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Filed Pursuant to Rule 424(b)(1)
Registration No. 333-89489
PROSPECTUS
2,000,000 Shares
[LOGO OF ASYST TECHNOLOGIES, INC.]
Common Stock
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We are selling 2,000,000 shares of our common stock. Our shares are
listed for trading on the Nasdaq National Market under the symbol "ASYT." On
November 11, 1999, the last reported sale price for our common stock was $41
7/16.
Investing in our common stock involves risks which are described in the
"Risk Factors" section beginning on page 5 of this prospectus.
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<TABLE>
<CAPTION>
Per Share Total
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<S> <C> <C>
Public offering price................................. $40.50 $81,000,000
Underwriting discount................................. $2.43 $4,860,000
Proceeds, before expenses, to Asyst Technologies...... $38.07 $76,140,000
</TABLE>
The underwriters may also purchase up to an additional 300,000 shares at
the public offering price, less the underwriting discount, within 30 days from
the date of this prospectus to cover over-allotments.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
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Merrill Lynch & Co. Lehman Brothers
Adams, Harkness & Hill, Inc.
Needham & Company, Inc.
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The date of this prospectus is November 11, 1999.
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EDGAR colorwork description:
Inside front cover of prospectus:
Set of pictures of Asyst products. The Asyst logo covers the left-hand side of
the page. The title is "Increased Productivity and Value Assurance." The text
in the upper middle of the page is as follows:
"We are the leading provider of Standard Mechanical InterFace-based (SMIF)
minienvironment and manufacturing automation systems that enable semiconductor
integrated circuit manufacturers to increase their manufacturing productivity
and protect their investment in silicon wafers during the manufacturing of
integrated circuits.
We offer a broad range of products that enable us to provide semiconductor
manufacturers and original equipment manufacturers (OEMs) with automated
solutions for the transfer of wafers and information between the process
equipment and the rest of the facility."
Inside gatefold:
Semiconductor manufacturing facility layout labeled "Semiconductor
Manufacturing Facility" with pictures of Asyst products and product names
incorporated into the facility layout to show where Asyst's products fit in
the semiconductor manufacturing process. The caption for the upper left hand
corner product picture is "Plus-Portal System." The caption for the upper
middle product picture is "Work-in-Process Materials Management." The caption
for the upper right hand corner product picture is "Isolation Systems." The
caption for the lower right hand corner product picture is "Connectivity
Automation Software." The caption for the lower middle product picture is
"Substrate-Handling Robotics." The caption for the lower left hand corner
product picture is "Automated Transport and Loading Systems." The Asyst logo
covers the left hand side of the gatefold.
Inside back cover of prospectus:
The Asyst logo.
<PAGE>
TABLE OF CONTENTS
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Page
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Prospectus Summary....................................................... 1
Risk Factors............................................................. 5
Forward-Looking Statements............................................... 14
Use of Proceeds.......................................................... 15
Dividend Policy.......................................................... 15
Price Range of Our Common Stock.......................................... 16
Capitalization........................................................... 17
Dilution................................................................. 18
Selected Consolidated Financial Data..................................... 19
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 20
Business................................................................. 32
Management............................................................... 43
Certain Transactions with Related Parties................................ 45
Principal Shareholders................................................... 47
Underwriting............................................................. 48
Legal Matters............................................................ 49
Experts.................................................................. 50
Where You Can Get More Information....................................... 50
</TABLE>
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You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate as of the date on the
front cover of this prospectus only. Our business, financial condition, results
of operations and prospects may have changed since that date.
Asyst is our registered trademark. Asyst-SMIF System, SMART-Traveler
System, SMIF-Pod, SMIF-Arms, SMIF-Indexer, SMIF-LPI, SMIF-LPO, SMIF-LPT, SMIF-
E, SMART-Tag, SMART-Comm, SMART-Storage Manager, SMART-Fab, Global Lot Server,
FlouroTrac Auto ID System and SMART-Station, are our trademarks. This
prospectus also contains registered trademarks of other entities.
<PAGE>
PROSPECTUS SUMMARY
This summary does not contain all of the information that may be
important to you. You should read the entire prospectus carefully, including
the financial data and related notes, before making an investment decision. The
terms "we," "us," "our" and "Asyst" mean Asyst Technologies, Inc. Unless
otherwise indicated, all information in this prospectus assumes that the
underwriters do not exercise their over-allotment option.
Asyst Technologies, Inc.
We are the leading provider of Standard Mechanical InterFace-based, or
SMIF, minienvironment and manufacturing automation systems that enable
semiconductor integrated circuit manufacturers, or semiconductor manufacturers,
to increase their manufacturing productivity and protect their investment in
silicon wafers during the manufacturing of integrated circuits, or ICs. We
offer a broad range of products that enable us to provide semiconductor
manfacturers and original equipment manufacturers of process equipment, or
OEMs, with automated solutions for the transfer of wafers and information
between the process equipment and the rest of the facility. We are the only
supplier with expertise in what we believe are the five key elements required
to provide the semiconductor manufacturing industry with integrated facility
automation solutions. We believe these elements are:
.isolation systems;
.work-in-process materials management;
.substrate-handling robotics;
.automated transport and loading systems; and
.connectivity automation software.
Currently, we believe we offer the most comprehensive product line in the
portal automation market. Portal automation systems use a standard interface to
transfer wafers and information between the process equipment minienvironment
and sealed contamination controlled containers, often referred to as pods.
We believe that semiconductor manufacturers, the end users of our
products, are able to obtain a higher level of productivity from their
equipment by integrating our products into the semiconductor manufacturing
process. Our products protect valuable wafers throughout the manufacturing
process by providing semiconductor manufacturers with efficient contamination
control, wafer level identification, and tracking and logistics management.
Semiconductor manufacturers face challenges in achieving and maintaining
high production yields, improving utilization of facilities and managing the
logistics of the increasingly complex semiconductor manufacturing process. In
order to meet these challenges, these manufacturers must continue to invest in
new technology and reduce operating costs. Semiconductor manufacturers are
currently making, and are expected to continue to make, significant investments
in manufacturing capacity through the construction of new 200mm wafer
facilities and the upgrade of existing 150mm and 200mm wafer facilities.
Additional investments are expected to occur as the industry transitions to
300mm wafer facilities.
We have achieved success in serving the 150mm and 200mm wafer markets by
applying our extensive experience in isolation technology, material tracking
and factory automation. Our strategy is to continue to build upon our success
and further capitalize on the accelerating demand for our technology. The
principal elements of our strategy are:
. Capitalize on Demand for New 200mm Facilities and Existing
Facility Upgrades. Increased demand for advanced integrated
circuits is fueling the construction of new 200mm
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facilities and upgrades of existing facilities. We intend to
continue to enhance our leadership position and our technical
expertise in this market by developing increasingly efficient
automation solutions in the 200mm market.
. Focus on Portal Automation. Our portal automation solutions allow
OEMs to improve productivity and decrease their total cost and
time to market. We believe that by leveraging our existing
relationships with OEMs and semiconductor manufacturers, we will
be in a position to capitalize on the increasing demand for a
standard interface between the process tool and the factory
environment.
. Increase Penetration of the Japanese Market. We believe Japanese
semiconductor manufacturers will continue to build 200mm
facilities, continue to upgrade existing facilities and begin to
build 300mm facilities. We intend to augment our ability to
directly supply our products to Japanese customers by increasing
our local presence in Japan. In September 1999, we entered into
an alliance with MECS Corporation, a Japanese engineering and
robotics company, that will increase our presence in Japan and
give us the ability to provide local engineering support.
. Leverage Success in 200mm to Capitalize on the Transition to
300mm. We believe our experience and market leadership in portal
automation and SMIF for the 200mm wafer market provide us with a
unique platform from which to transition our existing technology
to 300mm wafer processing equipment.
. Build on Strong End User Relationships to Increase Demand for Our
Products from OEMs. The demand for our products has been enhanced
by the strong relationships we have developed with semiconductor
manufacturers, our end users. By working closely with these
semiconductor manufacturers, we are able to better understand
their specific process requirements and, in turn, educate them on
the benefits of our products. Ultimately, this process encourages
our semiconductor manufacturer customers to specify our products
to OEMs as the preferred solution, thereby increasing demand for
our products.
We are a California corporation. Our principal offices are located at
48761 Kato Road, Fremont, California 94538, and our telephone number is (510)
661-5000. Our corporate Website is www.asyst.com. The information in our
Website is not incorporated by reference in this prospectus.
Recent Developments
In June 1999, we acquired all of the shares of Progressive System
Technologies, Inc., a Texas corporation, or PST, which manufactures wafer-
sorting equipment used by semiconductor manufacturers.
In August 1999, we acquired all of the shares of Palo Alto Technologies,
Inc., a California corporation, or PAT, which is in the process of developing a
continuous flow transport system for use in semiconductor manufacturing
facilities.
In September 1999, we entered into an alliance with MECS Corporation, a
Japanese engineering and robotics company, which provides that MECS will sell
our products and provide local customer support in the Japanese market. In
October 1999, we purchased approximately 9 2/3 percent of the common stock of
MECS in exchange for approximately $1.5 million. We also have an option to
purchase at least 66 2/3 percent of the common stock of MECS. If we exercise
this option we will use at least $8.4 million of the net proceeds from this
offering.
2
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The Offering
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<C> <S>
Common stock offered by Asyst.............. 2,000,000 shares
Common stock to be outstanding
after this offering....................... 14,955,886 shares. The number of shares of
our common stock to be outstanding after
this offering is based on the number of
shares outstanding as of September 30,
1999. This excludes 3,823,723 shares of
common stock issuable upon exercise of
outstanding stock options with a weighted
average exercise price of approximately
$14.22 per share. This number also excludes
241,337 additional shares reserved for
future issuance under our stock option
plans and 208,717 additional shares
reserved for sale under our employee stock
purchase plan.
Use of proceeds............................ For capital expenditures, working capital
and other general corporate purposes. If we
exercise our option to purchase at least 66
2/3 percent of the common stock of MECS, we
will use at least $8.4 million of the net
proceeds.
Risk factors............................... See "Risk Factors" for a discussion of
factors you should carefully consider
before deciding to invest in our common
stock.
Nasdaq National Market symbol.............. ASYT
</TABLE>
3
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Summary Consolidated Financial Data
The information under "As Adjusted" in the consolidated balance sheet
data below reflects the receipt of the estimated net proceeds from the sale by
us of the 2,000,000 shares of common stock in this offering at the public
offering price of $40 1/2 per share.
<TABLE>
<CAPTION>
Six Months Ended
Year Ended March 31, September 30,
-------------------------------------------- -----------------
1995 1996 1997 1998 1999 1998 1999
------- -------- -------- -------- -------- -------- -------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement
of Operations Data:
Net sales............... $41,184 $107,223 $152,303 $182,290 $ 92,948 $ 56,341 $67,782
Gross profit............ 19,899 44,221 60,702 79,898 33,053 21,167 29,615
In-process research and
development of acquired
businesses and product
line................... -- -- 1,335 -- 7,100 7,100 4,000
Operating income
(loss)................. 5,908 12,561 16,579 25,673 (39,475) (20,696) (6,761)
Income (loss) from
continuing operations.. 4,992 8,858 9,990 17,202 (26,931) (13,239) (5,634)
Net income (loss)....... 2,422 6,455 (4,675) 15,362 (26,931) (13,239) (5,634)
Basic Earnings Per
Share:
Income (loss) per share
from continuing
operations............. $ 0.81 $ 0.89 $ 0.96 $ 1.51 $ (2.30) $ (1.11) $ (0.45)
Net income (loss) per
share.................. $ 0.32 $ 0.65 $ (0.45) $ 1.34 $ (2.30) $ (1.11) $ (0.45)
Shares used in per share
calculation............ 7,540 9,956 10,363 11,429 11,730 11,944 12,532
Diluted Earning Per
Share:
Income (loss) per share
from continuing
operations............. $ 0.75 $ 0.83 $ 0.94 $ 1.41 $ (2.30) $ (1.11) $ (0.45)
Net income (loss) per
share.................. $ 0.30 $ 0.61 $ (0.44) $ 1.26 $ (2.30) $ (1.11) $ (0.45)
Shares used in per share
calculation............ 8,209 10,667 10,643 12,228 11,730 11,944 12,532
</TABLE>
<TABLE>
<CAPTION>
September 30, 1999
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Actual As Adjusted
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Consolidated Balance Sheet Data:
Cash, cash equivalents and short-term investments.......... $ 30,706 $106,146
Working capital............................................ 80,586 156,026
Total assets............................................... 139,084 214,524
Total shareholders' equity................................. 112,674 188,114
</TABLE>
4
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RISK FACTORS
You should carefully consider the risks described below before making a
decision to invest in our common stock. If any of the following risks actually
occur, our business, prospects, financial condition and results of operations
could be materially adversely affected. This could cause the trading price of
our stock to decline, and you may lose all or part of your investment.
This prospectus contains forward-looking statements that involve risks
and uncertainties, including statements about our future plans, objectives,
intentions and expectations. Many factors, including those described below,
could cause actual results to differ materially from those discussed in any
forward-looking statements.
Our quarterly operating results are subject to variability which could
negatively impact our financial results and our stock price
Our revenues and operating results can fluctuate substantially from
quarter to quarter depending on factors such as:
. the timing of significant customer orders;
. the timing of product shipments;
. variations in the mix of products sold;
. the introduction of new products;
. changes in customer buying patterns;
. fluctuations in the semiconductor equipment market;
. the availability of key components; and
. general trends in the economy.
Our sales cycle is typically six to twelve months or longer from initial
inquiry to placement of an order, making the timing of customer orders uneven
and difficult to predict. This process may also 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, multi-
million dollar customer projects involving upgrades of existing facilities or
the construction of new facilities. We typically cannot ship products until the
customer's facility or the process tools housed in its facility are ready.
Generally, our customers may cancel or reschedule shipments with limited or no
penalty. These factors increase the risk of unplanned fluctuations in net
sales. Moreover, a shortfall in planned net sales in a quarter as a result of
these factors could negatively impact our operating results for the quarter.
Given these factors, we expect quarter to quarter performance to fluctuate for
the foreseeable future and, consequently, that quarter to quarter comparisons
may not be meaningful. In one or more future quarters, our operating results
are likely to be below the expectations of public market analysts and
investors. If this occurs, the price of our stock will decline.
Because the semiconductor manufacturing industry is subject to rapid demand
shifts which are difficult to predict, our inability to efficiently manage our
manufacturing capacity in response to these rapid shifts may cause a reduction
in our gross margins, profitability and market share
Our ability to meet increases in demand depends in part upon our ability
to increase manufacturing capacity for our products in a timely manner. Our
manufacturing capacity is currently being strained by an increase in orders for
our products. If we are unable to expand our production on a timely basis or to
manage expansion effectively, we could lose customers to competitors and our
market share could be reduced. Even if we are able to expand our capacity
sufficiently, we may not be able to manage this expansion efficiently, in which
case, our gross margins and profitability would be negatively impacted.
Additionally, capacity expansion will increase our fixed operating expenses and
make us more vulnerable to a downturn in the semiconductor manufacturing
market.
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We depend on large purchases from a few significant customers, and any loss,
cancellation, reduction or delay in purchases by these customers could harm our
business
A small number of customers have accounted for a significant portion of
our revenues. Our success will depend on our continued ability to develop and
manage relationships with significant customers. In fiscal 1999, Worldwide
Semiconductor Manufacturing Company accounted for approximately 11 percent of
our net sales. For the six months ended September 30, 1999, Taiwan
Semiconductor Manufacturing Company accounted for approximately 11 percent of
our net sales. Although we are attempting to expand our customer base, we
expect that significant customer concentration will continue for the
foreseeable future.
The markets in which we sell our products are comprised of a relatively
small number of OEMs and semiconductor manufacturers. Our dependence on large
orders from a relatively small number of customers makes our relationship with
each customer critical to our business. It is not certain that we will be able
to retain our largest customers, that we will be able to attract additional
customers or that our OEM customers will be successful in selling our products.
We have in the past experienced delays and reductions in orders from some of
our major customers. In addition, our customers have in the past sought price
concessions from us and may continue to do so in the future. Further, some of
our customers may in the future shift their purchases of products from us to
our competitors. The loss of one or more of our largest customers, any
reduction or delay in sales to these customers, the inability to successfully
develop relationships with additional customers or the need to provide future
price concessions would have a negative impact on our business.
If we are unable to collect a receivable from a large customer, our
financial results will be negatively impacted. In addition, since each customer
represents a significant percentage of net sales, the timing of the completion
of an order can lead to a fluctuation in our quarterly results. As we complete
projects for a customer, business from that customer will decline substantially
unless it undertakes additional projects incorporating our products.
Because we do not have long-term contracts with our customers, our customers
may cease purchasing our products at any time if we fail to meet their needs
We do not have long-term contracts with our customers. As a result, our
agreements with our customers do not provide any assurance of future sales.
Accordingly:
. our customers can cease purchasing our products at any time without
penalty;
. our customers are free to purchase products from our competitors;
. we are exposed to competitive price pressure on each order; and
. our customers are not required to make minimum purchases.
Sales are typically made pursuant to individual purchase orders and often
occur with extremely short lead times. If we are unable to fulfill these orders
in a timely manner, we will lose sales and customers.
Continued rapid growth will strain our operations and require us to incur costs
to upgrade our infrastructure
During the last three years, we have experienced extremely rapid growth
in our operations, the number of our employees, our product offerings and the
geographic area of our operations. Our growth has been driven by an increase in
our customer base, the size of our installed base of products and acquisitions
of new operations. With the recent increase in demand for semiconductor
manufacturing equipment, we will have to grow even faster to meet customer
demands. Our growth places a significant strain on our management, operations
and financial systems. Our future operating results will be dependent in part
on our ability to
6
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continue to implement and improve our operating and financial controls and
management information systems. In order to succeed, we must train and manage
our employees to cope with growth and change. Failure to manage our growth
effectively could negatively impact our financial condition, results of
operations and profitability.
Because of intense competition for highly skilled personnel, we may not be able
to recruit and retain necessary personnel
Our future performance depends substantially on the continued service of
our senior management team, in particular Dr. Mihir Parikh, our Chairman of the
Board and Chief Executive Officer, and Anthony Bonora, our Senior Vice
President, Research and Development and Chief Technical Officer. We do not have
long term employment agreements with any of our senior management team, except
Dr. Parikh, and we do not maintain any key-man life insurance policies.
Our future success will depend in large part upon our ability to recruit
and retain highly skilled technical, manufacturing, 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 the demand for our products,
we have had to reduce our workforce and then rebuild our workforce as our
business has gone through downturns followed by upturns. For the fiscal year
ended March 31, 1999, because of the industry downturn, we restructured our
operations and as a result, we terminated the employment of approximately 110
employees in the United States and approximately 30 employees internationally.
In the current upturn, we will need to hire a number of highly skilled
employees, especially in manufacturing, to meet customer demand. The labor
markets in which we operate are highly competitive and as a result, this type
of employment cycle increases our risk of not being able to retain and recruit
key personnel. Moreover, our failure to maintain good employee relations could
negatively impact our operations.
The semiconductor manufacturing industry is highly volatile, and our results of
operations are affected to a large extent by events in this 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. During downturns,
some of our customers typically implement substantial reductions in capital
expenditures, and, as a result, drastically reduce their orders with us. For
example, in the fiscal year ended March 31, 1998, we had net sales of $182.3
million which declined to $92.9 million for the year ended March 31, 1999. This
sharp decrease in net sales was due to the reduction in industry capital
spending resulting from the downturn in the Asian economies and in worldwide
demand for semiconductors. In contrast, because of the recent demand for new
200mm facilities and upgrades of existing facilities, our net sales for the six
months ended September 30, 1999 were $67.8 million, an increase of 20.3 percent
over the same period in 1998. We believe that our future performance will
continue to be affected by the cyclical nature of the semiconductor industry
and, as a result, be adversely affected from time to time by such industry
downturns.
We may not be able to efficiently integrate the operations of our acquisitions
We have recently acquired several companies in order to expand our
product lines including Hine Design Incorporated, or HDI, PST and PAT. We have
also entered into a strategic alliance with MECS which gives us an option to
buy a controlling interest in MECS. We are likely to make additional
acquisitions of, or significant investments in, businesses that offer
complementary products, services, technologies or market
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access. If we are to realize the anticipated benefits of these acquisitions,
the operations of these companies must be integrated and combined efficiently.
The process of integrating supply and distribution channels, computer and
accounting systems and other aspects of operations, while managing a larger
entity, will present a significant challenge to our management. In addition, it
is not certain that we will be able to incorporate different technologies into
our integrated solution. 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, and we may
need to hire additional management personnel to successfully rationalize our
acquisitions. The difficulties of integration may be increased by the necessity
of combining personnel with disparate business backgrounds and combining
different corporate cultures. 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
stock or a 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 future
acquisitions.
We may not be able to realize the benefits of our alliance with MECS
In September 1999, we entered into an alliance with MECS which provides
that MECS will sell our products and provide local customer support in the
Japanese market. In October 1999, we purchased approximately 9 2/3 percent of
the common stock of MECS. We also have an option to purchase at least 66 2/3
percent of the common stock of MECS. If we exercise this option, we intend to
operate MECS largely as a stand-alone entity. In order to realize the
anticipated benefits of this relationship, our senior management will need to
work effectively with the senior management of MECS despite the geographic
distance between the two companies and the different languages and cultures. If
we are unable to work effectively with the senior management of MECS, then we
may not be able to realize the anticipated benefits of the alliance. If we do
not exercise our option, then we would incur a delay in establishing a greater
presence in Japan, and our position in that market could be negatively
impacted.
In addition, if we exercise this option, MECS may continue to have
minority shareholders, including its current majority owner and Chief Executive
Officer. Being a majority owner of a corporation with minority shareholders
would place responsibilities on us as the majority owner to consider the needs
and benefits of the minority shareholders, which may be different from ours. If
we exercise this option, the operating results and assets and liabilities of
MECS will be consolidated into our financial statements and our balance sheet,
even though MECS will not be a wholly-owned subsidiary. As of March 31, 1999,
MECS owed approximately $34.0 million in unsecured loans from banks and secured
bonds with interest rates ranging between 1.4 percent to 1.8 percent per annum.
Finally, if MECS performs poorly, this could materially and adversely affect
our financial results.
Shortages of components necessary for our product assembly can delay our
shipments and can lead to increased costs which may negatively impact our
financial results
With the recent increased demand for semiconductor manufacturing
equipment, our suppliers are straining to provide components on a timely basis
and, in some cases, on an expedited basis at our request. Although to date, we
have experienced only minimal delays in receiving goods from our key suppliers,
disruption or termination of these sources could have a temporary adverse
effect on our operations. Many of the components and subassemblies used in our
products are obtained from a single supplier or a limited group of suppliers.
We believe that, in time, alternative sources could be obtained and qualified
to supply these products in the ordinary course of business, but a prolonged
inability to obtain some components could have an adverse effect on our
operating results and could result in damage to our customer relationships.
Shortages of components may also result in price increases for components and
as a result, could decrease our margins and negatively impact our financial
results.
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Our efforts to be responsive to customers may lead to the incurrence of costs
that are not readily recoverable
We may incur manufacturing overhead and other costs, many of which are
fixed, to meet anticipated customer demand. We often require long lead times
for development of our products; during these periods we must expend
substantial funds and management effort. We may incur significant development
and other expenses as we develop our products without realizing corresponding
revenue in the same period, or at all.
We may not be able to effectively compete in a highly competitive semiconductor
equipment industry
The markets for our products are highly competitive and subject to rapid
technological change. We currently face direct competition with respect to all
of our products. Some of our competitors may have greater name recognition,
more extensive engineering, manufacturing and marketing capabilities and
substantially greater financial, technical and personnel resources than those
available to us.
Several companies, including Brooks Automation, Inc. through its
acquisition of Jenoptik Infab, Inc., offer one or more products that compete
with our Asyst-SMIF System and SMART-Traveler System products. We compete
primarily with Entegris, Inc. in the area of SMIF-Pods. We also compete with
several competitors in the robotics area, including, but not limited to, PRI
Automation, Inc. and Kensington Laboratories Inc. With our recent acquisition
of PAT, we have acquired technology in the area of transport automation systems
which we expect to allow us to develop products in this area. By entering this
market, our transport products will face competition from the main product line
of PRI, as well as from Daifuku Co., Ltd. and Murata Manufacturing Co., Ltd.
With our acquisition of PST, we have acquired products in the area of the
storage and management of wafers and reticles. We compete primarily with Irvine
Optical Company in this area.
In addition, the conversion to 300mm wafers is likely to draw new
competitors to the facility automation market. In the 300mm wafer market, we
expect to face intense competition from a number of companies such as PRI and
Brooks, as well as potential competition from semiconductor equipment and
cleanroom construction companies.
We expect that our competitors will continue to develop new products in
direct competition with ours, improve the design and performance of their
products and introduce new products with enhanced performance characteristics.
In order to remain competitive, we need to continue to improve and expand our
product offerings. In addition, we need to maintain a high level of investment
in research and development and expand our sales and marketing efforts,
particularly in Japan. Ultimately, we may not be able to make the technological
advances and investments necessary to remain competitive.
New products developed by our competitors or more efficient production of
their products could increase pricing pressure on our products. In addition,
companies in the semiconductor capital equipment industry have been facing
pressure to reduce costs. Either of these factors may require us to make
significant price reductions to avoid losing orders. Further, our current and
prospective customers continuously exert pressure on us to lower prices,
shorten delivery times and improve the capabilities of our products. Failure to
respond adequately to such pressures could result in a loss of customers or
orders.
If we are unable to develop and introduce new products and technologies in a
timely manner, our business could be negatively impacted
Semiconductor equipment and processes are subject to rapid technological
changes. The development of more complex ICs has driven the need for new
facilities, equipment and processes to produce these devices at an acceptable
cost. We believe that our future success will depend in part upon our ability
to continue to enhance our existing products to meet customer needs and to
develop and introduce new products in a timely manner. 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.
9
<PAGE>
If we are unable to convince our customers of the advantages of the Plus-Portal
System our growth prospects could be negatively impacted
We recently introduced our Plus-Portal System for sale to our OEM
customers as a complete, automated interface between the OEM's tool and the
facility. Currently, many OEMs design and manufacture automated equipment
front-ends for their tools utilizing purchased components and in-house
engineering and manufacturing resources. The Plus-Portal System offers OEMs a
standard, outsourced alternative. Although we anticipate that the Plus-Portal
System will not be widely adopted by OEMs until the market begins the
transition to 300mm wafers, we believe that our growth prospects in this area
depend in large part upon our ability to gain acceptance of the Plus-Portal
System by a broader group of OEM customers. Notwithstanding our solution, OEMs
may purchase components to assemble interfaces or invest in the development of
their own complete interfaces. The decision by an OEM to adopt the system for a
large product line involves significant organizational, technological and
financial commitments by this OEM. The market may not accept the Plus-Portal
System.
If we are unable to transition our 200mm technologies to meet the standards
required by the new 300mm wafer size, our business will be adversely affected
The semiconductor manufacturing industry is anticipated to undergo a
shift in wafer size from 200mm to 300mm over the next few years. As the market
shifts, new products and technologies will be needed to manufacture the larger
wafers. The introduction of new products to service the 300mm market utilizing
new technologies and the emergence of new industry standards could render our
products obsolete. Our success depends on our ability to adapt to rapidly
changing technologies and to improve the performance, features and reliability
of our services in response to changing customer and industry demands.
Furthermore, we may experience difficulties that could delay or prevent the
successful design, development, testing, introduction or marketing of new
products to meet the requirements of the 300mm market.
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 avoided, or that the rights granted
thereunder will provide us with competitive advantages. We also rely on trade
secrets that we seek to protect, in part, through confidentiality agreements
with employees, consultants and other parties. 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.
Intellectual property rights are uncertain and involve complex legal and
factual questions. We have in the past, and may in the future, unknowingly
infringe on the intellectual property rights of others and may be liable for
that infringement, which could result in significant liability for us. If we do
infringe the intellectual property rights of others, we could be forced to
either seek a license to intellectual property rights of others or alter our
products so that they no longer infringe the intellectual property rights of
others. A license could be very expensive to obtain or may not be available at
all. Similarly, changing our products or processes to avoid infringing the
rights of others may be costly or impractical or could detract from the value
of our product.
There has been substantial litigation regarding patent and other
intellectual property rights in semiconductor-related industries. Litigation
may be necessary to enforce our patents, to protect our trade secrets or know-
how, to defend Asyst against claimed infringement of the rights of others or to
determine the scope and validity of the patents or intellectual property rights
of others. Any litigation could result in substantial cost to us and divert the
attention of our management, which by itself could have an adverse material
effect on our financial condition and results of operations. Further, adverse
determinations in any litigation could result in
10
<PAGE>
our loss of intellectual property rights, subject us to significant liabilities
to third parties, require us to seek licenses from third parties or prevent us
from manufacturing or selling our products. Any of these effects could have a
negative impact on our financial condition and results of operations.
We face significant risks because a majority of our net sales are from sales
outside the United States
A majority of our net sales for the years ended March 31, 1997, 1998 and
1999 and the six months ended September 30, 1999, were attributable to sales
outside the United States, primarily in Japan, Singapore, Taiwan, and Europe.
We expect that international sales will continue to represent a significant
portion of our total revenues in the future. In particular, net sales to Taiwan
represented 30.8% of our total net sales for the six months ended September 30,
1999. This concentration increases our exposure to any risks in this area.
Sales to customers outside the United States are subject to various risks,
including:
. exposure to currency fluctuations;
. the imposition of governmental controls;
. the need to comply with a wide variety of foreign and U.S. export
laws;
. political and economic instability;
. trade restrictions;
. changes in tariffs and taxes;
. longer payment cycles typically associated with foreign sales;
. the greater difficulty of administering business overseas; and
. general economic conditions.
As of March 31, 1997 and 1998 and 1999 and the six months ended September
30, 1999, a majority of our accounts receivable, net, were due from
international customers located primarily in Japan, Singapore, Taiwan and
Europe. Receivable collection and credit evaluation in new geographies and
countries challenge our ability to avert international risks. In addition, the
laws of certain foreign countries may not protect our intellectual property to
the same extent as do the laws of the United States. Although we invoice
substantially all of our international sales in United States dollars, there
can be no assurance that our future results of operations will not be adversely
affected by currency fluctuations. If we exercise our option to purchase at
least 66 2/3 percent of the common stock of MECS, we will increase our exposure
to currency fluctuations.
We could lose revenues and incur significant costs if our systems, products or
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 could have a material adverse effect on our business. With
respect to our internal business systems, we are working with the third party
vendors of these 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 will 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. Our total incremental cost
of assessing and remediating our systems and product Year 2000 compliance
issues is estimated to be between $0.5 million and $1.0 million. Approximately
$0.2 million has been spent as of March 31, 1999, with between $0.2 million and
$0.4 million in capital expenditures planned for the first nine
11
<PAGE>
months of fiscal year 2000. 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.
Anti-takeover provisions in our articles of incorporation, bylaws and our
shareholder rights plan may prevent or delay an acquisition of Asyst that might
be beneficial to our shareholders
Our articles of incorporation and bylaws include provisions that may have
the effect of deterring hostile takeovers or delaying changes in control or
management of Asyst. These provisions include certain advance notice procedures
for nominating candidates for election to our Board of Directors, a provision
eliminating shareholder actions by written consent and a provision under which
only our Board of Directors, our Chairman of the Board, our President or
shareholders holding at least ten percent of the outstanding common stock may
call special meetings of the shareholders. We have entered into agreements with
our officers and directors indemnifying them against losses they may incur in
legal proceedings arising from their service to Asyst.
We have adopted a share purchase rights plan, pursuant to which we have
granted to our shareholders rights to purchase shares of junior participating
preferred stock. Upon the earlier of (1) the date of a public announcement that
a person, entity, or group of associated persons has acquired 15 percent of our
common stock or (2) ten business days following the commencement of, or
announcement of, a tender offer or exchange offer, the rights granted to our
shareholders will become exercisable to purchase our common stock at a price
substantially discounted from the then applicable market price of our common
stock. These rights could generally discourage a merger or tender offer
involving the securities of Asyst that is not approved by our Board of
Directors by increasing the cost of effecting any such transaction and,
accordingly, could have an adverse impact on shareholders who might want to
vote in favor of such merger or participate in such tender offer.
In addition, our Board of Directors has authority to issue up to
4,000,000 shares of preferred stock and to fix the rights, preferences,
privileges and restrictions, including voting rights, of those shares without
any future vote or action by the shareholders. The issuance of preferred stock
while providing desirable flexibility in connection with possible acquisition
and other corporate purposes, could have the effect of making it more difficult
for a third party to acquire a majority of our outstanding voting stock,
thereby delaying, deferring or preventing a change in control of Asyst.
Furthermore, such preferred stock may have other rights, including economic
rights senior to the common stock, and as a result, the issuance thereof could
have a material adverse effect on the market value of the common stock. We have
no present plans to issue shares of preferred stock.
Our stock price may fluctuate significantly which could be detrimental to our
shareholders
Our stock price has in the past fluctuated and will fluctuate in the
future in response to a variety of factors, including the following:
. quarterly fluctuations in results of operations;
. announcements of new products by Asyst or its competitors;
. changes in either our earnings estimates or investment
recommendations by stock market analysts;
. announcements of technological innovations;
. conditions or trends in the semiconductor manufacturing industry;
. announcements by Asyst or our competitors of acquisitions, strategic
partnerships or joint ventures;
12
<PAGE>
. additions or departures of senior management; and
. other events or factors many of which are beyond our control.
In addition, in recent years, the stock market in general and shares of
technology companies in particular have experienced extreme price fluctuations,
and such extreme price fluctuations may continue. These broad market and
industry fluctuations may adversely affect the market price of our common
stock.
We may not be able to secure additional financing to meet our future capital
needs
We currently anticipate that our available cash resources combined with
the net proceeds from this offering will be sufficient to meet our anticipated
needs for working capital and capital expenditures for at least twelve months
following the date of this prospectus. If we are unable to generate sufficient
cash flows from operations to meet our anticipated needs for working capital
and capital expenditures, we will need to raise additional funds after twelve
months to develop new or enhanced products, respond to competitive pressures or
make acquisitions. We may be unable to obtain any required additional financing
on terms favorable to us, if at all. If adequate funds are not available on
acceptable terms, we may be unable to fund our expansion, successfully develop
or enhance products, respond to competitive pressures or take advantage of
acquisition opportunities, any of which could have a material adverse effect on
our business. If we raise additional funds through the issuance of equity
securities, our shareholders may experience dilution of their ownership
interest, and the newly-issued securities may have rights superior to those of
the common stock. If we raise additional funds by issuing debt, we may be
subject to limitations on our operations.
Investors will suffer immediate and substantial dilution from this offering
The public offering price per share significantly exceeds the net
tangible book value per share. Accordingly, investors purchasing shares in this
offering will suffer immediate and substantial dilution investment of $29.16
per share.
13
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, and Section 21E of the Securities
Exchange Act of 1934. We intend such forward-looking statements to be covered
by the safe harbor provisions for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995, and we are including this
statement for purposes of complying with these safe harbor provisions. We have
based these forward-looking statements on our current expectations and
projections about future events. These forward-looking statements are not
guarantees of future performance and are subject to risks, uncertainties and
assumptions, including those set forth under "Risk Factors."
Words such as "expect," "anticipate," "intend," "plan," "believe,"
"estimate" and variations of such words and similar expressions are intended to
identify such forward-looking statements. We undertake no obligation to
publicly update or revise any forward-looking statements, whether as a result
of new information, future events or otherwise. In light of these risks,
uncertainties and assumptions, the forward-looking events discussed in this
prospectus might not occur.
14
<PAGE>
USE OF PROCEEDS
We estimated that the net proceeds from the sale of the 2,000,000 shares
of common stock that we are offering at the public offering price of $40 1/2
will be approximately $75.4 million after deducting the underwriting discounts
and commissions and estimated offering expenses payable by us. If the
underwriters exercise their over-allotment option in full, we estimate the net
proceeds from this offering will be approximately $86.9 million.
We expect to use the net proceeds from this offering for capital
expenditures, working capital and general corporate purposes. If we exercise
our option to purchase at least 66 2/3 percent of the common stock of MECS, we
will use at least $8.4 million of the net proceeds. We may use a portion of the
net proceeds to acquire other complementary products, technologies or
businesses when the opportunity arises; however, we currently have no
commitments or agreements other than with MECS and are not involved in any
other negotiations with respect to any such transactions. As of the date of
this prospectus, we cannot specify with certainty the particular uses for the
net proceeds we will receive in this offering. Accordingly, our management will
have broad discretion in applying our net proceeds of this offering. Pending
such uses, the net proceeds of this offering will be primarily invested in
investment grade, interest-bearing instruments.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock.
We currently intend to retain earnings, if any, to support the development of
our business and do not anticipate paying cash dividends for the foreseeable
future. Payment of future dividends, if any, will be at the discretion of our
Board of Directors after taking into account various factors, including our
financial condition, operating results and current and anticipated cash needs.
15
<PAGE>
PRICE RANGE OF OUR COMMON STOCK
Our common stock has been traded on the Nasdaq National Market under the
symbol ASYT since September 22, 1994. The following table sets forth for the
period indicated the high and low closing prices for our common stock, as
reported by the Nasdaq National Market, adjusted for a two for one stock
dividend in August 1997.
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
Year ended March 31, 1998
First Quarter................................................ $22 $ 9 1/2
Second Quarter............................................... $47 1/4 $21 5/8
Third Quarter................................................ $44 1/4 $20
Fourth Quarter............................................... $32 $18 5/8
Year ended March 31, 1999
First Quarter................................................ $25 3/4 $12 1/2
Second Quarter............................................... $15 $ 7
Third Quarter................................................ $21 11/16 $ 6 3/16
Fourth Quarter............................................... $28 3/16 $13 3/4
Year ending March 31, 2000
First Quarter................................................ $29 15/16 $14 3/4
Second Quarter............................................... $33 5/8 $24 3/4
Third Quarter (through November 11, 1999).................... $41 13/16 $29 5/8
</TABLE>
On November 11, 1999, the last reported sale price of our common stock on
the Nasdaq National Market was $41 7/16. As of September 30, 1999 there were
12,955,886 shares of our common stock outstanding held by approximately 210
holders of record.
16
<PAGE>
CAPITALIZATION
The following table sets forth on an unaudited basis our capitalization
as of September 30, 1999 and as adjusted to reflect the sale of the 2,000,000
shares of common stock we are offering at the public offering price of $40 1/2
per share and the receipt of the estimated net proceeds, after deducting the
underwriting discounts and our estimated offering expenses. You should read
this table in conjunction with the consolidated financial statements and notes
incorporated by reference and "Selected Consolidated Financial Data" included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
September 30,
1999
------------------
As
Actual adjusted
-------- --------
(in thousands)
<S> <C> <C>
Current portion of long-term debt.......................... $ -- $ --
Long-term debt............................................. -- --
Shareholders' equity:
Preferred stock, no par value, 4,000,000 shares
authorized; no shares issued and outstanding............ -- --
Common stock, no par value, 50,000,000 shares authorized;
12,955,886 shares issued and outstanding................ 135,716 211,156
Accumulated deficit...................................... (23,042) (23,042)
-------- --------
Total shareholders' equity.............................. 112,674 188,114
-------- --------
Total capitalization.................................. $112,674 $188,114
======== ========
</TABLE>
- --------
The table above excludes:
. 3,823,723 shares of common stock issuable upon exercise of options
outstanding at September 30, 1999 at a weighted average exercise
price of $14.22 per share; and
. 450,054 shares of common stock reserved for future grant or issuance
under our option plans and employee stock purchase plan.
17
<PAGE>
DILUTION
As of September 30, 1999, our net tangible book value was $94.1 million
in the aggregate, or $7.27 per share. Net tangible book value per share
represents our total tangible assets less total liabilities, divided by the
number of outstanding shares of common stock. Dilution per share represents the
difference between the amount per share paid by investors in this offering of
common stock and the net tangible book value per share after the offering.
After giving effect to the sale of 2,000,000 shares of common stock and after
our application of the estimated net proceeds from the offering, our net
tangible book value as of September 30, 1999 would have been $169.6 million in
the aggregate, or $11.34 per share. This represents an immediate increase in
net tangible book value of $4.07 per share to existing shareholders and an
immediate dilution in net tangible book value of $29.16 per share to new
investors purchasing shares of common stock in the offering. The following
table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Public offering price per share............................. $40.50
Net tangible book value per share before the offering..... $7.27
Increase attributable to new investors.................... 4.07
-----
Pro forma net tangible book value per share after the
offering................................................... 11.34
------
Dilution per share to new investors......................... $29.16
======
</TABLE>
18
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below should be read
together with "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and our financial statements and the related notes
incorporated by reference. The selected consolidated statement of operations
data set forth below for the years ended March 31, 1995 and 1996 and the
selected consolidated balance sheet data as of March 31, 1995, 1996 and 1997
are derived from unaudited financial statements that are not included in this
prospectus or incorporated by reference. The selected consolidated financial
data set forth below for the years ended March 31, 1997, 1998, and 1999 have
been derived from our audited financial statements incorporated by reference.
The selected consolidated financial data as of September 30, 1999 and for the
six months ended September 30, 1998 and 1999 are derived from unaudited
financial statements incorporated by reference. These unaudited consolidated
financial statements have been prepared on the same basis as the audited
financial statements and, in our opinion, contain all adjustments consisting of
normal recurring adjustments necessary for a fair presentation of our financial
position and results of operations. Our historical results are not necessarily
indicative of results to be expected for any future period.
<TABLE>
<CAPTION>
Six Months Ended
Year Ended March 31, September 30,
-------------------------------------------- -----------------------
1995 1996 1997 1998 1999 1998 1999
------- -------- -------- -------- -------- -------- -------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement
of Operations Data:
Net sales............... $41,184 $107,223 $152,303 $182,290 $ 92,948 $ 56,341 $ 67,782
Gross profit............ 19,899 44,221 60,702 79,898 33,053 21,167 29,615
In-process research and
development of acquired
businesses and product
line................... -- -- 1,335 -- 7,100 7,100 4,000
Operating income
(loss)................. 5,908 12,561 16,579 25,673 (39,475) (20,696) (6,761)
Income (loss) from
continuing operations.. 4,992 8,858 9,990 17,202 (26,931) (13,239) (5,634)
Net income (loss)....... 2,422 6,455 (4,675) 15,362 (26,931) (13,239) (5,634)
Basic earnings per
share:
Income (loss) per share
from continuing
operations............ $ 0.81 $ 0.89 $ 0.96 $ 1.51 $ (2.30) $ (1.11) $ (0.45)
Net income (loss) per
share................. $ 0.32 $ 0.65 $ (0.45) $ 1.34 $ (2.30) $ (1.11) $ (0.45)
Shares used in per
share calculation..... 7,540 9,956 10,363 11,429 11,730 11,944 12,532
Diluted earnings per
share:
Income (loss) per share
from continuing
operations............ $ 0.75 $ 0.83 $ 0.94 $ 1.41 $ (2.30) $ (1.11) $ (0.45)
Net income (loss) per
share................. $ 0.30 $ 0.61 $ (0.44) $ 1.26 $ (2.30) $ (1.11) $ (0.45)
Shares used in per
share calculation..... 8,209 10,667 10,643 12,228 11,730 11,944 12,532
<CAPTION>
March 31, September 30,
-------------------------------------------- -------------
1995 1996 1997 1998 1999 1999
------- -------- -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Balance
Sheet Data:
Cash, cash equivalents
and short-term
investments............ $39,183 $ 14,249 $ 14,739 $ 85,493 $ 35,762 $ 30,706
Working capital......... 53,051 56,077 56,835 122,535 72,484 80,586
Total assets............ 77,316 101,021 98,828 166,502 124,288 139,084
Total shareholders'
equity................. 58,868 68,146 68,376 129,250 96,634 112,674
</TABLE>
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and the related notes included elsewhere in this prospectus. This
discussion contains forward-looking statements which involve risks and
uncertainties. Our actual results could differ materially from those
anticipated in the forward-looking statements as a result of certain factors,
including but not limited to those discussed in "Risk Factors" and elsewhere in
this prospectus.
Overview
Our sales are tied to capital expenditures at wafer fabrication
facilities. The majority of our revenues in any single quarter are typically
derived from relatively few large customers; therefore, our revenues will
fluctuate based on a number of factors, including:
. the timing of significant customer orders;
. the timing of product shipments;
. variations in the mix of products sold;
. the introduction of new products;
. changes in customer buying patterns;
. fluctuations in the semiconductor equipment market;
. the availability of key components; and
. general trends in the economy.
In addition, due to production cycles and customer requirements, we often
ship significant quantities of products in the last month of the quarter. This
factor increases the risk of unplanned fluctuations in net sales since we have
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 was 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 our customers slashed capital
expenditure budgets by 40 percent or more. Net sales decreased 49.0 percent
from $182.3 million for the year ended March 31, 1998 to $92.9 million for the
year ended March 31, 1999. In addition, in fiscal year 1999, we acquired the
FluoroTrac Auto-ID product line from Flouroware, Inc. and HDI, enhancing our
wafer tracking and robotics capabilities. The significant decline in net sales
and the new acquisitions required us to undertake substantial restructuring
activities to reduce costs and eliminate low margin products. Nevertheless, we
experienced a net loss in fiscal year 1999 of $26.9 million compared to a
record net income of $15.4 million in fiscal year 1998.
In contrast, net sales for each of the quarters ended June 30, 1999 and
September 30, 1999 have increased sequentially by over 45 percent over the
prior quarter. Our book to bill ratios have improved and are higher than those
reported for the industry. Whereas for most of the year ended March 31, 1999 we
were dependent upon orders received and shipped during the same quarter, our
current backlog of orders exceeds our manufacturing capacity for the quarter
ending December 31, 1999. Many of our customers have announced significantly
increased capital expenditure spending plans.
In June 1999, we acquired all of the shares of PST, which manufactures
wafer-sorting equipment used by semiconductor manufacturers. The acquisition
was accounted for as a pooling of interests. Accordingly, our consolidated
financial statements for all periods presented have been restated to include
the financial statements of PST.
20
<PAGE>
In August 1999, we acquired all of the shares of PAT, which is in the
process of developing a continuous flow transport system for use in
semiconductor manufacturing facilities. The transaction was accounted for as a
purchase.
In September 1999, we entered into an alliance with MECS to sell our
products and provide local customer support in the Japanese market. In October
1999, we purchased approximately 9 2/3 percent of the common stock of MECS in
exchange for approximately $1.5 million. We also have an option to purchase at
least 66 2/3 percent of the common stock of MECS, once MECS meets various
operating performance levels and disposes of its non-core subsidiaries. If we
were to acquire 66 2/3 percent of the common stock of MECS, then we will spend
approximately $8.4 million. If we were to acquire 100 percent of the common
stock of MECS, then we will spend approximately $13.4 million. As of March 31,
1999, MECS had long-term debt and bonds, including the current portions,
totaling approximately $34.0 million with interest rates ranging between 1.4
percent to 1.8 percent per annum.
Three and Six Months Ended September 30, 1998 and 1999
The following table sets forth the percentage of net sales represented by
consolidated statements of operations data for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
--------------------- -------------------
1998 1999 1998 1999
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Net sales......................... 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales..................... 81.8 54.9 62.4 56.3
--------- -------- -------- --------
Gross profit.................... 18.2 45.1 37.6 43.7
--------- -------- -------- --------
Operating expenses:
Research and development........ 23.6 11.0 16.0 12.8
Selling, general and
administrative................. 65.1 30.3 40.5 34.9
In-process research and
development of acquired
businesses and product line.... 31.2 9.8 12.6 5.9
Restructuring charge............ 15.4 -- 5.2 --
--------- -------- -------- --------
Total operating expenses...... 135.3 51.1 74.3 53.6
--------- -------- -------- --------
Operating income (loss)....... (117.1) (6.0) (36.7) (9.9)
Other income, net................. 6.0 0.7 2.6 0.4
--------- -------- -------- --------
Income (loss) before provision
(benefit) for income taxes....... (111.1) (5.3) (34.1) (9.5)
Provision (benefit) for income
taxes............................ (36.3) 1.5 (10.6) (1.2)
--------- -------- -------- --------
Net income (loss)................. (74.8)% (6.8)% (23.5)% (8.3)%
========= ======== ======== ========
</TABLE>
Results of Operations
Net Sales. Net sales increased 115.3 percent from $18.9 million for the
three months ended September 30, 1998, to $40.7 million for the three months
ended September 30, 1999. Net sales increased 20.3 percent from $56.3 million
for the six months ended September 30, 1998 to $67.8 million for the six months
ended September 30, 1999. The increase in net sales for the three and six
months ended September 30, 1999 is due to increased demand for our products as
capital expenditures of semiconductor manufacturers have increased to add
capacity.
International sales have increased in terms of dollars of net sales but
decreased as a percent of net sales for the six months ended September 30, 1999
compared to the six months ended September 30, 1998. This is partly due to the
influence of the acquisition of HDI in August 1998 which sells primarily to
OEMs in
21
<PAGE>
the United States. International sales by region for the six months ended
September 30, 1998 and 1999, are summarized as follows:
<TABLE>
<CAPTION>
Six Months Ended September Six Months Ended September
30, 1998 30, 1999
--------------------------- ---------------------------
Geographic Net Sales Percentage of Net Sales Percentage of
Region (in millions) Net Sales (in millions) Net Sales
---------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Taiwan............ $23.1 41.0% $20.9 30.8%
Japan............. 6.6 11.7 10.8 15.9
Singapore......... 1.5 2.7 4.3 6.4
Europe............ 3.0 5.3 2.2 3.2
----- ---- ----- ----
$34.2 60.7% $38.2 56.3%
===== ==== ===== ====
</TABLE>
Our results of operations have not been adversely affected by currency exchange
rates because we have invoiced substantially all of our international sales in
United States dollars. However, there can be no assurance that our results of
operations will not be adversely affected by such fluctuations in the future.
We have experienced cancellations and delays of orders in the past,
particularly during fiscal year 1999, while the industry was undergoing a
significant downturn. During the six months ended September 30, 1999,
cancellation and delays were not significant. Given the cyclical nature of the
semiconductor industry, we can give no assurance that there will not be future
cancellations or delays in orders.
Gross Margin. Gross margin increased from 18.2 percent of net sales for
the three months ended September 30, 1998, to 45.1 percent of net sales for the
three months ended September 30, 1999. Gross margin increased from 37.6 percent
of net sales for the six months ended September 30, 1998 to 43.7 percent of net
sales for the six months ended September 30, 1999. The primary contributor to
the increase in the gross margin for the three and six months ended September
30, 1999 was the increase in net sales without increasing indirect
manufacturing costs at the rate net sales increased. Gross margin also improved
as a result of the impact of cost reduction efforts we undertook during the
past year, offset somewhat by lower gross margins in our robotics products
added to our portfolio of products by the acquisition of HDI in August 1998. It
remains our goal to improve gross margins as a percentage of net sales in the
future through reduction of direct manufacturing costs and increase the
leverage of the indirect manufacturing through higher net sales.
Research and Development. Research and development expenses were $4.5
million for the three months ended September 30, 1998 and 1999. Research and
development expenses decreased 3.4 percent from $9.0 million for the six months
ended September 30, 1998, to $8.7 million for the six months ended
September 30, 1999. The dollar decrease for the six months ended September 30,
1999 from the six months ended September 30, 1998 is because of our cost
reduction efforts in response to a sharp decline in sales. Research and
development expenses decreased as a percentage of net sales from 23.6 percent
for the three months ended September 30, 1998 to 10.9 percent for the three
months ended September 30, 1999 and decreased as a percentage of net sales from
16.0 percent for the six months ended September 30, 1998 to 12.8 percent for
the six months ended September 30, 1999. The decrease in research and
development expenses as a percentage of net sales for the comparative three and
six month periods is due primarily to the increase in our net sales. We expect
that our research and development expenses may increase in future periods, but
will fluctuate as a percentage of net sales.
Selling, General and Administrative. Selling, general and administrative
expenses were $12.3 million for the three months ended September 30, 1998 and
1999. Selling, general, and administrative expenses increased 3.7 percent from
$22.8 million for the six months ended September 30, 1998, to $23.7 million for
the six months ended September 30, 1999. Selling, general and administrative
expenses have increased because of the impact of the acquisition of HDI in
August 1998, staffing additions in response to the increase in our sales
22
<PAGE>
and higher commission expenses related to our increase in net sales. The
decrease in selling, general and administrative expenses as a percentage of net
sales is due primarily to the increase in net sales in both the three and six
month comparative periods. We expect that selling, general and administrative
expenses may increase in future periods, although the spending may vary as a
percentage of net sales.
In-process Research and Development of Acquired Businesses and Product
Line. In April 1998, we completed the acquisition of the FluoroTrac product
line from Fluoroware. The transaction was completed in the three months ended
June 30, 1998. In connection with the acquisition of FluoroTrac, we recorded a
write-off of $1.2 million of in-process research and development for the three
months ended June 30, 1998. The remaining excess cost of purchase price over
net assets acquired, approximately $0.3 million, is being amortized over
periods of three to five years.
In July 1998, we acquired HDI using the purchase method of accounting. In
connection with the acquisition of HDI, we recorded a write-off of $5.9 million
of in-process research and development costs for the three months ended
September 30, 1998. In addition, approximately $18.4 million of the purchase
price in excess of the value of net liabilities we assumed were allocated to
various intangible assets, which are being amortized over periods of four to
fourteen years, with a dollar average life of ten years. For the three months
ended September 30, 1999, a charge for amortization relating to these
intangibles, approximately $0.6 million, was included in our selling, general
and administrative expenses.
In August 1999, we acquired PAT using the purchase method of accounting.
In connection with the acquisition of PAT, we recorded a write off of $4.0
million of purchased in-process research and development costs for the three
months ended September 30, 1999. In addition, approximately $0.6 million of the
purchase price in excess of the value of the net liabilities we assumed were
allocated to goodwill, which is being amortized over five years. The purchased
in-process research and development and goodwill do not result in a tax
benefit.
Restructuring Charge. For the three months ended September 30, 1998, in
response to the reductions in capital spending by semiconductor manufacturers,
we undertook a formal plan to lower our cost structure and reorganize to more
effectively manufacture, market and sell our portfolio of products and value
added services. The restructuring effort consisted of the closure of two of our
facilities in the United States during the three months ended December 31, 1998
and the closure and downsizing of certain facilities in Europe for the three
months ended March 31, 1999. In addition, management of the software product
line was streamlined eliminating one level of management and administrative
activities, which were deemed redundant.
Other Income, Net. Other income, net, includes interest income, interest
expense, foreign exchange gain and loss, which has not been material, and
royalty income. Other income, net, decreased from $1.1 million for the three
months ended September 30, 1998 to $0.3 million for the three months ended
September 30, 1999. Other income, net, decreased from $1.5 million for the six
months ended September 30, 1998 to $0.3 million for the six months ended
September 30, 1999. Our average cash, cash equivalents and short-term
investments balance for the six months ended September 30, 1998 was
approximately $67.0 million compared to $33.2 million for the six months ended
September 30, 1999. Our average current and long-term debt balance was $5.8
million for the six months ended September 30, 1998, while we had no debt
outstanding for the six months ended September 30, 1999.
Provision (Benefit) for Income Taxes. We reported a benefit for income
taxes of $6.9 million and a provision for income taxes of $0.6 million for the
three months ended September 30, 1998 and 1999, respectively. For the six
months ended September 30, 1998 and 1999, we reported a benefit for income
taxes of $6.0 million and $0.8 million, respectively. The effective income tax
rates for the three and six months ended September 30, 1998 were impacted by
the acquisition of PST. The annual effective tax rates and benefits recorded
for the three and six months ended September 30, 1998 do not recognize the full
deferred benefits of the utilization of net operating losses of PST because
there was uncertainty as to PST's ability to generate
23
<PAGE>
future taxable income. Absent the restatement of earnings to reflect the
pooling of interests related to PST for the three and six months ended
September 30, 1998, our effective tax rate would have been 34.0 percent. The
provision for income taxes for the three months ended September 30, 1999
reflects the non-deductible charge of $4.0 million related to the acquisition
of PAT in August 1999. The annual estimated effective tax rate and benefit
recorded for the six months ended September 30, 1999, reflect the nondeductible
charge of $4.0 million related to the acquisition of PAT in August 1999.
Additionally, 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 benefit due to net operating losses for the six months ended
September 30, 1999 and limitations on state net operating loss carryforwards.
Fiscal Years Ended March 31, 1997, 1998 and 1999
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............................. 60.1 56.2 64.4
--------- --------- ---------
Gross profit............................ 39.9 43.8 35.6
--------- --------- ---------
Operating expenses:
Research and development................ 7.5 9.1 19.4
Selling, general and administrative..... 20.6 20.6 45.0
In-process research and development of
acquired businesses and product line... 0.9 -- 7.7
Restructuring charge.................... -- -- 6.0
--------- --------- ---------
Total operating expenses................ 29.0 29.7 78.1
--------- --------- ---------
Operating income (loss)................. 10.9 14.1 (42.5)
Other income (expense), net............... 0.4 1.0 1.9
--------- --------- ---------
Income (loss) from continuing operations
before provision (benefit) for income
taxes.................................... 11.3 15.1 (40.6)
Provision (benefit) for income taxes...... 4.7 5.6 (11.6)
--------- --------- ---------
Income (loss) from continuing
operations............................... 6.6 9.5 (29.0)
--------- --------- ---------
Loss from operations of Asyst Automation,
Inc., net of applicable income taxes..... (4.0) -- --
Loss on closure of Asyst Automation, Inc.,
net of applicable income taxes........... (5.6) (1.0) --
--------- --------- ---------
Net income (loss)......................... (3.0)% 8.5 % (29.0)%
========= ========= =========
</TABLE>
Net Sales. Net sales in the year ended March 31, 1999 decreased by 49.0
percent to $92.9 million from $182.3 million for the year ended March 31, 1998.
Net sales for the year ended March 31, 1997 were approximately $152.3 million.
The decrease in sales was consistent across all of our products. Both the OEM
channel and direct fabrication end user channel were impacted by the worldwide
reduction in capital spending of the major semiconductor manufacturers. Net
sales would have been approximately $6.3 million less had we not acquired the
FluoroTrac product line and HDI for the fiscal year ended March 31, 1999.
For the three months ended March 31, 1999, our ending backlog was greater
than our net sales for that quarter. We can give no assurance that orders may
not be cancelled in the future.
24
<PAGE>
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 Sales $ % of Sales $ % of Sales
----- ---------- ------ ---------- ----- ----------
<S> <C> <C> <C> <C> <C> <C>
Taiwan...................... $48.8 32.1% $ 79.3 43.5% $31.1 33.5%
Singapore................... 9.4 6.2 13.6 7.5 3.4 3.7
Thailand.................... 6.6 4.3 -- -- -- --
Korea....................... 6.1 4.0 -- -- 0.5 0.5
Japan....................... 10.3 6.7 15.9 8.7 8.1 8.7
Other....................... .4 0.3 0.5 0.3 0.3 0.3
----- ---- ------ ---- ----- ----
Total Asia................ 81.6 53.6 109.3 60.0 43.4 46.7
Europe...................... 5.1 3.3 6.5 3.5 4.1 4.4
----- ---- ------ ---- ----- ----
Total International....... $86.7 56.9% $115.8 63.5% $47.5 51.1%
===== ==== ====== ==== ===== ====
</TABLE>
Direct sales to international customers remain a substantial portion of
our sales. During fiscal year 1999, international sales as a percent of net
sales decreased to 51.0 percent from 63.0 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 Asyst. International net sales of robots, the primary
product of HDI, represented less than 10 percent of the $6.3 million of our
robot sales during fiscal year 1999. In addition, in fiscal year 1999, we
experienced a sharp decline in our Asia foundry sales in response to the
slowdown in worldwide demand for semiconductors. For example, our largest
customer in fiscal year 1998 reduced its purchases of our products from $53.0
million to just $6.3 million in fiscal year 1999, representing our second
largest customer. In fiscal year 1999, our largest customer purchased
$10.3 million of products. The largest customers as measured in net sales, in
the fiscal years 1997, 1998 and 1999, were Asia based foundries.
The net sales by product or service categories comprising our net sales,
were as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended March
31,
-------------------------
1997 1998 1999
-------- -------- -------
(in thousands)
<S> <C> <C> <C>
SMIF Systems.......................................... $118,647 $145,702 $66,609
NON-SMIF Systems...................................... 14,783 16,827 8,794
SMART Traveler Systems................................ 11,145 14,533 6,227
Robotics.............................................. -- -- 6,323
Services and other.................................... 7,728 5,228 4,995
-------- -------- -------
Total............................................... $152,303 $182,290 $92,948
======== ======== =======
</TABLE>
Gross Margin. Our gross margin was 39.9 percent of net sales in fiscal
year 1997, 43.8 percent of net sales in fiscal year 1998, and 35.6 percent of
net sales in fiscal year 1999. The decrease in the gross margin in fiscal year
1999 resulted because of the 49.0 percent drop in net sales from fiscal year
1998 and our inability to reduce our manufacturing overhead to compensate for
the lower revenues. We also increased our 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 our employees. Competition continued to put pressure on our
gross margin in spite of continuing efforts to reduce costs through design
changes and manufacturing overhead reductions process improvements. In fiscal
year 1998, our gross margin was benefited by record net revenues and changes in
our product mix. Our load port product line,
25
<PAGE>
or LPP, which has a higher gross margin than its other products, increased from
19.9 percent of net sales in fiscal 1997 to 43.7 percent of net sales in fiscal
1998. The gross margin on the LPP line in fiscal 1998 improved over the gross
margin in fiscal 1997 because of design improvements directed at reducing
manufacturing costs. We expect our gross margin to improve and return to
historical levels as net sales increase to those achieved in fiscal years 1997
and 1998. During fiscal year 1999, we operated a single shift in our
manufacturing operations. Given the level of net sales, we were only using
about 60 percent of our manufacturing capacity during that shift. We expect our
gross margin to continue to fluctuate because of pricing pressures from:
. 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.
Research and Development. Research and development expenses were $11.4
million, $16.6 million and $18.0 million for the years ended March 31, 1997,
1998 and 1999, respectively, representing 7.5 percent, 9.1 percent and 19.4
percent of net sales in those years. The increase in research and development
expenses in fiscal year 1999, was due to increased spending for our new 300mm
products, the acquisition of HDI and continuing enhancements and additions to
its 200mm product line due to the transition to 300mm facilities by the
semiconductor industry. Research and development expenses consist of salaries,
project materials and other expenses related to our commitment to ongoing
product development efforts. We capitalize certain legal cost related to its
patents. To date, we have not capitalized costs associated with software
development because the costs incurred to date that are eligible for
capitalization have not been material. We expect our research and development
activities and related expenditures to increase in future periods.
Selling, General and Administrative. Selling, general and administrative
expenses were $31.4 million or 20.6 percent of net sales, $37.7 million or 20.6
percent of net sales, and $41.9 million or 45.0 percent of net sales for the
year ended March 31, 1997, 1998 and 1999, respectively. Selling and marketing
expenses were $11.7 million or 7.7 percent of net sales, $14.1 million or 7.7
percent of net sales, and $14.7 million or 15.8 percent of net sales for the
same periods. The growth in selling and marketing expenses in fiscal year 1998
and 1999 is the result of our increased global presence and the development of
new customer relationships presented by the emerging 300mm technology. The
growth in selling and marketing expenses in fiscal year 1999 resulted primarily
from the acquisition of the FluoroTrac product line and HDI.
General and administrative expenses were $19.7 million or 12.9 percent of
net sales, $23.6 million or 13.0 percent of net sales, and $27.2 million or
29.2 percent of net sales for fiscal years 1997, 1998 and 1999, respectively.
In fiscal year 1999, general and administrative expenses increased $3.5 million
over the prior year even though net sales decreased 49.0 percent, due largely
to the acquisition of the FluoroTrac product line and HDI. We incurred goodwill
amortization related to the two acquisitions of approximately $1.7 million.
Other general and administrative expenses related to the acquisitions of
the FluoroTrac product line and HDI added another $1.9 million in the year
ended March 31, 1999. In addition, we incurred an additional $4.3 million of
legal expenses in connection with our patent infringement lawsuit that we
incurred in the prior year. We believe we 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 our warranty reserves for warranty labor in
fiscal year 1999. In prior years, expenses related to warranty activities were
charged to general and administrative expenses. In response to the 49.0 percent
reduction in net sales, we reduced general and administrative expenses by an
additional $2.9 million.
Restructuring Charge. In the year ended March 31, 1999, we underwent
significant restructuring of our operations to reduce our cost structure in
response to the 49.0 percent reduction in net sales. We restructured activities
in Japan and Europe to reposition our activities to compete more effectively.
In addition,
26
<PAGE>
we repositioned our product offerings to eliminate low gross margin products or
software services that have high risks of failure. The following table
summarizes restructuring charges by geographic region:
<TABLE>
<CAPTION>
Cash outlays Ending Accrual
through as of
Expensed March 31, 1999 March 31, 1999
-------- -------------- --------------
(in thousands)
<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
United States
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>
These restructurings resulted in the termination of 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. 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 Businesses and Product
Line. During the year ended March 31, 1999, we completed the acquisition of the
FluoroTrac product line and HDI. We acquired HDI using the purchase method of
accounting during the three months ended September 30, 1998. In connection with
the purchase price allocation related to the FluoroTrac product line and HDI,
we recorded write-offs of approximately $1.2 and $5.9 million, respectively, of
in-process research and development costs in the three months 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 is still being developed. Additionally, in November 1996, we
completed the acquisition of Radiance Systems, Inc., which was accounted for
using the purchase method of accounting. In connection with the purchase price
allocation, we recorded a write-off of $1.3 million of in-process research and
development in the three months ended December 31, 1996, as the acquired in-
process research and development had not yet reached technological feasibility
and had no perceived 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 1.0 percent of net sales primarily because of the increase in
interest income on our significantly higher cash position 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 our common
stock in September 1997. In fiscal year 1999, other income (expense), net was
1.9 percent of net sales. The increase as a percentage of net sales was due
largely to the 49.0 percent decrease in net sales in 1999.
27
<PAGE>
Provision (Benefit) for Income Taxes. In fiscal years 1997, 1998 and 1999
the effective tax rates were 42 percent, 37 percent and 29 percent,
respectively. In fiscal year 1999, we experienced a net operating loss, which
generated a tax benefit of approximately $10.8 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 benefit due to net
operating losses during the current year and limitations on State net operating
loss carryforwards. We have recorded a deferred tax asset of approximately
$19.1 million, of which $10.8 million relates to net operating losses and tax
credits generated during the current year. We will be able to realize in cash
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, we were able
to recognize certain tax benefits related to Foreign Sales Corporation 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 Radiance Systems.
Our provision for income taxes differs from the expected tax expense
(benefit) amount by applying the statutory Federal income tax rate of 35
percent to income (loss) before income taxes as a result of state income taxes,
permanent items and the application of the valuation allowance associated with
the deferred tax assets generated by PST acquisition.
Prior to the acquisition of PST, PST provided a valuation allowance to
offset the deferred tax asset in the amount of $3.1 million due to
uncertainties regarding the future realization of net operating loss
carryforwards and other deferred tax assets. As of March 31, 1999, PST had
Federal net operating loss carryforwards of approximately $5.3 million, which
will expire beginning in fiscal 2012. The utilization of the net operating
losses may be subject to a substantial annual limitation due to the "change in
ownership" and consolidated loss provisions of the Internal Revenue Code.
Subsequent to the acquisition, PST will be included in our consolidated income
tax return.
Discontinued Operations. In January 1997, we adopted a formal plan to
close Asyst Automation Inc. by the end of September 1997, which was accounted
for in the three months ended December 31, 1996. 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 Asyst Automation have been used as of March 31, 1999. In September
1997, we entered into an asset purchase agreement with PAT, pursuant to which
we sold to PAT, a related party, some intellectual property rights and office
equipment which were owned or licensed by Asyst Automation.
Selected Quarterly Financial Data
The following table presents unaudited consolidated quarterly financial
information for each of the six quarters ended September 30, 1999. In the
opinion of management, this information has been prepared on the same basis as
the audited consolidated financial statements incorporated by reference in this
registration statement 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 results of operations for each of the three months ended September 30,
1998, June 30, 1999 and September 30, 1999, principally due to the conditions
discussed in the preceding sections. Due to the decrease in our sales volume in
fiscal 1999 that resulted from world-wide reductions in capital spending of the
major semiconductor manufacturers, we were unable to reach economies of scale
needed to reduce overhead and other spending to be consistent with the rates
associated with the larger sales volume that we experienced during comparable
quarters in the prior fiscal year. As our 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
28
<PAGE>
quarters of our 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
registration statement.
<TABLE>
<CAPTION>
Fiscal Quarter Ended
-----------------------------------------------------
Jun. Dec. Jun. Sept.
30, Sep. 30, 31, Mar. 31, 30, 30,
1998 1998 1998 1999 1999 1999
------- -------- ------- -------- ------- -------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Net sales............... $37,441 $ 18,900 $17,911 $ 18,695 $27,086 $40,696
Cost of sales........... 19,724 15,450 11,577 13,143 15,840 22,327
------- -------- ------- -------- ------- -------
Gross profit.......... 17,717 3,450 6,334 5,552 11,246 18,369
Operating expenses:
Research and
development.......... 4,540 4,459 4,523 4,505 4,235 4,456
Selling, general and
administrative....... 10,545 12,297 10,409 8,608 11,342 12,343
In-process research
and development of
acquired businesses
and product line..... 1,200 5,900 -- -- -- 4,000
Restructuring charge.. -- 2,922 -- 2,620 -- --
------- -------- ------- -------- ------- -------
Total operating
expenses............. 16,285 25,578 14,932 15,733 15,577 20,799
------- -------- ------- -------- ------- -------
Operating income
(loss) .............. 1,432 (22,128) (8,598) (10,181) (4,331) (2,430)
Other income (expense),
net.................... 355 1,131 361 (110) (14) 299
------- -------- ------- -------- ------- -------
Income (loss) before
income taxes........... 1,787 (20,997) (8,237) (10,291) (4,345) (2,131)
Provision (benefit) for
income taxes........... 887 (6,858) (2,042) (2,794) (1,477) 635
------- -------- ------- -------- ------- -------
Net income (loss)....... $ 900 $(14,139) $(6,195) $ (7,497) $(2,868) $(2,766)
======= ======== ======= ======== ======= =======
Basic earnings (loss)
per share.............. $ 0.07 $ (1.20) $ (0.54) $ (0.65) $ (0.23) $ (0.22)
======= ======== ======= ======== ======= =======
Shares used in basic per
share calculation...... 12,148 11,746 11,455 11,602 12,228 12,828
======= ======== ======= ======== ======= =======
Diluted earnings (loss)
per share.............. $ 0.07 $ (1.20) $ (0.54) $ (0.65) $ (0.23) $ (0.22)
======= ======== ======= ======== ======= =======
Shares used in diluted
per share calculation.. 12,761 11,746 11,455 11,602 12,228 12,828
======= ======== ======= ======== ======= =======
</TABLE>
Liquidity and Capital Resources
Since inception, we have funded our operations primarily through the sale
of equity securities and public stock offerings, customer pre-payments, bank
borrowings and cash generated by our operations. As of September 30, 1999, we
had approximately $30.7 million in cash, cash equivalents and short-term
investments and approximately $80.6 million of working capital. In June 1998,
our Board of Directors authorized a stock repurchase program to repurchase up
to 2,000,000 shares of our common stock. In May 1999, we announced the
cancellation of the repurchase program and subsequently completed a sale of
625,000 shares of our common stock to eight institutional investors. At the
time of the cancellation, we had repurchased a total of 865,800 shares of
common stock at an aggregate cost of approximately $11.5 million. The sale was
priced at $18.00 per share and generated proceeds of approximately $11.3
million. The purpose of this transaction was to remove the tainted shares of
common stock to obtain pooling-of-interests accounting treatment for the
acquisition of PST. Additionally, during the third and fourth quarters of
fiscal 1999 and the first quarter of fiscal 2000, we reissued the remaining
240,800 shares of acquired common stock in connection with our employee stock
programs, which generated net proceeds of approximately $3.2 million. The
proceeds from the recent capital stock transactions will be used for general
corporate purposes.
Under two separate working lines of credit agreements with a bank, PST
was able to borrow up to $7.0 million conditioned upon meeting certain
financial covenants. In June 1999, in conjunction with the acquisition of PST,
all borrowings against the line of credit agreements were repaid. Subsequently,
the line of credit agreements expired and in light of our working capital
position and in efforts to reduce overhead costs, we decided not to renew the
line of credit agreements.
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In September 1999, we entered into an alliance with MECS to sell our
products and provide local customer support in the Japanese market. In October
1999, we purchased approximately 9 2/3 percent of the common stock of MECS in
exchange for approximately $1.5 million. We also have an option to purchase at
least 66 2/3 percent of the common stock of MECS once MECS meets various
operating performance levels and disposes of its non-core subsidiaries. If we
were to acquire 66 2/3 percent of the common stock of MECS, then we will spend
approximately $8.4 million. If we were to acquire 100 percent of the common
stock of MECS, then we will spend approximately $13.4 million. As of March 31,
1999, MECS had long-term debt and bonds, including the current portions,
totaling approximately $34.0 million with interest rates ranging between 1.4
percent to 1.8 percent per annum.
The nature of the semiconductor industry, combined with the current
economic environment, makes it very difficult for us to predict future
liquidity requirements with certainty. We believe that our existing cash and
cash equivalents, cash generated from operations and existing sources of
working capital will be adequate to finance our operations through March 31,
2000.
Year 2000 Compliance Initiative
What is commonly referred to as the Year 2000 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, we have launched a
comprehensive program to assess and address our potential exposures. The
program is substantially complete with the exception of PST as noted below.
With respect to our internal business systems, we are working with the
third party vendors of such systems to ensure that Year 2000 compliance either
exists today or will be achieved through vendor supplied upgrades in a timely
manner. Our principal enterprise resource planning system has been certified
Year 2000 compliant by its manufacturer and has passed in-house compliance
testing. We believe that except for a systematic failure outside our 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.
Our products have been, and will continue to be, evaluated for Year 2000
compliance. Many products 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.
Also being assessed is the potential impact on Asyst of non-compliance by
suppliers, subcontractors, business partners and customers. As part of that
assessment, we have 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 we identify that a third party has a material Year 2000
compliance issue, we 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 in June 1999, additional products and systems
must be integrated into our Year 2000 compliance program. These efforts are
still underway but we expect to complete the necessary elements of the program
prior to December 31, 1999.
Our total incremental cost of assessing and remediating our systems and
product Year 2000 issues is estimated to be between $0.5 million and $1.0
million. Approximately $0.2 million has been spent as of March 31, 1999, with
between $0.2 million and $0.4 million in capital expenditures planned for the
first nine months of fiscal year 2000.
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While we are engaged in an ongoing Year 2000 assessment, we have 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.
Quantitative and Qualitative Disclosures About Market Risk
Although we operate and sell products in various global markets,
substantially all sales are denominated in the U.S. dollar therefore reducing
the foreign currency risk. To date, the foreign currency transactions and
exposure to exchange rate volatility have not been significant. We cannot
anticipate with certainty the effect of inflation on our operations. To date,
inflation has not had a material impact on our net sales or results of
operations; however, with the industry's upturn currently underway, labor
markets are tightening thus putting upward pressure on current labor costs. Our
exposure to market risk for changes in interest rates relate primarily to the
investment portfolio. Our investment portfolio consists of short-term, fixed
income securities and by policy is limited by the amount of credit exposure to
any one issuer. The market value of fixed rate securities are adversely
affected by increases in interest rates. To date, the change in interest rate
markets has not had a material impact on our results of operations or the
market value of our investments. There can be no assurance that foreign
currency risk, inflation or interest rate risk will not have a material impact
on our financial position, results of operations or cash flow in the future.
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BUSINESS
Overview
We are the leading provider of SMIF-based minienvironment and
manufacturing automation systems that enable semiconductor manufacturers to
increase their manufacturing productivity and protect their investment in
silicon wafers during the manufacturing of ICs. We offer a broad range of
products that enable us to provide semiconductor manufacturers and OEMs with
automated solutions for the transfer of wafers and information between the
process equipment and the rest of the facility. We are the only supplier with
expertise in what we believe are the key elements required to provide the
semiconductor manufacturing industry with integrated facility automation
solutions. We provide facility automation solutions in the areas of isolation
systems, work-in-process materials management, substrate-handling robotics,
automated transport and loading systems, and connectivity automation software.
Currently, we believe we offer the most comprehensive product line
addressing the needs of the portal automation market. Portal automation systems
use a standard interface to transfer wafers and information between the process
equipment minienvironment and pods. We believe we are uniquely positioned to
provide OEMs with a comprehensive solution for automation-enabling process
equipment front ends.
We believe that semiconductor manufacturers are able to obtain a higher
level of productivity from their equipment by integrating our products into the
semiconductor manufacturing process. Our products protect valuable wafers
throughout the manufacturing process by providing semiconductor manufacturers
with efficient contamination control, wafer level identification, and tracking
and logistics management.
Industry Background
Advances in electronics technology have resulted in the development of
increasingly sophisticated ICs based on submicron geometries and complex
manufacturing processes. Modern IC design and verification techniques have
enabled semiconductor companies to rapidly design and manufacture semi-custom
and custom products addressing specific customer requirements. Thus, in
addition to producing high volumes of a limited number of standard products,
many large semiconductor manufacturing facilities produce varying volumes of a
wide range of products and are required to adapt readily to changing customer
and market requirements.
Semiconductor manufacturers face challenges in achieving and maintaining
high production yields, improving utilization of expensive facilities and
equipment and managing the logistics of increasingly complex semiconductor
fabrication processes. In order to meet these challenges these manufacturers
must improve their productivity and reduce their operating costs while
continuing to invest in new technology.
Semiconductor manufacturers are currently making, and are expected to
continue to make, significant investments in manufacturing capacity through the
construction of new 200mm wafer facilities and the upgrade of existing 150mm
and 200mm wafer facilities. Additional investments are expected to occur as the
industry transitions to 300mm wafer facilities. Dataquest, an independent
research group, estimates that in 1999 semiconductor manufacturers will spend
$14.6 billion on the construction of new 200mm wafer facilities and upgrades to
existing 150mm and 200mm wafer facilities and that this spending will grow to
$30.0 billion in 2002. This represents a compound annual growth rate of 27
percent. Dataquest also estimates that spending on 300mm wafer facilities will
grow from $530 million in 1999 to $3.3 billion in 2002, representing a compound
annual growth rate of 84 percent.
Semiconductor manufacturers are seeking to improve the production yields
of their facilities by utilizing minienvironment technology and manufacturing
automation systems to minimize wafer mishandling, misprocessing and
contamination. Minienvironment technology focuses on control of the environment
in the immediate vicinity of the in-process wafers and the processing
equipment. Minienvironment systems consist of
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enclosures with engineered airflows that encapsulate process equipment, pods
that hold wafers and robotics systems that transfer wafers into and out of
process equipment through a portal. Manufacturing automation systems increase
productivity by managing the flow of wafers throughout the production process
and are segmented by function as follows:
. Facility Automation Systems. These systems use robotics to manage the
transportation of wafers throughout the facility as they move between
process equipment, referred to as tools. Facility automation systems
also provide work-in-process management systems that track and store
wafers throughout the manufacturing process. These systems include
overhead rail systems, automated storage and retrieval systems, hoist
systems and system control software.
. Portal Automation Systems. These systems use a standard interface,
such as SMIF, to transfer wafers and information between the process
equipment minienvironment and pods. The wafers are then transported,
in pods, to storage systems or to other process equipment. An
integrated portal automation system includes atmospheric robots,
environmental control systems, integrated input/output interfaces,
automated identification and tracking systems, pods and connectivity
automation software.
. Tool-centric Automation Systems. These systems manage the movement of
wafers in the vacuum environment within the process equipment. Tool-
centric automation systems include robots, wafer handling systems,
environmental control software and thermal conditioning modules.
A growing portion of the semiconductor capital equipment spending is
attributable to manufacturing automation systems. Dataquest estimates that in
1999 semiconductor manufacturers will spend $906 million on manufacturing
automation and control systems and that this will grow to $2.3 billion by 2002,
representing a compound annual growth rate of 36 percent.
The increased complexity of semiconductor manufacturing combined with the
availability of more efficient processes is acting as a catalyst for
significant investment in flexible and scalable solutions that meet customer
requirements while improving manufacturer profitability. Semiconductor
manufacturers are embracing integrated systems in order to avoid designing
systems themselves and to secure consistent maintenance and standard
operational interfaces. OEMs are purchasing integrated systems to allow them to
focus on their core competency of process implementation. In addition,
integrated solutions reduce the complexity of combining multiple systems and
serve to optimize processes. The trend towards process productivity
optimization places a premium on integrated automation systems.
The Asyst Solution
We are the leading provider of SMIF-based minienvironment and
manufacturing automation systems that enable semiconductor manufacturers to
increase their manufacturing productivity and protect their investment in
wafers. We offer a broad range of products that enable us to provide
semiconductor manufacturers and OEMs with automated solutions for the transfer
of wafers and information between the process equipment and the rest of the
facility. Our products provide the following key benefits to semiconductor
manufacturers:
Comprehensive Solution. We are the only supplier with expertise in what
we believe are the five key elements required to provide the semiconductor
manufacturing industry with integrated facility automation solutions. We
believe these elements are:
. isolation systems;
. work-in-process materials management;
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. substrate-handling robotics;
. automated transport and loading systems; and
. connectivity automation software.
Currently, we believe we offer the most comprehensive product line
addressing the needs of the portal automation market. Our comprehensive product
line allows semiconductor manufacturers to source their entire portal
automation needs from one vendor. Our integrated solutions provide
semiconductor manufacturers with several advantages, including standard
maintenance and training, uniform user interface and single vendor
accountability.
Increased Productivity of the Manufacturing Process. We believe that
semiconductor manufacturers are able to attain a higher level of productivity
and performance from their equipment by integrating our products into their
manufacturing process. In addition, our connectivity automation software
provides semiconductor manufacturers with facility ready automation
capabilities, resulting in faster implementation times and more efficient
operational productivity. With automated transportation and loading solutions,
yield loss associated with mishandling is reduced and the semiconductor
manufacturer receives the benefit of timely wafer delivery, thereby realizing
significantly improved equipment utilization and productivity over non-
automated transport and equipment loading. Our products provide flexibility by
allowing semiconductor manufacturers the ability to add capacity while
minimizing disruption of ongoing production in the facility.
Value Assurance Through Wafer Protection. Increasingly sophisticated ICs
based on smaller geometries have resulted in an increase in the value of a
container of wafers. Today, a container of wafers can be worth in excess of
$500,000. Our isolation technology and robotics solutions provide semiconductor
manufacturers with efficient contamination control throughout the semiconductor
manufacturing process, effectively protecting valuable wafers from
contamination. This improved environmental control allows semiconductor
manufacturers to increase yields faster as well as attain higher eventual
yields. Using our work-in-process materials management products and
connectivity automation software, the IC manufacturer receives the benefits of
wafer level identification, tracking and logistics management, as well as the
ability to minimize yield loss associated with misprocessing.
Strategy
We have achieved success in serving the 150mm and 200mm wafer markets by
applying our extensive experience in isolation technology, material tracking
and factory automation to enable highly efficient semiconductor manufacturing.
Our strategy is to continue to build upon our success and further capitalize on
the accelerating demand for our technology. The principal elements of our
strategy are:
. Capitalize on Demand for New 200mm Facilities and Existing Facility
Upgrades. Increased demand for advanced ICs is fueling the
construction of new 200mm facilities and upgrades of existing
facilities. Semiconductor manufacturers are incorporating integrated
SMIF-based automation systems in their facilities in order to
optimize manufacturing productivity. We intend to continue to
enhance our leadership position and our technical expertise in this
market by developing increasingly efficient automation solutions for
the 200mm market.
. Focus on Portal Automation. Our portal automation solutions
integrate atmospheric robots, environmental control systems,
integrated input/output interfaces, auto identification and tracking
systems, pods and connectivity automation software. Our portal
automation solutions allow OEMs to improve productivity and decrease
their total cost and time to market. We believe the increased rate
of acceptance of SMIF and minienvironment solutions in 200mm
facilities indicates that OEMs are more likely to adopt our more
advanced tool portal automation systems. We believe that by
leveraging our existing relationships with OEMs and semiconductor
manufacturers we will be in a position to capitalize on the
increasing demand for a standardized interface between the tool and
the factory environment.
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. Increase Penetration of the Japanese Market. According to Dataquest,
in 1999 Japan will account for 29 percent of worldwide semiconductor
production. We believe Japanese semiconductor manufacturers will
continue to build 200mm facilities, continue to upgrade existing
facilities and begin to build 300mm facilities. As a result, we
believe that a significant opportunity exists for our products in
the Japanese market. We intend to augment our ability to directly
supply our products to Japanese customers by increasing our local
presence in Japan. In September 1999, we entered into an alliance
with MECS, a Japanese engineering and robotics company that will
increase our presence in Japan and give us the ability to provide
local engineering support, which we believe is critical to gaining
market share in Japan.
. Leverage Success in 200mm to Capitalize on the Transition to
300mm. We have achieved market leadership in SMIF-based systems for
the 200mm wafer market. We believe that new 300mm wafer facilities
will incorporate portal automation using similar technology. We
intend to leverage our success in 200mm manufacturing automation
technology to capitalize on the 300mm market. Our experience in
portal automation and SMIF technology provides us with a unique
platform from which to transition our existing technology to 300mm
wafer tools. Our 300mm products are currently being used in 300mm
pilot lines.
. Build on Strong End User Relationships to Increase Demand for our
Products from OEMs. The demand for our products has been enhanced by
the strong relationships we have developed with semiconductor
manufacturers, the end users of our products. By working closely
with these semiconductor manufacturers, we are able to better
understand their specific process requirements and, in turn, educate
them on the benefits of our products. Ultimately, this process
encourages our end users to specify our products to OEMs as the
preferred solution, thereby creating additional demand for our
products.
Products
Our products enable semiconductor manufacturers to increase yield and
production efficiency. We offer products in the areas of isolation systems,
work-in-process materials management, substrate-handling robotics, automated
transport and loading systems, and connectivity automation software. We have
incorporated the technologies from these areas to create our Plus-Portal System
which we offer to OEMs.
Isolation Systems
The Asyst-SMIF System is designed to provide a continuous, ultraclean
environment for semiconductor wafers as they move through the manufacturing
facility. Asyst-SMIF Systems can significantly reduce contamination by using
minienvironments to protect the in-process wafers and processing equipment from
exposure to contaminants caused by the human handling of cassettes and the
migration of contaminants from elsewhere in the cleanroom.
The Asyst-SMIF System consists of three main components:
. SMIF-Pods, used for storage and transport of 200mm wafers, and
front-opening unified pods, or FOUPs, used for storage and
transportation of 300mm wafers;
. SMIF-Enclosures, which provide custom minienvironment chambers built
around processing equipment to reduce contamination; and
. input/output systems including SMIF-Arms, SMIF-Indexers, SMIF-LPIs,
SMIF-LPOs, SMIF-LPTs and related products, which transfer the wafers
from the SMIF-Pod into the process tool or SMIF-Enclosure thereby
preventing the mishandling of wafers. In addition to our standard
Asyst-SMIF System products, we also offer our advanced SMIF-E
System, which provides the capability to store, transport and
transfer the product in a controlled environment to reduce
contamination by water vapor, oxygen and airborne molecular
contaminants.
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We also offer the Asyst-SMIF System for the handling and isolation of
reticles, a template used to transfer the circuit pattern onto the wafer
surface.
Work-in-Process Materials Management
The Asyst SMART-Traveler System allows semiconductor manufacturers to
reduce manufacturing errors by significantly decreasing the opportunities for
operator-associated misprocessing during the production process. The Asyst
SMART-Traveler System includes SMART-Tag, an electronic memory device that
combines display, logic and communication technologies to provide information
regarding the wafers inside the carrier, and the FluoroTrac Auto ID System,
which uses a radio-frequency based identification tag that can be attached to
or embedded into wafer carriers or storage boxes.
The Asyst SMART-Traveler System also includes the SMART-Comm, a
multiplexing and communication protocol converting device that increases
operator and tool efficiency in semiconductor facilities by optimizing
communications and minimizing hardware and software layers, and the SMART-
Storage Manager, an interactive system built around a personal computer and a
network of controllers and communication probes that provides work-in-process
control and management of wafers in storage racks or automated stockers.
Our substrate management systems, or sorters, are used to rearrange
wafers and reticles between manufacturing processes without operator handling,
which helps to increase a facility's yields. Sorters avoid the mishandling of
wafers by enabling the tracking and verification of each wafer throughout the
production process. Sorters also reduce scratches by automating the handling of
wafers. Substrate management systems utilize our input/output systems, auto
identification systems, robots, prealigners and minienvironment technology.
Substrate-Handling Robotics
We offer comprehensive robotic wafer handling solutions to the
semiconductor industry. Our products are incorporated by OEMs for use outside
of the semiconductor process tool to move wafers up to 300mm in diameter
between input/output systems and process stations. These products include
robots specifically designed for atmospheric, harsh chemical or wet chemical
process applications and prealigners used to orient the wafer. We also use our
robots and prealigners in our Plus-Portal System and wafer sorter products.
Our Axys robot family includes atmospheric robots used in metrology and
other clean room tools and harsh chemical robots used in chemical mechanical
polishing and plating processes. The Hine 4.3A robot family consists of
atmospheric and harsh chemical robots used in chemical mechanical polishing
tools to transport wafers through the entire processing sequence from input
cassettes through multiple polishing stages, wafer cleaning steps and back to
output cassettes. Our prealigners are used to locate the exact center of a
wafer and to locate and orient a feature on the circumference of the wafer,
important steps in processing wafers.
Automated Transport and Loading Systems
Automated transport and loading systems move wafer containers into and
out of tools and between process locations in semiconductor facilities. Our
automated transport and loading systems employ a unique concept referred to as
continuous flow. Competing systems use monorail vehicles or cars that can cause
delays in the facility when a monorail vehicle is not available at the correct
location to move material. Continuous flow transport, on the other hand, offers
significant improvements in factory efficiency by eliminating the need for
monorail vehicles to move wafers. Continuous flow transport loads SMIF-Pods or
FOUPs asynchronously onto our system and conveys them to the vicinity of the
next process location. Automated loading systems remove SMIF-Pods or FOUPs from
the transport system and deliver them to the tool loadport. The result is more
predictable wafer delivery times, which make process equipment loading more
efficient.
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Connectivity Automation Software
Software services for equipment automation solutions provide improved
material control, line yield and cycle time abilities, as well as increased
overall equipment effectiveness. In addition to automating the processing of
each wafer lot during the manufacturing cycle, the customizable software links
directly to the facility host system, thereby providing users with the ability
to pre-schedule material movement to specific process equipment. Our SMART-Fab
suite of Windows NT-based products focuses on the unique requirements of the
semiconductor facility. This suite includes SMART-Station, which uses workflow
and distributed object technology to rapidly automate facility equipment. Other
SMART-Fab products include SMART-Storage Manager and Global Lot Server. These
products provide material staging, work-in-process materials management and
global wafer lot location.
Plus-Portal System
Our Plus-Portal System combines our expertise in isolation systems, work-
in-process materials management, substrate handling robotics and connectivity
automation software to provide a complete front end to a process tool. This
system uses a standard interface, such as SMIF, to transfer wafers and
information between the process equipment minienvironment and pods. The wafers
are then transported, in pods, to storage systems or to other process
equipment. An integrated portal automation system includes atmospheric robots,
environmental control systems, integrated input/output interfaces, automated ID
and tracking systems, pods and connectivity automation software.
Asyst Plus-Portal System
[GRAPHIC]
Customers
Historically, our customers have primarily been semiconductor
manufacturers who are either building new manufacturing facilities or upgrading
existing facilities. Semiconductor manufacturers represent over 60 percent of
our net sales. We expect that semiconductor manufacturers will continue to
represent a majority of
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our net sales because of the high number of 150mm and 200mm upgrade projects
anticipated during the next several years. As the industry migrates to 300mm
wafer facilities, we expect that a majority of our net sales will shift from
semiconductor manufacturers to OEMs. We believe that our historical
relationships with semiconductor manufacturers, coupled with our existing
relationship with OEMs, will encourage OEMs to design our products into their
OEM's 300mm products.
Our net sales to a particular semiconductor manufacturer customer are
dependent on the number of facilities a semiconductor manufacturer is
constructing and the number of facility upgrades a semiconductor manufacturer
undertakes. As major projects are completed, the amount of sales to these
customers will decline unless new projects are undertaken by them.
In fiscal year 1999, Worldwide Semiconductor Manufacturing Company
accounted for approximately 11 percent of our net sales and was the only
customer that accounted for more than 10 percent of net sales. For the six
months ended September 30, 1999, Taiwan Semiconductor Manufacturing Company
accounted for approximately 11 percent of net sales.
Our ten largest U.S. and international customers based on cumulative
sales during fiscal 1997, 1998 and 1999, arranged alphabetically, were:
<TABLE>
<S> <C>
Chartered Semiconductor Manufacturing, Submicron Technology Public Co.
Ltd. Taiwan Semiconductor Manufacturing Co. Ltd
International Business Machines Tokyo Electron Ltd.
Corporation WaferTech LLC.
Lam Research Corp. Worldwide Semiconductor Manufacturing Co.
Macronix International Co. Ltd.
National Semiconductor Corp.
</TABLE>
Sales and Marketing
We sell our products principally through a direct sales force in the
United States and Asia/Pacific region. We market our products to semiconductor
manufacturers in Japan through our distribution relationship with Innotech and
to OEM customers through a direct sales force. We have notified Innotech that
we intend to terminate this relationship with them. Instead, we intend to
service the Japanese market through our strategic alliance with MECS. Our sales
organization is based in Northern California, and domestic field sales
personnel are stationed in Minnesota, Colorado, Arizona, Vermont, Washington
and Texas. The European market is supported through offices in the vicinity of
Horsham and Newport in the United Kingdom 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.
International sales accounted for approximately 51 percent, 64 percent
and 57 percent of total sales for fiscal 1997, 1998 and 1999, respectively.
International sales accounted for approximately 56 percent of total sales in
the six months ended September 30, 1999. International sales are invoiced in
U.S. dollars and, accordingly, have not historically been subject to
fluctuating currency exchange rates.
The sales cycle for our products ranges from six months to as long as 12
months from initial inquiry to placement of an order, depending on the
complexity of the project. For sales to semiconductor manufacturers, the sales
cycle is relatively short for repeat customers and much longer for new
customers. In the case of a new customer, time is required to educate the
client as to the nature of SMIF technology and the related benefits. The sales
cycle involves many elements of Asyst including, sales, marketing, technology
and senior management.
The sales cycle for an OEM customer is typically paced by the development
of new tools by the OEM customer. Our involvement in the tool's design cycle
begins in the very early stages, particularly for our Plus-Portal System, since
our products represent a major portion of the tool's architecture.
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An important part of our marketing strategy has been participation in key
industry organizations such as SEMATECH and SEMI, as well as attendance at
events coordinated by the Semiconductor Industry Association. In addition, we
actively participate in industry trade shows and conferences and have sponsored
symposiums with technology and business experts from the semiconductor
industry.
Systems Integration
After a sales contract for our Asyst-SMIF System is finalized, our
systems integration and OEM applications organizations are responsible for the
engineering, procurement and manufacturing of SMIF-Enclosures and interfaces
necessary to integrate that system with the processing equipment. Our systems
integration organization provides integration, installation, qualification of
the Asyst-SMIF System and other services associated with the facility-wide
integration of an Asyst-SMIF System.
Our systems integration and OEM applications organizations focus on
understanding our customer's manufacturing methodology and anticipated
production applications to develop customer-specific solutions. For
retrofitting and upgrading existing facilities with the minienvironment and
SMIF solution, our systems integration organization works with our customer's
facilities and manufacturing personnel to develop programs, schedules and
solutions to minimize disruption during the installation of our products into
our customer's facility. In the case of a new facility or tool design, our OEM
applications and systems integration organizations work with our customer's
facility planners and operations personnel, as well as with cleanroom
designers, architects and engineers.
In the case of OEM integration, our OEM applications organization designs
and integrates the SMIF components directly into the processing equipment. Our
OEM applications organization works very closely with the OEM to understand the
process equipment and the processing requirements to provide our customer with
an optimized solution.
Research and Development
Research and development efforts are focused on enhancing our existing
products and developing and introducing new products in order to maintain
technological leadership and meet a wider range of customer needs. Our research
and development expenses were approximately $11.4 million, $16.6 million and
$18.0 million during fiscal 1997, 1998, and 1999, respectively. Our research
and development expenses were approximately $9.0 million and $8.7 million for
the six months ended September 30, 1998, and September 30, 1999, respectively.
Our research and development employees are involved in mechanical and
electrical engineering, software development, micro-contamination control,
product documentation and support. Our central research and development
facilities include a prototyping lab and a cleanroom used for product research,
development and equipment demonstration purposes. These research and
development facilities are located in Northern California. In addition, we
maintain a research and development facility in Austin, Texas, used for our new
efforts in the area of wafer sorting and reticle handling.
Development efforts have intensified on the spectrum of products and
technologies needed to support both OEM and semiconductor manufacturer
customers. We have recently introduced the Plus-Portal Systems to meet the
needs of our OEM customers. In the area of transport systems, we are developing
systems based on the concept of continuous flow. This system makes process
equipment loading more efficient. Additionally, our development efforts in
robotics have resulted in a new robotic wafer transfer system that offers high
reliability and faster wafer transfer speeds.
Semiconductor equipment and processes are subject to rapid technological
change including the anticipated shift in wafer size from 200mm to 300mm. As
the market shifts, new products and technologies
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will be needed to manufacture the larger wafers. In addition, the development
of more complex ICs drives the need for new facilities, equipment and processes
to produce these devices at an 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 which maintain technological leadership.
Manufacturing
Our manufacturing activities consist of assembling and testing components
and sub-assemblies, which are then integrated into finished products. Once
completed, we perform the final tests on all electronic and electromechanical
sub-assemblies and cycle products before shipment. Much of the cleaning,
assembly and packaging of our SMIF-Pods is conducted in cleanroom environments
where manufacturing personnel are clothed in cleanroom gowns to reduce particle
contamination.
We currently maintain manufacturing facilities for our Asyst-SMIF
Systems, SMART-Traveler System products, Plus-Portal Systems and software
products and services in Fremont, California. We fabricate our custom SMIF-
Enclosures at both the Fremont facility and, in the case of large system
orders, near customer sites, where we lease temporary space for the manufacture
of SMIF-Enclosures. Our robotic products are manufactured in our Sunnyvale,
California facility. Our wafer management handling systems products and reticle
handling systems are assembled and integrated in our Austin, Texas facility.
While we use standard components whenever possible, most mechanical
parts, metal fabrications and castings are made to our specifications. With the
recent increased demand for semiconductor manufacturing equipment, our
suppliers are straining to provide components on a timely basis and, in some
cases, on an expedited basis at our request. Although to date, we have
experienced only minimal delays in receiving goods from our key suppliers,
disruption or termination of these sources could have a temporary adverse
effect on our operations. Many of the components and subassemblies used in our
products are obtained from a single supplier or a limited group of suppliers.
We believe that, in time, alternative sources could be obtained and qualified
to supply these components in the ordinary course of business. However, a
prolonged inability to obtain these components could have an adverse effect on
our operating results and could result in damage to our customer relationships.
Shortages in components may result in price increases for components that could
decrease our margins and negatively impact our financial results.
Competition
We currently face direct competition in all of our products. Many of
these competitors have extensive engineering, manufacturing and marketing
capabilities and potentially greater financial resources than those available
to us. Most competitors remain dedicated to a single product line in which we
compete. Our ability to provide a more complete automation and wafer isolation
solution provides a significant competitive advantage with respect to these
competitors. The markets for our products are highly competitive and subject to
rapid technological change. Several companies, including Brooks through its
acquisition of Jenoptik Infab, Inc., offer one or more products that compete
with our Asyst-SMIF System and SMART-Traveler System products. We compete
primarily with Entegris, Inc. in the area of SMIF-Pods. We also compete with
several competitors in the robotics area, including, but not limited to, PRI
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 over our competition. With our
recent acquisition of PAT, we have acquired technology in the area of transport
automation systems which we expect to allow us to develop products in this
area. By entering this market, our transport products will face competition
from the main product line of PRI, as well as from Daifuku Co., Ltd. and Murata
Co., Ltd. With our acquisition of PST, we have acquired products in the area of
the storage and management of wafers and reticles. We compete primarily with
Irvine Optical Company in this area.
In addition, the conversion to 300mm wafers is likely to draw new
competitors to the facility automation market. In the 300mm wafer market, we
expect to face intense competition from a number of
40
<PAGE>
companies such as PRI and Brooks, as well as potential competition from
semiconductor equipment and cleanroom construction companies.
We believe that the principal competitive factors in our market are the
technical capabilities and characteristics of systems and products offered,
technological experience and "know-how," product breadth, proven product
performance, quality and reliability, ease of use, flexibility, a global,
trained, skilled field service support organization, the effectiveness of
marketing and sales, and price. We believe that we compete favorably with
respect to the foregoing factors.
We expect that our competitors will continue to improve the design and
performance of their products and to introduce new products with competitive
performance characteristics. We believe we will be required to maintain a high
level of investment in research and development and sales and marketing in
order to remain competitive.
Intellectual Property
We primarily pursue patent, trademark and copyright protection for our
minienvironment and Asyst-SMIF System technology, our SMART-Traveler products,
our software products and our robotics technology. We currently hold fifty
patents in the United States, have eighteen pending patent applications in
process in the United States and intend 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 in existing patents, or
allowed from pending patent applications, will be sufficiently broad to protect
our technology.
There has been substantial litigation regarding patent and other
intellectual property rights in semiconductor-related industries. While we
intend to protect our intellectual property rights vigorously, there can be no
assurance that any of our patents will not be challenged, invalidated or
avoided, or that the rights granted thereunder will provide us with competitive
advantages. Litigation may be necessary to enforce our patents, to protect our
trade secrets or know-how or to defend us against claimed infringement of the
rights of others or to determine the scope and validity of the patents or other
intellectual rights of others. Any such litigation could result in substantial
cost and divert the attention of management, which by itself could have a
material adverse effect on our financial condition and operating results.
Further, adverse determinations in such litigation could result in our loss of
intellectual property rights, subject us to significant liabilities to third
parties, require us to seek licenses from third parties or prevent us from
manufacturing or selling our products, any of which could have a negative
impact on our financial condition and results of operations.
In October 1996, we filed a lawsuit against a number of defendants
including Jenoptik-Infab, Inc. alleging infringement of two patents related to
our SMART Traveler System and alleging breach of fiduciary duty and
misappropriation of trade secrets and unfair business practices. The defendants
filed counter claims alleging the patents invalid, unenforceable and not
infringed and alleging that we had violated federal antitrust laws and engaged
in unfair competition. In November 1998, the court granted defendants' motion
for partial summary judgment as to most of the patent infringement claims. In
January 1999, the court granted our motion for leave to seek reconsideration of
the November 1998 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 the
dismissal with prejudice of the defendants' unfair competition and remaining
antitrust counter claim, and our breach of fiduciary duty, misappropriation of
trade secrets and unfair business practices claims. In June 1999, the court
granted our motion for reconsideration in the sense that it considered the
merits of our arguments, but did not change its prior summary judgment ruling,
and also granted summary judgment for defendants on the remaining patent
infringement claim. We intend to take an appeal.
We also rely on trade secrets and proprietary technology that we seek to
protect, in part, through confidentiality agreements with employees,
consultants and other parties. There can be no assurance that these agreements
will not be breached, that we will have adequate remedies for any breach, or
that our trade secrets
41
<PAGE>
will not otherwise become known to or independently developed by others. Also,
the laws of some foreign countries do not protect our intellectual property
rights to the same extent as the laws of the United States.
Backlog
Our backlog was approximately $51.4 million, $52.5 million and $32.3
million as of March 31, 1997, 1998 and 1999, respectively, and was $58.8
million as of September 30, 1999. During 1998 and 1999, our 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 our
past experience. Ten customers with orders on backlog totaling between $0.6
million to $7.3 million comprised 67 percent of the total backlog as of
March 31, 1999. We include in our backlog only orders for which a customer's
purchase order has been received and a delivery date within 12 months has been
specified. Because purchase orders are generally subject to cancellation or
delay by customers with limited or no penalty, our backlog is not necessarily
indicative of future revenues or earnings.
Employees
As of September 30, 1999, we employed 623 persons on a full-time basis,
including 88 in research and development, 36 in software development, 192 in
manufacturing operations, 29 in system integration, 157 in sales and marketing,
which includes customer service, 59 in finance and administration and 62 in
international operations. Additionally, we employed 193 persons on a temporary
basis, including 170 in manufacturing operations. Many of our employees have
specialized skills of value to Asyst, and our future success will depend, in
large part, upon our ability to attract and retain highly skilled technical,
managerial, manufacturing, financial and marketing personnel, who are in great
demand. In particular, the Fremont, California and Hsin-Chu, Taiwan locations
have tight labor markets for the skilled employees we seek. We have never had a
work stoppage or strike and no employees are represented by a labor union or
covered by a collective bargaining agreement. We consider our employee
relations to be good. During fiscal year 1999, we restructured certain domestic
and international operations in response to the drop in our net sales. As a
result of these restructuring activities, we terminated the employment of
approximately 110 employees from our operations in the United States and
approximately 30 employees from our international operations.
Facilities
Our headquarters and principal manufacturing and research and development
activities are located in Northern California in four leased facilities. Our
headquarters in Fremont, California is approximately 91,300 square feet and is
pursuant to a lease expiring in October 2005. We have an option to extend this
lease for an additional five years. Our robotics facility in Sunnyvale,
California is approximately 45,100 square feet pursuant to a lease expiring in
August 2005. We also lease two adjoining manufacturing and research and
development facilities in Fremont, California, the first of which is
approximately 35,400 square feet and is pursuant to a lease expiring in January
2005 and the second of which is approximately 17,700 square feet pursuant to a
lease expiring in January 2002. We have a right of first refusal to lease
additional space under the first lease and we have an option to renew the
second lease for an additional five years. We also have manufacturing and
research development activities located in Austin, Texas in a leased facility
of approximately 81,000 square feet. This lease expires in November 2005. We
have a right to lease additional space under this lease, and we have an option
to renew it for an additional term of five years. We have subleased
approximately 21,600 square feet of the premises under this lease to a third
party. The sublease expires in January 2000. In addition, we lease offices in
Arizona, Colorado, Maine, Massachusetts, Texas and Washington, for sales and
service support, as well as maintain one small regional manufacturing facility
in Vermont. Overseas, we have sales and service support offices in leased
facilities located in Germany, Japan, Singapore, South Korea, Taiwan and the
United States. We are currently looking for additional space to meet our needs
for additional capacity.
42
<PAGE>
MANAGEMENT
Executive Officers and Directors
Our executive officers and directors, their ages and their positions as
of September 30, 1999, are as follows:
<TABLE>
<CAPTION>
Name Age Position(s)
- ---- --- ----------
<S> <C> <C>
Mihir Parikh............ 52 Chairman of the Board and Chief Executive Officer
Terry L. Moshier........ 50 President and Chief Operating Officer
Anthony C. Bonora....... 56 Senior Vice President, Research and Development and Chief
Technical Officer
Douglas J. McCutcheon... 51 Senior Vice President, Chief Financial Officer
Dennis R. Riccio........ 48 Senior Vice President, Global Customer Operations
Stanley Grubel.......... 57 Director
Tsuyoshi Kawanishi...... 70 Director
Ashok K. Sinha.......... 55 Director
Walter W. Wilson........ 55 Director
</TABLE>
Mihir Parikh has served as Chairman of the Board and Chief Executive
Officer of the Company since July 1992. He has been a director of the Company
since he founded the Company in 1984 and served as the Company's President and
Chief Executive Officer from its inception to July 1992. From 1974 to 1984, he
held various management positions with Hewlett-Packard and International
Business Machines Corporation. In 1999, SEMI honored Dr. Parikh for his
pioneering work and outstanding contribution to semiconductor manufacturing
technology. Dr. Parikh received his Ph.D in Engineering-Physics from UC
Berkeley.
Terry L. Moshier has served as President and Chief Operating Officer of
the Company since May 1997. From July 1996 to May 1997, Mr. Moshier served as
Executive Vice President and Chief Operating Officer of the Company. From June
1995 to June 1996, Mr. Moshier was on the Advisory Board of the Arizona
Technology Incubator Fund, a non-profit organization assisting start-up
technology companies. Prior to such time, Mr. Moshier was Senior Vice President
of Technology and Operations for Telxon Corporation, a designer and
manufacturer of hand-held wireless computers, from November 1993 to June 1995.
From June 1990 to October 1993, Mr. Moshier was Director of Operations of the
Motorola Computer Group, a wholly-owned subsidiary of Motorola.
Anthony C. Bonora joined Asyst in 1984 and has been Senior Vice
President, Research and Development of the Company since 1986 and Chief
Technical Officer since January 1996. From 1975 to 1984, he held various
management positions at Siltec Corporation, a manufacturer of products for the
semiconductor industry, including Vice President, Research and Development and
General Manager of its Cybeq equipment division. In 1999, SEMI honored Mr.
Bonora for his pioneering work and outstanding contribution to semiconductor
manufacturing technology.
Douglas J. McCutcheon joined the Company in January 1996 as Senior Vice
President, Chief Financial Officer. From January 1991 to November 1995, Mr.
McCutcheon was Vice President, Corporate Finance at Cadence Design Systems,
Inc., a design automation software company. Prior to 1991, Mr. McCutcheon was
President of Toshiba America Medical Credit, a captive financing subsidiary of
Toshiba America.
Dennis R. Riccio joined the Company in August 1998. From January 1997 to
August 1998, Mr. Riccio served as President, USA Operations of Novellus
Systems, Inc., a semiconductor equipment manufacturer. From 1989 to January
1997, Mr. Riccio held various senior management positions at Applied Materials
Inc., a semiconductor equipment manufacturer.
43
<PAGE>
Stanley Grubel has served as a director of the Company since January
1997. Mr. Grubel has served as Chief Executive Officer of MiCRUS, a
manufacturer of CMOS wafers since September 1994. Between January 1990 and
September 1994, he was a Director of Procurement and Capital Planning for
International Business Machines Corporation. Mr. Grubel serves on the board of
directors of Central Hudson Gas & Electric Corporation.
Tsuyoshi Kawanishi has served as a director of the Company since February
1996. He has served as Senior Adviser of Toshiba Corporation, a manufacturer of
electronic machinery and semiconductors, since June 1994. He previously held
the position of Senior Executive Vice President at Toshiba from June 1990 to
June 1994. Mr. Kawanishi also sits on the board of directors of Applied
Materials, Inc. and World Wide Semiconductor Manufacturing Ltd. (Taiwan). He is
also president of Japan's Society for Electronics Packaging and Chairman of the
Board of Singapore's Institute for Microelectronics.
Ashok K. Sinha has served as a director of the Company since January
1997. Dr. Sinha has served as Group Vice President of Applied Materials, Inc.,
a semiconductor equipment manufacturer, since 1990 and is President of the
Metal Deposition Product Business Group of Applied Materials, Inc.
Walter W. Wilson has served as a director of the Company since January
1995. Mr. Wilson serves as Senior Vice President, Business Integration and
Information Technology of Solectron Corporation, a provider of manufacturing
services to the electronics industry. Since joining Solectron in 1989, Mr.
Wilson has held numerous management positions including President of Solectron
California, President of Solectron North America and President of Solectron
Americas. Mr. Wilson also serves on the board of directors of Mylex
Corporation.
44
<PAGE>
CERTAIN TRANSACTIONS WITH RELATED PARTIES
In September 1997, we entered into an asset purchase agreement with PAT
pursuant to which we sold to PAT intellectual property rights and office
equipment which were owned or licensed by Asyst Automation, Inc., a
discontinued operation, in consideration for quarterly earn-out payments, up to
an aggregate of $2.0 million. In addition, PAT granted us the non-exclusive,
worldwide right to distribute and sell any of PAT's products on PAT's most
favorable distributor terms and conditions; provided that PAT could grant
exclusive distribution rights to particular markets so long as such rights were
first offered to Asyst and we did not accept the offer. We agreed that Mihir
Parikh, our Chairman of the Board and Chief Executive Officer, and Anthony
Bonora, our Senior Vice President, Research and Development and Chief
Technology Officer, could serve as the Chairman of PAT and an advisor to PAT,
respectively, provided they continued to meet their obligations as full time
employees of Asyst. In August 1999, we acquired all of the equity of PAT in a
stock purchase transaction for approximately $3.7 million and the repayment of
$0.8 million of debt and earn-out payments to certain PAT security holders
based on future transport automation product revenue in excess of certain
defined threshold amounts. Dr. Parikh received approximately $1.4 million in
proceeds from the sale of his shares of PAT for which he had paid approximately
$0.7 million. In addition Dr. Parikh received approximately $0.8 million for
the repayment of a loan he had made to PAT. Mr. Bonora received approximately
$0.2 million in proceeds from the sale of his shares of PAT for which he had
paid approximately $0.1 million. Neither Dr. Parikh nor Mr. Bonora participated
in the consideration or negotiation of this transaction by Asyst, nor are they
eligible to participate in any earn-out payments to the former PAT
shareholders.
In April 1999, we entered into an employment agreement with Dr. Parikh.
The term of employment commenced on April 1, 1999, and extends for three years,
renewing daily, so that, absent notice by either party of an intent not to
continue the term, the term shall always be three years. The employment
agreement set Dr. Parikh's initial base salary at a minimum of $325,000
annually. Pursuant to the agreement, our Compensation Committee is obligated to
review his base salary for increase no less often than annually. In addition,
during the employment term, Dr. Parikh is eligible to receive annual bonuses
and to participate in our stock award/option grant plans. Also, he is eligible
to participate in any benefit plans maintained by Asyst for our employees. If
we terminate Dr. Parikh's employment without cause or if he terminates his
employment for good reason, either before or within six months following a
change in control he will be entitled to receive a lump-sum cash payment equal
to the present value of the sum of (1) three times his then annual base salary
and (2) three times an annual average bonus amount, determined under a formula
set forth in the employment agreement. Dr. Parikh will also be entitled to all
benefits that were payable to him at the time of termination and to continued
participation for 18 months thereafter, in the health and life insurance plans
of Asyst in which he was then a participant. In addition, during the term of
employment and for one year thereafter, unless his employment terminates
without cause or for good reason, he may not solicit our employees or customers
away from Asyst.
In February 1999, we loaned Dennis Riccio, our Senior Vice President,
Global Customer Operations, $450,000 in order to facilitate his relocation to
California. This loan has an interest rate of 4.64 percent and is secured by a
second deed of trust on Mr. Riccio's California residence. This loan terminates
and shall be immediately due and payable upon the earlier of (1) January 31,
2004, (2) 30 days after the termination of Mr. Riccio's employment for cause or
after Mr. Riccio's resignation, or (3) the insolvency of Mr. Riccio.
In November 1998, we entered into a severance agreement with William R.
Leckonby, the former President and Chief Operating Officer of Asyst Software,
Inc. Under the terms of this severance agreement, Mr. Leckonby resigned his
position with us and agreed to provide consulting services to us until July 16,
2000. From October 16, 1998 through June 30, 1999, Mr. Leckonby received
payment in the amount equal to his then current base salary. From June 30, 1999
through July 16, 2000, we will pay Mr. Leckonby consulting fees in the amount
of $250 per hour and up to $10,000 for outplacement assistance. In addition,
the vesting of Mr. Leckonby's options to purchase common stock of Asyst was
accelerated by 12 months.
45
<PAGE>
In November 1998, we loaned $350,000 to Mr. Riccio in order to assist Mr.
Riccio with the purchase of a new residence as part of his relocation to
California. The loan has an interest rate of 4.47 percent per annum. This loan
is secured by a deed of trust on real property owned by Mr. Riccio in Texas.
This loan terminates and shall be immediately due and payable upon the earlier
of (1) May 31, 2000, (2) 30 days after the termination of Mr. Riccio's
employment for cause or after Mr. Riccio's resignation, or (3) the insolvency
of Mr. Riccio.
46
<PAGE>
PRINCIPAL SHAREHOLDERS
Information with respect to beneficial ownership provided in the
following table is as of September 30, 1999, and is based upon information
furnished by each director and executive officer or contained in filings made
with the Securities and Exchange Commission, or the SEC. Beneficial ownership
is determined in accordance with the rules of the SEC and generally includes
voting or investment power with respect to securities. Beneficial ownership
also includes shares of stock subject to options and warrants currently
exercisable or convertible, or subject to community property laws where
applicable, to our knowledge all persons named in the table below have sole
voting and investment power with respect to all shares of common stock, shown
as beneficially owned by them. Percentage of beneficial ownership is based on
12,955,886 shares of common stock outstanding as of September 30, 1999, and
14,955,886 shares of common stock outstanding after completion of this
offering.
<TABLE>
<CAPTION>
Percent
Beneficially
Number of Owned
Shares -----------------
Beneficially Before After
Name and Address of Beneficial Owner Owned Offering Offering
- ------------------------------------ ------------ -------- --------
<S> <C> <C> <C>
Mihir Parikh(1)................................ 879,056 6.47% 5.64%
48761 Kato Rd.
Fremont, CA 94538
J.&W. Seligman & Co., Incorporated............. 743,000 5.73% 4.97%
100 Park Avenue
New York, NY 10017
Terry L. Moshier(2)............................ 136,391 * *
Douglas J. McCutcheon(3)....................... 97,776 * *
Anthony C. Bonora(4)........................... 57,646 * *
Dennis R. Riccio(5)............................ 33,928 * *
Walter W. Wilson(6)............................ 29,582 * *
Tsuyoshi Kawanishi(7).......................... 22,582 * *
Stanley Grubel(8).............................. 17,082 * *
Ashok K. Sinha(9).............................. 17,082 * *
All directors and officers as a group (9
persons)(10).................................. 1,291,125 9.23% 8.08%
</TABLE>
- --------
* Less than one percent.
(1) Includes 194,900 shares held of record by Mihir & Nancy Parikh Living
Trust, dated April 3, 1986, of which Dr. Parikh is a trustee. Also
includes 46,600 shares held by a custodian for the benefit of Dr. Parikh's
minor children, of which Dr. Parikh disclaims beneficial ownership.
Includes 637,556 shares subject to stock options exercisable within 60
days of September 30, 1999.
(2) Includes 136,391 shares subject to stock options exercisable within 60
days of September 30, 1999.
(3) Includes 95,739 shares subject to stock options exercisable within 60 days
of September 30, 1999.
(4) Includes 50,886 shares subject to stock options exercisable within 60 days
of September 30, 1999
(5) Includes 33,928 shares subject to stock options exercisable within 60 days
of September 30, 1999.
(6) Includes 27,000 shares subject to stock options exercisable within 60 days
of September 30, 1999.
(7) Includes 20,000 shares subject to stock options exercisable within 60 days
of September 30, 1999.
(8) Includes 14,500 shares subject to stock options exercisable within 60 days
of September 30, 1999.
(9) Includes 14,500 shares subject to stock options exercisable within 60 days
of September 30, 1999.
(10) Includes an aggregate of 1,030,500 shares held by all directors and
executive officers that are subject to options exercisable within 60 days
of September 30, 1999. See Notes (1) through (9), above.
47
<PAGE>
UNDERWRITING
General
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Lehman Brothers Inc.,
Adams, Harkness & Hill, Inc. and Needham & Company, Inc., are acting as
representatives of each of the underwriters named below. Under the Purchase
Agreement among us and the underwriters, we have agreed to sell to each of the
underwriters, and each of the underwriters, severally and not jointly, has
agreed to purchase from us the number of shares of common stock stated opposite
its name below.
<TABLE>
<CAPTION>
Number
Underwriter of Shares
----------- ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................................ 850,000
Lehman Brothers Inc.............................................. 650,000
Adams, Harkness & Hill, Inc...................................... 250,000
Needham & Company, Inc........................................... 250,000
---------
Total...................................................... 2,000,000
=========
</TABLE>
Under the Purchase Agreement, the several underwriters have agreed to
purchase all of the shares of common stock being sold under the Purchase
Agreement if any shares of common stock are purchased. Under the Purchase
Agreement, the commitments of the non-defaulting underwriters may in some
circumstances be increased or the Purchase Agreement may be terminated.
Under the Purchase Agreement, we have agreed to indemnify the several
underwriters against some liabilities, including some liabilities under the
Securities Act, or to contribute to payments the underwriters may be required
to make.
The underwriters offer the shares of common stock, when as and if issued
to and accepted by them, subject to approval of some legal matters by counsel
for the underwriters and some other conditions. The underwriters reserve the
right to withdraw, cancel or modify such offer and to reject orders in whole or
in part.
Commissions and Discounts
The representatives have advised us that they propose initially to offer
the shares of common stock to the public at the public offering price stated on
the cover page of this prospectus, and to some dealers at such price less a
concession not in excess of $1.40 per share. The underwriters may allow, and
such dealers may reallow, a discount not in excess of $.10 per share on sales
to some other dealers. After the public offering, the public offering price,
concession and discount may be changed by the representatives.
The following table shows the per share and total underwriting discounts
that we will pay to the underwriters. This information is presented assuming
either no exercise or full exercise by the underwriters of their over-allotment
options.
<TABLE>
<CAPTION>
Without With
Per Share Option Option
--------- ------- ------
<S> <C> <C> <C>
Public offering price........................ $40.50 $81,000,000 $93,150,000
Underwriting discount........................ $2.43 $4,860,000 $5,589,000
Proceeds, before expenses, to Asyst.......... $38.07 $76,140,000 $87,561,000
</TABLE>
We will pay the expenses of the offering, estimated at $700,000.
48
<PAGE>
Over-allotment Option
We have granted to the underwriters an option exercisable for 30 days after
the date of this prospectus, to purchase up to an aggregate of an additional
300,000 shares of common stock at the public offering price stated on the cover
of this prospectus, less the underwriting discount. The underwriters may
exercise this option solely to cover over-allotments, if any, made on the sale
of the common stock offered by this prospectus. To the extent that the
underwriters exercise this option, each underwriter will be obligated, subject
to some conditions, to purchase a number of additional shares of common stock
proportionate to such underwriter's initial amount reflected in the table
above.
No Sales of Similar Securities
We and our executive officers and directors have agreed for a period of 90
days after the date of this prospectus, subject to exceptions, not to directly
or indirectly issue, sell, or otherwise dispose of or transfer any shares of
common stock or securities convertible into or exchangeable or exercisable for
common stock, without the prior written consent of Merrill Lynch on behalf of
the underwriters.
Price Stabilization
Until the distribution of the common stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the underwriters
and some selling group members to bid for and purchase the common stock. As an
exception to these rules, the representatives are permitted to engage in some
transactions that stabilize the price of the common stock in connection with
this offering. Such transactions consist of bids or purchases for the purpose
of pegging, fixing or maintaining the price of the common stock.
If the underwriters create a short position, i.e., sell more shares of
common stock than stated on the cover page of this prospectus, the
representatives may reduce that short position by purchasing common stock in
the open market. The representatives may also elect to reduce any short
position by exercising all or part of the over-allotment option described
above.
Neither we nor any of the underwriters make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the common stock. In addition, neither
we nor any of the underwriters make any representation that the representatives
will engage in such transactions or that such transactions, once commenced,
will not be discontinued without notice.
Other Relationships
Some of the underwriters and their affiliates engage in transactions with,
and perform services for, our company in the ordinary course of business and
have engaged, and may in the future engage, in commercial banking and
investment banking transactions with our company, for which they have received
or may receive customary compensation.
LEGAL MATTERS
The validity of the issuance of the common stock offered hereby will be
passed upon for Asyst by Cooley Godward LLP, Palo Alto, California, and for the
underwriters by Morrison & Foerster LLP, San Francisco, California.
49
<PAGE>
EXPERTS
The audited financial statements incorporated by reference in this
prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as set forth in their
reports. In those reports, Arthur Andersen LLP states that with respect to
certain subsidiaries its opinion is based on the reports of other independent
public accountants, namely Ernst & Young LLP. The financial statements referred
to above have been incorporated by reference herein in reliance upon the
authority of Arthur Andersen LLP as experts in giving their reports.
The consolidated financial statements of Progressive System Technologies,
Inc. and its subsidiary, which are not presented separately or incorporated by
reference in this Registration Statement have been audited by Ernst & Young
LLP, independent auditors, as stated in their report, which report is
incorporated herein by reference from the Asyst Technologies, Inc. Current
Report on Form 8-K/A dated August 16, 1999, and has been so incorporated in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
WHERE YOU CAN GET MORE INFORMATION
We are a reporting company and file annual, quarterly and current reports,
proxy statements and other information with the SEC. You may read and copy
these reports, proxy statements and other information at the SEC's public
reference rooms in Washington, DC, New York, NY and Chicago, IL. You can
request copies of these documents by writing to the SEC and paying a fee for
the copying cost. Please call the SEC at 1-800-SEC-0330 for more information
about the operation of the public reference rooms. Our SEC filings are also
available at the SEC's web site at "http://www.sec.gov." In addition, you can
read and copy our SEC filings at the office of the National Association of
Securities Dealers, Inc. at 1735 "K" Street, Washington, DC 20006.
The SEC allows us to "incorporate by reference" information that we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
will make with the SEC under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934:
. Annual Report on Form 10-K for the year ended March 31, 1999;
. Proxy Statement for the annual meeting of shareholders to be held on
September 2, 1999;
. Current Report on Form 8-K filed June 18, 1999, as amended;
. Quarterly Report on Form 10-Q for the three months ended June 30,
1999 and September 30, 1999, as amended; and
. The description of the common stock contained in Asyst's Registration
Statement on Form S-1, as filed on February 21, 1995 with the SEC.
You may request a copy of these filings at no cost, by writing,
telephoning or e-mailing us at the following address:
Asyst Technologies, Inc.
48761 Kato Road
Fremont, CA 94538
(510) 661-5000
This prospectus is part of a Registration Statement we filed with the SEC.
You should rely only on the information incorporated by reference or provided
in this prospectus and the Registration Statement.
50
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[LOGO OF ASYST TECHNOLOGIES, INC. APPEARS HERE]
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2,000,000 Shares
[LOGO OF ASYST TECHNOLOGIES, INC.]
Common Stock
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P R O S P E C T U S
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Merrill Lynch & Co.
Lehman Brothers
Adams, Harkness & Hill, Inc.
Needham & Company, Inc.
November 11, 1999
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