are
superior, cost-effective and flexible approaches to their needs, and the
Company's marketing efforts include extensive participation by the Company's
senior management. The sales cycle begins with generation of a sales lead,
which is followed by qualification of the lead, an analysis of the customer's
needs, a presentation to the customer, an equipment and airborne particulate
contamination audit, a detailed economic and return on investment analysis, a
further presentation to the customer, sign-off activities and contract
finalization. During the sales cycle, the Company
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offers a performance audit on customer-selected pieces of processing equipment
and limited installations of SMIF products to demonstrate the benefits of
Asyst's solution. The standard warranty period for the Company's products
ranges between one and two years, depending on product and time of shipment.
Warranty costs and product returns incurred over the last three fiscal years
have not been material.
An important part of the Company's marketing strategy has been the
participation by the Company in key industry organizations such as SEMI
SEMATECH and SEMI, in addition to attendance at events coordinated by the
Semiconductor Industry Association. The Company believes that such
participation serves to continue to educate the semiconductor industry on the
Company's SMIF minienvironment approach. In addition, the Company actively
participates in industry trade shows and conferences and has sponsored
symposiums with technology and business experts from the semiconductor
industry.
Systems Integration
After a sales contract for the Company's system products is finalized,
Asyst's Systems Integration organization and OEM Applications are responsible
for the engineering, procurement and manufacturing of SMIF-Enclosures and
interfaces necessary to integrate SMIF-Products with the processing equipment.
The organization provides system integration, installation, qualification of
the Asyst-SMIF System and other services associated with the facility-wide
integration of the minienvironment and Asyst-SMIF System.
The Systems Integration and OEM Applications organizations are focused on
understanding the customer's manufacturing methodology and actual production
applications and developing customer-specific solutions. For retrofitting and
upgrading existing facilities with the minienvironment and SMIF solution, the
Systems Integration organization works with the customer's facilities and
manufacturing personnel to develop programs, schedules and solutions to
minimize disruption during the installation of the Company's products into the
customer's facility. In the case of a new facility or tool design, the OEM
Applications and Systems Integration organizations work with the customer's
facility planners and operations personnel, as well as with cleanroom
designers, architects and engineers.
In the case of OEM integration, the OEM Applications organization designs
and integrates the SMIF components directly into the processing equipment. The
OEM integration team works very closely with the OEM (equipment suppliers) to
understand the process equipment, the processing requirements and then
provides the customer with an optimized solution.
Research and Development
Research and development efforts are focused on enhancing the Company's
existing products and developing and introducing new products in order to
maintain technological leadership and meet a wider range of customer needs.
The Company's research and development expenditures were approximately $8.6
million, $13.3 million and $14.7 million during fiscal 1997, 1998, and 1999,
respectively.
The Company's research and development employees are involved in mechanical
and electronic engineering, software development, micro-contamination control,
product documentation, and support. The Company's central research and
development facilities include a prototyping lab and a cleanroom used for
product research, development and equipment demonstration purposes. In
addition, it maintains engineering and development facilities for its robotics
product line. The Company's research and development facilities are located in
Northern California.
Development efforts have intensified on the spectrum of products and
technologies needed to support both OEM and End User customers. New products
include Radio Frequency ID capability for automated lot tracking to augment
the SMART-Traveler System and 300 mm Pods and I/O devices to support the
transition to increased wafer sizes. Additionally, a major effort in robotics
development has resulted in a new robotic wafer transfer system that offers
ultra high reliability and faster wafer transfer speeds.
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Semiconductor equipment and processes are subject to rapid technological
change. The development of more complex ICs has driven the need for new
facilities, equipment and processes to produce such devices at acceptable cost
and yield. The Company believes that its future success will depend in part
upon its ability to continue to enhance its existing products to meet customer
needs and to develop and introduce new products which maintain technological
leadership. There can be no assurance that the Company's product development
efforts will be successful or that the Company will be able to respond
effectively to technological change. See "Risk Factors--Our Ability to Develop
and Introduce New Products and Technologies will Have a Significant Impact on
Our Future Performance."
Manufacturing
The Company's manufacturing activities consist of assembling and testing
components and sub-assemblies, which are then integrated into finished
products. Once completed, the Company performs a final test of all electronic
and electromechanical sub-assemblies and cycles the product before shipment.
Much of the cleaning, assembly and packaging of the Company's SMIF-Pods is
conducted in cleanroom environments where manufacturing personnel are clothed
in cleanroom gowns to reduce particulate contamination.
The Company currently maintains manufacturing facilities for its Asyst-SMIF
System, SMART-Traveler System products and software engineering services in
Fremont, California. The Company fabricates its custom SMIF-Enclosures at both
the Fremont facility and, in the case of large system orders, near customer
sites, where the Company will lease temporary space for the conduct of
enclosure manufacturing by its personnel. The Company's robotic products are
manufactured in Sunnyvale, California.
While the Company uses standard components whenever possible, most
mechanical parts, metal fabrications and castings are made to the Company's
specifications. The Company procures certain of the components and sub-
assemblies included in its products from a single supplier or a limited group
of suppliers in order to ensure overall quality and timeliness of delivery. To
date, the Company has been able to obtain adequate supplies of such components
in a timely manner. However, disruption or termination of certain of these
sources could have a temporary adverse effect on the Company's operations. The
Company believes that alternative sources could be obtained and qualified to
supply these products, if necessary. Nevertheless, a prolonged inability to
obtain certain components could have an adverse effect on the Company's
operating results and could result in damage to customer relationships. See
"Risk Factors--We Are Dependent on Certain Key Suppliers."
Competition
The Company currently has direct competition in all of its products (Asyst-
SMIF Systems, SMART-Traveler System, robotics, and software services). Most
competitors remain dedicated to one of these product lines, enabling a focused
engineering, manufacturing, and marketing effort. The Company's primary source
of competition from these competitors remains alternative approaches to
solving the contamination and manufacturing control problems of the
semiconductor manufacturing industry. The Company's ability to provide a more
complete automation and wafer isolation solution provides a significant
competitive advantage with respect to these competitors, but there can be no
assurance that the competition's product offerings will not expand or that new
competitors will not enter the Company's market. Many of these competitors
have extensive engineering, manufacturing and marketing capabilities and
potentially greater financial resources than those available to the Company.
The Company believes that the principal competitive factors in its market
are the technical capabilities and characteristics of systems and products
offered, technological experience and "know-how," product breadth, proven
product performance, quality and reliability, ease of use, flexibility, a
global, trained, skilled field service support organization, the effectiveness
of marketing and sales, and price. The Company currently believes that it
competes favorably with respect to the foregoing factors, although there can
be no assurance that it will be able to do so in the future. See "Risk
Factors--We May Not Be Able to Effectively Compete in a Highly Competitive
Semiconductor Industry."
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Proprietary Rights
The Company primarily pursues patent, trade secret trademarks and copyright
protection for its minienvironment and Asyst-SMIF System technology, its
SMART-Traveler products, its software products and its robotics technology.
The Company currently holds forty-eight patents in the United States, has
eighteen pending patent applications in process in the United States and
intends to file additional patent applications as appropriate. There can be no
assurance that patents will be issued from any of these pending applications
or that any claims allowed from existing or pending patents will be
sufficiently broad to protect the Company's technology.
While the Company intends to protect its intellectual property rights
vigorously, there can be no assurance that any patents held by the Company
will not be challenged, invalidated or circumvented, or that the rights
granted thereunder will provide competitive advantages to the Company.
The Company also relies on trade secrets and proprietary technology that it
seeks to protect, in part, through confidentiality agreements with employees,
consultants and other parties. There can be no assurance that these agreements
will not be breached, that the Company will have adequate remedies for any
breach, or that the Company's trade secrets will not otherwise become known to
or independently developed by others. Also, the laws of some foreign countries
do not protect the Company's proprietary rights to the same extent as the laws
of the United States.
There has been substantial litigation regarding patent and other
intellectual property rights in semiconductor-related industries. Further
commercialization of the Company's products could provoke claims of
infringement from third parties. In the future, litigation may be necessary to
enforce patents issued to the Company, to protect trade secrets or know-how
owned by the Company or to defend the Company against claimed infringement of
the rights of others and to determine the scope and validity of the
proprietary rights of others. Any such litigation could result in substantial
cost and diversion of effort by the Company, which by itself could have a
material adverse effect on the Company's financial condition and operating
results. Further, adverse determinations in such litigation could result in
the Company's loss of proprietary rights, subject the Company to significant
liabilities to third parties, require the Company to seek licenses from third
parties or prevent the Company from manufacturing or selling its products, any
of which could have a material adverse effect on the Company's financial
condition and results of operations.
Backlog
The Company's backlog was approximately $43.9 million, $49.9 million and
$31.3 million at March 31, 1997, 1998 and 1999, respectively. During 1998 and
1999, the Company's orders moved to more of a turns business (orders placed to
be shipped during the next two to three months) as customers delayed orders
until they were ready to take delivery, apparently due to uncertainty in the
near term capacity situation of the semiconductor industry. By the end of
fiscal year 1999, the backlog was greater than sales for the current quarter
which is more consistent with the Company's past experience. Ten customers
with orders on the backlog totaling between $0.6 million to $7.3 million
comprised 67 percent of the total backlog at March 31, 1999. The Company
includes in its backlog only orders for which a customer's purchase order has
been received and a delivery date within 12 months has been specified. Because
purchase orders are generally subject to cancellation or delay by customers
with limited or no penalty, the Company's backlog is not necessarily
indicative of future revenues or earnings.
Although the Company believes that the backlog reflects continued acceptance
of minienvironment technology by its customers, there can be no assurance that
the Company will be successful in obtaining broader acceptance of its products
and technology. See "Risk Factors--We are Dependent on Global Acceptance of
Isolation and Minienvironment Technology by Our Customers."
Employees
As of March 31, 1999, the Company employed 542 persons on a regular full-
time basis, including 100 in research and development, 175 in manufacturing
operations, 27 in system integration, 108 in sales and marketing,
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which includes customer service, 63 in finance and administration, and 69 in
international operations. Many of the Company's employees have specialized
skills of value to the Company and the Company's future success will depend,
in large part, upon its ability to attract and retain highly skilled
technical, managerial, financial and marketing personnel, who are in great
demand. In particular, the Fremont, California and Hsin-Chu, Taiwan ROC
locations have tight labor markets for the skills the Company seeks. The
Company has never had a work stoppage or strike and no employees are
represented by a labor union or covered by a collective bargaining agreement.
Asyst considers its employee relations to be good. During fiscal year 1999,
the Company restructured certain domestic and international operations in
response to the drop in its net sales. As a result of these restructuring
activities, the Company terminated the employment of approximately 110
employees from its U.S. operations and approximately 30 employees from the
Company's international operations. See "Risk Factors--Our Success is
Dependent on Our Ability to Retain and Recruit Key Personnel."
Risk Factors
. Our Quarterly Operating Results Are Subject to Variability
Our revenues and operating results can fluctuate substantially from quarter
to quarter depending on such factors as:
. the timing of significant customer orders
. the timing of product shipments
. variations in the mix of products sold
. the introduction of new products
. the changes in customer buying patterns
. the fluctuations in the semiconductor equipment market
. the availability of key components
. general trends in the economy.
Our customers' procurement process is typically six to twelve months or
longer from initial inquiry to order, making the timing of customer orders
uneven and difficult to predict. The process may involve competing capital
budget considerations for our customers. A significant portion of the net
sales in any quarter is typically derived from a small number of long-term,
multimillion dollar customer projects involving an upgrade of an existing
facility or the construction of a new facility. We typically cannot ship
products until the customer's facility and/or the process tools housed in the
facility are ready. Customers generally may cancel or reschedule shipments
with limited or no penalty. These factors increase the risk of unplanned
fluctuations in net sales. Any delay or failure to receive anticipated orders
could adversely affect our financial performance. Moreover, a shortfall in
planned net sales in a quarter as a result of these factors could have a
material adverse effect on our operating results for the quarter. Given these
factors, we expect that quarter to quarter performance will fluctuate for the
foreseeable future and consequently that quarter to quarter comparisons may
not be meaningful.
. We Are Dependent on Global Acceptance of Isolation and Minienvironment
Technology by Our Customers
Since 1995, substantially all of our revenues have been from sales of
isolation and minienvironment systems to semiconductor manufacturers and tool
suppliers to the semiconductor industry. We expect sales of such systems will
continue to account for a majority of revenues for the foreseeable future.
Given that the use of isolation and minienvironment systems represents an
alternative to the conventional cleanroom approach utilized by semiconductor
manufacturers, we believe that our growth prospects depend in large part upon
our ability to gain acceptance by a broader group of customers of the efficacy
of the Company's isolation and minienvironment technology. The decision by a
semiconductor manufacturer that is currently not employing our isolation and
minienvironment approach to make a large-scale deployment of our products in
200 mm and smaller wafer
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facilities, involves significant organizational, technological and financial
commitments by such semiconductor manufacturer. There can be no assurance that
the market will continue to accept isolation and minienvironment technology.
. Our Net Sales are Derived From a Concentration of a Few Large Customers
Significant portions of our net sales are derived from a small number of
customers. Sales of our products to TSMC accounted for approximately 14
percent, 31 percent and 6 percent of the Company's net sales during fiscal
1997, 1998 and 1999, respectively. 67 percent or $21 million of our backlog at
March 31, 1999 was comprised of orders from twelve customers. Our projects are
typically completed within a six to eighteen month period from the time we
initially receive a customer's purchase order. As we complete projects,
business from these customers will decline substantially unless they undertake
additional projects incorporating our products. If additional projects are not
initiated by our existing customers, our performance may be materially and
adversely affected.
. We are Dependent on the Semiconductor Industry
Our business is entirely dependent upon the capital expenditures of
semiconductor manufacturers, which in turn are dependent on the current and
anticipated market demand for ICs as well as products utilizing ICs. The
semiconductor industry is cyclical and has historically experienced periodic
downturns. These downturns, whether the result of general economic changes or
capacity growth temporarily exceeding growth in demand for ICs, are difficult
to predict and have often had a severe adverse effect on the semiconductor
industry's demand for semiconductor processing equipment. For example, in the
year ended March 31, 1998, we ended the year with record quarter net sales of
$45.2 million. Our net sales in the quarters ended June 30, 1998, September
30, 1998, December 31, 1998 and March 31, 1999 were $34.1 million, $16.0
million, $16.9 million and $17.2 million, respectively. The sharp decrease in
net sales from the record net sales set in the quarter ended March 31, 1998
were due to the downturn in the Asian economies and worldwide demand for
semiconductors. We believe that our future performance will be adversely
affected from time to time by such industry downturns.
. Our Success is Dependent on Our Ability to Retain and Recruit Key
Personnel
Our success depends upon a small number of senior management and technical
personnel. The loss of the services of one or more of these key persons could
materially and adversely effect our results. In addition, in each of our
locations there is strong competition in the labor markets for the employees
we seek. Our future success will depend in large part upon our ability to
recruit and retain highly skilled technical, managerial, financial and
marketing personnel, all of whom are in great demand. A failure to retain,
acquire or adequately train key personnel could have a material adverse impact
on our performance. Due to the cyclical nature of 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. The labor markets in
which we are located are highly competitive and as a result, this type of
employment cycle increases our risk of not being able to retain and recruit
key personnel. Our failure to continue to ensure good employee relations could
materially and adversely affect our operations.
. We Need to Manage Our Growth and Personnel Changes
During the last three years, we have experienced extremely rapid growth in
the number of our employees and the geographic area of our operations. Our
growth, tempered by the current downturn in net sales, has been driven by an
increase in our customer base, the cumulative impact of historical
installations and acquisitions of new operations. This 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. To succeed we must train and manage our employee base to
cope with growth and change. Failure to manage our growth effectively could
materially and adversely affect our operations.
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. We May Not Be Able to Effectively Compete in a Highly Competitive
Semiconductor Equipment Industry
We currently have direct competition with respect to our Asyst-SMIF System
and SMART-Traveler System products. Our principal competition in these
products comes from conventional approaches to solving the contamination and
manufacturing control problems of the semiconductor manufacturing industry in
the 200 mm or smaller wafer semiconductor facility. The semiconductor
equipment industry, however, is highly competitive in general, and there can
be no assurance that one or more potential competitors will not enter the
microenvironment and isolation market. In recent years, several companies,
including Jenoptik, have begun offering one or more products that compete with
our Asyst-SMIF System products. During the past couple of years our
competitors have competed heavily on price in an attempt to win access to our
markets, putting pressure on our gross margins. Certain international
competitors receive various forms of government support, ranging from
different forms of financial subsidies to high level diplomatic support. There
can be no assurance that in the future our competitors will not put further
pressure on our gross margins or increase their market share.
The market acceptance of the isolation and minienvironment technology for
300 mm wafer sites is likely to draw new competitors since the market is
perceived to be much larger. In the 300 mm wafer market, we face stiff
competition from a number of companies such as PRI Automation, Inc. ("PRIA")
and Brooks Automation, Inc., as well as potential competition from other
semiconductor equipment and cleanroom construction companies. Some of those
competitors in the 300 mm wafer sites may have greater name recognition, more
extensive engineering, manufacturing and marketing capabilities and
substantially greater financial, technical and personnel resources than those
available to us. We also compete with several competitors in the robotics
area, including, but not limited to, PRIA and Kensington Labs. While price is
a competitive factor in the sale of robots, our ability to deliver quality,
reliability and on time shipments are the factors which will largely impact
our success against our competition. There can be no assurance that the
Company will be able to compete successfully in the future in these areas.
. Our Ability to Develop and Introduce New Products and Technologies Will
Have a Significant Impact on Our Future Performance
Semiconductor equipment and processes are subject to rapid technological
changes. The development of more complex ICs has driven the need for new
facilities, equipment and processes to produce such devices at acceptable cost
and yield. We believe that our future success will depend in part upon our
ability to continue to enhance our existing products to meet customer needs
and to develop and introduce new products to maintain technological leadership
in our market segment. There can be no assurance that our product development
efforts will be successful or that we will be able to respond effectively to
technological change.
. We May Not Be Able to Integrate the Operations of Acquisitions
We may make acquisitions of, or significant investments in, businesses that
offer complementary products, services or technologies. We have recently
acquired a number of companies in order to expand our product line including
HDI and Progressive System Technologies, Inc. ("PST"). If we are to realize
the anticipated benefits of these acquisitions, the operations of these
companies must be integrated and combined efficiently. The process of
rationalizing supply and distribution channels, computer and accounting
systems and other aspects of operations, while managing a larger entity, will
present a significant challenge to our management. There can be no assurance
that the integration process will be successful or that the anticipated
benefits of the business combinations will be fully realized. The dedication
of management resources to such integration may detract attention from the
day-to-day business. The difficulties of integration may be increased by the
necessity of integrating personnel with disparate business backgrounds and
combining different corporate cultures. There can be no assurance that there
will not be substantial costs associated with such activities or that there
will not be other material adverse effects of these integration efforts. Such
effects could materially reduce our short-term earnings. Consideration for
future acquisitions could be in the form of cash, common stock, rights to
purchase
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stock or combination thereof. Dilution to existing stockholders and to
earnings per share may result to the extent that shares of common stock or
other rights to purchase common stock are issued in connection with any such
future acquisitions.
. We Are Dependent on Certain Key Suppliers
Many of the components and subassemblies included in the Company's products
are obtained from a single supplier or a limited group of suppliers. Although
to date, the Company has experienced only minimal delays in receiving goods
from our key suppliers, disruption or termination of these sources could have
a temporary adverse effect on our operations. We believe that, in time,
alternative sources could be obtained and qualified to supply these products
in the ordinary course of business, but a prolonged inability to obtain
certain components could have an adverse effect on our operating results and
could result in damage to our customer relationships.
. We May be Unable to Protect Our Intellectual Property Rights and We May
Become Involved in Litigation Concerning the Intellectual Property Rights
of Others
We rely on a combination of patent, trade secret and copyright protection to
establish and protect our intellectual property. While we intend to protect
our patent rights vigorously, there can be no assurance that our patents will
not be challenged, invalidated or circumvented, or that the rights granted
thereunder will provide us with competitive advantages. We also rely on trade
secrets that we seek to protect, in part, through confidentiality agreements
with employees, consultants and other parties. There can be no assurance that
these agreements will not be breached, that we will have adequate remedies for
any breach, or that our trade secrets will not otherwise become known to, or
independently developed by, others.
There has been substantial litigation regarding patent and other
intellectual property rights in semiconductor related industries. Litigation
may be necessary to enforce our patents, to protect our trade secrets or know-
how, to defend us against claimed infringement of the rights of others or to
determine the scope and validity of the proprietary rights of others. Any such
litigation could result in substantial cost to us and divert the attention of
our management, which by itself could have an adverse material effect on our
financial condition and operating results. Further, adverse determinations in
such litigation could result in our loss of proprietary rights, subject us to
significant liabilities to third parties, require us to seek licenses from
third parties or prevent us from manufacturing or selling our products, any of
which could have an adverse material effect on our financial condition and
results of operations.
. We Face Additional Risks Because a Majority of Our Net Sales Are From
Sales Outside the United States
Approximately 57 percent, 64 percent and 52 percent of our net sales for the
years ended March 31, 1997, 1998 and 1999, respectively, were attributable to
sales outside the United States, primarily in Europe, Japan, Singapore and
Taiwan. We expect that international sales will continue to represent a
significant portion of our total revenues in the future. Sales to customers
outside the United States are subject to risks, including:
. exposure to currency fluctuations
. the imposition of governmental controls
. the need to comply with a wide variety of foreign and U.S. export
laws
. political and economic instability
. trade restrictions
. changes in tariffs and taxes
. longer payment cycles typically associated with foreign sales
. the greater difficulty of administering business overseas
. general economic conditions.
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As of March 31, 1997 and 1998 and 1999, approximately 55 percent, and 71
percent and 48 percent, respectively, of our accounts receivable, net, were
due from international customers located primarily in Japan, Singapore, Taiwan
and the United Kingdom. Receivable collection and credit evaluation in new
geographies and countries challenge the Company's ability to avert such risks.
In the first quarter of fiscal 1998, we realized a credit loss of
approximately $2.7 million relating to a $5.9 million sale to a customer in
Thailand in the prior fiscal year. There can be no assurance that the
continued turmoil in the Asian economics will not negatively impact revenue
growth and customer order in the future. Credit risks could also increase if
we do not maintain our collection efforts if the economic conditions worsen in
the Asia region. In addition, the laws of certain foreign countries may not
protect our intellectual property to the same extent as do the laws of the
United States. Although we invoice substantially all of our international
sales in United States dollars, there can be no assurance that our results of
operations will not be adversely affected by currency fluctuations in the
future.
We Would Lose Revenues and Incur Significant Costs if Our Systems, Our
Products or Our Third-party Systems are Not Year 2000 Compliant
Many currently installed computer systems and software products are coded to
accept or recognize only two digit entries in the date code field. These
systems and software products will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. As a result, computer
systems and software used by many companies and governmental agencies may need
to be upgraded to comply with such Year 2000 requirements or risk system
failure or miscalculations causing disruptions of normal business activities.
The failure of our internal systems, or any material third-party systems, to
be Year 2000 compliant would have a material adverse affect on our business.
With respect to our internal business systems, we are working with the third-
party vendors of such systems to ensure Year 2000 compliance either exists
today or will be achieved through a vendor supplied upgrade in a timely
manner. Our products have been, and continue to be, evaluated for Year 2000
compliance. Many of our products have been found to be compliant today and
others have been found to require modification to be compliant. Programs are
in place and are being further developed to complete such modifications, for
both future shipments and in the customer installed base. The costs of
effecting such modifications are not yet estimable, but we believe they will
not be material. Also being addressed is the potential impact on us of non-
compliance by suppliers, subcontractors, business partners and customers. Even
if our internal systems and products are Year 2000 compliant, any failure of
these third party systems to become Year 2000 compliant could adversely affect
our systems and cause disruption in our normal operations. There can be no
assurance that the Year 2000 issue will not materially and adversely affect us
in the future.
. We May Face Additional risks From the Conversion by Our European
Customers to the Euro
We use the United States dollar as our functional currency. Our policy is to
accept orders from customers in dollars, except for local sales of service and
spare parts. In January 1999, certain member states of the European Union
began a conversion to a common currency, the Euro, which will replace their
local currency. Asyst GmbH, our wholly owned subsidiary, is located in
Germany, a European Union country. Our accounting and administrative systems
are provided by a local outside accounting firm. Their systems are Euro
compliant and the records of our German subsidiary are being maintained in
both German marks and the Euro.
Since January 1999, certain of our customers in European Union countries
that have adopted the Euro, have submitted purchase orders denominated in the
Euro. Those purchase orders have not been accepted by us until they were
modified to indicate the dollar amounts and specified that the orders would be
paid in dollar in the amounts indicated on the modified purchase orders. Our
processes have been modified to invoice those customers in dollars with the
Euro amounts indicated on the face of the invoice to aid the customer in
processing the invoices. We believe that there is significant political
pressure being imposed on companies in European countries to make the Euro the
currency of exchange. There can be no future assurance that maintaining the
dollar as the functional currency for our sales and the business of Asyst GmbH
in the European Union countries will be successful.
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ITEM 2--Properties
The Company's headquarters and principal manufacturing and research and
development activities are located in Northern California in three leased
facilities, one approximately 91,275 square feet, the second approximately
35,360 square feet and the third approximately 45,120 square feet. The Company
also leases offices in Arizona, Maine, Massachusetts, Texas and Washington,
for sales and service support, as well as maintaining one small regional
manufacturing facility in Vermont. Overseas, the Company has sales and service
support offices in leased facilities located in Germany, Japan, Singapore,
South Korea, Taiwan, and the United Kingdom.
ITEM 3--Legal Proceedings
In October 1996, the Company filed a lawsuit in the United States District
Court for the Northern District of California against Jenoptik A.G.
("Jenoptik"), Jenoptik-Infab, Inc. ("Infab"), Emtrak, Inc. ("Emtrak") and
Empak, Inc. ("Empak") alleging infringement of two patents related to the
Company's SMART Traveler System. The Company amended its Complaint in April
1997 to allege causes of action for breach of fiduciary duty against Jenoptik
and Meissner & Wurst, GmbH, and misappropriation of trade secrets and unfair
business practices against all defendants. The Company's Complaint seeks
damages and injunctive relief against further infringement. All defendants
filed counter claims, seeking a judgment declaring the patents invalid,
unenforceable and not infringed. Jenoptik, Infab, and Emtrak also alleged that
the Company has violated federal antitrust laws and engaged in unfair
competition. The Company has denied these allegations. In May 1998, the
Company and Empak stipulated to a dismissal, without prejudice, of their
respective claims and counter claims against each other. In November 1998, the
court granted defendants' motion for partial summary judgment as to most of
the patent infringement claims and invited further briefing as to the
remainder. In January 1999, the court granted the Company's motion for leave
to seek reconsideration of the November summary judgment order and also,
pursuant to a stipulation of the parties, dismissed without prejudice two of
the three antitrust counter claims brought by the defendants. Since then, the
parties stipulated to, and the court has ordered, the dismissal with prejudice
of the defendants' unfair competition and remaining antitrust counterclaim,
and the Company's breach of fiduciary duty, misappropriation of trade secrets
and unfair business practices claims. On June 4, 1999, the court issued an
order by which it granted the Company's motion for reconsideration in the
sense that it considered the merits of the Company's arguments, but decided
that it would not change its prior ruling on summary judgment and would also
grant summary judgment for defendants on the remaining patent infringement
claim. The Company intends to take an appeal. The trial date has since been
vacated and the court has requested briefing, now due on July 12, 1999, on
whether it is obligated to proceed with any remaining matters. While it is not
possible to predict accurately or to determine the eventual outcome of these
matters, the Company believes that the outcome of these legal proceedings will
not have a material adverse effect on the financial position of the Company.
ITEM 4--Submission of Matters to a Vote for Security Holders
Not applicable.
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PART II
ITEM 5--Market for the Registrant's Common Equity and Related Shareholder
Matters
Since September 22, 1993, Asyst's Common Stock, no par value, has been
traded on the Nasdaq National Market ("Nasdaq") under the symbol ASYT. The
price per share reflected in the following table represents the range of high
and low closing prices for the Company's Common Stock on Nasdaq for the
periods indicated (adjusted for two for one stock dividend in August 1997).
<TABLE>
<CAPTION>
High Low
------ ------
<S> <C> <C>
April 1--June 30, 1997...................................... $22.00 $ 9.50
July 1--September 30, 1997.................................. $47.25 $21.63
October 1--December 31, 1997................................ $44.25 $20.00
January 1--March 31, 1998................................... $32.00 $18.63
April 1--June 30, 1998...................................... $25.75 $12.50
July 1--September 30, 1998.................................. $15.00 $ 7.00
October 1--December 31, 1998................................ $21.69 $ 6.19
January 1--March 31, 1999................................... $28.19 $13.75
</TABLE>
There were approximately 175 record holders of the Company's Common Stock as
of March 31, 1999. Asyst has not paid any cash dividends since its inception
and does not anticipate paying cash dividends in the foreseeable future.
ITEM 6--Selected Financial Data
The following table reflects selected summary financial data restated in
fiscal years 1995 and 1996 for the affects of the closure of Asyst Automation,
Inc. (dollars in thousands, except share and per share amounts):
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
------------------------------------------
1995 1996 1997 1998 1999
------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Consolidated Statements of
Operations Data:
Net sales.......................... $34,932 $97,549 $137,520 $165,463 $84,154
Gross profit....................... 17,322 40,903 56,788 73,726 31,465
In-process research and development
of acquired business.............. -- -- 1,335 -- 7,100
Operating income (loss)............ 4,691 11,310 17,910 26,338 (34,029)
Income (loss) from continuing
operations........................ 3,810 7,643 11,408 18,237 (20,979)
Net income (loss).................. 1,240 5,240 (3,257) 16,397 (20,979)
Basic Earnings Per Share:
Income (loss) per share from
continuing operations......... $ 0.51 $ 0.77 $ 1.11 $ 1.61 $ (1.80)
Net income (loss) per share.... 0.17 0.53 (0.32) 1.44 (1.80)
Shares used in per share
calculation................... 7,464 9,880 10,287 11,359 11,653
Diluted Earnings Per share:
Income (loss) per share from
continuing operations......... $ 0.47 $ 0.73 $ 1.09 $ 1.51 $ (1.80)
Net income (loss) per share.... 0.15 0.50 (0.31) 1.36 (1.80)
Shares used in per share
calculation................... 8,078 10,536 10,512 12,101 11,653
Consolidated Balance Sheet Data:
Cash, cash equivalents and short-
term investments.................. $38,947 $14,426 $ 12,021 $ 82,775 $35,496
Working capital.................... 50,845 53,572 52,189 117,868 73,302
Total assets....................... 71,965 90,502 94,079 154,471 119,766
Shareholders' equity............... 57,226 64,090 65,004 130,803 103,802
</TABLE>
18
<PAGE>
ITEM 7--Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
The Company develops, manufactures and markets systems utilizing isolation
technology, material tracking products and factory automation solutions used
primarily in cleanrooms for semiconductor manufacturing. The Company's sales
are tied to capital expenditures at wafer fabrication facilities. The majority
of the Company's revenues in any single quarter is typically derived from
relatively few customers, and the Company's revenues will therefore fluctuate
based on a number of factors, including the timing of significant customer
orders, variations in the mix of products sold and changes in customer buying
patterns. In addition, due to production cycles and customer requirements, the
Company often ships significant quantities of products in the last month of
the quarter. This factor increases the risk of unplanned fluctuations in net
sales since management has limited opportunity to take corrective actions
should a customer reschedule a shipment or otherwise delay an order during the
last month of the quarter.
Fiscal year 1999 has been significantly and adversely impacted by the
worldwide drop in demand for semiconductor devices. The drop in demand
resulted from a dramatic slowdown in the Asian economies and over-capacity of
memory chip manufacturing. In response, many of the Company's customers
slashed capital expenditure budgets by 40 percent or more. The Company's net
sales hit a record $45.2 million for the quarter ended March 31, 1998. Net
sales for the quarter ended June 30, 1998 (the first fiscal quarter of fiscal
year 1999) fell to $34.1 million. Net sales continued to fall to $16.0 million
in the quarter ended September 30, 1998 before rebounding to $16.9 million and
$17.2 million for the quarters ended December 31, 1998 and March 31, 1999,
respectively. In addition, in fiscal year 1999, the Company acquired the
FluoroTrac RFID product line and HDI. The significant decline in net sales and
the new acquisitions required the Company to undertake substantial
restructuring activities to reduce cost and eliminate low margin products.
Nevertheless, the Company experienced a net loss in fiscal year 1999 of $21.0
million compared to a record net income of $16.4 million in fiscal year 1998.
The following table sets forth the percentage of net sales represented by
certain consolidated statements of operations data for the periods indicated:
<TABLE>
<CAPTION>
Fiscal Year Ended
March 31,
---------------------
1997 1998 1999
----- ----- -----
<S> <C> <C> <C>
Net sales.............................................. 100.0 % 100.0 % 100.0 %
Cost of sales.......................................... 58.7 55.4 62.6
----- ----- -----
Gross profit......................................... 41.3 44.6 37.4
----- ----- -----
Operating expenses:
Research and development............................. 6.3 8.0 17.5
Selling, general and administrative.................. 21.0 20.7 45.3
In-process research and development of acquired
business............................................ 1.0 -- 8.4
Restructuring expense................................ -- -- 6.6
----- ----- -----
Total operating expenses............................. 28.3 28.7 77.8
----- ----- -----
Operating income (loss).............................. 13.0 15.9 (40.4)
Other income (expense), net............................ 0.5 1.3 2.7
----- ----- -----
Income (loss) from continuing operations before
provision (benefit) for income taxes.................. 13.5 17.2 (37.7)
Provision (benefit) for income taxes................... 5.2 6.2 (12.8)
----- ----- -----
Income (loss) from continuing operations............... 8.3 11.0 (24.9)
----- ----- -----
Loss from operations of Asyst Automation, Inc., net of
applicable income taxes............................... (4.5) -- --
Loss on closure of Asyst Automation, Inc., net of
applicable income taxes............................... (6.2) (1.1) --
----- ----- -----
Net income (loss)...................................... (2.4)% 9.9 % (24.9)%
===== ===== =====
</TABLE>
19
<PAGE>
Fiscal Years Ended March 31, 1997, 1998, and 1999
Net sales. Net sales in the year ended March 31, 1999 decreased by 49.1
percent to $84.2 million from $165.5 million for the year ended March 31,
1998. Net sales for the year ended March 31, 1997 were approximately $137.5
million. The decrease in sales was consistent across all of the Company's
products. Both the OEM channel and direct fabrication end user channel were
impacted by the worldwide reduction in capital spending budgets of the major
semiconductor manufacturers. Net sales would have been over $6.3 million less
had the Company not acquired the FluoroTrac product line and HDI during the
fiscal year ended March 31, 1999.
For the quarter ended March 31, 1999, the Company's ending backlog was
greater than net sales for that quarter. Beginning in the quarter ended March
31, 1999, many semiconductor manufacturers publicly announced increases in
their capital spending budgets. There is no assurance that this trend in
orders will continue. Furthermore, there is no assurance that orders may not
be cancelled in the future.
The Company's international sales, including the local revenues recorded at
the foreign locations were as follows (dollars in millions):
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
--------------------------------------
1997 1998 1999
----------- ------------ -----------
% of % of % of
$ Sales $ Sales $ Sales
----- ----- ------ ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Taiwan.................................... $43.5 31.6% $ 72.5 43.8% $27.9 33.2%
Singapore................................. 9.4 6.8 13.6 8.2 3.4 4.0
Thailand.................................. 6.6 4.8 -- -- -- --
Korea..................................... 6.1 4.4 -- -- 0.5 0.6
Japan..................................... 8.4 6.2 13.5 8.2 7.8 9.3
Other..................................... -- -- -- -- 0.3 0.4
----- ---- ------ ---- ----- ----
Total Asia.............................. 74.0 53.8 99.6 60.2 39.9 47.5
Europe.................................... 4.6 3.4 5.7 3.4 3.7 4.5
----- ---- ------ ---- ----- ----
Total International..................... $78.6 57.2% $105.3 63.6% $43.6 52.0%
===== ==== ====== ==== ===== ====
</TABLE>
Direct sales to international customers remain a substantial portion of the
Company's sales. During fiscal year 1999, international sales as a percent of
net sales decreased to 52.0 percent from 63.6 percent of net sales in fiscal
year 1998. The drop in international net sales as a percent of net sales
resulted in part due to the acquisition of HDI on July 31, 1998, as HDI had a
lower percentage of sales than the Company. International net sales of robots,
the primary product of HDI represented less than 10 percent of the $6.3
million of robot sales of the Company during fiscal year 1999. In addition, in
fiscal year 1999, the Company experienced a sharp decline in its Asia foundry
sales in response to the slowdown in worldwide demand for semiconductors. For
example, the Company's largest customer in fiscal year 1998 reduced its
purchases of the Company's products from $50.6 million to just $5.1 million
(representing the Company's second largest customer) in fiscal year 1999. In
fiscal year 1999, the Company's largest customer purchased $10.3 million of
products. The largest customer in each year, as measured in net sales, were
Asia based foundries.
The net sales by product or service categories comprising the Company's net
sales for the fiscal years ended March 31, were as follows (dollars in
thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended March
31,
-------------------------
1999 1998 1997
------- -------- --------
<S> <C> <C> <C>
SMIF Systems....................................... $66,609 $145,702 $118,647
SMART Traveler Systems............................. 6,227 14,533 11,145
Robotics........................................... 6,323 -- --
Services & other................................... 4,995 5,228 7,728
------- -------- --------
Total............................................ $84,154 $165,463 $137,520
======= ======== ========
</TABLE>
20
<PAGE>
The Company's competitors are increasingly competing on price. Certain
international competitors receive various forms of government support, ranging
from different forms of financial subsidies to high level diplomatic support.
While the Company has been successful in maintaining market share by competing
on product quality and service value, there is no assurance that the impact of
the competition's actions will not have a negative effect on future sales and
gross margins.
Gross margin. The Company's gross margin was 41.3 percent in fiscal year
1997, 44.6 percent in fiscal year 1998, and 37.4 percent in fiscal year 1999.
The decrease in the gross margin in fiscal year 1999 resulted because of the
49.1 percent drop in net revenues from fiscal year 1998 and the Company's
inability to reduce its manufacturing overhead to compensate for the lower
revenues. The Company also increased its inventory reserves by $2.3 million
during the fiscal year ended March 31, 1999. In addition, significant orders
were received and shipped near the end of each quarter requiring higher levels
of overtime by the Company's employees. Competitive pressures continue to put
pressure on gross margins in spite of continuing efforts to reduce costs
through design changes and manufacturing overhead reductions process
improvements. In fiscal year 1998, gross margins were benefited by record net
revenues and changes in the Company's product mix. The Company's LPP line,
which has a higher gross profit margin than its other products, increased from
22.2 percent of net revenues in fiscal 1997 to 48.2 percent of net revenues in
fiscal 1998. Gross margins on the LPP line in fiscal 1998 improved over the
gross margins in fiscal 1997 because of design improvements directed at
reducing manufacturing costs. The Company expects margins to improve and
return to historical levels as net revenues increase to those achieved in
fiscal years 1997 and 1998. During fiscal year 1999, the Company has operated
a single shift in its manufacturing operations. Given the level of net sales,
it is only using about 60 percent of its manufacturing capacity during that
shift. However, because of pressures on prices brought about by competition,
changes in product mix, the rate of change in net sales, changes in sales
activities, and customer demands for shorter lead times and the introduction
of new products, the Company expects gross margins to fluctuate.
Research and development. Research and development expenses were $8.6
million, $13.3 million and $14.7 million for the years ended March 31, 1997,
1998 and 1999, respectively, representing 6.3 percent, 8.0 percent and 17.5
percent of net sales in those respective periods. The increase in research and
development expense in fiscal year 1999, resulted because of increased
spending for the Company's new SMIF-300 product series, the acquisition of HDI
and continuing enhancements and additions to its 200 mm product line due to
the transition to 300 mm facilities by the semiconductor industry. Research
and development expenses consist of salaries, project materials and other
expenses related to the Company's commitment to ongoing product development
efforts. The Company capitalizes certain legal cost related to its patents.
The Company, to date, has not capitalized costs associated with software
development because such costs incurred to date that are eligible for
capitalization have not been material. The Company expects its research and
development activities and related expenditures to increase in future periods.
Selling, general and administrative. Selling, general and administrative
expenses were $28.9 million or 21.0 percent of net sales, $34.1 million or
20.7 percent of net sales, and $38.2 million or 45.3 percent of net sales for
the years ended March 31, 1997, 1998 and 1999, respectively. Selling and
marketing expenses were $10.2 million or 7.4 percent of net sales, $12.1
million or 7.3 percent of net sales, and $13.2 million or 15.6 percent of net
sales for the same periods. The growth in selling and marketing expenses in
fiscal year 1998 and 1999 are the result of increasing the Company's global
presence and developing new customer relationships presented by the emerging
300 mm technology. The growth in selling and marketing expenses in fiscal year
1999 resulted primarily from the acquisition of HDI and the FluoroTrac product
line.
General and administrative expenses were $18.7 million or 13.6 percent of
net sales, $22.0 million or 13.3 percent of net sales, and $25.0 million or
29.7 percent of net sales for fiscal years 1997, 1998 and 1999, respectively.
In fiscal year 1999, general and administrative expenses increased $3.0
million over the prior year even though net sales decreased 49.1 percent, due
largely from the acquisition of HDI and the FluoroTrac product line. The
Company incurred goodwill amortization related to the two acquisitions of
approximately $1.7 million.
21
<PAGE>
Other general and administrative expenses related to the two acquisitions
added another $1.9 million in the year ended March 31, 1999. In addition, the
Company incurred an additional $4.3 million of legal expenses in connection
with its patent infringement lawsuit (See "Item 3--Legal Proceedings") than it
incurred in the prior year. The Company believes it will incur substantially
lower legal fees in connection with this lawsuit during the year ending March
31, 2000. These increases in general and administrative expenses were offset
by $2.0 million of expenses charged to its warranty reserves for warranty
labor in fiscal year 1999. In prior years, expenses related to warranty
activities were charged to general and administrative expense. In response to
the 49.1 percent reduction in net sales, the Company reduced general and
administrative expense by an additional $2.9 million.
Restructuring charge. In the year ended March 31, 1999 the Company underwent
significant restructuring of its operations to reduce its cost structure in
response to the 49.1 percent reduction in net sales. The Company also is in
the process of restructuring activities in Japan and Europe to reposition its
activities to compete more effectively. In addition, the Company is
repositioning its product offerings to eliminate low margin products, or
software services that have high risks of failure. The following table
summarizes restructuring charges by geographic region (dollars in thousands):
<TABLE>
<CAPTION>
Cash outlays
as of Ending
Expensed March 31, 1999 Accrual
-------- --------------- -------
<S> <C> <C> <C>
Europe
Severance.................................... $1,732 $1,050 $ 682
Facilities................................... 336 235 101
Other........................................ 437 130 307
Japan
Severance.................................... 150 75 75
Other........................................ 35 -- 35
US
Severance.................................... 700 500 200
Facilities................................... 550 300 250
Other........................................ 1,002 102 900
Non-cash 600 N/A N/A
------ ------ ------
Total........................................ $5,542 $2,392 $2,550
====== ====== ======
</TABLE>
The restructurings have resulted in terminating the employment of 110 U.S.
employees and 30 international employees. Management had formal plans for each
of the activities undertaken and all affected employees were notified of the
actions. As of March 31, 1999, all of the employees affected have been
terminated except one in Japan and eight in Europe. All of those employees
were informed prior to March 31, 1999 and the Company expects to complete the
termination process of these employees by July 3, 1999. Facilities impacted by
these restructuring activities either have been vacated as of March 31, 1999
or will be vacated by July 3, 1999. Other costs include expenses incurred for
consultants and legal services, equipment or service buy-out cost and any
estimated incremental costs associated with the closure of facilities or
completion of other contractual obligations.
In-process research and development of acquired business and product
line. During the year ended March 31, 1999, the Company completed its
acquisition of the FluoroTrac product line and HDI. HDI was accounted for
using the purchase method of accounting during the quarter ended September 30,
1998. In connection with the purchase price allocation of both FluoroTrac and
HDI, the Company recorded a write-off of approximately $1.2 and $5.9 million,
respectively, of in-process research and development costs in the quarters
ended June 30, 1998 and September 30, 1998, respectively. The decision to
write-off these costs was primarily due to the fact that the acquired in-
process research and development related to the FluoroTrac product line and
HDI had not yet reached technological feasibility and had no perceived
alternative future uses. This technology
22
<PAGE>
is still being developed. Additionally, in November 1996, the Company
completed the acquisition of Radiance Systems, Inc. ("RSI") which was
accounted for as a purchase in the quarter ended December 31, 1998. In
connection with the purchase price allocation, the Company recorded a write-
off of $1.3 million of in-process research and development in the quarter
ended December 31, 1996, as the acquired in-process research and development
had not yet reached technological feasibility and had no alternative future
uses.
Other income (expense), net. Other income (expense), net includes interest
income, interest expense, foreign exchange gain and loss (which has not been
material), and royalty income. The primary components are interest income and
royalties. In fiscal year 1997, other income (expense), net was less than 1.0
percent of net sales. In fiscal year 1998, other income (expense), net
increased to 1.3 percent of net sales primarily because of the increase in
interest income on the significantly higher cash position of the Company
throughout the year. The improved cash and short-term investment position was
the result of improved receivable collection and a private placement of
1,000,000 shares of the Company's common stock in September 1997. In fiscal
year 1999, other income (expense), net was 2.7 percent of net sales. The
increase as a percentage of net sales was due largely to the 49.1 percent
decrease in 1999.
Provision (benefit) for income taxes. In fiscal years 1997, 1998 and 1999
the effective tax rate was 39 percent, 36 percent and 34 percent,
respectively. In fiscal year 1999, the Company experienced a net operating
loss, which generated a tax benefit of approximately $10.5 million. The
benefit for income taxes was impacted by foreign income and withholding taxes
in excess of the statutory rates, the lack of Foreign Sales Corporation
("FSC") benefit due to net operating losses during the current year and
limitations on State net operating loss carryforwards. However, the Company is
anticipating the recognition of increased tax benefits, over those recognized
in prior years, due to the increase in tax benefits related to tax exempt
income and other available tax credits. The Company has recorded a deferred
tax asset of approximately $19.1 million, of which $10.5 million relates to
net operating losses and tax credits generated during the current year. The
Company will be able to recognize approximately $5.0 million of the deferred
tax asset immediately following the filing of carryback claims with Federal
and various State taxing authorities, which will be completed in the near
future. Realization of the remaining deferred tax asset is dependent on
generating sufficient future taxable income. Although realization is not
assured, management believes that it is more likely than not that the deferred
tax assets will be realized. Although the deferred tax asset is considered
realizable, actual amounts could be reduced if sufficient future taxable
income is not achieved. In fiscal 1998, the Company was able to recognize
certain tax benefits related to FSC benefit and tax exempt income. The
effective rate in fiscal 1997 was impacted by the write-off of the in-process
research and development expenses related to the acquisition of RSI.
Discontinued operations. In January 1997, the Company adopted a formal plan
to close Asyst Automation Inc. ("AAI") by the end of September 1997, which was
accounted for in the third quarter of fiscal year 1997. In December 1997, it
was determined that an additional reserve of $1.8 million (net of a tax
benefit of $1.0 million) was necessary. All of the amounts reserved in
connection with the closure of AAI have been used as of March 31, 1999. In
September 1997, the Company entered into an asset purchase agreement with Palo
Alto Technologies, Inc. ("PAT"), pursuant to which the Company sold to PAT (a
related party) certain intellectual property rights and office equipment which
were owned or licensed by AAI. See Note 9 of "Notes to Consolidated Financial
Statements."
23
<PAGE>
Selected Quarterly Financial Data
The following table presents certain unaudited consolidated quarterly
financial information for the eight quarters ended March 31, 1999. In the
opinion of the Company's management, this information has been prepared on the
same basis as the audited consolidated financial statements appearing
elsewhere in this Form 10-K and includes all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the unaudited
quarterly results of operations set forth herein. Significant fluctuations
have occurred in the quarterly results of operations for the periods ended
June 30, 1998, September 30, 1998, December 31, 1998 and March 31, 1999 from
those of comparable quarters in the prior year, principally due to the
conditions as discussed in the preceding sections. Due to the decrease in the
Company's sales volume that resulted from world-wide reductions in capital
spending budgets of the major semiconductor manufacturers, the Company was
unable to reach certain economies of scale needed to reduce overhead and other
spending to be consistent with the rates associated with the larger sales
volume that was experienced by the Company during comparable quarters in the
prior fiscal year. As the Company's quarterly results have been subject to
fluctuation in the past, the operating results for any quarter are not
necessarily indicative of results for any future period. The first three-
quarters of Asyst's fiscal year end on a Saturday, and thus the actual date of
the quarter-end is usually different from the month-end dates used throughout
this Form 10-K. (dollars in thousands, except for share and share amounts)
<TABLE>
<CAPTION>
Fiscal Quarter Ended Fiscal Quarter Ended
---------------------------------- ----------------------------------
Dec. Mar. Jun. Dec. Mar.
Jun. 30, Sep. 30, 31, 31, 30, Sep. 30, 31, 31,
1997 1997 1997 1998 1998 1998 1998 1999
-------- -------- ------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $37,686 $40,312 $42,310 $45,155 $34,073 $ 15,963 $16,871 $17,247
Cost of sales........... 21,314 22,588 23,374 24,461 17,603 13,086 10,387 11,613
------- ------- ------- ------- ------- -------- ------- -------
Gross profit........... 16,372 17,724 18,936 20,694 16,470 2,877 6,484 5,634
Operating Expenses:
Research and
development........... 2,744 3,294 3,350 3,902 3,779 3,613 3,575 3,721
Selling, general and
administrative........ 8,710 8,344 8,541 8,503 9,579 11,402 9,457 7,726
In-process research and
development of
acquired business..... -- -- -- -- 1,200 5,900 -- --
Restructuring expenses.. -- -- -- -- -- 2,922 -- 2,620
------- ------- ------- ------- ------- -------- ------- -------
Total operating
expenses.............. 11,454 11,638 11,891 12,405 14,558 23,837 13,032 14,067
------- ------- ------- ------- ------- -------- ------- -------
Operating (loss)
income................ 4,918 6,086 7,045 8,289 1,912 (20,960) (6,548) (8,433)
Other income (expense),
net.................... 297 698 1,095 67 551 935 542 215
------- ------- ------- ------- ------- -------- ------- -------
Income (loss) from
continuing operations
before provision for
income taxes........... 5,215 6,784 8,140 8,356 2,463 (20,025) (6,006) (8,218)
Provision (benefit) for
income taxes........... 1,878 2,442 2,930 3,008 887 (6,858) (2,042) (2,794)
------- ------- ------- ------- ------- -------- ------- -------
Income (loss) from
continuing operations.. 3,337 4,342 5,210 5,348 1,576 (13,167) (3,964) (5,424)
------- ------- ------- ------- ------- -------- ------- -------
Loss from operations of
Asyst Automation, Inc.,
net of applicable
income taxes........... -- -- -- -- -- -- -- --
Loss on closure of Asyst
Automation, Inc., net
of applicable income
taxes.................. -- -- (1,840) -- -- -- -- --
------- ------- ------- ------- ------- -------- ------- -------
Net income (loss)....... $ 3,337 $ 4,342 $ 3,370 $ 5,348 $ 1,576 $(13,167) $(3,964) $(5,424)
======= ======= ======= ======= ======= ======== ======= =======
Basic Earnings Per
Share:
Income per share from
continuing operations. $ 0.31 $ 0.40 $ 0.44 $ 0.44 $ 0.13 $ (1.13) $ (0.35) $ (0.47)
======= ======= ======= ======= ======= ======== ======= =======
Net income (loss) per
share................. $ 0.31 $ 0.40 $ 0.28 $ 0.44 $ 0.13 $ (1.13) $ (0.35) $ (0.47)
======= ======= ======= ======= ======= ======== ======= =======
Shares used in per
share calculation..... 10,662 10,801 11,925 12,047 12,078 11,656 11,365 11,512
======= ======= ======= ======= ======= ======== ======= =======
Diluted Earnings Per
Share:
Income per share from
continuing operations. $ 0.30 $ 0.37 $ 0.41 $ 0.42 $ 0.12 $ (1.13) $ (0.35) $ (0.47)
======= ======= ======= ======= ======= ======== ======= =======
Net income (loss) per
share................. $ 0.30 $ 0.37 $ 0.26 $ 0.42 $ 0.12 $ (1.13) $ (0.35) $ (0.47)
======= ======= ======= ======= ======= ======== ======= =======
Shares used in per share
calculation............ 11,066 11,728 12,853 12,759 12,634 11,656 11,365 11,512
======= ======= ======= ======= ======= ======== ======= =======
</TABLE>
24
<PAGE>
New Accounting Pronouncement
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
establishes accounting and reporting standards requiring that every derivative
instrument be recorded in the balance sheet as either an asset or liability
measured at its fair value. It requires that changes in the derivative's fair
value be recognized currently in earnings unless specific hedge accounting
criteria are met and that a company must formally document, designate and
assess the effectiveness of transactions that receive hedge accounting. SFAS
No. 133 is effective for fiscal years beginning after June 15, 2000 and cannot
be applied retroactively. The Company has not yet determined the effect SFAS
No. 133 will have on its financial position, results of operations or cash
flows.
Liquidity and Capital Resources
Since its inception, the Company has funded its operations primarily through
the sale of equity securities and public stock offerings in fiscal years 1994,
1996 and 1998, customer pre-payments, bank borrowings and cash generated from
operations. The Company recorded net proceeds of $9.2 million in its initial
public offering in September 1993. In February 1995, the Company raised an
additional $34.4 million in net proceeds from a secondary public offering. On
September 30, 1997, the Company completed a private placement of 1.0 million
shares of its common stock, generating net proceeds to the Company of $42.9
million. As of March 31, 1999, the Company had approximately $6.1 million in
cash and cash equivalents, $29.4 million in short-term investments and working
capital of approximately $73.3 million. In June 1998, the Board of Directors
of the Company authorized a stock repurchase program to repurchase up to
2,000,000 shares of the Company's common stock. As of March 31, 1999, the
Company had repurchased 865,800 shares of common stock at an aggregate cost of
approximately $11.5 million. In May 1999, the Company announced it had
cancelled the repurchase program and completed a private placement of 625,000
shares of its Common Stock to eight institutional investors. The private
placement, was priced at $18.00 per share, for aggregate proceeds to the
Company of approximately $11.3 million. The purpose of the private placement
was to untaint shares of Common Stock to obtain pooling of interests
accounting treatment for the acquisition of PST. During the second, third and
fourth quarters of fiscal 1999, the Company issued 3,137 shares of common
stock in connection with its employee stock programs. The proceeds will be
used for general corporate purposes.
During fiscal year 1999, the Company used $2.8 million in cash to acquire
the net assets of the FluoroTrac product line and used $12.4 million in cash
in connection with the acquisition of HDI. In addition, the Company used $12.5
of cash to pay the debt assumed as part of the HDI acquisition. The Company
also used $4.9 million to modify its facilities and purchase new equipment and
furniture used in its operations. The Company sold $41.1 million of its short-
term investments to fund its cash requirements.
Although the Company cannot anticipate with certainty the effect of
inflation on its operations, to date inflation has not had a material impact
on the Company's net sales or results of operations. The functional currency
of the Company is the U.S. dollar. To date, the impact of currency translation
gains or losses has not been material to the Company's sales or results of
operations.
The nature of the semiconductor industry, combined with the current economic
environment, make it very difficult for the Company to predict future
liquidity requirements with certainty. However, the Company believes that its
existing cash and cash equivalents, short-term investments, cash generated
from operations and existing sources of working capital will be adequate to
finance its operations through the fourth quarter of fiscal year 2000.
Interest Rate Risk. The Company's exposure to market risk for changes in
interest rates relate primarily to the investment portfolio. The Company does
not use derivative financial instruments in its investment portfolio. The
Company's investment portfolio consists of short-term fixed income securities
and by policy is limited by the amount of credit exposure to any one issuer.
As stated in its policy, the Company ensures the safety and preservation of
its invested principal funds by limiting default risk, market risk and
reinvestment risk. The Company mitigates default risk by investing in safe and
high-credit quality securities and by constantly
25
<PAGE>
positioning its portfolio to respond appropriately to a significant reduction
in a credit rating of any investment issuer, guarantor or depository. The
portfolio includes only marketable securities with active secondary or resale
markets to ensure portfolio liquidity. These securities, like all fixed income
instruments, carry a degree of interest rate risk. Fixed rate securities have
their fair market value adversely affected due to rise in interest rates.
The table below presents principal amounts and related weighted average
interest rates for the investment portfolio at March 31, 1999. All investments
mature, by policy, in twelve months or less (dollars in thousands).
<TABLE>
<CAPTION>
Average
Carrying Interest
Amount Rate
-------- --------
<S> <C> <C>
CASH EQUIVALENTS:
U.S. corporate securities............................... $ -- -- %
------- ----
Total Cash Equivalents................................ -- -- %
------- ----
SHORT-TERM INVESTMENTS:
U.S. corporate debt securities.......................... $16,600 3.70%
Debt securities issued by States of the Unites States
and
political subdivisions of the States................... 12,780 3.58%
Foreign securities...................................... -- -- %
------- ----
Total Cash Equivalents................................ 29,380 3.65%
------- ----
Total Cash Equivalents................................ $29,380 3.65%
======= ====
</TABLE>
Foreign Currency Exchange Risk. The Company is engaged in international
operations and transacts business in various foreign countries. The primary
foreign currency cash flows are located in Europe, Japan, Singapore and
Taiwan. Although the Company and its subsidiaries operate and sell products in
various global markets, substantially all sales are denominated in the U.S.
dollar, therefore reducing the foreign currency risk factor. Currently, the
Company does not employ a foreign currency hedge program utilizing foreign
currency forward exchange contracts. To date, the foreign currency
transactions and exposure to exchange rate volatility have not been
significant. There can be no assurance that foreign currency risk will not be
a material impact on the financial position, results of operations or cash
flow of the Company in the future.
Year 2000 Compliance Initiative
What is commonly referred to as the Year 2000 ("Y2K") issue arises because
many computer systems use only two digits to represent the year portion of a
date. As a result, these systems may fail to properly calculate dates and
date-related computations at, around or after January 1, 2000, resulting in
erroneous results or system failures.
In conjunction with third-party expert consultants, the Company launched a
comprehensive program to assess and address its potential exposures. The
program is substantially complete with the exception of PST as noted below.
With respect to its internal business systems, the Company is working with
the third-party vendors of such systems to ensure Year 2000 compliance either
exists today or will be achieved via vendor supplied upgrade in a timely
manner. The Company's principal enterprise resource planning system has been
certified Year 2000 compliant by its manufacturer and has passed in-house
compliance testing. The Company believes that except for a systematic failure
outside its control, such as a prolonged loss of electrical power or telephone
service, Year 2000 problems of these third parties will not have a material
impact on operations.
The Company's products have been, and continue to be, evaluated for Year
2000 compliance. Many have been found to be compliant today and others have
been found to require modest modification to be compliant. Programs are in
place and are being further developed to complete such modifications, for both
future shipments and in the customer installed base.
26
<PAGE>
Also being assessed is the potential impact to the Company of non-compliance
by suppliers, subcontractors, business partners and customers. As part of that
assessment, the Company has requested, in writing, assurances from these third
parties that they are Year 2000 compliant. Some of these third parties have
indicated that they are Year 2000 compliant. Others are still in the process
of their own compliance reviews. If the Company identifies that a third party
has a material Year 2000 compliance issue, it will work with the third party
to resolve the issue or identify another supplier or service provider that is
Year 2000 compliant.
With the acquisition of PST on June 2, 1999, additional products and systems
must be integrated to the Company's Year 2000 Compliance Program. These
efforts are expected to be completed in a timely manner.
The Company's total incremental cost of assessing and remediating its
systems and product Y2K issues is estimated to be between $500,000 and $1
million. Approximately $200,000 has been expended as of March 31, 1999, with
between $200,000 and $350,000 in capital expenditures planned for the first
nine months of fiscal year 2000.
While the Company is engaged in an ongoing Year 2000 assessment, it has not
developed any contingency plans at this time. The completion of the ongoing
assessment will include a determination of the need for, and nature and extent
of any contingency plans.
ITEM 7A--Quantitative and Qualitative Disclosures Regarding Market Risks
The information required by Item 7A is incorporated by reference from the
section entitled "Disclosures About Market Risks" found above, under Item 7,
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations."
ITEM 8--Financial Statements and Supplementary Data
The Company's Financial Statements and notes thereto and Financial Statement
Schedules appear on pages 34-52 of this Form 10-K.
ITEM 9--Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
27
<PAGE>
PART III
ITEM 10--Directors and Executive Officers of the Registrant
The information required by this item concerning the Company's directors and
executive officers is incorporated by reference from the Company's Definitive
Proxy Statement filed not later than 120 days following the close of the
fiscal year ("1999 Proxy Statement").
ITEM 11--Executive Compensation
The information required under this item is hereby incorporated by reference
from the Company's 1999 Proxy Statement.
ITEM 12--Security Ownership of Certain Beneficial Owners and Management
The information required under this item is hereby incorporated by reference
from the Company's 1999 Proxy Statement.
ITEM 13--Certain Relationships and Related Transactions
The information required under this item is hereby incorporated by reference
from the Company's 1999 Proxy Statement.
28
<PAGE>
PART IV
ITEM 14--Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) (1) Index to Financial Statements
The Financial Statements required by this item are submitted in a
separate section beginning on page 32 of this report.
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants.............................. 31
Consolidated Balance Sheets........................................... 32
Consolidated Statements of Operations................................. 33
Consolidated Statements of Shareholders' Equity....................... 34
Consolidated Statements of Cash Flows................................. 35
Notes to Consolidated Financial Statements............................ 36
</TABLE>
(2) Schedule II Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable or the
required information is shown in the Financial Statements or the notes
thereto.
(3) Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
----------- -----------------------
<C> <S>
2.1 (iv) Stock Purchase Agreement among the Company, Hine Design
Incorporated and the Shareholders of Hine Design Incorporated,
dated July 2, 1998.
2.2 (vi) Agreement and Plan of Merger and Reorganization among the
Company, PSTI Merger Sub Acquisition Corp., Progressive System
Technologies, Inc., Advent International Investor II,
Envirotech Fund I and Global Private Equity II, dated as of
June 2, 1999.
3.1 (i) Amended and Restated Articles of Incorporation of the Company.
3.2 (i) Bylaws of the Company
4.1 (iii) Common Stock Purchase Agreement, dated September 25, 1997.
4.2 (v) Rights Agreement among the Company and Bank of Boston, N. A.,
as Rights Agents, dated June 25, 1995.
4.3 (vi) Common Stock Purchase Agreement, dated as of May 26, 1999
10.1 (i) Form of Indemnity Agreement entered into between the Company
and its directors and officers.
10.2 (i)(x) Company's 1993 Stock Option Plan and related form of stock
option agreement.
10.3 (i)(x) Company's 1993 Employee Stock Purchase Plan and related
offering document.
10.4 (i)(x) Company's 1993 Non-Employee Directors' Stock Option Plan and
related offering document.
10.5 (i) Manufacturing License Agreement between the Company and Tokyo
Electron Limited, dated January 10, 1993.
10.6 (i) Distributor Agreement between the Company and Tokyo Electron
Limited, dated January 10, 1993.
10.7 (i) Operating Agreement between the Company and M&W, dated
November 7, 1990.
10.8 (i) Hewlett-Packard SMIF License Agreement dated June 6, 1984.
10.9 (viii) Lease Agreement between the Company and the Kato Road Partners
dated February 16, 1995.
10.10(viii) Sublease Agreement between the Company and the Kato Road
Partners dated February 16, 1995.
10.11(vii) Asset Purchase Agreement between Palo Alto Technologies, Inc.,
the Company and Asyst Automation, Inc., dated September 30,
1997.
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------------ -----------------------
<C> <S>
10.12(ix)(x) Loan Agreement A and Promissory Note Secured by Deed of Trust
between the Company and Terry Moshier, all dated August 1,
1997.
10.13(ix)(x) Loan Agreement B, Promissory Note, and Loan Pledge Agreement
between the Company and Terry Moshier, all dated August 1,
1997.
10.14(x) Secured Promissory Note between the Company and Dennis
Riccio, dated November 16, 1998.
10.15(x) Secured Promissory Note between the Company and Dennis
Riccio, dated February 1, 1999.
21.1 (ii) Subsidiaries of the Company.
23.1 Consent of Arthur Andersen LLP.
27 Financial Data Schedule (Exhibit 27 is submitted as an
exhibit only in the electronic format of this Annual Report
on Form 10-K submitted to the Securities and Exchange
Commission.).
</TABLE>
(b) The Company filed no reports on Form 8-K with the Securities Exchange
Commission during the quarter ended March 31, 1999.
(c) See Exhibits listed under Item 14 (a)(3)
(d) The Financial Statement schedules required by this item are listed
under Item 14 (a)(2).
- --------
(i) Incorporated by reference to the Company's Registration Statement on
Form S-1 (No. 33-66184), as amended.
(ii) Incorporated by reference to the Company's Registration Statement on
Form S-1 (No. 33-88246).
(iii) Incorporated by reference to the Company's 8-K filed with the Securities
Exchange Commission on October 10, 1997.
(iv) Incorporated by reference to the Company's 8-K filed with the Securities
Exchange Commission on August 14, 1998.
(v) Incorporated by reference to the Company's 8-K filed with the
Securities Exchange Commission on June 29, 1998.
(vi) Incorporated by reference to the Company's 8-K filed with the
Securities Exchange Commission on June 18, 1999.
(vii) Incorporated by reference to the Company's 10-Q; quarter ended
September 30, 1997 (Confidential treatment granted).
(viii) Incorporated by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended March 31, 1995.
(ix) Incorporated by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended March 31, 1998.
(x) Management contract/compensation plan, contract or arrangement.
30
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Asyst Technologies, Inc.:
We have audited the accompanying consolidated balance sheets of Asyst
Technologies, Inc. (a California corporation) and subsidiaries as of March 31,
1999 and 1998, and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended March 31, 1999. These financial statements and the schedule referred to
below are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits 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 Asyst Technologies, Inc.
and subsidiaries as of March 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period
ended March 31, 1999, in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed under Item 14(a) is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in our audits
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
San Jose, California
May 7, 1999 (except for the matter
discussed in Note 15, as to which
the date is June 2, 1999)
31
<PAGE>
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share amounts)
ASSETS
<TABLE>
<CAPTION>
March 31,
------------------
1999 1998
-------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................ $ 6,116 $ 12,288
Short-term investments................................... 29,380 70,487
Accounts receivable, net of allowances for doubtful
accounts of $1,496
and $1,100 in 1999 and 1998, respectively............... 13,875 26,534
Inventories.............................................. 17,341 18,851
Deferred tax asset....................................... 19,142 7,697
Prepaid expenses and other............................... 3,412 4,241
Net current assets of discontinued operations............ -- 1,438
-------- --------
Total current assets................................... 89,266 141,536
-------- --------
PROPERTY AND EQUIPMENT:
Leasehold improvements................................... 4,592 4,039
Machinery and equipment.................................. 11,074 5,842
Office equipment, furniture and fixtures................. 12,472 11,265
-------- --------
28,138 21,146
Less--Accumulated depreciation and amortization.......... (16,490) (10,013)
-------- --------
11,648 11,133
OTHER ASSETS, net of accumulated amortization of
$4,021 and $1,414 in 1999 and 1998, respectively.......... 18,852 1,802
-------- --------
$119,766 $154,471
======== ========
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable.......................................... $ 4,403 $ 8,671
Accrued liabilities and other............................. 9,079 13,124
Customer deposits......................................... 1,806 1,267
Income taxes payable...................................... 676 606
-------- --------
Total current liabilities............................... 15,964 23,668
-------- --------
COMMITMENTS AND CONTINGENCIES (See Note 6 and 14):
SHAREHOLDERS' EQUITY:
Preferred Stock, no par value
Authorized shares--4,000,000
Outstanding shares--none................................ -- --
Common Stock, no par value
Authorized shares--20,000,000
Outstanding shares--11,528,864 and 12,064,767 shares in
1999
and 1998, respectively................................. 111,927 116,347
Retained earnings (deficit)............................... (8,125) 14,456
-------- --------
Total shareholders' equity.............................. 103,802 130,803
-------- --------
$119,766 $154,471
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
32
<PAGE>
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Fiscal Year Ended March
31,
----------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
NET SALES........................................ $ 84,154 $165,463 $137,520
COST OF SALES.................................... 52,689 91,737 80,732
-------- -------- --------
Gross profit................................... 31,465 73,726 56,788
-------- -------- --------
OPERATING EXPENSES:
Research and development....................... 14,688 13,290 8,629
Selling, general and administrative............ 38,164 34,098 28,914
In-process research and development of acquired
business...................................... 7,100 -- 1,335
Restructuring.................................. 5,542 -- --
-------- -------- --------
Total operating expenses..................... 65,494 47,388 38,878
-------- -------- --------
Operating income (loss)...................... (34,029) 26,338 17,910
-------- -------- --------
OTHER INCOME (EXPENSE):
Interest income................................ 2,261 1,391 810
Other income (expense)......................... (18) 766 (139)
-------- -------- --------
Other income (expense), net.................. 2,243 2,157 671
-------- -------- --------
Income (loss) from continuing operations
before provision (benefit) for income taxes
............................................ (31,786) 28,495 18,581
PROVISION (BENEFIT) FOR INCOME TAXES............. (10,807) 10,258 7,173
-------- -------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS......... (20,979) 18,237 11,408
DISCONTINUED OPERATIONS:
Loss from operations of Asyst Automation, Inc.,
Net of applicable income taxes................ -- -- (6,092)
Loss on closure of Asyst Automation, Inc., Net
of applicable income taxes.................... -- (1,840) (8,573)
-------- -------- --------
NET INCOME (LOSS)................................ $(20,979) $ 16,397 $ (3,257)
======== ======== ========
BASIC EARNINGS (LOSS) PER SHARE:
Income (loss) per share from continuing
operations.................................... $ (1.80) $ 1.61 $ 1.11
======== ======== ========
Net income (loss) per share.................... $ (1.80) $ 1.44 $ (0.32)
======== ======== ========
DILUTED EARNINGS (LOSS) PER SHARE:
Income (loss) per share from continuing
operations.................................... $ (1.80) $ 1.51 $ 1.09
======== ======== ========
Net income (loss) per share.................... $ (1.80) $ 1.36 $ (0.31)
======== ======== ========
SHARES USED IN THE PER SHARE CALCULATION:
Basic earnings (loss) per share................ 11,653 11,359 10,287
======== ======== ========
Diluted earnings (loss) per share.............. 11,653 12,101 10,512
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
33
<PAGE>
ASYST TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in thousands, except share amounts)
<TABLE>
<CAPTION>
Repurchased
Common Stock Shares Retained Total
------------------- ------------------ Earnings Shareholders'
Shares Amount Shares Amount (Deficit) Equity
---------- -------- -------- -------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, MARCH 31, 1996. 10,022,346 $ 62,774 -- $ -- $ 1,316 $ 64,090
Common stock used for
exercise of stock
options.............. 224,920 1,149 -- -- -- 1,149
Stock issued for
acquisition.......... 259,480 2,235 -- -- -- 2,235
Employee stock
purchase plan........ 88,500 640 -- -- -- 640
Tax benefit realized
from activity in
employee stock option
plans................ -- 147 -- -- -- 147
Net loss.............. -- -- -- -- (3,257) (3,257)
---------- -------- -------- -------- -------- --------
BALANCE, MARCH 31, 1997. 10,595,246 66,945 -- -- (1,941) 65,004
Common stock used for
exercise of stock
options.............. 385,841 3,313 -- -- -- 3,313
Common stock used for
private Placement.... 1,000,000 42,920 -- -- -- 42,920
Employee stock
purchase plan........ 83,680 928 -- -- -- 928
Tax benefit realized
from activity in
employee stock option
plans................ -- 2,241 -- -- -- 2,241
Net income............ -- -- -- -- 16,397 16,397
---------- -------- -------- -------- -------- --------
BALANCE, MARCH 31, 1998. 12,064,767 116,347 -- -- 14,456 130,803
Repurchased common
stock................ -- -- (865,800) (11,472) -- (11,472)
Common stock used for
exercise of stock
options.............. 25,685 178 184,817 2,450 (1,499) 1,129
Stock options issued
in acquisition....... -- 1,900 -- -- -- 1,900
Employee stock
purchase plan........ 67,523 725 51,872 687 (103) 1,309
Tax benefit realized
from activity in
employee stock option
plans................ -- 1,112 -- -- -- 1,112
Net loss.............. -- -- -- -- (20,979) (20,979)
---------- -------- -------- -------- -------- --------
BALANCE, MARCH 31, 1999. 12,157,975 $120,262 (629,111) $ (8,335) $ (8,125) $103,802
========== ======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
34
<PAGE>
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
------------------------------
1999 1998 1997
--------- --------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................. $ (20,979) $ 16,397 $ (3,257)
Adjustments to reconcile net income (loss) to
net cash provided by (used by) operating
activities--
Loss from operations of discontinued
operations................................. -- -- 6,092
Loss on closure of discontinued operations.. -- 1,840 8,573
Changes in net current assets of
discontinued operations.................... 1,438 (529) (8,178)
Depreciation and amortization expense....... 7,169 4,680 2,641
Change in provision for doubtful accounts... (320) 1,955 (300)
Non-cash restructuring expense.............. 784 -- --
Write-down of inventories................... 1,837 -- --
Tax benefit associated with employee stock
option plans............................... 1,112 2,241 147
Purchased in-process research and
development................................ 7,100 -- 1,335
Changes in assets and liabilities, net of
acquisition of FluoroTrac(R) product line and
Hine Design Incorporated:
Accounts receivable......................... 14,344 3,566 (4,711)
Inventories................................. 3,415 2,962 (74)
Deferred tax asset.......................... (11,445) 3,902 (6,051)
Prepaid expenses and other.................. 167 (3,214) 1,317
Other assets, net........................... (551) (10) (546)
Accounts payable............................ (5,148) (4,721) 4,165
Accrued liabilities and other............... (5,129) 2,919 4,932
Customer deposits........................... 539 (1,701) (5,970)
Income taxes payable........................ 70 (1,904) (685)
--------- --------- --------
Net cash provided by (used by) operating
activities............................... (5,597) 28,383 (570)
--------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments........... (38,680) (326,737) (7,000)
Sale of short-term investments................ 79,787 257,250 8,005
Purchase of property and equipment, net....... (4,942) (4,790) (3,217)
Cash used in the acquisition of the FluoroTrac
product line................................. (2,794) -- --
Cash used in the acquisition of Hine Design
Incorporated................................. (12,433) -- --
--------- --------- --------
Net cash provided by (used by) investing
activities............................... 20,938 (74,277) (2,212)
--------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash used in the reduction of debt assumed in
the acquisition of Hine Design Incorporated.. (12,479) -- --
Issuance of common stock...................... 2,438 47,161 1,789
Cash used to repurchase common stock.......... (11,472) -- --
--------- --------- --------
Net cash provided by (used by) financing
activities............................... (21,513) 47,161 1,789
--------- --------- --------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS.................................... (6,172) 1,267 (993)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR.... 12,288 11,021 12,014
--------- --------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR.......... $ 6,116 $ 12,288 $ 11,021
========= ========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
35
<PAGE>
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION OF THE COMPANY:
Asyst Technologies, Inc. (the "Company") was incorporated in California on
May 31, 1984, for the purpose of designing, developing, manufacturing and
marketing minienvironment systems utilized primarily in clean rooms for
semiconductor manufacturing. These systems are designed to reduce
contamination of in-process wafers by isolating processing equipment and
wafers in ultra clean minienvironments within a cleanroom production facility.
In July 1998, the Company acquired 100 percent of the common stock of Hine
Design Incorporated ("HDI"), a Delaware Corporation in a transaction accounted
for using the purchase method of accounting. HDI manufactures robots used
primarily in tools supplied by original equipment manufacturers ("OEMs") to
semiconductor manufacturers. (See Note 12).
In January 1997, the Company adopted a formal plan to discontinue the
operations of its subsidiary, Asyst Automation, Inc. ("AAI"), which
manufactured interbay automation products that automate the transport, storage
and handling of individual silicon wafers and other wafer containers during
the semiconductor manufacturing process. The consolidated statements and the
related notes to the consolidated financial statements and supplemental data
have been adjusted and restated to reflect the results of operations and net
assets of AAI as discontinued operations in the quarter ended December 31,
1996 (See Note 9).
Asyst Software, Inc. ("ASI") was incorporated in the state of Delaware in
January 1996. The Company develops software integration solutions to tie OEM
tools to the manufacturing facilities operating system and to automate
material control throughout a semiconductor fabrication facility. In November
1996, the Company through its subsidiary, ASI, acquired Radiance Systems, Inc.
("RSI") (See Note 10). In September 1998, through a plan to restructure its
operations (See Note 4), the Company consolidated the activities related to
its software business.
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All material intercompany
accounts and transactions have been eliminated in consolidation. 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.
Actual results may differ from those estimates.
2. SIGNIFICANT ACCOUNTING POLICIES:
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less from the date of purchase to be cash and cash
equivalents. The carrying value of the cash equivalents approximates their
current fair market value.
Short-term Investments
As of March 31, 1999 and 1998, the Company's short-term investments consist
of liquid debt investments with maturities, at the time of purchase, greater
than three months and less than one year. All such investments have been
classified as "available-for-sale" and are carried at fair value, with
unrealized holding gains and losses, net of taxes reported, which have not
been material to date, as a separate component of shareholders' equity. The
cost of the debt security is adjusted for amortization of premiums and
accretion of discounts to maturity. Such amortization, interest income,
realized gains and losses and declines in value that are considered
36
<PAGE>
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
to be other than temporary, are included in other income (expense), net, on
the accompanying consolidated statements of operations. There have been no
declines in value that are considered to be other than temporary for any of
the three years in the period ended March 31, 1999. The cost of investments
sold is based on specific identification. The Company does not intend to hold
the individual securities for greater than one year.
Short-term investments by security type are as follows (dollars in
thousands):
<TABLE>
<CAPTION>
March 31,
---------------
1999 1998
------- -------
<S> <C> <C>
Debt securities issued by States of the United States and
political subdivisions of the States...................... $12,780 $50,487
U.S. Corporate debt securities............................. 16,600 20,000
------- -------
Total.................................................... $29,380 $70,487
======= =======
</TABLE>
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market
and include materials, labor and manufacturing overhead costs. Provisions,
when required, are made to reduce excess and obsolete inventories to their
estimated net realizable values. Inventories of continuing operations
consisted of the following (dollars in thousands):
<TABLE>
<CAPTION>
March 31,
---------------
1999 1998
------- -------
<S> <C> <C>
Raw materials............................................... $15,017 $15,019
Work-in-process and finished goods.......................... 2,324 3,832
------- -------
$17,341 $18,851
======= =======
</TABLE>
Property and Equipment
Property and equipment are recorded at cost. Depreciation and amortization
are computed using the straight-line method over the estimated useful lives of
the assets (or over the lease term if it is shorter for leasehold
improvements) which range from two to five years.
Software Development Costs
The Company capitalizes eligible software development costs upon the
establishment of technological feasibility, which the Company has defined as
completion of a working model. For fiscal years 1999, 1998 and 1997, costs
which were eligible for capitalization, after consideration of factors such as
realizable value, were insignificant and, thus, the Company has charged all
software development costs to research and development expense in the
accompanying consolidated statements of operations.
Accrued Liabilities and other
Accrued liabilities and other consisted of the following (dollars in
thousands):
<TABLE>
<CAPTION>
March 31,
--------------
1999 1998
------ -------
<S> <C> <C>
Accrued warranty costs....................................... $1,589 $ 3,892
Accrued payroll and payroll related costs.................... 3,433 4,997
Accrued restructuring costs (See Note 4)..................... 2,550 --
Other accrued liabilities.................................... 1,507 4,235
------ -------
$9,079 $13,124
====== =======
</TABLE>
37
<PAGE>
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Revenue Recognition
The Company recognizes revenues from standard products and custom enclosures
at the time of shipment to the customer assuming no significant obligations
remain. The Company records reserves for anticipated product returns,
installation costs and warranty costs at the time of shipment based on
historical and anticipated rates of return and cost, as appropriate. The
Company generally sells products on net 30-day payment terms. Prepayments are
sometimes required on orders that involve significant engineering. As of March
31, 1999 and 1998, the Company has received prepayments of approximately $1.8
million and $1.3 million, respectively, which is reflected as customer
deposits in the accompanying consolidated balance sheet.
The Company accounts for software revenue in accordance with the American
Certified Public Accountants' Statement of Position 97-2, "Software Revenue
Recognition." Revenues for integration software work are recognized on a
percentage of completion. Software license revenue is recognized when the
software ships; payment is due within one year; collectibility is probable and
there are no significant obligations remaining.
Comprehensive Income
In 1999, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 130 "Reporting Comprehensive Income," which establishes standards
for reporting and presentation of comprehensive income. SFAS No. 130, which
was adopted by the Company in the first quarter of 1999, requires companies to
report a new measure of income (loss). Comprehensive income is defined as the
change in equity of a company during a period from transactions and other
events and circumstances excluding transactions resulting from investments by
owners and distributions to owners and is to include unrealized gains and
losses that have historically been excluded from net income (loss) and
reflected instead in equity. The Company has not had any such transactions or
events during the periods and therefore comprehensive income (loss) is the
same as the net income (loss) reported in the consolidated financial
statements.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to a
concentration of credit risk principally consist of cash investments and
accounts receivable. The Company has a cash investment policy that limits cash
investments to short-term, low risk investments. As of March 31, 1999 and
1998, approximately 66 percent and 62 percent, respectively, of accounts
receivable, net, were concentrated with ten customers. In addition, as of
March 31, 1999 and 1998, approximately 71 percent and 48 percent,
respectively, of accounts receivable, net, respectively were due from
customers located in Japan, Singapore, Taiwan and the United Kingdom. As of
March 31, 1999, approximately 15 and 11 percent of the total accounts
receivable, net, were due from two customers located in Taiwan. As of March
31, 1998, approximately 20 percent of the total accounts receivable, net, was
due from a single customer in Taiwan. The Company performs ongoing credit
evaluations of its customers' financial condition and, generally, does not
require collateral on accounts receivable as the majority of the Company's
customers are large, well established companies. The allowance for non-
collection of accounts receivable is based upon the expected collectibility of
all accounts receivable.
Common Stock Split
On July 21, 1997, the Board of Directors declared a two-for-one stock split
of the Company's Common Stock in the form of a stock dividend. The stock
dividend was paid on August 22, 1997 to the holders of record on August 1,
1997. All share and per share data, including common stock equivalents, have
been adjusted to give effect to the split.
38
<PAGE>
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Patents
The Company capitalizes the direct costs associated with obtaining patents.
The costs, which are included in other assets, net in the accompanying
consolidated balance sheets, are being amortized using the straight-line
method over the expected useful lives of the patents of 10 years. Accumulated
amortization was approximately $0.7 million and $0.6 million as of March 31,
1999 and 1998, respectively.
Foreign Currency Translation
The functional currency of the Company's foreign subsidiaries is the U.S.
dollar. Accordingly, foreign translation and foreign exchange gains and
losses, which have not been material, are reflected in other income (expense)
in the accompanying consolidated statements of operations.
Intangible Assets
The realizability of intangible assets (See Note 10, 11 and 12), which are
included in other assets, net, in the accompanying consolidated balance sheet,
is evaluated periodically as events or circumstances indicate a possible
inability to recover the net carrying amount. Such evaluation is based on
various analyses, including cash flow and profitability projections that
incorporate, as applicable, the impact on existing lines of business. The
analyses involve a significant level of management judgment in order to
evaluate the ability of the Company to perform within projections. During the
year ended March 31, 1999, the Company determined that an impairment loss had
occurred related to the intangibles associated with the acquisition of RSI
(See Note 10).
New Accounting Pronouncement
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
establishes accounting and reporting standards requiring that every derivative
instrument be recorded in the balance sheet as either an asset or liability
measured at its fair value. It requires that changes in the derivative's fair
value be recognized currently in earnings unless specific hedge accounting
criteria are met and that a company must formally document, designate and
assess the effectiveness of transactions that receive hedge accounting. SFAS
No. 133 is effective for fiscal years beginning after June 15, 2000 and cannot
be applied retroactively. The Company has not yet determined the effect SFAS
No. 133 will have on its financial position, results of operations or cash
flows.
Earnings Per Share
Earnings per share has been reported based upon SFAS No. 128, "Earnings Per
Share," which requires presentation of basic and diluted earnings per share.
Basic earnings per share has been computed using the weighted average number
of actual common shares outstanding, while diluted earnings per share has been
computed using the weighted average number of common and common equivalent
shares outstanding. Common equivalent shares used in the computation of
diluted earnings per share result from the assumed exercise of stock options,
using the treasury stock method. For the year ended March 31, 1999, the number
of shares used in the computation of diluted earnings (loss) per share was the
same as those used for the computation of basic earnings (loss) per share due
to potentially dilutive securities of 688,750 being not included in the
computation of diluted earnings (loss) per common share because to do so would
reduce the loss per share.
39
<PAGE>
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Company adopted SFAS No. 128 as of December 31, 1997 and restated all
prior periods. The reconciliation of the numerators and denominators of the
basic and diluted earnings per share computations are as follows (dollars in
thousands, except per share amounts):
<TABLE>
<CAPTION>
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
<S> <C> <C> <C>
FOR YEAR ENDED MARCH 31, 1997
Basic Earnings Per Share:
Income from continuing operations
available to common shareholders..... $ 11,408 10,287 $ 1.11
=======
Common shares issuable upon exercise
of stock options using treasury
method............................... -- 225
---------- ------
Diluted Earnings Per Share:
Income from continuing operations
available to common shareholders plus
assumed conversions.................. $ 11,408 10,512 $ 1.09
========== ====== =======
FOR YEAR ENDED MARCH 31, 1998
Basic Earnings Per Share:
Income from continuing operations
available to common shareholders..... $ 18,237 11,359 $ 1.61
=======
Common shares issuable upon exercise
of stock options using treasury
method............................... -- 742
------
Diluted Earnings Per Share:
Income from continuing operations
available to common shareholders plus
assumed conversions.................. $ 18,237 12,101 $ 1.51
========== ====== =======
FOR YEAR ENDED MARCH 31, 1999
Basic Earnings (loss) Per Share:
Loss from continuing operations
available to common shareholders..... $ (20,979) 11,653 $ (1.80)
=======
Common shares issuable upon exercise
of stock options using Treasury
method............................... -- --
---------- ------
Diluted Earnings (loss) Per Share:
Loss from continuing operations
available to common shareholders plus
assumed conversions.................. $ (20,979) 11,653 $ (1.80)
========== ====== =======
</TABLE>
Reclassifications
Prior years' amounts have been reclassified where necessary to conform with
the fiscal 1999 presentation.
40
<PAGE>
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
3. SUPPLEMENTAL STATEMENTS OF CASH FLOWS DISCLOSURES:
Cash paid for interest and domestic and foreign income taxes was as follows
(dollars in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
---------------------------
1999 1998 1997
----------------- ---------
<S> <C> <C> <C>
Interest............................................. $ 47 $ 51 $ 42
Income taxes......................................... $ 532 $ 5,031 $ 3,153
Non-cash operating activities (dollars in thousands):
Reduction of accounts receivable, net in exchange for
return of inventories............................... $ -- $ 3,204 $ --
</TABLE>
4. RESTRUCTURING CHARGE:
In the year ended March 31, 1999 the Company underwent significant
restructuring of its operations to reduce its costs structure in response to
the 49.1 percent in reduction in net sales. The Company also is in the process
of restructuring activities in Japan and Europe to reposition its activities
to compete more effectively. In addition, the Company is repositioning its
product offerings to eliminate low margin products, or software services that
have high risks of failure. The following table summarizes restructuring
charges by geographic region (dollars in thousands):
<TABLE>
<CAPTION>
Cash outlays
as of Ending
Expensed March 31, 1999 Accrual
-------- -------------- -------
<S> <C> <C> <C>
Europe
Severance.................................. $ 1,732 $ 1,050 $ 682
Facilities................................. 336 235 101
Other...................................... 437 130 307
Japan
Severance.................................. 150 75 75
Other...................................... 35 -- 35
US
Severance.................................. 700 500 200
Facilities................................. 550 300 250
Other...................................... 1,002 102 900
Non-cash..................................... 600 N/A N/A
------- ------- -------
Total...................................... $ 5,542 $ 2,392 $ 2,550
======= ======= =======
</TABLE>
The restructurings have resulted in terminating the employment of 110 U.S.
employees and 30 international employees. Management had formal plans for each
of the activities undertaken and all affected employees were notified of the
actions. As of March 31, 1999, all of the employees affected have been
terminated except one in Japan and eight in Europe. All of those employees
were informed prior to March 31, 1999 and the Company expects to complete the
termination process of these employees by July 3, 1999. Facilities impacted by
these restructuring activities either have been vacated as of March 31, 1999
or will be vacated by July 3, 1999. Other costs include expenses incurred for
consultants and legal services, equipment or service buy-out cost and any
estimated incremental costs associated with the closure of facilities or
completion of other contractual obligations.
41
<PAGE>
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
5. COMMON STOCK:
As of March 31, 1999, the following shares of common stock were reserved for
issuance:
<TABLE>
<S> <C>
Employee Stock Option Plans..................................... 3,598,597
Non-employee Director's Stock Option Plan....................... 244,374
Employee Stock Purchase Plan.................................... 250,553
---------
4,093,524
=========
</TABLE>
Private Placement
On September 30, 1997, the Company completed a private placement of one
million unregistered shares of its common stock at $42.92 per share to a group
of mutual funds managed by a single, large, institutional investment
management company, generating net proceeds to the Company of $42.9 million.
The Company filed a registration statement with the Securities Exchange
Commission on Form S-3, which became effective on December 1, 1997, for the
resale of the securities. The proceeds from such private placement augmented
the Company's working capital.
Stock Repurchase Program
In June 1998, the Board of Directors of the Company, authorized a stock
repurchase program whereby up to 2,000,000 shares of its Common Stock may be
repurchased by the Company, from time-to-time at market prices, and as market
and business conditions warrant, in the open market, or in negotiated
transactions, using existing cash. The Company will utilize a portion of the
reacquired shares for common stock required by the Employee Stock Option and
Employee Stock Purchase Plan activity. The Company will use the first-in,
first-out method and the excess of repurchase cost over reissuance price, if
any, is treated as a reduction of retained earnings. As of March 31, 1999, the
Company had repurchased 865,800 shares of common stock at an aggregate cost of
approximately $11.5 million.
Stock Option Plans
Under the Company's stock option plans, options are granted for ten year
periods and become exercisable ratably over a vesting period of four years, or
as determined by the Board of Directors'. Under the 1986 Plan (the "86 Plan"),
which was terminated in 1994, there are no further options available for
issuance. Under the 1993 Plan (the "93 Plan"), as amended, 2,600,000 shares of
common stock are reserved for issuance thereunder. The 93 Plan provides for
the grant of both incentive stock options and non-qualified stock options to
key employees and consultants of the Company. Under the 93 Plan, options may
be granted at prices not less than the fair market value of the Company's
common stock at grant date (85 percent for non-qualified options). Under the
1993 Non-Employee Directors' Stock Plan (the "Directors' Plan"), as amended,
250,000 shares of common stock are reserved for issuance thereunder.
Activity in the Company's stock option plans is summarized as follows
(prices are weighted average prices):
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
------------------------------------------------------
1999 1998 1997
----------------- ----------------- -----------------
Shares Price Shares Price Shares Price
--------- ------ --------- ------ --------- ------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding,
beginning of year...... 1,791,273 $13.96 1,648,220 $11.87 1,433,994 $11.58
Granted................. 1,930,128 9.87 1,119,745 16.11 790,152 10.37
Exercised............... (210,502) (5.53) (385,841) 8.59 (224,920) 5.09
Canceled................ (148,056) (14.98) (590,851) 15.72 (351,006) 11.78
--------- ------ --------- ------ --------- ------
Options outstanding, end
of year................ 3,362,843 $12.10 1,791,273 $13.96 1,648,220 $11.84
========= ====== ========= ====== ========= ======
Exercisable, end of
year................... 1,492,949 $12.59 554,456 $11.05 472,742 $11.04
========= ====== ========= ====== ========= ======
</TABLE>
42
<PAGE>
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following table summarizes the stock options as of March 31, 1999
(prices and contractual life are weighted averages):
<TABLE>
<CAPTION>
Options Outstanding Exercisable Options
-------------------------------- --------------------
Remaining
Actual Range of Number Contractual Exercise Number Exercise
Exercise Prices Outstanding Life Price Exercisable Price
--------------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ .25 -$ .25 7,000 8.37 $ .25 6,333 $ .25
.84 - .84 23,547 9.33 .84 9,680 .84
1.67 - 2.09 27,258 9.33 2.05 20,815 2.03
4.50 - 6.27 160,001 5.99 6.14 153,458 6.14
6.88 - 10.25 1,522,180 8.57 8.17 406,780 9.10
10.84 - 15.00 1,155,332 8.47 13.14 693,343 13.27
16.38 - 24.31 287,543 7.93 21.18 158,222 21.33
24.88 - 38.75 179,982 8.67 32.84 44,318 34.21
--------------- --------- ---- ------ --------- ------
$ .25 -$38.75 3,362,843 8.37 $12.10 1,492,949 $12.59
=============== ========= ==== ====== ========= ======
</TABLE>
The Company accounts for these plans under APB Opinion No. 25. Had
compensation cost for these plans been determined consistent with SFAS No.
123, "Accounting for Stock-Based Compensation," the Company's net income
(loss) and per share information would have been adjusted to the following pro
forma amounts, for the years ended March 31, (dollars in thousands, except per
share amounts):
<TABLE>
<CAPTION>
1999 1998 1997
--------- -------- --------
<S> <C> <C> <C> <C>
Net income (loss)................. As reported $ (20,979) $ 16,397 $ (3,257)
Pro forma $ (29,050) $ 13,826 $ (4,600)
Basic net income (loss)
per share........................ As reported $ (1.80) $ 1.44 $ (0.32)
Pro forma $ (1.11) $ 1.22 $ (0.45)
Diluted net income (loss)
per share........................ As reported $ (1.80) $ 1.36 $ (0.31)
Pro forma $ (1.11) $ 1.14 $ (0.44)
</TABLE>
The weighted-average grant date fair value of options during 1999, 1998 and
1997 was $15.21, $16.93 and $5.88, respectively. The fair value of each option
grant is estimated on the date of grant using the Black-Scholes option pricing
model with the following weighted average assumptions used for grants in 1999,
1998 and 1997; risk-free interest rate of 5.1 percent; 5.4 percent and 7.0
percent, respectively; expected dividend yields of 0.0 percent; expected lives
of 3.95 years, 4.16 years and 4.3 years, respectively; expected volatility of
73 percent, 72 percent and 70 percent, respectively. Because the SFAS No. 123
method of accounting has not been applied to options granted prior to fiscal
1996, the resulting pro forma compensation cost may not be representative of
that to be expected in future years.
Employee Stock Purchase Plan
Under the 1993 Employee Stock Purchase Plan (the "Plan"), as amended,
700,000 shares of common stock are reserved for issuance to eligible
employees. The Plan permits employees to purchase common stock through payroll
deductions, which may not exceed 10 percent of an employee's compensation, at
a price not less than 85 percent of the market value of the stock on specified
dates. At March 31, 1999, 449,447 shares had been purchased by employees under
the Plan.
43
<PAGE>
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
6. COMMITMENTS:
The Company leases various facilities under non-cancelable operating leases.
At March 31, 1999, the future minimum commitments under these leases are as
follows (dollars in thousands):
<TABLE>
<CAPTION>
Fiscal Year
Ending March 31,
----------------
<S> <C>
2000................................................................. $ 2,129
2001................................................................. 884
2002................................................................. 432
2003................................................................. 310
2004 and thereafter.................................................. --
-------
$ 3,755
=======
</TABLE>
Rent expense under the Company's operating leases was approximately $3.2
million, $2.1 million and $1.9 million for fiscal years 1999, 1998 and 1997,
respectively.
7. REPORTABLE SEGMENTS:
In 1999, the Company adopted SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS 131 supersedes SFAS 14, "Financial
Reporting for Segments of a Business Enterprise", replacing the "industry
segment" approach with the "management" approach. SFAS 131 designates the
internal organization that is used by management for making decisions,
evaluating performance and allocating resources of the enterprise as the
source of the Company's reportable segments. SFAS 131 also requires
disclosures about products and services, geographic areas and major customers.
The adoption of SFAS 131 did not impact the results of operations or financial
position but did affect the disclosures of segment information.
The Company offers a family of products and related services to provide a
front-end automation and isolation system for wafer handling in semiconductor
manufacturing facilities. All of the Company's activities are aggregated into
a single operating segment. As a result, no operating segment information is
required.
Net sales by geography were as follows (dollars in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
----------------------------
1999 1998 1997
------------------ ---------
<S> <C> <C> <C>
United States................................. $ 40,571 $ 60,142 $ 58,984
Taiwan........................................ 27,935 72,455 43,484
Singapore..................................... 3,351 13,605 9,410
Japan......................................... 7,759 13,516 8,393
Europe........................................ 3,682 5,745 4,553
Other Asia (excluding Japan, Singapore and
Taiwan)...................................... 856 -- 12,696
-------- --------- ---------
Total..................................... $ 84,154 $ 165,463 $ 137,520
======== ========= =========
</TABLE>
The net sales by product or service categories comprising the Company's net
sales for the fiscal year ended March 31, were as follows (dollars in
thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
----------------------------
1999 1998 1997
------------------ ---------
<S> <C> <C> <C>
SMIF Systems.................................... $ 66,609 $ 145,702 $ 118,647
SMART Traveler Systems.......................... 6,227 14,533 11,145
Robotics........................................ 6,323 -- --
Services & other................................ 4,995 5,228 7,728
-------- --------- ---------
Total....................................... $ 84,154 $ 165,463 $ 137,520
======== ========= =========
</TABLE>
44
<PAGE>
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In the fiscal year ended March 31, 1999, one customer accounted for 12
percent of the Company's net sales. In fiscal years ended March 31, 1998 and
1997, another customer accounted for 31 percent and 14 percent, respectively
of net sales.
8. INCOME TAXES:
The provision (benefit) for income taxes attributable to continuing
operations is based upon income (loss) before income taxes from continuing
operations as follows (dollars in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended March
31,
---------------------------
1999 1998 1997
--------- ------- -------
<S> <C> <C> <C>
Domestic......................................... $ (35,425) $30,375 $18,476
Foreign.......................................... 3,639 (1,880) 105
--------- ------- -------
$(31,786) $28,495 $18,581
========= ======= =======
</TABLE>
The provision (benefit) for income taxes consisted of (dollars in
thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
------------------------------
1999 1998 1997
---------- ------------------
<S> <C> <C> <C>
Current:
Federal.................................... $ 64 $ 4,435 $ 3,437
State...................................... 456 851 1,294
Foreign.................................... 118 35 97
---------- -------- ---------
Total current............................ 638 5,321 4,828
---------- -------- ---------
Deferred:
Federal.................................... (11,020) 3,047 (4,616)
State...................................... (425) 855 (1,288)
---------- -------- ---------
Total deferred........................... (11,445) 3,902 (5,904)
---------- -------- ---------
$(10,807) $ 9,223 $ (1,076)
========== ======== =========
</TABLE>
The provision (benefit) for income taxes included in the accompanying
consolidated statements of operations consisted of the following (dollars in
thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Continuing operations......................... $ (10,807) $ 10,258 $ 7,173
Discontinued operations....................... -- (1,035) (8,249)
--------- -------- --------
Total....................................... $ (10,807) $ 9,223 $ (1,076)
========= ======== ========
</TABLE>
45
<PAGE>
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The provision for income taxes attributable to continuing operations is
reconciled with the Federal statutory rate as follows (dollars in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Provision computed at Federal statutory rate. $ (11,128) $ 9,974 $ 6,503
State taxes, net of Federal benefit.......... 30 1,676 1,295
Foreign income and withholding taxes in
excess of statutory rate.................... 635 -- --
In-process research and development cost
write-off................................... -- -- 467
Non-deductible expenses and other............ 375 169 276
FSC benefit.................................. -- (1,159) (705)
Change in valuation allowance................ -- -- (578)
Tax exempt income............................ (719) (402) (85)
--------- -------- --------
$(10,807) $ 10,258 $ 7,173
========= ======== ========
Effective income tax rate.................... 34% 36% 39%
========= ======== ========
</TABLE>
The components of the net deferred tax asset are as follows (dollars in
thousands):
<TABLE>
<CAPTION>
March 31,
----------------
1999 1998
------- -------
<S> <C> <C>
Provisions for discontinued operations.................... $ -- $ 3,042
Accounts receivable allowances............................ 668 441
Inventory reserves........................................ 2,210 1,983
Accrued vacation.......................................... 265 583
Accrued warranty.......................................... 1,196 1,562
Acquired technology....................................... 2,868 692
Restructure reserve....................................... 989 --
Capitalized research and development and other
carryforwards ........................................... 954 --
Net operating loss carryforwards.......................... 10,183 --
Other temporary differences............................... 635 141
------- -------
Deferred tax asset....................................... 19,968 8,444
------- -------
Depreciation and amortization............................. (655) (439)
Capitalized patent costs.................................. (171) (308)
------- -------
Deferred tax liability................................... (826) (747)
------- -------
Net deferred tax asset................................... $19,142 $ 7,697
======= =======
</TABLE>
The Company has recorded a deferred tax asset of approximately $19.1
million, of which $10.5 million relates to net operating losses and tax
credits generated during the current year. The Company will be able to
recognize approximately $5.0 million of the deferred tax asset immediately
following the filing of carryback claims with Federal and various State taxing
authorities, which will be completed in the near future. Realization of the
remaining deferred tax asset is dependent on generating sufficient future
taxable income. Although realization is not assured, management believes that
it is more likely than not that the deferred tax assets will be realized.
Although the deferred tax asset is considered realizable, actual amounts could
be reduced if sufficient future taxable income is not achieved.
46
<PAGE>
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
9. CLOSURE OF ASYST AUTOMATION, INC.:
In January 1997, the Company adopted a formal plan to cease operations of
its subsidiary, Asyst Automation, Inc. ("AAI") by the end of September 1997.
The operations of AAI ceased on September 30, 1997. The decision was based
upon the subsidiary's lack of ability to profitably manufacture and sell AAI's
products. Accordingly, AAI has been accounted for as a discontinued operation
in the accompanying financial statements. In the third quarter of fiscal year
1998, an additional loss of $1,840,000, net of $1,035,000 income tax benefit
was recorded. This resulted from management's determination that higher costs
related to ongoing warranty activities and contractual obligations existed for
periods extending beyond those originally estimated. The net assets of AAI at
March 31, 1998 and 1997 consisted primarily of trade receivables, inventory
and property, plant and equipment, net of ongoing warranty reserves, assumed
by Asyst Technologies, Inc.
The losses from the closure of AAI reflected management's best estimate,
based on the information currently then available, of costs to be incurred for
existing and probable events of the discontinued operations. The results of
AAI are as follows (dollars in thousands):
<TABLE>
<CAPTION>
Fiscal Year
Ended March 31,
-----------------
1998 1997
------- --------
<S> <C> <C>
Net sales................................................ $ -- $ 22,743
======= ========
Loss from operations before income tax benefit........... $ -- $ (9,519)
Income tax benefit....................................... -- 3,427
------- --------
Loss from operations................................... -- (6,092)
------- --------
Loss on disposal before income tax benefit............... (2,875) (13,395)
Income tax benefit....................................... 1,035 4,822
------- --------
Loss on disposal....................................... (1,840) (8,573)
------- --------
Total loss on discontinued operations.................... $(1,840) $(14,665)
======= ========
</TABLE>
10. ACQUISITION OF RADIANCE SYSTEMS, INC.:
On November 15, 1996, the Company purchased RSI, a developer and supplier of
software products to be used in the semiconductor manufacturing industry, by
acquiring all of the outstanding stock of RSI in exchange for 129,740 shares
of common stock of the Company. The total purchase price was approximately
$2.4 million and was accounted for as a purchase in the quarter ended December
28, 1996.
In connection with the acquisition, approximately $1.3 million of the
acquired intangible assets consisted of in-process research and development.
Because there was no assurance that the Company would be able to successfully
complete the development of RSI products or that the acquired technology had
any alternative future use, the acquired in-process research and development
was charged to expense in fiscal 1997. As a result of the purchase price
allocation, $1.7 million (including $0.6 million of deferred tax liability)
was assigned to intangible assets related to existing product technology, the
assembled workforce and excess of the purchase price over net assets acquired.
These intangible assets are being amortized over a period of three years.
Accumulated amortization including approximately $0.5 million as a result of a
write-down of the intangible assets (See Note 2) was approximately $1.6
million and $0.7 million as of March 31, 1999 and 1998, respectively.
Management believes that the unamortized balance of these assets, which is
included in other assets, net, in the accompanying consolidated balance
sheets, is recoverable.
Comparative pro forma information reflecting the acquisition of RSI has not
been presented because the operations of RSI are not material to the Company's
consolidated financial statements.
47
<PAGE>
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
11. ACQUISITION OF THE FLUOROTRAC PRODUCT LINE:
In April 1998, the Company entered into an agreement with Fluoroware, Inc.
("Fluoroware"), a supplier of materials management solutions, to acquire
Fluoroware's FluoroTrac automated radio frequency identification ("RFID")
technology for automated work-in-progress tracking in semiconductor factories.
Under the terms of the agreement, the Company acquired all of the FluoroTrac
intellectual property including RFID tracking solutions, inventory and
installed-base opportunities from Fluoroware in consideration for
approximately $2.8 million in cash and liabilities assumed by the Company.
In connection with the acquisition, approximately $1.2 million of the
intangible assets acquired consisted of in-process research and development.
Because there can be no assurance that the Company will be able to
successfully complete the development of FluoroTrac products or that the
technology has any alternative future use, such in-process research and
development was charged as an expense. As a result of the purchase price
allocation, approximately $0.3 million was assigned to intangible assets
related to existing product technology, the assembled workforce and the excess
purchase price over the net assets acquired. These intangibles are being
amortized over a three to five year period. Management believes that the
unamortized balance of these assets, which is included in other assets, net,
in the accompanying condensed consolidated balance sheets, is recoverable.
12. ACQUISITION OF HINE DESIGN INCORPORATED:
On July 31, 1998, the Company completed its acquisition of HDI, a supplier
of wafer-handling robots for semiconductor processing tools. Accordingly,
results of HDI's operations have been combined with those of the Company's,
since the date of acquisition. Under the terms of the agreement, the Company
acquired all of the outstanding capital stock of HDI for approximately $12.4
million in cash and assumed debt of approximately $12.5 million. In addition,
the Company exchanged outstanding options to acquire HDI Common Stock and
deferred compensation units for identical options of the Company. The value of
the options substituted was approximately $1.9 million. The acquisition was
accounted for using the purchase method of accounting.
In connection with the acquisition, a portion of the purchase price was
allocated to the net liabilities acquired based on their estimated fair
values. The fair values of the tangible assets acquired and liabilities
assumed were approximately $4.4 million and $14.4 million, respectively. As a
result of the purchase price allocation, approximately $18.4 million was
assigned to intangible assets related to existing product technology, the
assembled workforce and the excess purchase price over the net assets
acquired. These intangibles are being amortized over a four to fourteen year
period. As of March 31, 1999, charges for amortization of the intangible
asset, made by the Company, amounted to approximately $1.6 million. Management
believes that the unamortized balance of these assets, which is included in
other assets, net, in the accompanying condensed consolidated balance sheets,
is recoverable. In addition, approximately $5.9 million of the intangible
assets acquired consisted of in-process research and development. Because
there can be no assurance that the Company will be able to successfully
complete the development of HDI products or that the technology has any
alternative future use, such in-process research and development was charged
as an expense.
Comparative proforma information reflecting the acquisition of HDI has not
been presented because the operations of HDI are not material to the Company's
financial statements.
13. RELATED PARTY TRANSACTIONS:
On September 30, 1997, the Company entered into an asset purchase agreement
with Palo Alto Technologies, Inc. ("PAT") pursuant to which the Company sold
to PAT certain intellectual property rights and
48
<PAGE>
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
office equipment which were owned or licensed by AAI in consideration for
quarterly "Earn-Out Payments" up to an aggregate of $2.0 million. The earn-out
payments are equal to 4.0 percent of PAT gross revenue. The Company may
convert the right to receive such earn-out payments into shares of PAT
securities at the closing of certain issuances of securities by PAT. In
addition, PAT granted the Company the non-exclusive, worldwide right to
distribute and sell any of PAT's products on PAT's most favorable distributor
terms and conditions; except PAT may grant exclusive distribution rights to
particular markets so long as such rights are first offered to the Company and
the Company does not accept the offer. Such distribution rights shall
terminate on the earlier of (i) the fifth anniversary of such agreement or
(ii) if the Company begins selling its own products which are directly
competitive with PAT's products. The Chairman and Chief Executive Officer of
the Company is the Chairman and principal shareholder of PAT. The parties have
agreed that the Chairman and Chief Executive Officer of the Company and one
other officer (also a shareholder of PAT) of the Company may be advisors or
directors of PAT while employed full time by the Company.
At March 31, 1999, the Company held four notes receivable, with balances
totaling $1,172,750, from two executive officers of the Company. Loans
extended to the officers amounted to $365,250 and $757,500 during the years
ended March 31, 1998 and March 31, 1999, respectively, and have resulted from
advances made to the officers to assist in their relocation to California. The
notes bear interest that ranges from 4.0 percent to 6.4 percent per annum and
are fully secured by second deeds of trust on certain real property, as well
as, other pledged securities of the Company owned by the officers,
respectively. The notes mature at various dates between September 1, 2202 and
January 31, 2004.
14. LEGAL PROCEEDINGS:
In October 1996, the Company filed a lawsuit in the United States District
Court for the Northern District of California against Jenoptik A.G.
("Jenoptik"), Jenoptik-Infab, Inc. ("Infab"), Emtrak, Inc. ("Emtrak") and
Empak, Inc. ("Empak") alleging infringement of two patents related to the
Company's SMART Traveler System. The Company amended its Complaint in April
1997 to allege causes of action for breach of fiduciary duty against Jenoptik
and Meissner & Wurst, GmbH, and misappropriation of trade secrets and unfair
business practices against all defendants. The Company's Complaint seeks
damages and injunctive relief against further infringement. All defendants
filed counter claims, seeking a judgment declaring the patents invalid,
unenforceable and not infringed. Jenoptik, Infab, and Emtrak also alleged that
the Company has violated federal antitrust laws and engaged in unfair
competition. The Company has denied these allegations. In May 1998, the
Company and Empak stipulated to a dismissal, without prejudice, of their
respective claims and counter claims against each other. In November 1998, the
court granted defendants' motion for partial summary judgment as to most of
the patent infringement claims and invited further briefing as to the
remainder. In January 1999, the court granted the Company's motion for leave
to seek reconsideration of the November summary judgment order and also,
pursuant to a stipulation of the parties, dismissed without prejudice two of
the three antitrust counter claims brought by the defendants. Since then, the
parties stipulated to, and the court has ordered, the dismissal with prejudice
of the defendants' unfair competition and remaining antitrust counterclaim,
and the Company's breach of fiduciary duty, misappropriation of trade secrets
and unfair business practices claims. On June 4, 1999, the court issued an
order by which it granted the Company's motion for reconsideration in the
sense that it considered the merits of the Company's arguments, but decided
that it would not change its prior ruling on summary judgment and would also
grant summary judgment for defendants on the remaining patent infringement
claim. The Company intends to take an appeal. The trial date has since been
vacated and the court has requested briefing, now due on July 12, 1999, on
whether it is obligated to proceed with any remaining matters. While it is not
possible to predict accurately or to determine the eventual outcome of these
matters, the Company believes that the outcome of these legal proceedings will
not have a material adverse effect on the financial position of the Company.
49
<PAGE>
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
15. ACQUISITION OF PROGRESSIVE SYSTEM TECHNOLOGIES, INC. DATED JUNE 2, 1999:
On June 2, 1999, the Company completed its acquisition of 100 percent of the
common stock of Progressive System Technologies, Inc. ("PST"), a Texas
corporation, in exchange for 500,000 shares of common stock of the Company.
PST manufactures wafer-sorting equipment used by semiconductor manufacturers.
The acquisition originally announced in April 1999, will be accounted for
using the pooling-of-interests method of accounting. In conjunction with the
closing of the acquisition, the Company also completed a private placement of
625,000 shares of its Common Stock to eight institutional investors. The
private placement, which closed in May 1999 was priced at $18.00 per share,
for aggregate proceeds of approximately $11.3 million. The purpose of the
private placement was to untaint shares of Common Stock to obtain pooling-of-
interests accounting treatment for the acquisition of PST. The proceeds will
be used for general corporate purposes.
50
<PAGE>
SCHEDULE II
ASYST TECHNOLOGIES, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)
<TABLE>
<CAPTION>
Balance Charged to/ Recovery Balance
Beginning Recovery of End
of Year of Expenses Deductions Inventory of Year
--------- ----------- ---------- --------- -------
<S> <C> <C> <C> <C> <C>
Accounts Receivable:
March 31, 1997
Reserve for doubtful
accounts............... $4,363 $ (300) $(2,218) $ -- $1,845
March 31, 1998
Reserve for doubtful
accounts............... $1,845 $1,955 $(5,904) $3,204 $1,100
March 31, 1999
Reserve for doubtful
accounts............... $1,100 $ 658 $ (262) $ -- $1,496
Warranty:
March 31, 1997
Reserve for warranty.... $1,151 $2,750 $ (86) $ -- $3,815
March 31, 1998
Reserve for warranty.... $3,815 $3,453 $(3,376) $ -- $3,892
March 31, 1999
Reserve for warranty.... $3,892 $ 240 $(2,543) $ -- $1,589
Restructuring:
March 31, 1997
Reserve for
restructuring activity. $ -- $ -- $ -- $ -- $ --
March 31, 1998
Reserve for
restructuring activity. $ -- $ -- $ -- $ -- $ --
March 31, 1999
Reserve for
restructuring activity. $ -- $5,542 $(2,992) $ -- $2,550
</TABLE>
51
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report on Form 10-K to
be signed on its behalf by the undersigned, thereunto duly authorized on the
29th day of June 1999.
Asyst Technologies, Inc.
/s/ Mihir Parikh
By: _________________________________
Mihir Parikh
Chairman and Chief Executive
Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Mihir Parikh Chairman and Chief Executive June 29, 1999
____________________________________ Officer (Principal
Mihir Parikh Executive Officer)
/s/ Douglas J. McCutcheon Senior Vice President and June 29, 1999
____________________________________ Chief Financial Officer
Douglas J. McCutcheon (Principal Financial and
Accounting Officer)
/s/ Stanley J. Grubel Director June 29, 1999
____________________________________
Stanley J. Grubel
/s/ Tsuyoshi Kawanishi Director June 29, 1999
____________________________________
Tsuyoshi Kawanishi
/s/ Ashok K. Sinha Director June 29, 1999
____________________________________
Ashok K. Sinha
/s/ Walter W. Wilson Director June 29, 1999
____________________________________
Walter W. Wilson
</TABLE>
52
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------------ -----------------------
<C> <S>
2.1 (iv) Stock Purchase Agreement among the Company, Hine Design
Incorporated and the Shareholders of Hine Design Incorporated,
dated July 2, 1998.
2.2 (vi) Agreement and Plan of Merger and Reorganization among the
Company, PSTI Merger Sub Acquisition Corp., Progressive System
Technologies, Inc., Advent International Investor II, Envirotech
Fund I and Global Private Equity II, dated as of June 2, 1999.
3.1 (i) Amended and Restated Articles of Incorporation of the Company.
3.2 (i) Bylaws of the Company
4.1 (iii) Common Stock Purchase Agreement, dated September 25, 1997.
4.2 (v) Rights Agreement among the Company and Bank of Boston, N. A., as
Rights Agents, dated June 25, 1995.
4.3 (vi) Common Stock Purchase Agreement, dated as of May 26, 1999
10.1 (i) Form of Indemnity Agreement entered into between the Company and
its directors and officers.
10.2 (i)(x) Company's 1993 Stock Option Plan and related form of stock option
agreement.
10.3 (i)(x) Company's 1993 Employee Stock Purchase Plan and related offering
document.
10.4 (i)(x) Company's 1993 Non-Employee Directors' Stock Option Plan and
related offering document.
10.5 (i) Manufacturing License Agreement between the Company and Tokyo
Electron Limited, dated January 10, 1993.
10.6 (i) Distributor Agreement between the Company and Tokyo Electron
Limited, dated January 10, 1993.
10.7 (i) Operating Agreement between the Company and M&W, dated November
7, 1990.
10.8 (i) Hewlett-Packard SMIF License Agreement dated June 6, 1984.
10.9 (viii) Lease Agreement between the Company and the Kato Road Partners
dated February 16, 1995.
10.10(viii) Sublease Agreement between the Company and the Kato Road Partners
dated February 16, 1995.
10.11(vii) Asset Purchase Agreement between Palo Alto Technologies, Inc.,
the Company and Asyst Automation, Inc., dated September 30, 1997.
10.12(ix)(x) Loan Agreement A and Promissory Note Secured by Deed of Trust
between the Company and Terry Moshier, all dated August 1, 1997.
10.13(ix)(x) Loan Agreement B, Promissory Note, and Loan Pledge Agreement
between the Company and Terry Moshier, all dated August 1, 1997.
10.14(x) Secured Promissory Note between the Company and Dennis Riccio,
dated November 16, 1998.
10.15(x) Secured Promissory Note between the Company and Dennis Riccio,
dated February 1, 1999.
21.1 (ii) Subsidiaries of the Company.
23.1 Consent of Arthur Andersen LLP.
27 Financial Data Schedule (Exhibit 27 is submitted as an exhibit
only in the electronic format of this Annual Report on Form 10-K
submitted to the Securities and Exchange Commission.).
</TABLE>
- --------
(i) Incorporated by reference to the Company's Registration Statement on
Form S-1 (No. 33-66184), as amended.
(ii) Incorporated by reference to the Company's Registration Statement on
Form S-1 (No. 33-88246).
(iii) Incorporated by reference to the Company's 8-K filed with the Securities
Exchange Commission on October 10, 1997.
(iv) Incorporated by reference to the Company's 8-K filed with the Securities
Exchange Commission on August 14, 1998.
(v) Incorporated by reference to the Company's 8-K filed with the
Securities Exchange Commission on June 29, 1998.
(vi) Incorporated by reference to the Company's 8-K filed with the
Securities Exchange Commission on June 18, 1999.
(vii) Incorporated by reference to the Company's 10-Q; quarter ended
September 30, 1997 (Confidential treatment granted).
(viii) Incorporated by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended March 31, 1995.
(ix) Incorporated by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended March 31, 1998.
(x) Management contract/compensation plan, contract or arrangement.
<PAGE>
EXHIBIT 10.14
SECURED PROMISSORY NOTE
$350,000.00 November 16, 1998
For Value Received, Dennis Raymond Riccio ("Employee") and Brenda Ellen
Riccio (together with Employee, collectively, "Maker"), hereby unconditionally
promise to pay to the order of Asyst Technologies, Inc., a California
corporation ("Lender"), at 48761 Kato Road, Fremont, California 94538,
Attention: Doug McCutcheon, or at such other place as the holder hereof may from
time to time designate in writing, in lawful money of the United States of
America and in immediately available funds, the principal amount of Three
Hundred Fifty Thousand Dollars ($350,000.00) together with interest accrued on
the unpaid principal (the "Loan") in accordance with the terms hereof.
1. Security. This Secured Promissory Note ("Note") is secured by a Deed
of Trust dated of even date herewith, executed by Maker in favor of Lender, as
beneficiary (as the same may from time to time be amended, modified or
supplemented or restated, the "Deed of Trust"), granting a security interest in
certain real property located at 5000 Spartanburg Cove, Austin, Texas, as more
particularly described therein (the "Property"). Maker hereby represents and
warrants that, as of the date hereof, (a) Maker is or will be the sole and
lawful fee owner of the Property, (b) the fair market value of the Property, as
determined by an M.A.I. appraiser reasonably satisfactory to Lender, exceeds the
aggregate amount of all indebtedness secured by liens upon the Property and (c)
the Deed of Trust creates a lien on the Property second in priority only to a
first lien of a Deed of Trust executed by Maker in favor of Accubanc Mortgage
Corporation securing a loan in the original principal amount of Three Hundred
Forty-Eight Thousand Seven Hundred and No/100 Dollars ($348,700.00).
2. Principal Repayment. The entire outstanding principal balance of the
Loan shall be due and payable in full upon the earlier to occur of (a) May 31,
2000; (b) thirty (30) days after either the resignation by Employee of his
employment with Lender or the termination of his employment for Cause; or (c)
immediately upon the insolvency of Employee or Maker, including, but not limited
to, a bankruptcy or insolvency proceeding having been instituted by or against
Employee or Maker or a receiver being appointed for the property of Employee or
Maker, or if Employee or Maker makes an assignment for the benefit of creditors
(the "Maturity Date"). For purposes of this Note, "Cause" shall mean (i)
conviction of any felony or any crime involving moral turpitude or dishonesty;
(ii) participation in a fraud or act of dishonesty against Lender; (iii) willful
breach of Lender's policies; (iv) intentional damage to Lender's property; (v)
material breach of any employment agreements entered into with Lender, or any
other agreements with Lender, including, but not limited to, agreements
regarding confidentiality or proprietary information; (vi) engaging in or in any
manner participating in any activity which is competitive with or intentionally
injurious to Lender; (vii) commission of any fraud against Lender or use or
appropriation for Employee or Maker's personal use or benefit of any funds or
properties of Lender not authorized by Lender to be so used or appropriated; or
(viii) conduct by Employee which in the good faith and reasonable determination
of Lender demonstrates gross unfitness to serve. Physical (excluding self-
inflicted incapacitation) or mental disability shall not constitute Cause.
1.
<PAGE>
3. Interest Rate. Maker further promises to pay interest on the
outstanding principal amount hereof from the date hereof until payment in full,
which interest shall be payable at the rate of Four and 47/100 percent (4.47%)
per annum, compounded annually, or the maximum rate permissible by law (which
under the laws of the State of California shall be deemed to be the laws
relating to permissible rates of interest on commercial loans), whichever is
less (the "Interest Rate"). Interest shall be due and payable on the Maturity
Date and shall be calculated on the basis of a 360-day year for the actual
number of days elapsed.
4. Default Interest. If any amount payable hereunder shall not be paid
within five (5) days of the due date thereof, at the option of Lender the unpaid
principal balance shall immediately begin to accrue interest at a rate equal to
the Interest Rate plus one percent (1.0%) and Lender shall have all remedies
available to it by law as a creditor hereunder.
5. Application of Payments. Payment on this Note, if any, shall be
applied first to accrued interest, and thereafter to the outstanding principal
balance hereof. Any payment due hereunder shall be paid to Lender at the address
first set forth above, or at such other place as Lender may designate. Any
amount payable hereunder will be due and payable without set-off, deduction, or
counter-claim.
6. Sale of Property. In the event that Maker shall desire to transfer
title in the Property prior to the Maturity Date, Lender shall permit Maker to
make such transfer free of the lien of the Deed of Trust, provided that (i)
Maker is not, at the time of closing such transfer, in default hereunder or
under the Deed of Trust and (ii) prior to any such transfer, Maker delivers to
Lender a promissory note in the amount of the outstanding principal and interest
hereunder as of such date in a form satisfactory to Lender, which promissory
note is secured by a second deed of trust encumbering real property located in
California which is owned by Maker and which is Maker's principal residence on
such date.
7. Prepayment. Maker may prepay the unpaid principal of this Note in
whole or in part, without penalty, at any time, upon the payment of all unpaid
interest accrued to the date of such prepayment.
8. Default and Remedies.
(a) Default. Each of the following events shall be an "Event of
Default" hereunder: (i) Maker fails to pay timely any of the principal amount
due under this Note on the date the same becomes due and payable or any accrued
interest or other amounts due under this Note on the date the same becomes due
and payable; (ii) the breach by Maker of any other covenant or agreement under
this Note, (iii) the default by Maker of its obligations under the Deed of Trust
or any other instrument evidencing or securing this Note, (iv) the default by
Maker of its obligations under any mortgage, deed of trust, encumbrance or lien
respecting the Property, which encumbrance is senior to the Deed of Trust, (v)
the death of Employee, (vi) the appointment of a receiver for any part of the
Property of, or an assignment for the benefit of creditors by, or the
commencement of any proceedings under any bankruptcy or insolvency laws by or
against any Maker or (vii) the transfer, directly or indirectly, of all or any
part of any interest in Maker or the Property, whether by sale, lease,
assignment, mortgage or otherwise, voluntarily or involuntarily.
2.
<PAGE>
(b) Remedies. Upon the occurrence of an Event of Default, Lender may,
with notice to Maker, declare the entire principal amount of this Note and any
amounts due thereon immediately due and payable and exercise any and all of the
remedies provided under the Deed of Trust or at law or in equity.
9. Notice. All notices or other communications required or given
hereunder shall be in writing and shall be deemed effectively given when
presented personally or on the date of receipt (or refusal of delivery) if sent
by courier service or U.S. Mail (certified or registered, postage prepaid,
return receipt requested) to the parties at the addresses given below or such
other addresses as the parties may hereafter designate in writing. The date
shown on the courier's confirmation of delivery or return receipt shall be
conclusive as to the date of receipt.
Maker: 6420 Stoneridge Mall Road
Suite M-215
Pleasanton, CA 94588
Lender: Asyst Technologies, Inc.
48761 Kato Road
Fremont, CA 94538
Attn: Doug McCutcheon
10. Maximum Legal Rate of Interest. All agreements between Maker and
Lender, whether now existing or hereafter arising, are hereby limited so that in
no event shall the interest charged hereunder or agreed to be paid to Lender
exceed the maximum amount permissible under applicable law. Lender shall be
entitled to amortize, prorate and spread throughout the full term of this Note
all interest paid or payable so that the interest paid does not exceed the
maximum amount permitted by law. If Lender ever receives interest or anything
deemed interest in excess of the maximum lawful amount, an amount equal to the
excessive interest shall be applied to the reduction of the principal, and if it
exceeds the unpaid balance of principal hereof, such excess shall be refunded to
Maker. If interest otherwise payable to Lender would exceed the maximum lawful
amount, the interest payable shall be reduced to the maximum amount permitted
under applicable law. This section shall control all agreements between Maker
and Lender in connection with the indebtedness evidenced hereby.
11. Waiver. Maker, severally waives diligence, presentment, protest and
demand and also notice of protest, demand, dishonor, acceleration, intent to
accelerate, and nonpayment of this Note, and shall pay all costs of collection
when incurred, including, without limitation, reasonable attorneys' fees, costs
and other expenses. The right to plead any and all statutes of limitations as a
defense to any demands hereunder is hereby waived to the full extent permitted
by law.
12. Use of Proceeds; Non-Transferable. The proceeds of the Loan may only
be used by Maker to purchase the Property as their principal residence. The
right of Maker to request and receive the Loan hereunder, as well as the other
benefits under this Note, shall not be assignable or otherwise transferable by
Maker.
3.
<PAGE>
13. Miscellaneous.
(a) Maker shall pay all costs, including, without limitation,
reasonable attorneys' fees and expenses incurred by Lender in collecting the
sums due hereunder or in connection with the release of any security for this
Note.
(b) This Note may be modified only by a written agreement executed by
Maker and Lender.
(c) The terms of this Note shall inure to the benefit of and bind
Maker and Lender and their respective heirs, legal representatives and
successors and assigns.
(d) Time is of the essence with respect to all matters set forth in
this Note.
(e) If this Note is destroyed, lost or stolen, Maker will deliver a
new note to Lender on the same terms and conditions as this Note with a notation
of the unpaid principal in substitution of the prior Note. Lender shall furnish
to Maker reasonable evidence that the Note was destroyed, lost or stolen and any
security or indemnity that may be reasonably required by Maker in connection
with the replacement of this Note.
(f) If any provision of this Note shall be held to be invalid or
unenforceable, such determination shall not affect the remaining provisions of
this Note.
(g) If this Note is now, or hereinafter shall be, signed by more than
one party or person, it shall be the joint and several obligation of such
parties or persons and shall be binding upon such parties and upon their
respective successors and assigns.
(h) In the event of any litigation concerning this Note, the
prevailing party shall be entitled to a reasonable sum for attorneys' fees,
costs, and litigation expenses, whether or not such action is prosecuted to
judgment. "Prevailing Party" shall mean, without limitation, a party who agrees
to dismiss an action upon payment by the other party of sums allegedly due or
performance of the covenants allegedly breached, or who obtains substantially
the relief sought by that party. In the event that Lender is the Prevailing
Party, Lender shall also be entitled to reasonable costs associated with the
collection of the Loan.
14. Governing Law. This Note shall be governed by, and construed and
enforced in accordance with, the laws of the State of California, excluding
conflict of laws principles that would cause the application of laws of any
other jurisdiction.
In Witness Whereof, Maker has executed this Secured Promissory Note as of the
date and year first above written.
/s/ Dennis Raymond Riccio /s/ Brenda Ellen Riccio
- ------------------------------ -----------------------------
Dennis Raymond Riccio Brenda Ellen Riccio
4.
<PAGE>
EXHIBIT 10.15
SECURED PROMISSORY NOTE
$450,000,00 February 1, 1999
For Value Received, Dennis Raymond Riccio ("Employee") and Brenda Ellen
Riccio (together with Employee, collectively, "Maker"), hereby unconditionally
promise to pay to the order of Asyst Technologies, Inc., a California
corporation ("Lender"), at 48761 Kato Road, Fremont, California 94538,
Attention: Doug McCutcheon, or at such other place as the holder hereof may from
time to time designate in writing, in lawful money of the United States of
America and in immediately available funds, the principal amount of Four Hundred
Fifty Thousand Dollars ($450,000.00) together with interest accrued on the
unpaid principal (the "Loan") in accordance with the terms hereof.
1. Security. This Secured Promissory Note ("Note") is secured by a Second
Deed of Trust With Assignment of Rents dated of even date herewith, executed by
Maker in favor of Lender, as beneficiary (as the same may from time to time be
amended, modified or supplemented or restated, the "Deed of Trust"), granting a
security interest in certain real property located at 4210 Remillard Court,
Pleasanton, California, as more particularly described therein (the "Property").
Maker hereby represents and warrants that, as of the date hereof, (a) Maker is
or will be the sole and lawful fee owner of the Property, (b) the fair market
value of the Property, as determined by an M.A.I. appraiser reasonably
satisfactory to Lender, exceeds the aggregate amount of all indebtedness secured
by liens upon the Property and (c) the Deed of Trust creates a lien on the
Property second in priority only to a first lien of a Deed of Trust executed by
Maker in favor of James McDiarmid and Alice McDiarmid, husband and wife, as
joint tenants, securing a loan in the original principal amount of Two Hundred
Sixty-Eight Thousand Five Hundred and No/100ths Dollars ($268,500.00).
2. Principal Repayment. The entire outstanding principal balance of the
Loan shall be due and payable in full upon the earlier to occur of (a) January
31, 2004; (b) thirty (30) days after either the resignation by Employee of his
employment with Lender or the termination of his employment for Cause; or (c)
immediately upon the insolvency of Employee or Maker, including, but not limited
to, a bankruptcy or insolvency proceeding having been instituted by or against
Employee or Maker or a receiver being appointed for the property of Employee or
Maker, or if Employee or Maker makes an assignment for the benefit of creditors
(the "Maturity Date"). For purposes of this Note, "Cause" shall mean (i)
conviction of any felony or any crime involving moral turpitude or dishonesty;
(ii) participation in a fraud or act of dishonesty against Lender; (iii) willful
breach of Lender's policies; (iv) intentional damage to Lender's property; (v)
material breach of any employment agreements entered into with Lender, or any
other agreements with Lender, including, but not limited to, agreements
regarding confidentiality or proprietary information; (vi) engaging in or in any
manner participating in any activity which is competitive with or intentionally
injurious to Lender; (vii) commission of any fraud against Lender or use or
appropriation for Employee or Maker's personal use or benefit of any funds or
properties of Lender not authorized by Lender to be so used or appropriated; or
(viii) conduct by Employee which in the good faith and reasonable determination
of Lender demonstrates gross
1.
<PAGE>
unfitness to serve. Physical (excluding self-inflicted incapacitation) or mental
disability shall not constitute Cause.
3. Interest Rate. Maker further promises to pay interest on the
outstanding principal amount hereof from the date hereof until payment in full,
which interest shall be payable at the rate of Four and 64/100 percent (4.64%)
per annum, compounded annually, or the maximum rate permissible by law (which
under the laws of the State of California shall be deemed to be the laws
relating to permissible rates of interest on commercial loans), whichever is
less (the "Interest Rate"). Interest shall be due and payable on the Maturity
Date and shall be calculated on the basis of a 360-day year for the actual
number of days elapsed.
4. Default Interest. If any amount payable hereunder shall not be paid
within five (5) days of the due date thereof, at the option of Lender the unpaid
principal balance shall immediately begin to accrue interest at a rate equal to
the Interest Rate plus one percent (1.0%) and Lender shall have all remedies
available to it by law as a creditor hereunder.
5. Application of Payments. Payment on this Note, if any, shall be
applied first to accrued interest, and thereafter to the outstanding principal
balance hereof. Any payment due hereunder shall be paid to Lender at the address
first set forth above, or at such other place as Lender may designate. Any
amount payable hereunder will be due and payable without set-off, deduction, or
counter-claim.
6. Prepayment. Maker may prepay the unpaid principal of this Note in
whole or in part, without penalty, at any time, upon the payment of all unpaid
interest accrued to the date of such prepayment.
7. Default and Remedies.
(a) Default. Each of the following events shall be an "Event of
Default" hereunder: (i) Maker fails to pay timely any of the principal amount
due under this Note on the date the same becomes due and payable or any accrued
interest or other amounts due under this Note on the date the same becomes due
and payable; (ii) the breach by Maker of any other covenant or agreement under
this Note, (iii) the default by Maker of its obligations under the Deed of Trust
or any other instrument evidencing or securing this Note, (iv) the default by
Maker of its obligations under any mortgage, deed of trust, encumbrance or lien
respecting the Property, which encumbrance is senior to the Deed of Trust, (v)
the death of Employee, (vi) the appointment of a receiver for any part of the
Property of, or an assignment for the benefit of creditors by, or the
commencement of any proceedings under any bankruptcy or insolvency laws by or
against any Maker or (vii) the transfer, directly or indirectly, of all or any
part of any interest in Maker or the Property, whether by sale, lease,
assignment, mortgage or otherwise, voluntarily or involuntarily.
(b) Remedies. Upon the occurrence of an Event of Default, Lender may,
with notice to Maker, declare the entire principal amount of this Note and any
amounts due thereon immediately due and payable and exercise any and all of the
remedies provided under the Deed of Trust or at law or in equity.
2.
<PAGE>
8. Notice. All notices or other communications required or given
hereunder shall be in writing and shall be deemed effectively given when
presented personally or on the date of receipt (or refusal of delivery) if sent
by courier service or U.S. Mail (certified or registered, postage prepaid,
return receipt requested) to the parties at the addresses given below or such
other addresses as the parties may hereafter designate in writing. The date
shown on the courier's confirmation of delivery or return receipt shall be
conclusive as to the date of receipt.
Maker: 4210 Remillard Court
Pleasanton, CA 94566
Lender: Asyst Technologies, Inc.
48761 Kato Road
Fremont, CA 94538
Attn: Doug McCutcheon
9. Maximum Legal Rate Of Interest. All agreements between Maker and
Lender, whether now existing or hereafter arising, are hereby limited so that in
no event shall the interest charged hereunder or agreed to be paid to Lender
exceed the maximum amount permissible under applicable law. Lender shall be
entitled to amortize, prorate and spread throughout the full term of this Note
all interest paid or payable so that the interest paid does not exceed the
maximum amount permitted by law. If Lender ever receives interest or anything
deemed interest in excess of the maximum lawful amount, an amount equal to the
excessive interest shall be applied to the reduction of the principal, and if it
exceeds the unpaid balance of principal hereof, such excess shall be refunded to
Maker. If interest otherwise payable to Lender would exceed the maximum lawful
amount, the interest payable shall be reduced to the maximum amount permitted
under applicable law. This section shall control all agreements between Maker
and Lender in connection with the indebtedness evidenced hereby.
10. Waiver. Maker, severally waives diligence, presentment, protest and
demand and also notice of protest, demand, dishonor, acceleration, intent to
accelerate, and nonpayment of this Note, and shall pay all costs of collection
when incurred, including, without limitation, reasonable attorneys' fees, costs
and other expenses. The right to plead any and all statutes of limitations as a
defense to any demands hereunder is hereby waived to the full extent permitted
by law.
11. Use Of Proceeds; Non-Transferable. The proceeds of the Loan may only
be used by Maker to purchase the Property as their principal residence. The
right of Maker to request and receive the Loan hereunder, as well as the other
benefits under this Note, shall not be assignable or otherwise transferable by
Maker.
12. Miscellaneous.
(a) Maker shall pay all costs, including, without limitation,
reasonable attorneys' fees and expenses incurred by Lender in collecting the
sums due hereunder or in connection with the release of any security for this
Note.
3.
<PAGE>
(b) This Note may be modified only by a written agreement executed by
Maker and Lender.
(c) The terms of this Note shall inure to the benefit of and bind
Maker and Lender and their respective heirs, legal representatives and
successors and assigns.
(d) Time is of the essence with respect to all matters set forth in
this Note.
(e) If this Note is destroyed, lost or stolen, Maker will deliver a
new note to Lender on the same terms and conditions as this Note with a notation
of the unpaid principal in substitution of the prior Note. Lender shall furnish
to Maker reasonable evidence that the Note was destroyed, lost or stolen and any
security or indemnity that may be reasonably required by Maker in connection
with the replacement of this Note.
(f) If any provision of this Note shall be held to be invalid or
unenforceable, such determination shall not affect the remaining provisions of
this Note.
(g) If this Note is now, or hereinafter shall be, signed by more than
one party or person, it shall be the joint and several obligation of such
parties or persons and shall be binding upon such parties and upon their
respective successors and assigns.
(h) In the event of any litigation concerning this Note, the
prevailing party shall be entitled to a reasonable sum for attorneys' fees,
costs, and litigation expenses, whether or not such action is prosecuted to
judgment. "Prevailing Party" shall mean, without limitation, a party who agrees
to dismiss an action upon payment by the other party of sums allegedly due or
performance of the covenants allegedly breached, or who obtains substantially
the relief sought by that party. In the event that Lender is the Prevailing
Party, Lender shall also be entitled to reasonable costs associated with the
collection of the Loan.
13. Governing Law. This Note shall be governed by, and construed and
enforced in accordance with, the laws of the State of California, excluding
conflict of laws principles that would cause the application of laws of any
other jurisdiction .
In Witness Whereof, Maker has executed this Secured Promissory Note as of the
date and year first above written.
/s/ Dennis Raymond Riccio /s/ Brenda Ellen Riccio
- ------------------------- -----------------------
Dennis Raymond Riccio Brenda Ellen Riccio
4.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report included (or incorporated by reference) in this Form 10-K, into the
Company's previously filed Registration Statement Nos. 333-71641, 333-45799,
333-31417, 33-301438 and 33-70100 on Form S-8.
ARTHUR ANDERSEN LLP
San Jose, California
June 29, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE TWELVE MONTHS ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 6,116
<SECURITIES> 29,370
<RECEIVABLES> 15,371
<ALLOWANCES> 1,496
<INVENTORY> 17,341
<CURRENT-ASSETS> 89,266
<PP&E> 28,138
<DEPRECIATION> 16,490
<TOTAL-ASSETS> 119,766
<CURRENT-LIABILITIES> 15,964
<BONDS> 0
0
0
<COMMON> 111,927
<OTHER-SE> (8,125)
<TOTAL-LIABILITY-AND-EQUITY> 119,766
<SALES> 84,154
<TOTAL-REVENUES> 84,154
<CGS> 52,689
<TOTAL-COSTS> 118,183
<OTHER-EXPENSES> (2,243)
<LOSS-PROVISION> 658
<INTEREST-EXPENSE> 47
<INCOME-PRETAX> (31,786)
<INCOME-TAX> (10,807)
<INCOME-CONTINUING> (20,979)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (20,979)
<EPS-BASIC> (1.80)
<EPS-DILUTED> (1.80)
</TABLE>
